Emissions Trading Scheme Is Flawed Design

News Release

11 September 2008

Emissions Trading Scheme Is Flawed Design

The passage of the most ambitious emissions trading scheme in the world will come at a high cost to the New Zealand economy, according to the Greenhouse Policy Coalition, representing the energy intensive sector.

Executive director of Greenhouse Policy Coalition, Catherine Beard says the scheme has been rushed through under urgency for political expediency and there will be a huge number of problems that will emerge from the most complex legislation ever attempted in New Zealand.

“As people in business know better than politicians, there are high costs and risks in being a first mover and you need to have deep pockets. Unfortunately the deep pockets that will be called on to fund this ambitious scheme will be all businesses and householders.”

Catherine Beard said the major scheme risks were the loss of international competitiveness, the disincentive for economic growth and the high and volatile price of carbon.

“Any new investment will face the full international price of carbon – with no allocation of units to offset the cost – unless those units are taken off other trade exposed companies thereby reducing their competitiveness in a global market.”

Catherine Beard said the price of carbon on international carbon markets has increased by over 200% in the last year and the government should have provided for a price safety valve as is being contemplated in Australia.

“While at current carbon prices a household could expect to be paying an extra $600 in energy costs a year; if carbon prices continue on the same upward trend that cost could be considerably higher when electricity generation enters the scheme in 2010”.

Catherine Beard says a better scheme design would be one that involved international benchmarking of industry and agriculture on a “worlds best practice” basis. “Those that are operating at world’s best practice in energy intensity should be able to grow, while those that are not at world’s best practice would face a price of carbon.”

“Capping emissions at a historical point in time will mean that future production will shift to countries where there is no price on carbon, thereby exporting our industry and employment opportunities to other countries where the environmental performance is likely to be more carbon intensive than in New Zealand.”

“This is a scheme that needs to be fixed and fixed soon - before new investment goes to other countries.”

ENDS

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