Political realities mean emissions scheme phase in slower than desirable

The political reality of having all sectors included in an emissions trading scheme means some major emitters will start paying for their greenhouse gas emissions later than is desirable in a perfect world.

The New Zealand Business Council for Sustainable Development says a new report from the Sustainability Council, arguing major emitters will enjoy an estimated $4 billion carbon price subsidy up until 2012 and should be brought into the trading scheme earlier, provides "welcome transparency" on the assistance some are receiving.

However, political realities to achieve the introduction of a scheme, which the Government today said would cut emissions 11% between now and 2012, have to be faced, the Business Council's Chief Executive, Peter Neilson said.

"There has been a gap in political leadership around the world to argue that climate change needs to be addressed, and in New Zealand we had a confused debate for some time. While emissions have been rising we've had a failure of political parties and sectors in the past to back a carbon tax. Now we have cross party support for emissions trading and general agreement on involving all sectors. We are moving in the right direction."

Mr Neilson says the price is greater support in giving major emitters free emissions credits during the transition period between now and 2013, when all sectors will be covered by the scheme. Agriculture, the highest emitting sector, which the Sustainability Council report estimates will receive a net subsidy of up to $1.31 billion up to 2012, will be the last one to enter, in 2013.

"We need to recognise that, wherever emission trading schemes have been introduced, there is a transition period and a need to support the major emitting sectors, to protect them from overseas competitors who don't yet face a price on carbon, and to allow them to adjust and lower emissions.

"In agriculture's case, recent work by the Ministry of Agriculture and Forestry shows some parts of the sector, like dairy, can actually lift profits by 33% as a result of emissions trading, if they use nitrogen inhibitors, change some land use to forestry and lower energy use.

"The Business Council argues in its submission on the bill to introduce emission trading that we'd prefer some farm level emitters to be included in the scheme earlier where possible. Delegating responsibility – and the price incentive to act on emission reduction – would be desirable if it were made earlier.

"Farmers also need to recognise the major risks their industry is facing from overseas customers and domestic water quality issues. Overnight one of the UK's largest retailers, Tesco, started a trial of new carbon content labels on 20 house products. It's the trial of a new standard which will may quickly sweep the UK and other markets. The market will demand our food producers compete. Going carbon neutral early has already earned some New Zealand firms millions in new contracts, one with Tesco.

"Farmers also need to realise that if they don't act to reduce nitrate and other emissions, they will not get rights to discharge into our waterways. Many in agriculture recognise the need for leadership and to act more quickly.

"We also need policy to be broadly politically acceptable.

"It's been difficult to get everyone into the tent and agree in general on emissions trading. We can do nothing if we don't also manage the politics well both here and abroad."

The Business Council's 71 members' annual sales of more than $44 billion equate in dollar value to about 34% of gross domestic product. Members include leaders in all major sectors, including agriculture, energy, finance, professional services and retail.

ENDS

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