4 AUGUST 2011

Climate change update

New Zealanders seem to want a cautious approach to climate change policy, seeing other issues as more important and expressing concern about the cost of dealing with climate change, this year’s Greenhouse Policy Coalition survey shows.

“The survey shows that while many people feel climate change is an issue we need to deal with, they see other priorities as more important and are very concerned about any policies that impose further costs on them,” says the Coalition’s Executive Director, David Venables.

“The results should reinforce comments in recent months by the Government on continuing to moderate the impact of the emissions trading scheme on consumers and businesses.

“The Coalition has previously recommended that the ETS

transition measures should remain in place until there is comparable progress internationally, with retention of the $25 fixed price cap and surrender half-obligation (i.e. one carbon unit surrendered by emitters for each two tonnes of emissions).

“We also note the first ETS annual report, released this week, indicates the scheme is working to the Government’s satisfaction with these measures in place.”

The survey shows those agreeing that climate change is a serious issue increased to 39% this year from 36.3% in 2010. This is still below the 2009 figure, when 42.6% rated climate change as a serious issue.

The Coalition’s survey also found:

43% disagree NZ should take part in a global

emissions trading regime if it costs people $5 each a week – an increase from 38% in 2010

Just 19.4% agree we should cut emissions if it costs jobs – slightly up from 18.1% last year

Only 26.8% agree NZ should reduce emissions if it means cutting our standard of living, a small increase from last year’s 23.4%

Only 40.3% agree with the statement “I feel fully informed about the ETS”; this is, however, a rise on last year’s response of 33.9%

The survey, conducted by UMR, interviewed 500 people by telephone in July. It has a margin of error of 4.4% at a 95% confidence level.

Public urge caution on climate change—survey

Post-2012 gap almost certain for Kyoto

It’s official - there will almost certainly be a gap in terms of international obligations to reduce emissions after 2012.

The executive director of the UN body leading the negotiations, Christiana Figueres, told delegates at the negotiations in Bonn in June that there is not enough time left to pass a new agreement

to replace the Kyoto first commitment period obligations when the period finishes at the end of 2012.

Furthermore, few are expecting an agreement for a new commitment period to come out of this year’s Durban conference.

The prospect of a post-2012 gap raises some issues for

New Zealand, including:

Whether we set up bilateral carbon trading links, e.g. with Australia.

What sort of price we are exposed to in the absence of binding Kyoto targets.

How we access least cost carbon abatement.

Highlights of climate change survey 2011

Climate change 9th out of 10 on list of issues

2010—10th

39% see climate change as a serious issue

2010—36.3%

43% oppose spending $5 a week to take part in global emissions trading

2010—38%

19.4% support cutting emissions if it costs jobs

2010—18.1%

26.8% support cutting emissions if it reduces our standard of living

2010—23.4%

38.2% think pricing carbon is fair

2010—32.3%

44.2% feel we shouldn’t “quibble too much about money” in tackling climate change

2010—45.1%

40.3% say they feel fully informed about the ETS

2010—33.9%

The Greenhouse Policy Coalition represents New Zealand’s energy intensive, trade-exposed businesses:

Rio Tinto (Alcan) NZ Ltd

Carter Holt Harvey Ltd

Fonterra Cooperative Group Ltd

Solid Energy NZ Ltd

Methanex NZ Ltd

New Zealand Steel Ltd

BusinessNZ

If you have any questions or wish to contact us, please call +64 4 473 0600, +64 27 848 2368, or email us.

The Australian Government last month announced it will bring in a carbon tax on 1 July 2012, with a starting price of $A23 per tonne of emissions. The carbon price will rise by 2.5% a year until the scheme morphs into an emissions trading scheme (ETS), due to happen by 1 July 2015. At that point, a rising floor price and price cap will kick in.

Comparing the Australian scheme with the NZETS is very difficult. It is tempting to compare the headline price figures, and conclude that New Zealand should drop its emissions half-obligation and require emitters to surrender one carbon unit at $NZ25 for each tonne of emissions.

This is a simplistic response.

The half-obligation is our limited answer to Julia Gillard’s multi-billion dollar compensation policy, which will see several million households receive tax cuts and other support measures to offset price rises, including petrol for individuals and small businesses being exempt from the tax. The agriculture, forestry and fishing sectors will also avoid paying a carbon charge for fuel. If the half-obligation is removed, the fuel and power price rises New Zealanders pay due to the ETS will double.

In Australia, businesses caught by the carbon tax have compensation set at 94.5% for the most intensive emitters, falling to 66% for the second tier. If you factor in the half-obligation, the impact on New

Zealand emitters at a 90% free allocation of carbon units is very close to the Australian 94.5% level. Remove the half-obligation and a major disparity creeps in.

The half-obligation will help keep the cost impact of the NZETS and the Australian scheme comparable.

The two schemes serve different economies and respond to different emissions profiles. Comparisons should be made cautiously and perhaps only at a sector or even company level. This caution will be essential as the two countries discuss linking their two schemes.

BusinessNZ has produced a detailed comparison of the two schemes, which can be found on its website.

Information about the Greenhouse Policy Coalition

When New Zealand developed its emissions trading scheme it was envisaged that there would be a global carbon market, with trading schemes in many countries. However, progress towards this goal has been disappointing.

The United States attempted to bring in a cap-and-trade scheme last year, but this ground to a halt at the Senate, partly due to opposition from some Democrats.

The election late last year of a Republican-dominated House of Representatives means there is little chance of cap-and-trade coming back on the agenda any time soon.

California intends to start a cap-and-trade scheme in January, but the state recently announced it was pushing back that deadline by a year.

Ten eastern states set up the Regional Greenhouse Gas Initiative to target emissions from power generation, but New Jersey is in the process of withdrawing.

Japan late last year announced it was shelving its ETS plans, and has since started to rethink its ability to meet emissions reduction targets in the wake of the Fukushima nuclear leaks.

South Korea has pushed out the intended start date of its ETS by two years. Originally meant to start in

2013, the scheme is now timetabled for 2015.

China intends to start six provincial and city pilot emissions trading schemes by 2013 - Beijing, Shanghai, Chongqing, Tianjin, Hubei and Guangdong. The plan appears to be to try and move to a national trading scheme by 2015. Recent comments from China suggest these target dates are optimistic.

It is this slow progress that has led our Government to suggest the NZETS $25 fixed price cap and surrender half-obligation might be kept beyond 2012 and that agricultural gases might not come into the ETS in 2015.

Slow progress on carbon pricing everywhere else

Comparing Australian and NZ carbon schemes difficult

ends

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