24 September 2012

The Perfect Storm: ETS profitable for Emitters, while Costing the Economy and Environment

Ollie Belton of Permanent Forests International told the Finance and Expenditure Select Committee last week that the NZ Emissions Trading Scheme is currently facing the perfect storm resulting in a defective scheme that is benefiting polluters while failing the environment and the New Zealand economy. He told the Committee that instead of fixing the issues the changes under the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill will make the situation worse.

In his oral submission, Belton argued that there is a lack of transparency in the NZ ETS which allows emitters to pass through carbon charges to consumers at an inflated price up to the $25/unit cap, while they purchased cheap offshore credits, instead of investing in carbon forestry or clean technology. This means that carbon pollution under the NZ ETS has become a valuable additional income stream to emitters.

However, the Committee was told of a silver lining; which is that the NZ economy can cope with a reasonable carbon price close to $25/unit. The issue is making sure that the money goes to domestic efforts to reduce emissions and not as profit to emitters who are responsible for the pollution.

Permanent Forests proposed four key amendments to the Bill which it say’s would transform the ETS into a meaningful tool for reducing New Zealand’s GHG emissions and help send the right price signals through the economy.

1. Require Transparency in carbon charges being passed through to consumers from emitters to ensure the margin on carbon goes to the right place i.e. either stays with the consumer or goes to emissions reduction projects.
2. Restrict UN Credits to at least 50%. This will immediately raise the price of NZ units ensuring some capital is kept in NZ and is spent on carbon forests and clean technology.
3. Only Auction NZ Units to fill the shortfall in the domestic supply of units from NZ forests. This will help maintain a reasonable price in the NZ ETS and gather revenue for Government.
4. Earmark Auction Revenue to invest in domestic emission reductions such as insulating homes or subsidising permanent forest projects that deliver multiple land use benefits such as riparian plantings or native forest restoration.

Permanent Forest International’s written submission can be read here.

ENDS

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