What we should do about the emissions trading scheme

What we should do about the emissions trading scheme

The Government has made it clear that we are going to press ahead with the emissions trading scheme.

Not everyone will welcome this. Many had sought a delay till other countries start emissions trading.

Among business there’s a wide range of opinion stretching across the spectrum from zealous green right through to emissions denial.

The most common reaction has been concern about increased energy costs coming just as many businesses start to recover from the recent recession.

Why not delay it, they say – especially since Australia is now pulling back from its earlier commitment to emissions trading.

The answer is probably that delay wasn’t a feasible option.

New Zealand’s situation is very different from Australia’s. Australia has never had an emissions trading scheme, so delaying the introduction of one would have been relatively straightforward.

But New Zealand has been committed to it ever since the ETS legislation passed in 2008 by the previous Labour-Greens Government.

The present Government came into power that same year, on an election promise to improve the ETS passed by Labour and the Greens.

Their mandate wasn’t to dismantle or delay the scheme, but to improve it. Arguably they have done this, although most of us would like to see it improved a great deal more.

Had the Government sought to dismantle or delay, we would have had a fourth Parliamentary / select committee process in as many years, with even more divisive, rancorous debate.

With Labour committed to returning New Zealand to the previous draconian ETS and the Greens unwilling to compromise on their climate change stance, the issue would have become a long-running festering sore.

Politically, the Government has probably done the best it could, given competing environmental and economic constituencies

Taking the longer view, it’s hard to deny the certainty that the world is headed towards a price on carbon.

Whether it’s by way of carbon taxes or emissions trading schemes and whether within two years or twenty, the clear intent of governments around the world is to restrain emissions using economic tools.

Despite the problems at Copenhagen and in the months since then, virtually every developed and many developing countries including China, India and Brazil, have now associated themselves with the Copenhagen Accord.

The international process will continue, and organisations and individuals all around the world will continue to press governments to take action to reduce emissions.

Official figures show New Zealand is on track to meet our 2012 Kyoto target. In 2012 our gross emissions will be 23% higher than in 1990, but that this will be more than offset by forests planted since 1989, with many New Zealand foresters actively receiving tradeable carbon credits.

So, under the ETS, the incentive to plant trees is beginning to work and it will be bolstered by the financial incentive to reduce emissions from 1 July.

The fact that we already had ETS legislation as far back as 2008 and the kinds of decisions made by other governments over the last year have led to the situation where New Zealand is now a leader in taking action on emissions, rather than our desired position of fast follower.

With the Government’s decision to stick to its course on emissions trading, we should now focus on making the scheme the best it can be.

We should hold the Government to account on its pledge to ensure the scheme does not harm our economy with flight of capital or loss of jobs.

Business should keep the pressure on the Government with regard to this, and BusinessNZ will work with the Government to address some of the issues of concern to our member businesses, including affordability of energy costs, impact on consumer confidence, impact on small firms, and protection for trade-exposed firms.

Having made a firm decision to forge ahead with the emissions trading scheme, the Government will need to conduct the execution of its policy the right way, using the proper decision procedures.

The way in which Environment Minister Nick Smith recently floated changing the entry date of agriculture was not an example of proper decision procedures.

It is a perfectly valid position to say that if the rest of the world is not going to include agriculture in their carbon pricing policies, then New Zealand should not do so either.

But if so, it should be a decision that is made according to proper processes, not through floating ideas in the media and making policy on the hoof. If the rules for agriculture were to get changed in that way, what else would?

What we should all do – all New Zealanders – is keep informed about what is happening here and overseas, and hold our Government to account on its pledge to ensure the emissions trading scheme does not cause us harm or competitive disadvantage.

We are scheduled to have a review of the scheme before the end of next year. BusinessNZ believes this review should be brought forward to start no later than the end of this year.

The review should cover issues like the cost impact on consumers and businesses, competitive disadvantage issues and the position of agriculture and other sectors within the scheme. Positions need to be developed based on current economic and international considerations.

We should all keep in mind the fact that the world’s consumers are increasingly seeking low-carbon goods and services and our ETS is the vehicle for nudging our producers onto a profitable low-carbon path.

And in all the debate around this issue we shouldn’t forget that, at the end of the day, taking action to reduce emissions and look after our environment is in the long run the right thing to do.

Phil O’Reilly is Chief Executive BusinessNZ




6 May, 2010

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