New Zealand Emissions Trading Scheme
The NZ ETS was until 2015 highly linked to international carbon markets as it allowed unlimited importing of most of the Kyoto Protocol emission units.
The impacts of the various options were estimated as the differences between a carbon tax and a reference 'business as usual' scenario assuming New Zealand had not signed the Kyoto Protocol.
Therefore, the "interpretation of CGE results should centre on their direction (up or down) and broad magnitude (small, medium or large), rather than on the precise point estimates that the model produces".
[24] However, the report noted that there was little difference in costs between the government paying all and the ETS with free allocation, as all the model results indicated small reductions (-0.1% and -0.4%) in Gross National Disposable Income compared to 'business as usual'.
[2] The proposed scheme covered all six greenhouse gases specified in the Kyoto Protocol and was intended to progressively apply to all sectors of the economy including agriculture.
[33] The Labour Government subsequently lost the 2008 New Zealand election to the coalition led by National Party, who had campaigned on amending the NZ ETS.
[35] On 24 September 2009, the Climate Change Response (Moderated Emissions Trading) Amendment Bill had its first reading in Parliament and was sent to the Finance and Expenditure Select Committee for public submissions.
[11] There is also no cap on total emissions during the transition period as the Government will supply the market with unlimited New Zealand units at the fixed price of NZ$25 per NZU.
[50] Dr Christina Hood, a climate change and energy policy consultant, submitted to the Finance and Expenditure Select Committee that the use of uncapped intensity based allocation of units will result in a taxpayer subsidy to emitters of about NZ$105 billion up to 2050.
[52] Nick Smith's Cabinet Paper noted that the New Zealand Treasury had estimated that the long-term costs of intensity-based allocation of units to industry and agriculture would be 'very significant', in the order of NZ$900 million per annum by 2030.
[53] The Clerk of the House invited economist Suzi Kerr to give independent specialist advice on the Climate Change Response (Moderated Emissions Trading) Amendment Bill.
Kerr's advice was that the free allocation of emission units significantly raised the overall cost of the NZ ETS to the economy and transferred it to taxpayers.
In late 2009, Climate Change Minister Nick Smith stated that estimates of fiscal impacts beyond 2020 at the present time are meaningless as there are simply too many unknowns.
[57] During the transition period participants in energy, fossil fuels and industry will only need to surrender one NZU for two tonnes of carbon dioxide equivalent emissions.
Our modelling suggests that, in the short term, such exemptions do not reduce economy wide welfare.The Parliamentary Commissioner for the Environment considered that there was insufficient evidence to justify leaving agriculture out of the NZ ETS until 2015.
[40] During the transition phase (July 2010 to December 2012), only the forestry sector will be able to convert the NZUs allocated to them to assigned amount units that can be sold to overseas buyers.
The Coalition stated that it approved of the half-cost unit surrender obligation in the first commitment period, the $12.50 price cap on carbon, and the slower phase-out of assistance to industry.
[70] Business New Zealand welcomed National's revisions to the NZ ETS of 14 September 2009 as better balancing environmental and economic needs, and stated that it was pleased that the Government had accepted the intensity basis for allocation of units.
[71] The Business Council for Sustainable Development stated that New Zealand was risking "being left behind" in proposing an all-sectors, all-gases ETS that in 2015 would have almost no impact on heavy emitting industries facing international competition.
[27] The New Zealand Herald described the Climate Change Response (Moderated Emissions Trading) Bill as "backward legislation" and a "miserable offering to the international effort".
[76] In November 2009, the Sydney Morning Herald reported that the revised NZETS had been "significantly watered down" and that it gave "big polluters a much easier ride".
[78] In March 2010, Reuters reported that the NZ ETS had "no emissions cap nor any limit on the number of free carbon permits for energy-intensive companies that export their products".
Reuters noted that the absence of a cap and the two-tonnes-for-one-unit surrender arrangement had led to "accusations of some big polluters getting a free ride and that the scheme will fail to cut emissions of planet-warming gases".
[79] In March 2010, The Economist commented on the delayed entry of agriculture into the scheme and noted the environmental concerns over the "generous allocations of free carbon credits to business".
[80] Rod Oram commented in a Sunday Star Times column that the National Government's changes to the ETS were "a giant step backwards" which would "drive up emissions, perpetuate old technology, necessitate ever-greater subsidies and reduce New Zealand's international competitiveness and reputation."
[84] Labour Party climate change spokesman Charles Chauvel said that the National NZ ETS "is fundamentally flawed on multiple levels.
Boscawen was critical of the effect that the ETS will have on households and farmers, stating that the average power bill will rise 10%, fuel bills will rise by 7 cents per litre and dairy farms will face an increase in costs before agriculture enters the scheme of NZ$7,500 per year as a result of associated increases in fuel, electricity and the cost of processing milk products.
[90] Gary Taylor, of the Environmental Defence Society, said that "An emissions-trading scheme welcomed by polluters and coal producers is not going to work" and "New Zealand is now a climate change laggard".
[94] In October 2009, New Zealand's independent environmental watchdog, Jan Wright, the Parliamentary Commissioner for the Environment, made a submission to the Select Committee considering National's amendments to the NZ ETS.
[58] In April 2011, a report prepared by consultants Covec for the Ministry for the Environment concluded that the NZETS had no discernible impact on either wholesale or retail electricity prices.
