Submission to ETS Review Panel (#4)
NZCPR Submission on the Emissions Trading Scheme Review
1. THIS SUBMISSION IS FROM:
Dr Muriel Newman on behalf of the New Zealand Centre for Political Research
The New Zealand Centre for Political Research is a public policy think tank established in 2005 by former Member of Parliament Dr Muriel Newman. The NZCPR takes a research based approach to public policy matters of a national interest. The NZCPR Weekly electronic newsletter is the biggest in the country with almost 30,000 subscribers, and the NZCPR.com website attracts upwards of 1 million visitors each year. This submission is also on behalf of over 6,500 people who have signed an on-line petition to suspend the ETS.
The NZCPR wishes to address Question 1 of the consultation document: What do you think of the overall package of amendments the Government is proposing to make to the ETS as outlined in this document?
The NZCPR believes that the amendments to the ETS that are being proposed are fundamentally flawed and that the on-going cost burden it will impose on New Zealand businesses and families makes it unaffordable.
- The NZCPR strongly rejects the proposed changes to the ETS and recommends that the scheme is repealed at the end of 2012, once the Kyoto Protocol expires.
5. KEY POINTS:
*KYOTO PROTOCOL WILL EXPIRE IN DECEMBER AND SHOULD BE REPEALED AT THAT TIME:
The ETS was introduced by the Labour government as a mechanism to ensure that New Zealand complied with the provisions of the Kyoto Protocol that required countries to keep their emissions of man-made greenhouse gases at no more than 1990 levels during the four year period from 2008 to 2012. Since the Kyoto Protocol expires in December 2012, and there is no on-going binding agreement, the justification for the scheme also expires.
- After December there will be no international obligations to meet - for that reason, the NZCPR recommends that the ETS should be repealed at the end of the year.
*THE ETS IS INEFFECTIVE:
Figures released by the government, indicate that New Zealand will easily meet our Kyoto obligations – but not because of the ETS.
Some of the biggest reductions in emissions occurred as a result of the drought in 2008, when farmers reduced livestock numbers. Since livestock contribute almost half of New Zealand’s greenhouse gases slaughtering cows and sheep helped to reduce our liability.
Higher rainfall helped too. When the lakes are full, hydro and geothermal generation go a long way towards meeting New Zealand’s demand for power.
The recession followed by the global economic crisis have dampened the economy - including output from the transportation and manufacturing sectors, two of the main contributors to the production of man-made greenhouse gases.
It was a combination of factors such as these that have reduced New Zealand’s emission of greenhouse gases.
- The ETS has created an ineffective bureaucracy and should be repealed.
*THE ETS IS UNAFFORDABLE AND PLACES AN UNFAIR COST BURDEN ON HOUSEHOLDS:
The ETS has been designed to pass the cost of carbon and the bureaucracy onto households. Former Minister Nick Smith acknowledged the success of the scheme in transferring costs onto consumers last year: “Early signs are that a price on carbon has successfully entered the New Zealand economy; businesses and foresters are factoring in this price into their long-term decisions and passing the price of carbon down to consumers”.
It is estimated that the ETS has cost businesses $350 million a year since it was introduced in 2010. Once the transition phase is over, it will cost over $700 million a year. The scheme is designed to pass these costs on to households.
To date the cost burden on the average family of four has been estimated to be around $750 a year. This is expected to double over the next three years to around $1,500 a year.
These costs represent an unaffordable government regulatory impost on businesses and households that are struggling in an extremely difficult economic climate.
- If the government is serious about its desire to grow New Zealand’s economy and raise our living standards, the ETS must be repealed.
*THE ETS IS DAMAGING THE COMPETITIVENESS OF NEW ZEALAND BUSINESSES:
Before the Emissions Trading Scheme was introduced, many businesses expressed concern that a price on carbon would be unaffordable and could affect their viability - especially those competing against rivals in countries that do not have carbon charges. Many of those businesses will have managed to cope with the present carbon prices. But the proposed doubling of charges will inevitably force some to close, others to lay off staff, and some businesses with a strong manufacturing component to relocate to countries where such arbitrary costs are not imposed.
- The ETS has imposed an unacceptable cost burden on businesses that have to compete with countries that do not have an ETS and should be repealed.
*NEW ZEALAND’S ETS ENSURES WE DO MORE THAN OUR “FAIR SHARE”:
The government continues to pretend that New Zealand should only do its “fair share” - while ensuring the ETS doesn’t impact unreasonably on business and households. Under the present ETS, this statement is a grossly misleading fabrication.
The ETS has been specifically designed to ensure that New Zealand does far more than its fair share, as the former Minister Nick Smith explained to Parliament: “On 1 July 2010 New Zealand will have the first emissions trading scheme up and running outside Europe, and it will cover more sectors than the European scheme does. We were also the first country in the world to include forestry, in 2008, and we were the very first country in the world to have a plan for introducing agriculture, in 2015. If we can settle our emissions trading scheme by December, we will be at the front end of international action on climate change, and will actually have the most comprehensive emissions trading scheme of any country in the world.”
New Zealand’s ETS remains the only country-wide trading scheme in the world outside of the European Union. The EU scheme is not an “all gasses, all sectors” scheme like New Zealand’s - instead it targets just 43 percent of industrial emissions. It excludes the transport sector, households and small businesses, agriculture, and construction and waste. In addition, the EU scheme is based solely on carbon dioxide and excludes methane, which is such a major part of our emissions profile.
If our ETS had been modelled on the EU scheme, to include only manufacturing and heavy industry, the cost burden on the country would have been minimal. But rather than deal fairly, by excluding food producers, households, small businesses and transport, all sectors are included in our scheme.
- The ETS inflicts a disproportionate cost on the New Zealand economy and should be repealed.
*AN ETS CARBON TAX IS UNACCEPTABLE:
If the objective of the government is to convert the ETS into a permanent carbon tax – as appears to be being signalled in the consultation document – then this should be strongly rejected.
The ETS was not promoted to New Zealanders as a permanent carbon tax - it was justified as a temporary mechanism to help us comply with our Kyoto Protocol commitments.
- To convert the ETS into a permanent carbon tax by stealth is dishonest and should be rejected – the ETS should be repealed.
*NEW ZEALAND VERSUS AUSTRALIA - HOW OUR GOVERNMENT PENALISES CITIZENS:
While the New Zealand government is proposing to punish New Zealand householders permanently with an unaffordable carbon tax, the Australian government has gone to great lengths to ensure that the public does not bear the cost of their controversial carbon tax. Some $15 billion worth of tax cuts and other benefits have been proposed to compensate households for the cost. In total, 90 per cent of households are expected to get tax cuts and/or extra payments when the $23 per tonne price kicks in on July 1st this year. These tax cuts and other compensation measures are meant to ensure that the average household will be 20 cents a week better off, not worse off.
It is no wonder that record numbers of New Zealanders are flocking to Australia, when our government, in comparison, is planning to punishes citizens permanently by converting the most far reaching, costly and bureaucratic ETS in the world into a permanent carbon tax on households.
- To help stop the exodus of New Zealanders to Australia, the ETS should be repealed.