Smith signals inevitable ETS delay for stationary energy

Thursday 25th June 2009

Inclusion of the stationary energy and industrial processes sectors in the Emissions Trading Scheme from next January was never achievable, Environment Minister Nick Smith told the Local Government and Environment select committee this morning.

He also revealed that cross-parliamentary negotiations are under way with the Labour Party to help ease the passage of an amended ETS, a select committee review of which is running behind schedule, with new legislation required before global climate change talks in Copenhagen in December.

"The timetables in the ETS were always unachievable, even without a select committee review," Smith said of the January 1, 2010, start date for stationary energy - power stations - and industrial processes in the ETS. "There is going to have to be some modification."

Smith is unable to officially announce timetable changes ahead of the reportback of the ETS select committee because of parliamentary rules. However, his comments all but confirm not only that stationary energy and industrial processes face delayed entry to the ETS, but also that they will be treated differently from forestry, which is also subject to delay.

Plantation forestry came into the ETS in January 2008, but the Government announced last week that forest owners would not be required to report for the scheme until 2011, a year later than previously envisaged.

It would be "untenable" to treat the stationary energy and industrial process sectors that way, Smith said after the select committee hearing. "You could not start up the ETS without the details of the allocation plans being known. Many of them (stationary energy and industrial) are processes of production and without knowing the net impact on the prices of their goods or services they provide, it's very unfair to impose that requirement on them."

Smith was guarded on the recommendation of last week's joint NZIER-Infometrics study for the ETS review which recommended the initial exclusion of agriculture from an ETS because of the cost and complexity of measuring agricultural emissions. Agriculture was already last into the ETS and would definitely to be included "at some point", Smith said.

He signalled also that transport fuels were a more straightforward proposition for ETS inclusion, and revealed that officials advised their inclusion prior to the current target date of January 2011 was possible, although the Government would make no decisions before the ETS select committee reportback to Parliament.

Commenting on the delay this week in the Australian Senate of that country's equivalent of an ETS, the Carbon Pollution Reduction Scheme, Smith said: "We are not waiting for Australia to make its decisions before ours, albeit we will be taking into account some of the key design features of the Australian scheme."

He reiterated to the select committee the Government's concern not to impose higher rates for inclusion in an ETS than Australia's, since this could discourage energy-intensive businesses from investing in New Zealand.

Smith also confirmed progress on establishing a target for emissions reductions through to 2020, which is required for the Copenhagen climate summit this summer.

New Zealand would take its position to pre-Copenhagen talks in Bonn in August, with announcements due in the next few days on the public consultation process relating to that setting that target.

Businesswire.co.nz

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