National does deal with Maori Party for watered-down ETS

Monday 14th September 2009

Sept 14 (BusinessWire) - The Government has secured the bare parliamentary majority it needs to pass an amended Emissions Trading Scheme by doing a deal with the Maori Party that promises special treatment for iwi (tribes) that gained forests in Treaty of Waitangi settlements.

While National says it will seek Labour Party support for the Bill, to be introduced to Parliament next week, Labour leader Phil Goff accused the Government of bad faith in its negotiations and of lumping the full costs of carbon reduction on taxpayer rather than polluter industries.

Details of the deal with the Maori Party are still being negotiated and may only emerge in detail as the amended ETS legislation works its way through the select committee process. The new Bill has yet to be drafted.

The deal confirms an intensity-based approach to the free allocation of carbon credits to major emitting industries without, at this stage, any cap on total allowable emissions before an industry is exposed to carbon prices. This remains the critical difference between National and Labour on how the ETS should operate.

Labour argues that energy-intensive industries need to face carbon prices at some stage to force investment in lower carbon technologies and that taxpayers will pick up the tab for their extra emissions.

Environment Minister Nick Smith counters that a capped approach could encourage major emitters to continue using old, inefficient technology rather than investing in new plant, since higher production with new equipment could expose them to increased carbon liability.

However, Smith indicated that the issue of a cap on intensity-based free allocation could yet be revived at the review of the ETS scheduled for 2011.

The ETS amendments hammered out with the Maori Party have the following key elements:

For the first three years of its operation to January 1, 2013, the new scheme will only impose a carbon cost on half the emissions originally intended to be covered in the industrial processes, energy, and liquid fuels sectors. This will limit the impact on households of electricity and petrol price rises caused by pricing carbon to around a 5% rise in electricity prices and a 3.5 cents per litre increase in petrol prices;
A transitional $25 top price for carbon will be imposed until January 1, 2013 to limit the impact of possible global carbon price volatility on industries needing cost certainty;
Agriculture will formally enter the scheme in 2015, two years later than planned, coinciding with Australia's timetable;
Forest owners will be able to trade their carbon credits internationally, removing one of the biggest barriers to increased forestry planting, which is essential to limiting the cost of New Zealand's carbon liabilities into the future;
The stationary energy and industrial processes sectors - covering big emitters like electricity generators, steel, aluminium, cement, and milk processing - will now enter the scheme six months later than planned, on 1 July next year, to give time for implementation of the ETS following delays this year;
Liquid fuels - mainly petrol and diesel - will come into the scheme at the same time as stationary energy, six months' earlier than planned;
Assistance with transition will reduce at a rate of 1.3% a year, consistent with National's goal of reducing carbon emissions by 50% from 1990 levels by 2050;
The fishing industry will receive 90% rather than 50% transitional support through to 2013.

The Government's aim is to have the Bill passed into law in time for the global climate change summit in Copenhagen in December.

Prime Minister John Key said the decisions balanced the need for New Zealand to do its part in world efforts to combat climate change while taking a "more modest" approach than Labour's scheme.

Settlements reached recently with central North Island iwi, and an earlier settlement with the South Island iwi, Ngai Tahu, carried no recognition of the impact on forest owners of an ETS if they choose to fell forests and use the land for another purpose.

The Maori Party put a similar deal to Labour before the last election, which declined because it feared not only creating a special class of Treaty settlement forestry assets with special property rights, but also that it would set a precedent for future renegotiation of Treaty settlements following major government policy changes which affect the value of settlement assets.

Businesswire.co.nz

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