Carbon-tax option back on agenda

David Parker

A carbon tax limited to major emitters of greenhouse gases such as thermal power stations and big smokestack industries remains an option, Climate Change Minister David Parker says.

A Cabinet paper on "the way ahead" for climate change policy, released yesterday, says that "in the longer run the most effective policy mix is likely to include mechanisms that introduce a price [cost] of greenhouse gas emissions".

And in order to minimise the risk of stranded assets where investments have long lives, the sooner such signals are made the better, it said.

Last December when the Government scrapped plans for a broad-based carbon tax, which would also have applied to transport fuels, the option of a narrow-based tax was left on the table.

Parker said yesterday that he was open-minded about the issue and that a decision could be 18 months away.

Options other than a carbon tax are also under consideration as a transitional measure to prepare large emitters for whatever regime is adopted post-2012, when the Kyoto Protocol's first commitment period ends, an outline of the Government's climate change work programme indicates.

They include emissions trading (such as the Europeans have), voluntary agreements (which large New Zealand emitters already have some experience of) or regulation through the Resource Management Act.

Catherine Beard, of industry lobby group Greenhouse Policy Coalition, welcomed the Government's commitment to consultation, which was vital if politically durable policy was to eventuate.

"There seems to be a greater willingness to look at the costs and benefits of some of these ideas," she said.

"You have got to evaluate whether the price signals will have an impact. Are they enough to change behaviour or will they just add cost? Which often depends on whether there are technological alternatives available."

Other policies being worked on are a regime for progressively improving the fuel economy of the national car fleet, perhaps by banning imports of vehicles over a certain age, or imposing differential fees at the border.

A transport biofuels target is also being looked at.

And the Government will be talking to the forestry sector on the vexed issues of incentives for planting new forests and replanting those which are harvested.

Parker emphasised the need for climate change policy to focus on the longer term, that is the period after 2012, but said it was difficult for the Government to give businesses the policy certainty they wanted when it was unclear what the international framework would be.

"Whether [Kyoto] metamorphoses into something better post-2012 only time will tell," he said.

The Government might have to make some assumptions about what the level of international commitment on the global warming issue would be and say that if that did not eventuate it would have to look at the matter again.

Meanwhile, Parker indicated that fresh official estimates, due soon, of the extent to which New Zealand is likely to fall short of its target under the Kyoto Protocol should show some improvement on the 36 million tonnes of carbon dioxide equivalent projected last year.