Details soon on carbon tax plan

David Parker

The Government may provide details on options for a carbon tax on the country's power generators as early as next week, Energy Minister David Parker said yesterday.

Parker told Parliament the Government was likely to publish a formal proposal for submissions within the next two months. He declined to comment on the options before announcements planned for next week.

"Having a price or risk of carbon cost to investors in generation is an important consideration for climate change policy," he told members of Parliament's commerce select committee.

A previous carbon tax plan, which was to start next year, was forecast to raise electricity costs by about 6 per cent. That would make power from the coal or gas-fired power stations owned by Contact Energy, Genesis Power and Mighty River Power more expensive than that from wind farms and hydro-electric dams. TrustPower last month cited the scrapping of that tax in its decision to cancel a proposed wind farm project.

Shares in Contact closed at $7.38 yesterday, up 3 cents.

New Zealand, a signatory to the Kyoto Protocol on climate change, had planned to charge power generators and factory owners $15 for each tonne of carbon dioxide produced.

The tax was cancelled in December after a decline in forest planting and increased economic growth meant emissions would exceed Kyoto targets by 36.2 million tonnes in the period from 2008 to 2012.

The Government had previously expected to beat its target, giving it emission credits to sell and offset the harm to the economy from higher taxes.

At the time, Parker said the Government may revisit a tax for just the largest power users and polluters. It was also likely to retain negotiated greenhouse agreements, or NGAs, which exempt companies from the tax if they bring their plants to world-best standard for emissions and energy efficiency.

Government-owned Genesis Power runs the 1000MW coal-fired Huntly power station, the country's biggest generator.

The company, which has run Huntly at near capacity the past year to meet rising demand, had expected to pay an extra $60 million under the earlier proposal.

"You can't just turn Huntly off," Genesis spokesman Richard Gordon said. "We would like to see some sort of NGA for Huntly under which we would work to reduce its emissions over the rest of its working life."

- BLOOMBERG