Heat increases on Govt to delay start of carbon trading

Business New Zealand chief executive Phil O'Reilly. Photo / Mark Mitchell

The Government is under increasing pressure from business, farmers and coalition partner Act to delay or at least soften the impact of the emissions trading scheme (ETS) ahead of its introduction in July this year.

Yesterday Business New Zealand chief executive Phil O'Reilly confirmed his organisation was one of a number of signatories to a letter from business groups to the Government in March asking it to delay or alter the entry onJuly 1 of key parts of the scheme.

The Herald understands other signatories included the NZ Chambers of Commerce, the Road Transport Association, the Petroleum Exploration and Production Association, the Major Electricity Users Group and the Meat Industry Association.

Mr O'Reilly said the Government had made it clear its scheme was based on the expectation Australia would have its own ETS in effect before New Zealand and the local version would not cause a flight of capital or labour to countries that did not have carbon pricing.

"We weren't delighted with the scheme but were comfortable with it based on those predications. They're no longer there and really the Government needs to be rethinking the nature of the scheme and its impact."

Mr O'Reilly said Business NZ and other groups, including the Business Roundtable, had suggested three options in their letter: delaying the implementation of the scheme, amending it to give greater protection to emitters facing strong overseas competition, or bringing forward the 2013 review to 2011.

Don Nicholson of Federated Farmers said his organisation did not sign the letter but "would have been very supportive" if given the opportunity.

He indicated that Federated Farmers would continue its opposition to the scheme.

Act MP John Boscawen continued his attacks on the ETS last week in Parliament, saying that although agriculture would not be coming into the scheme until 2015, farmers would suffer significant additional costs from July this year anyway.

"No less than three-quarters of the ETS tax that farmers will pay comes as a consequence of their use of electricity, and petrol and the emissions of the dairy processing factories."

That could add $7800 a year to the average dairy farmer's costs.

Climate Change Issues Minister Nick Smith was not available for comment yesterday.

Labour climate change spokesman Charles Chauvel said he was aware of the pressure on the Government because of "rushed amendments" aligning the scheme with Australia's.

"It will be interesting to see whether it can resist pressure from certain business interests to suspend the scheme instead of amending it to make it better."

Green Party co-leader and climate change spokesman Russel Norman said suspending the scheme would send a signal to business "that there's never going to be a price on carbon".