Carbon curbs tipped to push up prices

By BRIAN FALLOW, Economics editor

The Kyoto Protocol to curb global warming could add 4c a litre to the price of petrol and 8 or 9 per cent to commercial and residential electricity prices by 2008, according to a study by PA Consulting Group.

The study, commissioned by the Ministry of Economic Development, looks at the effect of a proposed regime of tradeable permits to emit greenhouse gases.

If New Zealand ratifies the protocol and if, as seems likely, enough other countries do for it to come into force, New Zealand would be committed to reducing its net emissions of greenhouse gases back to 1990 levels on average in the first commitment period, 2008 to 2012.

The PA study make two crucial assumptions. One is that the initial allocation of permits is auctioned rather than grandfathered (that is, allocated free according to historic emission levels).

The other is that the international price of permits is $20 a tonne of carbon dioxide equivalent.

The actual price will not be known until trading begins.

On those assumptions the study concludes that:

* The costs of the Glenbrook steel works could rise to the point that its viability is undermined.

* The costs of agricultural production would rise by 5.5 per cent for dairying, 10 per cent for beef, 16 per cent for lamb and 21 per cent for venison.

* Wholesale gas prices would rise 30 per cent, coal prices 60 per cent and electricity prices 16 per cent.

* Transport fuels would rise around 4c a litre.

* The cost of a New Zealand-made refrigerator would rise 1 or 2 per cent.

The chief executive of the Employers and Manufacturers Association (Northern), Alasdair Thompson, said New Zealand would be disadvantaged whatever the price of carbon, because our main competitors - the United States and Australia - were not signing the protocol.

nzherald.co.nz/climate

Intergovernmental Panel on Climate Change (IPCC)

United Nations Environment Program

World Meteorological Organisation

Framework Convention on Climate Change

Executive summary: Climate change impacts on NZ

IPCC Summary: Climate Change 2001