Catherine Beard: Council not looking at the full picture in estimating taxpayers' climate bill

Opinion

The Sustainability Council claims that taxpayers will be "subsidising" business and agriculture to the tune of billions of dollars if the Government passes through some of the free units from the United Nations to these sectors.

It claims huge taxpayer "subsidies" will occur in the first commitment period, which is 2008-2012. However the most recent greenhouse gas inventory shows that New Zealand will be in credit in this period, due to our tree sinks having been higher than our emissions over and above 1990 levels.

Instead of the Government owing the United Nations millions of carbon units, we will be in credit by an estimated $300 million. So how does the Sustainability Council turn a surplus of units allocated by the UN into a big bill for taxpayers?

They don't take into account the tree sinks that will offset the increase in emissions since 1990, they are using gross figures instead of net figures.

The council argues that we should not be counting the tree sinks now against our country liability because those credits will have to be paid back in 2020 when the trees are felled. It argues that it is better to put all the cost on agriculture and industry now, even if we are the only country in our trading region to put a price on carbon.

The council is ignoring that by 2020 there may no longer be any loss of competitiveness issues, if all the countries in our trading region have decided to join New Zealand in pricing carbon. Also, there might be more technology solutions available in 2020 that will allow agriculture and industry to reduce emissions at a lower cost.

To get to big, scary numbers the council had to extrapolate costs out to 2090 and assume high prices of carbon.

If New Zealand is still in the minority of countries pricing carbon by 2020 then we have shot ourselves in the foot economically and we will have probably contributed to the increase in global emissions by driving our highly efficient agriculture and industrial manufacturers to more carbon-intensive countries.

There is plenty of much more credible and peer reviewed economic analysis that concludes if we wanted to take the least cost approach to meeting our Kyoto commitment then it would be cheaper for the Government to just go out and buy the carbon units on the international carbon markets if we are short.

The analysis does not recommend this course of action, because it advocates sending a price signal to industry and agriculture, but notes that if you put all the costs on already efficient productive sectors you risk losing the engine of your economy.

The Institute of Economic Research and Infometrics found that if we do not get similar action from other countries in putting a price on greenhouse gas emissions in terms of coverage, timing of entry and free allocation, then the cost to New Zealand increases by 33 per cent at $25 a tonne and by 50 per cent at $100 a tonne of CO2.

The Sustainability Council has painted the taxpayer as the saint and the industrial manufacturer or agricultural producer as the sinner. The facts are that emissions have increased by about 20 per cent since 1990, and so has the population. Emissions increases correlate closely to population growth.

There is no environmental gain if our efficient industry and agriculture producers are forced to move to more carbon intensive countries to stay in business.

* Catherine Beard is executive director of the Greenhouse Policy Coalition.