Grudging vote for carbon tax

By BRIAN FALLOW

The McLeod tax review gives tepid endorsement to the idea of a carbon tax.

It is sceptical about the magnitude of the global warming problem, and emphatic that New Zealand should not get ahead of the international pack in addressing it.

But, it says, if the Kyoto Protocol comes into force, a carbon tax would be a better instrument for transmitting the cost to the economy than a system in which individual companies trade in emissions on the international market.

"A broad-based carbon tax, aligned to international carbon prices and including the agricultural sector, merits consideration as New Zealand's central measure for the first commitment period [2008 to 2012]," says the review.

The protocol requires New Zealand to take responsibility for any increase in emissions above 1990 levels.

New Zealand can either cut its emissions of greenhouse gases or buy emission rights surplus to someone else's requirements on the international market.

The McLeod committee considers emissions trading is best done by the Government, rather than handed over to individual companies.

Devolving trading to the level of companies would involve divisive disputes about how the initial stock of carbon credits should be divided up, says the review.

Using a carbon tax as the central domestic policy instrument would avoid that and deliver lower compliance costs.

The committee sees no reason to exclude belching sheep and cattle, which are the largest single source of greenhouse gases in New Zealand.

The Government has in the past indicated a preference for devolved emissions trading, but Finance Minister Michael Cullen said yesterday: "We are not ruling out a carbon tax at this point."