Carbon tax part of Government policy under Kyoto Protocol

12.00pm

The Government intends imposing a carbon tax on greenhouse gas emissions but it will not be introduced before 2007, Energy Minister Pete Hodgson announced today.

It is part of the Government's policy to meet the targets of the Kyoto Protocol, which it expects to ratify in August.

If it is ratified by enough countries, the protocol will come into force with binding effect in 2008. Under its provisions, New Zealand would have to reduce emissions to 1990 levels over five years from 2008 to 2012.

Other main points in the policy include:

* the provision of government incentives for projects that will deliver defined reductions in greenhouse gas emissions, in any sector of the economy;

* negotiated "greenhouse agreements" for sectors and industries that would face difficulty in adjusting to a full price on emissions in the first commitment period (2008-2012);

* exemption for the agricultural sector from any price measures in the first commitment period provided the sector is willing to invest in research to identify options for reducing agricultural emissions.

Mr Hodgson said the price on carbon dioxide emissions -- the carbon tax -- would be applied at first through an emissions charge on carbon fuels and would be capped at $25 a tonne of carbon dioxide equivalent.

Ratification of the protocol is opposed by the business and agricultural sectors.

They argue that it will damage New Zealand's trade competitiveness against countries such as Australia and the United States, which are not going to ratify it and are proposing alternative solutions. European Union governments support the protocol.

The Government says the danger greenhouse gases pose to the environment outweigh the concerns.

Today Mr Hodgson said climate change was being taken seriously.

"We have much to lose if global warming continues unchecked, and much to gain by contributing to the international effort to tackle it through the Kyoto Protocol," he said when he released the policy.

"This package lines up with the Government's principles of ensuring that policy achieves permanent reductions in emissions over the long term."

Mr Hodgson said revenue gained from a carbon tax would not be used to improve the Government's financial position but would be "recycled", for example through the tax system.

Under the protocol there will be a system of "sink credits" paid to countries which take measures to soak up emissions, mainly through forests.

Mr Hodgson said the Government would retain those credits, at least for the first commitment period, and would accept liability created by the protocol for deforestation.

Mr Hodgson said final policy decisions would be taken in July, as would the decision to ratify the protocol.

"A decision in principle to ratify was taken in February and the Government anticipates ratifying in August. We are likely to be about the 20th developed nation to do so," he said.

"As far as domestic policies are concerned, we began last spring with New Zealand's first ever energy efficiency and conservation strategy."

He said those and other policies such as waste management would help prepare the country to meet the protocol's requirements.

"Their effectiveness means that no pricing policies, for example in the form of a low emissions charge, will be necessary before 2007."

- NZPA

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