Government caps emission charges in climate change policy

1.00pm - By KENT ATKINSON

The Government has capped its planned greenhouse gas emission charges at $25 a tonne for the half dozen gases contributing to global warming.

It plans to apply the charges between 2008 and 2012 to the use of fossil fuels such as petrol, oil, diesel, and coal, as well as emissions from industrial processes, and will not trigger the charges before 2007.

The huge revenues involved will be fiscally neutral, recycled back into the economy through tax reductions and funding of climate change projects, Energy Minister Pete Hodgson said today.

Mr Hodgson was announcing the Government's policy package on climate change, which he said would also keep open the potential for the government to switch from emissions charges to emissions trading in "carbon credits" if the international carbon market proves to be functional "and the price is reliably below the $25 cap".

Mr Hodgson is the convenor of the ministerial group on climate change, and said the confirmation by cabinet of the policies meant New Zealand would be ready to ratify the Kyoto Protocol to the United Nations Framework Convention on Climate Change once the Climate Change Response Bill was passed by Parliament.

The Government expects to ratify the protocol later this year.

"Policies announced today will enable New Zealand to meet its greenhouse gas emission targets under the Kyoto Protocol while protecting the nation's economic interests," Mr Hodgson said in a statement.

Cabinet had substantially confirmed the preferred policy package that was released for consultation in April, with some refinements.

The foundation policies of the climate change package were the Growth and Innovation Framework, the National Energy Efficiency and Conservation Strategy, the New Zealand Waste Strategy, climate change research, and a partnership with local government in addressing climate change at a local level.

The New Zealand Transport Strategy, still under development, would also be part of it.

Mr Hodgson said government incentives for climate change projects could deliver defined reductions in greenhouse gas emissions in any sector of the economy.

Incentives might include money or the pre-allocation of emission units. The government would invite competitive bids from firms or groups.

But to qualify, the projects would have to be on top of business-as-usual efforts.

He expected incentives would accelerate the uptake of emission reduction initiatives, including new technologies and practices, that would otherwise be uneconomic.

Where there was a "significant risk" to the international competitiveness of a business or sector, negotiated greenhouse agreements would be offered by the Government.

In sectors such as the cement industry -- which is a heavy user of energy, and manufactures locally only a little below the cost of importing cement -- the Government could seek a contractual commitment by the firm or industry to achieve international best practice in managing emissions, in return for exemption from all or part of the emissions charge.

Mr Hodgson said the agricultural sector would be exempted from both emissions charges or carbon trading regimes in the first commitment period to 2012, provided the sector invested in research to identify options for reducing agricultural emissions.

"The Government retains the option of imposing a research levy if the research effort falls below what is required," he warned.

In forestry, the Government would retain all rights to carbon sink "credits" and any potential liabilities allocated to New Zealand under the protocol in recognition of the carbon sink value of post-1990 forest plantings.

"These credits will be retained and managed by the Government, at least for the first commitment period," he said.

But the Government, rather than forest owners, would also assume the liability created by the Kyoto Protocol for deforestation, up to a specified cap.

Because the forestry sector had helped create the sink credits, a "forestry framework" for further policy development would be put in place to allow measures such as raising the cap on deforestation liability, and establishing a mechanism to encourage permanent forest sinks.

"This is a robust package of policies to achieve permanent reductions in greenhouse gas emissions over the long term," Mr Hodgson said in his statement.

It would enable the nation to respond to international change, maintain a growing and sustainable economy, and it would not disadvantage the vulnerable in society.

Mr Hodgson said the consultation process since April showed there remained no real national consensus on what the nature of the response to climate change should be.

"In such circumstances, Government must accept the responsibility of leadership and that is what this policy package represents," he said.

Key points of difference between the preferred and confirmed policies included incentives for the establishment of permanent forest sinks.

The cap on the liability the Government will assume for deforestation had been raised from 5 per cent to 10 per cent of forests expected to be harvested during the protocol's first commitment period.

Mr Hodgson said the change was because the forestry sector feared too low a cap might create an undesirable incentive for forest owners to harvest trees too early, to avoid possible liabilities.

The Resource Management Act would be changed to remove regional councils' ability to directly control greenhouse gas emissions through resource consents and regional plans, because emissions would be handled through national policies.

The changes also included confirmation of the National Energy Efficiency and Conservation Strategy target of 30 petajoules (PJ) of additional energy use a year from renewable sources.

- NZPA

Key Policies

Further reading
nzherald.co.nz/climate

Climate change links

nzherald.co.nz/environment