Editorial: Climate regime flawed

The Government's climate change proposals yesterday are marred by a decision to nationalise the property rights (and liabilities) created by the Kyoto Protocol. If the international agreement ever comes into force it will set up a market in carbon credits that can be traded between polluters and those who plant carbon-absorbing crops.

Overall, New Zealand stands to gain from the trade. Its forests absorb about one and half times the carbon that its industry emits. Unfortunately, the Government has decided that those carbon credits will be owned by the state rather than by the forestry owners. Many in forestry may not be unduly concerned about that. They have long questioned the supposed benefits of Kyoto, pointing out that only plantings after 1990 would attract credits and that the liabilities to be imposed on land that is deforested would lower the value of pre-1990 plantations.

Furthermore, like business as a whole, forestry companies are wary of the extra costs Kyoto would impose on fuel and transport. And they are concerned about handing a competitive advantage to the likes of South Africa, Malaysia, Chile and Indonesia if the Government signs up to an agreement that does not include so-called developing countries.

The United States and Australia are spurning the protocol because it would exempt developing countries for the time being. The Government's confirmation yesterday of its intention to ratify the agreement means this country will be lining up with Western Europe, Russia (which stands to gain from carbon trading) and probably Japan. Together those countries represent more than 55 per cent of the developed world's carbon emissions, which is the threshold the protocol requires before it can come into force. But it is hard to imagine the signatories bringing it into force without the United States, the world's largest producer of greenhouse gases.

New Zealand likes to think it leads the world in environmental improvement but it is a claim that might not stand scrutiny on this cause. For one thing, this country's major contribution to greenhouse gases is not carbon from industry and vehicles but methane from the flatulence of farm animals. The Government dares not tax that. Agriculture will have an exemption on condition that "the industry" invests in research to reduce emissions from livestock.

In other respects, too, the decisions announced yesterday were something of a backdown for would-be champions of greenhouse containment. The Government has heeded the concerns of business and provided for carbon tax concessions for industries or sectors that might be in difficulty if their emissions were fully taxed. And forestry, as mentioned, will not suffer the consequences of reduced planting.

So the burden of carbon tax, if it ever happens - the Government has put it off to at least 2007 - would fall on small business and households. Voters may have something to say about that at the election of 2005, if not before. But if global warming is the problem that an international panel of climatologists suspects it might be, and if there is anything that can usefully be done about it, a carbon tax is probably inescapable.

Care must be taken, however, to see that taxes and carbon credits do not unduly distort the economic picture. Taxes should be applied without favour and the credits traded between companies rather than states. Yesterday's proposals would cushion New Zealand's main offenders from the costs of their pollution and give the Government control of environmental investments that ought to be left to Kyoto's intended market.

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