Feb 20, 2008

Is The Government Getting Cold Feet On Emissions Trading?

With David Parker sidelined with a mystery illness, Michael Cullen has been spending more time looking into the implications of the Government's proposed emissions trading policy. He is not happy with what he has discovered.

First, the extent of opposition to the policy in the business community is greater than the Government had been led to believe by Business New Zealand and the Business Council for Sustainable development. As we have reported before the Business Council is facing an internal revolt.

Second, it seems that the impact of the proposed scheme on some sectors, companies and regions had not been fully appreciated by Government officials (indeed there are some suggestions that officials in Treasury and MED were seeking to use the emissions trading policy to force "economic transformation" - forcing companies or sectors to relocate abroad). This might be OK in a normal year, but this is election year. Some uncomfortably detailed impact assessment is beginning to emerge as the submissions are being put together by industry. Does the Government really want this to be the backdrop against the election is fought?

Third, it is increasingly clear that there are potential design flaws in the proposed scheme. The Government, itself, doesn't understand exactly how it is going to work. The policy has indeed been rushed - as some said it had been. Minister Parker had naively thought that these problems could be solved at Select Committee level. But Cullen now believes that this is a very big ask.

A group of businesses has sent a letter into the select commitee pointing out, that as new problems are being discovered with the proposed legislation, more analysis is being required before submissions can be finalised. They have asked for a one month extansion to allow this work to be done. The Hive suspects that the Government might be surprisingly receptive to this suggestion. An extra month might allow Cullen the time he needs to get to grips with this chaos and to decide the best way forward.