Brian Fallow, writing in the NZ Herald, tries to calm fears over the inflationary impact of the Government's proposed emissions trading policy. He uses the Reserve Bank's forecasts as the basis for the analysis. These forecasts are using a NZ$25 per tonne assumption for the cost of carbon - this is onlt Euro 12-13 per tonne. Why, apart from political convenience, would you use a price that is so unrealistically cheap???
In contrast the front page of today's NBR uses some Treasury analysis which uses a price of $50 per tonne (in line with the current price in the EU). This shows the emissions trading regime adding 1.3% to inflation in 2010. That's an enormous impact. And a very big difference from the Reserve Bank's forecast.
