Sep 2, 2008

Cost Of The Back Door Deals On ETS

2 September 2008


A “behind closed doors” deal with the Green Party to get their support for the emissions trading Bill has significantly increased the cost of the scheme for all energy users in New Zealand, according to the Greenhouse Policy Coalition.

Catherine Beard, executive director of the Greenhouse Policy Coalition says what was already the most expensive and comprehensive emissions trading scheme (ETS) in the world, just got more expensive.

“This latest move means consumers will be facing increases in energy costs of between $600-1,000 every year for the foreseeable future when the scheme takes effect, leaving the government grant of a one off payment of $120 barely scratching the surface.”

“It appears the Green Party has successfully argued that the least costly Kyoto Protocol units (Assigned Amount Units or AAU’s) will not be able to be purchased by New Zealand companies with obligations, unless they have been “greened” first.”

“Countries that have AAU’s to sell are typically Eastern European countries and Russia, that earned the AAU’s due to large emission reductions that came about due to the collapse of their economies and closure of old and inefficient plant after 1990. While these AAU’s are recognized by the United Nations as genuine emission reductions (hence the allocation of AAU’s), environmental groups frown on them and have labelled them “hot air.”

“The greening of AAU’s requires the country selling the AAU’s to put the revenue towards projects that will reduce emissions. This is laudable but as yet there is no information on which of the Eastern European countries the government will accept units from.”

“The restriction on AAU’s and the need to look for alternatives will push the price up significantly.”

Catherine Beard says it is disappointing that such a significant change to the cost of the scheme for New Zealand consumers and businesses did not go through a more transparent process, with the costs and benefits of the restriction made clear to the public.

“We estimate that with this change, emissions units will be now cost between $40-50/tonne co2e, which is a far cry from the $15/tonne claimed by Minister Parker when the proposal for an emissions trading scheme was first launched in September last year.”

“The government promoted a scheme that would deliver the least cost emission reductions through unrestricted access to all UN recognized units and linkages with other emissions trading schemes.”

“The changes to the emissions trading Bill have just ruled out the least cost emission reduction units, which many other governments have been purchasing over the last few years for around 6-9.00 Euros.”

“Australia is talking about designing an emissions trading scheme that delivers a low and stable price of carbon in the early years of trading, with a price cap if necessary.”

“In the US, the only mandatory cap and trade scheme involving 9 US States (Regional Greenhouse Gas Initiative) is restricted to electricity generators and the price of carbon is trading at around US$5.00/tonne CO2.”

“It seems madness that the NZ government is going to expose the NZ economy to expensive carbon prices driven upwards by the European trading scheme for 100% of our emissions, when Europe itself has limited its exposure to only 40% of their emissions and looks to be backing away from exposing its energy intensive industries to anything more than a token price of carbon.”

“While other countries are applying the brakes to their exposure to the price of carbon due to high energy prices and weakening economies, New Zealand is applying the accelerator.”