Oct 13, 2008

Emissions Trading Scheme: Victim Of Meltdown?

Business New Zealand has raised the need for an incoming Government to make radical changes to the Emissions Trading Scheme given the financial crisis. We agree, indeed we wonder if the scheme will be able to survive the economic downturn. Already Greenpeace is getting upset at this notion, but lets remember that the ETS in itself is not going to have much impact at all on our emissions over the next few years. The sector that produces 50% of our emissions isn't coming into the scheme until 2013. But the economic downturn is likely to cut the growth in our emissions. Some reports suggest that vehicle use in Auckland is down 11%. Emissions from transport were some of the fastest growing in our economy. So lets use this slowing in emissions growth to buy us the time to get the scheme right. All would be OK if the Government had designed the scheme to be fiscally neutral and ensured that our international competitiveness was not under threat. It is not fiscally neutral, indeed it is going to such hundreds of millions and eventually billions from the productive sector to Government. And it makes New Zealand exporters less competitive than key competitors. With the productive sector under enormous strain from domestic and international recession, it will be nuts to continue with plans to put the sector under more strain, simply so that New Zealand can trumpet the fact that we are the only country in the world with a scheme that covers all sectors and all gases.

We also wonder whether, internationally, the global climate response process is going to survive this downturn. The European scheme is under enormous pressure, with governments seeking exemption after exemption. And the UN negotiations seem deeply troubled.