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Review panel’s ETS report courts controversy

Seldom has the ETS garnered as much attention as it did when it first launched in July last year. But when the government last week released the Emissions Trading Scheme Review Panel’s report, opinions once again abounded from every direction. The uncapped emissions trading scheme requires all sectors to eventually participate. But while industries like forestry have already entered, the panel said others should be phased in. In a bid to ease the price impact on households and businesses, the panel recommends the energy, transport and industrial sectors sectors, which are due to fully enter the scheme in 2013, instead enter in three steps in 2013, 2014 and 2015. Likewise the panel recommends the agricultural sector’s entry be slowed. 

Minister for Climate Change Issues Nick Smith described the recommendation as “well considered” and supported by the government. 

“The Government does not support the introduction of agricultural emissions into the ETS before 2015,” he said. “The Government also needs to consider the advice of the Agricultural ETS Advisory Committee on the practical implementation challenges. Agricultural emissions will only be included if practical technologies are available to enable farmers to reduce their emissions and more progress is made by our trading partners on measures to reduce emissions.” 

Opinions about the review have been coming in from every direction. Here’s a summary: 

Professor Martin Manning, Climate Change Research Institute, Victoria University 

“New Zealand’s Emission Trading Scheme Review makes some recommendations that are intended to develop a smoother transition towards taking responsibility for our greenhouse gas emissions, but at the same time it has no clear focus on the long term goals. 

“This review has recognised that delays in reaching long term international agreements should not be used as a reason for delays in national planning, and it also specifically notes that there will be an increasing requirement for us to take responsibility for our emissions. A more gradual transition period is proposed before the price of carbon emissions reaches $25 per tonne, but then it compensates for that by recommending that the price should continue to increase by $5 per tonne each year after 2013. 

“However, there is still no direct link to the 50 percent emission reduction target that government has said should be achieved by 2050, even though many climate scientists say this would not be enough for a developed country. Nor does the review provide a response to the International Energy Agency’s report in March, which had said that New Zealand needs to assign clearer priorities for working towards these emission reduction goals.” 

Associate professor Ralph Chapman, director of the graduate programme in Environmental Studies at Victoria University 

“The dramatic scale of the climate change problem facing us is not being translated into credible policy. Much of the Review Panel’s analysis is reasonable, but its conclusions are predictably over-cautious. I commend the Panel for noting that: 

• A clear long-term price signal is critical.

• Some businesses are already planning to cut their emissions in sectors where other businesses have claimed no such options exist.

• Agriculture should enter the ETS on the current legislated timescale (i.e. not have entry delayed past 2015). 

“However, the Panel proposes further incremental weakening of the ETS’s already weak approach. Its proposed smoothing-out of price increases from 2013 postpones the day when emitters face a more realistic price on carbon – a price in any case way below what is needed to adequately cut emissions globally. And the Panel’s go-lightly approach for agriculture also underestimates that sector’s ability to find creative ways to cut emissions.” 

Federated Farmers: Dr William Rolleston, Federated Farmers vice-president 

“It is good to get positive recognition that over the past 20 years, agriculture has reduced emissions per unit of product by 1.3 percent per annum. 

“What’s more farmers, through our industry levies, contribute around $18 million towards pastoral greenhouse research. We’re not sitting on our hands. 

“The key challenge for any government planning to enrol biological emissions into the ETS is to address the economic and practical ramifications.” 

“Farmers will be extremely pleased that Minister Smith has reaffirmed a pledge Government has given to Federated Farmers, that biological emissions will not be included in the ETS, if our trading partners do not follow suit. 

“The Government is to be congratulated for this. It is also to be congratulated for recognising that farmers, despite the research investment, lack the practical means to reduce emissions.” 

Sustainability Council of New Zealand 

The ETS continues to market the aroma of change without actually delivering gross emission reductions. 

Gross emissions will have been reduced by less than 1 per cent during the first five years of the ETS (relative to business as usual). 

Nowhere in the review report is there an estimate of what the total effect of proposed changes will be on gross emissions. However, as the regime would be weaker than that assumed by the Ministry for the Environment when filing to the UN last year, it is clear that it too will make a minimal impact on gross emissions over the next decade. The MFE filing showed that gross emissions in 2020 would be higher than in 2010, despite the ETS. 

The science dictates that large and rapid reductions in emissions are required to avoid ‘dangerous climate change’. Reductions in the intensity of emissions are not enough as they are often accompanied by rising production and so increased volumes of emissions overall. 

The ETS is not delivering the needed gross emission reductions, but it is delivering mult-billion dollar contingent liabilities to taxpayers who must foot the bill for the nation’s international commitments. 

Green Party: Co-leader Russel Norman 

“John Key’s Government introduced a watered-down ETS that reduces greenhouse gas emissions by less than one percent. Now they want to weaken it even further, and they want the New Zealand taxpayer to pick up the increased tab for polluting industries. 

“When they talk about striking a balance and slowing the introduction of a price on carbon, what they really mean is putting off until tomorrow the hard work that we need to do today. 

“The agricultural sector, responsible for half our emissions, will take the lesson from this that it pays off to lobby Government to maintain subsidies, rather than actually investing to reduce emissions. 

“The Monetary Policy Statement out today shows that commodity prices are set to stay high, which means greenhouse intensive industries like dairy are in a strong position to pay their own way. But This Government will continue to give them a hand-out. 

“It is green-washing to claim we have a meaningful mechanism to reduce carbon emissions, when we do not. 

“The report notes that our major trading partners, especially Australia, are moving in a much clearer direction to set a firm price on greenhouse pollution. 

“New Zealanders will lose twice by this move. Firstly the tax payer will have to pick up the tab for greenhouse polluters. Secondly, we will miss the smart green economic wave, as new low carbon industries set up across the ditch where they will receive greater support.” 

Labour Party: Climate Change spokesperson Brendon Burns 

“Dr Smith has one message for farmers and one for other audiences. Six weeks ago he was telling a climate change and business conference that climate change was the issue of our time and had to be addressed. 

“Today he’s reiterating how the Government won’t support bringing agriculture – which accounts for half of New Zealand’s emissions – into the ETS until 2015.” 

“Even then is double-qualifying agriculture’s entry by saying it will only be included if “practical technologies’ are available to enable farmers to reduce their emissions and more emissions progress is made by our trading partners. 

“Failing to include agriculture simply adds to the costs ordinary New Zealanders face. It’s the rest of us who will be picking up the tab, already estimated under the current ETS scheme at more than $100b.” 

Act Party: Parliamentary leader John Boscawen 

Today’s report confirms what ACT has been saying all along; the ETS is a disaster and should be scrapped. The Government has realised that by including all gases and all sectors in the ETS we are in a lonely club of one, so has backtracked and delayed subsequent stages of the scheme.” 

“Despite the concessions likely to arise from today’s report the ETS is still harming New Zealand households and strangling our economy. New Zealanders are paying an extra four cents a litre for petrol and an extra five percent for electricity, all to subsidise the private planting of new forests. 

“Farmers and businesses also face enormous costs with dairy farmers paying $3,900 a year through higher electricity and processing costs and beef and wool farms paying an extra $1,000 a year. 

“The report today does a great job of highlighting the scheme’s flaws but does little to remedy them. Instead of delaying the inevitable the Government should have the courage of its convictions and do what ACT has called for all along – scrap the ETS,” 

WWF-New Zealand: Peter Hardstaff, Climate Change programme manager 

“WWF-New Zealand is disappointed that the Emissions Trading Scheme Review Panel has recommended a further extension of the loopholes in an already weakened and flawed scheme. 

“For example, the Review Panel recommends extending the two-for-one deal on carbon credits. However, they also reach conclusions that seem to contradict such recommendations stating for instance that “New Zealand has strong reasons to start a steady transition to a lower carbon economy sooner rather than later”

“WWF urges the Minister for the Environment Nick Smith to kick start the transition to a low carbon economy now by strengthening rather than weakening an already watered down ETS. 

“We also urge the Minister look beyond this scheme and implement other policies that will help New Zealand lower our emissions, as identified by the Review Panel. Opportunities include improving vehicle fuel economy, developing home grown biofuels and incentivising small scale renewable electricity generation.

“This review appears to have ignored the many opportunities for New Zealand businesses to create green jobs and increase prosperity by joining the global low carbon revolution.” 

Climate Science Coalition: Chairman Barry Brill 

“The Caygill Review’s recommendation for doubling the current emissions trading scheme (ETS) energy levy over the next three years my be acceptable to the Minister for Climate Change, but It is certainly not acceptable to the people of New Zealand”, said Hon Barry Brill, chairman of the New Zealand Climate Science Coalition. 


“The Government’s constant refrain has been that New Zealand will not try to be a world leader and that kiwis will never be forced to do more than their ‘fair share’ in reducing emissions.” 

Greenhouse Policy Coalition: Executive director, David Venables

“The ETS review panel, whose report was released today, recommends phasing out transitional support measures from 2013-2015 on the basis that conditions are right for New Zealand to place a greater carbon cost on the economy – on businesses and consumers. This effective hardening of the scheme is based on an over-optimistic reading of international conditions, including an expectation that other countries will bring in carbon pricing, which is by no means certain,” 

“The recommendations are also at odds with Government comments that the lack of international action on climate change supports continued moderation of the scheme. This moderation should be a continuation of the existing transitional assistance measures at their current levels beyond 2012 and not the phase-out recommended by the Panel. 

“The Government has made it plain that the stepping up of the scheme in 2013 and the addition of further sectors is conditional on substantive progress being made in other countries, particularly our major trading partners like Australia. Australia is only now introducing legislation, with no certainty of it passing or surviving.” 

Generation Zero: Spokesperson Paul Young

We already stand to suffer from the lack of strong action to combat climate change and fossil fuel dependence. Minimising the short-term cost of the ETS for polluters and consumers just means that more cost and more suffering will be borne by young people in the future. This disregard for our future is hard to take.” 

“More people ought to be aware that by failing to reduce greenhouse gas emissions, we are literally passing the buck to the next generation of taxpayers,” said Mr Young. “The Government thinks it is a good idea to sell profitable state assets to pay down debt, but on the other hand it is running away from implementing costs on carbon emissions that would ease the debt – both economic and ecological – being transferred to the future as a result of inaction on climate change.” 

NZ Forest Owners' Association 

Forest owners say that if the government adopts the changes to the ETS recommended by its review panel more forests are likely to be planted. New Zealand needs more forests in order to meet its targets for reducing greenhouse gas emissions. 

“New Zealand has based its ETS laws on the wording of the Kyoto Protocol and this has created anomalies that discourage forest owners and farmers from planting,” said Forest Owners president Peter Berg. 

“Forest owners have been arguing for these changes since ETS legislation was first drawn-up under the former Labour-led Government. We also correctly predicted that rates of new planting would be modest without them.” 

Berg welcomed Smith’s largely positive response to the panel’s recommendations but is concerned that the minister has distanced himself from the panel’s strong call for agriculture to come into the ETS as planned in 2015. 

You can download Doing New Zealand’s Fair Share. Emissions Trading Scheme Review 2011: Final Report here.