INTRODUCTION

There are few reasons to commend being in opposition, but the choice of what you can choose to deal with is one.  In Government one has to engage in every issue and make decisions some of which are bound to be unpopular.  The ETS is one such issue.  For this reason we have given a very serious level of scrutiny to decisions made.  National believes that it is in the best interest of New Zealand to implement a modified emissions trading scheme for transport energy and industrial sectors on the 1st of July.  As with all countries who are, or will implement this phase,  there will be some contention.

THE SCIENCE

The science is far from perfect, but the Government is satisfied that enough is known to justify some action.  New Zealand has taken a precautionary approach to risks on a number of threats, we don’t for example expect to be destroyed by an earthquake but it is good practice to take cover with earthquake insurance.

The global problem is that mankind has destroyed much of the planets forests.  These are the main processors of carbon gases and other greenhouse emissions.  On top of this we are combusting huge quantities of fossil fuel that are releasing increasing quantise of CO2 into the atmosphere.  Most of the scientific community accept that we are in a naturally warming cycle but that mankind is accelerating this process.  A question to consider is if releasing over ten billion tons of carbon into the atmosphere each year is not impacting our planet, when will it, in a decade, a hundred years or a thousand?  It would be a brave person who would claim that we can continue on our current track for an indefinite time.

INTERNATIONAL POLITICS

This issue is about as difficult as the science.  There is a lot of finger pointing as to who is causing the problem with a divide between first world countries and the developing block.  There is debate on what will be the appropriate remedies, there are vested interests, there is something of a reluctance as to who should initiate programmes, where the liabilities should fall and other related matters.  On top of the politics there is an increasing comcern by consumers in some of our major markets.  It is reported that TESCOs, the largest retailer in the EU is spending 200 million pounds developing a GHG branding regime for over 110, 000 food items, not because they particularly want to save the planet but because they want to comply with their consumers demands.  The other major food distributors are reported to also be developing their own systems.  It would be a huge risk for us to ignore this mood to engage.  We face the possibility of a consumer boycott.  Some Northern hemisphere countries are said to be considering application of a countervailing levy on imports from countries who are not engaging in some remedial action to climate change.

AUSTRALIA’S BACKDOWN

Many are claiming that we should delay until Australia puts in place a similar regime.  There are also claims that New Zealand is the only country in the world that has adopted an ETS programme.

Of the thirty eight countries that have been designated as category one countries under the IPCCC, twenty nine have an ETS.  The bulk of the EU countries have a scheme that covers 43% of their emissions while NZ has committed to 23%. In Australia the Rudd Government is still claiming it will pass the legislation when it can get the numbers, Rudd has recently another $5.1 billion to clean energy iniatives.  The Liberals under Abbot are also planning to adopt a scheme.  Both schemes Aus Liberals or Labour Govt. are more complex and apply a tougher regime than the National Government in NZ  has legislated for.  The uncertainty in Australia has had some interesting outcomes.  In the week after Rudd announced that Australia would delay its ETS The Australian Labour Party popularity has fallen eight percentage points?  Discussion with our major industrial emitters demonstrates that they prefer certainty.  New Zealand’s biggest emitter of GHG’s is the Smelter at Tiwai.  While they clearly prefer that this is a matter which has been thrust upon them they are pleased that they now know the rules and are continuing to invest in Tiwai Point.  They are currently not investing in any of their Australian plants till they know what the rules are.  The big test will be whether other large emitters will invest in NZ plants.  An example is Holcim which has a cement plant planned to be constructed close to Oamaru.  I am informed that they have made a similar decision to the Smelter and now plan to proceed with this development, I guess it will be a case of watch this space.

A similar example can be made to decisions made in the nineteen seventies around international marketing of food stuffs.  Rules were drawn up and Codex Alimentarius was the adopted standard.  This meant that we were faced with significant modification in our processing plants.  Copious amounts of stainless steel and modified killing chains in our freezing works had to be adopted.  As a result New Zealand was granted 268,000 tons of sheep meat access into the EU,  The next biggest player into that market was Australia with access for 17,000 ton, largely because they ignored to requirements of the new Codex.

NEW ZEALAND IS A SMALL COUNTRY

Many would claim that we are so small it will make no difference what we do.

Per head of population each year we emit eleven tons of GHG equivalents, as such we sit as the ninth worst emitter in the world on an individual basis.  The world average is less than three tons.  Our clean green image comes under scrutiny if we ignore or refuse any response.

WHY AN ETS

To meet our obligations, an ETS is the most cost effective programme.  The ETS is an emissions trading scheme,  it is a market between those who have a credit and those who are emitting.  As opposed to an emissions tax, which applies a fixed cost, which has no options to reduce or minimise by modifying behaviour.  In setting the cost of carbon at not more than twenty five dollars per ton, we have a level which is both internationally credible and affordable.  If the science firms up to say the climate change is not an issue the value of a ton of carbon will be zero.  If the science confirms that climate change is a serious ongoing issue, we have limited our liability.

A question often asked is ‘where does the money go’?  The ETS is a trading scheme and if a polluter is unable to address their emissions by applying new technology, or creating their own off set, they are able to buy credits from someone who has credits.  Credits are created by such activities as planting trees, or adopting a clean technology over a dirty one eg Wind turbines or hydro electric generation instead of coal burning thermal electricity generation.

CONCLUSION

New Zealand’s clean green brand is important to us and we want to be part of a solution rather than be part of the problem on climate change.  Contrary to many claims New Zealand is not leading the pack and we face negative reactions either by legislation or more probably from consumer pressure.   Doing nothing is not really an option. Our ETS is quite moderate and is a sensible way for us to make credible progress.