ETS review

I haven’t had time to research this but I still want to give it some exposure since it’s happening in New Zealand.

Australis tells us in comments where to contribute a submission.

A topical topic to pick is the Government’s “Climate Change Response (Emissions Trading and Other Matters) Amendment Bill”. Submissions close on Monday next, and can be sent to parliament.

The Bill is useful in that it extends the current cost of the scheme rather than doubling the rate in January 2013. But if halving the economic burden is a good thing then removing the burden altogether would obviously be a much better thing.

In particular, the Bill changes the entire nature of the legislation from being nominally a (wrong-headed) environmental measure to being an outright tax instrument. In future, the Minister will auction NZ carbon credits and retain the proceeds. There will no longer be any obligation to back the NZUs with international carbon credits (earned by abating emissions somewhere).

Let me ask the possibly bone-headed question (and preserve the dignity of other readers): What leads you, Australis, to describe the proposed ETS provisions as an outright tax?

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3 Thoughts on “ETS review

  1. PeterM on 06/09/2012 at 7:46 am said:

    Regardless of whether the ETS is a tax – it is still a scam with the potential of extremely damaging consequences and with no effect on the climate. Our farmers live with the climate every day, are not blinded by statistical games and we should pay more attention to what they have to say.
    see – “Federated Farmers vice-president William Rolleston has blasted the agricultural policies of a future Labour-Greens coalition government”

  2. Richard C (NZ) on 06/09/2012 at 9:39 am said:

    “What leads you, Australis, to describe the proposed ETS provisions as an outright tax?”


    “In future, the Minister will auction NZ carbon credits and retain the proceeds”

    A tax – but to what part of the govt budget will the proceeds be allocated? If not to furtherance of carbon emissions abatement then it’s simply a revenue gathering exercise.

  3. Australis on 08/09/2012 at 12:11 am said:

    The ETS passed (under urgency) by the Labour Government in 2008 and amended (under urgency) by the National Government in 2009 is to be amended again – with urgency. 10 days have been allowed for the filing of submissions.

    Under the current ETS, the Government derives no revenue from either the issue or surrender of NZUs. The NZUs are initially issued free, and surrendered NZUs are converted by the Government into international “Kyoto Units”. The cash value levied from emitters flows either to New Zealand abaters (eg tree owners) or sellers of Kyoto Units (eg overseas abaters). The Government benefits from building its stock of Kyoto Units, which are eventually retired to meet its international obligations.

    However, the Government receives no actual cash.

    Following the expiry of the Kyoto Protocol (KP1) in December 2012, the Government expects its international obligations to reduce quite sharply (to the extent of $140 million during 2013-15). Its major commitment to the forestry industry is largely satisfied and it prefers not to stockpile Kyoto Units to meet possible future obligations.

    The April consultation paper proposed that the ‘backing’ of NZUs by Kyoto Units be removed, so that surrendered NZUs can be sold back into the market. The cash proceeds of sale would create a new revenue stream for the Government.

    Under this proposal, emitters (primarily the energy sector) will pay cash to the Government for credits which must then be re-assigned to the Government. This is clearly a tax.

    The majority of submitters opposed this proposal. The appropriate response to a reduction in the Government’s obligations is a corresponding reduction in the burden passed on to the private sector. It ought not to be seen as an opportunity to convert an environmental measure into a tax instrument.

    Once the ETS operates as an energy tax, the Government will have a strong self-interest in increasing its scale and scope, whether or not any future international agreements ever eventuate.

    In sum, dollars which currently buy abatement will go into Treasury coffers instead.

    Fine, the abatement wasn’t doing any good, so why shouldn’t the Government put the money in its kick? Because, now and forever, Government will have a huge incentive to increase its opportunistic revenue flow.

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