Ag entry to ETS postponed to 2015

03/07/2012

Changes to the ETS announced by the government are designed to maintain incentives for emission reductions, without loading large extra costs onto households, employers and exporters.

“Today’s decisions are a reflection of the balanced and responsible approach this Government has taken to reducing greenhouse gas emissions.  They offer Kiwi exporters, employers and households certainty in a challenging and changing world economy,” Climate Change Issues Minister Tim Groser says. . .

“We have considered in-depth the recommendations of the ETS Review Panel, listened to what those affected by the ETS are saying, and reviewed what our trading partners are doing.  We also considered feedback through community consultation, including written submissions, a series of regional meetings, and hui.

“The National-led Government remains committed to doing its part to reduce greenhouse gas emissions, but it is worth noting that we are the only country outside Europe with a comprehensive ETS.  In these times of uncertainty, the Government has opted not to pile further costs on to households and the productive sector.

“The Government remains an active and engaged participant in the on-going discussions focused on global agreements, and the changes announced today offer us useful flexibility to adapt in the future, while still demonstrating our commitment to doing our fair share,” says Mr Groser.

Not surprisingly the left reckon this is disastrous.

However, Business NZ says the government has taken a reasonably balanced approach to carbon pricing in its amendments.

The protections – companies having to surrender carbon units for only half the carbon they emit, and a cap of $25 per tonne in the price of emissions –recognise the fact that New Zealand is ahead of most of the world in accepting a price on carbon.

BusinessNZ Chief Executive Phil O’Reilly says the changes will maintain incentives for emissions reduction while shoring up New Zealand companies’ ability to compete against companies in other countries.

“The move recognises the financial constraints not only on businesses but also on consumers.  It guards against increases in the price of electricity and fuel that would otherwise occur because of an unequal international playing field.

“This is not a softening of the ETS.  The changes announced today will not reduce the costs currently faced by New Zealand business and consumers.

“We should remember that the current cost of carbon, although relatively low, is still more than is being faced by our trade competitors, and will doubtless increase as the global economy recovers.

“While these amendments do not make the environment harder for business, neither do they make it easier.  Moreover the frequent reviewing of the scheme’s design also loads uncertainty costs onto New Zealand business.

 Federated Farmers says the changes, which include delaying the entry of agriculture into the scheme, are one step towards reality:

The New Zealand Emissions Trading scheme (ETS) has taken a big step towards forward, yet remains the harshest treatment of any agricultural production system on earth.

“The Government realises even tougher measures would hurt not just agriculture but the wider economy,” says Dr William Rolleston, Federated Farmers Vice-President and climate change spokesperson.

“Both our Chief Executive, Conor English, at the Rio+20 Earth Summit  and our President, Bruce Wills, at the World Farmers Organisation, got the same message; targeting primary food production in ETS-type policies is anathema to sustainable primary food production.

“In a world preoccupied with the survival of their economies and with food security, there is no point in trying to lead where others will not follow.

“Yes biological emissions account for some 47 percent of New Zealand’s emissions profile.  They also represent 68.1 percent of our merchandise exports and indeed, 100 percent of the food we eat. 

“New Zealand is able to not only feed itself, but produces enough food to feed populations equivalent of Sri Lanka. 

“This is why it is positive the Government has listened to Federated Farmers and will keep agricultural biological emissions out of the ETS until at least 2015. 

“We have retained the one-for-two surrender obligation we asked for, along with the $25 fixed price option. Federated Farmers also wanted offsetting for pre-1990 forests and opposed the reduction of pre-1990 forest allocations. The Government has listened to that too, but those who do offset will be penalised. 

“We are pleased the Government has chosen not to further complicate matters by imposing additional restrictions on the importation of overseas emissions units.

“Despite what some Opposition parties are likely to say following these changes, our ETS remains the harshest on any agricultural production system, anywhere in the world. 

“Unlike other countries where agriculture is given special treatment, farmers here, just like every other business and family, pay the ETS on the fuel and energy we use.  This not only impacts a farm’s bottom line, but the cost of turning what we produce into finished goods for export.   

“Australia’s new Carbon Tax is really aimed at Australia’s 300 largest companies.  Meanwhile, Australian farmers are being financially rewarded for boosting soil carbon levels on-farm. 

“Since 1 January, all agricultural processors in New Zealand have been filing emission returns accounting for agricultural biological emissions.  We are still counting emissions no other government is contemplating, including our cousins across the Tasman.

“While agriculture emissions here grew 9.4 percent between 1990 and 2010, the dollar value these generated for NZ Inc exploded almost five-fold.  Our sector’s emission growth needs to be put into context alongside a 59 percent increase in electricity emissions and 60 percent for transport.

“What’s more former Labour Cabinet Minister, the Hon David Caygill, found emissions in every single unit of agricultural product have fallen some 1.3 percent each year, for the past 20 years. 

“We do not need an ETS to improve our productivity.  Global competition has done that for us. 

“That New Zealand’s farmers are among the world’s most carbon efficient, is an inconvenient truth New Zealanders are not hearing from Opposition politicians. 

“We can do more but that will be through productivity gains and research leadership exemplified by the Global Research Alliance on Agricultural Greenhouse Gases.

“In a world of increasing food deficit, our hope is for Opposition parties to realise being a carbon efficient food exporter is global leadership,” Dr Rolleston concluded.

The Kyoto Protocol was the triumph of politics and bureaucracy over science and negotiations have yet to reach agreement on its successor.

There is nothing to be gained for the environment and a lot to be lost from the economy if agriculture is forced into the scheme when none of our competitors faces similar costs.


Certainty and predictability needed

12/04/2012

Sir Graeme Harrison, chair of the  NZ International Business Forum, wants the Cabinet ministers considering the Crafar farm sale to Shanghai Pengxin to give a clear signal foreign investment is welcome here:

NZIBF chairman Sir Graeme Harrison makes the point that foreign investors are prepared to respect the rules but they need predictability and certainty that when conditions are complied with the investment will be able to proceed.

“That is why the current uncertain situation with regard to the Crafar Farms is so negative for New Zealand’s interests. It risks detracting from New Zealand’s attractiveness as an investment destination at a time when there is strong competition for foreign investment from other countries.”

Sir Graeme’s determined push follows a strong statement by Auckland Regional Chamber of Commerce chief executive Michael Barnett who railed against the way the Shanghai Pengxin bid had been demonised by late-comer bidders in an appearance on Q&A at the weekend.

Fran O’Sullivan has added Sir Graeme to her unofficial roll-call of business people who are finally stepping up and saying this country needs to protect its reputation as a fair regime for foreign investors.

But the big question is why is that only Sir Graeme, Barnett, BusinessNZ’s Phil O’Reilly and George Gould have been prepared to openly speak up for what matters in this area. The paucity of open debate on the pros of foreign investment is astounding and business does need to step up here.

One of the glaring omissions from the list is anyone from Fonterra.

I can’t understand why the company which sells most of its produce overseas and which itself owns farms in other countries, is opposed to foreign ownership here.

As Sir Graeme says, we need foreign investment to make up for our own lack of savings:

“Foreign investment is what plugs the gap in our low domestic savings rates. Without it, ratings agencies could react by increasing New Zealand’s (already high) credit risk rating and interest rates will rise.”

Would the people so strongly opposed to foreign investment be quite so sure of their stand if their mortgages increased without it?


The subsidy myth

16/11/2009

Business New Zealand has released a paper analysing claims that farms and other businesses will be subsidised by households under the proposed emissions trading scheme.

Chief Executive Phil O’Reilly says :

The subsidy myth is based on the mistaken belief that ‘households are good and business is bad’ and that business should be punished for any emissions.

“The truth is not so one-sided. In reality, we are all in this together. Businesses are consumer-driven, and consumers need to see a price signal on carbon in order for carbon emissions to be reduced.

“By making an early start on emissions trading we will be putting NZ export companies in a vulnerable position – they will have to compete against companies overseas that won’t be paying any carbon charges. Allocating carbon credits is simply a way of reducing that vulnerability in the short term, and is in the interest of all New Zealanders.

“Once other countries also adopt emissions trading that vulnerability will cease, reducing the need for carbon credit allocations. So, alarmist publications about ‘decades of subsidies’ are wrong in fact as well as assumption.

“Emotive statements about ‘bludging business’ have the effect of undermining confidence in emissions trading. They reflect an anti-business attitude that could harm our future prosperity.

“We have an altogether more positive view on how businesses and consumers can adapt to carbon pricing,” Mr O’Reilly said.

The Subsidy Myth paper is here.

One of the questions about the ETS no-one seems able to answer easily, is where will the money go? Paul Henry tried to get an answer from carbon credit expert Seeby Woodhouse on Breakfast this morning, but he wasn’t entirely successful.

If no-one can say where they money’s going how can anyone know if it will do any good?

Especially when, as Matthew Hooton pointed out in Friday’s NBR (print edition not online) that any government which seriously proposes paying a liability will be kissing re-election goodbye.


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