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Carbon tax – pain for no gain

The major reason we should not impose a carbon tax in New Zealand is because it will not reduce our emissions, but make the cost of living, working and running a business in New Zealand more expensive. A lot of pain for not much emission reduction gain.

The carbon tax will not help reduce our emissions because nearly 50% of them come from agricultural methane and nitrogen oxides where there will be no quick or easy solutions. The next largest area of emissions is transport at around 20% and again there are no easy answers in this area. The price of a carbon tax would have to go very high before people abandoned their cars, given we are a geographically spread out country with a low population, which makes affordable and comprehensive public transportation options challenging to fund. Just look at the protracted debates we are having in the Wellington region about the funding of new roads.

There are things we can do in transport to reduce emissions, but they will not be without cost. Lowering the age of the motor vehicle fleet and getting the newer cleaner technology into circulation is one option, by placing restrictions on the age of second hand cars that can be imported into the country. This would reduce greenhouse gas emissions, but it also puts up the price of motor vehicles. Better roads, smoother traffic flow, smaller vehicles (appropriate for purpose) and better public transport options – would all help, but again theses initiatives come at a price.

Business can do its bit to reduce emissions by becoming as energy efficient as possible. Many in the energy intensive sector (companies using a lot of fuel and energy) are already highly energy efficient because it is such a big cost to their business. So while we can and should strive for continuous improvement, many are already operating at or close to Worlds Best Practice in emissions intensity.

While there may be room for improvement in energy efficiency in the small to medium sized business sector, you have to remember that in New Zealand not a lot of our emissions come from business (14% from manufacturing, construction, industrial processes) so even if we do make good progress here, it is not going to contribute that much to reducing our country emissions.

With regard to future international action, we believe that New Zealand should proceed very cautiously. Given our emissions profile, we have much more in common with countries like Brazil and Argentina (dominated by agricultural emissions and with lots of renewables like Hydro in their electricity generation sector) than industrialized countries where their emissions are largely from burning fossil fuels.

The other route (non-Kyoto route) that is opening up to tackle greenhouse gas emissions is the technology route. Countries like the USA and Australia are investing heavily in developing new lower emitting technologies rather than setting emission reduction targets. They have just announced the creation of a new multi-lateral agreement which is aimed at creating and deploying modern technologies to help energy hungry growing economies such as India and China and South Korea reduce their emissions.

The bottom line is that these developing economies are growing at a huge pace and so are their emissions of greenhouse gases. The conundrum for the whole world is that economic growth is currently largely based on the burning of fossil fuels. Until we develop new technology that can remove or reduce emissions from those fuels; the only sure way to reduce emissions is to limit economic growth. That is not an option in a world where millions of people still do not have access to electricity, and it is not that attractive to developed economies either.

New technology will bring the answers eventually, but in the meantime New Zealand needs to be pragmatic about how much we can achieve given our national circumstances. Investing in energy efficiency and adaptation to climate change might be the best strategy for New Zealand in the medium term.

If New Zealand fails to meet its Kyoto Protocol targets to reduce emissions for the first commitment period, which now looks highly likely, we will be facing having to buy carbon credits internationally at a very high cost to our economy.

Ironically countries like Russia will benefit, because their economy collapsed after 1990 (when targets were measured from), and the resulting emission reductions have given them a surplus of emission credits to sell. This just goes to show that an economy going backwards is the surest way of reducing greenhouse gas emissions.

Catherine Beard

Executive Director

Greenhouse Policy Coalition

The Greenhouse Policy Coalition represents most of the energy intensive companies in New Zealand over a range of sectors.

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