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Letter to Climate Change Leadership Forum

1 July 2008

Mr Stephen Tindall


Climate Change Leadership Forum

Dear Stephen

Thank you for your letter dated 17 June 2008 in which you addressed the issues I had raised on behalf of my members at the Climate Change Leadership forum meeting on 28th May.

You say the Greenhouse Policy Coalition’s concerns are at odds with the views of the Climate Change Leadership Forum and in particular the views expressed in the 10 key points agreed at the Climate Change Leadership Meeting of 17 April (notwithstanding the later concerns raised by Business NZ and the New Zealand Chambers of Commerce).

While we do not wish to play the game of who has the greatest numbers our view remains that the Bill has serious flaws and needs considerable amendment in order to prevent leakage of industry from New Zealand and this view is supported by a wide range of the business sector. I attach for your information a pan industry letter sent to all politicians on the 25 June 2008, supported by 14 industry leaders, representing all sectors of the economy and in particular, New Zealand’s productive sectors. The letter seeks further input from the public on the Bill, in order to get a better piece of legislation.

We are concerned that in your letter you characterize an intensity approach to measuring emissions as an approach that merely passes cost onto the taxpayer. The reality is that the costs of an emissions trading scheme will ultimately fall on consumers and there is no escaping that. Either through higher costs as business passes through the increased costs of carbon in their products and services – or if business can’t pass on the cost, through job losses and lower wages, as businesses close down or relocate to other countries where there is no price on carbon. The only instance where direct price increases might not be passed on to consumers is where substitute goods are imported from developing countries that do not price carbon but nevertheless the country’s social welfare costs will increase and we all bear the cost of that.

We are disappointed to see this false dichotomy (i.e. it is either the taxpayer or business that will bear the cost and therefore if one does not “pay” the other will have to) being perpetuated in the debate around the emissions trading scheme. It is an unsophisticated approach to the issue, and particularly so when raised in the context of allocation to industry as it ignores the fact that New Zealand has already been freely gifted as a country the equivalent of its 1990 emissions.

In many cases industry has already reduced its emissions to the equivalent of its 1990 levels and it is other parts of the economy e.g. transport that have significantly increased their emissions over and above 1990 levels. It is therefore hard to see how it is generous to allocate (possibly) 90% of a company’s 2005 emissions (less any liquid fossil fuel use) to a company.

The position of Greenhouse Policy Coalition is that it is prudent not to expose our trade exposed energy intensive industry to the full price of carbon until such time as other countries are similarly pricing carbon. Once we have a real global price on carbon we are confident New Zealand industry will be able to compete based on its efficient emissions intensity for the products we produce without the need for further allocation of units.

In your letter you say that the proposed ETS design is generous to trade-exposed businesses and this will avoid economic regrets. We are concerned that you are not fully informed in making this statement because it is the judgment of the companies that will be most affected by the ETS, that far from being generous, the allocation of units and the speed of the phase out, will leave them struggling to stay viable in New Zealand.

Thank you for the opportunity to have input into the policy discussion.

Yours sincerely,

Catherine Beard

Executive Director

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