When the National Government came to power in 2008, one of the things near the top of its priority list was to amend the New Zealand Emissions Trading Scheme (ETS) to “make the ETS workable and affordable”. In other words, National wanted to reduce the price of carbon considerably. Their supposed rationale was that the economy was in a downturn, and it wasn’t fair to introduce an extra tax on households and businesses when they were already struggling.
So in 2009, National passed a number of changes to the ETS:
- A two-for-one permit deal, so businesses only had to submit one carbon unit for every two tonnes of liable emissions.
- Introduced a “flexible cap” so that businesses get allocated free permits in line with their production. So if businesses increase production, they get allocated more permits, and New Zealand’s emissions could go up.
- Agriculture wouldn’t participate in the scheme till December 2015 (instead of the original January 2013 entry date)
Those changes were pretty fundamental to the operation of the ETS. Without a sinking cap on emissions, there’s no particular reason why the price of carbon will increase. So this lack of a cap, combined with the importation of a whole lot of cheap, low-quality, international credits has kept the price of carbon in New Zealand extremely low.
Then in 2011, National commissioned another review of the ETS. The review came out with a number of recommendations. The most important ones were:
- phasing out the two-for-one arrangement over three years, so that by 2015 businesses would have to surrender one emissions unit for each tonne of emissions
- the price cap of $25 per tonne would be increased by $5 per year from 2013
- that the agricultural sector should still enter the ETS in 2015, but should initially be granted a two-for-one allowance
National then largely ignored the review’s suggestions, and instead opted for an extension of the feeble status quo. They extended the transitional two-for-one period, and agriculture was made exempt from participating in the ETS for the foreseeable future. At the time, the justification was that they couldn’t rock the boat too much while the economy was still going through its worst recession since the Great Depression. Here’s the official line:
“[the amendments] maintain the costs that the ETS places on the economy at current levels. This will ensure businesses and households do not face additional costs during the continued economic recovery; and that New Zealand continues to do its fair share on climate change.”
Now that New Zealand’s economic prospects have improved, and oil prices have fallen, surely it is time to revisit these amendments to the ETS. While I don’t believe that there was ever justification for watering down the ETS, whatever justification there was has surely evaporated.
If National doesn’t strengthen the price of carbon in light of these changed conditions, then their previous changes will be revealed for what they truly were. Those changes most likely had nothing to do with the state of the economy and everything to do with pleasing National’s corporate mates who prioritise short-term profit above everything else.
Tim Groser says he cares about combating climate change. It’s time for him to act like it.
Last updated 12 February 2015