New Zealand passes ETS legislation

Not for the first time, New Zealand has beaten Australia to the punch in democratic innovation. Today on 1 July, 2010 it became the first Asia Pacific country to implement an Emissions Trading Scheme. The passing of the legislation will look even more remarkable to Australian eyes given a conservative administration has enacted it.

The legislation was the brainchild of the Helen Clark Labour administration but when the Nationals won the election in 2008, the new John Key Government amended it with input from the Maori Party and United Future. Key needed the support of the Maori Party and United Future to form a stable majority Government and an ETS was part of the deal. Key himself to 50 percent emission reductions of 1990 levels by 2050. The Nationals have watered down some provisions but it represents a start for emissions trading in the region that Australians will need to study closely.

The New Zealand Unit, is now in existence with one one NZU being the right to emit one tonne of carbon dioxide, or the equivalent amount of other greenhouse gases. Householders won’t have to take any direct action though they will notice slightly larger energy bills. Businesses who engage in mandated activities will now be obliged to surrender NZUs to the Government to account for the greenhouse gas emissions they incur during their business.

With few of New Zealand’s major trading partners yet signed up for an ETS, Kiwi companies may be slightly disadvantaged in trading due to the additional taxation burden. However these same companies will be ahead of the game when other countries impose similar schemes. Don’t expect Australia to quickly learn the lesson. As well as the intractable political problems caused by the Liberal Party, the country is too trapped in the short-term focus of the media cycle to judge an ETS on its own merits.

Even the ABC’s report on the ETS today was framed in terms of cost rather than impact. This may be acceptable journalism for New Zealand media whose customers will be directly affected. But the ABC has no constituency in New Zealand and therefore should not have fallen into the trap of reporting people “bracing for higher electricity prices” rather than looking at the longer term impact. There is little discussion in any media today what an ETS might do in terms of improving the way Kiwis see themselves, setting an example to others, being a good world citizen and not to mention actually reducing emissions.

The New Zealand ETS probably won’t initially reduce emissions. But like a ship with a wide turning circle, it forces a radical change of direction that is not immediately apparent. It will make people think about emissions in their business decision making. Given that it will also increase the price of petrol and electricity it will impact on consumer behaviour and make them more frugal with energy, surely an desirable unintended consequence.

Nonetheless, there are justifiable criticisms of the plan but there are nothing that can’t be tweaked. The agriculture sector is omitted until 2015 despite being the largest single source of greenhouse gas emissions in New Zealand with almost half the total emissions. They will come under the scheme in four years. The cap and trade ETS is not without its problems (not least that it was designed to solve pollution in a small American market). The EU 2005 version is flawed by the free permits given to heavy industry. The New Zealand version is also generous to polluters but is the first true all-sectors all-gases scheme in the world. It is a brave first step by a small and independent country. New Zealand has set a good standard for Australia and the rest of the world to follow.

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2 thoughts on “New Zealand passes ETS legislation

  1. Lets hope that this New Zealand government is the first and the last to lead their country in to finanacial oblivion all in the name of socialism.

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