Business groups say singling out the electricity sector for early action while exempting major emitting sectors would be unjust. Photo / Dean Treml

Business groups say singling out the electricity sector for early action while exempting major emitting sectors would be unjust. Photo / Dean Treml

In the first of a four-part series on Government options for dealing with climate change, economics editor Brian Fallow looks at what business lobby groups want.


Amid fresh warnings about the long-term dangers of global warming, the Government has received more than 3000 submissions on its strategy for responding to climate change, released late last year.

Some clear themes emerge from business lobby groups' submissions.

First, New Zealand is a tiny contributor to global warming. Where doing our bit for the planet ends and futile self-sacrifice begins depends on what the big emitting nations do.

So any measures to expose New Zealand to a cost on carbon emissions should not get ahead of what major trading partners, including Australia and the United States, undertake.

Secondly, relying on price signals is better than prescriptive regulation. And price-based measures should apply across the economy. Singling out the electricity sector for early action while exempting major emitting sectors - transport and agriculture - for political reasons would be distortionary, inefficient and unjust.

There is, however, no consensus on whether a carbon tax or a cap-and-trade system would be better.

Business New Zealand prefers emissions trading but the Chambers of Commerce favour the certainty of a carbon tax, provided the extra revenue is used to decrease income tax.

Both the Business Roundtable and the Major Electricity Users Groups argue that the case for preferring trading to a carbon tax - as both the Government and the National Party do - has not been made.

Business New Zealand said it was concerned the Government thought its proposed policies would impose only a moderate cost on the economy without apparently having done any cost-benefit analysis to substantiate that.

It agreed with the Government's indication that it would introduce a broad price-based measure when international conditions were appropriate, but not before 2012.

To reduce uncertainty and encourage early voluntary action it should commit itself soon to a method of charging firms - even though it would not be implemented until international conditions warranted, it said.

"We do not support the early introduction of emissions trading and certainly not before our major trading partners, as this will place New Zealand exporters at a disadvantage," it said. "Nowhere else in the world are manufacturers facing the true cost of carbon [emissions]."