Fran O'Sullivan: Emissions scheme worries

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The government's emissions trading scheme will go centre- stage this week as a parliamentary select committee gets down to holding public hearings on the proposals.

The Climate Change (Emissions Trade and Renewable Preference) Bill has attracted more than 200 submissions from businesses ranging from major emitters to those who hope to profit from selling greenhouse gas credits into the new market.

It sets the scene for a revolutionary "all gases, all sectors" emissions trading scheme which its authors hope will spur market participants to reduce the carbon footprint within their own industries.

But submitters - which include some of New Zealand's major companies - are concerned they will not have enough time to make their case to the committee over the impact of the legislation on their company's bottom lines.

Parliament's finance and expenditure committee faces a tight deadline to wrap up determinations on the bill. It needs to report back to Parliament by the end of August - a reality which leaves precious little time for substantial submissions to be appropriately considered.

It falls to finance and expenditure committee chairman Charles Chauvel to ensure the submitters have sufficient time to raise their reservations over the new legislation.

Chauvel is a relative neophyte as far as parliamentary politics is concerned. The former lawyer - now a Labour MP - who made his name while working for legal firm Minter Ellison, got offside with the Prime Minister when he issued a press statement welcoming his appointment as a ministerial undersecretary before any confirmation from Helen Clark. That confirmation is still waiting.

But Chauvel is well-plugged into Finance Minister Michael Cullen and his circle of Associate Finance Ministers, and is sufficiently confident of his own powers to secure confidence from business that he will act as his "own man" by chairing the select committee sessions rather than as a simple cipher for the Government.

A big issue that the committee will need to confront is the planned moratorium on new thermal electricity generation.

The Cabinet's business committee considered proposals for the planned 10-year moratorium last August.

A Cabinet paper obtained by the Herald on Sunday noted there were potential risks associated with introducing a moratorium on new thermal generation.

Among the risks are the potential harmful effect on electricity supply; perceptions on the security of supply; and the impact on the exploration for petroleum products.

The Cabinet paper noted one benefit of the moratorium was that it would make it less likely that New Zealand would need to import liquid fuel natural gas.

But the paper also said there was no need to discuss the issue with the Government caucus or other parties ahead of the announcement.

The moratorium is now under heavy attack from business. Parties ranging from the major electricity users group through to the Business Council for Sustainable Development have raised issues with the plans.

The problem is that New Zealand is frequently confronted with dry years, which means less electricity is generated from hydro-power stations.

This means the back-up potential from thermal generation becomes critical to sustaining business operations in New Zealand. What companies worry about is the prospect that the thermal moratorium is seen as a line in the sand as far as the Government is concerned. Even if a majority of submitters raise issues over the plan, and convince the committee some modifications need to be made to secure the nation's future electricity supply, the Government may not want to take a knock to its credibility on this by changing the rules over the moratorium.

The bottom line problem is the Government's propensity for rushing through major policy shifts relating to climate change issues without first taking detailed soundings.

Already growing concerns over the contribution that biofuels will make to reducing New Zealand's carbon footprint are threatening to derail another Government policy to get new fuels flowing from petrol pumps in less than three months.

A biofuels bill, which is also in front of a select committee, will ensure that oil companies include progressively higher amounts of biofuels within the "petrol" they sell consumers from July 1 next year.

The problem the committee faces is that since the policy was announced debate has arisen over the real impact biofuels have on reducing global greenhouse emissions.

At issue is whether the increased prices now having to be paid for food which was previously grown on ground now occupied by biofuels crops, is a plus for the planet.

The Government concedes that the programme may now have to be delayed while officials determine that the new fuels will make a positive contribution rather than simply cause harm through impact on food prices.

Cullen is worried about this.

But Climate Change Minister David Parker takes a more zealous approach. While Parker concedes the introduction of the new rules may have to be delayed he does not concede the basic principle is wrong.

Political support for the biofuel legislation is now shaky.

Parker remains confident this issue can be worked out.

But my soundings yesterday suggest the concerns over his management of the climate change suite of policies is growing. Parker's tendency to shout down business people who raise legitimate concerns over the operational impact of the Government's policies is not endearing him to senior ministers such as Cullen, whose focus is the international competitiveness of the New Zealand economy.

What it will come down to is a contest between the realists - and I would include Cullen at the top of that list from the Government side - and the zealots.

Parker's approach has major flaws. Let's hope Cullen gets the opportunity to exercise a moderating influence in response to the select committee's deliberations.

- Herald on Sunday

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