Huntly Power Station

Huntly Power Station

The Government's proposed carbon emissions trading scheme has been criticised from yet another quarter - with a leading economics group now saying the plan will damage our economy more than necessary.

The New Zealand Institute of Economic Research (NZIER) has put a $4.5 billion price tag on the plan, saying households, the provincial economy, agriculture, energy producers; transport and "most other industries" will feel the pain.

Its report comes just a day after the Sustainability Council said the scheme was neither fair nor efficient. It said households, small business and road users will bear 90 per cent of the costs. Agriculture and big business, said the council, were getting

Paying directly for emission reductions, (whether from actions in other countries to reduce emissions or action in New Zealand), will also make a greater contribution to a reduction in global emissions than could be achieved as a result of an ETS forcing a reduction in New Zealand emissions, says the NZIER Report. New Zealand produces an estimated 0.4 per cent of the world's emissions.

At the core of NZIER's criticism is its belief that the trading scheme makes firms in New Zealand less competitive than firms in countries that have not imposed the cost of greenhouse gas emissions.

It says New Zealand is the only country in the world known to be including agriculture in an emissions trading scheme, despite very limited opportunities for this sector to control its emissions.

"Agriculture, which delivers more than a third of the country's export earnings, will be particularly hard hit because it cannot make quick adjustments and its ability to do so is largely reliant on unknown future improvements in technology," says Dr Brent Layton, the institute's chief executive.


"We can reduce the amount of agricultural products we produce at great cost to the economy - but the slack would simply be taken up by a less efficient overseas producer not covered by an Emissions Trading Scheme (ETS) Scheme."

Rural economies in Southland and Northland would face a double hit from the loss of sheep, beef and dairy farmers as well as contraction in the refining and metal production sectors, says the research. Rural economies generally suffer more that the service based economies of Auckland and Wellington.

"Other countries can make spectacular gains by increasing the efficiency of electricity generation plants, but New Zealand is already a world leader with 70 per cent of our electricity produced from renewable sources, and accordingly, small scope for gains in efficiency," says Layton.