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Home / Business

Emitters get '$1.4b corporate welfare'

Brian Fallow
By Brian Fallow
Columnist·NZ Herald·
24 Jun, 2008 05:00 PM2 mins to read

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KEY POINTS:

Eight of the country's largest industrial emitters are set to receive "corporate welfare" of at least $1.4 billion over the next 10 years, the Sustainability Council says.

That is its term for the allocation of free emission units large trade-exposed emitters will get when they are brought into
the emissions trading scheme from 2010 under the bill now before Parliament.

It is intended to cover them collectively for 90 per cent of their 2005 on-site emissions and for 90 per cent of the ETS-related increase in their electricity costs.

The electricity subsidy accounts for 85 per cent of the benefit to large emitters, the Sustainability Council's executive director Simon Terry estimates.

This is based on indicative figures in a Government document outlining the framework of the scheme.

These indicative figures assume that every unit of electricity sold will increase in price by the average cost of the emissions units generators will need to buy.

While some generators would dispute that assumption, Terry said it was defensible in light of the way the wholesale electricity market worked.

In any case it was offset by the very conservative assumption he had made of a carbon price of $30 a tonne over the next 10 years.

The council did not dispute a good case could be made for providing transitional assistance for trade-exposed emitters, he said.

But the ETS bill would expose them to a carbon price for no more than 10 per cent of their 2005 emissions until 2018 and not completely eliminate the subsidy until 2030, he said.

"Our concern is the degree to which the legislation would commit the Government to a very high level of subsidy so far out into the future."

The bill allows for period reviews of the grandfathering arrangements.

"The problem is once a subsidy is in place it is extraordinarily hard to unwind," Terry said.

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