Path clear to sign off Kyoto pact

By BRIAN FALLOW

New Zealand can ratify the Kyoto Protocol this year, says the minister in charge of climate change issues, Pete Hodgson.

The preferred policy package announced in April went through a round of public consultation and has been approved by the Cabinet substantially unchanged.

The only remaining matter to be concluded before ratification is the passage of the Climate Change Response Bill, dealing with the gathering of necessary information on greenhouse gas emissions and forest "sinks".

It has been reported back by the foreign affairs select committee and Hodgson said it would be passed before Christmas.

There will be a carbon tax but not before April 2007. It will be capped at a level that would add 6c a litre to the cost of petrol, 7c a litre to diesel and about 9 per cent to an average residential electricity bill.

Agriculture, the source of more than half of New Zealand's emissions, will be exempt.

Industries whose international competitiveness would otherwise be at risk will be able to negotiate the terms of a partial or total exemption from the tax, which will depend on them showing that they are moving to the world's best practice in minimising emissions.

Following concerns raised in the consultation process, work will be done on whether special provisions are needed for small and medium-sized enterprises which are too small to bear the transaction costs of negotiating a greenhouse agreement with the Government and cannot easily face the impact of the carbon tax.

"It might be that instead of energy being 3 or 4 per cent of their total input costs, it might be as much as 20 per cent," Hodgson said.

"We don't know how many such firms there are but we need to find out and work out what we are going to do about it."

The "no gain, no pain" deal for the forestry sector announced in April has been sweetened slightly.

The Government will retain ownership of forest sink credits, but it will also carry the liability created under the protocol for deforestation.

That removes a potential barrier to exit for forest owners who want to switch land to other uses.

In April the Government proposed a cap on that liability of 5 per cent of the forest harvested in any one year.

That is at least twice the estimated average proportion of forests harvested but not replanted.

That cap has now been raised to 10 per cent.

The industry was concerned that if the cap was too low it might create a perverse incentive, encouraging forest owners considering deforestation to get in early and deforest prematurely lest the cap be reached.

The Government has also agreed there should be a mechanism to encourage the establishment of permanent forest sinks.

One option is for forest owners to be paid in proportion to the carbon taken up by a given forest stand, in return for covenanting and managing the land to create a permanent forest.

The costs of measuring and verifying the amount of carbon taken up would fall on the owners.

Another option is for the Government to use some of its revenue from selling forest sink credits in the international market to fund the legal protection and management of newly regenerated forest areas - mainly the costs of covenanting and fencing - where the owners do not seek any payment for the carbon taken up.


Further reading
nzherald.co.nz/climate

Climate change links

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