KEY POINTS:
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.
He says there will be a major impact on an already faltering economy, with rising prices, reduced export earnings and reduced employment.
MAJOR IMPACTS
The NZIER report says that if the Government's proposed emissions trading scheme is implemented unchanged, then:
" In 2012 the cost to the New Zealand economy of trying to reduce emissions in New Zealand would be more than eight times as great as the Government paying for credits from overseas projects and schemes that have succeeded in reducing global emissions
" In 2012, the equivalent of 20,000 jobs will be lost as the economy adjusts.
" By 2025, GDP will fall by almost $6 billion, household spending will be down by $3000 per household and hourly wage rates will be down by $2.30 in today's prices.
" The rural economy will be particularly hard hit with dairying land possibly dropping in value by 40 per cent in 2025 and sheep and beef farms losing 23 per cent of their value.
Layton said the Government's desire for New Zealand to play its part in reducing global warming was admirable.
"Many New Zealanders will support the principle. Clearly, we would all want the best environmental outcome at the least possible cost to our economy, our standard of living and our international competitiveness."
Without any comprehensive global commitment, paying directly for emissions reductions out of general taxation was cheaper and more effective than the Government's scheme, he said.
How the Emissions Trading Scheme Works:
The Climate Change (Emissions Trade and Renewable Preference) Bill sets up a trading scheme which will eventually affect all sectors of the economy, including agriculture.
* The system will make greenhouse gas emitters pay for their emissions through the trading of carbon credits.
* The scheme is to be phased in by sectors. The stationary energy sector - electricity generators and large industrial plants - has obligations from January 2010.
* Large trade-exposed companies, especially in the aluminium, steel, cement and glass industries, will get a free allocation of most of the units they need, but still face a carbon price at the margin.
- NZHERALD STAFF
