ETS 'elephant in the room'

So, it's started already. Mercury Energy and Contact Energy this week announced they were raising their prices as of July 1, the day our ridiculous emissions trading scheme (ETS) comes into effect.

This, the company said, will mean an extra $5 a month to average residential electricity bills and $1.75 a month to average residential gas bills.

Thus do the meagre tax reductions for low-income earners and beneficiaries begin to be eroded before they even start, for you can be sure that other power companies will only too readily follow suit.

And it will get worse. On July 1, too, petrol prices will go up by 4c a litre. Not only will that further cancel out the Budget's wee tax cuts for those earning little, but it will be reflected throughout the economy in increased prices for goods and services, to which increased GST will be applied.

Nowhere in the Budget coverage and commentary that I read did the effects of the ETS get even a look-in, except for a couple of paragraphs "reporting" Act New Zealand leader Rodney Hide's Budget speech to Parliament. Not surprising, I suppose, since the media seem as besotted with the ETS as some National ministers.

Yet Mr Hide had much to say on the matter, and every word of it is worth considering. So let's take a broader look at what he said.

Having paid tribute to the Budget in general - as he is required to do under Act's confidence and supply agreements with National - Mr Hide said there was one glaring failure, "an elephant in the room", that threatened to undo all the good work being done.

"Here we are," he said, "tuning up the car for peak performance, new tyres, tank full of gas, any aerodynamic impediments removed. But some silly bugger has locked the handbrake into place. The handbrake is the emissions trading scheme. The rest of the world has the handbrake off, and we have it locked on."

Mr Hide said New Zealand was the only country with an all-gases, all-sectors ETS. This was "a damaging and incomprehensibly foolish imposition on our fragile economic recovery". It would slow the country's ability to create jobs, and to generate higher incomes for working people, and would "stop us catching Australia".

"This is a folly on the scale of past National-inspired disasters. This is up there with Rob Muldoon's attempts at central planning. It matches and surpasses Bill Birch's disastrous 'Think Big'."

The ETS, he said, was "an act of financial folly". It would take more than $1 billion from struggling households and businesses, and transfer that wealth to forest owners whose forests were planted long before the ETS was even thought of.

Higher energy costs would bite savagely deep into New Zealand households, which would also be facing higher GST, into farm profitability and into the profitability of processing industries.

Mr Hide said New Zealand's trading partners were not proceeding with emissions trading schemes. The Australians had dropped theirs and Europe had an ETS in form only, but not in substance.

"We are the odd ones out. We are sacrificing international competitiveness for the sake of nothing more than empty posturing and strutting on a now-empty world stage."

However, Mr Hide said, many National Party members were unhappy with the ETS and wanted it deferred. One big National Party conference had already voted to defer the ETS and a remit was before another to do the same.

"I say to those National Party members, good on you. Keep at it. Make your employees in Parliament listen. We can stop this madness, this self-inflicted wound, this handbrake on growth and jobs and incomes ...

"If Act, together with the support of the numerous National supporters urging us on, can convince the Government to defer the ETS, then New Zealand really will be on the road to recovery. We will have the handbrake off," Mr Hide said.

Mr Hide is right. On July 1, New Zealand will be the only country in the world to have a national, all-sectors, all-gases ETS. None of our trading partners Australia, the United States, China, Japan - will have such a scheme.

The Minister for Climate Change Issues, Nick Smith, is wont to point out that the European Union has an emissions trading scheme.

So it has, but the EU scheme does not apply to any gas emissions except carbon dioxide. And even that does not apply to the transport industry or to households and small business or to agriculture, construction or waste management.

So since it applies only to heavy industry and electricity generation, almost 60% of EU emissions are omitted. And even in electricity generation the European scheme has become so complex, so full of exceptions and allowances, that it has not built any measurable carbon price into electricity for the first five years. So what the devil are we playing at?

- Garth George is a retired editor. He lives in Rotorua.


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