The cacophony of lobbying around the proposed Emissions Trading Scheme (ETS), coupled with high petrol prices, has prompted the government to announce a couple of changes to the scheme. Liquid fuels were supposed to enter the ETS in 2009, but this has now been delayed to 2011, and the phase out of the free allocation of emissions units to big emitters will now be postponed five years until 2018 [Herald, Radio NZ, Dominion Post].
Announcing the changes to the proposed legislation, Helen Clark also released the latest figures for the Kyoto liability:
… the provisional net position is projected to be a deficit of 21.7 million units during the first commitment period of the Kyoto Protocol (2008-2012). This compares with the projected deficit reported in May 2007 of 45.5 million units, and is a drop of 52 per cent. This means the liability halves from $1 billion to $481.6 million.
When the ETS was announced last year, it was projected that the net liability would be about 22 million units after taking the expected effects of the scheme on emissions into account. The government is clearly confident that high petrol prices will achieve the same effect as the ETS over the two year extension period. That’s a defensible position at the moment, but if fuel prices fall the Kyoto liability could increase. It signals, perhaps, that the government is reasonably confident that petrol prices won’t fall. Or perhaps simply that in an election year contentious new policy is up for grabs. The word pusillanimous springs unbidden to my mind…
The fuel move is getting the most attention, but the five year extension on allocations of free units to big emitters is a direct response to intensive lobbying from those sectors. It will significantly reduce the business costs of cutting emissions in the longer run, but also amounts to an extension of a tax payer subsidy to those businesses. It will be interesting to see how they respond. Looking into my crystal ball, I confidently predict someone will say “it’s a welcome move, but not big enough”.