Federated Farmers want out of emissions scheme

Federated Farmers wants the Government to follow Australia's lead and exclude farmers from its emission trading scheme, despite Climate Change Minister Nick Smith's opposition.

At the same time, Business New Zealand is rejecting claims that farms and businesses will get a long term subsidy from households under proposed emissions trading legislation.

A recently released Sustainability Council report suggested households would bear half the total cost under the amended ETS during its first five years, while accounting for about a fifth of all emissions.

Farmers would gain a $1.1 billion subsidy and pay an amount equal to about 2 per cent of their fair share of the bill during the period up to 2012. Large emitters would gain a subsidy worth close to $500 million, the Sustainability Council report said.

Federated Farmers president Don Nicolson said Australia was taking a pragmatic approach to emissions trading laws, with its decision over the weekend to exclude agriculture.

The Australian government had previously planned to include agriculture in an ETS from 2015.

"That means New Zealand is now the only country on the planet to include agricultural gases in its emissions response," he said.

Land-based industries make up almost two-thirds of New Zealand's exports.

"Australia's farm lobby has put forward the very same arguments New Zealand farmers have.

"It says agriculture's exclusion does not mean farmers cannot be part of the solution," Mr Nicolson said.

Business New Zealand said yesterday that "extreme and misleading statements" that farms and business would get a subsidy from households were causing confusion and fear about emissions trading.

There had been "flawed assumptions" regarding the allocation of carbon credits, carbon pricing and the treatment of forestry under the planned emissions trading scheme, Business NZ said in a report issued yesterday.

Making an early start on emissions trading would put exporters in a vulnerable position when they competed with overseas firms not facing a carbon charge.

Allocating carbon credits reduced that vulnerability in the short term and once other countries adopted emissions trading that risk would cease, said Business NZ chief executive Phil O'Reilly.

The Sustainability Council report asserted that households would in effect subside business for years into the future.

"This assertion is incorrect and is best described as a subsidy myth," the Business NZ report says.

However, businesses could move to countries where there was no price on carbon, the so-called carbon leakage of business overseas.

The allocations to industry and agriculture were because of the risk of`carbon leakage in industries where firms competed in world markets such as aluminium, steel, cement, wood pulp and food, Business NZ said.

However, carbon leakage would be temporary until there was wider international pricing for greenhouse gas emissions.

Business NZ said there would also be a review of the ETS operation a year before the end of each commitment period or each five years.

That would include possible changes to allocations to industry and agriculture, including a phase-out rate and level of assistance.

- © Fairfax NZ News