Govt dismisses carbon profiteering claims

ROB STOCK
Last updated 05:22 11/11/2012
Tim Groser
REUTERS
TRADE MINISTER: Tim Groser.

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When bugman Rudd Kleinpaste told a gathering of honey producers and retailers on Monday that motorists were paying $25 for carbon at the petrol pump when it was trading on the carbon market for a dollar, it was not the first time the allegation has received a public airing.

The Bugman was speaking mainly about how economics ignores the value of biodiversity. But similar comments were made to Parliament earlier this year, alleging that some fuel and electricity companies have pocketed windfall profits from passing on carbon prices to consumers and businesses at $25 for each two tonnes of emissions when they were able to buy credits far cheaper than that.

There has been silence so far from the Government about the claims, made in select committee hearings in the run up to the watering down of the Emissions Trading Scheme (ETS). However, the claims prompted an investigation by officials, who appear to have dismissed them.

The ETS does not require those buying and surrendering carbon credits to pay for their carbon emissions to reveal the prices they paid for credits or whether they bought cheap and questionable overseas credits or local credits backed by local trees plantings

Minister Tim Groser's office said officials were instructed to investigate the claims made by the likes of meat processors and petrol retailer Gull.

Having contacted the companies concerned, the official reported back that "costs being passed through directly from the NZ ETS are not visible or distinguishable due to the wholesale market pricing mechanism and that these costs are not directly passed through due to competition factors".

In other words, competition should mean carbon becomes just another input cost, and it is the market that dictates prices.

Parliament had been told that some electricity companies and fuel retailers, who have to buy and surrender carbon credits to pay for their emissions, had factored prices of $25 a tonne for carbon into their prices, though the two-for-one structure of the ETS reduced that to $12.50 a tonne.

But carbon credit prices collapsed thanks, in part, to Europe's economic woes.

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