Aim to get ETS nod before talks

BY MARTIN KAY

National and Labour are seeking a compromise on emissions trading in an effort to get a scheme settled before a key climate change summit in December.

Prime Minister John Key said he favoured a "grand coalition" between the two parties to ensure broad political consensus on an issue that had consumed Parliament for two years.

"There are potential advantages if you can get to a point where it's settled between the major parties, then that can give a sense of security and predictability to the business community and consumers."

Labour climate change spokesman Charles Chauvel said he wanted to continue discussing areas where the two parties could agree with Climate Change Minister Nick Smith.

The search for a compromise comes after a parliamentary review of the present emissions trading scheme failed to find consensus on almost every point.

The report shows National, UnitedFuture and ACT favour a scheme based on the intensity of greenhouse gas pollution, with no cap on emissions. Such a plan lets polluters increase emissions for free provided they produce more goods relative to the extra gases.

But that was as broad as any deal went, with National and UnitedFuture wanting the scheme to cover all gases and sectors and ACT opposing the inclusion of agriculture, which accounts for half New Zealand's greenhouse emissions.

Mr Chauvel said Labour could consider an intensity-based scheme as it accepted there were industries where it was difficult to increase production without extra pollution.

But there would have to be a cap on overall emissions per sector.

"Intensity without a cap is just a recipe for big emitters to keep polluting by buying permission to do so offshore, so you don't really get any domestic reductions in pollution."

Labour would oppose a price on carbon, which National favours in the short term to give emitters time to adjust. Mr Chauvel had not met Dr Smith for several weeks, but was confident a new ETS could be passed before the Copenhagen summit.

Labour has said it will back suspending the introduction of energy and industry, due to join the present scheme in January, but the other timetables should be adhered to. That would see transport join in 2011 and agriculture in 2013.

PARTY PLATFORMS

* NATIONAL: Favours an uncapped intensity-based scheme covering all sectors and gases, but has no time frame on when agriculture should be included. Prime Minister John Key is keen to find a compromise with Labour to ensure broad political support.

* LABOUR: Favours the present cap and trade system, but could support an intensity-based one if emissions are capped. Wants agriculture in by 2013 and would be unlikely to support a cap on the price of carbon.

* THE GREENS: Originally pushed for a carbon tax, but have come around to an ETS because that is where the rest of the world is headed. Want a scheme covering all sectors and gases but vehemently oppose an intensity-based model and a cap on the price of carbon.

* ACT: Yet to be convinced human-induced climate change is real, but reluctantly accepts New Zealand should be seen to be pulling its weight. Believes a low-level carbon tax is best, but if there must be an ETS, wants it uncapped and intensity-based without agriculture.

* THE MAORI PARTY: Wants a carbon tax and was the only party on the review committee that did not say it could support an ETS. However, spokeswoman Rahui Katene has since said it is open to negotiations but will vote against one that is intensity-based.

* UNITED FUTURE: With National in favouring an intensity-based scheme that is uncapped and covers all gases and sectors.

WHAT'S ON THE TABLE

THE PRESENT SYSTEM

Cap and trade Greenhouse gas emissions capped at a certain level for each sector. The Government allocates free carbon credits to cover amounts historically emitted up to the cap, but polluters must offset emissions above that. This can be done by buying credits from emitters who are below their cap or foresters, whose trees absorb carbon. Credits can also be bought and sold internationally.

NATIONAL'S FAVOURED MODEL

Intensity-based without a cap This allows polluters to emit more than they do now, providing the extra emissions are of lower intensity or they follow international standards for best practice. For example, a coal-burning electricity generator that emits a tonne of carbon to produce a unit of power can increase production, providing it emits less than a tonne for each extra unit. Alternatively, the generator can emit more gases providing it has the most efficient low-emission processes possible.

POSSIBLE COMPROMISE

Intensity based with a cap The same principles regarding the intensity of emissions apply, but there is an overarching cap for the amount of extra gasses allowed for each sector. For example, the energy sector may be able to produce more emissions to generate more electricity, provided the extra production is more efficient, but must pay once a certain limit is reached.

RULED OUT

Carbon tax The simplest of all the methods, a carbon tax applies levies according to the level or emissions and can be charged either at the point of sale (for example, at the petrol station in the case of fuel) or at the point of production or processing. It effectively means those who use the most carbon pay the most.

- © Fairfax NZ News