Battling climate change will add further $110b - report

The Government's plans to combat climate change will add $110 billion more than expected to New Zealand's debt, a report out this morning has revealed.

The select committee report into National's proposals to change the Emissions Trading Scheme says Treasury now estimated that proposals to allow much higher allocations of free carbon credits to big polluters would increase government debt by 13-17 per cent of gross domestic product by 2050.

That was about twice the 6 to 8 per cent of gdp that had previously been advised to the Cabinet. 

The changed calculation was included in Labour's minority report from the finance and expenditure committee's consideration of a bill which significantly changes the previous government's ETS.

National's proposed model would allow big polluters - such as Rio Tinto, which runs the aluminium smelter at Tiwai Point in Southland - to increase emissions.

It also pushed back the date for the full phase of  free carbon credits to big polluters, and delays the introduction of agriculture, which accounts for about half New Zealand's emissions, from 2013 to 2015.

The existing law would phase out free allocations by 2030, and Labour claims National's proposals at present allow them to continue, albeit at very low levels, indefinitely.

Labour's minority report launched a stinging attack on the select committee process, saying it had been rushed and unfair to submitters who were often given just hours notice of when they were required to appear.

Labour said Treasury's renewed estimate of the cost to the crown of the scheme, which comes from a more generous allocation of free carbon credits, was an example of how "rushed contributes to serious error".

It noted wryly that National had been highly critical of the speed with which the previous bill proceeded through the select committee, which was significantly slower that the planned amendments.

The committee was deadlocked, meaning it could not recommend that the bill be passed - a rare outcome for a government bill.

National is likely to get support from the Maori Party to get the bill through the House, but is likely to have to introduce a Treaty of Waitangi clause that will protect settlements for iwi which have included significant amounts of forestry.

Forests planted before 1990 cannot be harvested without incurring significant costs as they are carbon sinks and count against New Zealand's overall emissions tally.

The Maori Party also wants an extension of the home insulation programme to help poor families cope with higher energy costs.