Govt's big green cash machine

The Government stands to make billions from its key climate change policy while householders facing higher power and petrol prices under the scheme await details of a compensation package.

Treasury figures released yesterday show officials expect the Government to reap $21 billion from its controversial emissions trading scheme (ETS) over the next 20 years and it could make as much as $42.6b under some scenarios. Despite almost 300 submissions and nearly 1000 minor and technical amendments, the finance and expenditure select committee has ignored calls for major changes to climate change legislation that ushers in the scheme, and recommends that it be passed.

But the Government does not yet have a majority, with both New Zealand First and the Greens continuing to hedge their support. Prime Minister Helen Clark said yesterday it was "business as usual" for a minority government, and negotiations over the legislation continued.

NZ First appears best placed to demand significant concessions in return for its support, however, and top of those is understood to be a compensation package for lower-income groups and the elderly to assist them in paying the higher power bills the scheme will incur. Some industries will also receive a measure of protection through free carbon credits, which the committee yesterday recommended be extended through until 2018.

Yet official projections of the revenue implications of the scheme show that while the Crown stands to lose money during the first few years of the scheme, it stands to reap billions of dollars from industry and households in the long run. The projections show that by 2030 the Government's coffers could swell by up to $42b assuming a carbon price of $100 a tonne. At $50 a tonne it would make $21b, and at $30 a tonne, $12b. The "central", or mid-range projection, is for a $21b windfall. They also show that before the Government decided to lengthen the phase-out of free credits it stood to make even more money up to $67b by 2030. Until 2020 the scheme could cost the Government up to $1.2b a year but these losses would reverse out once it began selling credits.

Ironically, the worse the country performs at meeting its Kyoto commitments the more money the Government makes, since industry would be forced to buy more carbon credits.

The official figures appear to go some way to backing up claims by Solid Energy chief executive Don Elder during the select committee process that the Government stood to reap windfalls of up to $80b from the scheme.

Parker said yesterday that the figures ignored the likelihood that carbon emitters would change their behaviour as the price soared, and therefore such windfalls were unlikely.

National's climate change spokesman Nick Smith said the bill was riddled with disincentives and would lead to major industries heading offshore while the Government reaped windfall profits. The scheme was like a giant cash cow, "from which the Government will profit by more than $23 billion from the extra costs like the 7c a litre on fuel and 18 per cent on electricity".

NZ First leader Winston Peters yesterday said that his party was in "serious discussions" with the Government on the scheme but he could not guarantee his party's support for it.

In its report, the committee said it agreed with the Government's plan to delay the entry of the transport and liquid fuels sector into the scheme by two years and to issue five more years' worth of free credits to selected industries.

But it rejected calls by the Green Party and other submitters for agriculture to be brought into the scheme earlier than 2013.

The only requirement added is that farmers declare their emissions from 2012.

The only significant change to the ETS bill appears to be a wider exemption for thermal power stations to build new generation, if it is for peak load only.

CARBON DATING:

Amendments to the Government's emissions trading scheme legislation include:

• Deferring the entry of transport fuels until 2011.
• Deferring the phase-out of "freely allocated emissions units" subsidies to industry for five more years until 2018.
• An increase in the number of free emissions units for some forest owners.
• Mandatory reporting for agriculture from 2012 in preparation for entry into the emissions trading scheme.
• An allocation of 18 units per hectare for future Treaty claimants receiving Crown Forest land.
• Provisions for more frequent independent reviews of the scheme.
• The coal industry having to take responsibility for methane emitted from mines.  

- © Fairfax NZ News