Jeanette Fitzsimons

Make the ETS fair and more urgent

by Jeanette Fitzsimons

Some of the readers here may have heard my interview on RadioNZ’s Nine to Noon programme last week, outlining the changes the Greens need to see in order to support the ETS legislation. I notice that there has been some robust debate here about the need for action on climate change. For most people, including me, that scientific debate ended a decade ago and we just need to get on with it.

For the Greens there are two key principles at stake with the ETS. They are fairness and urgency. The Bill as drafted, even before the government’s recent backtracking on timing, is deficient in both.  Half our emissions (agriculture) don’t enter the scheme till 2013. Big business is protected against trade competition, but not small and medium business. Because none of the allocation issues are even signalled in the legislation itself, business is both complaining of uncertainty and crying wolf about how it will send them broke, just to spook the Government. Just look at Rio Tinto – it’s no accident their smelter is located at a place called Bluff.

Problem is, with no guidance in the legislation to what allocation plans are supposed to achieve, the next government, regardless of who it is, is pretty much free to rig the system for their friends without any oversight from parliament.

This is grossly unfair to businesses and households, who genuinely do need certainty in order to plan investments. It also means there will be furious lobbying by vested interests and gaming and special pleading.

Remember why we’re doing this? It’s to get a price signal for carbon into the market so that businesses and individuals begin to change their behaviour in ways that mitigate climate change. We don’t even need to get a huge signal into the market all at once. But we do need to allocate the costs of carbon fairly amongst those who use and abuse it the most. This is why I continue to call for an earlier entrance for agriculture and transport so that our foresters have someone to trade with, and so that the effort is seen to be shared across the economy. Even if this means that they come in gradually. We don’t need to bring transport in at 100% in 2009. But they should pay for at least some fraction of their emissions from that year.

Back in the mid 1990’s, when Simon Upton asked whether we should have a carbon charge or an ETS, I argued for a carbon charge, because this at least gave business certainty of price, even if there was no certainty of environmental outcome. And I knew that businesses don’t invest in new technologies if prices are uncertain.

An ETS should in theory give certainty of emissions reductions, but not of price. However, because this ETS has no cap, with potentially unlimited credits from overseas, it offers neither certainty of price nor of reductions.

In conclusion, we need more sectors in the market, earlier, to get faster action and to allow trading to begin. Having all sectors in earlier, even at lower exposure rates, begins to send the price signals the market needs and ensures a fairer spread of the costs. It would also begin to meet the urgency test. After all, Pachauri says that if we haven’t taken action by 2012, it is too late. Please take a few minutes and listen to the radio interview linked above.

Published in Parliament by Jeanette Fitzsimons on Sat, June 7th, 2008   

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