Jeanette Fitzsimons

The ETS, power prices and income compensation

by Jeanette Fitzsimons

The Maori Party seems to be having difficulty getting the National Party to agree to raising the core benefit to compensate for higher electricity and transport fuel prices under the ETS. This is not surprising as the party that slashed benefits in 1991 has never shown any remorse for that, or any interest in raising them.

Raising benefits is the correct way to compensate for higher prices, rather than the Government’s proposal for a three year transition where the energy and transport sectors only have to purchase one tonne of emissions units for very two tonnes emitted by their products, effectively halving the price from $25/tonne to $12.50. A rise in the core benefit would achieve two things:

  • it would give financial relief to the households who most need it, without subsidising those who don’t;
  • it would not dilute the price signal  that makes it worth while to save energy and fuel.

So beneficiaries could take their higher benefit and use it to purchase more efficient appliances or vehicles in order to reduce fuel and power costs permanently.

It is not clear from the Government’s announcements so far whether the family assistance measures negotiated  between the Greens and the Labour Party as part of the 2008 ETS legislation will be allowed to stand. First, the billion dollar home insulation fund which is in the legislation but may be repealed by National’s bill, was to have offered 100% subsidy for low income households and a lesser subsidy for those who could have afforded to put up some of the money, and none for those on the highest incomes. When we worked with National to reinstate the scheme, it was a bottom line for them to have no income cap, so 100% funding for poor families was not affordable.

It was also part of the agreement last year, though not implemented through legislation, that every household would get a one-off payment in compensation for the higher power prices, and the CPI based benefit adjustment would occur in advance rather than in arrears. Those changes were to cost $180m but may not survive.

We argued with Labour for a general benefit rise last year, and failed. National should reconsider it this year.

Published in Environment & Resource Management | THE GAME by Jeanette Fitzsimons on Wed, September 16th, 2009   

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