Does John Key understand the uncertainty his wild statements have created for business? Is there any thinking or policy intent behind the statement that the ETS will be “put on hold” or was it just post-election rhetoric? The key thing is that the businesses most affected don’t know.
About a week after the election, reassured by pre-election statements that there would still be an ETS, though it might be different, a major forestry company was about 12 hours away from concluding a sale of forestry credits. They had achieved a price of NZ$30/tonne. The legislation passed last August provided that the ETS comes into effect for forestry on 1 January ’08, though not for energy till ’10 or transport till ’11. That is still the law.
From 1 January ’09 foresters can apply to have NZ units credited to their account in the registry, and can then sell them.
Then Key announced, part way through the coalition negotiations, that the ETS might be “repealed”. The buyer immediately shot through. Now we have Gerry Brownlee announcing that there will still be an ETS (despite setting up a committee to consider whether a carbon tax would be better) but business is gun-shy now and no-one is going to commit investment based on that.
The interesting question is, what does “put on hold” mean for forestry? If companies apply on 1 January to have units transferred to their account for carbon sequestered during 2008 by their post-1989 forests, as the law provides, will those units be forthcoming? That is dependent on whether MAF has completed the work needed to rollout the mapping tool that allows foresters to prove that their land is eligible. They were on track to have this done in time to meet the requirements of the law; have they been told not to proceed?
If so, under what authority? You can’t suspend the law just by announcing it. I was fully expecting an amendment bill to come to Parliament before Christmas, changing the date of coming into force for forestry. That hasn’t happened. Just as well, as that would also “put on hold” the deforestation penalties for those who clear and don’t replant, and lead to a frenzy of land conversion for dairying, with more damage to our emissions profile. That would be ironic, as Nick Smith grandstanded constantly in the last Parliament, attacking the Labour government for mismanaging the question of forestry credits and causing a landslide of dairy conversions in the year before the penalty came into force.
Of all people, a key player in the financial markets which rely on rumour and reading the tea leaves as they make their daily trades, should understand the damage loose talk can do to business confidence.