Nick Smith - Nelson MP, Minister National Government

Doing our Fair Share on Climate Change

Late last month as Minister for Climate Change Issues I enjoyed meeting with Blenheim farmers to chat about the emissions trading scheme.

It was one of 27 meetings, including Nelson, where I explained the ETS, answered a wide range of questions and outlined the opportunities to make energy efficiencies and savings.

The National Government believes our moderate emissions trading scheme will help us reduce emissions in ways that result in least cost to society and the economy.

The world is set on a path to constraining emissions. Countries have to adapt to a price being placed on emissions. We are one country along with many others that is taking action, whether it is an ETS, a carbon tax, or funding from taxpayers. The sooner New Zealand starts that process, the easier the transition will be rather than waiting and having to go harder later.

The ETS is crucial to meeting our Kyoto Protocol target. Without the scheme, we would exceed it by 11 million tonnes. Regardless of whether you like the Kyoto Protocol or not, it is in New Zealand's interests that we honour those commitments.

We could meet our Kyoto commitments with other policies. You could regulate and tell citizens what sort of light bulbs they must use, how much water they can have in their shower, what sort of cars they can buy and tell business what sort of power plants they must build. An ETS encourages emissions reductions without reverting to a nanny state.

At the beginning of this month the energy and industrial sectors entered the ETS. This means there is now a price on carbon in petrol, diesel, gas and coal and electricity and this will be passed on to consumers, including farmers. Amendments to Labour’s ETS last year halved these price increases to around 1 cent/kWh for electricity, 3.1 cents/litre for petrol and 3.3 cents/litre for diesel.

The Government also deferred agricultural emissions coming into the scheme until 2015 and has said this will only occur if our trading partners make progress. MAF estimates the impact of the ETS from 1 July on an average dairy farm will be $3335 per year and for the average beef and sheep farm $1183 per year.

Farmers can offset some or all of their emissions by planting trees on the least productive land. For an average dairy farm 6 hectares of pinus radiata would generate $4000 per year under the ETS over 30 years. Energy efficiency and technology upgrades will reduce on-farm consumption and the cost of emissions. For example, Heat pump technology in the milking shed will save $2000 a year in electricity costs.

Money collected under the ETS by oil companies and electricity generators will go towards funding projects that offset their carbon dioxide emissions, such as planting trees in New Zealand. The Government does not make any money from the ETS.

As a small trading nation it is in New Zealand’s long-term interests to have an ETS to protect our clean, green brand. Doing our bit now to curb emissions growth puts us in the right space long term to protect our brand, market access and economy. It is vital to our future prosperity that we ensure there are no barriers to overseas markets.

New Zealand is not leading the world with an ETS. Of the 38 countries that signed the Kyoto Protocol, 29 have an ETS – the bulk in the European Union. In the United States the Obama Administration has indicated its intent to pass legislation before the end of the year. Ten north-eastern states in the US are already part of a cap and trade scheme, and a further 13 have schemes under development. Four Canadian provinces have similar schemes. Tokyo has already introduced an ETS and the Japanese government recently introduced legislation to implement an ETS that it wants to harmonise with South Korea.

In Australia its government has been unable to get its ETS through its parliament and some have assumed there will be no cost for Australian households and businesses. This is incorrect. Australia, like New Zealand, has signed the Kyoto Protocol and is liable for its emissions.

To meet these international commitments, the Australian Government increased funding in its Budget by $5.1 billion for clean energy initiatives. This money will come out of the pocket of Australian households and businesses. They are also taking a regulatory approach that requires all power companies to invest heavily in converting to renewable electricity. It has been estimated this will increase power prices by 7% this year – greater than the 5% forecast for our ETS.

It is important New Zealand does its fair share in combating climate change but we don’t want to jump ahead of the rest of the world. That is why there will be a review of the ETS next year, and at regular intervals thereafter, so we can reassess our approach relative to international progress and the latest science. Our very moderate ETS is the sensible way for New Zealand to make progress.