Editorial
Nothing to Hide
The Emissions Trading Scheme review is not Act’s to hijack.
The new Government’s decision to send the Emissions Trading Scheme (ETS) to a select committee for a complete review – including a rethink about a carbon tax – beggars belief. It seems, yet again, we are headed back to the drawing board on how to deal with our Kyoto obligations.
When National joined New Zealand up to the Kyoto Protocol in 1998, it strongly favoured an ETS as the best way to put a price on carbon and encourage businesses and consumers to shift to low-emission activities.
Labour came to office in 1999 and ditched that idea, favouring a carbon tax. Detailed policies were worked up that included plans for the introduction of a tax, backed up by programmes to encourage renewable-energy projects and provide relief for trade-exposed industries. It all added up to a comprehensive – albeit controversial and imperfect – policy framework.
Then, three years ago, Labour stitched up a coalition agreement with New Zealand First and United Future. The deal called for a review of the carbon tax. In the aftermath, not only the tax but also the key supporting policies – Projects to Reduce Emissions, Negotiated Greenhouse Agreements – went into the shredder, and squadrons of officials were sent back to their desks to start all over again.
Eventually, a plan emerged for an all-sectors/all-gases ETS, which was initially supported by National. It was a controversial and, in many respects, deeply flawed scheme, passed only after last-minute concessions thrown to the Green Party and New Zealand First.
National voted against it, not because it opposed the principle of an ETS, but because it believed the scheme was badly designed and would lead to perverse and economically damaging outcomes. Among the criticisms were that it would encourage high-emitting industries to move offshore, that it was more aggressive than similar schemes under development elsewhere in the world and that it would encourage inefficient land use.
The National MPs who served on the select committee that considered the ETS wrote a detailed, carefully considered analysis giving a clear steer on the kind of changes a new National Government would make.
Throughout the debate, National’s climate change spokesman, Nick Smith – now Climate Change Minister – proved himself highly knowledgeable about this complex area of policy, and was plainly committed to a well-designed ETS. In an interview with the Listener in September, he reiterated that he wanted a reworked ETS – which he called “the right tool” – in force by 2010, starting with the electricity sector.
So, there was never any reason to doubt that National would stick with the ETS, subject to amending legislation that would address the scheme’s numerous and significant shortcomings.
But now, Prime Minister John Key has agreed with his junior support party Act – which campaigned on abandoning the ETS and withdrawing from Kyoto – that the whole shebang should be put up for review. The National-Act confidence and supply agreement allows for “any amendments or alternatives” to an ETS to be considered, “including carbon taxes”.
Terms of reference for the inquiry are to be agreed between National and Act, but, worryingly, the confidence and supply deal includes a draft prepared by Act, which envisages the select committee hearing “competing views on the scientific aspects of climate change from internationally respected sources”.
Key’s decision to allow this document to be published as part of the deal is bizarre. Surely, a decade after New Zealand signed up to the Kyoto Protocol, and after tomes of scientific evidence confirming the trend of human-induced climate change, he’s not seriously considering indulging Hide’s fancy that global warming is a figment of the international community’s imagination?
All this is a humiliation for Nick Smith, who has carefully nurtured the Blue-Green brand and earned respect for his knowledge on climate change issues.
It is also confusing for investors, who thought that after a decade of policy confusion, the rules were finally beginning to come into focus.
It’s not too late for Key to salvage the situation. He is clearly obliged to go ahead with the select committee review, but he ought to slap down Hide’s ridiculous terms of reference, and he needs to ensure that his Climate Change Minister steers the debate from here on. Unlike Hide, Smith understands that climate change is happening, that New Zealand needs to play its part in the solution and that, sooner or later, a price needs to be put on emissions. The only debate that’s needed now is on how to write the rules of an ETS to encourage climate-friendly behaviour without doing unnecessary damage to a fragile economy.
