New Zealand passes ETS legislation

Not for the first time, New Zealand has beaten Australia to the punch for a great democratic innovation. Today on 1 July, 2010 it became the first country in the Asia Pacific region to implement an Emissions Trading Scheme. The passing of the legislation will look even more remarkable to Australian eyes given that it was a conservative administration that has enacted it.

The legislation was the brainchild of the old Helen Clark Labour administration but when the Nationals won the election in 2008, the new John Key Government amended it with input from the Maori Party and United Future. These are two of the minor parties Key needed the support of to form a stable majority Government and their horsetrading insisted an ETS be part of the deal. Key himself committed to 50 percent reductions of 1990 levels by 2050. And so while the Nationals have watered down some provisions, it represents a real start for emissions trading in the region that Australians will need to study closely.

A new trading concept, the New Zealand Unit, is now in existence with one one NZU being the right to emit one tonne of carbon dioxide, or the equivalent amount of certain other greenhouse gases. Under the plan householders won’t have to take any direct action though they will notice slightly larger energy bills. Businesses who engage in certain mandated activities however, will now be obliged to surrender NZUs to the Government to account for the greenhouse gas emissions they incur during their business.

With few of New Zealand’s major trading partners yet signed up for an ETS, Kiwi companies may be slightly disadvantaged in trading due to the additional taxation burden imposed on them. However these same companies will be ahead of the game when other countries bow to the inevitable and impose similar schemes of their own. Don’t expect Australia to quickly learn the lesson. As well as the intractable political problems caused by Key’s contemporaries in the Liberal Party, the country is also is too trapped in the short-term focus of the media cycle to ever raise its head above the parapet long enough to judge an ETS on its own merits.

Even the supposedly neutral ABC’s report on the ETS today was framed in terms of cost rather than impact. This may be acceptable journalism for New Zealand media whose customers will be directly affected. But the ABC has no constituency in New Zealand and therefore should not have fallen into the trap of reporting it in terms of people “bracing for higher electricity prices” rather than looking at the longer term impact. There is little discussion in any media today what an ETS might do in terms of improving the way Kiwis see themselves, setting an example to others, being a good world citizen. not to mention whether it will actually reduce emissions.

The New Zealand ETS probably won’t initially reduce emissions. But like a ship with a wide turning circle, it forces a radical change of direction that is not immediately apparent. It will at the very least make people think about emissions in their business decision making. Given that it will also increase the price of petrol and electricity it may even impact on consumer behaviour and make them more frugal with energy, surely a desirable consequential impact.

There are justifiable criticisms of the plan but there is nothing that cannot be tweaked. The agriculture sector is omitted until 2015 despite being the largest single source of greenhouse gas emissions in New Zealand with almost half the total emissions. But although they may bitch and moan, they will come under the scheme in four years. The cap and trade ETS is not without its problems (not least that it was designed for pollution in a small American market). The EU version founded in 2005 is flawed by the free permits given to heavy industry. The New Zealand version is also generous to polluters but is the first true all-sectors all-gases scheme in the world. It is a brave first step by a small and independent country. New Zealand has set a good standard for Australia and the rest of the world to follow.