The article below was written by John Boscawen. It is a good summary of Nick's rort.
The Emissions Trading Scheme Must Be Stopped
John Boscawen ACT M.P.
On July 1 this year, the Emissions Trading Scheme (ETS) will be extended across most productive sectors of our economy, making them instantly more costly for everyone.
The ETS was created because of the theory that human emissions of carbon dioxide cause “global warming” or, as it’s now called, “climate change”.
The government wants to make energy (electricity and petrol) more expensive, so consumers will use less of it, so less carbon dioxide will be emitted into the atmosphere, so arguably less climate change will occur.
Although the ETS will not influence the climate, it will influence your budget. The Treasury predicts that the immediate financial impact of New Zealand’s ETS will be a 5% increase in the price of electricity and a 4c/litre increase in the price of petrol. These increases have already started to be announced and there will be many more. Natural gas will also increase in price.
In three years (January, 2013) there will be another round of similar increases making a total of 10% for electricity and 8c/litre for petrol, just from the ETS.
The Reserve Bank says prices generally will go up by about 0.4% on July 1, since these price increases will affect everything that we buy. While the government promised to adjust superannuation and benefits if GST increased, they didn’t make the same promise about the ETS, and for many people the additional costs imposed by the ETS will take a big chunk of their tax cuts.
Because of the way the New Zealand electricity market works, these increases will create massive windfall profits for the electricity generators, paid for by hard-working Kiwi families. Even the government is up for huge windfall tax gains. Together they amount to hundreds of millions of dollars. (read the full details below).
These profits will come from ordinary consumers, farmers and exporters. The impact on our exporters and farmers will be huge, because they cannot just pass these costs on to their foreign customers, as domestic firms can. So Kiwi jobs will be lost and it will take even longer for New Zealand to recover from the recession.
New Zealand is the first country in the world to install an ETS that covers the whole economy – it means everyone will pay. While Europe has an ETS, it is nowhere near as extensive as ours. In particular, the European ETS applies to the whole European Union block and imposes costs on all businesses. Around 80% of European exports don’t leave Europe and only 20% do. Of New Zealand’s exports 100% leave New Zealand, and none of our four major trading partners – Australia, China, the US or Japan- has an ETS.
Lately, attitudes towards climate change have changed. This is powerfully illustrated in the recently-failed attempt by France to introduce a carbon tax on petrol, as will apply in New Zealand, President Sarkozy abandoned this in March when other countries in Europe refused to match it.
When National amended the ETS last September they modelled it on Australia’s ETS. Everyone fully expected that Australia would also introduce one, as would the US. However, the Rudd government has just shelved its emissions trading scheme for at least three years. It is most unlikely to be re-introduced.
As a consequence, New Zealand has gone from being a “fast follower”, as John Key promised us, to being actually the world leader in ETS taxes.
Since our ETS tax became law, the Copenhagen climate talks have broken down and nowhere around the world is there any expectation that we will see a climate agreement to replace the Kyoto Protocol from 2013. At the same time, “Climategate” and other UN IPCC irregularities have increased public scepticism of the human-induced global warming theory.
The ETS was originally passed by Labour, the Greens and New Zealand First. It was supposed to start on January 1 this year, with a 10% increase in electricity prices and an 8c/litre petrol increase from 2011. Because they introduced the ETS, you won’t hear Labour or the Greens speak against it, even though we are the only country to have such comprehensive increases.
National argue that because they halved Labour’s tax plans and delayed the scheme, it is not as bad as it might have been. Perhaps we ought to be grateful for this. But the scheme won’t have any effect on the climate, none of our trading partners has an ETS and can hardly complain if we don’t, so what are we paying for? What are we getting?
ACT, and only ACT, believes that regardless of whether man-made global warming is true, New Zealand is crazy to be proceeding with an ETS tax at any time, but especially during a recession.
ACT believes that the implementation of the ETS should be delayed, at least until our major trading partners, Australia and the US have caught up.
ACT says that, in the absence of concerted action from our major trading partners, there should be NO INCREASE at all.
The government has made a big point of saying that agriculture doesn't come into the ETS until 2015. This is correct with regard to animal methane and nitrous oxide from fertilizers. However, Meat and Wool New Zealand has calculated that the average dairy farmer will incur a cost of $3900 pa from July 1 this year, $7800 pa from January 1 2013 and $10,200 pa from 2015. By far the biggest cost to a farmer is the petrol, electricity and processing costs of dairy factories and meat works. And these costs start on July 1 this year. Does Nick Smith not realise that Farms are a business too?
Windfall Profits from Electricity Generation
Electricity in New Zealand is generated primarily by five major companies – the government-owned Meridian Energy, Mighty River Power and Genesis, and the privately-owned Contact Energy and Trustpower.
Electricity is generated from both renewable sources (hydro, wind and geothermal) and non-renewable sources (gas and coal). Meridian, owner of South Island hydro stations and wind farms, generates 100% renewable power, while Genesis, owners of the coal and gas-fired Huntly power station, generates mostly non-renewable power.
From July 1, generators using coal and gas will have to pay for their carbon emissions. They will recover this cost by increasing the wholesale price at which they sell electricity to the market. However, all the other generators will also get the higher price – whether they pay the tax or not. That’s the way our auction system operates. So Meridian (renewable power) will get a higher price and don’t need to pay for carbon emissions. So they collect a “carbon tax”, and they get to keep it.
This gives the term “windfall profit” an entirely new meaning. Their bitterly unlucky consumers will be forced to pay the carbon tax, even though their power is coming from hydro stations and wind turbines.
The government, as owner of Meridian, will pocket not just the carbon tax, but Meridian’s windfall profits. Literally hundreds of millions.
National are Feeling the Heat
In response to ACT’s campaign, Nick Smith and the National MP’s are fighting a rear guard action and publishing some incorrect and misleading statements in an effort to neutralise the economic logic I am presenting at Public Meetings and through the media. But this is a last-ditch attempt to justify the unreasonable excesses of an ETS regime.
If you email a National MP you may receive a standard email in return, containing these misleading pronouncements. I detail them below and also the truth of the matter so that you, the tax-paying citizens of New Zealand, can reach your own conclusions.
Misleading Statement Number 1
In the next 12 months the government has to pay $1.1 billion to foresters, in the form of emissions credits for forests planted since 1990.
Nick Smith’s own officials confirmed to me that this was not correct. This figure is a combination of payments for both pre 1990 forests and post 1989 forests. And there is a very important difference. The first is a lump sum; non-recurring payment ($420 million) and the second ($685 million) covers forests planted in 2008, 2009 and 2010 and has an ongoing recurring element Also, those who planted forests in the 1990s and early 2000’s did so without any expectation of emissions credits or subsidies from their fellow taxpayers.
The governments budget documents this year also showed that the payment due to foresters who planted post-1990, is $1.6 billion over the years 2008-2012 . This $1.6 billion is based on an assumption that 67 percent of eligible post-1989 foresters will take up their entitlement. Unfortunately for National, government officials have advised me that recent projections show that some 87 percent of foresters may now be planning to take up their entitlement. If this happens, the $1.6 billion will blow out to over $2 billion.
When will they come clean on that?
These subsidies will go to New Zealand and foreign-owned forests alike. These payouts will be funded by all New Zealanders, forced to pay more for electricity and fuel – and all for no environmental gain whatsoever!!
ACT says we should defer the ETS and compensate foresters who planted after the forestry aspect of the ETS came into effect on 1 January, 2008, because they did so with the expectation that they would receive carbon credits from the government. So it is only fair to compensate them. That would cost no more than $20 million and would be a much cheaper option.
Misleading Statement Number 2
The Government’s revenue in the first year from the ETS will be about $350 million.
Nick Smith’s officials also confirmed to me that this figure excludes the windfall profit gains from the three government owned electricity generators. So Act expects the government revenue from the ETS will be in excess of $500 million pa
Misleading Statement 3
New Zealand is not leading the world with our ETS, because 29 other countries have one.
The New Zealand ETS is a single country scheme; no other country in the world has a single country scheme. The European Union as a trading bloc has a scheme which covers 29 countries. The European ETS imposes costs on the entire European trading bloc and 80 percent of European exports are internal, only 20 % go outside of Europe. In contrast, 85% of New Zealand’s exports go to countries that do not have an ETS. New Zealand truly leads the world, in penalising our exporters and farmers, all for no environmental gain. The European ETS also excludes major parts of their economy, whereas our government has been very proud of the fact that our all gases/all sectors ETS is a world first.
Misleading Statement 4
New data shows that the moderated ETS has reversed the trend of deforestation which was a major worry under Labour.
New Zealand’s plantation forest area grew extensively through the 1990s. In the lead up to 1 January, 2008, there was excessive harvesting of forests, only because people rushed to fell them before January 1 so they wouldn't be subject to a bill of $17,000 per hectare. This would never have happened if it weren’t for the ETS.
Misleading Statement 5
National’s development and implementation of the ETS is in line with National’s 2008 election policy.
It is true that National said they would continue with an ETS albeit an amended version. ACT was the only party last election who campaigned to “dump the ETS”. However, bear in mind that John Key also said in October 2008; “we shouldn’t be the world leader because that will come at the expense of our economy”.
Since the election, many things have changed. We are now the only single country with an all encompassing ETS. We are now world leaders.
Misleading Statement 6
In response to ACT’s statements about carbon taxes on petrol, you will be told that “29 countries have implemented an ETS. Most of the schemes include some kind of coverage of petrol, diesel and electricity generation.”
The UK - has a carbon tax on petrol but it does not apply to the transport or domestic sector.
Sweden - has a carbon tax on petrol and its introduction coincided with a major tax reform with the aim to reduce taxes on income and capital and to increase environmental taxes.
Norway - has a carbon tax on all fossil fuels but some industry sectors were granted exemptions to preserve their competitive position.
Denmark - has a carbon tax on diesel only and does not cover the transport sector.
Finland –has a carbon tax covering fuels used for heating and transportation.
Ireland- has recently introduced a tax on petrol and auto-diesel which includes the transport sector but excludes the 12,000 installations, covering industrial and stationary energy activities already covered by the EU ETS
So of the 29 countries that come under the umbrella of the European ETS, only three have a carbon tax on petrol that covers the domestic sector. Nick Smith stretches the truth when he claims that “Most of the schemes include some kind of coverage of petrol…”
Outside of Europe Quebec has a small carbon tax on petrol of 0.8 cents per litre.
Misleading Statement 7
The Government views this issue as one of risk management. There are uncertainties in the science, just as there are over earthquakes, but the prudent approach is to take steps to reduce the risks.’
This is ridiculous. Not only are there uncertainties over whether global warming is occurring – and if so, whether it is man-made – everyone agrees New Zealand is too small to make any difference to world climate. The Prime Minister’s own Chief Science Advisor Professor Sir Peter Gluckman has said ‘anything we do as a nation will in itself have little impact on the climate – our impact will be symbolic, moral and political.
Misleading Statement 8
The government is also conscious of concerns specific to New Zealand’s economic resilience, namely the high value consumer markets where issues of carbon footprint pose a long term risk to our key export industries.
49% of New Zealand’s exports go to our top 4 trading partners, Australia, United States of America, People's Republic of China and Japan. These total $18 billion per annum or 48.5 % of our total exports. None of these countries have an ETS and are unlikely to ever have one. Our exports to all of the EU countries combined total $5 billion per annum or 14.3 % of the total.