September 21, 2007 (New Zealand Herald) The New Zealand government has announced an emissions trading scheme will begin in 2008 to reduce the country’s greenhouse gas emissions, ending more than two years of delay in its policy response to climate change.The cap-and-trade scheme will cover all six greenhouse gases but be phased in sector by sector over five years, starting with the next year with the forestry industry. The scheme will provide a boost for foresters, allowing carbon credits to be earned and retained by forest owners – a reverse of the previous, deeply-resented policy under which credits for carbon stored in forests planted since 1990 were nationalised by the government.
The oil industry will be brought into the scheme in 2009 and the power generation sector and high-energy/heavy-emitting industry in 2010. Emissions allowances for these sectors will be allocated at 90 per cent of their 2005 emissions.
The government said petrol prices would rise by 4 cents a litre from 2009. Power company Contact Energy estimates a 4 per cent rise in retail electricity prices at a cost of carbon of $NZ20 a tonne when electricity comes into the scheme.
Farmers won’t face a price on their emissions until 2013, somewhat controversially given that agriculture is responsible for 49 per cent of total emissions in New Zealand, mainly methane and nitrous oxide. This sector has been behind a blow-out in the country’s total emissions in recent years, causing it to fall short of its Kyoto Protocol target by a 45.5 million tonnes of CO2-equivalent as per latest official projections.
No indication of carbon prices has been given by the government but the scheme will be internationally linked to the UN’s Clean Development Mechanism (CDM) and possibly other national schemes eventually. This will widen the market for carbon offsets available to local industry and help reduce carbon prices, said climate change minister David Parker.
Government estimates put the scheme’s cost to economic growth at 0.1 percentage point of GDP over five years. The scheme was broadly welcomed by business groups and political parties across New Zealand, including the opposition National Party and the Greens.
Prime Minister Helen Clark also announced new climate targets including a 90 per cent renewable energy target by 2025, up from 70 per cent currently. New Zealand would also aim to reduce by half per capita emissions from transport by 2040, increase in forests by a net 250,000 hectares by 2020 and facilitate the introduction of electric cars.