Emissions trading will work better than carbon tax

13 April 2007

Media Release

Business Council: emissions trading will work better than carbon tax

An emissions trading regime will work better than a carbon tax.

In submissions on climate change policy, the New Zealand Business Council for Sustainable Development, whose members' annual sales account for 40% of the country's gross domestic product, says a trading regime is the best way to make sure emissions prices reflect what will become a dynamically changing world emissions market.

A carbon tax or charging system will be based on a fixed price for emissions but will not necessarily achieve a fixed environmental outcome, like emissions trading.

"We need a domestic emissions price that adjusts dynamically to changes in the world price," Business Council Chief Executive Peter Neilson said today.

"This is difficult to do if it is effectively embedded in an Act of Parliament, even if it can be changed by an Order in Council (by a Cabinet decision.)

"Just as we generally do not have controls for other prices in the economy it is preferable to allow the market to set the emissions price, which can best be done through emissions trading."

If the Government wants to shelter New Zealand from the full cost or short term fluctuations of the world price, the trading system can be designed to accommodate that – and make sure any Government intervention in the market remains fully transparent.

The Business council says political pragmatism also favours a trading system.

"The blunt fact is that emissions charging has already been politically defeated once and will for a long time be tarnished with the image of being 'just another tax'. There is an instinctive reaction to vote down anything that looks like a tax, and the previous policy was even named 'carbon tax' and was to be collected by the IRD.

Full copies of the Business Council's submissions are available at http://www.nzbcsd.org.nz/project.asp?ProjectID=37

ENDS

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