Cost blow-out from rushed carbon trading

24 June 2007

New figures show cost blow-out from rushed carbon trading

New figures released today show an enormous cost to the economy if planned carbon trading plans go ahead. The figures show a $3.5 billion direct cost to New Zealand in five years' time, more than seven times higher than that claimed by government, and knock-on costs higher, with businesses forced to pass on carbon costs to consumers.

The Business NZ analysis looks at the real costs if the government passes its Kyoto liability to individual firms, as intended. The background to the analysis includes the fact that the government wanted to own the commitment when it was thought it would make a profit, but now the commitment has turned into a liability instead, it wants to pass on that liability to individual businesses.

Business NZ Chief Executive Phil O'Reilly says it was the government that made the commitment, not NZ businesses, and the government should deal with it. "Passing the liability on to business makes it more than seven times higher than if government pays for it out of the consolidated account, because individual businesses don't have the purchasing power that the government has."

Mr O'Reilly says a lot of consequences would follow from the government's decision to transfer the liability. "It means if businesses couldn't reduce operations to cut emissions, they would have to buy carbon credits from overseas. This would mean NZ would have to rush into a carbon trading system almost immediately. This is dangerous territory. A flawed carbon trading system brings the risk of being gamed by large international companies as happened with Enron in the US."

The EU is taking six years and Australia has a four-year time line to develop its system. "It is dangerous to be planning for a NZ system to be operational in just a few months," Mr O'Reilly said.

"The government needs to meet the 2012 liability itself rather than multiply its cost many times by passing on to businesses. And we need to slow down and design a proper, robust carbon trading system, just like the EU and Australia are doing."

Mr O'Reilly said Business NZ and the business sector were committed to positive change on emissions, and were showing leadership on the issue by their research work on robust carbon tradingearlier this year.

This, and the new analysis, demonstrated the positive, fact-based approach needed in this important area.

ENDS

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