Government confirms key climate change policies
The Government has confirmed a policy package on climate change that puts New Zealand in the best possible position to
meet its international obligations and move towards a sustainable energy future, says the Convenor of the Ministerial
Group on Climate Change, Pete Hodgson.
The confirmation by Cabinet of the policies means New Zealand will be ready to ratify the Kyoto Protocol to the United
Nations Framework Convention on Climate Change once the Climate Change Response Bill is passed by Parliament. The
Government expects to ratify later this year.
"The policies announced today will enable New Zealand to meet its greenhouse gas emission targets under the Kyoto
Protocol while protecting the nation's economic interests," Mr Hodgson said. "We have substantially confirmed the
preferred policy package that was released for consultation in April, with some refinement."
The foundation policies of the climate change package are the Growth and Innovation Framework, the National Energy
Efficiency and Conservation Strategy, the New Zealand Transport Strategy (under development), the New Zealand Waste
Strategy, climate change research, and a partnership with local government in addressing climate change at a local
level.
The key policies completing the package have been confirmed as:
· An emissions charge applied to fossil fuels and industrial process emissions. The charge will approximate the
international emissions price, but be capped at $NZ25 a tonne of carbon dioxide equivalent. It will apply in the Kyoto
Protocol’s first commitment period 2008-2012 and not before 2007. Revenue will not be used to improve the Crown’s fiscal
position but will be recycled, for example through the tax system and into funding climate change Projects and
programmes. The Government retains the option of introducing emissions trading as an alternative to an emissions charge
if the international carbon market is functional and the price is reliably below the $NZ25 cap.
· Provision of government incentives for Climate Change Projects that will deliver defined reductions in
greenhouse gas emissions, in any sector of the economy. Incentives might include money or the pre-allocation of emission
units. The government will invite bids from firms or groups via a contestable process. To qualify, Projects must be
additional to business-as-usual. The provision of incentives will accelerate the uptake of emission reduction
initiatives, including new technologies and practices, that would otherwise be uneconomic.
· Negotiated Greenhouse Agreements for firms and industries where there is significant risk to their international
competitiveness and risk of “leaking’ production overseas as a result of climate change policies. Negotiated Greenhouse
Agreements would comprise a contractual commitment by the firm or industry to achieve international best practice in
managing emissions, in return for exemption from all or part of the emissions charge.
· Exemption for the agricultural sector from any price measure (emissions charge or trading regime) in the first
commitment period, provided the sector invests in research to identify options for reducing agricultural emissions. The
Government retains the option of imposing a research levy if the research effort falls below what is required.
· Government retention of the sink credits and associated liabilities allocated to New Zealand under the Protocol
in recognition of the carbon sink value of post-1990 forest plantings. These credits will be retained and managed by the
Government, at least for the first commitment period. The Government, rather than forest owners, will also assume the
liability created by the Kyoto Protocol for deforestation, up to a specified cap. In recognition of the forest sector’s
role in creating the sink credits, the Government and the sector have agreed to develop a "forestry framework" for
further policy development. Two measures already agreed under the framework – raising the cap on deforestation liability
and establishing a mechanism to encourage permanent forest sinks – are described below.
“This is a robust package of policies to achieve permanent reductions in greenhouse gas emissions over the long term,"
Mr Hodgson said. "It enables us to respond to the changing international context, it is consistent with a growing and
sustainable economy and it will not disadvantage the vulnerable in our society.”
Mr Hodgson said the public and sector group consultation process in May and June this year had helped the government
refine the policy package and identify areas needing clarification.
"The consultation process showed that although there is an increased level of understanding about the need to act in
response to climate change, there remains no real consensus on what that nature of the response should be. In such
circumstances government must accept the responsibility of leadership and that is what this policy package represents."
The key points of difference between the preferred and confirmed policies are:
· There will be incentives for the establishment of permanent forest sinks. The preferred option is for forest
owners who establish permanent (non-harvest) forest sinks, for example by regenerating indigenous forests, to receive
returns in proportion to the carbon sequestered in their forests. This was widely supported during consultation.
· The cap on the liability the Government will assume for deforestation has been raised from 5 percent to 10
percent of forests expected to be harvested during the Protocol's first commitment period (2008-2012). This equates to
21 million tonnes of carbon dioxide emissions. The change responds to concerns raised by the forestry sector that the
lower cap might create an undesirable incentive for forest owners to deforest early, to avoid the risk of incurring
liabilities should the cap be exceeded.
· The Resource Management Act will be amended to remove regional councils' ability to directly control greenhouse
gas emissions through resource consents and regional plans. This is because emissions are to be dealt with through
national policies. Further amendments are being considered relating to prioritising renewable energy and adaptation to
the effects of climate change.
· The confirmation, as part of the foundation policies, of the National Energy Efficiency and Conservation
Strategy target of 30 Petajoules (PJ) of additional energy use a year from renewable sources.
"In addition the Government has recognised concerns expressed during consultation that small to medium-sized businesses
may not be able to take advantage of Negotiated Greenhouse Agreements or the Projects mechanism," Mr Hodgson said.
"Accordingly we will investigate whether additional policies targeted at emission reduction opportunities for such
businesses are needed.
"With the confirmation of this policy package New Zealand is now very well positioned for the entry into force of the
Kyoto Protocol, which is likely to occur next year following ratification by Russia. New Zealand now has considerably
more clarity in its domestic policy position than many other developed nations. While policy will continue to be refined
within this framework, New Zealand business now has a level of certainty that will help it plan for the future and
exploit the opportunities arising from the transition to a low-emission economy."