ACT releases its policy on energy

Ken Shirley Thursday, 16 June 2005 Speeches - Energy

Speech Notes to PEPANZ Energy Political Forum; Wellington; Thursday,16 June 2005.

No one in this room will be surprised to learn that ACT strongly favours more market and less government across the energy sector. We recognise that competitively priced and reliable energy has been a key comparative advantage for the New Zealand economy. Our main export products carry a significant energy component in both their production and transport. As a trading nation our future prosperity is dependent upon retaining this comparative advantage.

I simply cannot understand the current government’s determination to drive up the price of electricity so that renewable fuel options become more competitive. All fuel options should stand on their merits. To do otherwise is to throw away the very comparative advantage that underpins our economy.

ACT believes the role of government should be confined to being a light- handed regulator promoting competition in a stable and neutral environment that is conducive to investment. A competitive market free of government interference will best ensure that energy supply meets demand at optimum price.

ACT will end the states domination in the energy sector.

ACT’s policies for low flatter tax (25 cents in the dollar top personal and corporate rate) together with a lowering of regulatory hurdles would contribute greatly to the investment climate.

ACT alone would end New Zealand’s foolish adherence to the fundamentally flawed Kyoto Protocol. The Kyoto Protocol is highly politicised. It is unfair, distortionery and fails to achieve its own stated objective. Today we have learnt of Government’s embarrassment that instead of having a 30 million ton carbon surplus in the first reporting period of 2008/2012, New Zealand will now confront a $30 million deficit. The unfortunate fact is that all of our climate response policies have been developed on the assumption that we would be in surplus. I have no doubt that a different set of policies would have been implemented if a deficit was projected.

ACT is not opposed to market instruments provided they are applied correctly. What we have with the Government’s climate change package is not a market instrument but rather a series of government dictates.

By nationalising the forest owner’s carbon credits they have removed the incentive to plant more trees to absorb atmospheric carbon dioxide. On the other side of the ledger government dishes out largesse in the highly politicised way by picking winners. In essence the energy efficient subsidise the energy inefficient. This also destroys any tradable market instrument.

We have similar distortions in the electricity market with the state- owned hydro generators gaining windfall profits from the carbon tax which will be paid back to government as dividend payments. Therefore instead of a market instrument we just have another taxation impost on the economy.

Over the last three decades natural gas more than any other fuel source has fed the nations growing appetite for energy. With the wind down of the Maui gas field, New Zealand must look increasingly to the full scope of energy supply resources and options including a greater use of coal and consideration of the nuclear option as part of the optimum mix.

There are several obvious means of securing energy supplies:

* Replace depleted oil and gas resources by prospecting and developing new reserves. * Increase production of other forms of energy. * Import them.

Renewable resources such as wind and solar will be part of the mix but they cannot be expected to meet anywhere near the full increased demand.

By world standards New Zealand is under explored for oil and gas reserves. We face the inherent disadvantage of distance, higher exploration costs and an isolated relatively small market.

ACT is also of the view that the existing structures and ownerships reinforce perverse disincentives for active exploration and development of oil and gas resources. More transparent competition in the energy market is required.

With uncertainty surrounding energy supply, availability and reliability New Zealand will find it harder to attract investors who feed economic growth. The catch is that economic growth drives energy supply growth leading to improved supply availability and reliability. This impasse must be addressed as a matter of urgency.

On the demand side ACT recognises the significant gains that can be achieved through greater energy efficiencies. There are some exciting new technologies available. What ACT says is that proper pricing mechanisms in a transparent and competitive market will best achieve appropriate demand side responses whether that be solar panels, better insulation or increased co-generation.

I am delighted to welcome former Secretary of Treasury Graham Scott to the ACT team and look forward to working with him in the next Parliament. He has a wide experience across public policy areas and has specialist knowledge in both health and energy. He will be a true asset to ACT and also the Parliament at large.

In support of my comments, I have tabled ACT’s energy policy http: //www.act.org.nz/item.aspx/27086 which essentially is calling for more market and less government.

ENDS

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