6 May 2008

New Kyoto figures give more flexibility to phase in Emissions Trading Scheme

Prime Minister Helen Clark today released new projections of New Zealand’s Kyoto liability, showing the provisional net position is projected to be a deficit of 21.7 million units during the first commitment period of the Kyoto Protocol (2008-2012).

This compares with the projected deficit reported in May 2007 of 45.5 million units, and is a drop of 52 per cent.

This means the liability halves from $1 billion to $481.6 million.

“A range of factors is leading to the projected lower deficit. The impact of the Emissions Trading Scheme, the investment in renewable energy and sustainable transport modes, combined with slower growth and the effect of rising oil prices on fuel consumption are all having an impact. This gives more scope for flexibility around the phasing in of the Emissions Trading Scheme.

“I’m announcing today changes which the government will propose to the ETS Bill which is currently before the Finance and Expenditure Select Committee.

“These changes will lessen the burden on businesses and households which have been facing steeply rising fuel costs,” Helen Clark said.

Our proposals are to :

- defer the introduction of liquid transport fuels (petrol and diesel) into the ETS from 1 January 2009 to 1 January 2011, and
- defer the beginning of the phase out of Free Allocations by five years to 2018.

Helen Clark said that the ETS is a key part of the Labour-led Government’s plan for the future to help New Zealand meet the challenges posed by climate change.

“It is important to our long term prosperity that we encourage businesses and households to become more energy efficient.

“The Government, however, is determined that the ETS does not harm our economy or unnecessarily increase the cost of living for New Zealanders.

“The proposed changes I am announcing today will ensure that the transition to the ETS is at a pace that households and businesses can cope with.

“Petrol prices in the Consumer Price Index (CPI) rose by 7.9 per cent per annum on average between the March quarters of 2002 and 2007. Yet between the March quarter of 2007 and the March quarter of this year, petrol prices soared by 20.5 per cent.

“The effect of this has been a reduction in the rate of increase of fuel consumption and has helped curtail emissions from our transport sector.

“Between 2000 and 2007, the average growth rate of petrol consumption was 1.6 per cent per annum. The 2008 net position forecast projects a nil growth rate in petrol demand over the first commitment period.

“It is estimated that between 725 and 900 million litres less fuel will be consumed over the first commitment period than was forecast last year, due to increased forecast fuel prices.

“In other words the steeply rising price of oil in the short term is effectively doing part of the job the ETS is designed to do by slowing the rate of fuel consumption and emissions. Taking this into account, and also the pressures which rising petrol and diesel prices are having on businesses and families, the Government proposes that the introduction of liquid transport fuels into the ETS should be deferred by two years to 1 January 2011.

“The second proposed change will see the start of the phase out of Free Allocations pushed out from 2013 to 2018 with the end of the free allocation period moving from 2025 to 2030.

“The Government has listened to concerns from business, and considered advice from the Climate Change Leadership Forum. We are proposing this change to ensure that New Zealand firms do have enough time to adapt to the ETS, and that they are not unfairly disadvantaged compared with their competitors in other countries.

“This week the Government has also made clear its position on regional fuel taxes to pay for public transport projects. Ministers will only approve proposals from regional councils which are phased in over a period of time. This too will lessen the impact on consumers”, Helen Clark said.

ENDS

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