5 July 2006

Carbon tax will hit consumers without reducing output or CO2 emissions

The Government's evident desire to placate the green lobby with talk of a carbon tax will increase power costs to consumers, without reducing either the amount of power generated or the volume of carbon dioxide emitted. This is the opinion of power industry consultant Bryan Leyland, who is chairman of the economic panel of the New Zealand Climate Science Coalition.

"Because of the way our electricity market works, with gas and coal fired generators setting the price about 80% of the time, and the fact that all generators get paid the price charged by the most expensive generator, the existing hydro power generators will make huge windfall profits. Most of these will go straight to the Government in the form of profits and tax. Electricity consumers will, in effect, be paying carbon tax on hydro power generation.

"Huntly power station is burning large amounts of coal because we do not have enough gas, the Government has effectively ruled out new hydro power stations and there are very real technical limits on how much we can get from wind and these limits will be reached in a few years. So we continue to burn coal or accept that the lights will go out, " said Mr Leyland.

"As electricity consumption is not sensitive to small changes in price, the imposition of a carbon tax will not reduce the amount of power we need.

"All the tax will do is increase power costs to consumers and increase Government revenue without making any noticeable difference to carbon dioxide emissions. Add to this the fact that we have not yet seen any hard scientific evidence that carbon dioxide contributes to any global warming that may be occurring, and it is easy to see that all a carbon tax will do is damage our economy.

“What we really need is overall reviews of future power generation and transmission and of the science and economics underlying the government's policy on climate change, where there is no doubt that ‘the science is in no way settled’.” Mr Leyland concluded.

ENDS

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