Call to reject polluter pleas
The Government should ignore ‘‘special pleading’’ from polluters receiving taxpayer subsidies or risk failing to meet its climate targets, the Parliamentary Commissioner for the Environment says.
In sharply worded comments on a planned overhaul of climate change legislation, Simon Upton – a former National party cabinet minister – essentially said the changes did not go far enough, and were too corporate friendly.
A Government bill making significant changes to the Emissions Trading Scheme (ETS) is winding its way through Parliament. The scheme is a major tool to lower greenhouse gas emissions and will be vital in meeting New Zealand’s climate change commitments.
While an overhaul of the scheme has been broadly welcomed, some of the proposed changes have been contentious.
A key matter of contention is the fate of long-standing subsidies given to a handful of polluters.
When the scheme began in 2008, exporters with highintensity emissions – primarily steel, aluminium and methanol manufacturers, together known as Emissions Intensive, Trade Exposed (EITE) firms – were deemed to be vulnerable to overseas competitors, and were thus given free carbon credits covering most of their pollution.
The intent was for the subsidies to quickly wind down, and disappear completely by
2025. The phase-out was delayed in 2012 and not reinstated.
The new bill proposes phasing the subsidies out, but slowly; reducing from 90 per cent now to 80 per cent by 2030, to 60 per cent by 2040, and
30 per cent by 2050. Yesterday, Stuff reported some companies are likely making ‘‘windfall gains’’ from these subsidies, due to outdated methodology that is overcompensating some recipients.
In comments to MPs considering the bill late last week, Upton spoke out against the subsidies and the slow rate at which they would be phased out.
‘‘In all likelihood, we have been giving units to businesses that did not need them, or are less efficient than their overseas competitors,’’ he said.
‘‘Free allocation . . . Should be about protecting the environment. This is not what New Zealand’s current free allocation system does.’’
The primary issue was the lack of criteria to decide what companies are entitled to subsidies, he said.
To receive a subsidy, a company merely needs to show it is emissions-intensive and is – or could be – internationally trading its products.
‘‘It does not need to show that meeting its obligations under the ETS would put it out of business, or that if the activity was relocated overseas, that would increase global emissions,’’ Upton said.
He raised the possibility of overseas industries setting up in New Zealand to take advantage of the subsidies, which would make it difficult for the country to meet climate targets.
The bill also increases the level of assistance for agriculture – which is currently outside the ETS, but could be included from 2025 – from 90 per cent to 95 per cent, as part of Labour’s coalition
agreement with NZ First.
With a phase-out rate of 1 per cent, it would mean farmers would be subsidised for nearly a century.
In their own comments on the bill, subsidy recipients have said the free credits are vital to protecting them from overseas competitors, some of whom face no price on their pollution.
‘‘[W]e stress that the risk of carbon leakage remains,’’ Business NZ said in its submission on the bill.
Others had said any adjustments to the free allocation would disincentivise them from investing in emissions reduction.
Upton, however, urged MPs to ignore these appeals.
‘‘Frankly, it is up to the Government, and not the EITE businesses, to decide who should receive subsidies for emission reduction technologies,’’ he said.
‘‘You should ignore this special pleading.’’
Several other experts have been critical of the changes to the ETS, arguing they don’t go far enough.
Among them is economist Dr Geoff Bertram, who described the ETS as a ‘‘dog’s breakfast’’ and said New Zealand should just acknowledge it wasn’t willing to take climate change seriously.
‘‘So thoroughly has the scheme been captured to date by rent-seeking special interests that it has served only to enrich insiders at the expense of the rest of the country, while failing completely in its ostensible purpose of reducing nationwide emissions,’’ Bertram said.
‘‘The outlook under the proposed legislation is for more of the same.’’
MPs are considering changes of the bill under the select committee process and will report back ahead of its second reading.