Winners and Losers in the ETS

The second argument, which was argued more eloquently – but not necessarily more credibly – by Business NZ, is that the right to pollute is a property right, “That compensation is generally owed to all businesses who suffer a loss of value as a result of a new policy.”

Existing use rights are a feature of resource management law both in New Zealand and in other developed countries. But those rights fall far short of being absolute. Where these rights conflict with community or national interests, such as pollution of the commons, they are normally phased out, with no compensation paid.

Pulling the property rights card in this context undermines the very real debate that we need to have about the lack of legal protection for real property rights in New Zealand. Yet, intriguingly, many other elements of BNZ’s submission on the ETS Amendment Bill in September were both constructive and well argued.

Overall, the tone contrasted with its submissions of earlier years and showed a much higher level of political sophistication than Federated Farmers. Sometime in 2008 Business NZ clearly decided the writing was on the wall and moved from a stance of outright opposition to the ETS, to one of trying to moderate the impact of the ETS on business when it became law.

Its 2007 argument had been that New Zealand should not adopt a price on carbon, “either through a carbon market mechanism or carbon charges, unless our major trading competitors, including all major developing countries, take a similar step.”

By 2009 it was arguing for the Labour Government’s ETS to be replaced with an uncapped intensity-based scheme to protect ‘at risk’ businesses. It wanted a slower phase-out of industry support and delayed sector commencement dates.

By and large the amended ETS delivers exactly that – on the face of it, an excellent outcome for Business NZ’s membership. In contrast, Federated Farmers got little of what it asked for.


Few successes for big business emitters
The Greenhouse Policy Coalition, which represents the large emitters, also strongly advocated for an intensity-based scheme for large trade-exposed energy users. This win is worth tens of millions of dollars for some of the coalition’s backers from the Major Electricity Users Group.

Otherwise, its policy successes are thin on the ground. Until the end it was arguing for the suspension of the ETS “until a better designed scheme can be created” and for the exclusion of agriculture “until agriculture around the world faces a price on carbon or the sector has options to reduce carbon dioxide emissions that are affordable and that can be widely deployed”.

The Business Roundtable can’t be said to have had many exclusive wins either. However its recommendation, that initial government action should be modest and ‘ramped up’ over time if technological breakthroughs make carbon reduction more affordable, mirrors much government thinking.

The Roundtable was opposed to the adoption of a climate change strategy until a post-2012 international agreement was reached and action taken by other countries, particularly Australia and the United States. Even then, it wanted a low revenue-neutral carbon tax with subsidies for carbon sinks for a transitional period … something it had opposed when Labour originally suggested a similar concept.

Beyond that, it argued for a price cap to provide greater carbon price certainty. Yet this would clearly disadvantage Kyoto forest owners and carbon-efficient firms in energy intensive sectors.

This apparent disjoint with its free market principles was counterbalanced by the Roundtable’s staunch defence of the owners of pre-1990 forests, who face a 100% tax on emissions (less token compensation) if they fail to replant following harvest. The contrast with farmers, who enjoy 100% grand parenting of their livestock emissions until 2015 and thereafter a 90% taxpayer subsidy on their post-2005 emissions growth, couldn’t be more marked.

Business NZ, the Greenhouse Policy Coalition and forest industry organisations all opposed the deforestation tax, or argued for offsetting, as did National in its 2008 election policy – subject to weasel words about cost implications. But most pre-1990 forest land is owned by large low profile organisations that can be easily disregarded by a government trying to boost its Kyoto ledger or avoid a credit downgrade.