New Zealand passes revamped carbon law

WELLINGTON Wed Nov 25, 2009 1:39am EST

WELLINGTON (Reuters) - New Zealand's revised emissions trading plan passed into law on Wednesday, opening the way to controlling greenhouse gas emissions from industry, although critics say the scheme is too soft on big polluters.

The governing minority National Party with the backing of the small Maori Party pushed the legislation through a detailed clause-by-clause examination, without amendments, before it was given final approval.

"It is a critical and important first step in our nation's effort to do our fair share in combating climate change," Climate Change Minister Nick Smith said in parliament.

National had been pushing the law's passage ahead of next month's U.N. climate summit in Copenhagen. The scheme is only the second to pass into law after Europe's began in 2005.

New Zealand has set a target of cutting greenhouse gas emissions by between 10 and 20 percent by 2020 on 1990 levels, depending on the outcome of the Copenhagen meeting that is meant to settle on the broad outlines of a tougher global climate pact.

The amended scheme will replace the previous Labor-led government's carbon trading plan and gives extra support to big carbon emitters and delays entry for the economically vital farm sector by two years.

New Zealand, with about 4.5 million people, produces only a fraction of mankind's greenhouse gas emissions.

Per-capita emissions were about 16 tonnes in 2007, higher than some European countries, with about half the greenhouse gas pollution coming from agriculture, such as dairy farming.

An independent advisor on environmental issues to the parliament said the revamped scheme would give too many free carbon credits to polluters, and removed the incentive to move to low-carbon technology.

"It's virtually certain our emissions will grow and the burden on the taxpayer will be uncurbed," Jan Wright told Radio NZ.

CERTAINTY FOR BUSINESS

New Zealand's total emissions increased by 24 percent from 1990 to 2008, which the government had previously said would make setting a target difficult.

Under the U.N.'s Kyoto Protocol, New Zealand's emissions are supposed to show no increase from 1990 levels during the pact's 2008-12 first commitment period.

The government said it wanted New Zealand to be more closely aligned to neighboring Australia, where a revised carbon-trade scheme offering increased compensation to big carbon emitters, coal companies and electricity generators was unveiled this week.

Other changes to the New Zealand scheme include a delay to the entry of certain sectors, a cap on the price of carbon and support for forestry planting.

Under the revised scheme, there will be a transitional period from July 1, 2010, until January 1, 2013, in which emitters will only have to meet 50 percent of their obligations, and will be able to take up an option of paying a fixed price of NZ$25 ($18.25) per tonne of emissions.

The estimated annual cost to households would be halved under the new scheme, to NZ$165 from NZ$330 during the transitional period.

Wayne King of advisory firm Carbon Market Solutions in New Zealand agreed the amended scheme would not do much to reduce emissions, but said it would give certainty to business.

"It's good for the overall business to reduce the uncertainty ... in the context of forestry, it may be still quite positive because there's certainty around what you can and can't do," he said.

King said he expected it would take some time for a liquid carbon trading market to evolve in New Zealand and didn't think it would drive buying of more expensive U.N. offsets under the Kyoto Protocol.

The New Zealand trading scheme allows unlimited imports of the offsets called certified emissions reductions but these are priced in euros per tonne of carbon dioxide-equivalent.

Business groups have largely backed the changes proposed by National, while environmental groups say it does not go far enough in putting the onus on large polluters to cut emissions.