National snubs Labour, buys Maori support for watered-down ETS

By Gareth Renowden 14/09/2009

Nick Smith announced this afternoon that National has cut a deal with the Maori Party to support an amended, watered-down emissions trading scheme. Key features (from the press release):

  • Revised entry dates of 1 July 2010 for transport, energy and industrial sectors and 1 January 2015 for agriculture
  • A transitional phase until 1 January 2013 with a 50% obligation and $25 fixed price option for the transport, energy and industrial sectors
  • A production-based industry average approach to allocations for trade exposed, emissions intensive businesses
  • A phase-out of industry support aligned with trading partners and the Government’s long-term -50 by 2050 emissions reduction target
  • Incentives for afforestation created by a domestic and international market for carbon credits
  • Enhanced transitional support for the fishing industry

Smith says that these changes will reduce the impact of fuel and electricity price rises to 3.5 cents per litre and 1 cent per kWh. In addition, the Maori Party get assurances that “further work will be done” on extending the energy efficiency assistance for low-income households, promoting new forestry planting, biodiversity protection, and provisions for treaty settlements affected by the deforestation provisions applying to pre-1990 forests. The government aslo released two background documents: a summary of the proposals and “Questions and Answers” about the changes.

A couple of thoughts spring to mind. The Maori Party’s support flies in the face of their minority report on the ETS Review, where they said they would prefer stronger action, not a weakening of the emissions cuts being considered. I suspect that the real meat of their deal lies in the treatment of pre-1990 forests, where many tribes have very significant assets.

It also looks as though Smith could not cut a deal with Labour, who would have objected to the price cap and reduced obligations during the new “transitional phase”, and the considerable softening of the long term phase out of free allocations to big emitters. Both of these moves have the effect of increasing the subsidy from taxpayers to big (often foreign-owned) corporates. At the same time, delaying agriculture’s entry into the scheme by two years may not do much to blunt objections from farmers if recent Federated Farmers pronouncements are anything to go by.

I’ll have more on this in due course, but here’s a revealing line from the Q+A document:

Assuming new afforestation of 50,000 hectares per year, New Zealand’s emissions in 2020 would decrease by approximately 20% relative to 1990 levels.

In other words, despite refusing to acknowledge forestry’s role in meeting targets during the “consultation” process, Smith has clearly known all along the role it would have to play — because he’s expecting it to deliver a big enough carbon sink to offset all of New Zealand’s emissions growth since 1990 and then 20% more. Words fail me — but only briefly, you may rest assured… ;-)