Transcript Presentation on ETS to Finance and Expenditure Select

Moving ahead to an Effective ETS
8 May 2008
Outline
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Brief summary of our CGE modelling results
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Suggestions for amendment of the Bill
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Other material
– Full report
– Summary Report
– Questions and Answers
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NZIER analysis of proposal in the Bill
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Short term (2012), the proposed ETS
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Reduces GDP by $900 million (0.5%)
Reduces average households expenditure by $600 (0.8%)
Reduces employment by 22,000 jobs (1.0%)
ETS costs 8x what paying for the Kyoto liability through taxation
would cost
Longer term (2025)
– Reduces GDP by $5.9 billion (2.1%)
– Reduces average household spending by $3,000 (3.0%)
– Reduces hourly wage rate by $2.30 per hour or $90 per week
(6.7%)
– ETS costs 4x what paying through taxation would cost
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NZIER analysis of proposal in the Bill
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Lost competitiveness is costly
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One quarter of emission reductions are “leakage”
Technology change is not a complete solution
Lost earnings larger than “wealth transfer”
Impacts worse at higher prices for “carbon”
Results similar to most other research/findings
– Analysis suggests weight to give to particular issues or concerns
“Policy used to address leakage should be simple and closely
targeted. It should be designed to phase out as other countries
regulate their emissions.” Dr Suzi Kerr, NZ ETS review, Motu, (2007)
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Policy must be effective, efficient, fair
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New Zealand must play its part in addressing a global
issue
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NZIER supports the idea that
– society faces the full cost of the resources it uses
– market instruments are used, such as an ETS
– coverage is comprehensive and avoids carve-outs
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But cost and effectiveness of the ETS are closely tied up
with the policies of our international competitors in both
export and import markets
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Make Bill enabling, not entrenching
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The Bill provides many of the administrative
requirements we identified in our 2007 report
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But some of the elements in our report not picked up
impose significant risks of long term regret:
– Part 4 and Schedule 3 entrench entry and limits on allocation in
isolation of what our trade competitors are doing
– Leading in the introduction of new sectors and full exposure to
price of carbon creates damage that will be hard or impossible to
undo
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Our recommendations
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Avoid regrets by amending Part 4/Schedule 3:
– enable entry and/or free allocation, not limited to 90%, to manage
competitiveness-at-risk
– do not entrench obligations in isolation of what our trade
competitors are doing.
– provide mechanism to link introduction and phase out to
competitor policies and technological opportunities
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Also improve transparency and scrutiny
– use independent commission with statutory objectives and
criteria to deal with allocation and timing of entry and phase-out
– require that determinations on entry timing and allocations of
sectors are made on basis of detailed cost benefit analysis
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