Kiwis put ETS on the shelf

New Zealand has had an emissions trading scheme since 2008, a parting gift of the Clark Labour government. Europe likes to flaunt its climate credentials but the Organisation for Economic Co-operation and Development’s latest Environmental Outlook thinks New Zealand’s is the most developed and comprehensive in the world.

So developed in fact that in 2009 the new National-led government neutered it a bit, ramping up “transitional assistance” and reducing its scope.

That’s why Australian emissions trading scheme fanatics should look at what’s happened in New Zealand.

Its ETS is predicated on an Australian scheme just as Australia’s assumes an international one. And with the vastly changed politics of global warming, most New Zealanders don’t even consider the scheme important. In fact “climate policy” is now just a part of environmental policy, and the Minister for Climate Change has been dropped from the front bench.

Moving towards a “clean energy economy” is still the official language in NZ. Yet agriculture won’t be included in the scheme until “at least” 2015. The absence “of any practical and real technologies to reduce agricultural emissions means that it would only impose a cost or tax on our most important export industry”, the government says.

Agriculture makes up half of New Zealand’s emissions. Restrictive forestry land use rules are also being scrapped. These changes will probably be indefinite if the Coalition prevails at the next federal election in Australia. In fact, if the carbon tax in Australia is scrapped, NZ’s ETS will be gone by lunchtime.

NZ is not doing nothing. It leads the Global Research Alliance on Agricultural Greenhouse Gases (to reduce cow “emissions”) and an international ginger group committed to the abolition of fossil fuel subsidies. But these measures are in the NZ national interest and are good policy anyway.

Since the Durban fiasco this week, Trade Minister Tim Groser said: “We will need to take account of our national circumstances and compare our efforts to the efforts of others.”

NZ essentially views carbon politics as a trade issue. It will not pre-empt international developments or harm its international competitiveness.

And rightly so. The NZ carbon price has crashed from $NZ22 in May to $NZ9.50 ($7.18) last week because cash-strapped European companies are offloading credits and NZ firms are buying offshore credits of dubious provenance.

NZUs (carbon credits) are far more expensive than the imports. The market is on the verge of collapse.

New Zealand’s realistic policy approach, combined with its almost defunct carbon market, should be a real wake-up call for Australia to reconsider its ill-fated scheme.

Luke Malpass is an analyst with the New Zealand Policy unit of the Centre for Independent Studies.