The Business New Zealand organisation has echoed what this country’s energy companies have been saying for a long time - that a carbon tax should be a last resort in attempting to curb greenhouse gas emissions.

Business New Zealand chief executive Simon Carlaw earlier this week said a carbon tax should only be introduced if it was matched by cuts in company and personal tax rates.

Business NZ, reinforcing its opposition to the government's intention to ratify the Kyoto Protocol in September, has outlined a series of greenhouse emission policies that it argues will be more effective and more affordable economically.

Doing nothing about climate change was not an option, but Kyoto was not the only game in town, Carlaw said ahead of the government release of its preferred policy option on climate warming next week.

New Zealand needed to take full account of decisions by its big trading partners, Australia, the United States and Japan. The European markets were important, but New Zealand had more in common with Asian and Latin American economies, which would not be subject to Kyoto obligations.

Australia had recently signed a climate change partnership with the United States, and Canada was exploring a similar approach. New Zealand should be moving along the same route, Carlaw said.

Business New Zealand had reservations about several suggestions that a new carbon tax should be part of the government's climate change policy framework because "the ability to change behaviour through specific taxes is debatable.”

The inelasticity of demand for petrol meant the level of increase in petrol excise tax needed to change the level of consumption would be excessively large.

"If attempted, taxes intended to alter energy use should be instituted only as a last resort and only if accompanied by a countervailing reduction in corporate and personal tax rates so that the net impost is fiscally neutral," Carlaw added.

Two years ago, then Fletcher Challenge Energy chief operating officer Lloyd Taylor (now Shell NZ chairman) told the NZ Petroleum Conference that New Zealand’s energy and environmental polices needed to be integrated and consistent with those of other developed countries.

“A consistent international response and accompanying international systems of carbon taxation and carbon credit trading that will allow the most efficient resolution of this global problem is required,” he said.

Natural gas for electricity generation was cleaner and less damaging to the environment than coal, while alternative fuels such as LPG were environmentally friendlier than diesel.

A carbon tax on energy producers, not energy consumers, would raise energy costs across the board, adversely affecting economic growth and New Zealand’s international competitiveness.

Methanex Corporation Asia-Pacific vice-president Bruce Aitken has also called for the government not to impose any carbon tax that would leave New Zealand disadvantaged relative to its Australian or Asian neighbours.

Any additional tax on methanol produced in New Zealand would see the Kiwi product become uncompetitive internationally and hasten the closure of the Motunui and Waitara Valley complexes. Methanex, the world’s largest methanol trader, would be forced to shift its operations to more fiscally attractive regions.

The New Zealand Government intends ratifying the Kyoto Protocol later this year, and a carbon tax is expected to be one of its key initiatives for managing cuts in greenhouse gas emissions.

New Zealand businesses across several sectors and trade union groups oppose ratifying the protocol because they fear it would leave New Zealand uncompetitive with countries either refusing to ratify or not bound by its first emission target period between 2008 and 2012.

Among other things, Business New Zealand recommends reforming the Resource Management Act to encourage renewable energy generation, such as small-scale hydro and wind generation plants; accelerating the promotion of efficiency energy technology and research and development; and developing benchmarking tools and best practice guidelines in energy efficiency for small to medium-sized enterprises.