The government yesterday dropped plans for the tax on fossil fuels from April 2007 after a Ministry for the Environment report concluded the proposed charge (of NZ$25 per tonne of emissions) was unfair, inefficient and unlikely to substantially cut greenhouse gas emissions.
In its report, the ministry said there was now virtually no chance of New Zealand meeting the 2012 carbon emissions target it signed up to under the Kyoto Protocol unless it bought carbon units on the world market to make up the shortfall.
Climate change minister David Parker, who is also energy minister, announced the scrapping of the proposed tax but signalled some kind of carbon charge was still on the cards for large energy users, including power stations.
Parker said a targeted tax regime – such as the existing negotiated greenhouse agreements (NGAs) – was likely for large energy users and electricity generators, but a broader based carbon tax might be considered after 2012.
The government earlier this year streamlined the NGA process under which large industries can gain exemptions from Kyoto Protocol carbon taxes in return for moving to world's best practice in emissions management.
The New Zealand Refining Company, which operates the country’s sole refinery at Marsden Point near Whangarei, and OceanaGold, which operates the Macraes and Reefton goldfields, have already signed NGAs with the government.
New Zealand’s two largest natural gas users – Contact Energy and Genesis Energy – also operate the country’s largest fossil fuel-fired power stations in Auckland, Waikato and Taranaki.
Genesis spokesman Richard Gordon told EnergyReview.net today that his company would need to analyse the government’s “pretty vague” intentions regarding Kyoto and greenhouse gases.
But Genesis was already moving to reduce greenhouse gas emissions by more efficient electricity generation and better environmental operating standards.
That included using more natural gas and less coal. Genesis was also working with large customers encouraging them to reduce their emissions.
Contact spokesman Pattrick Smellie said Contact already had a large proportion of renewable, hydro and geothermal, generation capacity and was working at improving operating efficiencies at its gas-fired stations in Auckland and Taranaki.
“Like Genesis, we're not too sure what is intended regarding any future carbon charges. Contact is unclear as to the detail of what kind of specific narrow-based tax could be applied, to what and how much,” Smellie told ERN.
Early next year, cabinet will consider alternative policies aimed at reducing emissions, including ways of reducing deforestation and encouraging new plantings of forests for credits under the Kyoto Protocol.
