The country's fledgling carbon market has been thrown into limbo
only weeks before its planned start date, after the government met
an election pledge to review emissions trading, industry officials
said.
The scheme was to be the first carbon cap-and-trade scheme outside
of Europe and had been designed to help the country meet its
obligations under the Kyoto climate-change protocol.
The decision to review it has unnerved market participants; afraid
the new conservative government could delay or substantially weaken
plans to roll out carbon-trading over the next few years, hurting
the country's green image.
"What the government has said has created a lot of uncertainty,"
said Mark Franklin, head of carbon exchange TZ1, the would-be
operator of the country's first carbon market. TZ1 is owned by the
NZX.
"From a global perspective, we had a pretty good scheme here and
there was a fair bit of interest from overseas," he added.
The new government has frozen implementation of emissions-trading
since its election on November 8.
Prime Minister John Key and Climate Change Minister Nick Smith have
said the government will adopt a carbon trading scheme in some
form, but Key has suggested a revised version might not start
trading until 2010.
That is the same year neighbouring Australia is due to launch its
own scheme, meaning New Zealand could lose any first-mover
advantage if it delayed its own until then.
Forestry was the first industry ready to participate under the now
frozen scheme, with sectors ranging from transport to agriculture
scheduled to be phased in over the next five years.
The planting of forests to generate carbon credits worth tens of
millions of dollars has been cast into doubt, said Forest Owners
Association president Peter Berg.
"Some people are particularly concerned because a number of them
have invested money on the basis of the existing scheme," Berg
said.
Very reluctant
New Zealand has lost any chance of having a liquid carbon-trading
market for a year said Wayne King, director of consulting firm
Carbon Market Solutions.
"Most of our clients are very, very reluctant to do anything until
we see some sort of clarity," King said.
"There were quite a number of corporates and companies that were
about to engage and now they can't," he said.
"Emissions liabilities were in the order of over $100 million for
some," he added.
King felt the scheme would be softened and that there could be
exemptions, at least initially, for some of the bigger emitters,
such as steel makers and power firms.
Key has also said the government might consider amending the
emissions scheme to include a carbon tax, something opposed by the
National Party when it was in opposition.
"The opportunity for New Zealand business is to use the review
period to ensure that they are well prepared for carbon pricing,
whether through a tax or trading scheme," said Sean Lucy, head of
nabCapital's Carbon Solutions Group in Australia.
The National Party said before the election it would keep
emissions-trading but revise it to lessen the burden on
businesses.
But it faces pressure from one of its minor support parties to
make substantial changes.
The Act Party had originally campaigned to scrap the scheme but
compromised and accepted a review.
The government has suggested the review night also examine the
science behind climate change, a move that has outraged
environmental groups, who say New Zealand's reputation will be
damaged if the concept of global warming is questioned.
Data released by the UN Climate Change Secretariat last week showed
New Zealand had the sixth highest growth in emissions out of 40
industrialised countries between 1990 and 2006.
New Zealand greenhouse gas emissions grew 25.7% in the
period.
Under the Kyoto Protocol, New Zealand's emissions are meant to show
no increase from 1990 levels between 2008 and 2012, the pact's
first commitment period.
"I'm quite confident the select committee review will come up with
what we always wanted, which is more balance in this whole debate,"
Key said last week.
