Passage of the Emissions Trading Scheme is proving to be anything but smooth

In this article, senior associate Kate Radka provides a brief update on changes to the Climate Change (Emissions Trading and Renewable Preference) Bill as it nears the end of the Select Committee process.

The Finance and Expenditure Select Committee is currently considering the Climate Change (Emissions Trading and Renewable Preference) Bill in light of the numerous written and oral submissions it has received. The committee will also be considering the Government's proposed amendments to the policy underlying the bill, namely:

• the deferral of the introduction of liquid fossil fuels into the scheme from 1 January 2009 to 1 January 2011, in part due to the high fuel costs currently being experienced throughout New Zealand; and

• the deferral of the start of the phasing-out of free allocations from 2013 to 2018. The free allocation of units to agricultural participants and trade-exposed industries is currently proposed under the bill to be phased out gradually over the period 2013 to 2025. Following the Government's announcements it is now expected that such phase-out would be deferred by five years, so that it runs from 2018 to 2030.

The Committee is expected to report back by 11 June, leaving the Government about three months to get the proposed bill through a second and third reading in the House before the general election.

Although National has said that it supports the emissions trading scheme in principle, it has announced that it will not support the bill without:

• all six of its key demands being included in the bill, those being:

• the need to strike a balance between New Zealand's environmental and economic interests;

• recognising the importance of small and medium enterprises and not discriminating against them in allocating emission units;

• being closely aligned with the Australian emissions trading scheme, with common compliance regimes and tradability (which would await the anticipated release of the proposed features of the Australian emissions trading scheme at the end of June 2008);

• encouraging the use of technologies that improve efficiency and reduce emissions intensity;

• being fiscally neutral rather than providing billions of dollars in windfall gains to the Government accounts at the expense of businesses and consumers; and

• incorporating the flexibility to respond to progress in international negotiations;

• sending any re-drafted bill (including a bill that National agrees with) back out for public consultation.

This is not likely to be achieved and therefore National's support will probably not be secured. The Government will need to rely on building a coalition of minor parties in order to secure the passage of its legislation this year.

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