The biggest tax of them all – the ETS

NZPA reports on testimony today from Solid Energy:

The Government could take up to $80 billion in windfall gains due to the climate change emissions trading scheme (ETS), Solid Energy chief executive Don Elder told MPs today. …

Mr Elder said the bill was not only about climate change, but was also the most far-reaching taxation legislation since the 1980s.

He said no one had seemed to consider the possibility that even if pollution targets were met, billions of dollars would end up in the Government’s coffers.

The ETS, as designed, would punish polluters for all their emissions, not just those above the 1990 level set by the Kyoto Protocol.

Even if emissions were reduced to 1990 levels by 2025/2030, which he felt was unlikely, it would mean the Government would still collect $20b over that period.

He said the $20b figure assumed a low price for carbon — $22 a tonne — and if it was replaced with a “realistic figure” of up to $200 a tonne the windfall gain over the period would be in the region of $80b.

“Now that may well be a justified policy and it may well be able to be redistributed, but that is a tax restructure…buried inside an emissions trading system.”

Climate Change Minister David Parker said he fundamentally disagreed with the analysis and said the Government would never allow such a scenario to occur.

Mr Elder told MPs the complexities of the scheme were creating unintended consequences that saw the details change on a weekly basis.

This was complicated by the number of processes going on simultaneously to write the policy even as the committee considered the legislation.

He said that the European Union took five years to design a much more modest trading system and still got it badly wrong first time around.

The climate change bill was laying down conditions that would exist 22 years away.

“People aren’t even born yet who will probably be playing for the All Blacks by the time this legislation is still showing its teeth…yet we are rushing this through in six months and it doesn’t make sense.”

Mr Elder said instead of having a prescriptive bill, it should be rewritten into more general enabling legislation.

Then over the next year the details could be thrashed out and slotted into place.

He said the rush to put the ETS in place was not necessary as most sectors were now not being hit by the scheme until 2011 and onwards.

So who thinks the Government will refund all those billions that they will accidentially accumulate?

It is worth noting Elder is not saying do not have an ETS. He said this is a scheme for the next 22+ years, and trying to finalise it is six months is going to be a disaster. The EU took five years. And with the Government delaying the first sectors by a year, there is no real reason not to delay it.