Isra-Mart srl: Authors claim NZ carbon debt will be over $1 billion

Isra-Mart srl news:
New Zealand taxpayers are still likely to face a liability of over $1 billion dollars when the first commitment period of the Kyoto Protocol finishes in 2012 — because they haven’t done enough to slash greenhouse gas emissions, say two Wellington authors.

The ultimate level of carbon debt depends on future carbon prices and it could be as much as $5.7 billion — based on Treasury advice — according to Geoff Bertram, a senior researcher at Victoria University’s Institute of Policy Studies, and Simon Terry, executive director of the Sustainability Council, a Wellington thinktank.

They said the Government’s May budget dropped a longstanding pretence that the nation could at times be in credit under the treaty, and put key deforestation liabilities on the books that signal the real cost of a 22 percent overshoot of the Kyoto target.

While the nation’s forests planted since 1990 are now earning credits, those will have to be paid back when the trees are harvested in the 2020s, by the next generation.

Bertram and Terry said in their book, The Carbon Challenge, launched today, that the budget’s inclusion of a contingent liability for harvesting forests covered only the five years in the first Kyoto commitment period, to 2012.

“The next period from 2013 to 2020 will be even more costly,” they said.

New Zealand diplomats are negotiating new commitment that will require a stricter emissions target, while official projections are for the nation’s emissions to keep rising and carbon prices to also go up.

Treasury has previously said that it “will be necessary to recognise” a contingent liability as far out as 2020.

Based on pledges to date and the current emissions trading scheme (ETS) settings, there would again be a very significant taxpayer liability after all ETS charges are paid.

“The ETS simply fails to collect enough revenue to cover expected international commitments,” they said.

After all the exemptions, rebates and compensation payments are allowed for up to 2012, the Government will receive just 12 million emission units net under the ETS, with each unit accounting for a tonne of greenhouse gas emissions. The estimated Kyoto liability of 69 megatonnes (Mt) of carbon, will be reduced by only a sixth and over 80 percent of the liability will fall to future taxpayers.

At the low carbon price of $20.29/tonne used in the budget this was knocked back to a net Kyoto liability of $1.1 billion once ETS revenue equal to 12 Mt was accounted for, leaving the shortfall of 57 Mt.

But the authors noted Treasury warned in July 2009 that carbon prices could go as high as $100/tonne, and so the net liability could be as much as $5.7 billion.

For the next period from 2013 to 2020, the Treasury has canvassed a contingent liability of roughly another 100 Mt, which the authors said should lead to a potential liability of about $2 billion at the $20/tonne carbon price, though the net liability depends on the new emissions target and the ETS settings.

Big manufacturers and pastoral farmers receive heavy discounts at the taxpayers’ expense, and households already bear half the total costs resulting from the ETS during its first five years (52 percent), while accounting for just a fifth of all emissions (19 percent).

Together with small-medium industry, commerce and services, and transport operators, householders will pay 90 percent of the costs resulting from the ETS during the first five years while being responsible for only 30 percent of total emissions.