New Zealand passes revised emissions trading scheme by narrow margin

New Zealand has passed into law a revised emissions trading scheme that critics say is too lenient on polluters and will shift much of the financial burden of compliance on to taxpayers.

The legislation was passed by a narrow margin in Parliament yesterday in a 63-58 vote led by the governing minority National Party, with support from the Maori Party and United Future.

The Green and Labour parties refused to back the scheme, saying the measures did not go far enough to combat global warming. It was also opposed by ACT New Zealand and the Progressive Party.

The law is an amended version of a more stringent system drawn up last year. Concessions included a larger allocation of free emissions trading units to businesses and compensation to some Maori tribes whose forestry businesses will be affected by the scheme. Five tribes will receive permission to plant trees on 35,000 hectares of public land and earn carbon credits from them.

The new legislation will be phased in, with a transitional phase between 1 July 2010 and 1 January 2013. Carbon dioxide emitters in the electricity, industrial and transport sectors will pay a fixed price of NZ$25 (US$18.25) for allowances that permit them to emit one tonne of CO2.

However, polluters will also only need to surrender one emission allowance unit for every two tonnes of carbon emitted during the transition period.

In addition, the agricultural sector – which accounts for about half of the country's greenhouse gas emissions – will not join the scheme until 2015, after being granted an exemption from the original start date of 2013.

"It is a critical and important first step in our nation's effort to do our fair share in combating climate change," climate change minister Nick Smith told parliament yesterday.

However, Labour climate change spokesman Charles Chauvel branded the amended scheme as "environmentally counterproductive and fiscally unsustainable", as it was too lenient on polluters.

Agriculture, along with heavy industries, will also receive a free allocation of emission trading units from the government for 77 years. Labour argued that the cost would be passed on to taxpayers – a charge that was denied by Smith.

"It strikes that right balance that we need to find between protecting our environment and ensuring that New Zealanders have jobs," he said.

Smith’s National Party estimates that the annual cost to households would be halved under the revised scheme, to NZ$165 from NZ$330 during the transitional phase

The legislation is only the second cap-and-trade system to pass into law after the EU Emission Trading Scheme, which came into force in 2005.

The National Party's determination to quickly pass the legislation prior to next month's UN climate change talks in Copenhagen was criticised by Chauvel, who said the law's "hallmark was of poor procedure and hasty consideration".

New Zealand has set a target of cutting greenhouse gas emissions by 10 per cent if developed countries agree to a comprehensive treaty in Copenhagen; it will increase the target to 20 per cent if any deal also gains commitments from developing nations.