Like it or not, New Zealand has ratified the Kyoto protocol, which means it needs to reduce its net emissions of greenhouse gases (primarily carbon dioxide, methane and nitrous oxide) to 1990 levels, or buy emission permits from another country under an international emissions trading scheme. It seems likely the latter scenario will eventuate.
If the government introduced no domestic policies to reduce emissions it would be responsible for buying a sufficient number of emission permits from overseas. In effect, then, taxpayers pick up the bill and there is no incentive for anyone to reduce emissions.
The best way to encourage a reduction in emissions is to discourage the use of products that contain relatively high amounts of greenhouse gas emissions – electricity (from thermal generation), aluminium and steel products, cement, dairy products, some forestry products and of course most forms of travel.
This is most simply accomplished by introducing a tax on emissions. Such a tax generates certainty about the price of emissions, but does not guarantee any given emissions reduction target would be met. But even if a tax has no effect on emissions, it is still fairer to put the cost of emissions on those who cause them than on taxpayers generally.
It seems likely that the government will not introduce a tax on emissions, opting instead for an emissions permit trading system. When emissions trading schemes have been introduced overseas, it is usual for governments to give permits to emitters, rather than selling or auctioning them to the highest bidders.
For example, an emissions price might make cement produced in New Zealand uncompetitive compared with imported cement. If this led to lower output from, or even the closure of New Zealand cement plants, overseas plant would increase production – a process frequently referred to as "carbon leakage".
New Zealand would more easily meet its Kyoto obligation, but global emissions would not change – hardly the actions of a responsible global citizen.
