Business New Zealand chief executive Phil O'Reilly is not lighting a cigar in celebration of the Government's revised emissions trading scheme policy, but concedes he is more relaxed about it than the proposals it replaces.
Mr O'Reilly said some industries would still struggle to remain viable under the revised emission trading scheme (ETS) policy, especially if they ran old or inefficient plant, and although waiting to see the policy detail, he said it posed major challenges for business.
"Do not underestimate it. Even this new policy is the world's most aggressive ETS, because it includes agriculture and all gases. It is an aggressive scheme and will pose a huge challenge for New Zealand."
The Government, with support from the Maori Party, introduced changes on Monday to the previous Labour government's ETS policy, which would halve the proposed increases in the price of energy, give polluters an easier ride and a longer time to adjust.
Mr O'Reilly said he welcomed the introduction of an intensity measure, which rewarded businesses that had world's best energy efficiency, rather than the previous blanket policy.
He also saw benefits from capping the international carbon price at $25 a tonne - "so in the event of it all turning to custard, it will not cause enormous economic damage".
Linking the New Zealand and Australian schemes also made sense, while changes that encouraged tree planting were also welcomed.
The Labour Party - which quit talks on the ETS on Monday after the Government made its deal with the Maori Party - the Green Party and environmental groups have all claimed the changes mean taxpayers were subsidising business.
Labour leader Phil Goff said while consumers might face lower fuel and electricity bills, they would be subsidising the polluting costs of business in the order of $1.5 billion over three or four years.
Mr O'Reilly said the comments were disappointing.
"I am astonished and saddened that we are having this silly debate in New Zealand, that if business pays it is good, but if taxpayers pay it is bad. We should be looking at what is the best solution for New Zealand."
New Zealand would be the loser if large employers were forced to close because of the ETS, he said. Unlike Australia, our carbon profile meant we could not close coal-fired power plants to meet our climate change obligations.
New Zealand Business Council for Sustainable Development chief executive Peter Neilson said political expediency drove the changes and the Government policy was designed to secure support to be passed into law.
The lack of broad cross-party support meant the ETS would remain a political issue, vulnerable to changes after each election, he said in an interview.
Farming leaders continue to push the Government to advocate for agriculture to be exempt from the Kyoto Protocol at international climate change discussions in Copenhagen in December.
Federated Farmers president Don Nicolson said other than removing methane-emitting animals, farmers had no way of reducing greenhouse gas emissions.
Forest Owners Association chief executive David Rhodes said the proposals changed little for his members, but the use of taxpayer dollars to cushion households and energy-intensive industries was in the national interest and more appropriate than taking the money from forest owners, as could have happened.
EMISSIONS TRADING SCHEME
Government changes to proposed Emissions Trading Scheme legislation include:
• Revised entry dates of July 1, 2010, for transport, energy and industrial sectors and January 1, 2015, for agriculture.
• Transitional phase until January 1, 2013, with a 50% obligation and $25 fixed price option for the transport, energy and industrial sectors.
• Production-based industry average approach to allocations for trade exposed, emissions intensive businesses.
• A phase-out of industry support aligned with trading partners and the Government's long-term emissions reduction target.
• Incentives for afforestation created by a domestic and international market for carbon credits.
• Enhanced transitional support for the fishing industry.
• New Zealand's 2009 net position report on emissions expects the Kyoto target to be exceeded by 9.6 million tonnes.
• This compares with the 2009 report which projected a 21.7 million tonne deficit.
Source: Government and Ministry for the Environment
