17 Aug 2009

Carbon price cap could backfire, say Greens

8:48 am on 17 August 2009

A cap on the price of carbon could result in polluters emitting more greenhouse gasses, says the Green Party.

The Government is apparently considering an initial limit on the sale price of emissions units as a way of cushioning the financial impact of the emissions trading scheme on heavy emitters.

But Green MP Jeanette Fitzsimons says a cap would interfere with the market by subsidising polluters and discouraging those committing to a low-carbon economy.

The cap concept has riled forestry groups, which fear it will turn off investors and prevent much-needed plantings.

But some business groups say a cap would provide certainty about the costs associated with the emissions trading scheme. They say such a step would make it easier to plan for the financial effects of the emissions trading scheme.

Wellington Chamber of Commerce chief executive Charles Finny says a maximum limit could provide businesses with some confidence.

The move would align the scheme with the Australian version, which proposes a cap of $A10 dollars a tonne of carbon dioxide emitted in its first year of operation, rising to $A40 a tonne dollars in the second year.

The Government is also considering a ban on the sale of New Zealand credits overseas.

There is opposition from the forestry industry which is lobbying for any cap to be set at or above the current market price of between $20 and $25 a tonne.

The Forest Owners Association says a limit much below this would all but kill off the domestic emissions market before it begins.