26 Jul 2017

Government signals higher carbon price cap

2:38 pm on 26 July 2017

New Zealanders are being told they will have to pay more money to compensate for environmental damage.

The warning is from Minister for Climate Change Issues Paula Bennett in the second stage of a review of the emissions trading scheme.

Emissions

Cabinet has decided in principle to eventually raise the current maximum price on greenhouse gas emissions. Photo: 123RF / RNZ

Ms Bennett said Cabinet had decided in principle to eventually raise the current $25 a tonne maximum fixed price on greenhouse gas emissions.

The price is the highest companies like oil firms can be compelled to pay for each tonne of CO2 they emit into the atmosphere, and is designed to deter them from emiting, or to pay for compensatory measures such as forestry projects.

The $25 cap is already above the current price for CO2 emissions and is expected to go higher in the 2020s.

The government is now telling New Zealanders it will not protect them from that trend.

For now though, this is a theoretical proposal and no actual future price is being mentioned.

Many environmentalists have long argued that the real cost of climate change is far higher than the $25 on each tonne of the greenhouse gas emissions that cause it.

As a result, they have said the $25 figure is too low to have the right sort of environmental effect.

In other parts of today's decision, the government has said agriculture, which has long been exempt from charges, will stay out of the ETS system.

It has also decided to continue free allocation of emissions credits to large companies that could easily shut down and move offshore if costs here grew too high.

However this could ease off in the 2020s.

It has also agreed in principle to sell some greenhouse gas credits itself through an auction system, potentially earning it hundreds of millions of dollars.

Get the new RNZ app

for ad-free news and current affairs