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Peter Wilson: ETS Deal Poses Problems For Labour

Peter Wilson
Peter Wilson

Well, so much for a grand coalition on the emissions trading scheme.

Grand shambles, more like, although there's more to this than meets the eye.

The Government's agreement with the Maori Party, a rare example of a leak-proof deal, came as a surprise on Monday afternoon.

Climate Change Minister Nick Smith had been negotiating with Labour, and the minor parties, as he sought broad parliamentary support for the revised scheme.

The agreement with the Maori Party is far from broad. It puts 63 votes behind the legislation -- 58 National, five Maori Party -- which is a bare majority in the 122-member Parliament.

But that's enough to get it through, however strident the protests.

Smith said the door was still open for ongoing discussions with Labour, but the immediate gut reaction to being jilted was to hell with you.

Labour cried foul, said the Government had acted in bad faith and there weren't going to be any more talks.

It held the moral high ground, which doesn't mean much in politics, but where would it go from there?

Labour's starting position was that it would oppose the ETS, which had emerged from the deal with the Maori Party.

Its problem is that the scheme, in its latest form, halves the cost of power and petrol price rises that are an inevitable consequence of introducing any ETS.

It gives industries an easier ride and it gives farmers more time to work on ways to reduce their emissions. The sector won't come under the ETS until 2015 compared with the original 2013.

The business sector, not surprisingly, considers it to be an sensible and responsible approach to climate change.

Opposing it puts Labour on the wrong side of the argument, however much it might argue that the scheme is an inadequate response.

The downside, from the Government's perspective, is that taxpayers are going to have to pay more if New Zealand doesn't meet its international obligations.

The figure is highly indeterminate. The Government says the bill will be about $400 million over the next four years to subsidise the polluters, which is better than putting a big burden on businesses which could be forced to close.

Labour's Phil Goff says it could be four times that. "You could be talking $1.6 billion in the first three or four years alone."

The scheme also extends the subsidy period until 2050 rather than 2030 as set in the ETS drafted by the previous government and passed just before the election.

"What they've done is loaded the cost of pollution on the average New Zealand family rather than on the heavy polluter and they've reduced the incentive on the heavy emitters to reduce their pollution," says Goff.

Prime Minister John Key responded to that: "We're out there trying to protect New Zealanders jobs and those industries that are getting some form of protection would otherwise close down."

He thinks Smith has negotiated "a delicate balance" between environmental responsibility and economic opportunity.

By the end of last week Labour had indicated it was ready to start talking again "for the good of New Zealand".

Each side was waiting for the other to make the first move.

Because of the deal with the Maori Party, Labour's position has been significantly weakened. The Government would prefer broad support, but it doesn't need Labour to make up the numbers.

The main parties were believed to be moving closer together on some key aspects of the ETS, although neither was saying anything in public.

Now, Labour hasn't got the clout to talk tough because if it does the Government's doesn't have to listen.

The effect on the Maori Party is the opposite. If it turns out to be the Government's only ally, it could demand more than it has already gained.

There are no indications it will do that, but it could. The agreement is only for the vote on the first reading of the legislation, which will send it to a select committee.

The Maori Party isn't committed to seeing it all the way through the parliamentary process. Unless Labour gets behind the bill, Maori Party votes will be essential for further progress.

It has, basically, got what it wants in terms of easing the burden on poor families and there will be free insulation put into the homes of low income households.

Iwi also have big interests in forestry, which benefits from the carbon trading system in the ETS, as well as fisheries which receive large pollution subsidies.

Co-leader Pita Sharples gave ministers a fright by talking to the media about negotiating an increase in benefits, but later said that was "off the menu" and rises would come about through the normal inflation indexing system.

Questions have been raised about whether there are any secret arrangements, such as the Government's approach to the foreshore and seabed legislation, but both sides say there aren't.

One aspect that hasn't received very much attention, and which has the potential to deal with the taxpayer burden, is the strong incentive in the ETS for planting trees which offset carbon emissions.

Millions might be needed but it seems to be a win-win solution and the Government should push it as hard as it can.

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