The BusinessNZ Energy Council (BEC) says the Emissions Reduction Scheme should be left to do its job.
In its submission on proposed changes to the ETS, BEC said businesses across New Zealand are already working hard to reduce emissions under the current ETS rules, and their work should not be put at risk by new requirements on top of the ETS.
BEC Executive Director Tina Schirr noted businesses recognise that adjustments may be necessary to the ETS over time.
“However, it is important to strike the right balance between regulatory change and regulatory certainty.
“We are concerned the proposed setting adjustments indicated by the Ministry for the Environment could rapidly accelerate the price of NZ Unit prices from 2023, bringing significant cost increases in a very short time with no extra carbon emission reductions.”
Schirr said higher NZU prices along with the phase-out of industrial allocations increased the risk of carbon leakage.
Carbon leakage is where the cost of climate policies increases the cost of operating in a particular country leading to businesses moving their operations to countries with less stringent climate policies.
“If the cost differential between NZ and its overseas competitors increases rapidly in a short timeframe, the risk of carbon leakage rises exponentially.
“Emissions-intensive businesses play an important role in the New Zealand economy. Their possible exit from NZ would significantly dent NZ’s growth and bring supply chain vulnerabilities, while contributing to an increase in total emissions globally,” concluded Schirr.
“All NZ businesses – not just emissions-intensive ones – would suffer from frequent changes and additional costs signalled under proposed ETS price-setting arrangements, and this would also impact wholesale electricity prices, given that electrification is a big element of NZ’s decarbonisation strategy.”