A joint study for the Ministry for the Environment by the NZ Institute of Economic Research and Infometrics into climate change policy concludes introducing a carbon price, while not costless, will not significantly affect its potential growth rate. The two organisations support a broad emissions trading scheme - with free allocation of units to sectors whose competitiveness is at risk, and agriculture excluded as long as measurement of its emissions is too expensive.

Their modelling shows income per capita, as measured by real gross national disposable income, would rise to $54,000 by 2025 from $38,500 now, even with a carbon price of $100 a tonne, four times the current price. In the absence of any policy response to climate change, it would be $56,000.

They say the global trend is clearly towards the gradual introduction of carbon pricing. The forecasters say in the short run a narrow carbon pricing scheme - whether through an ETS or a tax - at a low domestic price, could provide the necessary signal to business investment at a slightly lower cost than the all-industries, all-gases ETS with free allocation currently on the statute books. In the longer run, the modelling shows a broad-based, full price signal with no free allocation or exemptions would be the lowest-cost way to meet the country’s post-2012 obligations. However, they warn it all depends what everyone else in the world does.

 Copyright © The Main Report Group