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New carbon tax to hit families and business

NEW ZEALAND, a country where thousands of homes have open wood and coal fires, and where central heating is rare, is to introduce a carbon tax.

The New Zealand government's pioneering announcement of the details of its carbon tax is triggering its own global warming of the country's political climate as the national election approaches.

Every major public body in the nation is responding noisily to the tax - with business groups mostly negative.

It is grabbing worldwide fame as an ecological pioneer, the first of the Kyoto Protocol signatories to announce details of a broad-based carbon tax, set at $NZ15 per tonne of carbon emitted, to be introduced on April 1, 2007.

The government estimates that it will cost an average household $NZ4 a week, chiefly as a result of a rise in the price of petrol and electricity. The tax will raise about $NZ360 million a year.

The price of a unit of electricity will rise by about NZl˘, a litre of petrol by NZ4c, a 9 kilogram bottle of LPG by NZ46˘ and a 20 kilogram bag of coal by NZ68˘.

The government says that if an international carbon market takes off before 2007, and sustains a price below $NZ25 per tonne, then it could introduce emissions trading as an alternative to the carbon tax.

Companies can gain a share of $NZ240 million in relief, budgeted from the new tax, if they negotiate agreements with the government to reduce their dependence on greenhouse-emitting fuels. The announcement amounted to a countdown for firms to complete such deals within two years.

The business response has been gloomy.

New Zealand Business Roundtable director Roger Kerr described it as "a further anti-growth measure."

"The Kyoto measures will have only a minuscule impact on global warming, and New Zealand is far too small an economy to make a difference," he said. "A carbon

charge is a distorting tax which can only be partially remedied by recycling revenue from it."

Business NZ chief executive Phil O'Reilly said that although the government had set up negotiated greenhouse agreements to give tax relief for high energy users, only two had succeeded so far in "jumping through the hoops."

"Now it has announced taxpayer funded grants for selected small and medium-sized companies to introduce energy-efficient technologies," he said. "In other words, companies will be taxed to fund their competitors."

"All of the cross-subsidising activity is just to introduce a tax that isn't necessary and which will make New Zealand companies overall less competitive than others overseas."

Tom Lambie, president of Federated Farmers of NZ, said farmers were very disappointed by the imposition of "another pointless tax".

"This tax will suck money out of rural communities," he said. "It compounds as it impacts on every step in the product chain, from on-the-farm operations through to increasing costs of transport, processing and exporting."

In addition to this, he said, it would erode the ability of farmers to invest in new technologies that would reduce emission.