NEW ZEALAND EXPECTS TO MISS KYOTO PROTOCOL TARGET

UNCLAS SECTION 01 OF 02 WELLINGTON 000603

SIPDIS

SENSITIVE

STATE FOR EAP/ANP AND OES/EGC
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA

E.O. 12958: N/A
TAGS: SENV ENRG NZ
SUBJECT: NEW ZEALAND EXPECTS TO MISS KYOTO PROTOCOL TARGET


1. (SBU) Summary: The GoNZ has revised its assessment of the
Kyoto Protocol's impact on New Zealand, saying that it now
expects to exceed its emissions allocation target and will
have to buy carbon credits from other parties to the treaty.
Previously, the government had claimed that participation in
the protocol would earn the country millions of dollars.
With a campaign under way for elections September 17, the
revised assessment has provided fodder for opposition attacks
on the Labour-led government's competence. Nonetheless, New
Zealand will remain committed to the Kyoto Protocol in the
short term. Backing out would belie the country's identity
as a "clean and green," multilateral player. End Summary.


2. (U) Minister Pete Hodgson, Convener of the Ministerial
Group on Climate Change, announced June 16 that for the first
time New Zealand's estimate of its greenhouse gas (GHG)
emissions would exceed targets set under the Kyoto Protocol.
In 2002, Hodgson campaigned for ratification of the treaty,
saying that not signing it would be setting fire "to a very
big check." At that time, estimates gave New Zealand an
overall surplus position, due in large part to a sizeable
forestry carbon sink credit of 100 million tons. With this
recent changed estimate, New Zealand now faces an invoice of
hundreds of millions of dollars--its magnitude depending on
how much the excess GHG emissions will be and how much carbon
credits will cost. Even under the most optimistic scenario,
New Zealand expects to purchase carbon credits to meet its
protocol obligations during the first commitment period of
2008 to 2012.


3. (U) The changed assessment results from the increased
vehicle and factory emissions of a prospering economy and a
decreased benefit from forest carbon sink credits. Vehicle
and factory emissions jumped 24 percent from last year.
Changes in how forest sinks are assessed--disallowing the
inclusion of trees that were planted on land previously
covered by scrub--reduced New Zealand's forestry carbon sink
credits. Moreover, commercial forest planting has decreased
from an annual peak of nearly 100,000 hectares in 1994 to
only 10,000 hectares last year. When the government ratified
Kyoto, it "nationalized" commercially saleable carbon credits
from forest sinks. The forest industry believes those
credits should instead be devolved to those who risk their
capital to plant trees and asserts the government has taken
away any incentive to plant more trees. With a glut of
timber worldwide, high land and transportation costs, and a
high exchange rate, a large increase in tree planting would
be unlikely anyway.


4. (U) The Kyoto Protocol is seen by many New Zealanders as
integral to their country's "clean and green" identity,
constraining options for the GoNZ and would-be successors.
Hodgson unsurprisingly affirmed on June 16 the Government's
unwavering commitment to the protocol. The government
believes that any movement away from the treaty would
undermine New Zealand's image as faithful to its
international obligations. Thus, while not missing the
opportunity to accuse the Labour Government of mismanagement,
the opposition National Party--which claims credit for the
concession allowing New Zealand to take into account its
forestry carbon sink--has indicated its support for Kyoto
through the first commitment period ending 2012. However,
the National Party has reserved the right, if elected to lead
government, to bow out of further commitment periods if
economically damaging to New Zealand. National opposed
ratification because it feared a trade disadvantage with its
two lead trade partners, Australia and the United States,
which are not members of the treaty.


5. (U) To help meet its protocol obligations, the government
in May had set a carbon tax of NZ $15 (US $10) per ton of
carbon dioxide, which the government said would not change
despite the expectation it will now miss its protocol target.
Nevertheless, New Zealand's energy companies already were
expecting to pass on more costs to their customers, meaning
higher electricity and fuel bills for New Zealanders.


6. (SBU) Comment: While New Zealand's participation in the
Kyoto Protocol is unshakable in the near term, National and
other opposition parties will continue to cite the revised
assessment as among several examples of Labour leaders' empty
promises and failure to live up to their self-image as good
managers. Labour also remains vulnerable on pocketbook
issues, with many New Zealanders feeling they have not
participated proportionately in New Zealand's recent economic
prosperity. Labour suffered a decline in public polls over
its failure to include immediate tax cuts in this year's
budget, and the commitment to the protocol will mean higher
fuel and electricity prices. However it is unlikely that the
Kyoto Protocol will be an election-breaking issue.
Burnett