CLARK GOVERNMENT ANNOUNCES COMPREHENSIVE PLAN TO

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SIPDIS

SIPDIS
SENSITIVE

STATE FOR EAP/ANP AND OES

E.O. 12958: N/A
TAGS: SENV ETRD PREL NZ KGHG
SUBJECT: CLARK GOVERNMENT ANNOUNCES COMPREHENSIVE PLAN TO
TACKLE CLIMATE CHANGE IN NEW ZEALAND


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1. (SBU) Summary. Prime Minister Helen Clark announced on
September 20 her government's plan to significantly reduce
New Zealand's greenhouse gas emissions. This comprehensive
plan would establish an Emissions Trading Scheme (ETS)
designed to impose prices to limit greenhouse gas emissions.
The ETS program would be phased-in over the next six years
and is intended to halve New Zealand's level of 2007
emissions by 2040. The coin of the ETS realm would be a New
Zealand Unit (NZU),which would float in value on
international markets. This announcement appears timed to
enhance the stature the Labour Government, which recently has
been lagging the opposition National Party in the polls.
National Party MPs and some smaller party representatives
have tentatively endorsed the proposed plan. Media reports
since the announcement suggest the battle is on between those
want to debate the details concerning the implementation and
economic impact of the plan now versus those who would prefer
to resolve the realities of ETS after the election. End
Summary.

The Announcement
--------------


2. (U) On September 20, PM Helen Clark announced at a
Wellington press conference an initiative aimed at addressing
climate change through an emissions trading scheme designed
to reduce New Zealand's contribution to greenhouse gases.
Clark kicked off the press conference with an upbeat speech
explaining that the purpose of the initiative was to not only
meet New Zealand's commitments under the Kyoto Protocol, but
also protect New Zealand markets and its reputation as a
world leader in environmental practices and policies. The
goal, according to Clark, is to halve the level of New
Zealand's 2007 emissions by the year 2040 with a minimum of
economic impact, and to eventually make New Zealand
completely carbon-neutral. Clark claimed that her plan would
reduce the growth of New Zealand's GDP by only 0.1 percent
between 2005 and 2010. The Minister Responsible for Climate
Change David Parker and the Minister of Agriculture and
Forestry Jim Anderton followed Clark's comments with power
point presentations and details of the plan.

Plan Details
--------------


3. (U) According to the speakers, ETS would eventually cover
all sectors of the New Zealand economy and is designed to
reduce the emission of all six greenhouse gases addressed
under the Kyoto Protocol (carbon dioxide, methane, nitrous
oxide, hydrofluorocarbons, perfluorocarbons, and sulfur
hexafluoride). ETS would have a phased-in approach, designed
to allow the government and various economic sectors time to
prepare for implementation.


4. (U) The sectors affected and the timetable for
implementation are as follows:

-- Forestry (includes deforestation of pre-1990 forest land
and reforestation post-1989): January 2008

-- Liquid fossil fuels (mainly transport): January 2009

-- Stationary energy (mainly coal, gas and geothermal
energy): January 2010

-- Industrial processes (non-energy) emissions: January 2013

-- Agriculture (including pastoral and arable farming and
horticulture): 2013

-- Waste: 2013


5. (U) According to the speakers, applying ETS to the
agricultural sector, which generates 49% of all domestic
greenhouse gas emissions, would be the most challenging part
of the plan ) hence, that sector has the longest delay in
implementation (2013).


6. (U) The ETS unit of trade would be a New Zealand Unit
(NZU) issued by the GNZ, and it would hold the same value as
one Kyoto Unit (KU) which value will be determined in
international trading markets. All New Zealand participants
would be required to spend one NZU or one KU to cover each

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metric ton of emissions per year. Participants could hold,
carry over and trade NZUs domestically and internationally.
The GNZ would, from time to time and as needed, sell NZUs at
auction.


7. (U) ETS does not include a domestic cap on emissions but
New Zealand will be subject to whatever cap is imposed under
the Kyoto Protocol. If no Kyoto cap is imposed, then a
domestic cap would be considered.


8. (U) Compliance under ETS would occur largely through self
reporting. However, there would be a central ETS registry
with roving inspectors to verify compliance. The exact
location of the ETS administrative framework within the GNZ
has not yet been proposed.


9. (U) The government announced its intent to apply emission
obligations as far "upstream" as possible, to facilitate
administration of the plan. For example, obligations would
be imposed on fuel companies rather than motorists, and on
food processors and cooperatives rather than individual
farmers. However, the government admitted that the cost of
compliance would inevitably trickle down to consumers.


10. (U) In conjunction with ETS, the speakers announced that
the government proposes to commit 175 million New Zealand
Dollars (NZD) over the next five years in support of land
management and climate change initiatives. The lion's share
of that investment would go to agriculture and forestry, and
would include projects for R&D, technology transfer, farmer
education, emission monitoring and reporting, irrigation,
reforestation, and erosion prevention.

Media Reaction
--------------


11. (U) Newspaper headlines on September 21 predicted rising
fuel and electricity prices as a result of ETS, forecasting
an increase in fuel prices of .04 to .06 NZD per liter by
2009 and a 5% to 10% jump in electricity costs by 2010. In
response, Parker dismissed the cited price increases as
trivial and called them a "deal" for the public. Parker
added that the government's initiative would help make New
Zealand a world leader in the use of electric cars, a program
which the government would also like to roll out. (Note:
There have reportedly been discussions between the GNZ and
Japanese auto manufacturers. End note.) Concerning increased
electric rates, Finance Minister Michael Cullen promised more
details before the elections but commented that there was no
need to rush, as electrical generation would not fall under
ETS until 2010.

Opposition Reaction
--------------


12. (U) Some opposition National Party MPs and smaller party
representatives have tentatively endorsed the measure in
principle. While the government's initiative toward reducing
greenhouse gas emissions seems to have broad support,
discussions reported in the media suggest that the battle
will now be fought between those will push for more details
concerning the implementation and economic impact of the plan
now and those who would prefer to resolve the realities of
ETS after the election.

What's Next
--------------


13. (U) The GNZ is conducting a series of ETS workshops and
informational meetings thoughout the country in October.
Clark said that legislation to implement ETS will be
submitted to parliament toward the end of the year.


14. (SBU) Comment. The release of the Clark government's
plan to address global climate change was well-orchestrated,
well-prepared and well-executed. The hundreds of attendees
each received a large stack of glossy publications explaining
ETS and the reasoning behind it -- possibly enough to require
several NZUs if the initiative were in effect now. The
government's failed 2005 attempt to launch a similar scheme
has not been forgotten, but media commentary suggests that
the public mood now accepts climate change as an issue
requiring action (and sacrifice),and so far the suggested

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price tag is modest. It appears that Clark (who until
recently has had great instincts in judging changing public
opinion) intended to bolster her party's poor showing in
recent polls with this dramatic initiative and enlist public
enthusiasm for a plan that will, in the months to come, be
dissected and scrutinized. Clark shrewdly included an
implementation timetable that commences after the election.
Nevertheless, in the year leading up to the election, ETS is
likely to become the subject of further media commentary and
political debate. End Comment.


15. (U) More information concerning ETS can be found at:
www.climatechange.govt.nz.
MCCORMICK