5 May 2005Climate ArkGavin Evans
New Zealand household power prices will rise by at least 6 per cent because of a tax on carbon dioxide in an effort to comply with the nation's obligation to reduce emissions under terms of the Kyoto protocol, the NZ government said.
Power generators and factories will pay a tax of $NZ15 ($14) per metric tonne of carbon dioxide emitted while burning coal, oil and gas, starting in April 2007, Pete Hodgson, convener of the government's ministerial working group on climate change, said yesterday. The tax will be paid when buying fuel.
The NZ government signed the Kyoto protocol, which binds 35 countries and the European Union to reducing emissions of gases blamed for global warming by 5 per cent from 1990 levels. Wellington had previously indicated a range for the tax of $NZ15 to $NZ25 a tonne.
"It's good to see there are no surprises," said Tom Campbell, managing director of Comalco's NZ aluminum smelting operations.
The company, NZ's biggest power user, was waiting to see how the government would mitigate the impact of the tax on its Tiwai Point smelter, he said.
The NZ government is exempting its most energy-intensive industries from the tax so they are not forced to close or relocate to other countries where carbon is not taxed. In return, companies such as Comalco, which uses 15 per cent of the country's power, and Carter Holt Harvey, the biggest saw miller, must get emissions from their plants down to world-best-practice standards.
NZ gets about 29 per cent of its electricity from gas or coal-fired power stations, which operate at higher rates when the nation's hydropower lakes are low on water.
The tax on fuel for thermal power plants owned by Contact Energy, Genesis Power and Mighty River Power will add NZ0.7¢ to NZ1.1¢ per kilowatt-hour to the residential price of electricity, the government said. At present, retail power prices average NZ17¢ per kilowatt-hour, according to the NZ Inland Revenue Department's web site.
The government estimate "looks to be in the right sort of ballpark", said Richard Gordon, a spokesman for Genesis Power, operator of the country's biggest coal-fired power station. It was still analysing the impact of the tax on industrial customers, most of whom took power directly from the national grid at half-hourly prices, he said.
"Confirming the level at $NZ15 per tonne provides welcome certainty,' Contact Energy chief executive Steve Barrett said in a statement. "The actual impact of the carbon tax on electricity prices will not become clear until it is introduced."
Allowing for negotiations on exemptions, the tax would reap about $NZ360 million a year, MrHodgson said, and add about $NZ4 a week to the household cost of power and petrol.
