Solid Energy said that, while it supported the Government's objective for an emissions trading scheme, the current proposal was ineffective and inefficient, failing to meet the Government's ETS objectives.

“To be effective and sustainable [an emissions trading system] should not unreasonably compromise our ability to meet other priority national objectives," Solid Energy said.

Solid Energy said the Bill risked compromising New Zealand's dual emissions reduction and economic transformation objectives by assuming largely costless economic transformation under the ETS, which was not supported by government or independent economic analyses.

“Economic transformation objectives include economic growth through adding increased value in the primary sector. An ETS based on the Bill as drafted risks undermining this opportunity," Solid Energy said.

Economic transformation objectives include a transition away from emissions intensive industries to low-emitting sectors, which Solid Energy said went against specific analysis of New Zealand's economic makeup.

“New Zealand's past and ongoing economic prosperity and social wellbeing are closely linked to the performance of our primary and resources sector and the value we add to products before they are exported,” said Solid Energy.

“Growth in our existing sectors offers the most substantial opportunities for growth in economic prosperity and social wellbeing."

Solid Energy made four key recommendations to the Parliamentary Finance and Expenditure Select Committee:

• Obligations placed on individual emitters should not exceed New Zealand's net liability under the Kyoto Protocol;
• The ETS should, in time, cover all sectors of the economy, with each sector bearing an obligation consistent with its contribution to New Zealand's net emissions deficit and ability to contribute to reduction of the deficit; and
• Global emissions consequences should be recognised – where New Zealand production has lower emissions intensity than other countries, NZ should not reduce its own production.

Following this, Solid Energy recommended that further substantive ETS elements that do not change the core principles be put in place, and that implementation decisions, particularly in areas where benefits, costs and consequences are uncertain, be made through regulations.

Finally, Solid Energy said the New Zealand ETS should be harmonised as much as possible with the Australian scheme, rather than with the European Union ETS, which could increase, rather than decrease, the price of credits available to New Zealand.