Cap and Dividend

Posted: June 1, 2014 in democracy, economic justice, environment, government

So the Green Party has announced its new Climate Protection Plan, a $320(ish) tax cut for everyone earning an income in New Zealand, a 1% cut to the company tax rate, funded by a levy of $25/tonne on carbon-equivilent emissions for most polluting sectors, with a $12.50 rate for dairy and an exemption for all other farming sectors that have already kept their emissions at or below 1990 levels. They’ve also pledged that all the money raised by the levy will be refunded to the tax payer, and an independent panel will be set up to suggest any future amendments to the scheme.

This is one of those excellent policies that hits both highly technical and sensible policy benchmarks, and is great politics at the same time. The Greens were never happy with the idea of the Emissions Trading Scheme, being persauded to vote for the stronger version proposed by Labour only because it was marginally better than doing nothing, and due to the potential energy reduction of $1billion invested in insulating houses. The National version of the scheme is largely a giveaway, and where it isn’t, it’s functioning as a money-go-round and not actually reducing emissions, and the small amount of houses they’ve agreed to insulate is bizzare, given that we are already seeing reductions in health costs beyond what the first round of the scheme cost.

This presents the Greens, (and barring and announcements of a competing policy from Labour, the entire opposition) as a movement that can square the circle: They’ll use a carbon reduction policy to provide a tax cut to ordinary New Zealanders, (and because their tax cut is broad-base, it will stimulate the economy, too) and make the business environment even more competitive for companies that achieve low-to-zero emissions. This is an excellent scheme known more internationally as “Cap and Dividend”, and given the shocking failure of ETS policies globally, (mostly due to their vulnerability to business lobbying) a great second-try at making New Zealand more of an environmental leader. (Or perhaps more fairly, a close follower- we would have led in this if we had proposed this during the previous government rather than for the next one)

This isn’t a policy that can be de-railed as a “fart tax”: it’s charitable to farmers, and most charitable where they’ve stepped up and done their part. It’s fair to the rest of New Zealand, refunding us for the externalities heaped on us by polluters. And as a country vulnerable to climate change, especially any political destabilisation it might cause, becoming a leader or a close-follower in addressing emissions is in both our economic and social interests, not to mention our national security interests, given that the more extreme range of climate change prediction could leave New Zealand one of the few relatively agriculture-friendly areas of land.


edit: Looks like the $319 is based on two-incomes, so if you’re solo, that’s a $159.50 tax cut. This is, however, the amount after potential cost increases are accounted for.


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