New Zealand Abandons ‘Global Warming Tax’

In response to pressure from consumer and business groups, New Zealand’s Climate Change Minister has shelved plans for a proposed carbon tax, slated to go into effect in 2007. From the New Zealand Herald:

The Government has dumped its planned carbon tax, but more targeted tax could still proceed.

The u-turn on the $360m a year tax was announced today by Climate Change Minister David Parker….

Mr Parker said rising oil prices had already partly achieved the intended effect of the tax in the transport sector and officials had advised the tax would not cut emissions enough to justify its introduction…

Critics have said costs would have to be passed on to consumers, with petrol and power prices among items likely to be hiked.

Business leaders welcomed the move. But it was attacked by the Green Party, whose co-leader Jeanette Fitzimons said: “What is clear is that the Government views the rise in New Zealand’s carbon emissions as inevitable and that they are only going to try and slow the trend, rather than reversing it.”

A Government review of climate change policies has found the tax is unworkable in its current form. (Full story here.)

As noted in our previous post on the carbon tax, the levy was expected to raise the annual tax burden of New Zealand consumers by $50-$150 per year. The tax would’ve made New Zealand the first country to write Kyoto protocol guidelines into its tax code.

Since many of New Zealand’s trading partners, including China and Australia, aren’t constrained by the Kyoto Protocol, lawmakers feared the new tax would chase away foreign investment—a pretty well-justified fear.