VZCZCXYZ0008
RR RUEHWEB

DE RUEHWL #0991 3560355
ZNR UUUUU ZZH
R 220355Z DEC 05
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2178
INFO RUEHBY/AMEMBASSY CANBERRA 4250
RUCPDOC/USDOC WASHDC 0016
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS WELLINGTON 000991 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/ANP - DRICCI AND OES/EGC - SYOFFE 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA 
 
E.O. 12958: N/A 
TAGS: SENV ENRG NZ
SUBJECT: NEW ZEALAND SCRAPS PLANS FOR CARBON TAX 
 
REF: WELLINGTON 603 
 
¶1. (U) The New Zealand government has scrapped its plan to 
levy a tax on the carbon content of petrol and diesel fuel, 
which it had hoped would help New Zealand meet its emission 
targets under the Kyoto Protocol.  However, the government 
still will consider a carbon tax on fuel-burning power 
stations and other measures to reduce the country's 
carbon-dioxide emissions. 
 
¶2. (U) Climate Change Minister David Parker announced 
December 21 that a government review initiated in June 2005 
showed that the carbon tax  would not cut emissions enough to 
justify its introduction.  Parker said a new set of policies, 
due in March 2006 -- would deliver larger emissions 
reductions.  The tax had been expected to cut by 3 percent 
the country's emissions during the first Kyoto commitment 
period from 2008 to 2012.  Due to go into effect in April 
2007, the tax would have added approximately NZ 4 cents per 
liter (US 10.6 cents per gallon) to gasoline, considered 
negligible when compared to the rise in gas prices resulting 
from higher world oil prices. 
 
¶3. (SBU) Although Parker denied the move was forced by 
political reality, the Labour government lacked sufficient 
votes to pass the carbon tax legislation.  Two of Labour's 
partners in government, United Future and New Zealand First, 
had opposed the carbon tax, as had the National and ACT 
parties.  The only strong support for the carbon tax came 
from the Green Party, whose leader Jeanette Fitzsimons 
criticized the government for "giving up on its goal to 
reduce New Zealand's carbon emissions," capitulating to the 
anti-Kyoto lobby, and abandoning a carbon tax plan 10 years 
in the making. 
 
¶4. (SBU) While the carbon tax might not have made much of a 
dent in New Zealand's carbon emissions, its cancellation 
exacerbates the government's budgetary pressure by creating a 
shortfall of NZ$ 350 million (US$ 245 million) per year, 
which already had been earmarked for tax reductions.  Finance 
Minister Michael Cullen said that the loss in expected 
revenue may require the government to adjust its plans to 
increase personal income tax thresholds beginning in April 
¶2008. 
 
¶5. (SBU) At the same time, the cost to New Zealand for its 
commitment to the Kyoto Protocol is getting bigger, 
considering the cost of the extra emissions that the carbon 
tax had been expected to prevent.  In June 2004, the 
government announced for the first time that New Zealand's 
estimate of its greenhouse gas emissions would exceed targets 
set under the Kyoto Protocol.  It is still estimating a 
liability of hundreds of millions of dollars (reftel). 
Burnett