The following is my unpublished letter to an editor, which I have posted here as people may or may not find value in it. After that are more recent thoughts on the differences between a carbon tax and an ETS.
Currently industries such as agriculture only pay for some of their carbon emissions. Otherwise they would suffer a competitive disadvantage because of foreign competitors that don't have to pay for emissions.
Each year industries are expected to pay for more of their emissions. Agriculture is set to pay for all of its emissions in 2072.
I would prefer the NZ carbon tax or ETS fully include industries such as agriculture, but exclude exports. This would help NZ move to a low carbon future, while not hindering the economy.
Exports can be excluded by allowing a tax refund if exporters can prove the goods were exported. The exported emissions would still be taxed, but by other countries, and only once those countries have a carbon tax. Importers would tax all imported emissions using their country's carbon price, so that a consistent price is used throughout their market.
If NZ taxes exports and other countries don't fairly tax their emissions, our carbon tax would be rewarding polluting countries with a price advantage.
A related point is that responsibility for emissions and removals should lie with the consumer. So NZ's carbon budget would be less responsible for agricultural emissions, and more responsible for emissions involved in the production of imported goods.
My thoughts on the differences between a carbon tax and an Emissions Trading Scheme (Cap and trade):
|Emissions Trading Scheme|
The best solution might be for ETS credits to be created by the government paying a fixed price for removals to the forestry owner, and then the government selling the credits on the market. This would effectively remove the forestry sector's ability to drive prices higher and would also allow the revenue to be used equitably. In this scenario, exports could be excluded by exported emissions not having to be offset. Unsure about exported removals but might be better to still have the government buy and create the credits in NZ, but allow the credits to be sold to countries buying the wood. In case this needs to be stated, to have a transition mechanism the government would sell more units in the early years and less in later years until they reach a target level of emissions.
Or maybe the government's units get distributed to everyone equally and to buy things requires units as well as money, and people/businesses could buy and sell their units on a market.