US embassy cable - 05WELLINGTON603

UNCLAS SECTION 01 OF 02 WELLINGTON 000603 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/ANP AND OES/EGC 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA 
 
E.O. 12958: N/A 
TAGS: SENV, ENRG, NZ 
SUBJECT: NEW ZEALAND EXPECTS TO MISS KYOTO PROTOCOL TARGET 
 
1.  (SBU) Summary: The GoNZ has revised its assessment of the 
Kyoto Protocol's impact on New Zealand, saying that it now 
expects to exceed its emissions allocation target and will 
have to buy carbon credits from other parties to the treaty. 
Previously, the government had claimed that participation in 
the protocol would earn the country millions of dollars. 
With a campaign under way for elections September 17, the 
revised assessment has provided fodder for opposition attacks 
on the Labour-led government's competence.  Nonetheless, New 
Zealand will remain committed to the Kyoto Protocol in the 
short term.  Backing out would belie the country's identity 
as a "clean and green," multilateral player.  End Summary. 
 
2.  (U) Minister Pete Hodgson, Convener of the Ministerial 
Group on Climate Change, announced June 16 that for the first 
time New Zealand's estimate of its greenhouse gas (GHG) 
emissions would exceed targets set under the Kyoto Protocol. 
In 2002, Hodgson campaigned for ratification of the treaty, 
saying that not signing it would be setting fire "to a very 
big check."  At that time, estimates gave New Zealand an 
overall surplus position, due in large part to a sizeable 
forestry carbon sink credit of 100 million tons.  With this 
recent changed estimate, New Zealand now faces an invoice of 
hundreds of millions of dollars--its magnitude depending on 
how much the excess GHG emissions will be and how much carbon 
credits will cost.  Even under the most optimistic scenario, 
New Zealand expects to purchase carbon credits to meet its 
protocol obligations during the first commitment period of 
2008 to 2012. 
 
3.  (U) The changed assessment results from the increased 
vehicle and factory emissions of a prospering economy and a 
decreased benefit from forest carbon sink credits.  Vehicle 
and factory emissions jumped 24 percent from last year. 
Changes in how forest sinks are assessed--disallowing the 
inclusion of trees that were planted on land previously 
covered by scrub--reduced New Zealand's forestry carbon sink 
credits.  Moreover, commercial forest planting has decreased 
from an annual peak of nearly 100,000 hectares in 1994 to 
only 10,000 hectares last year.  When the government ratified 
Kyoto, it "nationalized" commercially saleable carbon credits 
from forest sinks.  The forest industry believes those 
credits should instead be devolved to those who risk their 
capital to plant trees and asserts the government has taken 
away any incentive to plant more trees.  With a glut of 
timber worldwide, high land and transportation costs, and a 
high exchange rate, a large increase in tree planting would 
be unlikely anyway. 
 
4.  (U) The Kyoto Protocol is seen by many New Zealanders as 
integral to their country's "clean and green" identity, 
constraining options for the GoNZ and would-be successors. 
Hodgson unsurprisingly affirmed on June 16 the Government's 
unwavering commitment to the protocol.  The government 
believes that any movement away from the treaty would 
undermine New Zealand's image as faithful to its 
international obligations.  Thus, while not missing the 
opportunity to accuse the Labour Government of mismanagement, 
the opposition National Party--which claims credit for the 
concession allowing New Zealand to take into account its 
forestry carbon sink--has indicated its support for Kyoto 
through the first commitment period ending 2012.  However, 
the National Party has reserved the right, if elected to lead 
government, to bow out of further commitment periods if 
economically damaging to New Zealand.  National opposed 
ratification because it feared a trade disadvantage with its 
two lead trade partners, Australia and the United States, 
which are not members of the treaty. 
 
5.  (U) To help meet its protocol obligations, the government 
in May had set a carbon tax of NZ $15 (US $10) per ton of 
carbon dioxide, which the government said would not change 
despite the expectation it will now miss its protocol target. 
 Nevertheless, New Zealand's energy companies already were 
expecting to pass on more costs to their customers, meaning 
higher electricity and fuel bills for New Zealanders. 
 
6.  (SBU) Comment: While New Zealand's participation in the 
Kyoto Protocol is unshakable in the near term, National and 
other opposition parties will continue to cite the revised 
assessment as among several examples of Labour leaders' empty 
promises and failure to live up to their self-image as good 
managers.  Labour also remains vulnerable on pocketbook 
issues, with many New Zealanders feeling they have not 
participated proportionately in New Zealand's recent economic 
prosperity.  Labour suffered a decline in public polls over 
its failure to include immediate tax cuts in this year's 
budget, and the commitment to the protocol will mean higher 
fuel and electricity prices.  However it is unlikely that the 
Kyoto Protocol will be an election-breaking issue. 
Burnett