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Inland Revenue

Tax Policy

PUBLISHED 21 December 2005

Carbon tax not to proceed

The government announced today that it will not proceed with the proposed carbon tax, and will instead consider other ways for New Zealand to meet its commitments to cut greenhouse gas emissions. The decision follows a comprehensive review of climate change policy. For more information see the media statement.

Hon David Parker
Minister Responsible for Climate Change Issues


Carbon tax will not go ahead in 2007

Minister Responsible for Climate Change Issues David Parker today announced the government is not proceeding with its proposed carbon tax and will instead consider other ways to ensure New Zealand meets its commitments to cut greenhouse gas emissions.

"The government has decided not to implement a carbon tax, or any other broad based tax, in the first commitment period under the Kyoto Protocol. Officials now advise that the proposed carbon tax would not cut emissions enough to justify its introduction.

"New Zealand is committed to meeting our international obligations under Kyoto and achieving our domestic goal of lowering emissions. The government takes seriously the threat that human-induced climate change poses to our environment, economy, and way of life. We have an obligation to do something about it, and we will."

The decision not to implement the carbon tax follows a whole of government review of climate change policy, which the government called for in June. Mr Parker today released the 460-page review. The government has asked officials to undertake further policy work, in consultation with stakeholder. This is due to be reported back to ministers in March.

"Many of our current policies were developed in the 1990s. Since then, New Zealand's economy has boomed, petrol prices have risen and other factors, such as falling log prices, have changed our situation.

"It is important that we modify climate change policies in light of this. They need to be fair to everyone, from residential consumers and small businesses to major energy users and power generators.

"It is a complex area and all countries are facing increasing costs and risks of climate change such as more flooding and droughts. As a country dependent on agriculture, we are particularly vulnerable."

Mr Parker said some parts of New Zealand's climate change policy, such as Projects to Reduce Emissions (PREs), have been successful. Due to PREs, we now have the lowest-cost wind generation in the world. This is a significant achievement and we need to build on this," Mr Parker said.

"The review also highlighted some forestry, land use and agriculture policies that need refinement to ensure they help cut emissions.

Other policies linked to the carbon tax, such as Negotiated Greenhouse Agreements for major energy users and emitters, are likely to be retained in some form.

Mr Parker said some areas that officials would report back on in March include:

  • Incentivising investment in renewable energy
  • Encouraging new tree planting and reducing deforestation
  • Improving fuel efficiency of the transport fleet
  • Assessing options for a narrow-based carbon tax on major energy users and emitters who do not meet world best practice
  • Improving energy efficiency and conservation.

Mr Parker said the agriculture sector, which accounts for approximately 50 per cent of New Zealand's emissions, would be protected from any broad-based price measure. It is anticipated that some of the money saved by the sector will be reinvested in research and development.

The review is available at

Contact: Gordon Jon Thompson (press secretary) 04 471 9889 or 021 392571

All David Parker's media releases and speeches are posted at