New green taxes to affect extractives
Momentum is building for increased environmental tax measures, which will impact extractive industries.
The Government – and its Tax Working Group – is looking at new approaches for using the tax system to drive environmental outcomes. New or increased taxes may be applied to water (pollution and abstraction), biodiversity loss and ecosystem services.
This is on top of an expanded waste disposal levy, emissions trading scheme, and congestion charging, which are already on the Government’s radar. These taxes will affect extractive industries, which are typically high users of natural resources.
Given the potential for significant change in this area, high resource users should: keep a close eye on developments, including the release of the Working Group’s final report in February 2019; and factor these developments into their short and medium-to-long term planning.
Increases to Waste Disposal Levies
Together with Minister Eugenie Sage’s focus on waste, the Ministry for the Environment is considering an increase in the scope, coverage and rate of the Waste Disposal Levy. It hopes that changes in this area would change behaviour (assuming that illegal dumping is managed).
The Waste Disposal Levy is currently $10 per tonne and only applies to 11 per cent of landfills. These rates could increase to $140 per tonne, with a lower rate for inert waste.
The Working Group has expressed its approval of such a measure, and noted the UK’s approach to reducing landfill waste through waste pricing.
Changes to the Emissions Trading Scheme (ETS)
The Government has already begun drafting the Zero Carbon Bill, which aims to reduce New Zealand’s carbon emissions to net zero by 2050. The Bill is expected to change the ETS by re-pricing carbon and could allow the Government to raise revenue as well.
The Government is already considering the future of the transport revenue system as part of its Urban Growth Agenda.
The Working Group has identified that there is scope for new methods of transport revenue gathering, which includes congestion charging (something which has been successfully implemented in the UK).
Possible measures in the mid to long-term
In addition to the areas above, the Working Group is considering a broad range of additional environmental tax measures that could be introduced in the mid- to long-term. In the Working Group’s Interim Report, released in September, it noted that measures worth considering include the following.
Water taxes: Over the medium-term, tax instruments could be used to address water pollution. The Working Group has also discussed a water abstraction tax to rationalise water take, improve the efficiency of water use, and to raise revenue.
Environmental footprint taxes: The Working Group proposes that a land-focused environmental tax, levied based on the intensity of land use and the consequential impacts on the environment, could help address issues such as biodiversity loss and impacts on ecosystem services.
The Working Group acknowledges various challenges surrounding the introduction of such measures, but it seems likely that at a minimum the Working Group will recommend (in its final report due in February 2019) the Government consider these matters further.
When will all this happen?
Changes to the ETS, the waste disposal levy and congestion charging are possible within this term of Government.
The Government is well underway in developing the Zero Carbon Bill, which will set up the Climate Commission and tweak the Emissions Trading Scheme. The shape of the Bill is expected this month, with the Bill itself going before Parliament next year.
The timing of mid- to long-term changes is more speculative. The Government has already promised that there will not be resource rentals for water under its coalition agreement and so, at the earliest, water taxes could be introduced in the next term of this Government.
First published in Inside Resources.
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