But Climate Change Minister David Parker dismissed the report as "scaremongering from groups that have an interest in seeing greenhouse gas emissions continue to rise."
The report Carbon Mitigation Scenarios by analysts Infometrics, found the country's goal to become carbon-neutral cannot be achieved.
The period to 2025 was chosen for the study because it represents a 'milestone' on the path to the government's goal of carbon neutrality by 2050. The government set a target for greenhouse emissions to be level with 1990 emissions by 2025.
The study looked at the impact of a carbon price of $NZ300 ($264) per tonne and $NZ100 ($88) per tonne on the international market. It found even with this high carbon price, emissions would be about 90% above 1990 levels by 2025.
A total of 85Mt of greenhouse emission permits would have to be purchased on the international market to make up for shortfall. At $NZ100 per tonne, the cost to the economy would be $NZ8500 million ($7484 million).
The carbon neutral target also implies a doubling of electricity prices relative to 2007/08 and increases in petrol prices of more than 50%, the report found.
In addition, the impact on numerous industries would be devastating – reductions in output of the order of 30-40% are reported in the case of sheep and dairy farming and major industrial firms could face complete closure. The report found this is because industry would have almost no opportunity to reduce emissions other than reducing volume.
Commenting on the study, Business Roundtable executive director Roger Kerr said it called into question the consistency of the government's twin goals of faster economic growth and carbon neutrality. He said: "rhetoric about 'carbon neutrality' and 'leading the world' is fanciful and irresponsible and no basis for sound policy".
But Parker said: "The report does not take into account the new technologies already being developed here and elsewhere which will allow us to reduce emissions while growing the economy. These include electric cars, carbon capture and storage, new solar technology, second generation biofuels, nitrogen inhibitors and many more."
He added the report assumes the government will force New Zealanders to stop driving or using electricity by raising prices to exorbitant levels but the government has no intention of doing this.
EnvironmentalManagementNews.net
