Bluescope which owns Glenbrook Steel Mill is one of the companies to benefit from getting most of their emissions free. Photo: CC BY 2.0 / Auckland Photo News
The Don't Subsidize Pollution campaign has taken a 6000 strong petition to Parliament asking the government to scrap free carbon credits for major polluters.
Under the Emissions Trading Scheme, most carbon dioxide emitters including petrol companies and coal-burning electricity companies pay a price - currently around $50 - for every tonne of emissions.
But companies such as Rio Tinto, Methanex, and Bluescope, which owns the Glenbrook Steel Mill, get most of their emissions free so that they do not move their plants - and emissions - overseas.
Alex Johnston, one of the campaign leaders, said together the top five recipients of free carbon credits created the same emissions as more than 2 million petrol cars.
The campaign wants the free credits stopped and companies helped to cut their emissions instead.
He said it was unfair that households had to pay a carbon cost on top of their petrol and electricity bills, when large multinational companies in some sectors did not. Many of the largest recipients are overseas-owned.
"It's quite an expensive policy to prop up and maintain these jobs... is there a better way we could be supporting these companies to decarbonise?"
The campaigners say the scheme is a dinosaur, dating back to the birth of the Emissions Trading Scheme when few other countries were acting on carbon emissions.
It comes at a cost to the government - if it did not give the carbon credits away for free, the government could sell them to polluters for hundreds of millions of dollars a year at current carbon prices.
Opposition MPs hammered this point when challenging Climate Change Minister Simon Watts at an environment committee meeting.
Green co-leader Chlöe Swarbrick called the scheme 'corporate welfare'.
Labour climate spokesperson Megan Woods suggested it would be cheaper and more beneficial to spend the money helping the same companies cut emissions, rather than continuing so-called industrial allocation.
"Forty-nine percent of industrial allocation comes from aluminium, iron and steel, we know that all three of those industries are industries that can be abated... so flipping it and actually paying to decarbonise rather than subsidising pollution."
During its last term in government, Labour subsidised companies such as Bluescope to cut their emissions. It also maintained the free carbon credits, for emissions not able to be reduced.
ACT's Simon Court defended the scheme against any moves to phase it out, saying overseas competitors may not face an emissions price.
The subsidies are being phased out, at 1 percentage point a year.
At that rate, companies will still be getting a third of their emissions free in 2050, when the whole country is supposed to be carbon neutral.
Watts told the Environment Committee he supported that gradual phase out.
If nothing changes, the free allocations will take up an increasing share of the total emissions New Zealand can produce each year.
New Zealand has binding caps on how much greenhouse gas it can emit each year, and the cap is falling much faster than the phase out of free carbon credit allocations.
That means that within two years the government could find itself giving out more free carbon credits each year to these large manufacturing companies than it is allowed to sell at auctions to all other carbon emitters.
By 2030, according to the latest estimate, the government will be giving away twice as many tonnes of emissions as it is allowed to auction, leaving just 2m tonnes which it can sell to all other emitters. That is one seventh of what is available to purchase by other emitters this year.
