New Zealand FFSR voluntary report APEC EWG44 Washington D.C. November 2012

New Zealand fossil fuel producer support* 2 *Based on OECD’s Inventory of Estimated Budgetary Support and Tax Expenditures Relating to Fossil Fuels in Selected OECD Countries

OECD Inventory fossil fuel consumer and general support* 3 *Based on OECD’s Inventory of Estimated Budgetary Support and Tax Expenditures Relating to Fossil Fuels in Selected OECD Countries

Historical reform of CNG/LPG subsidies NZ government supported conversion of vehicles to CNG/LPG during 1980s as: – 1970s oil crises led to spike in global oil price; and – NZ had discovered large reserves of natural gas Most support was removed following drop in oil price Demand for CNG/LPG as a vehicle fuel fell following removal of support 4

Evolution of oil and gas mining tax regime late-1980s: NZ overhauls tax system to broaden tax base, lower tax rates, and remove distortions (including removal of support for oil and gas mining) 1990s: oil and gas mining tax regime reformed again to ensure comparability with overseas jurisdictions 2000s: further tax/royalty changes to encourage exploration following concerns about security of supply of gas (and electricity) 5

Lessons learned from reform CNG/LPG subsidies limited the ability of the market to efficiently respond to the fall in the oil price following the oil crises NZ’s oil and gas tax regime is designed to ensure tax treatment is not out of line with competing jurisdictions and thus to ensure security of supply and economic development. May point to the need for multi-lateral reform in this area. Periodic review of fossil fuel support policies is important to ensure that policies are still meeting objectives efficiently. 6