On the heels of the Government's $60m Fletcher Building cement deal, Finance Minister Nicola Willis says NZ increasingly needs to think about its own self-reliance

Cabinet's decision to give Fletcher Building's Golden Bay Cement up to $60 million to keep cement production onshore was about New Zealand's self-reliance, with the alternative of tinkering with the Emissions Trading Scheme potentially opening the Government and taxpayers up to even more problems, Economic Growth Minister Nicola Willis says. 

On Monday Cabinet signed off on allocating Fletcher's Golden Bay Cement (GBC) up to $60 million to continue to manufacturing cement in Whangarei and to keep clinker manufacturing capability.

Fletcher Building CEO Andrew Reding said without Government support, "increasing costs, including carbon emission costs that our competitors importing cement from overseas do not currently incur at the same level, would likely have required us to close the plant and move to an import-only model from 2030."

On Tuesday Willis said Cabinet looked at three aspects in its decision - how critical cement was to the economy and the country's dependence on it, if the business was viable without the emission costs, and if they would get a good deal out of it.

"We still have imports of cement from other countries in the world. What we were concerned about was a situation in which that was disrupted. We've experienced that in recent times," she said.

During the time Cabinet was deciding on the grant, a financial assessment concluded there were "binding constraints on the financial viability of domestic cement production, primarily due to emissions costs."

“While we considered alternative forms of regulatory relief, we were concerned to take a lowest-cost approach that did not undermine the effective operation of the Emissions Trading Scheme. The agreed approach strikes the right balance, preserving a strategically significant domestic capability without creating a precedent for wider support, or undermining the integrity of the ETS," Willis said. 

Asked about the potential of a carbon border adjustment for concrete, Willis said the challenge would be that it's not permitted within the current free trade agreements.

"The risk of New Zealand acting unilaterally on a mechanism like that would be that it would expose our other industries, our other exporters, to similar taxes offshore, and so we would be reluctant to do that in isolation. Although we watch closely what other countries are doing in that regard."

Willis said she expects to see "investments happening at that firm to make it more productive and more efficient in the future, more emissions efficient."

"So that is positive that in the future they will be less carbon intensive and more competitive."

Cabinet ministers were conscious if they intervened in the ETS, "that could actually create massive costs for the New Zealand taxpayer, or create a conga line of others asking for exceptions."

On Newstalk ZB on Tuesday, Infrastructure Minister Chris Bishop said they went; "into this not wild about it frankly, no Government wants to put its hand in its pocket for 60 million bucks for a corporate."

"The challenge is the emissions costs. which are coming as a result from the ETS from 2030 onwards... do render that plant unviable, or at least arguably uneconomic," he said. 

"This is what happens in government right, you get confronted by difficult decisions and I don't pretend this was an easy one, it isn't, and I didn't get into politics to give money to corporates," Bishop said.

Fletcher announced on the NZX that an assessment confirmed; "that without support, rising costs, including carbon costs, would force closure and a shift to an import-only model from 2030."