Tradable Energy Quotas or Tradable Emissions Quotas? – our discussion rages on

When you fill up with petrol you would surrender TEQ units.

We have now had three online meetings of those wanting to promote TEQs as described by Dr David Fleming and summarised by his colleague Shaun Chamberlin here.

The last discussion was very stimulating and it was hard to sleep that night. Five good brains agonised for an hour over whether to make the unit energy or emissions, but still no conclusion. It isn’t any good launching a campaign until we are clear in our minds of what it would be called, how it is designed and how, if at all, it would work alongside the ETS structure or replace it.

First let’s look at the history. TEQs were designed as applying to energy. Dr David Fleming wrote about managed energy descent and invented this tradable quota system to ensure a smooth descent rather than a chaotic one. But on the website the Parliamentary report of 2011 states on P47 that it could be designed for emissions. It’s just that we can’t see the second design and it is far from simple to figure out what it would be.

Fleming, who died in 2010, didn’t include non CO2 emissions in his Tradable Energy Quotas and I would imagine he didn’t envisage that a country like New Zealand would have half its emissions in agriculture in the form of methane and nitrous oxide.

Josh Floyd the Melbourne researcher from the Simplicity Institute had tentatively suggested to us in an email that we use TEQs for fossil fuels and use the ETS for other GHGs. But there would be different prices for the units coming from two different systems. Someone argued that is logical because they are different gases. I don’t know the answer.

We then asked where is the public now in their thinking? Will they want to reduce their fossil fuel energy? We think they will know they have to reduce their emissions yes. Would they be more on board if the unit was emissions? Probably.

Jack brought up the idea of what happens to a society during a big disruption as he had read that research shows altruism dominates the responses during big disruptions. (Think Christchurch earthquake and the 2020 lockdowns). Then someone asked if we could somehow use the pandemic issue to edge into the campaign.

Every time we talk to someone new about whether we want Tradable Energy Quotas or Tradable Emissions Quotas they answer the latter. But let’s think a bit more.

Ideally it seems people would like it to be Tradable Emissions Quotas (TEQs). As yet we not really sure whether the data is there for making this feasible. TEQs were originally designed to be Tradable Energy Quotas, but since in New Zealand half our emissions are from methane and nitrous oxide from agriculture, and we know we need to reduce all the greenhouse gases, we instinctively choose emissions as the unit. 

But let’s suppose the technology and the data is now available to make the unit for the quota “emissions” and see what happens.

There are two ways of measuring emissions – production based and consumer based.

The IPCC has asked countries to use the production-based as the way to  count our emissions. In the case of Aotearoa New Zealand we import manufactured goods with embedded carbon dioxide and we export food  with embedded methane and nitrous oxide emissions. Using the the IPCC method means we must measure all our emissions from agriculture and waste as well as from industry and transport. And that is why, when we try to invent a Tradable Emissions Quotas and plan to do it on consumption data it just doesn’t work.

And the design still has to be worked out. In the case of Tradable Energy Units the TEQ scheme only wants us to surrender units when we buy fossil fuels or energy. The units go up the chain to the producer or importer and then to the registrar. When we buy items of services with embedded emissions we don’t surrender units, as the price is already reflecting the embedded emissions. In the case of emissions being the unit, there is nothing comparable to fossil fuels.

Also you can think of it this way:-

If we bring down energy use, we will bring down emissions too.
But if we bring down emissions there is no guarantee we will bring down energy use and this will lead to ecological disaster. In fact Dr Rodney Carr in answer to a question on a Climate Commission webinar said our energy would be the same in 2050 as it is now. And our GDP would have increased by 73% with all the material throughput that implies.
I have been reading the chapter in Jason Hickel’s book Less is More called Can Technology Save Us? There was lots of data and science reported.  He eventually dismisses green growth as a fantasy.

 

 

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We’ve had ETS since 2008 but how much has it affected you?

I can’t believe it. We’ve been discussing Emissions Trading Scheme since 1993 in New Zealand and I still didn’t know how to explain it. Although I consider myself a responsible citizen who keeps up with the news I somehow managed to escape from having to learn.

You see I didn’t need to know. Oh well, unless I was a politician, a government servant, a Parliamentary staff member or a consultant involved with ETS. Although I had been in climate change groups we had never discussed it because we were in the process of persuading government to do something about climate change. In my case it was local government.

Then, because I was interested in Tradable Energy Quotas (TEQs) as a framework to reduce emissions, I finally thought it necessary to understand ETS. I discovered that only larger land owners and businesses were involved.

Then I read a paper that reviewed the scheme in late 2019  by Catherine Leining, Suzi Kerr and Bronwyn Bruce-Brand.

To my amazement there was a table of climate change policy milestones in New Zealand from 1993 to 2019. 42 lines of actions were listed over those 26 years. Every sector seems to start for a few years with voluntary obligations and then it becomes mandatory. The sectors are forestry, transport, waste, synthetic gas, agriculture. I can’t imagine the number of work hours that everybody has put into this.  We know how to measure emissions now for those sectors. Well done.

You can see the political wranglings as the Labour and National Government gain and lose power. But even after all that work, the fourth page says, “As of November 2019 the system applies unit obligations to approximately 52% of New Zealand’s gross emissions.” Agriculture is the biggest political football and so far the industry seems to have  persuaded the government to wait and wait.

Then I flip to the end of the article to look at the conclusion. I notice a mild little sentence which says, “While it constitutes a functional cross sector market, the NZ ETS  has not significantly reduced emissions to date” Oops! It then goes on to say something quite extraordinary:- “The NZ ETS was not designed to achieve specific targets for domestic mitigation.”  Wow.

While things are due to improve with the new Government and the Climate Commission (they finally start auctioning the units in March this year) there is still no reason for you or me to understand the ETS. We aren’t involved. We just see the result – a net increase in emissions. A pity, considering all that work has gone into it…

We are not involved because we aren’t part of the scheme. That is where Tradable Energy Quotas (TEQs) are different. Units are given to the downstream consumer, not bought by the upstream emissions producer. TEQs are denominated in quantity and, unlike ETS, they involve every citizen. The climate emergency can’t be addressed by upstream systems because it doesn’t guarantee emissions decline and it doesn’t involve energy users like you and me and require us to play an active part.

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New Zealand’s agricultural emissions are high

Nearly half of New Zealand’s emissions are from livestock. A shocking 46.1% for the year 2012 as calculated by the Ministry for the Environment. (MfE). A large proportion of this comes from beef and to a less extent sheep. The MfE paper tells us tells us that in 2012 we had 6.4 m dairy cattle, 3.8m beef cattle, 3.1 m sheep and 1 m deer. So a total of 14.3m ruminant livestock.

So I read their paper calculating our emissions, or more accurately skimmed through it, reading the less technical parts of it as it is hundreds of pages long. I was looking for indications of what Global Warming Potential they were using for methane. It was only when I was reading a book by Richard Oppenlander that I saw the statement that methane is 72 times as powerful as carbon dioxide over a 20 year period and checked this out with Prof James Renwick of Victoria University. Yes he said that is the figure that scientists are taking now.

I finally discovered on a Stats NZ site that we do calculate our methane contribution with a GWP of 25 and once again questioned the climate science professor. He answered,

“Yes a GWP of 25 sounds right as they’ll be using GWP100. That’s still the standard under .the UNFCCC so is how we are required to report emissions (as I understand things), even though the science has clearly moved on to the two baskets approach. ”

But then I asked him if I was right to say the percentage contributed by agriculture would rise if methane GWP was 72, and he said no it would fall. So I was wrong, the headline above is misleading now and I will change it.

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New Zealand editorial writer is dreaming if he thinks sustainable beef production is possible

In June 2019 the Herald was doing some editorialising on the end of meat. Impossible Burgers had recently made an entry and it was looking like there were going to be more plant based imitation meat appearing on the market soon. They said, “While in New Zealand beef and lamb consumption has fallen, 38 per cent and 45 per cent respectively in the past 10 years, the trend doesn’t spell doom for our $10 billion red meat industry.”

That is a considerable drop, some of which is compensated for by New Zealanders now eating more chicken. No wonder Beef and Lamb has been panicking recently.

The editorial then went on to get excited about the FAO’s prediction that meat consumption will rise globally and that the meat trade is going to increase 20% rise between 2017 and 2027. Ah exports to developing countries, that looks promising.

Oh yes, it’s China. They are taking more of our red meat, much more. But then the Herald editorial goes on to say that this is breathing space for us and “If anything the rise of global demand adds to the challenge to produce meat more sustainably, with less impact on the environment.”  

Well I’ve been boning up on what Dr Joseph Poore has been saying and it just doesn’t tally. And what Dr Robert Goodland, formerly of the World Bank where he led the environmental assessment team for 23 years, said. It doesn’t tally with that either. They are both sure there is no such thing as sustainable beef production.

Dr Poore of Oxford University recently published a study of 38,700 commercially viable farms in 119 countries over 40 agricultural products. This represented about 90% of global protein and calorie consumption worldwide. He gathered data from thousands of scientists and his lecture took an hour and a half to listen to.

Climate change is only one of the environmental problems of food systems. The others were freshwater use, water pollution (eutrophication) and air pollution (acidification). Because they were studying emissions farm by farm, he found they varied hugely, even within the same region. For beef, one farm can produce 1000% more emissions of another and use 5000% more land. That is one beef farm can produce 11 times more emissions than another. He was staggered by the variability.

And here is the kicker: “Even the lowest impact beef farms are producing six times more greenhouse gases and using 36 times as much land for growing a fixed weight of protein as farms growing beans and pulses.”  His conclusion: “Eating plant based protein and milk delivers more environmental benefits than trying to purchase sustainably produced meat and dairy.”

The Guardian of course gives a great run down of his research findings – “Avoiding meat and dairy is the Single Biggest Way to Reduce your Impact on Earth” (31 May 2018) But they omit his big recommendation: That there be mandatory environmental labelling of food products. He says that nowadays with satellites able to give good data on crop areas, crop identity and crop yields together with farm inspectors looking at fertiliser, crop residues etc, each farmer can provide information to next in food chain. Four possibilities for data on labels – emissions, water scarcity, pesticide toxicity and impact on biodiversity, thought the first two are easier than the second two.

 

 

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What if New Zealand farmers grew less meat and dairy for the climate’s sake?

In New Zealand we all know that agricultural emissions are the second biggest sector at 48%. We have a big beef and dairy sector, the latter having expanded into dry regions once irrigation became available. These areas are entirely unsuitable for dairy conversions.

Since the New Zealand government announced in October 2019 that it would not include farm emissions in the Emissions Trading Scheme just yet, I have been wondering how farmers will adapt during this initial trial period. The scheme aims to cut emissions by charging companies a price for each unit of greenhouse gas produced and farmers will be exempt till 2025 while they adapt. Under the scheme, farmers would be responsible for collecting data, reporting it, and paying directly for emissions. If the government doesn’t think they are moving fast enough they will legislate earlier.

People seem to think it is just their farm practices that will have to change. So is it just their farm practices or is it something else as well?

It’s not just about adopting good water management practices. Emissions come from burps.

In a significant study by a 37 experts-strong EAT-Lancet commission called Food in the Anthropocene, published in The Lancet in January 2019, there is this astounding statement:  “We estimated that changes in food production practices could reduce agricultural greenhouse-gas emissions in 2050 by about 10%, whereas increased consumption of plant-based diets could reduce emissions by up to 80%.” Well, it looks like experts from our agricultural colleges might quibble with that factor, but nonetheless the potential is huge. Even the 11,000 scientists who recently declared a climate emergency wanted us to eat less meat and dairy.

So while we may be the first country in the world to include agriculture in our emissions pricing scheme, the future is in the hands of farmers. The government wants methane emissions down 10% by 2025.

And of course it’s not just methane emissions that have to come down. According to Professor James Renwick (email 2 Nov 2019) “The key thing to do is limit CO2 concentrations as they decide the long-term change in climate. How important methane reductions are depends on what’s happening with CO2 concentrations.
Reducing methane emissions will buy us decreases in methane concentrations over just a few years, but it’s pretty much wasted effort if we continue to let CO2 continue to build up.”
Feed lots in New Zealand are becoming more common

The main agricultural greenhouse gases (GHG) are methane and nitrous oxide. Methane is produced in the rumen of the cows by certain microbes and are naturally present in all ruminant animals. … Nitrous Oxide (N2O) is emitted from soil when urine, faeces and fertilisers are broken down by microbes in the soil.

The EAT-Lancet study, which had 357 references at the end, and was done by an international team of experts from health, agriculture, climate change and politics, puts methane as 56 times as powerful a greenhouse-gas as carbon dioxide over a 20 year period and nitrous oxide as 280 times as powerful. (It also recommended that protein be just 10% of the daily calories)

It’s fairly horrifying to find that over a period of 55 years (1961-2016) there has been a worldwide 89% increase in agricultural emissions (not CO2). That is methane and nitrous oxide mostly. But on that same climatewatchdata site, we have agricultural emissions being only 11.5% of total emissions. That, of all estimates, is the lowest, the highest being from the consultants that Worldwatch commissioned in 2009, at 51%. The FAO in 2006 estimated 18% and revised that down later to 14%. Goodland, one of the Worldwatch Institute’s consultants noted that by then FAO had ‘partnered with international meat, dairy and egg organisations so was no longer objective.’

Wise Response, an environmental organisation comprised mainly of academics, said in their submission on agricultural emissions, “While CO2 is the dominant greenhouse gas, keeping global warming less than 2°C or 1.5°C clearly requires control of all greenhouse gases and in particular of methane (CH4) that is the second most significant. As noted in a recent and very detailed comparison of different pathways consistent with the 1.5°C target, “early mitigation of CH4 emissions would significantly increase the feasibility of stabilising global warming below 1.5 °C, alongside having co-benefits for human and ecosystem health”.

They also state that because of New Zealand’s knowledge from agricultural universities to date, “In terms of dairy emissions reduction, anything up to 24% can be done without any drop in farm profitability (i.e. zero marginal cost of abatement). ”

The good thing about this is this. The Interim Climate Change Committee said, “Innovation in the agricultural sector has reduced its emissions intensity (emissions per unit product) by about 20% over the last 25 years. But overall agricultural emissions have increased 13.5% since 1990. The improvements farmers have made have helped keep agricultural emissions relatively stable since 2012”

While Wise Response referred briefly to the benefits of eating less meat and dairy, the sad thing is that as the Western world reduces its meat intake, the developing world is increasing. And that means China and India. Our exports are going increasingly to China and in fact China is New Zealand’s top market for red meat now. It’s just no good for global emissions for a few developed countries to reduce meat and dairy products because they have heard the health message and the environment message. China and all the other developing countries  must stop their demand for animal products.

And that is something we can’t control. If we grew less beef and dairy, what would we replace our exports with? A tiny movement is detectable I believe which is reported on by Country Calendar on TVOne and by Country Life from RNZ of farmers experimenting with growing pumpkin seeds and hazelnuts as well.

 

 

 

 

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The price of petrol and climate action

Climate change groups were noticeably absent from the recent public discussion about the rising price of petrol. Nobody was saying publicly that if we are to turn emissions around, we have to make it more expensive to drive. Not the Greens, not Generation Zero or 350.0rg. Nobody. It had been a unanimous outcry of pain against high petrol prices. Why? Surely lower petrol prices would clog up our roads, get people off public transport and adversely impact our emissions?

Here was a discussion about how the margins had increased in Wellington and the South Island yet nobody had said we should drive less so use petrol and reduce our carbon footprint. Nobody came out with a comment that the oil companies have a growing debt burden because it is getting more and more uneconomic to get oil out of the ground, so it is not surprising. They have been binging on debt and are struggling to pay dividends and find new barrels. The big four doubled their net debt between 2014-2016.

The public debate was started by Judith Collins the Minister of Energy and Resources after a report came out, and Labour’s Stuart Nash praised her for ordering the report. Labour’s Stuart Nash praised her for ordering the report.

So how important is petrol to us? The average Kiwi family spends $42.30 a week on petrol – only $8 less than their average weekly spend on meat, fruit and veggies. That is mighty close. It won’t take much for petrol to be a bigger part of the budget than food. And to complicate it, when petrol costs rise food costs mostly get passed on to us.

But then I thought of the implications. The gross profit margin on fuel at the pump had doubled to about 30 cents a litre in Wellington and the South Island over the past four years and gone up by 5c a litre elsewhere. It has something to do with Gull only selling petrol north of Levin, but it is more than that.

The petrol retailers Z Energy, BP, Mobil, Caltex and Gull all defended their positions. Maybe the companies are suffering from their growing debt burden so increasing their margins are the only way to stay solvent.

Ten years ago when many environmentalists were involved with peak oil we would argue that the price of oil will one day be over $100 a barrel. It hasn’t turned out that way because we didn’t factor in debt or falling interest rates. As actuary Gail Tverberg says, the economy was far more complex than the original model assumes. “When interest rates fall, this tends to allow oil prices to rise, and thus allows increased production. This postpones the Peak Oil crisis, but makes the ultimate crisis worse.”

We all remember that the economy slowed right down when the price of oil spiked in 2008. That showed us how critical the price of oil is. High prices on energy products ripple through the economy is many different ways. Just thinking about the price of petrol gives a misleading impression. Tverberg says, “Because interest rates, debt, wages, and oil prices (and, in fact, commodity prices of all kinds) are linked, the system is much more complex than what most early modellers assumed was the case.”

Not all of us can get a handle on the huge complexity of it all and I am no exception. But I know Tverberg believes the price of oil will not rise beyond about $50 a barrel because consumers can’t afford it.

Environmental commentators are faced with several problems. First they are unlikely to have an understanding of the complexity of the peak oil problem and secondly because they know that saying petrol prices should rise (through increased taxes) will be unpopular. The petrol price components vary.

What should happen of course for climate change purposes is for the Government to increase taxes on petrol, diesel etc. The fact that the oil companies have been the villain has excused the government for inaction. Now we can cry together that the oil companies are a greedy, conniving cartel. I am not sure that does much to reverse climate change trends.

Back in 2015 the IMF issued a warning that permanently low fossil fuels are choking off investment in renewable sources of energy and hindering the fight against climate change. A year later after a big study, the World Bank chimed in.

 

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