Why has NZ managed to increase its net emissions since 1990 while others reduced them?

I asked Professor Robert McLachlan this and he answered, “Cutting down more trees than we planted wasn’t so great but the bigger impact of trees in our climate policy has been to delay getting out of fossil fuels.  We put all our eggs in the domestic & international carbon trading basket, which fell apart in the 2010s. Now we’re trying more tools. We didn’t have to get out of generating electricity from coal as UK did.”

In the past its main flaws were:-
  1. political football, e.g. as soon as it was set up National campaigned to weaken it, removing agriculture and giving everyone a 50% discount, only recently phased out.
  2. no cap on emissions.
  3. was designed to work together with international markets, but these failed. NZ was a major party to the biggest carbon trading scandal of all time.
  4. carbon price too low.”

He is merciful.

Not so the late Jeanette Fitzsimons who said in  2016, “Scrap it. It fails on every count. Many suspect the design of the ETS, with no price floor and no emissions cap, was never intended to make a real difference to our climate-changing emissions. It was intended to provide a trading platform for speculators, which it has done. While all this waste of effort has been going on, the existence of the ETS has been used to justify having no other measures to address climate change.”

She said, “The purpose of a price on carbon emissions is to encourage people and firms to make better decisions in how they use energy (avoid that extra trip to town); and more importantly, better investment decisions: a wood-waste boiler instead of coal; a wind rather than gas-fired power station; a more efficient car next time. The ETS has done none of this.”

And after reading a long  review of it by Catherine Leining, Suzi Kerr and Bronwyn Bruce-Brand, I can’t help but agree with Jeanette’s conclusion,”Any further public time and expense tweaking a broken system will send good money after bad, and use resources that would be better used on measures that will actually reduce emissions.” In one telling sentence at the end, they admit it failed, but they don’t comment on whether the new version will work.

Leining et al’s review goes into the painfully long history since 1993 , says the system applies to about 52% of our gross emissions, says agriculture was going to be introduced in 2013 once ( it not getting there till 2023), gives a graph showing how the price dropped from  just less than $30 a tonne in 2011 to about $5 in 2013 then crept up again, and concludes that ETS was “not designed to achieve specific targets for domestic mitigation.”  Then comes the punch line. “As a result, while it constitutes a functional cross-sector market, the NZ ETS has not significantly reduced domestic emissions to date”  (They failed to say that net emissions had risen 60%)

They go on to say how it will be tweaked. Units will be auctioned every three months from March 2020 under a cap, which is an improvement. It will also limit  participant purchasing of overseas units and improve forestry accounting.

However a major distortion occurs by giving a 90 percent subsidy to businesses who are “emissions intensive and trade exposed”.  Stuff journalist Charlie Mitchell produced a comprehensive article on these industries.  Australian owned Blue Scope Steel, Canadian owned Methanex, Fletchers Golden Bay Cement, Rio Tinto’s aluminium smelter and Fonterra are the biggest recipients. It is argued that some would relocate overseas if they were in the scheme.

It’s no wonder Charlie Mitchell summed up up in Feb 2020 as “Kafkaesque, having nightmarish complexity, riddle with exemptions, impenetrable” and economist Geoff Bertram called it a “dog’s breakfast”.

 

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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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