As parliament starts to get stuck into the serious business of legislating for the government’s proposed emissions trading scheme (ETS), the tempo of criticism (from all sides) is increasing. Owners of pre-1990 forests have weighed in, and in the past week Greenpeace has launched a broadside:
â€œThe current proposal for the structure of the ETS will deliver no significant reductions in greenhouse gas emissions, will act as an impediment to the rapid implementation of less carbon intensive production technologies in the manufacturing industry and will do nothing to slow the destruction of forests to make way for increasingly greenhouse gas intensive forms of dairy farming.â€ (Full report here [PDF])
At the same time, the New Zealand Institute has produced its second report on climate change policy (Actions speak louder than words: Adjusting the New Zealand economy to a low emissions world [PDF]), and isn’t impressed either…
Overall, however, we estimate that the various policies will only serve to reduce New Zealandâ€™s domestic emissions in 2050 to about their 1990 level. The level of emissions reduction is not sufficient to adjust the New Zealand economy so that it is well positioned to compete in a low-emissions world.
Herald report here. Meanwhile Brian Fallow considers some more complex fishhooks in the proposed ETS, particularly as they affect cement manufacturers Holcim.
Both new reports make good points (and are well worth reading), but both also suffer from real problems, some general and some particular.
Regular readers will know that I took the NZI to task for their first report, which advocated that NZ pursue a policy of “fast following” – deliberately avoiding taking the lead in emissions reductions, but being prepared to respond quickly to international policy changes. Unfortunately, because they have not revisited the assumptions that underlie that first report, the Institute fails to take its own advice – to adapt to change as it happens. Continuing to advocate a 30% reduction in net emissions by 2050 when it is clear both from commitments made by other countries and from the latest science that we need to go a great deal further, isn’t exactly helpful. (I will post on the latest thinking on atmospheric GHG targets in the near future).
However, this new report is much more focussed on the detail of the ETS and mechanisms for achieving emissions reductions, and it makes some very important points. The authors are absolutely correct when they assert that economic transformation is central to climate policy, and that few in government – and even fewer in the business world – have really appreciated that fact. Moving to a low carbon economy is going to require radical shifts, and those will not be brought about purely by the pricing signals an ETS is designed to produce. The NZI report is at its strongest when discussing the need for the development of what it terms “weightless” activities – “software, financial services, health or marketing consulting, education, biotechnology, entertainment, and new media”. If economic transformation is going to be required – and the NZI makes a strong case – then there needs to be a lot of work on how it is to be achieved. Here’s where the nub of the political debate should lie. Can market-based policies deliver the goods, or does government need to intervene? Where’s the balance between the two approaches? I hope this will be debated before the election later this year, but I’m not holding my breath.
The Greenpeace report, as you might expect from a campaigning organisation, castigates the government for not doing enough, and is particularly strong on the failure to bring agriculture into the ETS during the Kyoto commitment period up to 2012. I have some sympathy for this view, especially in the light of the sector’s commitment (in the memorandum of understanding signed with the government at the time the “fart tax” was killed) to reduce emissions over the period – a commitment seldom mentioned and completely ignored by farmers. Unfortunately, the authors rather turned me off by beginning the executive summary with “economists typically prefer an ETS to a carbon tax”. The reverse is true, in my view. Economists prefer the simplicity and transparency of a carbon tax (and the Greenpeace authors actually suggest one as an interim measure), while politicians prefer the fiddle factors available in the design and operation of ETS’s. You can hand out free credits to big emitters to keep them sweet, set lax caps to avoid too much pain, and so on.
Both reports don’t like the idea that the NZ ETS has no explicit cap, and allows effectively unlimited purchases of overseas credits. This, they argue, provides no incentive for firms to make emissions reductions in New Zealand, and at the same time exposes the economy to the risks of high international carbon credit prices and price volatility. Again, I have some sympathy for this view – particularly for the NZI’s concern that buying reductions offshore doesn’t help the country to create and support a global low carbon brand (something it argues is important). However, coupling the NZ ETS to the global market means that firms have access to “least cost” emissions reductions, and means that we take part in the “global cap” set by international negotiations. Setting a domestic cap might be easier to understand, but would be laden with difficult political and economic pressures. The prospects for a tight NZ cap are no better than an international one. No Right Turn provides some sensible words on the issue here.
I said earlier that I was disappointed that the NZI hadn’t revisited their 30 by 50 target. I am also concerned that they ignore two key issues that I believe are going to become important over coming decades. The first is economic resilience. To insulate itself from a buffeting (economic and social) as climate changes bite in the rest of the world, the country has to take a strategic look at the services we may need to retain within our boundaries. There is a real risk that the days of easy globalisation of production and consumption will pass, and we will have to have to maintain basic competencies on our own shores. This discussion may not be pressing or urgent, but when looking forward 40 years, it has to be considered – especially in the light of the need for economic transformation. It’s no good being a nation of whizz-kid new media specialists if we can’t feed or clothe ourselves cost-effectively.
The second issue is a more general concern, and it’s unfair of me to single out the NZI for their failure to consider it, but when you’re looking at a 40 year time horizon it can’t be ignored. At some point we need to re-examine our focus on growth as being necessary for the healthy functioning of the national and global economy. Somehow, 9 billion people (the expected global population in 2050) are going to have to find a way to live within our planetary means (see last chapter of HT for a longer discussion), and NZ will not be exempt from this real sustainability crisis. The NZI convincingly demonstrates that we have to decouple economic growth from carbon emissions, but assumes that the economy has to grow indefinitely. We also need to decouple economic growth from total ecological impact – and at some point growth may have to be foregone in the light of excessive (unsustainable) impacts. That’s a real intellectual and political challenge. We don’t yet have the vocabulary for the discussion, let alone the information needed to make that sort of decision, but those problems will have to be faced, globally and nationally.