How fast shall we drive over the cliff? NZ’s ETS watered down (again)

by Mr February on September 4, 2012

How fast shall we drive over the cliffSimon Johnson looks at the Government’s amendments to the New Zealand Emissions Trading Scheme and concludes we are arguing about what gear to drive in as we speed towards the cliff. The Government has kindly given us the opportunity to make a submission about how fast fast we should go over the emissions cliff. Time to fasten your seatbelts.

Back in July, Tim Groser announced more watering-down of the New Zealand Emissions Trading Scheme (NZETS). About a week ago, on 23 August 2012, Groser introduced the amending legislation – the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill. Consistent with previous emissions trading scheme legislation, the bill will be fully and rationally considered by Parliament’s Finance and Expenditure Select Committee in an insultingly short period of time – ten working days. The closing date for public submissions is Monday, 10 September 2012.

What does this ETS amending bill do?

  • It indefinitely postpones the entry of pastoral agriculture into the NZETS.
  • The ‘two-for-one’ deal, which halved the number of carbon credits each emitter had to surrender for a tonne of carbon dioxide equivalent greenhouse gases, is extended for another three years. It was to end on 31 December 2012, but will now run on at least to 2015.
  • The price cap of $12.50 per tonne ($25 for two tonnes) will also extended. It was to end on 31 December 2012, but will now run on at least to 2015.

What doesn’t the bill do?

  • It ignores the recommendation from the 2011 ETS review committee to stop the unlimited use of international carbon credits by New Zealand emitters. Which as we know, makes the NZETS the weakest link.

Whats the cliff we are driving off? Well, it’s climate change. And it’s the price of the New Zealand emissions unit.

NZ Unit price 2009 to 2012 from OMF Financial Ltd

Who said what about the bill?

Simon Terry of the Sustainability Council said that the NZETS is now in a state of eternal transition”.

Helen Clark stated the obvious, that pastoral agriculture must be in the NZETS; “You can’t have your major sector generating greenhouse gases outside the scheme.”

A Federated Farmers spokesperson said the deferral of agriculture was huge win for New Zealand’s farmers.

Business New Zealand seem unusually silent. I guess for them it is all going to plan. Back in July they welcomed Tim Groser’s announcement of the delays to the NZETS. So why waste space repeating the message?

However, I do offer some relief from this dreary “business-as-usualism”. Green MP Kennedy Graham has given some strong speeches accurately reflecting both the scientific reality of the cumulative carbon dioxide emissions and the ethical challenge of the failure of politics and governance to respond.

None more so than in his ‘first reading’ speech in which he summed up the bill thus:

Today’s bill will defer agriculture indefinitely, defer any increase in the price cap, defer the one-for-one surrender obligation, allow a greater switch from forestry to dairying, and enable importers to increasingly use dangerous synthetic gases. What remarkable, steel-like resolve!

I do recommend you read Kennedy Graham’s speech in full. Graham, a much more experienced diplomat than Tim Groser, walks us through more than 20 years worth of futile international climate change negotiations, all the while as the relentless accumulation of emissions in the atmosphere uses up the carbon budget consistent with limiting warming to two degrees. And with no faux-realist “get people on the bus” cliches we have come to expect from Tim Groser.

Kennedy Graham concludes that we don’t have to accept this state of affairs. He calls on us to make a submission to the Finance and Expenditure Select Committee.

Greenpeace are also saying get stuck in with a submission. What should one say?

How about “the NZETS is completely ineffective in reducing GHG emissions due to it’s many design flaws – the use of unlimited international junk credits, the delays and exemptions, the partial coverage, the lack of a cap, the price ceiling, the lack of revenue recycling due to the excessive free allocation to emitters.” Something brief and to the point.

However, I will leave the last word to Jeanette Fitzsimons speaking on TV Ones’s Q+A: Panel after a Nick Smith/Russel Norman debate back in September 2011.

“Look, its like we are in a very fast car, we are heading towards a cliff, which is getting really close, and we are arguing whether to change from fifth to fourth gear”.

{ 37 comments… read them below or add one }

Thomas September 4, 2012 at 9:06 pm
bill September 4, 2012 at 11:22 pm

If we’re going to do driving off a cliff I’m going to invoke The Master

And here’s one just for andy.

Tom Bennion September 5, 2012 at 10:04 am

Great post

Forget driving, our hubris knows no bounds. We are literally flying off the cliff: http://www.antarcticaflights.com.au/

Mr February September 5, 2012 at 12:14 pm

Last night I left my submission on the Parliament website. It was no harder than commenting on a blog that has a an anti-bot security step. My submission was pretty much exactly my suggested paragraph saying the NZETS is not a 100% fee and rebate carbon tax. It will probably be deemed outside the narrow scope of the consultation. But there was no way I wasn’t having my say.

Australis September 5, 2012 at 12:55 pm

The worst features of the amendment bill are the regulations allowing the Government to auction future NZU’s so that the proceeds go to Treasury instead of overseas projects to reduce emissions.

This converts the scheme from an environmental measure to an indirect tax. And a very regressive and inefficient tax at that.

Every dollar retained by the Government is a dollar subtracted from the worldwide effort to reduce global emissions.

Mr February September 6, 2012 at 12:00 am

Have you read my post NZ ETS, you are the weakest (international) link which argues that unlimited importing of international units equals no cap and a very low price incentive?

Elisabeth Rosenthal has written recently in the NYT about the lack of credibility of some international units; Profits on Carbon Credits Drive Output of a Harmful Gas.

andyS September 5, 2012 at 2:16 pm

Helen Clark stated the obvious, that pastoral agriculture must be in the NZETS; “You can’t have your major sector generating greenhouse gases outside the scheme.”

Ruminants do not “generate” greenhouse gases. They temporarily convert it from one form (CO2) to another (CH4)

SimonP September 5, 2012 at 7:37 pm

Photosynthesising cows?
I always thought they ate grass and converted that to milk, meat, Nitrogen, methane and various unpleasant smelling compounds. Grass is a carbon sink, not a source.

andyS September 5, 2012 at 8:03 pm

Co2 and water and sunshine makes grass. Cows eat grass. Cows make methane.Methane reacts with OH to form CO2 and water.

Co2 and water and sunshine make grass. Cows eat grass,

Cows make methane ……

Etc.

Thomas September 5, 2012 at 8:20 pm

You don’t understand a thing Andy! Your analogy is way to simplistic.
See below.

BTW: now even the gutter press in the UK is getting interested as the consequences of AGW are beginning to hurt in the pocket book in the UK, while they will hurt in the tummy in less fortunate places… http://www.dailyrecord.co.uk/news/scottish-news/fears-over-food-crisis-in-uk-1304099

andyS September 5, 2012 at 8:26 pm

So your response to my basic carbon cycle is to give me a link to the Daily Record, Scotlands answer to the Daily Mail except worse.

joke.

Thomas September 5, 2012 at 8:02 pm

Humans cut down forests which sequester CO2 to make room for ruminants which convert CO2 to Methane which – while its Methane – has a 20x GW effect to the CO2 that the growth of the grass removed…
If on a permanent basis large swath of land are converted from forest to pasture the effect on GW will be a significant contribution.
So Andy, do your math and think before posting another own goal….

bill September 5, 2012 at 9:22 pm

Is it just me, or is andy becoming more zealous?

Tony September 5, 2012 at 9:40 pm

Thomas,

Don’t forget the coal fired power plants for water evaporation, which is necessary for milk solids.

Beaker September 5, 2012 at 9:54 pm

add to that the N fertiliser pumped into dairy systems, fixing N has its own significant carbon footprint, and there are N emissions to the atmosphere that are potent greenhouse gasses.
andyS, please try reading up on carbon and nitrogen cycles before commenting.

andyS September 6, 2012 at 7:59 am

The coal, nitrogen and land use are all issues external to the carbon cycle of the ruminant itself.

These all have their own regulations and controls under the ETS.

A herd of cows with a static population – without these already controlled externalities – neither adds nor subtracts from the atmospheric GHG concentration over time.

If you have a problem with the nitrogen fertilizers or the deforestation, then deal with it directly. The cow is an innocent bystander.

Gareth September 6, 2012 at 10:25 am

The cow itself may be innocent, but the bacteria in its gut convert carbon into the very effective GHG methane which would not otherwise exist. The farming system of which the cow is part has grown strongly over the last 20 years and is a major contributor to NZ’s emissions. Giving that system a free ride does nothing to help reduce national emissions, as we committed to doing under Kyoto. It amounts, in effect, to a subsidy from taxpayers to dairy farmers.

andyS September 6, 2012 at 10:34 am

The cow itself may be innocent, but the bacteria in its gut convert carbon into the very effective GHG methane which would not otherwise exist

This is getting a little existential

The carbon in the methane comes from the carbon from the atmosphere. I am sure we can all agree on this point.
Methane has a global warming potential (according to the perceived wisdom) of 21 times that of CO2.

Yet the methane is displacing the CO2, and eventually returns to that state after a decade or so.

If we imagine an idealised “thought experiment”, in which Daisy and her happy herd are grazing on a 100% pure organic paddock, and maintain their population at a constant level for eternity, then the steady state is that Daisy and her herd are not changing the levels of GHG emissions in the atmosphere.

You may have points regarding increase of herd size, deforestation etc. However, the ETS under its proposed model will penalise even poor old “perfect Daisy and her perfect herd” by fining her owners, every year for eternity.

password1 September 6, 2012 at 10:43 am

Just fixing a common economics error. Excluding agriculture is only a subsidy until the end of 2012. No international obligations with quantitative targets from 2013 mean no cost to taxpayers from our emissions.

Gareth September 6, 2012 at 11:01 am

Andy: your “thought experiment” is meaningless. For NZ, rational emissions policy should include agriculture and reward farmers who move to lower emissions systems.

Password1: Granted, except that we shouldn’t assume there will be no cost to our emissions in the future. There is also the extra cost associated with pursuing actions now which lock in higher emissions in future, at the point that those emissions attract economic liabilities.

The longer we delay moving to cut emissions, the steeper (and therefore more expensive) the eventual cuts will have to be if we are to have any hope of avoiding the worst impacts of warming.

andyS September 6, 2012 at 11:41 am

There aren’t any rewards for farmers to move to lower emissions.
Even if they get a genetically modified cow that emits no methane, they will still get charged the same amount under the current arrangements

Thomas September 6, 2012 at 6:17 pm

Sorry Andy, but your math is not adding up. We have a problem with the quantity of radiative forcing due to AGW components such as Anthropogenic CO2 and Methane. Farming at constant heard levels maintains a constant level of Methane in the atmosphere which produces forcing far in excess of the normal – non farming – CO2 component that is involved in the natural grass growing and decaying cycle.
Further: Good markets for milk have induced large scale forest to pasture conversions in NZ over the years all raising the persistent AGW footprint of ruminant farming.
So therefore the farming AGW footprint must be included in the ETS regulations of NZ. Currently the pasture to $$ cycle is causing a constant elevated AGW forcing. Farming must be contributing their fair share to addressing the AGW problem. Farmers have no entitlement to adding to our AGW footprint! Causing AGW is a serious liability to the future. And unless we address the problem in this manner nothing will ever change.

andyS September 6, 2012 at 6:27 pm

So what are you suggesting Thomas, that we stop farming and feeding people?

The level of CH4 remains constant in my idealised scenario. You seem to agree with this and yet say my maths isn’t adding up.

Unless you can show that the current levels of methane in the atmosphere are a problem, then farming presents no threat to the planet

End of story

Thomas September 7, 2012 at 6:29 am

Andy, correct, if would STOP increasing pasture at the expense of forests and bush THEN a level of Methane will stabilize at the level forced by that activity. However that means that it STAYS a constant problem and significant contribution to our AGW issue. For NZ it is perhaps our biggest contribution to the AGW problem. Would you agree?

If your goal is to feed the 7 Billion people successfully AND to reduce the AGW issue – then reducing animal husbandry and concentrating on other much more efficient ways to feeding humanity would be progress.
But as usual you defend the status quo, belittle the issue and the consequences and are unwilling to admit that animal farming is part of the problem, especially since in many parts of the world animal farming has increased rapidly due to the $$ being made with the growing demand for meat and milk products.

andyS September 7, 2012 at 8:44 am

In response to Thomas, re: your forestry question, I would agree that chopping down forests to make way for pasture is a problem for the large carbon sinks.

However,
(a) the forests are already covered under the ETS
(b) we are not chopping down large amounts of forest. Most of the dairy conversions are from other forms of established farmland (e.g sheep)
(c) A much bigger problem in my view is that large amount of water required for dairy, plus the run-off issues.

I’m not defending any “status quo”, just trying to understand what appears to be an illogical system

How much methane comes from rice paddies? Rice is a staple food for possibly 50% of the world’s population. Are we doing anything about that?

Jake September 5, 2012 at 3:01 pm

Mr February et al, can you help? I am looking for the recommendation in the Caygill review that refers to banning use of imported credits, but can’t find it. Have I missed it amongst all the jargon-speak? Thanks.

Mr February September 5, 2012 at 5:55 pm

Jake,
It would appear to be Recommendation 9.5 discussed on para 63 on page 27. 
“The  Government  should  urgently  consider  whether  HFC  CERs  pose a significant risk and whether a time limit should be imposed on their eligibility.” 

password1 September 5, 2012 at 7:13 pm

You’re confusing two issues.

Firstly, surrendering CERs from particular HFC/N2O projects was restricted at the end of last year. Something about existing forward contracts allows some people to still use them, but soon there will be none surrenderred in the NZETS. So the govt did act on the review panel’s recommendation, and quickly as well. Perhaps you could change your submission and blog post.

Secondly, whether or not a quantitative limit on international units should exist is interesting (as used in the EU ETS, where only a certain fraction of surrenderred units can be from offshore). Australis picks up on this, and I think Jake was asking about this. My view is that because they represent actual emission reductions, that it doesn’t matter to the climate where emisison reductions occur, because NZ should be seen to participating in a global solution by its domestic policies, then full use of the international trading mechanisms should be continued. However because the surrendered CERs cannot be used by our govt once they are surrendered in the absence of international obligations, international purchasing represents a worrying flow of wealth offshore.

Mike Palin September 6, 2012 at 3:30 pm

The ETS, similar national schemes and international emissions agreements are not the solution. They provide income for lawyers and convention hosts and little else. The one and only meaningful goal at this point is to keep as much as possible of the world’s vast unburned coal in the ground. This means getting the citizens of the USA, Russia, China, India and Australia to deny themselves the benefits of the wealth that would otherwise be generated by mining this natural resource. The only way I can see to do this is to make the use of coal uneconomic, and the only way to do that is to find cheaper renewable energy sources – on a huge scale and fast. Everything else is a sideshow.

andyS September 6, 2012 at 3:48 pm

The only way you will do that is to find a magic bullet with solar, or accept that 10,000 years of known reserves of Thorium make it essentially “renewable” for all intents or purposes.

Shale gas is driving down the cost of power everywhere it is being deployed, and with 200 years worth in some countries it will take a miracle for renewables to compete in the free market anytime soon.

Mike Palin September 7, 2012 at 2:57 am

andyS, I am disappointed by your pessimism. I have confidence in the ingenuity of humans to find less expensive alternatives to coal and for the market to deliver these in the most efficient manner possible.

As we have discussed previously, “shale gas” covers a range of fossil fuel resources the majority of which are far from cheap. It may contribute to temporarily reducing spot electricity costs on a local scale, but coal is still “king”.

andyS September 7, 2012 at 9:38 am

Coal is still king, which is why Germany is building 25 coal fired power stations, some of them Lignite, to replace their nuclear facilities.

Why do you think I get pessimistic and lose faith in my fellow humans, when dumb decisions like this are made based on emotion rather than logic and science?

Mike Palin September 7, 2012 at 7:51 pm

andyS, you are a pessimist because you lack imagination. Imagine the next … Christchurch, source of energy, way to deal with our common environment. It’s not a magic bullet, it’s the new – the next. It’s been happening for thousands of years and every time we move forward, the conservative backward-lookers are quickly forgotten.

andyS September 7, 2012 at 8:07 pm

I lack imagination because I own a stuffed property in ChCh and the insurance company and government are doing their best to keep it that way

I get sick of all the bravado and propaganda that gets stuffed down our throats when the people of eastern ChCh want the hell out of there

Mike Palin September 8, 2012 at 1:23 pm

I am sorry for your loss. You are fortunate that you live in a nation that recognizes that there is much more to life than those things that can be dealt with through the free market.

Nonetheless, I find the positions you take on the this blog rather strange. You should understand better than most the situation when humans mess with natural systems. There are numerous risks – which will always be uncertain. To ignore a risk because it is uncertain is folly. The only way to make rational decisions in the face of uncertain risk is to base them on the best available scientific evidence. Minimising risk by avoiding demonstrably “dangerous ground” is the best way forward. Politically motivated decisions are bound to fail in both the short and long term.

Thomas September 7, 2012 at 11:37 pm

How much more coal would Germany need to burn per year if they had no wind and no solar?

Besides that, I for once agree with Andy. Germany is bloody stupid to turn off their nuclear plants!!! They are the safest in the world and Germany has little to fear from natural disasters. Plus the plants will in any case pose a risk of nuclear pollution until they are dismantled and that can take many decades to complete. So it would have been much better to run them to their design life time and plan long term for alternatives and not banking on coal. What a waste and what a travesty! Clearly: bowing to public irrationality is indefensible and in this case the irrationality was entirely on the side of the anti-atomic energy ignoramuses.

Mr February September 14, 2012 at 3:09 pm

Pattrick Smellie writes an interesting article on the amendments to the NZETS in the Stuff business section
Weakening of ETS raises taxpayers’ liabilities .

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