Nick Smith announcedthis afternoon that National has cut a deal with the Maori Party to support an amended, watered-down emissions trading scheme. Key features (from the press release):
- Revised entry dates of 1 July 2010 for transport, energy and industrial sectors and 1 January 2015 for agriculture
- A transitional phase until 1 January 2013 with a 50% obligation and $25 fixed price option for the transport, energy and industrial sectors
- A production-based industry average approach to allocations for trade exposed, emissions intensive businesses
- A phase-out of industry support aligned with trading partners and the Government’s long-term -50 by 2050 emissions reduction target
- Incentives for afforestation created by a domestic and international market for carbon credits
- Enhanced transitional support for the fishing industry
Smith says that these changes will reduce the impact of fuel and electricity price rises to 3.5 cents per litre and 1 cent per kWh. In addition, the Maori Party get assurances that “further work will be done” on extending the energy efficiency assistance for low-income households, promoting new forestry planting, biodiversity protection, and provisions for treaty settlements affected by the deforestation provisions applying to pre-1990 forests. The government aslo released two background documents: a summary of the proposals and “Questions and Answers” about the changes.
A couple of thoughts spring to mind. The Maori Party’s support flies in the face of their minority report on the ETS Review, where they said they would prefer stronger action, not a weakening of the emissions cuts being considered. I suspect that the real meat of their deal lies in the treatment of pre-1990 forests, where many tribes have very significant assets.
It also looks as though Smith could not cut a deal with Labour, who would have objected to the price cap and reduced obligations during the new “transitional phase”, and the considerable softening of the long term phase out of free allocations to big emitters. Both of these moves have the effect of increasing the subsidy from taxpayers to big (often foreign-owned) corporates. At the same time, delaying agriculture’s entry into the scheme by two years may not do much to blunt objections from farmers if recent Federated Farmers pronouncements are anything to go by.
I’ll have more on this in due course, but here’s a revealing line from the Q+A document:
Assuming new afforestation of 50,000 hectares per year, New Zealand’s emissions in 2020 would decrease by approximately 20% relative to 1990 levels.
In other words, despite refusing to acknowledge forestry’s role in meeting targets during the “consultation” process, Smith has clearly known all along the role it would have to play — because he’s expecting it to deliver a big enough carbon sink to offset all of New Zealand’s emissions growth since 1990 and then 20% more. Words fail me — but only briefly, you may rest assured…
Can someone tell me if at 2013 this means energy and fuel goes to 100% or does it get increased at 1.3% per annum with industry?
From a forestry perspective Gareths last paragraph says what we knew all along.
From a business perspective for forestry we have just turned into a export business – bit sad when we should focus on NZ first but this is the sop to us. The price cap is silly really as most sales are around $20 – $23 – it only got to $40 at the peak of the credit boom. This will get forestry going slowly – 2010 is finished now as seedlings have already been sown so 2011 will be the main year for most. Even then new forests won’t be producing credits until 2014 – 2015.
Be interesting to see what average emissions are set at.
The government’s docs show a step change, not a gentle transition… (see the “summary” pdf).
The international trading thing is interesting, because foresters will sell where the price is highest, and that will have the effect of setting the price in NZ’s market, at least after National’s 2 year transition is over.
I assume the energy guys go to 100% in 2013 as well.
This annoucement will be a shock to them – spoke to one company tonight – they have sold a heap of next years power with no carbon charge – assumed nothing until 2011 – busy day in the office tomorrow!!!. Another of the large emitters has done nothing at all and are a bit stunned that it is going to actually happen.
Agree on the international price – this is all about short term politics really – keep the costs low to start and just let everyone get used to it. This just encourages us forestry people to develop more offshore sales, contacts etc – if after 2013 we aren’t limited by the CP1
cap of 30million units the sky is the limit really if Japan, USA etc get going as they plan to.
The New Zealand landscape could be in for a massive change and if done with a mix of native and exotic could have some great environmental spinoffs.
The price cap works differently according to whether you’re a buyer or seller. If a buyer, the most you’ll pay for a tonne of emissions is $12.50. If a seller, your domestic market has been halved, with a consequent reduction in price.
Logger – energy (electricity generation and transport fuels) are already required to surrender 100% of their emissions, or will be from 1 July. Some firms/industries will be getting a free allocation of units to help manage those costs. It is that free allocation that reduces 1.3% per year. Someone might want to work out when free allocation reaches 0% – it never gets there for me.
So NZers are about to subsidise foreign firms to pollute in NZ to the tune of around $430 Million a year! – GREAT! Well done the Maori Party. I’m sure the rank and file will be happy with this.
(A quick analysis of the costs under the new scheme can be found at NRT here: http://norightturn.blogspot.com/2009/09/climate-change-subsidised-pollution.html
Password I/S has a graph from the Announcement of the revised scheme and boasts that the scheme is “consistent” with the 50% by 2050 that John Key was bandying about prior to the election – NRT has added a couple of lines to show that in fact those claims are well off the actual mark.
here
http://norightturn.blogspot.com/2009/09/climate-change-consistent.html
I should add: I have assumed that the y axis on that graph is millions of tons of CO2. I’m worried that it may not be – its entirely unclear.
(OTOH, it is clearly not percentage of 1990 emissions, because then it would be a lot higher, even comparing net to gross as they are trying to do…)
I think you’ve confused national emissions with the allocation phase out. The graph refers to the decrease in % free allocation, not national emissions, starting at 90%. By 2050, it appears free allocation will be around 50%. To my mind, the amount of free allocation is only relevant to national gross emissions. My point was that the line illustrating the decrease in free allocation should not be a straight line. It is a line that never reaches zero, as year 2’s allocation is just 1.3% less than the year 1 allocation.
I think you’ve confused national emissions with the allocation phase out.
That thought occured to me this morning. Guess a correction is in order.
My point was that the line illustrating the decrease in free allocation should not be a straight line.
Legislatively, they don’t define it as an exponential decrease, but a flat one.
Password 1 – the demand goes down but the price will still be max $25. With Energy and Liquid fuels at 100% was about 30 – 32million per year. So demand now 15 million – still some.
Agree that we are all going to subsidize big polluters and that stinks. Forestry can still make this a nightmare for the government. If all post 1990 forests claimed their credits to 2013 – around 14 million per year for 5 years, sold 30 mill overseas and banked the rest – do the math – not a pretty sight for the government. Lot of crossed fingers and toes at Treasury that A. This dosn’t happen and B. The international carbon price dosn’t rise to much. If labour get back in 2014 it will only get tougher.
And I think the price of carbon is (in the medium term) essentially a one-way bet. Sometime soon the world is going to wake up to what’s really happening, and the response will be stepped up more than a notch or two. Some are already calling for a “wartime response”.
So the government is going to decide the price of carbon instead of letting the free market decide?
And R2 thinks that it is the Greens who are secretly communists inside?
Stop the world, I want to get off.
CTG, and the National party is are for direct subsidies to companies from the taxpayer? If Roger Douglas and ACT vote for it that would be the icing on the cake. This world is indeed a crazy place.