So it goes

NZETS.jpg The cacophony of lobbying around the proposed Emissions Trading Scheme (ETS), coupled with high petrol prices, has prompted the government to announce a couple of changes to the scheme. Liquid fuels were supposed to enter the ETS in 2009, but this has now been delayed to 2011, and the phase out of the free allocation of emissions units to big emitters will now be postponed five years until 2018 [Herald, Radio NZ, Dominion Post].

Announcing the changes to the proposed legislation, Helen Clark also released the latest figures for the Kyoto liability:

… the provisional net position is projected to be a deficit of 21.7 million units during the first commitment period of the Kyoto Protocol (2008-2012). This compares with the projected deficit reported in May 2007 of 45.5 million units, and is a drop of 52 per cent. This means the liability halves from $1 billion to $481.6 million.

When the ETS was announced last year, it was projected that the net liability would be about 22 million units after taking the expected effects of the scheme on emissions into account. The government is clearly confident that high petrol prices will achieve the same effect as the ETS over the two year extension period. That’s a defensible position at the moment, but if fuel prices fall the Kyoto liability could increase. It signals, perhaps, that the government is reasonably confident that petrol prices won’t fall. Or perhaps simply that in an election year contentious new policy is up for grabs. The word pusillanimous springs unbidden to my mind…

The fuel move is getting the most attention, but the five year extension on allocations of free units to big emitters is a direct response to intensive lobbying from those sectors. It will significantly reduce the business costs of cutting emissions in the longer run, but also amounts to an extension of a tax payer subsidy to those businesses. It will be interesting to see how they respond. Looking into my crystal ball, I confidently predict someone will say “it’s a welcome move, but not big enough”.

13 thoughts on “So it goes”

  1. I steer clear of “peak oil” discussions, because there are plenty of places on the net for that, but in the current context. Joe Romm’s latest at Climate Progress is interesting. A Goldman Sachs analyst is suggesting that oil could go to US$200/barrel in the next 6-24 months. If that happens, liquid fuels may never need to enter the ETS because we won’t be able to afford to use them.

  2. nobody seems to remember Stern – oil is not going to get any cheaper… food prices will probably stay up as a result… droughts kicking in will continue to reduce food basket. Action on climate will only continue to cost more.

    taxpayers will continue to pay the cost of big business’s mess.

    be nice to have a bit of long term thinking in this country.

  3. It is a disappointing back down from the Government…the idea that the increased prices has reduced demand is only part of the story.

    What about the offsets that were supposed to be bought by the oil companies?

  4. That’s a really good point. NZUs generated this year by forestry could have been used by the liquid fuels sector next year. At this rate, anyone looking to sell over the next two years will have to go overseas. Very useful for our domestic scheme…

  5. This is all part of the jockeying over free allocations, and in Tiwai Point’s case, the future price of electricity. Threats to “quit NZ” depend on there being places overseas outside carbon limits. That might be the case for the moment, but for how long? And if they did bugger off, for the price of an upgrade to the power links in Southland and the SI, we’d gain a lot of hydro power…
    Interesting to note that the RNZ story includes foresters complaining about the fossil fuel delay, as discussed above.

  6. Of course there are more issues than simply more peak/off peak electricity availability – jobs and foreign currency being the big ones. By the sounds of it “how long” could be a few decades, easy. Now if anyone gets around to actually taxing the carbon on imports like Gareth alludes to in his book. I notice the there are some stories coming out of the US in that vein, but of course it’s all highly contentious…

  7. It’s not a matter of “if” but “when” but for cross-border carbon adjustments to deal with “leakage”. They will have to be a part of any international K2 deal, so that activities inside carbon controlled regions are protected from “freeloaders”. They probably become even more likely in the absence of a global deal, because regional trading blocks will have the same rules – possibly stronger ones.

    Europe has put it firmly on the table, and the US is suggesting that it’s a way of bringing China and India into line…

  8. So if leakage controls are put in place, a company like Rio Tinto could conceivable benefit from operating a smelter in a country with a working ETS… but it seems to me that they’re a multinational with an ideological resistance to environmental regulations, and this is at least in part about flexing their muscles to try and prevent emissions regulations and international deals. But even if it’s just jockeying for freebie credits, the threat looks like a political maneuver, rather than the case of rational business decision-making they’re claiming.

  9. I think it’s much more to do with jockeying for freebies than anything else. And it would be rational for them to leave NZ if they could make aluminium somewhere with cheaper electricity, and not have the product hit with carbon charges in key markets. That’s a big if – but not one that many people are taking into consideration. I’ll have a post about that soon…

  10. At least someone is standing up and speaking out………..

    Lee Iacocca Says:

    Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder. We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, ‘Stay the course’

    Stay the course? You’ve got to be kidding. This is America, not the damned ‘Titanic’.

    You might think I’m getting senile, that I’ve gone off my rocker, and maybe I have. But someone has to speak up.

    These are times that cry out for leadership. But when you look around, you’ve got to ask: ‘Where have all the leaders gone?’ Where are the curious, creative communicators? Where are the people of character, courage………. and common sense?

    Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane, or demanding accountability for the decisions that were made in the crucial hours after the storm. Everyone’s hunkering down, fingers crossed, hoping it doesn’t happen again. Now, that’s just crazy. Storms happen. Deal with it. Make a plan. Figure out what you’re going to do the next time.

    Name me a government leader who can articulate a plan for paying down the debt, or solving the energy crisis, or managing the health care problem. The silence is deafening.

    Hey, I’m not trying to be the voice of gloom and doom here. I’m trying to light a fire. I’m speaking out because I have hope……………….If I’ve learned one thing, it’s this:

    You don’t get anywhere by standing on the sidelines waiting for somebody else to take action….. It’s not too late, but it’s getting pretty close.

    Steven Earl Salmony
    AWAREness Campaign on The Human Population,
    established 2001

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