National’s ETS: the kids can pay

The report released today by the Sustainability Council on the Bill to amend the Emissions Trading Scheme hits hard, and rightly so. It’s straightforward reading over 20 pages if you have the time, but I’ll pull out some of its main points here:

Originally the design of the ETS was to face polluters with the full cost of the nation’s Kyoto Protocol obligations. As legislated in 2008 it was watered down to go half way, but the proposed changes all but abandon the concept. The changes rank as one of the biggest economic reforms since GST was introduced 20 years ago. They promise in excess of $60 billion in new subsidy payments and a major reallocation of responsibility in terms of who pays the Kyoto liability. There has not been authoritative analysis of the costs to the nation in the public domain, yet Parliament has completed hearing submissions and there is less than a month before the government plans to pass the Bill.

The official accounts are giving a misleading impression of New Zealand’s emissions so far, by treating the 85 megatonnes (Mt) of credits generated by temporarily sinking carbon in new forests as if they carry no future liabilities when the forests are chopped down. That is how a 22% excess over 1990 emission levels has been turned into a 4% credit. This far understates the urgent need to reduce emissions. However, the Treasury recently advised that it will be necessary to recognise a “contingent liability” on the Government’s books to account for the forestry credits. This would show the cost to a future generation of not making today’s emitters pay today’s emissions bill. The Kyoto accounts need to be updated urgently to include this correction and inform consideration of the Bill before Parliament.

The emission reductions expected from the 2008 ETS legislation during the commitment period from 2008 to 2012 (CP1) were a mere 1.5% down from projected gross emissions under business as usual. The amended legislation reduces this to about 0.7% of gross emissions. We haven’t entered into any commitment for the period after 2012 but the report comments that any target in line with the commitments proposed by other developed nations will open up a huge gap to be filled with emission reductions and/or purchases of carbon credits.

Who pays? Here’s what the report says:

90% of the costs resulting from the ETS during CP1 are paid by those responsible for only 30% of total emissions. The costs, including higher charges for renewable electricity, dominantly fall on the small guys – households and small-medium businesses. This general picture changes only slowly after 2012 due to the very long phase out period for subsidies.

Households (including private road users) would bear half the total costs resulting from the proposed 2009 ETS (52%), while accounting for just a fifth of all emissions (19%).
Small-medium industry, commerce and services, and transport operators, account for 11% of emissions and face 38% of the costs under the 2009 ETS.
Combined, these sectors account for 30% of emissions but would carry 90% of the total costs.

On the other side of the divide:

Large industrials that account for 15% of emissions would pay just 1% of costs under the 2009 ETS.
Agriculture, with 49% of emissions would pay only 3% of the 2009 ETS costs.

The subsidies are large. If the nation as a whole must meet the charges for the 76 megatonne Kyoto liability, at the current price for credits of $30/t this would be a cost of about $2.3 billion. On this basis pastoral farmers would gain a $1.1 billion subsidy. Large Industrial Producers would gain a $488 million subsidy, much of it delivered as “compensation for higher electricity prices”, a form of corporate welfare the report notes is not available to other electricity users.

After accounting for all subsidies and compensation liabilities, the amended ETS could not reduce the Kyoto liability of 76 Mt by more than 16% (12/76 Mt) during the Kyoto period. 84% or more of the Kyoto liability would be transferred to future taxpayers unless current taxes are raised to fund this. On current plans, those in the 2020s will pay – making it a massive intergenerational wealth transfer.

The report asks when the Kyoto accounts will be changed to reflect the reality that in the long term the forestry sector is essentially a zero sum game. As recently as June Treasury estimated NZ being 9.6 Mt ahead of its Kyoto target and valued this “position” as a credit to the nation worth $207 million (based on a carbon price of NZ$21.61/t). The next update will need to change to reflect the real position. By July Treasury was offering new analysis to ministers, quoted in the report:

Treasury considers that it will be necessary to recognise a contingent liability on the Government’s books, associated with the forestry credits that will be used to meet the countries [sic] international commitments between 2008-2020. … At a price of $100/unit, this contingent liability could be as much as $18 billion for the period 2008-2020.

An appendix to the report carries an extended discussion on forestry and regrets the uncertainty and potential retrospective taxation facing the forestry sector which holds the real key to balancing the country’s future carbon budgets.

The report concludes with a consideration of the full eighty-year transition period from 2010 to 2089, and concludes that the proposed changes would deliver subsidies to agriculture and large industries with a nominal value of about $100 billion at $50/t, and $200 billion at $100/t. Two thirds of this would be paid to pastoral farmers and one third to major industries. If the subsidies are later wound back, it is likely these groups will attempt to secure compensation, unless the law clearly precludes this. In support of this possibility the report notes that:

some major emitters and Federated Farmers have already signalled that they view carbon charges as an attack on their claimed property rights – as though they had ownership to, or rights to perpetual use of, the atmosphere’s limited ability to absorb pollutants (by virtue of past use). They further claim that measures infringing their claimed rights are “takings” and require compensation.

It’s at the end of the appendix on forestry that the report delivers its overall verdict:

The ETS has not been designed to promote economically-efficient abatement. It has been designed to protect and promote the position of vested interests that are unwilling to shoulder the asset write-downs required to recognise a price on carbon, and to transfer the costs of this to future generations.

10:10 on its way to NZ

The 10:10 emissions reduction campaign launched in the UK earlier this year is likely to arrive in New Zealand soon — perhaps before the end of the year. Speaking on Chris Laidlaw’s RNZ Sunday Morning show [mp3], organiser Daniel Vockins confirmed that discussions were underway with interested parties(*) in NZ, and promised that if 1,000 New Zealanders signed up at 1010global.org, they’d launch before Christmas. 10:10 is the brainchild of Age Of Stupid producer Franny Armstrong. Individuals and companies make personal commitments to reduce their carbon emissions by 10% in 2010 — giving them something practical to do while the world haggles over longer term and larger targets for cuts. In the NZ context, a 10:10 campaign is expected to work well alongside existing efforts such as Greenpeace’s 40 by 20 Sign On campaign, and 350.org’s longer range commitment, but will send a very direct message to a government seemingly locked in to unambitious targets. If John Key won’t go to Copenhagen, will he sign up to 10:10? Britain’s Conservative leader David Cameron and his entire front bench already have.

(*) Including me…

Wind more welcome some places than others

Good and not-so-good news on wind energy.  First, a report that Spanish windfarms set a new record for wind-generated electricity over the weekend when for a few hours they provided 53% of the country’s total electricity needs. The winds were high and in previous years turbines would have been turned off because they were providing more electricity to the grid than needed.  But now the spare electricity is exported or used by hydroelectric plants to pump water back into their dams — effectively storing the electricity for future use. The head of the Spanish Wind Energy Association recalled that just five years ago critics had claimed the grid could never cope with more than 14% of its supply from wind. He predicted more than doubling wind power in Spain over the next decade. 

Continue reading “Wind more welcome some places than others”

Forecast

Forecast: The Surprising--and Immediate--Consequences of Climate Change

The future of our planet can be found now, on the frontiers of climate change.” That’s how freelance journalist Stephan Faris frames his new book Forecast: The Surprising – and Immediate – Consequences of Climate Change. He visits and talks with people in regions already experiencing some of the early effects of a changing climate and looks to what might lie ahead for them as the change gathers momentum.

It’s a varied picture.  The fearful upheaval in Darfur has many strands, but until the rains began to fail nomadic herders and settled farmers lived without conflict. Faris acknowledges that the contribution of human causes to the long drought is debatable, but more severe droughts are part of the climate change agenda and at very least Darfur is a foretaste of the climatically driven political chaos that can result. Especially is this so when the conditions of life are already fragile, as in Haiti, his next port of call, where severe deforestation has left the country wide open to the likely impacts of climate change.

Across to the southern Florida coast and a less intense but nonetheless troubling feature of climate change. It’s the very sharp rise in insurance premiums and in refusals to offer insurance coverage. One company says bluntly “We believe what the scientists are telling us…We believe it would be bad business to continue to add to our risk.”  Faris describes the physical conditions in Florida and in New Orleans and how people have had to try and cope with them.  While the world has not yet put a formal price on carbon, the cost of global warming is beginning to be monetized in higher insurance prices.

Disturbing in a different way is Faris’s description of his interviews with political figures in Italy and the UK who are bent on making political capital out of the influx of refugees likely to be increased by climate change.  Fear and empathy are the two polar emotions which coexist in the public mind, and some far right  politicians are working on the fear.  The British National Party spokesperson Faris spent time with was happy to incorporate environmentalism into their platform.  “We consider ourselves the only logical green party in Britain.” The logic? Turning people into Westerners turns their tiny climate footprint into a massive one.

In Brazil Faris explores the spread of malaria increased by the clearing of forest. Not perhaps the first consideration that occurs to most of us when thinking of deforestation, but so serious for the populations concerned that at least one economist is arguing that it is a large enough cost to the economy on its own to provide reason to cease deforestation. Faris’s discusion of vector-borne disease and its relationship to climate change ranges into other countries as well.

On a gentler note is a description of the challenges and opportunities facing wine-growers. Faris’s visits provides a fascinating glimpse into the impact of small climatic differences on the wine product. It also raises the prospect of some wine-growing regions having to stop production altogether.  From sunny California he jumps to the icy port of Churchill on he Hudson Bay coast.  Enjoying three more weeks ice-free than it did ten years ago, the port is getting increased business. It offers shorter voyages for cargo from northern Europe.  Yes, agreed the manager of the port, global warming has the potential to be good for Churchill.  Does this mean the port wants to see global warming? “No. Of course not. Nobody does.”

Finally to South Asia.  On the border of North East India and Bangladesh Faris talks with locals about Bangladeshi immigrants and the likelihood that there will be many more of them as global warming pummels Bangladesh with rising seas in the south and increasingly unpredictable rivers from the north.  A terrible massacre of more than two thousand Bengali Muslims took place in 1983. Faris spoke with a village elder on whose land the massacres happened. He runs a non-profit group dedicated to development and reconciliation between his people and the Bengali-speaking Muslims. But if emigration from Bangladesh accelerates he thinks there could be violence. “The scenario has to remain what it is now.”

Across in Kashmir Faris considers the retreat of the Himalayan glaciers and what that will mean for the rivers suppplying water to Pakistan. Reservoirs along the rivers are an obvious way to improve the outlook, but they would need to be constructed in territory controlled by India, which means co-operation with an enemy.  Or the grim possibility of escalating conflict.

For each of the places Faris has visited he furnishes a lively narrative of conversations and excursions, sometimes ranging briefly to other places and related topics. The accounts embrace a considerable variety of people and observations and are highly readable.  Underlying his report is a clear understanding of what climate change involves and a deep concern at its implications for human society, though for the most part he lets the record speak for itself.  It is in conclusion that he points out that if we wait for drought, conflict, migratory tensions, international crises, and humanitarian disasters to pile up we may find ourselves with little time for the complicated challenge of cutting carbon.  We don’t have the luxury of waiting for devastating disasters to scare us into action. Now’s the time.

The book is a valuable addition to the record of what is happening to our world, and deserves many readers.  Journalists who go to places, talk to people, and then pull us into the detail of what they have seen and heard perform a much-needed function amid the heedlessness which still marks much of our public discourse.

If you don’t have time to read the book but can spare half an hour or so to listen to an interview, there’s one here on Writers Voice in which the author draws out some of the book’s main points in a sharply informative way.

 

Addendum:

Last night, after finishing Faris’s book I watched a BBC news programme on the alarming spread of dengue fever in Jakarta as a result of climate change. Increased precipitation is extending the opportunities for the mosquito which spreads the disease.  Vigorous measures are being taken to counter the greatly increased occurrence of the fever, but the programme made clear how serious the climate change-related spread of vector-borne diseases is likely to prove.  The medical people involved in the programme were absolute that this is climate change-related.  The BBC journalists did the same as Faris aims to do – took us to the spot and showed us what is happening.

Bolivia: the necessity of adaptation

Oxfam’s messages on the battering effects of climate change on poorer countries continue with the publication this week of their report Bolivia: Climate Change, Poverty and Adaptation. Poverty and injustice in many countries of the world is what Oxfam works on, and this focus has inevitably led to concern about what climate change is adding to the problems faced by the poor.  This report, like their others, includes a number of interviews with local people whose livelihoods depend on the food they grow. It can be argued that this is anecdotal evidence of climate change and not to be trusted. I don’t see it that way. What the local people are experiencing fits with what we would expect from the predictions of climate science. I see no reason for Oxfam to withold their stories on the grounds that we can’t be absolutely certain that all of what the locals report is down to global warming. If we wait for absolute certainty on such matters we will have waited until it is too late.  Climate change is always going to be mixed with natural variability but the underlying warming trend is as apparent in the human stories as it is in the global temperature graphs. And the stories are certainly guides to the kind of adaptation measures that need to be urgently addressed.  Continue reading “Bolivia: the necessity of adaptation”