Something old, something blue, something borrowed, not much new: Labour’s climate policy

Mr February (aka Simon Johnson) looks at the Labour Party’s climate change policy and concludes it’s not exactly innovative.

As I was saying in my previous post Labour do have a seven page climate change policy that is at first look pretty comprehensive.

Labour will

  • begin the transition to a low carbon clean energy economy
  • set ambitious greenhouse gas reduction targets and plans to achieve them
  • set up an independent climate change commission
  • will implement a comprehensive risk assessment framework in order to develop a comprehensive climate change response plan
  • establish a carbon budget process
  • achieve 90% renewable electricity generation target by 2025
  • reduce per capita domestic transport emissions 50% by 2040 from a base year of 2007
  • ensure that there is no retail carbon price gouging of consumers
  • manage the transition to ensure social justice particularly with respect to low income families
  • restore the carbon price to the NZETS (NZ Emissions Trading Scheme)
  • require emitters to cover at least half their emissions with NZ issued Units (not the cheap international ‘hot air’ units).
  • bring agriculture into the NZETS from 1 January 2016
  • give agriculture a free allocation of NZ units equal to 90% of 2007 production

Something borrowed

This really does appear to be a great list of policies. Interestingly, some of these policies have been borrowed from a variety of people.

The carbon budget idea is borrowed from the Sustainability Council back in 2011 and in 2012 and from Generation Zero’s “Big Ask” Report of July 2014.

The independent climate commission idea is also borrowed from the Sustainability Council in 2012 and from Generation Zero’s “Big Ask” Report of July 2014.

The comprehensive risk assessment framework and climate change response plan is borrowed from the Wise Group.

The policy requiring ETS emitters to use at least 50% NZ units is borrowed from the long-suffering carbon forest industry who in 2012 asked for limits on the amount of ultra cheap ‘hot air’ imported units that emitters can use to meet their ETS obligations.

Labour’s policy also has a swipe at National for ignoring the foresters request to do something about the catastrophic decline in the NZ carbon price.

“Also, National sat on its hands as an influx of cheap, imported, international emission units collapsed the price of NZUs.

So, Labour’s fix for the price collapse is to;

“..restrict international units by requiring at least 50% of all units surrendered to meet obligations under the ETS to be NZUs (on an ongoing basis).

The problem with this measure is that it won’t work. It won’t stop the cheap dumpster diver international units holding down the NZ unit price. If its compulsory for 50% of units surrendered to be NZ units, then thats the same as permitting 50% to be cheap international units. So the international units will still drag down the NZ unit price.

I have argued in a previous post that allowing use of international units was a fundamental flaw in the design of the NZETS (along with the lack of a cap). Previous partial restrictions on international units have not had any impact on prices.

The ironic thing about the Labour policy swipe at National “sitting on its hands”, given that their 50% restriction fix won’t work, is that that the unlimited importing of international units into the NZETS was hardwired into the original design of the NZETS in the Labour government’s 2007 Framework for a New Zealand Emissions Trading Scheme document. In other words, it was originally Labour’s idea that the NZETS be so open to international units that they set the NZ carbon price.

The only way to set a “real” carbon price in the NZETS is to ban the use of all international units and manage the supply of NZ units and assigned amount units so that the carbon price is sufficient to incentivise changes in behaviour. If Labour won’t do that, then their position is closer to Tim Groser’s view that the international price should set the NZ price than to the views of the environmental NGOs and foresters who want an effective carbon price.

Something old

The rest of Labour’s policy to “fix” the emissions trading scheme is to largely return it to the 2008 version Labour originally enacted.

Labour’s “something old” policies on the ETS are to:

  • strengthen the ETS by bringing agriculture in on 1 January 2016
  • base the amount of free emissions units allocated to agriculture on 90 per cent of its 2005 emissions
  • continue with free allocations for carbon-intensive industries exposed to export competition, such as steel and aluminium.

This means that Labour will continue gifting excessive amounts of carbon credits to major polluters like Tiwai Point smelter owner Rio Tinto Alcan NZ and Norske Skog Tasman. The base for allocation will change from past production intensity to historic 2005 production levels – which may end up being pre-Global Financial Crisis peaks.

Forestry professor Euan Mason points out that once agriculture is in the ETS with 90% free allocation, they too will be able to take advantage of the price differences in the ETS, just like the carbon intensive industries have. They will be able to surrender half of their free NZ units back to the government, with the other half of their obligation satisfied by buying 11c international units. They can then sell their remaining NZ units for say $4.00 each. They then pocket the arbitrage difference between the prices of the units.

It’s important to remember that Labour’s original NZETS wasn’t particularly well designed or effective. As Jeanette Fitzsimons said in the documentary “Hot Air”, the Greens only unwillingly voted for it as it was “the only game in town”, a first step and better than nothing.

In 2009, economist Geoff Bertram gave one of those Victoria University Institute of Policy Studies talks about the Labour and National emissions trading schemes. After about 30 minutes of carbon supply and demand curves, some one asked Geoff to sum up in plain language. Geoff Bertram’s reply is the only part of the lecture I can remember to the letter. He explained that both schemes were patchwork quilts of exemptions and loopholes and delays. Both schemes lacked caps on emissions. Both schemes introduced unnecessary NZ units whose pricing would be at the whim of the international markets. He concluded:

“Well the Labour ETS is a dog, and the National ETS is a complete dog”

Something blue

Are you surprised that I am saying that Labour’s climate change policy includes “something blue’, as in from the National Party? I am surprised as well. Any climate change policy in common with National would seem almost to be logically impossible given that in National’s list of policies has no climate change policy.

This statement from the the third page is what I mean.

“Labour is committed to achieving a lasting consensus among New Zealand’s main political parties on an ETS. We have consistently tried to work with the National Party to reach common ground. But we aren’t prepared to compromise our fundamental principles to do so.

Labour also gave a similar answer to Forest and Bird in their “Polling the Pollies 2014” report. Forest and Bird asked why Labour wasn’t supporting the Green’s ‘carbon tax cut’ policy.

“Labour’s preferred means of pricing is to fix the the existing ETS. Using an ETS to price carbon is the only broad area of agreement in climate change policy, particularly particularly between the two largest parties (despite National’s lip service for an ETS). Labour would not throw that agreement away lightly to start again with a carbon tax.”

Reading these statements removes any doubts I may have had about being too hard on Labour’s climate change policy. Ultimately Labour are just borrowing the headline ideas of the NGOs to make their policy appear effective. The truth is that in terms of how they intend to price carbon via an ETS, they would rather be “something blue”, closer to National than to the Greens. This is just raw political expedience masquerading as high principle. A compromise being justified on the grounds we can’t let the perfect be the enemy of the good.

In an enigmatically named post I wrote three years ago for the 2011 election, The snake swallows the elephant in the room and then flogs a dead horse, I suggested that climate change politics and particularly the NZETS could potentially descend into a politically institutionalised ritual of “flogging the dead horse”.

My fears appear to have been realised. National and Labour in effect have the same policy narrative that explains the problem; “THEY undermined the NZETS”, and a narrative solution, “WE will fix the NZETS”. This creates the on-going cycle of the ‘horse is underperforming’ and the narrative’ solution (keep flogging the horse). But beneath the impenetratable detail and complexity of the arguments about fixing the NZETS, it will remain ineffective.

In summary, it is not enough for Labour’s climate change policy to borrow some good policies from the NGO’s when the fundamental problems of the NZETS are not addressed. It needs a cap on emissions. The number of units or carbon credits or permits must be limited to the cap. It needs to exclude all international units. There should be no free allocation of units. It should apply to all sectors. All the ducks must be in a row. All the cogs must turn in the same direction. Returning the NZETS settings to the 2008 design doesn’t achieve this. Seeking a ‘flog the dead horse’ consensus with National also doesn’t achieve this. Isn’t climate change important enough to warrant policies better than something old, something blue, something borrowed and not much new?

11 thoughts on “Something old, something blue, something borrowed, not much new: Labour’s climate policy”

  1. I wish I wish I wish they’d stop this bloody stupid shagging about and introduce a fiscally neutral carbon tax like British Columbia. A steadily rising tax on all fossil carbon that is returned equally to every individual with no leakage to the Consolidated Fund or overheads, etc. They are then free to do what they please with it, blow it on Lotto, feed their obese SUV or install solar PV panels on their house, their call.
    It must be the only tax in history that is actually popular with the taxpayers and it clearly brought BC’s carbon release down.

  2. I’ve been chuckling a bit at the deafening silence from you guys about Labour’s policy. It looks like National’s.* But whereas we can always count on a diatribe from Bryan Walker about anything much National does, he’s nowhere to be seen on this one. This is one reason why National have little incentive to play on climate policy – because even if they adopted identical policies, most of you would assess them differently. What incentives do you think this generates for Blue-Greens? My answer would be “an incentive to concentrate on other issues.”

    *Of course it does… it has some additional material, and I think the stuff I’ve heard from Labour on adaptation seems much more developed than the stuff I’ve heard from the others. But in broad brush strokes, National and Labour look like they share fairly similar long-term goals. That’s actually quite healthy, since it suggests that the dominant Government partner is committed to a positive price on carbon via an ETS, Compared with other Anglophone New World countries, that’s not too bad. [Not sure what the Greens are doing by proposing to scrap it and have the structural conversation all over again – if we’re lucky it’s just a ruse to get their voters (yay tax! boo market-based systems!) out.]

    1. Given the current decline of Labour and ascendancy of Greens maybe in about 8 years we will see a National/Labour coalition and a Green led opposition/government

      That is assuming that scientists don’t find a way to preserve Winston Peters for eternity

      1. You mean as a last resort the reactionaries on the right and left unite to prevent true progress towards transforming our society from a train wreck trajectory towards a sustainable future?

        1. andyS: Tongue in cheek though it is I am both entertained and interested in your comment.

          On Winston Peters, though I doubt he thought about climate change, his Gold Card was and is a substantive step with respect to climate change. It did make it easier for me to dump my car instead of repairing it once again. It’s significance in getting more people using public transport and walking will increase.

          On the ascendancy of the Greens versus Labour, if the Greens’ portion of the vote is accurately predicted by the polls I doubt they have gained much but I could believe they have solidified their support. They are committed as a whole with respect to climate change whereas the other parties are not and are therefore vulnerable to the kind of manipulation the “Hot Air” documentary reveals.

          1. I was basing my comment on a graph I saw at Kiwiblog which showed the trend of Labour and Green votes over the last few years and extrapolated that to show Greens ahead of Labour in about 8 years.
            We should be careful about extrapolating straight lines though. The Greens may head into a cooling period

  3. At the rate things are changing now (Antarctic glaciers irreversalbly collapsing, dark snow in Greenland ramping up melting, huge plumes of Arctic Ocean methane eruptions) eight years may be just enough to spook the polies into the action they should have initiated 30 years ago……

    Assuming Jo Average has also been spooked enough to abandon their SUVs and overseas holidays. Why is that little pink birdie up in the tree going “oink. oink!”

  4. “The Greens may head into a cooling period”
    Not likely unless the Earth does too and apart from a MASSIVE volcanic eruption, I can’t see any plausible cause for that to happen.

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