Are the Wheels Falling Off the ETS?
What started off as merely a flawed and highly complex system is getting progressively worse. After weeks of intensive hearings the implications are crystallising and the flaws becoming more apparent. At the same time the Government is engaged in a process of pandering to vested interests and watering down the scheme, notifying the select committee as an afterthought.
I have rarely blogged before, so it will be interesting to see how it helps me organise my thoughts.
There are so many important issues that it is difficult to know where to start. So I will blog about them in no particular order and see where the conversation leads. There are issues with allocation, with equity and with the basic trading unit called an NZU or New Zealand Unit. There are missing Kyoto emissions and there is also the complementary measure of a ten year moratorium on new thermal baseload generation. May as well start there, actually.
Frog blogged here that the National Business Review reported that the Nats had done a deal with Labour to scrap the moratorium in exchange for continued support for the Bill. While I was issuing a press release here, the Nats were vehemently denying any deal and calling for a retraction. All that drama aside, one would have to ask if the moratorium actually mattered at all as it is written.
I asked three submitters during the Select Committee hearings whether there was any kind of thermal power station at all that could not be built under the exhaustive list of exemptions within the Bill. None of the three could name a single instance of something that would actually be banned. Contact Energy even argued that was not the point – it was having to get the Minister’s permission under the exemption clauses that was onerous and time wasting!
Many are arguing that with a price on carbon, the market will take care of it (heard that one before?) and build renewables. Certainly Contact has told us geothermal is currently cheaper than building new gas fired generation, which is why they have switched their emphasis and plan to build a great deal of geothermal baseload generation.
But not Genesis. Re-packaging their proposed Rodney gas fired station (which would be the biggest in the country by a large margin) as a peaking station by changing just a few words in their resource application is incredibly cynical, but no-one, including their shareholders, is pulling them up on this.
They’ve figured out that if they build it as a peaking plant (not allowed to run more than say, 30% of the time) then whenever supply gets a little tight they can apply under the “emergency� clause to run it all the time for “security of supply�. Knowing there are 480 MW of gas station just sitting there waiting for an opportunity will discourage others from building renewables, so supply is guaranteed to get a little tight. However, if that doesn’t work there are other exemptions it can try.
Fact is, if we want to reach the 90% renewables target by 2025 we have to stop building thermal plant and start retiring it. But that won’t happen under this legislation. It’s that simple.
May 14th, 2008 at 1:42 pm
I think the problem is in your last paragraph:
“if we want to reach the 90% renewables target by 2025 ”
We, the people, don’t. When the financial collapse started, the entire game changed, which is why Labour blinked.
May 14th, 2008 at 2:03 pm
BP - Speak for yourself. I, for one, would prefer to be tied to a long term fixed price for renewable energy rather than be tied to the vagaries of the international energy market over the long term.
We, the people, want energy security at an affordable price. Prudence says that this will be best met by a reasonable renewables target. The research shows that up to 90%, there is very little additional cost for the price security that renewables bring. After 90%, the costs and the over-building grow quite steeply.
May 14th, 2008 at 2:06 pm
BP is partially correct. The public wants a free lunch. They will support any strategy that aims for a cleaner environment or a lower road toll by targetted baddies like big business or boy racers. But as soon as you imply or, even worse, state that the average person is just as much to blame and propose a strategy that will require an increase in petrol tax to pay for it (as the NRSC did in 2000 with it’s road safety strategy 2010 discussion document) then it will get the big thumbs down from the public -and Labour with its focus group leadership.
May 14th, 2008 at 2:06 pm
BP,
The problem with the modern democracy is politicians know that they have the ability to gain public support by appeasing public sentiment through allowing the electorate to temporarily ignore price signals by wasting the publics money through expensive and wasteful construction projects. It may satisfy the people that the government is acting in their best interests, but they’re ignoring the long term.
The public may think that construction of more generating capacity will reduce power bills, and it might in the short term, but energy companies nor banks are charities. We’ll pay for it in the long-term, maybe when the economy improves, but there is an oppurtunity cost to that, which most people are happy to ignore.
May 14th, 2008 at 2:12 pm
Kevyn’s right. Not to mention the economic crisis happened, because people thought they were entitled to a free lunch.
Jeanette,
thanks for highligting the cynical and oppurtunistic behaviour of Genesis Energy’s board, although I don’t expect the MSM will pick the issue up.
May 14th, 2008 at 2:13 pm
We are a nation that decided not to reduce the road toll by three-quarters because that would have meant paying an extra 8 cents a litre! We don’t care about what it costs tomorrow as long as it doesn’t cost anymore today.
May 14th, 2008 at 2:15 pm
Jeanette,
Perhaps you should make Rod Oram aware of what Genesis Energy are doing with their plans for the thermal energy plant. I imagine he’d be one of the few business columnists that would run with the story.
May 14th, 2008 at 2:16 pm
Jeanette
Thanks for that, it is great that we can get the chance to “chat” with the leaders in election year.
The problem you face is convincing the people of NZ that our efforts can make a difference, given that we are such a low (one might say insignificant) emitter then the reality is that most of the proposals around climate change are nothing more than feel good ones.
Middle NZ are not convinced that we need to cripple ourselves when our efforts will not make one ounce of difference to climate change.
May 14th, 2008 at 2:23 pm
Kevyn is on the money.
Greens: You’re not going to sell the hairshirt approach in this economic climate. If you haven’t detected the weather has changed in the past few months, you really need to get out more. Key understands it, but I sense that you still do not. The public will humour you when they have money in their pockets, but they won’t when money is tight.
Read this: tinyurl.com/3l9me3
By all means, continue on your path. Suits me, but I’m not sure you’ll get the result you want come election time.
May 14th, 2008 at 2:26 pm
“the public needs “carrots” as well as “sticks” to go green; that they suspect green taxes are stealth taxes.”
May 14th, 2008 at 2:31 pm
BP
He was saying that the average New Zealander has become myopic and selfish. He wasn’t being particularly flattering in his description.
“the public needs “carrots� as well as “sticks� to go green; that they suspect green taxes are stealth taxes.�
That much I agree with and neither the ETS nor the former ecotaxes would have done much to change people’s behaviour. Look at how the cost of petrol is only now beginning to have an impact and they’ve what doubled in 5 years?
May 14th, 2008 at 2:33 pm
“Middle NZ are not convinced that we need to cripple ourselves when our efforts will not make one ounce of difference to climate change.”
Applause, but widen that to “all of NZ”.
Not to mention that there still doesn’t exist an mechanism that will take dollars and remove carbon, which is the underlying problem of ETS - its built on a false premise.
May 14th, 2008 at 2:38 pm
>>He wasn’t being particularly flattering in his description
It doesn’t matter how it is characterised, it remains a political problem if you’re trying to push a green agenda. People need to pay the rent.
BTW: It is not myopic and selfish to oppose taxes that will achieve nothing. It could be argued that those who support these taxes selfishly impose their myopic ideologies on others…..
May 14th, 2008 at 2:45 pm
PS:
“Not to mention that there still doesn’t exist an mechanism that will take dollars and remove carbon, which is the underlying problem of ETS - its built on a false premise.”
Applause….
May 14th, 2008 at 3:03 pm
Jeanette
Why did the Green Party support the ETS in the first place then?
Yes the Greens pointed out a few of the problems or disadvantages of carbon trading when the policy was launched, but you also welcomed it.
Is the Green Party going to admit it was wrong to support the ETS? If not, it seems like you’re merely trying to rewrite history.
Bryce
http://www.liberation.org.nz
May 14th, 2008 at 3:06 pm
BP
Did I not say above that I don’t support the ETS, because its so flawed and ineffective?
I’m different from other greens who feel that well, at least we’re doing SOMETHING “for the planet”, regardles of how flawed and ineffective that something is.
Maybe ignorant, complacent, and myopic would be a better characterisation rather than selfish to describe middle New Zealand?
dbuckley
Yep the ETS was based on a false premise, that a carbon charge would be sufficient to change people’s behaviour sufficient to reduce carbon emissions.
The Greens (and Labour) have failed to keep up with the latest research that recognises that it isn’t the cost of fuel thats important, but its the cost relative to income level that will determine if people are going to make behaviourial changes regarding energy use.
http://www.reason.com/blog/printer/126175.html
May 14th, 2008 at 3:16 pm
Sleepy
So you agree that it is stupid for us to cripple ourselves when our efforts will not make any difference at all?
May 14th, 2008 at 3:25 pm
Thats what it looks like, strange as it is that I find myself agreeing with BB twice in one day.
I’m hopeful the wheels are off the ETS wagon once and for all. Then we can have a meaningful discussion about how NZ can reduce its carbon footprint. The “one cow” topic gave some clues, we’re so busy doing (relatively) low value dirty things like aluminium and cows that we’ve failed to move our economy on to something more modern, cleaner, and intellect based.
May 14th, 2008 at 3:27 pm
Coupling green party policy to using environmental ‘taxes’ like the ETS would mean people get a tax-cut, with the ability to choose between low carbon products and high carbon products (a little hard to know sometimes though).
I still think it’s rubbish to say it’s not our responsibility based on our numbers (maybe say, the US counties could argue that, then where would we be?) and the ‘effect’ of ‘crippling’ the economy sounds like so much rubbish when the NZIER reported that we’d only be as rich in 2025 as we would have been in 2024 if we hadn’t had an ETS, *without* allowing for market induced innovation, behaviour change, or US/European tariffs/duties on goods that are climate-unfriendly.
May 14th, 2008 at 3:58 pm
It depends on what you mean by crippling “us” We’re at no risk of crippling the New Zealand economy as the worst impact that the ETS could have is that it would that GDP in 2026 will be what it otherwise would be in 2006. Aside from the fact that GDP was never meant to measure the wealth of a nation.
I AM concern about the effects that will have on the well being of ordinary New Zealanders as the costs will be passed down to them. The construction of the ETS assumes that it assumes that business would rather change their behaviour rather than pass the costs down to consumers, but there is certainly no guarantee of that.
I was describing Kiwis attitutes that assert that they’re entitled to be free from the consequences of market price signals without taking into account the long term.
May 14th, 2008 at 4:30 pm
Bryce- I think the Greens have been pretty clear that they supported the ETS in its original form as a slightly flawed first step. The trouble is that if Labour have to flop back to National for support, it will probably grandfather in a ridiculous amount of credits and exempt highly profitable industries for much too long to have any effect, and not reduce the overall level of available licence to pollute, and thus essentially become an expensive and complicated waste of time.
Treehugger is also correct that there needs to be some sort of mechanism to avoid shucking responsibility onto the consumer, at least for markets where there is monopolistic or olygopolistic behaviour. At this stage, it’d almost be simpler to institute a straight carbon tax and give the general population the generous tax cuts they seem to want at all costs, now that National and the media have hyped up the electorate…
Jeanette- awesome to hear from you. Keep up the good work.
May 14th, 2008 at 5:25 pm
Odd that Jeanett thinks peaking plants run less than 30% of the time when Contact were in the paper saying their planned peakers - the ones that have been welcomed by govt - would run about half of the time.
May 14th, 2008 at 9:07 pm
what is your alternative proposel BB?
what is your plan for New Zealand to clean up its act, and pay its way?
————-
big bro Says:
May 14th, 2008 at 3:16 pm
Sleepy
So you agree that it is stupid for us to cripple ourselves when our efforts will not make any difference at all?
May 14th, 2008 at 9:08 pm
its not a matter of no difference, but how much of a difference in the larger whole (the global effect), as a small country we can have control over our emissions and on emissions of others, thru our trade and trade policies - ie at current we support china’s growing carbon dragon thru exporting them coal from the west coast.
May 14th, 2008 at 9:29 pm
“low value dirty things like aluminium and cows”
Ahhh the old knowledge economy debate where we all sit on our collective asses and pontificate or write software !!!
David Lange tried that “Farming is sunset industry ”
ummmm WRONG dairy farming is the only thing, other than tourism keeping the social welfare payments happening in the country,
take that away and Im sorry to say boys and girls we may as well be TONGA
May 14th, 2008 at 9:36 pm
uhm no, art (such as what came from weta studios), service industries, landscaping, forestry, building and all sorts of jobs keep things ticking along panda.
ps what kind of panda are you (the mike moore type?)
are you talking about corporate welfare as well? cause a lot of us taxpayers contribute to that one.
dairy farming is subsidized, and a lot of the profits dont spread into other industries.
and the NZ govt supports Tonga, don’t see Fonterra complaining about that, infact they quite like despots, if Burma and China are anything to go by.
Farming is our past.
May 14th, 2008 at 10:35 pm
coal cooks the climate
LABOUR LOVES COAL
May 14th, 2008 at 11:15 pm
“dairy farming is subsidized” HOW ??
“and a lot of the profits dont spread into other industries”. what a load of Rubbish, I spend at least 400k a year in my local economy
“Art” Dont make me laugh “OMG” Art !now I have heard it all ,the NZ economy is going to be saved by Art
haven’t u herd of the arts benefit so all the struggling so called artists can survive
and u have the audacity so say dairy farming is subsidized
May 14th, 2008 at 11:49 pm
There are ways of taking dollars and converting them into CO2 reductions.
One is to adapt Huntley to burn wood or charcoal, thus retaining some thermal generation and keeping the generation renewable.
Another is to build geothermal/wind/wave/tidal/solar power plants and retire or mothball the oil/gas/coal plants. However this may require building extra capacity. This is only expensive if we don’t have a use for the extra capacity when it is available (wet years, warm windy nights). Any extra capacity can be used to replace fossil fuels (or renewable fuels) for space heating, water heating and industrial heat, and even hydrogen generation (currently from natural gas) - all of which reduces our emmissions as well.
Trevor.
May 15th, 2008 at 2:44 am
panda, by being allowed to use public streams and rivers as private toilets. By being allowed to use the Public Works Act to force grain farmers to give up their land to CPW. By not having to pay the full cost of the damage milk tankers are doing to rural roads designed only for seasonal use by stock trucks and harvesters.
That might be the extent of it.
May 15th, 2008 at 3:59 am
Why does the New Zealand public have to inccur the pollution costs for the NZ dairy industry? Why shouldn’t the person creating the pollution pay for it, why is that so hard to understand.
Oh thats right because we don’t believe in a free market but rather a market where the profits are privatized and the costs are socialized.
The left wants to socialize profits and privatize costs.
The right wants to privatize profits and socialize costs.
I would like to privatize profits and privatize costs.
May 15th, 2008 at 7:15 am
Trees
NZ does not have an “act” to clean up apart from (and here I will differ from my friend Panda) the shocking amount of effluent that makes its way into our rivers and streams.
You know as well as I do that we are not even a minor player when it comes to climate change, we produce 0.02%.
Given that I need to ask you again, why on earth would we want to cripple ourselves simply to make a few people feel good?….unless of course there is a hidden agenda.
May 15th, 2008 at 8:54 am
what are you doing then to convince the big players (our trade partners) to reduce their emissions then?
May 15th, 2008 at 8:56 am
“allowed to use the Public Works Act to force grain farmers to give up their land to CPW”
I am sorry I have no idea what you are on about here!!
as for the other typical nonsence, huge strides have been made in cleaning up waterways ,why is it we never get any credit for any move we make in this direction ?
BTW what is your defination of a public stream or a waterway?
as for your tripe about milk tankers we pay millions in govt imposed Road user taxes, more than they need in fact as they steal most of it to top up our huge social welfare bill
May 15th, 2008 at 8:59 am
good that you are writing/talking to us in this forum..jeanette..
there should have been/should be more of it..
..and not just from you..
a perennial greens complaint is that the media ignores/distorts the/your ‘green message’..
it has long puzzled me why you (all) haven’t made use of this forum..
your post is the second frogblog post i have linked to/publicised this morning..
(and hey..!..i do have my readers/audience..!..eh..?)
i am sure other media..not to mention party members/supporters(heh!)..would welcome clarification/explaining of the ‘green message’..
(not to mention the general public..!..)
the time couldn’t be ‘better’ to clarify/elucidate your/the green message..
they are no longer ‘ignoring you’..eh..?
phil(whoar.co.nz)
May 15th, 2008 at 9:13 am
Why does the New Zealand public have to inccur the pollution costs for the NZ dairy industry?
depends on what type of pollution u are talking about
sh#T or the so called Carbon emissions
if u mean effluent, for sure the polluter should pay, but if u mean the carbon nonsence no other country in the world is including agriculture in their ETS so why the hell sould we!!!
it makes no sense
if fact evey other country knows its number one mission is to feed its people (except Burma and Zim)and so dont attempt to punish their farmers for doing so
May 15th, 2008 at 9:54 am
If the Greens are so worried about carbon emission, why are they so enthusiastic and proud about stopping hydro power? What do they want to happen, pensioners and the unemployed freezing to death in the dark so we can become carbon-neutral? Great!
Seems to me if the Greens are serious, they need to release a plan for the doubling of power generation in NZ over the next 30 years (2% growth per year) that doesn’t involve thermal power.
Otherwise they are just dooming everyone to huge power increases and who’s going to vote for that?
May 15th, 2008 at 9:55 am
Trees
“what are you doing then to convince the big players (our trade partners) to reduce their emissions then?”
I don’t know, what do you suggest?, but until they do we should not commit economic suicide just so a few people in NZ can fell good about themselves.
May 15th, 2008 at 1:57 pm
BB, I still have no idea where you get your figures on “economic suicide” .
May 15th, 2008 at 1:58 pm
“Greens secure warmer, drier State homes” http://www.scoop.co.nz/stories/PA0805/S00252.htm. Good stuff!
May 15th, 2008 at 2:00 pm
Stephen
So a whole heap of extra taxes is not going to harm the economy?
While you are there, can you tell me how money is going to stop climate change?
May 15th, 2008 at 2:15 pm
Stephen- that link is a 404
May 15th, 2008 at 2:28 pm
http://www.scoop.co.nz/stories/PA0805/S00252.htm or just search the title.
BB, what ‘heap of extra taxes’? What if the money from the ETS was recycled into energy efficiency and energy projects? Or even income tax reductions? What if income tax were lowered (as the greens seem to advocate, at least at the moment) at the same time? I’m just saying those are options, not sure Labour is too keen on any of them, hard to tell.
May 15th, 2008 at 2:43 pm
The downside of ETS is that it is, like GST, (by and large) neutral on business, instead just passing an extra set of costs onto the consumer. Now if the consumer could get those costs back in an equitable and useful manner, making it cost neutral for the consumer, then the scheme is not doomed to failure, as ever providing that the consumer has some ability to exercise a meaningful and reasonable choice of behaviours.
May 15th, 2008 at 2:47 pm
‘choice’, exactly.
May 15th, 2008 at 3:23 pm
People can choose to change their behaviour based on cost BB, and they generally do. One could give oneself an even bigger tax cut by buying goods/services that have taken measures efficiency or emissions reduction measures, which will presumably be competitive with low efficiency/high emitters, because their pollution now has a cost.
May 16th, 2008 at 11:01 am
Hi Ari (and Jeanette)
If you look back at Green Party statements at the time of the ETS announcement you’ll find enthusiasm for the scheme. Yes, the Greens had some complaints - mostly about how this market mechanism didn’t go *far enough*. But the Greens have always been generally supportive of market models like ETS. The statement from the Greens that I saw included some reservations, but also said things like
* The ETS “is well designed”
* “The Greens welcome the underlying design of the scheme, which takes a number of features from our climate change policy we released in March.�
So it seems that the Greens are now backing away from this support and rewriting history.
For a very different view and critique of the scheme, see:
http://liberation.typepad.com/liberation/2007/10/the-green-labou.html
Bryce
May 16th, 2008 at 11:08 am
“Why does the New Zealand public have to inccur the pollution costs for the NZ dairy industry?
depends on what type of pollution u are talking about
sh#T or the so called Carbon emissions
if u mean effluent, for sure the polluter should pay, but if u mean the carbon nonsense no other country in the world is including agriculture in their ETS so why the hell should we!!!
it makes no sense
if fact every other country knows its number one mission is to feed its people (except Burma and Zim)and so dont attempt to punish their farmers for doing so”
no answer to my questions ?