Labour Party MP Sue Moroney claimed that delaying the entry of bio emissions into the ETS would cost $400 million. She said this during debate over her private members bill to increase paid parental leave to 26 weeks which passed its first reading in Parliament thanks to Peter Dunne and the Maori Party voting against National and ACT. Bill English is going to veto the bill once it gets to third reading.
In her speech Sue Moroney said this
“Ironically, the day National threatened to use a financial veto against families needing extended paid parental leave, National also announced that it was keeping agriculture out of the emissions trading scheme for longer. The cost to the taxpayer of that decision alone is estimated to be $400 million. That decision alone would pay for extended paid parental leave,” …..”So this Government’s priorities were spelt out loud and clear on that day in April. It has money to incentivise farmers to pollute for longer.”
Sue Moroney is quite wrong about the money and calling methane and N2O pollution.
The costs of delaying bio emissions is $35 million over 4 years according to the Cabinet Paper.
Table 4: Net fiscal impact of removal of entry date of agriculture ($ million)
increase/ (decrease) in operating balance
|$ million||2011/12||2012/13||2013/14||2015/16& outyears||Total across the forecast period|
|Removal of entry date of agriculture||–||–||(12.156)||(23.640)||(35.796)|
The $400 million she referred to is an exaggeration of the $328 million cost over 4 years of the total cost of all the changes to the ETS announced in the Cabinet Paper, delaying agriculture’s bio emissions being only one of them and at $35M over 4 years a relatively minor one. (but the only one the media focused on)
If she knew how the ETS works Sue Moroney would not compare the cost of paid parental leave and the cost of these ETS changes because while the ETS costs are a net fiscal cost they have no impact on net debt because they represent only a book value movement of NZ Units of carbon, not real money. The Government does not need to source this money from the taxpayer or the foreign lender. In fact only one of the many changes to the ETS has an impact on net debt and it is a positive one with the introduction of a levy for synthetic greenhouse gases. The levy brings in money, not these carbon units which are only an accounting entry. Paid parental leave on the other hand would have to be funded by borrowing or taxes.
What most do not seem to understand is that if farmers had to purchase NZU’s for their bio emissions to surrender to the Govt, they would purchase them from a forester or a foreign seller of carbon units. The money that the farmer pays does not go to the Government. There is a fiscal effect only in that the NZ Government gives the forester an NZU, and in doing so creates a liability for itself. The farmer then buys that NZU from the forester and gives it back to the Government. At that point the liability created when the NZU was first given to the forester is cancelled. Net fiscal effect to the Government is nil. So the $35 million cost of delaying bio emissions entry into the ETS is misleading because it is in reality $0.
The figure of $35 million is devised by reasoning that having given a forester an NZU the Government has a liability. If a farmer then surrendered an NZU the liability would be wiped. Because farmers are not buying NZU’s for their bio emissions and surrendering them to the Government, the Government calculate that farmers will not surrender $35 million of NZU’s over the 2 years and because of that the Government liability for NZU’s will be $35 million higher. Like everything with the ETS it is a highly questionable methodology.
It is pretend money only and like monopoly money which is only real when playing the game of monopoly, this ETS money is of no real use in the sense that it can not be used outside the game of the ETS. It certainly can’t be used to pay paid parental leave to people who don’t want to pay for their own children.
Complicated I know but the long and the short of it is that farmers are not being subsidised by $35 million nor $400 million. The fact that politicians don’t understand this and mislead the public is the worry.
Sue Moroney by the way is from a horse racing background. The horse industry’s methane farts (and yes horses do fart their methane) is exempt from the ETS. I wonder if Sue Moroney thinks her industry is being subsidised too?