The ETS review is underway with submissions for the first part of the review closing on Friday 19th February. Biological emissions are part of the ETS but are exempted indefinitely and this is exemption is not part of the review. Also excluded from the review is whether the ETS is the best response to global warming.
The review is very low key with no review panel like last time, just Ministry staff reading through the submissions.
The review is in two parts, the first focuses on whether the two for one surrender obligation should continue. Presently emitters surrender one NZ unit for every two tonnes of CO2 equivalent they emit. Making them face full surrender obligations will double their surrender obligations and double their demand to purchase NZ Units for them to surrender.
Expect the forestry industry to be screaming out for this because this will increase the price of carbon and they will make more money.
With biological emissions out of the review we have no specific interest in the review apart from as a general citizen I do not want to pay more for fuel and energy and everything else and effectively have my money boosting the profits of forestry corporations. So we have submitted to keep surrender obligations as they are.
Points we made to the first question which was do you agree with the drivers of this review.
Do you agree with the drivers for the review? Yes/No/Unsure
No I do not agree with the drivers of the review.
The first driver is improving performance of the NZ ETS against its objectives
The two objectives are meeting international obligations and reducing emissions below business as usual. As the discussion document notes there is no evidence that the ETS has reduced emissions at all and it seems unlikely that it ever will. The reason for this is that the only way to reduce emissions is to get consumers of product or service to change their purchasing choices. The ETS is not doing this because the price is too low so increasing the price would on the face of it help but the price increase would have to be so substantial it would be devastating. A reduction in emissions will only be achieved by putting significant financial pain on consumers to force that change. The sort of price point pain the ETS would need to cause to do this will devastate the poor whilst only causing minor inconvenience to the rich. A successful ETS will increase inequality and cause such disruption as to be politically unpalatable.
On the objective to help New Zealand meet our international obligations these can and have been met without reducing emissions at all because of the use of gross emissions to set the target and meeting this using net emissions. New Zealand’s emissions do not need to reduce at all to meet the reduction target of 30% below 2005 levels because our net emissions today are already 30% below our 2005 gross emissions.
The second driver is preparing for a more carbon-constrained future
The Paris agreement seems likely to be the last serious effort to get any agreement to reduce emissions. In the days of the Kyoto Protocol, for which the ETS was created, binding agreements were seen as essential to reduce emissions. The Copenhagen talks were a failure because this was not achieved. The Paris talks were similarly a failure and more importantly signal the end of any attempt to reach any meaningful binding agreement. International efforts are going backwards not forwards so the assumption that we face a more carbon restrained future has no basis. If anything it is the other way around. The enthusiasm for enforceable international agreements has gone and as well as that fossil fuels are getting cheaper and more abundant.
Moving to full surrender obligations
Should the NZ ETS move to a full surrender obligation for the liquid fossil fuels, industrial processes, stationary energy and waste sectors? Yes/No/Unsure
No. The discussion document asserts that increasing the cost of emitting by moving to full surrender obligation would increase the incentive to reduce emissions. This is not true in situations where the increased costs can just be passed on to consumers. In the case of petrol and diesel consumers have little alternative and will just have to pay more. Moving to full surrender obligation will in these cases just make people poorer and have no impact on emissions.
The other point on which we submitted was on what impact increasing surrender obligations would have on my business.
My business is an avocado orchard and I submitted that our fuel costs will increase and we have no ability to reduce these apart from using the most modern and efficient equipment. By increasing my costs and reducing my ability to update my equipment as often as I do currently, increasing surrender obligations will have the effect of increasing my emissions because I will be using older less efficient equipment. The ETS is typical of many Government policies which have a perverse effect, in this case the only likely scenario for me is that the ETS will increase emissions.
If you would like to make a submission the document is on the Ministry for the Environment website. The second part of the review is due in April and is more focused on forestry. This is when we will submit about the fraudulent forestry carbon credits that ignore the huge soil carbon losses that occur under forestry.