Nick, nobody has an ETS like ours

The Earth's atmosphere

In the Parliament today, Chris Auchinvole asked Nick Smith (Minister for Climate Change): “Are claims correct that New Zealand is the first in the world to have an emissions trading scheme, and that it is just a tax for revenue purposes?”

And thus did Nick reply:

No, 38 countries have commitments under the Kyoto Protocol, and 29 of them, or three-quarters, already have an emissions trading scheme. Nor is the scheme a tax. Although consumers and businesses will pay $350 million in the first year of the scheme for their emissions, foresters will receive $1,100 million in carbon credits for post-1989 forests. Far from providing net revenue to the Government, the scheme is actually a cost to the Crown. There are 12,000 New Zealanders who, in good faith, planted trees on the assurances of both National and Labour Governments that they would receive carbon credits for those post-1989 forests. The emissions trading scheme honours that commitment.

But the facts are different from those presented by our Nick.

Far from Nick’s claim of 29 countries having an ETS, in actual fact no country except NZ has ever enacted one. However, the 27 countries of the European Union (plus Norway & Switzerland) have all signed up to (or been forced to join) a regional scheme. This gives the impression of a sizeable number of individual countries “having” an ETS.

What are the details of the EU scheme?

The EU ETS is said to affect 43% of industrial process emissions: i.e., “installations with a net heat excess of 20 MW”. But there are important differences between the European ETS and ours.

Coverage

The EU scheme is very far from having the all-gases all-sectors coverage of the NZ ETS. Take note:

  1. The EU ETS doesn’t apply to methane, nitrous oxide, fluorocarbons, ozone, etc. Carbon dioxide only — which the IPCC reckon represents just 52% of human-caused emissions. So 48% of EU greenhouse gases (i.e., all non-CO2) are left out. Perhaps it was too hard?
  2. It doesn’t apply to emissions from the transport sector (21% of emissions), households and small business (17%), agriculture (10%), construction, waste, etc. (9%). So 57% of EU emissions are omitted.
  3. It applies only to heavy industry and electricity generation — omitting all other economic sectors (e.g. Government, services, wholesale and retail trade, finance, etc.) which make up 96% of economic activity. So only 4% of economic output is covered.
  4. It operates at an international level — so over 80% of exports and imports by value are with countries under the same regime, facing the same costs and the same restrictions.

New Zealand is the world’s only country — the only national entity — that has legislated an ETS. Everyone we deal with won’t be facing the same costs and the same restrictions as our businesses.

Now, some argue that other EU sectors are affected through electricity (although not gas, or petrol or diesel or heating oil). This may be what they want you to believe, but in reality:

Electricity

Although electricity generators are nominally included as industrial process emitters, each country received allowances for 95% of their expected emissions in 2005, to be distributed under a National Allocation Plan (NAP). During the first trading period (2005–7), the total number of allowances successfully claimed was 104.4% of 2005 actuals, so unregulated power utilities made windfall profits and had no costs to pass on to consumers. This didn’t prevent them from over-recovering the costs of the oil spike in 2007 (at a time when the traded carbon price had reduced to zero), to provide even higher profits.

In the second trading period (2008-12) much the same thing has happened — aided by the financial crisis. The allocations have become complex and riddled with exceptions and special cases. The bottom line is that electricity industry regulators throughout Europe seem unanimous in saying that the ETS has not yet justified ANY pass-on to non-industrial consumers. For all practical purposes, the EU ETS has not built any carbon price into electricity during its first five years.

Irrelevant

That’s a lot to remember, but to capture the near-irrelevance of the EU ETS, just remember that it covers only 4% of EU economic output. It’s quite different from ours after all, isn’t it?

You paying attention, Nick?

Another view of the Earth's atmosphere

7 Thoughts on “Nick, nobody has an ETS like ours

  1. Barry Brill on April 28, 2010 at 10:24 pm said:

    Because New Zealand is the only country in the world to enact a national ETS – and certainly the only one to even think about including all gases and all sectors, we are the BEST. The world champion at “fighting global warming” with everything we’ve got. Gold medal for effort.

    Now we come to timing. We are also the FIRST country to legislate for an ETS. Come the revolution, we’ll be ready willing and waiting – until America, or Japan, or India, or Australia …. or somebody (maybe Fiji)… catches up. Gold medal for speed.

    Now we insist upon being the best SOLOIST – the only country to implement greenhouse gases while everybody else is starting to move away. Gold medal for stupidity.

    Did John Key promise we wouldn’t be the world LEADER. He’s right – nobody is following!

  2. Gary Kerkin on April 28, 2010 at 11:48 pm said:

    Is it not curious that when John Boscawen quoted the Minister (Smith) from 2005 criticising the hardship that Labour’s “Carbon Tax” would cause to all New Zealanders (“It will drive up the costs of living and undermine the competitiveness of New Zealand business for negligible environmental gain”) the Minister replied that Mr Boscawen did not understand the difference – that Labour’s scheme was a carbon TAX whereas the ETS is NOT a tax? He said, however, “Nor is the scheme a tax. Although consumers and businesses will pay $350 million in the first year of the scheme for their emissions, foresters will receive $1,100 million in carbon credits for post-1989 forests. Far from providing net revenue to the Government, the scheme is actually a cost to the Crown. There are 12,000 New
    Zealanders who, in good faith, planted trees on the assurances of both National and Labour Governments that they would receive carbon credits for those post-1989 forests. The emissions trading scheme honours that commitment.”

    Perhaps the Minister would be kind enough to explain why consumers and businesses HAVE to pay $350 million if it is not a tax? And, if it is not a tax, to whom is it paid? Further he might like to explain where the $1,100 million in credits the foresters will receive will come from? Particularly as no other nation will have an effective, viable, ETS? Is the $350 million to be transferred to foresters from other New Zealanders? Where will the balance of $750 million be found? Or are we dealing with sleight of hand and cash from a popular board game?

  3. outtheback on April 29, 2010 at 6:27 am said:

    Is our dear Dr Smith really saying that those 12000 NZ ers planted those trees for the carbon credit promise? $300 per hectare (or so I was told by someone trying to sell me the scheme) come on. No one until earlier this century could have planted trees with that knowledge so anyone between 89 and some 6 years ago would have planted trees without the knowledge of this “windfall”. So how many people are we talking about now? Only those who planted trees since this first came about during the reign of our previous leader. But can anyone in their right mind claim that these credits were the main reason why they planted these trees. BS. The restrictions placed on these plantings once you claim the trade money would render it almost economical suicide. You have to plant trees again once you have cut them down, so you better have a very good crystal ball to see if there is still money in trees in 40 years time.
    Trees planted in the early 90’s will start to be milled around 2018. Better hope that the demand for timber is still there in 2045. Oh, that’s right, that could be the reason why new plantings have dropped off over the last 6 years. Perhaps a vote further to the right is a better option next time.

  4. Mike J on May 1, 2010 at 12:41 pm said:

    Sounds like Smith is hiding behind a small lobby group to justify this huge tax. Stop blowing smoke, Smith and be honest for once. We are alone in the world on the breadth and depth of our ETS. It is an all-pervasive aggressive taxation. Admit it.

  5. Pingback: Climate Conversation Group » We’re alone in these trenches, Nick

  6. G.S. Williams on June 26, 2010 at 11:39 am said:

    Hi,

    It seems to me that the “ETS” , rather than being an Emissions Trading Scheme, is an Emissions Taxing Scam.

    Nick Smith must know that the IPCC has been making fraudulent statements, therefore the ETS is also fraudulent. QED.

    G.S. Williams

  7. Just to rub salt in the wound, Richard North has followed up on the CFC / CDM scam here

    http://eureferendum.blogspot.com/2010/06/perverse-consequences.html

    which has also been reported in Le Monde (link on euref above)

    Put simply, manufacturers are creating a gas – HCF 23 – a very potent greenhouse gas which they can then get carbon credits for by destroying the gas. The credits from destroying the gas are 70 times the cost of production.

    This is making “entrepreneurs” in China and India very rich, and we will be paying.

    Time to take a deep breath and then count to 10….

Leave a Reply

Your email address will not be published. Required fields are marked *

Post Navigation