12 December 2019

Five reasons why international carbon markets are a waste of time Thomas Spencer

Negotiators, diplomats, ENGOs, BINGOs and New Zealand Minister for Climate Change Issues James Shaw are meeting in Madrid for the 25th Conference of the Parties (COP25) of the UNFCCC.

This conference has a specific stepping stone goal for implementing the 2015 Paris Agreement; that is to agree the rules for international carbon markets.

However, I was surfing Kevin Anderson's twitter account lead me which to a really concise ten point tweet from Thomas Spencer that explained why international carbon markets and linked international emissions trading schemes won't be an effective means to prevent global warming exceeding 1.5 degrees Celsius. Here it is.

Why international carbon markets are a waste of time

As negotiators battle it out in Madrid over Article 6, time for me to share my (perhaps controversial) views on carbon markets.

Buckle up.

Five reasons why international carbon markets are a waste of time.

One, the cost-optimising potential of international trading is wildly overstated. The costs of our transition will depend on getting things right which are not susceptible to being directed (only) by carbon prices: massive energy efficiency, innovation, infrastructure.

Two: in a world where we have 30-40 years to be at net zero as a globe, there is no space for offsets.

Every country needs to be on a pathway for zero by mid-century, a little later for developing countries, and all investments have to be scrutinized from that perspective.

Three: seriously linking carbon markets means unachievable levels of institutional coordination. Linking markets equals linking energy policy. No country will accept that, unless it is within a very tightly knit federal or quasi-federal or extremely integrated economic zone.

Four: the 'cheap abatement potential' in developing countries is not 'cheap'. Massive abatement in developing countries requires grinding governance reforms, market reform and policy reform.

Carbon revenues are not a pixie dust that can remove the need for this.

Five: we do not live in a world were massive public flows of capital are possible. Carbon revenues are not 'private' because the good traded is created and valued by public fiat. Countries are not ready to send tens or hundreds of billions of dollars/euros/yen overseas.

As long as these conditions hold, international carbon markets will continue to remain marginal. Their historical political and intellectual domination reflects a category error: Climate change is not 'like' environmental problems that were solved by pollution markets or resource transfers. Hint: it's not.

The intellectual domination of carbon trading reflects, as well, the dominance of economists and modellers that didn't think enough about the real world.

That's a big shame, almost a criminal error, and it set climate governance efforts back almost 20 years.

This may sound overly pessimistic about the potential and role of international policy coordination. I'm not. We need: targeted, strategic, catalytic international public finance, in greater quantities than we have today and massive innovation and diffusion.

The best thing that developed countries can do is innovate an attractive, low-carbon development model for themselves.

The twenty billion Euro per year that Germany spends on paying back high-cost, early-stage solar was better spent than all the money spent on the Clean Development Mechanism, if the criteria is increasing access to mitigation options for developing countries. Time to do the same for batteries and hydrogen.

All of this is not to belittle the very dedicated negotiators currently fighting it out in Madrid. We need to wrap up that negotiation and move on, and we need to prevent the worst abuses of the mechanisms that will result.

But the need for and gap in international governance of climate change goes far beyond these markets.

Let's try and put as much effort into that.

30 October 2019

Rio Tinto says that's a nice hydro-powered aluminium smelter you got, shame if something happened to it...

Another threat to close the Tiwai Point aluminium smelter. I better finish up my data project on the free gift industrial allocation of NZETS emissions units to the big high emitting industries. Over nine years the Tiwai Point smelter alias New Zealand Aluminium Smelters/Rio Tinto Alcan received $82 million worth of free emissions units under the NZ emissions trading scheme

The Tiwai Point aluminium smelter, which is owned by New Zealand Aluminium Smelters Limited, which is majority owned by the multi-national corporate Rio Tinto Alcan, has been in the news over the last few days. As welcome as a flurry of cold westerly fronts arriving from the Tasman Sea, the company's threat to close the smelter has consumed column inches of media coverage.

23/10/19; Rio Tinto considering closing Tiwai Aluminium Smelter

23/10/19; Bluff aluminium smelter could close taking power prices tumbling

24/10/19; S&P warns of potential risk to electricity generators in the event of a closure at Tiwai smelter

24/10/19; The Southland Times Editorial; Smelter review sets up an anxious wait for Southland

24/10/19; Rio Tinto's Tiwai Point aluminium smelter - should it stay or should it go?

None of the selection of articles I have read read mention the huge quantities of free emissions units gifted to New Zealand Aluminium Smelter Limited under our pointless and irrelevant emissions trading scheme.

So I better use the smelter news as a prompt to wrap up my data project on the industrial allocation of free emission units to emitters. And to do a couple of graphs.

Yes that's right. Instead of our emissions trading scheme requiring emitters to buy and surrender emissions units - thus pricing the emissions, it gives them free emissions units which they can then sell!

The industrial allocations have prompted some of my recent posts as well as this very detailed summary about New Zealand Aluminium Smelters Limited.

Over the nine years of the NZETS from 2010 to 2018, New Zealand Aluminium Smelters Limited received 7,151,987 free emissions units. I estimate these had a market value of NZ$81,737,303.

Here is the graph of the unit allocations per year. What the fuck happened in 2013? 1,524,172 free units? It looks like they got an extra bonanza of free units to go with the $NZ30 million Bill English gave them.

Here is the graph of the estimated market value of the free units allocated per year.

Look how the market value sky-rocketed from 2016 onwards. That's just a reflection of the recovery in the emission unit prices once we were kicked out the international carbon markets after Tim Groser wouldn't sign up to a second commitment period of the Kyoto Protocol.

The price change isn't really a big deal. As I argued in this post about the smelter, because the industrial allocation formula includes extra units to offset the fictitious ETS-related electricity costs, most but not all emissions units are surrendered back to the Government under the NZETS.

The industrial allocation certainly is a subsidy but the real function is to provide New Zealand Aluminium Smelters Limited a hedge or insurance policy that prevents them facing an actual emissions price under the NZETS. It's like a Clayton's emissions price!

All the calculations are documented on this Github repository I set up for the data project.

09 September 2019

In 2018 the 6.7 million NZETS emission units allocated to 76 emitters were worth at least 243 million NZ dollars

All this data tidying and charting. It can lead to not seeing the forest for the trees. In this post I estimate the value of the 2018 free industrial allocation of emissions units to emitting industries. The number is 243 million New Zealand dollars. I find that gob-smacking

Following up from my last post, I wondered what was the market value of the 6.7 million emission units given to eligible emitters under the New Zealand Emissions Trading Scheme 2018 industrial allocation?

We will need market prices for emissions units. There is an online 'open data' Github repository of New Zealand Unit (NZU) prices going back to May 2010.

The NZU repository has it's own citation and DOI:

Theecanmole. (2016). New Zealand emission unit (NZU) monthly prices 2010 to 2016: V1.0.01 [Data set]. Zenodo. http://doi.org/10.5281/zenodo.221328

Under the Section 86 of the Climate Change Response Act 2002, eligible emitters or 'participants' in the ETS, as they are defined, may apply to the Environmental Protection Authority for a 'provisional' or estimated quantity of units for a future compliance year and for a 'final' or actual quantity of units for a past year.

We recall that one of National's 2009 amendments to the NZETS was to make unit allocation proportional to actual production. So that requires an provisional estimate and an actual 'wash-up' calculation once actual production from the regulated 'activity' is known.

The emitters must apply for both provisional and final allocations between 1 January and 30 April of each year. I am assuming that the EPA checks the applications and then transfers the initial allocation to accounts in the NZ Emissions Trading Register in May of each year.

The provisional allocation does not have to be gazetted or published. The final allocation must be gazetted or publicised on the EPA's website under Section 86B(5). But it can't be known until the EPA has received and processed all the historic wash-up applications for the just finished calendar year. That's why in September 2019 the EPA have only the 2018 unit allocations on their website. And not the 2018 final allocations.

It may be the accountant within me, but I think the emitters will want to get their initial application as close to 100% correct as possible. Or to exceed it. Because free units now will always be better than free units in 12 months time.

So let's assume the initial industrial allocation is transferred to emitters' accounts in May. At that point we can make a calculation of market value. We can check our NZU price data for a mid-May price as it's expressed in average monthly prices.

On our graph of of NZU prices, we add a vertical line for the 15th of May and then where that line intersects with the price line we add a horizontal line across to the prices on the Y axis. Or we could have looked up the .csv file of the prices. We get $NZ 21.38 per unit.

Multiplying the 6,743,573 units by $21.38 equals 143,503,233 NZ dollars!

I am gob-smacked by that! $143.5 million! Just gifted to emitters! Deliberately to reduce the effect of the carbon price on these privileged emitters. And as Idiot/Savant noted, the allocations will slowly and incrementally 'phase out' by the minutest of percentages until 2015!

Of the big three, New Zealand Steel received units worth $NZ 37.9 million, New Zealand Aluminium Smelters received units worth $NZ 28 million and Methanex received units worth $NZ 20 million. Here's the pie chart denominated in dollars.

Here is a bar chart which are usually easier to read.

Here is the tidied data of the name of the emitter, the amount of final units and the value at the mid May price of $NZ21.38. The data file is also at Google Drive sheets.

EPA Industrial Allocation Units Value 2018
Name Allocation Value
New Zealand Steel Development Limited 1782366 37928748.48
New Zealand Aluminium Smelters Limited 1324556 28186551.68
Methanex New Zealand Ltd 945210 20114068.8
Fletcher Concrete and Infrastructure Limited 584032 12428200.96
Oji Fibre Solutions (NZ) Limited 484322 10306372.16
Ballance Agri-Nutrients (Kapuni) Limited 325594 6928640.32
Pan Pac Forest Products Limited 210652 4482674.56
Norske Skog Tasman Ltd 200556 4267831.68
Winstone Pulp International Limited 151546 3224898.88
Graymont (NZ) Limited 144405 3072938.4
Whakatane Mill Limited 139690 2972603.2
ACI OPERATIONS NZ LIMITED 59945 1275629.6
Fonterra Limited 50664 1078129.92
Asaleo Care New Zealand Limited 29419 626036.32
Nelson Pine Industries Limited 26569 565388.32
Wallace Group Limited Partnership 26539 564749.92
Pacific Steel (NZ) Limited 19550 416024
EVONIK PEROXIDE LIMITED 18443 392467.04
Daiken New Zealand Limited 17770 378145.6
Dongwha New Zealand Limited 16854 358653.12
Status Produce Limited 15496 329754.88
Taranaki By-Products Ltd 14197 302112.16
Exception Limited 11618 247231.04
Tuakau Proteins Ltd 11393 242443.04
Anchor Ethanol Limited 10784 229483.52
Southern Paprika Limited 10406 221439.68
Alliance Group Limited 10012 213055.36
Affco New Zealand Limited 9465 201415.2
Under Glass (Karaka) Limited 7574 161174.72
Gourmet Mokai Limited 7006 149087.68
Under Glass (Bombay) Ltd 6194 131808.32
Websters Hydrated Lime Company Limited 5999 127658.72
J.S.Ewers Ltd 5853 124551.84
Hawkes Bay Protein Limited 5740 122147.2
CMP Canterbury Limited 5470 116401.6
Juken New Zealand Ltd 5304 112869.12
Gourmet Paprika Limited 4837 102931.36
PVL Proteins Limited 3632 77288.96
Fletcher Building Products Limited 3344 71160.32
Sharma Produce Limited 2677 56966.56
Gourmet Waiuku Limited 2190 46603.2
Kakariki Proteins Limited 2037 43347.36
Shipherd Nurseries Limited 1900 40432
Island Horticulture Limited 1717 36537.76
Tegel Foods Limited 1632 34728.96
Value Proteins Ltd 1581 33643.68
Whakatane Growers Limited 1393 29643.04
P H Kinzett Ltd 1344 28600.32
Moffatts Flower Company Limited 1182 25152.96
Karaka Park Produce Limited 1169 24876.32
Van Lier Nurseries Ltd 1123 23897.44
Taylor Preston Limited 1104 23493.12
Meenakshi Devi Sharma, Raj Kumar Sharma 1080 22982.4
Vege Fresh Growers Limited 1075 22876
Jai Shankar Growers Limited 928 19747.84
Prime Range Meats Limited 928 19747.84
Homestead Produce Ltd 881 18747.68
Sinai Hort Limited 604 12853.12
J.S. Mahey Limited 599 12746.72
Castle Rock Orchard Ltd 564 12001.92
Karamea Tomatoes Limited 526 11193.28
Poppas Peppers 2009 Limited 351 7469.28
Taaza Green Limited 337 7171.36
Harbour Head Growers Ltd 261 5554.08
Ting-Yuan Robert Wu 239 5085.92
Parkgard Growers 2000 Limited 222 4724.16
Antone James Ivicevich, Joanne Elizabeth Gould Ivicevich 210 4468.8
Graeme Lowe Protein Limited 198 4213.44
Mary Jane Fausett, Peter James Fausett 143 3043.04
Pomoana Gardens Limited 100 2128
John Hamilton Charles Falloon, Paul Gregory Whitehead 79 1681.12
Royal Roses Limited 66 1404.48
Kingbridge Ltd 61 1298.08
Eseta Kovati, Reupena Kovati 37 787.36
GELITA NZ Ltd 29 617.12
Wallace Corporation Limited 0 0

02 September 2019

Ten NZ companies were given 6.7 million free emission units in 2018

Have open tidy data; will graph it. I whip up a pie chart of the top ten New Zealand companies rorting the New Zealand Emissions Trading Scheme via free allocation of emissions units.

Of 6.7 million NZ Emissions Trading Scheme emission units allocated by the Environmental Protection Authority (given for free instead of being sold by auction) to industries in 2018, 6.2 million or 91% went to ten well-known New Zealand companies.

Here is the R script.

Here is the data of the emissions units gifted for free to industrial emitters in 2018.

Windfall gifting of emissions units to industry in 2018
Name Allocation
New Zealand Steel Development Limited 1,782,366
New Zealand Aluminium Smelters Limited 1,324,556
Methanex New Zealand Ltd 945,210
Fletcher Concrete and Infrastructure Limited 584,032
Oji Fibre Solutions (NZ) Limited 484,322
Ballance Agri-Nutrients (Kapuni) Limited 325,594
Pan Pac Forest Products Limited 210,652
Norske Skog Tasman Ltd 200,556
Winstone Pulp International Limited 151,546
Graymont (NZ) Limited 144,405
Whakatane Mill Limited 139,690
ACI OPERATIONS NZ LIMITED 59,945
Fonterra Limited 50,664
Asaleo Care New Zealand Limited 29,419
Nelson Pine Industries Limited 26,569
Wallace Group Limited Partnership 26,539
Pacific Steel (NZ) Limited 19,550
EVONIK PEROXIDE LIMITED 18,443
Daiken New Zealand Limited 17,770
Dongwha New Zealand Limited 16,854
Status Produce Limited 15,496
Taranaki By-Products Ltd 14,197
Exception Limited 11,618
Tuakau Proteins Ltd 11,393
Anchor Ethanol Limited 10,784
Southern Paprika Limited 10,406
Alliance Group Limited 10,012
Affco New Zealand Limited 9,465
Under Glass (Karaka) Limited 7,574
Gourmet Mokai Limited 7,006
Under Glass (Bombay) Ltd 6,194
Websters Hydrated Lime Company Limited 5,999
J.S.Ewers Ltd 5,853
Hawkes Bay Protein Limited 5,740
CMP Canterbury Limited 5,470
Juken New Zealand Ltd 5,304
Gourmet Paprika Limited 4,837
PVL Proteins Limited 3,632
Fletcher Building Products Limited 3,344
Sharma Produce Limited 2,677
Gourmet Waiuku Limited 2,190
Kakariki Proteins Limited 2,037
Shipherd Nurseries Limited 1,900
Island Horticulture Limited 1,717
Tegel Foods Limited 1,632
Value Proteins Ltd 1,581
Whakatane Growers Limited 1,393
P H Kinzett Ltd 1,344
Moffatts Flower Company Limited 1,182
Karaka Park Produce Limited 1,169
Van Lier Nurseries Ltd 1,123
Taylor Preston Limited 1,104
Meenakshi Devi Sharma, Raj Kumar Sharma 1,080
Vege Fresh Growers Limited 1,075
Jai Shankar Growers Limited 928
Prime Range Meats Limited 928
Homestead Produce Ltd 881
Sinai Hort Limited 604
J.S. Mahey Limited 599
Castle Rock Orchard Ltd 564
Karamea Tomatoes Limited 526
Poppas Peppers 2009 Limited 351
Taaza Green Limited 337
Harbour Head Growers Ltd 261
Ting-Yuan Robert Wu 239
Parkgard Growers 2000 Limited 222
Antone James Ivicevich, Joanne Elizabeth Gould Ivicevich 210
Graeme Lowe Protein Limited 198
Mary Jane Fausett, Peter James Fausett 143
Pomoana Gardens Limited 100
John Hamilton Charles Falloon, Paul Gregory Whitehead 79
Royal Roses Limited 66
Kingbridge Ltd 61
Eseta Kovati, Reupena Kovati 37
GELITA NZ Ltd 29
Wallace Corporation Limited 0

31 August 2019

If we can't tidy up the NZ emissions trading scheme can we tidy up the dataframe of the free allocation of units

I do some data cleaning and tidy up the EPA's table of 2018 free giveaway emissions units.

In this follow up post about the EPA's non-tidy table of 2018 industrial allocation/free giveaway of emissions units, I use a great opensource programme OpenRefine to tidy the allocation data into a 'tidy' format of 'each variable is a column, each row is a an observation and each cell is a value'.

I have recorded my commands as much for my own benefit in the future if and when I try to replicate the commands. There's a joke in the reproducible research online community "the hardest person to email questions to is yourself three years ago".

Assuming you have installed OpenRefine to your Linux Debian based operating system, open a terminal window and type:

cd /home/user/Refine/openrefine-3.2/

Type './refine' and press enter

Wait for Firefox to start at IP http://127.0.0.1:3333/ which will start OpenRefine

Go to the Google sheet obtained from the EPA webpage https://docs.google.com/spreadsheets/d/1arfDpqiXg84SwTAiY5TWzDxOJNrnJxvG9GgyBY8jCRM/ and download the .csv file to '/home/user/Downloads'

Copy the downloaded .csv file to /home/user/Refine/openrefine-2.6-beta.1/

Go back to Firefox and enter "http://127.0.0.1:3333/" into the address bar. That will open OpenRefine.

In OpenRefine, select the button "Create a project by importing data"

Browse to and select /Refine/openrefine-2.6-beta.1/NZ-emission-unit-industrial-allocation-decisions-EPA-2018 - Sheet1.csv

Click on 'Next' button and 'create new project'

Select and tick 'ignore first line at the beginning of the file

Tick 'Parse next 1 line as column headers'

Click on 'create new project'

We should have 108 rows of data - look at the second column, it mixes two variables, 'Applicants name' and 'Activity'

Edit column - Add new column 'Activity' based on column *Activity and Applicant's Name* - add name 'Activity'

write " if(value.startsWith("*"), value[1,37],"")" into the Expression box. That moves only the activities into their own column.

Edit column, Add column based on column Applicants Name called 'Name'

in the Expression box , leave 'value' in box and copy the column by selecting 'ok'

Select Activity column, edit cells, fill down (fills all Activities to empty cells)

Edit column - Add new column 'Year' based on column *Activity and Applicant's Name* - add name 'Year' and value '2018' in expression box

Select the header *2018 Final Unit Entitlement*, edit cells, common transforms, to number

Select the header *2018 Final Unit Entitlement*, select Facet, numeric facet, go to left side of dashboard, untick 'numeric' box, leave 'blank' box (24 records) ticked,

Select column 'All', then Edit rows, remove all matching rows (that leaves 84 rows with no blank cells in *2018 Final Unit Entitlement*)

Select column *Activity and Applicant's Name*, Edit column, Remove this column

Select column *Activity", Edit column - Add new column 'Activity' based on column 'Activity2' - add name 'Activity' and expression in box enter value.replace("*","") - to remove the *. And we have a tidy data table!

Click on the data project name at the top and just right of the "OpenRefine" label "NZ-emission-unit-industrial-allocation-decisions-EPA-2010-2018-Sheet1-csv". Change the name to "NZ emission unit industrial allocation decisions EPA 2018 tidy"

Select 'Export' (in top right corner) as a .csv file

Upload the csv file to Google Drive via the Gdrive command line utility

Open a xterminal window, for first upload enter;

gdrive upload /home/user/Refine/NZ-emission-unit-industrial-allocation-decisions-EPA-2018-tidy.csv

In Google sheets i changed the file's name to "NZ-emission-unit-industrial-allocation-decisions-EPA-2018-tidy" and I 'shared' the file to 'public'.

Download the file to your computer and open it with a spreadsheet program such as gnumeric.

We can see that we now have a tidy dataframe where each variable is a column, each row is a an observation and each cell is a value - the number of emissions units given away for free to greenhouse gas emitters under the NZ emissions trading scheme.

25 August 2019

Industrial allocation of ETS emissions units to emitters is subsidizing polution forever

It's 2019 and the NZ emissions trading scheme is still over-allocating free emissions units to high emitting industries instead of just making them pay for 100% of their emissions. I reference the No Right Turn blog and do some open data with the 2018 free allocation of units.

On 31 July, the indefatigable Idiot/Savant of No Right Turn blog reported that the Government had decided to start a very gradual phase-out of 'free allocation' of emissions units to industrial emitters under the emissions trading scheme.

Now for a reminder about the context, revisit this post NZ Aluminium Smelters Ltd and their free allocations of NZETS units - carbon price or carbon insurance policy?. There I summarise all my many posts about excessive over-allocation of emissions units to emitters under the NZETS.

The media statement released by Minister for Climate Change Issues James Shaw states:

"The plan is to begin phasing down industrial allocation at 1 per cent per year from 2021-2030, then at 2 per cent from 2030-2041, and at 3 per cent per year from 2041-2050".

To quote Idiot/Savant:

"And when you do the maths, it means the government will still be subsidising highly intensive industrial polluters by 20% of their emissions in 2050, the year we're supposed to be at net-zero emissions.
This is bullshit, simply bullshit. And it is bullshit neither the country nor the planet can afford".

Idiot/Savant termed this "Pollution forever".

I agree with him. This is just an appalling policy. Every emission unit given for free to an emitter is a right to emit one tonne of greenhouse gases. Its a voucher for pollution. It's worse than that, it's an instruction to pollute. Every unit allocated represents a blunting of the price incentive to reduce emissions. It's exactly the same as the Government giving the emitters petrol (or coal) vouchers paid for by the taxpayer. I am amazed that James Shaw can even put his name to this policy.

Idiot/Savant is the only blogger, or commentator for that matter, in New Zealand, who is regularly providing hard analysis of climate change and emissions trading scheme policy. In a further post, he looks at how the free industrial allocation of units will benefit New Zealand's largest industrial emitters; New Zealand Steel, New Zealand Aluminum Smelters Ltd, Ballance Agri-Nutrients (Urea) and Methanex (methanol).

In this post, I am going to go through the steps to obtain the latest data, for the 2018 calendar year, of free allocation of emissions units from the webpage of the NZ Environmental Protection Authority. And then upload it to Google sheets.

Here is the EPA webpage listing the final annual allocations from 2010 to 2018.

Okay, we need to scroll down and expand the tabs to see the data.

We see that the industrial activity of aluminium smelting always leads off. New Zealand Aluminium Smelters Limited received 1.3 million units for 2018. Alphabetical order is after all the text version of linear progression.

The EPA web site has a copyright statement saying that a Creative Commons International Attribution licence applies to their website.

And Section 86B subsection 5 "Decisions on applications for allocations of New Zealand units to industry and agriculture" of the Climate Change Response Act requires the EPA to publish the final allocation numbers for a calendar year "as soon as practicable" in the Gazette and on the EPA website.

So the industrial free allocation data is intended to be available to and used by the public. However, the EPA does not provide a link for downloading the data in an 'open data' format such as text, .csv or spreadsheet. There is a table in .html format. However it is not in a 'tidy' format. The first column mixes up two variables; the name of the emitter and the name of the industrial activity generating the emission. The name of the industrial activity has a sub-heading row to itself. This creates blank cells.

The rule for tidy data is:

Each variable has its own column
Each observation has its own row
Each value is in its own cell

To obtain the data, I am going to repeat a 'webscrape' I have used before. I create a new google sheet. I insert the url of the EPA Industrial allocation decision webpage into cell 'A1'. I insert the text '=importhtml(A1,"table",1)' into cell A2. And the full table of the 2018 year unit allocation data appears in the sheet.

The next step will be cleaning the data stored in the google sheet to make it 'tidy' Then some data analysis. That can be a new post.

13 August 2019

Inaction on Agriculture - pastoral agriculture gets feather bedded into the emissions trading scheme

At 4:58 p.m., two minutes before the deadline, I uploaded my submission to the Ministry for the Environment's In Action on Agriculture consultation.

This is about the Government's response to the first report of the Interim Climate Change Committee. The proposal is extremely disappointing. It involves 'feather bedding' New Zealand's pastoral agriculture sector into the emissions trading scheme by giving the public a Hobson's choice of two completely compromised proposals.

First weak option; agriculture joins the emissions trading scheme from 2025 with the weakest obligation possible (i.e. after a free allocation of emissions units equal to 95% of emissions - and at the most complex way possible - at farm level.

Or - the second weak option; the industry runs their own scheme, also based on a free allocation of emissions units equal to 95% of emissions at farm level from 2025.

The Ministry helpfully provides a set of questions submitters have to navigate through. Some of which pre-suppose certain limits to the answers. I have underlined each question and then provided my response.

1. What is the best way to incentivise farmers to reduce on-farm emissions?

I do not agree that this is the correct question to ask. The framing of the question pre-supposes the answer. The more objective, neutral and policy-relevant question is "What are the best policies to reduce emissions from the pastoral agriculture sector?"

I consider that the proposals are compromised and inadequate responses to the urgent need to reduce agricultural emissions. They are clearly not fit for purpose.

The proposals are so weak in terms of price, scope, timeliness, exceptions, excessive unit allocations, complexity and difficulty of implementation - that they are worse than doing nothing.

The proposals, if implemented, would undermine the role of the yet to be established Independent Climate Commission by predetermining the agricultural emissions targets and 5 year budgets.

I recommend that neither proposal is accepted.

I recommend that pastoral agriculture be entered into the emissions trading scheme at processor level from 2020 with no free allocation of emissions units.

2. Do the pros of pricing emissions at farm level outweigh the cons, compared with processor level, for (a) livestock and (b) fertiliser? Why or why not?

Even the consideration of pricing emissions at farm level is the incorrect framing to apply. Farm level pricing would not be fit for purpose. It is highly problematic in terms of price, scope, timeliness, exceptions, excessive unit allocations, complexity and difficulty of implementation. Processor level pricing is efficient and sends an effective emission price back through the value chain.

3. What are the key building blocks for a workable and effective scheme that prices emissions at farm level?

There are no feasible building blocks for a workable and effective scheme that prices emissions at farm level. The framing of this question is not appropriate as it presupposes the outcome.

The notion of a "workable and effective scheme that prices emissions at farm level" is currently a figment of the imagination.

From the point of view of establishing reasonably effective policy, it has become an unrealistic and unachievable expectation of 'best' policy. In this consultation, it has the role "letting the perfect be the enemy of the good" and being given as a reason to try to implement the most difficult , the most time-consuming and most impractical point of obligation.

4. What should the Government be taking into consideration when choosing between Option 1: pricing emissions at the processor level through the NZ ETS and Option 2: a formal sector-government agreement?

The Government should be considering the interplay of the 2019 'zero carbon bill' debate and of the dogged determination of the pastoral agriculture interests to avoid any regulation of their emissions.

I question the utility of negotiating a detailed ETS/emissions policy agreement with pastoral agriculture sector, when the pastoral agriculture organisations do not accept or agree with the higher level goal - the proposed 2050 methane target in zero carbon bill. How can there be a 'partnership' approach when the partners do not even agree what the methane target is?

Dairy NZ, Federated Farmers, and Beef and Lamb NZ have a uniform and consistent position of opposing any methane target above 'business as usual' incremental changes in efficiency. The only mitigation they will tolerate will be technology-based 'supply side' reductions in intensity in per unit of output. Such technology has been researched at the tax payers expense for about a decade.

In short, their position on New Zealand's 'zero carbon' targets, is that there should be no absolute reduction in methane emissions, no absolute reduction in stock numbers and no changes in land use in the pastoral sector to lower-emission land use.

Given the firmly and repeatedly articulated viewpoint of the pastoral lobby, I was very surprised on 16 July 2019, to read about Ministers Shaw and O'Connor announcing "Consensus reached on reducing agricultural emissions".

This must a different definition of 'consensus' than the one from my dictionary. The Ministers and the pastoral lobby have opposite views on the proposed 2050 methane target in the zero carbon amendment bill. How can a partnership compromise proceed without agreement on the basic methane target?

The tactics of the pastoral agricultural lobbyists are clear; to delay policy timing/implementation by promoting the problematic farm-level obligation and to minimise policy scope by including minimal targets and exceptions/discounts through excessive free allocation of units. Then wait out a period of 'wet bus ticket' compromised and ineffectual policy until it is removed by the next National-led Government.

Todd Muller of the National Party is on record that the next National government will lower the 2050 the methane target (speech to Federated Farmers Taranaki AGM in Stratford on 24 May) and that National will never put pastoral agriculture in the emissions trading scheme (interview with Jack Tame of 'Q & A' on 23 July).

If the proposed 2050 methane target is lowered to about 20% over 30 years (the same as past efficiency gains), as Dairy NZ, Federated Farmers, and Beef and Lamb NZ have submitted, I absolutely question if is there any point adopting either proposal.

Research into mitigation of agricultural emissions

The Productivity Commission (2018) on pages 312 and 313 notes that the Government invests roughly $20 million each year into mitigation research, most of which helped fund three research centres.

1. The Pastoral Greenhouse Gas Research Consortium, set up in 2003.
2. The New Zealand Agricultural Greenhouse Gas Research Centre, established in 2009.
3. The Global Research Alliance on Agricultural Greenhouse Gases (GRA) in 2009.

As a taxpayer, I do not begrudge the significant investment of tax that has been invested in researching mitgation technologies for methane and nitrous oxide. I accept that the benefits could help many countries. However, I do not see that research can be a substitute for mitigation for an indefinite time.

I consider that indefinite time has passed and there is a 'quid pro quo' that applies. Given the research funding, and given the past decade-long exemption of agriculture from the ETS, I think it is now unconscionable for pastoral agriculture to be evading emissions reduction policies. I consider this applies whether the evasion of policies is - by seeking a 'zero methane' target or by seeking 95% free allocation of units or by seeking farm-level point of obligation. This just isn't acceptable.

5. As an interim measure, would Option 1: pricing emissions at the processor level through the NZ ETS with recycling of funds raised back to the sector to incentivise emissions reduction or Option 2: a formal Government-industry agreement for reducing emissions be best? Why?

What will be best will be emissions pricing implemented on the basis of standard economics principles such as 'pricing the externality', 'polluter pays', 'finite emissions cap' and 'processor level point of obligation'.

I recommend that pastoral agriculture be entered into the emissions trading scheme at processor level from 2020 with no allocation of emissions units.

6. What additional steps should we be taking to protect relevant iwi/Māori interests, in line with the Treaty of Waitangi?

The Ministry should already have carried out a suitable process of consultation with iwi and hapu. The consultation document does not mention any consultation. I find that unsatisfactory. The Ministry should be taking into account the principles of the Treaty of Waitangi. That requires, at a minimum, consultation. The Productivity Commission 2018 report into the low emissions economy discussed issues affecting iwi and hapu and it is a poor reflection on the consultation document that it doesn't.

7. What barriers or opportunities are there across the broader agriculture sector for reducing agricultural emissions? What could the Government investigate further?

The main barriers to reducing agricultural emissions are the pastoral agricultural lobbyists Dairy NZ, Federated Farmers, and Beef and Lamb NZ and their preferred political party the National Party. Their positions and actions and statements show that they are a generation behind urban New Zealanders (and many farmers) in terms of responding to climate change. They say they accept the science and that it supports their position of no policy and no absolute reduction in emissions. And that they are already the world's most efficient farmers. They are, to coin a term, 'mitigation deniers'.

The Government should investigate "less cows" - which is otherwise known as 'demand side management' or changes in land use (to lower emissions uses).

The ICCC report only mentions the option of change in land use once in it's report. Todd Muller has even embarrassed himself in stating to TV One, to Radio New Zealand that Te Papa is not allowed to mention "less cows" in the context of a exhibition on declining water quality.

8. What impacts do you foresee as a result of the Government’s proposals in the short and the long term?

In the short term the implementation of either proposal will involve almost insurmountable practical difficulties that will result in no practical reduction in greenhouse gas emissions from pastoral agriculture.

Nor will the Government be thanked for it's compromise. It will only earn further scorn from the agriculture sector for 'imposing' an 'impractical' policy on them. There is nothing some agricultural interests like more than criticising governments and bureaucrats for not being 'practical'.

In the long term the implementation of either proposal will be remembered as yet another failed implementation of emissions pricing where the political lobbying of the sector's vested interests prevented effective policy.