18 August 2011

OIA pie chart

Maybe Dr Smith can explain what the total number of NZ Units allocated to industry is - as represented in the pie chart Figure 8 in the Report on the New Zealand Emissions Trading Scheme. I will see how it goes. Probably I will have to wait 20 working days for an answer.

The Hon Nick Smith
Minister for Climate Change Issues
Parliament Office
Private Bag 18888
Parliament Buildings
Wellington 6160

By email to: N.Smith@ministers.govt.nz

17 August 2011

Request for Official Information regarding the Report on the New Zealand Emissions Trading Scheme

Dear Mr Smith, [Oh dear, I should have called him Dr Smith]
I have read with interest the Report on the New Zealand Emissions Trading Scheme, by the Ministry for the Environment, which you released on 1 August 2011.
However, I am puzzled by one of the charts, Figure 8, on page 16.
Figure 8 presents allocations of New Zealand Units by activity expressed as a percentage for each 'pie slice'. The report appears to omit the total number of New Zealand Units allocated (the number that each represents 100% of all the 'pie slice' proportions) and the number of units allocated to each activity. This seems inconsistent with other charts in the report. For example, Figure 5 on page 9 is accompanied by a table of the data used.
Will you please provide me with the actual data, for Figure 8, being the actual number of units allocated to each activity and the total number of units?
Thank you for your assistance

Subject: Thank you for your email
From: "N Smith (MIN)"
Date: Wed, August 17, 2011 3:59 pm
On behalf of Hon Dr Nick Smith thank you for your email. Your correspondence has been noted and will be recorded. All correspondence, including email, is routed through our mail tracking process. Although e-mail increases the speed of delivery, the "behind-the-scenes" efforts of the Minister's staff in responding to mail cannot always provide the kind of speedy response users of email may anticipate.
While the minister considers all correspondence to be important, if it is obvious that you are writing only to express a personal view your opinion will be noted but a response beyond this acknowledgement may not be sent. Kind regards

Subject: RE: Official Information Act 1982 attached
From: "Natasha Lewis (MIN)"
Date: Wed, August 17, 2011 4:50 pm

On behalf of the Hon Dr Nick Smith, Minister for Climate Change Issues, I acknowledge receipt of your request for information as identified in your email below. Your request will be processed in accordance with the provisions of the Official Information Act. Please contact me should you have any questions in relation to this request. Kind regards
Natasha Lewis
Private Secretary for Environment and Climate Change Issues
Office of Hon Dr Nick Smith, Minister for the Environment and Minister for Climate
Change Issues
Parliament Buildings|Wellington| New Zealand

17 August 2011

Charting unexplained territory in the NZ ETS Report

So far, I have posted on the comprehensiveness of the NZ ETS vs the Australian Clean Energy Future ETS, the Kyoto chart junk in the Report on the New Zealand Emissions Trading Scheme, and the over-supply of the New Zealand Units in 2010.

This post mixes two of these ideas; searching out bad charts and looking again at the supply side of the NZ ETS market, how many New Zealand Units were allocated for free to emitters and businesses.

The Report on the New Zealand Emissions Trading Scheme provides in Figure 5 a pie chart of the number of New Zealand Units (NZUs) surrendered by emitters.

Although the pie chart is Kaiser Fung's least favourite type of chart, this pie chart isn't too bad. There are a manageable number of categories; only five; and no 3-D effects. The key point is clear from the pie chart, that about two-thirds of NZUs surrendered were purchased from foresters. Also the chart follows the Ministry for the Environment usual practice of providing the original data underneath so you can make your own chart.

I did a bar chart of the data, re-labelling the "Other" NZUs as "Free NZUs".

The free allocations of NZUs are shown in another pie chart, Figure 8.

The allocations to industry activities (the pie slices) are charted not as as numbers of NZUs as in Figure 5, but as proportions. The proportions are noted as percentages on each pie slice. There is no table of data accompanying the chart. This is clearly inconsistent with Figure 5. Why doesn't the pie chart show either the actual total number of NZUs allocated, or the number allocated by activity? The total number of NZUs allocated for free in 2010 is not disclosed anywhere else in the Report on the New Zealand Emissions Trading Scheme. There is another chart, Figure 11, that appears to show free NZU allocations to each industry sector.

Maybe these add up to the total "pie" in Figure 8. I added them up. 1.76 million NZUs given to industry, plus 6.9 million NZUs given to pre-1990 forest owners plus 0.69 million NZUs given to fishing quota holders, equals a total of 9.35 million NZUs.

However, the total number of NZUs allocated by free gifting between 1 July 2010 to 31 December 2011 is 12,776,026, according to the Ministry of Economic Development Chief Executives report. So there appears to be a gap of 3.4 million gifted NZUs, not disclosed in The Report on the NZ ETS.

Is this a big deal? I think it is. Dr Jan Wright, the Parliamentary Commissioner for the Environment, describes free allocation for what it is; a subsidy to industry

In her submission on the 2009 amendments to the NZ ETS, Jan Wright said;
Allocation is costly. Each credit that is given away rather than kept or sold is a real dollar loss to the taxpayer. And there is another cost: it lessens the incentive to invest in low-carbon technology and emissions reductions. Generous and unlimited allocation that is promised to last a long time –whether or not it actually does - removes the push to transform to a low carbon-intensive economy.

To me presentation is an unsatisfactory level of disclosure of information. I am struggling to find an explanation for this other than to obscure the amount of subsidies funded via NZUs to emitters such as Comalco. I leave the last word to Jan Wright.
The principle of Parliamentary scrutiny in the Public Finance Act should also apply to allocation. Given the large taxpayer expense, the reason for allocating to a particular sector should be transparent.

The NZ ETS Report disclosure does not meet this standard of transparency.

12 August 2011

The Beauty of cricket pavilion names

I love the website Ugly New Zealand.com So I sent them some pictures "at and about" Karori Park.
Dear Ralf,

I love your website.

May I provide you these photos I took today? Please feel free to put them on your website if they meet your standards.

Some descriptions.

"What is is with cricket clubs? Why are they obsessed with naming their facilities after retired club Presidents? Why is the font CAPS plus plus? Was there really a club President named David Bain? Is there something the residents of Karori don't know?

What can you see from the David Bain viewing area. Duh! You can see the Ted Tyler scoreboard!

What other anthropomorphic facilities are in Karori Park? Well there is the Catley Curtis Nimmo PAVILION.

Whats the rest of Karori Park like? A damp running track around a mist-shrouded rain-drenched cricket field hidden in the ravines of Karori. It is a little known fact that Karori Park has the third highest annual average rainfall in NZ after the Cropp River recorder in the upper Hokitika catchment and Milford Sound.

10 August 2011

Report on the New Zealand Emissions Trading Scheme

Finally I have got past the chartjunk and I have read the Report on the New Zealand Emissions Trading Scheme that Minister for Climate Change Issues Nick Smith released on 1 August 2011.

Perhaps the first point to make is that the New Zealand Emissions Trading Scheme (NZ ETS) has now been though a complete compliance period, the six months from 1 July 2010 (when energy and industry entered) to 31 December 2010. In that period both buyers (emitters) and sellers (foresters) of emissions units had obligations under the NZ ETS. So we should be able to make an assessment of how the NZ ETS is working.

The same underlying data, emissions units issued and surrendered in the 2010 compliance period, has already been available from the "central bank" for emissions units - the NZ Emissions Unit Register, run by the Ministry of Economic Development. The Climate Change Response Act requires certain information on emissions trading to be disclosed annually. The Ministry for the Environment's Report on the New Zealand Emissions Trading Scheme is really this same trading information with some, ugh, "100% Pure" photo shoot pictures, quite a few junk charts and several text-boxes.

The MfE report and Dr Smith's press release received some media coverage. The best reporting, with no junk charts, is Brian Fallow in the NZ Herald.

Dr Smith's narrative is that the NZ ETS is going well and Fairfax/Stuff repeated this angle, as did the National Business Review and even Reuters said the NZ ETS was working as intended. The Sydney Morning Herald even reported that the NZ ETS had "performed to expectations."

In terms of raw numbers, there 96 mandatory "participants" (emitters) in the NZ ETS at 31 December 2010, of which 76 are in the energy sector. There were 1,216 voluntary participants, of which 1,206 were in the forestry sector; forestry having entered the NZ ETS from 1 January 2008 mainly in terms of sequestering carbon in forest carbon sinks. In the six months from 1 July to 31 December 2010, 12.8 million NZUs were gifted to participants by "free allocation"; 9.4 million NZUs were transferred to mostly to foresters for forest carbon sequestration and 8.3 million units were surrendered to the Government (Surrender means to obtain units equivalent to a participant's GHG emissions and to transfer them to the Government's account at the NZ Emission Units Register).

We may then ask "So what?" in response to these raw facts. Well, lets think how the NZ ETS performed according to the expectations of someone who has written a book on the NZ ETS - The Carbon Challenge: the economist Geoff Bertram. In the book, Bertram analysed the NZ ETS as a market for emission units/carbon credits and as a market it can be understood in terms of supply, demand and price.

The supply of NZUs into the market for the six months from 1 July to 31 December 2010 was 22.2 million NZUs, made up of 12.8 million NZUs gifted to companies by "free allocation"; and 9.4 million NZUs transferred for forest carbon removals.

The demand from the market participants (the emitters) is the 8.3 million units surrendered in 2010. The NZ Emissions Unit Register report tells us that the 2010 year GHG emissions were 33.4 million tonnes and the NZ ETS-liable emissions from 1 July 2010 to 31 December 2010 were roughly half that at 16.3 million tonnes. Remember Nick Smith's 2-for-1 deal to surrender 1 unit for 2 tonnes of GHGs? That explains why only 8.3 million units were surrendered, when 16 million tonnes of GHGs were reported.

For me the critical issue here is that supply (22.2 million units) exceeded demand (8.3 million) by 13.9 million units (or by 267%). There were 13.9 million units left over after emitters satisfied their 2010 NZ ETS surrender obligations.

As we know from basic economics, when supply exceeds demand, the price drops. The MfE report and Dr Smith's press release make no mention of the NZ ETS carbon price. However, the reliable Westpac carbon update provided this chart which shows the declining price of NZUs in 2010-2011.

The excess 2010 units have no expiry date and will carry forward to 2011. In 2011 and 2012, as well as starting with excess units, the 2010 template will be repeated for 12 months not six. More units will be allocated for free to industrial emitters and more units will be given to pre-1990 foresters as compensation, and to post-1989 foresters for carbon sequestration. The 1-for-2 deal carries on as well to 2013. These features are embedded into the structure of the NZ ETS and will ensure that for the rest of the Kyoto Protocol commitment period to 2012 that the NZ ETS market will be over-allocated with NZUs which will trade at a discount to other internationally marketable Kyoto emissions units.

Geoff Bertram and Simon Terry made a number of predictions in The Carbon Challenge. Here's one.
"In the New Zealand scheme, arbitrage between the NZU and the Kyoto currencies sets a ceiling on the carbon price, with no quantity limit. Local emissions volumes will change only insofar as the price of the Kyoto currencies constitutes an incentive to change behaviour; and NZUs will be used to cover liable emissions only insofar as they are a cheaper alternative to Kyoto currency units" (p 58).

My conclusion is that, contrary to Dr Smith's narrative, the MfE report on the NZ ETS is completely consistent with Geoff Bertram's prediction that the NZUs would be over-allocated, would be priced at a discount to international units and as a consequence the NZ ETS will not provide a sufficient price incentive to reduce GHG emissions.

09 August 2011

How to chart the NZ Kyoto Protocol commitment

The post about Dr Nick Smith's junk chart has been on Hot Topic NZ, the Oil Drum Oz and NZ and hat-tipped on No Right Turn

Okay, so what would a good chart of New Zealand's greenhouse gas emissions and compliance with the Kyoto Protocol look like?

We mulled over that issue last year when we wrote a how to book on carbon forests.

I came up with this chart as a first draft.

Clunky and black and white. Add colour.

Paul Kennett said "hmmmm" and asked me for the data and he came up with this.

Not surprisingly, Paul's version appeared in the published version of The Carbon Forest (available now at the Kennett Bros!)

02 August 2011

Trends in Labour and Greens polling

I prepared this chart as my response to the media chortling and blogosphere despair over the Labour Party's polling. It's of course dedicated to Scott of Imperator Fish.

I downloaded the 2009-2011 polls data lovingly recorded on Wikipedia for Labour and the Greens. Lots of dots. To keep it simple, I put in a linear regression trend line through each series of dots.

On that basis, there is no real trend in either the Labour or the Greens polling! And it's just not valid to say "Labour's polling is on a downward trend".

So for Labour the bad news is not extremely bad, but it still fairly bad, as there is still a consistent trend of a 20 point gap between Labour and National.

The NZ ETS Review 2011 and the Minister's Chartjunk

This evening I was intending to carefully read the Report on the New Zealand Emissions Trading Scheme that Minister for Climate Change Issues Nick Smith released today and write a considered review.

However, I only got as far as Nick Smith's forward on the the third page when I got stopped in my tracks by Figure 3, a misleading piece of chartjunk if I ever saw one, about New Zealand being on target to meet its obligations under the Kyoto Protocol. Here it is.
The chart legend says it shows "Kyoto net emissions (actual emissions)". This parameter trends upward to 2007 and then in 2008 and 2009 it suddenly drops below the blue line of NZ 1990 emissions. Thus showing we are meeting our emissions reduction commitment that we signed up in the Kyoto Protocol. Its enough to make you proud to be a Blue-Green.

This chart is junk because it misrepresents the underlying data on greenhouse gas emissions. Back to the legend: "Kyoto net emissions (actual emissions)". Why does it say "actual emissions" in brackets? Because Smith would like you to think that. Lets look at a real chart of real New Zealand greenhouse gas emissions.

This shows total real emissions up to 2007 and predicted emissions 2008 to 2012 - the green line. It looks nothing like Fig 3. The actual and predicted trend does not show a return to 1990 volumes of emissions. However, that legend also said net emissions, that is total or gross emissions in any year less carbon absorbed by forests. Maybe Fig 3 is based on net emissions.

The trend in net emissions (total less forest sink removals) or the blue line shows an even steeper rate of increase than the total emissions. So how can Fig 3 show that New Zealand reduced emissions to 1990 volumes? Two more clues are in Figure 3. The title is "Kyoto net" and there is a note under the data source says "Kyoto net 2000-2007 values are backcasted". So the Fig 3 data is not just "net", it is also "Kyoto net" and "backcasted". What does ''backcasted" mean? Another chart shows how Smith gets to Fig 3 from the real total and net emissions data.

Greenhouse gas emissions, as defined for compliance with the Kyoto Protocol, are gross from 1990 to 2007, and once the Kyoto commitment period starts in 2008, an Annex B country like New Zealand can meet its target by deducting removal units issued for carbon sinks - so Kyoto-defined emissions go net from 2008. Hence the red line. The removal units issued for afforestation (the increase in carbon stock in a forest planted since 1990) appear as if from nowhere in 2008 and disguise the growth in both the gross and net emissions.