28 August 2016

Moro bars and triple dips Geoff Simmons fact checks Paula Bennett's claim that the surplus units are clean

Geoff Simmons tells us a good story about dodgy uncle Trev, fake bank notes and real moro bars while he fact-checks Paula Bennett on the integrity of the surplus emission units. It's a real triple-dip!

The Morgan Foundation's Geoff Simmons has done a whiteboard Friday video on Minister for Climate Change Issues Paula Bennett's claim that the surplus emission units are not tainted by the 97 million fake Russian and Ukrainian emission reduction units that the Climate Cheats report of April 2016 showed had been handed to the Government under the NZ emissions trading scheme.

Geoff explains the issue very well and has the numbers right. More than that, I think Geoff should get the Joe Romm language intelligence award for using a great metaphor for New Zealand's use of the 'hot air' Ukrainian and Russian emission reduction units.

Dodgy uncle Trev's fake twenty dollar note.

Your dodgy uncle Trev gives you a twenty dollar note. It looks like a ordinary twenty dollar note, but knowing uncle Trev, you have your doubts. Anyway, you use the dodgy note to buy a moro bar at a dairy and get back seventeen dollars change in valid notes. The dairy owner now has a fake twenty dollar note in the till. You have eaten the real moro bar. You still have seventeen real dollars. You could buy more moro bars.

Obviously the fake twenty dollar note represents the emission reduction units. Replace uncle Trev with the Ukrainian and Russian joint implementation projects and the carbon brokers.

The purchase of the moro bar stands in for the emitters surrendering the 'el-cheapo' emission reduction units to the Government under the emissions trading scheme. And also for the Government then using the 'el-cheapo' emission reduction units that it holds to comply the Kyoto Protocol 2008 to 2012 target.

The seventeen real dollars (and the moro bar) are the legally valid 'surplus' assigned amount units that the Government is now 'using' to meet both the 2020 and (some of) the 2030 emissions reduction targets.

The Government has, in effect, used the post Kyoto Protocol "true up" process for declaring that NZ has correctly retired the right emission units"Report upon expiration of the additional period for fulfilling commitments by New Zealand", to 'launder' the dubious emission reduction units from the emissions trading scheme into valid surplus assigned amount units held in Government accounts.

Arguably, Bennett's intentions are ethically worse than the fake-note-moro-bar metaphor.

Bennett is going for a "triple dip" of using surplus/dodgy units to 'comply' with three different emissions targets in spite of the upward trend in New Zealand's GHG emissions.

Dip 1: the Kyoto Protocol 2008 - 2012 target

Dip 2: the UNFCCC 'minus 5%' 2013 - 2020 target

Dip 3: the Paris Agreement 2020 - 2030 target.

You can verify for yourself that the Government intends to do some creative accounting with the surplus units so that they allow greenhouse gas emissions to increase out to 2020 while the Government can claim that New Zealand is 'meeting' it's "minus 5%" emission reduction target. Just go to Latest update on New Zealand's 2020 net position on the Ministry for the Environment's website.

That webpage states explicitly that New Zealand will have 85.7 million emission units surplus to use out to 2030 after using some to meet the 2020 target. Here is a screenshot.

Further down the page is this barchart that shows that New Zealand's gross emissions from 2013 to 2020 are expected to be 655.9 million tonnes and that the baseline is 509.8 million tonnes. I have somewhat crudely marked the increase in emissions on the left hand bar.

I fully agree with Geoff Simmon's conclusion. It's simply unethical to make a monetary gain from fake currency. Just as you should wipe the moro bar crumbs off your shirt and give the dairy owner back the seventeen dollars (or a real twenty) in place of the fake note, Paula Bennett and the Government should cancel the surplus units instead of explicitly using them to meet targets while emission volumes increase. And we should never ever let ourselves be in the position of having an uncapped internationally linked emissions trading scheme that permits creative accounting as our main climate change policy.

15 August 2016

Morgan Foundation's Climate Cheats II: Who’s the Real Cheat Here? The Dozen Dirty - Now thats a title!

Geoff Simmons and the Morgan Foundation have done it again! They have just released a sequel to 'Climate Cheats', the fantastically-named 'Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses'. Simon Johnson breathlessly reviews Climate Cheats II and concludes that while it's about time we had some transparency over Government and corporate shenanigans with emissions trading, we mustn't forget that these are symptoms of the root problem - the uncapped design of the New Zealand emissions trading scheme.

Shock Newsflash Horror! The Morgan Foundation and Geoff "Wild-Shirt" Simmons have done it again! They have just released another tell-all critique of corporate emissions trading shenanigans! A sequel in the franchise they started in April 2016 with the report Climate Cheats. As we know, 'Cheats I' outlined this sad course of events:

  • the 'flood' of low-cost and low-integrity Russian and Ukrainian emissions reduction units into the NZ emission unit market
  • which then crashed the domestic emission unit price
  • which allowed NZ emitters to meet emissions trading obligations for next to nothing
  • which allowed the Government to own surplus (but dodgy) units
  • which meant Paula Bennett could claim 'form over substance' compliance with climate charge targets out to 2020
  • not withstanding the real increases in both gross and net NZ emissions of greenhouse gases.

Weighing in at a thankfully concise 16 pages, the wonderfully named 'Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses' starts with a simple question. Which companies had the most dodgy Russian and Ukrainian emission units? Well, here they are.

Simmons and co then note that Minister Bennett has refused requests to cancel the surplus dodgy units the Government holds, giving the excuse she is 'seeking advice' (That would seem to be a perpetually applicable excuse!). So they ask 'who owned and used dodgy emission reduction units?' The dirty dozen corporates, of course.

The report then discusses three types of liability (physical, liability and transition) that may fall on companies who used the emission reduction units. To paraphrase, Simmons is thinking 'did they really think this would never come back and bite them?' And he is making the point that if Government is failing to act ethically, then why don't we shine a spotlight on our corporate citizens and ask them to shoulder some of the responsibility for the dodgy unit fiasco?

Simmons assigns highest culpability to New Zealand Steel and Fonterra. Because they are emitters who received generous free allocations of NZ units but who also owned dodgy emission reduction units. Referencing a blogger (meaning me!), the report notes New Zealand Steel booked $4.4 million Australian dollars of profit from emissions trading that is probably from arbitrage trading of their free NZ units while also owning dodgy units.

Five forestry companies are on the dozen list. Some sympathy is due to some of them as the unit price crash devalued their allocations of units. But none is due to any foresters who carried out 'forest re-registration arbitrage' in the ETS. This was exiting and re-entering the same forest in and out of the ETS several times. For each ETS 'exit', the forester would 'square-up' the refund of carbon liabilities with emission reduction units costing several cents each. For each 're-entry' to the ETS, the forester would be given an allocation of free NZ emissions units worth a few dollars each. The result being instant no-effort windfall profits. The Government took far too long to clamp down on this practice.

Finally, energy companies get their turn in the spotlight. BP, Chevron, Z Energy, Contact Energy and Genesis Energy all owned and used some dodgy international units. Did these companies price their products to NZ customers on the basis of the higher NZ unit prices or the lower dodgy unit price? The Morgan Foundation approached the energy companies for comment which is in an appendix. All give worthy statements saying they followed the rules and of course they put customers first. However, Mobil shows up the fine words of the others. Mobil never owned any dodgy international units and managed to supply fuel just as competitively as the others.

Climate Cheats II concludes by suggesting that the companies who owned dodgy international units and lowered their costs (as well as those who made windfall profits) have two options to put things right.

  1. They could voluntarily cancel NZ units to match the dodgy units used
  2. They could alternatively pressure Paula Bennett to cancel the surplus units the Government holds.

With NZ emission unit prices now hovering between $17 and $18 per tonne, the latter option will hurt much less than the former.

In summary, it's hard not to like a Morgan Foundation report that references me! But leaving that bias/good taste aside, Climate Cheats II is a concise readable summary of the abject state of New Zealand's emissions targets and trading policies and practices. As Kevin Anderson would say, we need to see clearly where our rose-tinted spectacles have brought us. Climate Cheats II mostly does that.

However, if anything, the report, by focusing on the top dozen owners of the dodgy international units, underplays the pervasiveness of the ownership and use of those international units. Most entities with emissions trading accounts owned some dodgy units. In 2013, more than 400 entities (out of 496 account holders) owned some share of the almost 35 million emission reduction units in private hands. You can check this with this Google sheet of Kyoto Units obtained from the Emission Unit Register at the EPA.

Finally, I have one concern which is perhaps more about how 'Climate Cheats II' will be received rather than what message it has. It seemed to me that the media response to initial splash of 'Climate Cheats I' (they loved the emotive framing - 'fraud!' - 'cheating!') really missed the fundamental point that I think both reports support, and that other assessments of the ETS support, that an emissions trading scheme that has no cap on emissions, that earns no revenue and that isn't economy-wide, is an excuse and rationalisation for doing nothing and not an effective mitigation policy at all.

08 August 2016

Where is the Two Degrees Celsius Carbon Budget for New Zealand?

I have been thinking about carbon budgets on and off since the Paris Agreement at COP21 last December.

By 'carbon budget' I mean "a finite amount of carbon that can be burnt before it becomes unlikely we can avoid more than two degrees of global warming".

And I have been asking myself "where is New Zealand's carbon budget that is consistent with no more than two degrees Celsius of average global warming"?

There is a Canadian "2C"-consistent carbon budget. Canadians Simon Donner and Kirsten Zickfield asked themselves similar questions in two blog posts Canadas contribution to meeting the Paris temperature targets and Can Canada live up to the promise of the Paris Agreement? The chart on the top left shows three Canadian 'temperature' budgets/emission pathways under a share of emissions approach.

In short, Donner and Zickfield calculated several "2C"-consistent carbon budgets, based on a range of temperature goals, a range of probabilities of success, and a range of sharing principles used for allocating part of the global carbon budget to Canada. They wrapped that up in a short 3-page paper "Canada’s Contribution to meeting the temperature limits in the Paris Climate Agreement".

Simon Donner also wrote a more policy-oriented summary What do the temperature targets mean for Canada?

This is their summary table of budgets by temperature targets and probabilities.

Simon Donner's conclusion from Can Canada live up to the promise of the Paris Agreement is:

The analysis in our report suggests that the current Canadian target of a 30% reduction below 2005 levels by 2030 could be consistent with maintaining a likely chance (66%) of limiting warming to less than 2°C globally, but only if Canada is given a generous allocation of the world’s “remaining” future carbon budget (based on the present fraction of the world’s emissions). A target consistent with a likely (66%) chance of avoiding 1.5°C of warming globally is extremely limited regardless of the method of allocation. Even under a generous allocation to Canada, national net CO2 emissions would need to decline 90-99% below 2005 levels by 2030.

Simon Donner also notes that "The 1.5°C limit is at best unrealistic, at worst politically impossible.”

Simon Donner is also highly aware that 'sharing-on-current-emissions' unfairly favours developed highly carbon-intensive OECD countries like Canada (or New Zealand) over the developing countries with much lower greenhouse gas emissions per capita.

Allocating the remaining carbon budget based on present-day emissions places an unfair burden on developing and rapidly industrializing countries that historically have had low per-capita emissions. Despite being far less responsible for climate change to date, and currently having low per-capita emissions, countries like India would essentially be asked to bear an equal part of future mitigation efforts.

Good work Canada! But where the bloody hell is New Zealand's 2C consistent carbon budget?