tag:blogger.com,1999:blog-81187752964399515972024-02-20T07:38:24.386+13:00Robin Johnson's Economics Web PageRobin Johnson's Economics Webpage has moved to <a href="https://theecanmole.github.io/Robin-Johnsons-Economics-Web-Page/">https://theecanmole.github.io/Robin-Johnsons-Economics-Web-Page/</a>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.comBlogger297125tag:blogger.com,1999:blog-8118775296439951597.post-35563442985335866262023-06-06T20:02:00.001+12:002023-06-06T20:38:27.349+12:00The unbearable annual updates to the NZ ETS auction volume limits and price control settings for units 2023<div padding: 1em; class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWTLKcUJIYJawWuj0KHCH0Ogw3Yrsb1tVmnZYVYM3nl1yZUB865Mgs2ZqNTrVxD8yZ6s-w1crLoDwzYR7la8YAE2KVNE6_E4HpUe4sJbIZqPF6QzwNsFy4eYEkX8EmKRBW2RubgbDpgRJ4O_jnYpLOni-HDPQ5-IIbAjLmv5pT_6_fXW9PUq6kIgSa/s1600/auction-4-180-120px.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="" border="0" data-original-height="120" data-original-width="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWTLKcUJIYJawWuj0KHCH0Ogw3Yrsb1tVmnZYVYM3nl1yZUB865Mgs2ZqNTrVxD8yZ6s-w1crLoDwzYR7la8YAE2KVNE6_E4HpUe4sJbIZqPF6QzwNsFy4eYEkX8EmKRBW2RubgbDpgRJ4O_jnYpLOni-HDPQ5-IIbAjLmv5pT_6_fXW9PUq6kIgSa/s1600/auction-4-180-120px.jpg"/></a></div>
<p>The Ministry for the Environment is running a consultation on the utterly incomprehensible <a href="https://consult.environment.govt.nz/climate/annual-updates-nz-ets-unit-settings-2023/">Annual updates to the NZ ETS limits and price control settings for units 2023</a>.</p>
<p>There is a very dense 56 page consultation paper <a href="https://environment.govt.nz/assets/publications/climate-change/NZETS-unit-settings-consultation-document.pdf">Ministry for the Environment. 2023. Annual updates to New Zealand Emissions Trading Scheme limits and price control settings for units 2023: Consultation document. Wellington: Ministry for the Environment.</a>.</p>
<p>This is based on another annual round of dense advice over 64 pages from the Climate Change Commission <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/our-advice-on-the-nz-ets/nz-ets-unit-limits-and-price-control-settings-2024-2028/">Advice on NZ ETS unit limits and price control settings for 2024-2028</a></p>
<p>I wrote a submission today. Due to the density of the reports, and the way Ministry for the Environment framed the 24 compulsory questions, it was really hard. Submissions close on 16 June 2023.</p>
<p>I can however try to summarise it in three charts.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJLEba0729bhC3uNPXg1eXL3VPKwRlaz11wfdQ3Ln67IiR159XWNHqEmhIGsoeQzn8prTHAE-5pH1uwMnA6k3U_6qQLiYIrMAPKo11C1n4iWgvaugQous3FoJN3rQbirYnebbS8ZQE0kh7PwIFb8LKo0pB4O2RVfpD27m26zExn2RJVEh4caSYZIbu/s1600/Auctionvolume-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJLEba0729bhC3uNPXg1eXL3VPKwRlaz11wfdQ3Ln67IiR159XWNHqEmhIGsoeQzn8prTHAE-5pH1uwMnA6k3U_6qQLiYIrMAPKo11C1n4iWgvaugQous3FoJN3rQbirYnebbS8ZQE0kh7PwIFb8LKo0pB4O2RVfpD27m26zExn2RJVEh4caSYZIbu/s1600/Auctionvolume-560by420.png"/></a></div></p>
<p><b>The Climate Change Commission wants the Government to reduce the number of emission units it auctions from 2026 to 2028.</b></p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9cYUB0ow-_BRI2ENaBnllnrDQPPGwfAByDo3bnCaw-GNz9smmfytV_k-auDxe7fmXXZWZOkazoE6rev1Rt5Gg_py2ptdUz9vBkDqllh2aYApsNwWI-T3c8EROF_WI_axq0WRwRm2Y6O7JKMcLef65wvAXr04sLEGzKM0QogN6kugPomAQIOzGffE1/s1600/Auctionreserveprice-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9cYUB0ow-_BRI2ENaBnllnrDQPPGwfAByDo3bnCaw-GNz9smmfytV_k-auDxe7fmXXZWZOkazoE6rev1Rt5Gg_py2ptdUz9vBkDqllh2aYApsNwWI-T3c8EROF_WI_axq0WRwRm2Y6O7JKMcLef65wvAXr04sLEGzKM0QogN6kugPomAQIOzGffE1/s1600/Auctionreserveprice-560by420.png"/></a></div>
<p><b>The Climate Change Commission wants the Government to increase the minimum price for emission units in the auctions from 2026 to 2028.</b></p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0N37DmryCyGQGA-1Dmb2KorbWEyCIKSgjkdh_Xm6YxjQF5mkAhZBAjCpmjbXvx8BzKe3nNFuUGdYS2tCb804u-HIQoWK5VsQzcilJYNL4g1dQyIDzjkggSgPrjC6OhpvipEoyI4ciQ2u-Ie6_kkXxqjAs4Z9pw5RLXraKrLGhxVnj2khdZ9r5OywX/s1600/costcontainmentreserve-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0N37DmryCyGQGA-1Dmb2KorbWEyCIKSgjkdh_Xm6YxjQF5mkAhZBAjCpmjbXvx8BzKe3nNFuUGdYS2tCb804u-HIQoWK5VsQzcilJYNL4g1dQyIDzjkggSgPrjC6OhpvipEoyI4ciQ2u-Ie6_kkXxqjAs4Z9pw5RLXraKrLGhxVnj2khdZ9r5OywX/s1600/costcontainmentreserve-560by420.png"/></a></div>
<p><b>The Climate Change Commission wants the Government to increase the cost containment reserve 'maximum price' for emission units in the auctions from 2026 to 2028.</b></p>
<p>I am guessing that a Chris Hipkins led Labour Government is probably going to try to ignore the Commission's recomendations.</p>
<p>Russell McVeagh have the best short summary of the issues: <a href="https://www.russellmcveagh.com/insights/april-2023/climate-change-commission-urges-government-to-reduce-ets-unit-supply-and-raise-trigger-prices">Climate Change Commission urges Government to reduce ETS unit supply and raise trigger prices</a>.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-33552006837861033182023-05-27T17:32:00.015+12:002023-05-30T20:59:21.136+12:00If it's worth paying New Zealand Steel to reduce emissions shouldn't we first stop paying them emission units to increase emissions?<p><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s248/reality_turtles.gif" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="248" data-original-width="106" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s200/reality_turtles.gif"/></a></div><p>
<p><i>The $140 million emissions subsidy to New Zealand Steel is not just corporate welfare, it's greenwashing and it's <a href="http://www.climatecodered.org/p/brightsiding.html">climate bright siding</a> and it's our insane emissions trading scheme. Can we have our 16 million free emissions units back?</i></p>
<p>I am still blown away by the Government's <a href="https://www.beehive.govt.nz/release/nz%E2%80%99s-biggest-ever-emissions-reduction-project-unveiled">announcement</a> a week ago that they will pay New Zealand Steel Ltd $140 million over three years to adopt an <a href="https://www.nzsteel.co.nz/assets/NZ-Steel-Media-Release_Electric-Arc-Furnace_21-May-web.pdf">electric arc furnace</a> that reduces the emissions intensity of steel smelting.</p>
<p>I am also blown away by the over-egging of the project by the Chris Hipkins, Megan Woods and James Shaw.</p>
<p>Hipkins states: <blockquote>“The economics of this really stack up, especially compared to current carbon prices. The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the Government and the country money.</blockquote><p>
<p>And I am also aghast at the largely uncritical treatment of the announcement in the media. Much comment fails to look at the NZ Steel deal in the context of our dreadful emissions trading scheme (or ETS). Some comment has included basic errors of fact such as saying New Zealand Steel is exempt from the ETS.</p>
<p><a href="https://www.stuff.co.nz/national/politics/132102525/government-announces-massive-emissionscutting-deal-with-nz-steel-contact-energy">Massive emissions cutting deal</a> says Luke Malpass in Stuff.</p>
<p>James Shaw is quoted by RNZ <blockquote>"The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the government and the country money."</blockquote></p>
<p>Duncan Greive at The Spinoff calls it the <a href="https://thespinoff.co.nz/politics/23-05-2023/why-did-we-give-140m-to-a-shady-australian-corporate-because-we-had-no-choice">beginning of a new climate pragmatism</a>.</p>
<p>Duncan Greive makes this factual error.</p><blockquote>"NZ Steel was already exempt from the Emissions Trading Scheme (ETS), having baldly stated that it would have shut the factory were it to have to pay the cost of its emissions"</blockquote>
<p>No, New Zealand Steel is not exempt from the emissions trading scheme (They would be more likely to face a carbon price if they were exempt). Yes, they have threatened to close the smelter. Several times</p>
<p>Michael Neilson in the Herald says the <a href="https://www.nzherald.co.nz/nz/politics/why-government-is-making-a-big-deal-of-the-nz-steel-climate-change-emissions-initiative/YNO6SR4RJNFVLH3GJGYTB44P54/">initiative is remarkable.</a></p>
<p>Bernard Hickey agrees with Hipkins and says it's <a href="https://thekaka.substack.com/p/140m-well-spent-at-1620tonne#details">$140m well spent at $16.20/tonne.</a></p>
<p>Even the Lawyers for Climate Change Action, who have just filed a <a href="https://www.lawyersforclimateaction.nz/news-events/ets-jr">judicial review of the December 2022 ETS price settings decision</a>, said <a href="https://www.rnz.co.nz/news/business/490424/approach-to-decarbonisation-would-be-back-to-drawing-board-without-co-investment-nz-steel-boss">"This is a great initiative"</a></p>
<p>What's the relevance of Hickey and Hipkins and Shaw comparing the predicted cost per tonne of emissions reduced with the current market price of emission units?</p>
<p>It's emission pricing. Carbon prices are emblematic of having an emissions trading scheme. And in theory New Zealand is big on emissions pricing.<p>
<p>The Ministry for the Environment keeps saying <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/">"the New Zealand Emissions Trading Scheme is the <u>Government’s main tool for reducing greenhouse gas emissions".</u></a> New Zealand has had an emissions trading scheme since 2010. It includes the steel industry.</p>
<p>This is the emissions pricing logic.</p>
<ul><li>NZ Steel's emissions are covered by the ETS and are priced via the mandatory surrender of emission units.</li>
<li>NZ Steel has a project to reduce emissions that will cost less per tonne of emissions than the current market price.</li>
<li>NZ Steel's overall emissions liability under the ETS will reduce.</li>
<li>The project pays for itself as it is the lower cost option.</li></ul>
<p>That's what emissions trading schemes are meant to do.</p>
<p>So why isn't NZ Steel paying 100% of the cost? Why is the Government paying almost half? Why are Hipkins, Wood and Shaw saying this subsidy isn't just necessary but it's good policy?</p>
<p>The answer is the bullshit that is the emissions trading scheme <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> rules.</p>
<p>Tom Pullar-Strecker of Stuff, who seems the only <a href="https://www.stuff.co.nz/business/132108154/the-real-deal-on-nz-steel-climate-change-win-or-corporate-welfare">skeptical voice</a>, correctly notes New Zealand Steel would never fund the electric arc furnace as they receive so many free emission units under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">ETS Industrial Allocation rules</a>.</p>
<p>Pullar-Strecker has also noted that in New Zealand Steel's last annual report, it received <a href="https://www.stuff.co.nz/business/130935028/tasman-steel-posts-340m-profit-with-benefit-of-117m-of-free-carbon-credits">free emission units worth $117 million</a>. And that the chief executive stated they received so many free emission units that carbon costs were <a href="https://www.stuff.co.nz/business/130935028/tasman-steel-posts-340m-profit-with-benefit-of-117m-of-free-carbon-credits">"neutralised"</a> including indirect ETS costs from electricity prices.</p>
<p>Just to repeat the point again. New Zealand Steel are allocated far more free emission units than needed for their actual smelter emissions.</p>
<p>They have never needed to buy any additional units to comply with the ETS.</p>
<p>Here is the chart of actual final allocations of emission units from the EPA to NZ Steel compared to the estimated actual steel emissions from the Greenhouse Gas Inventory.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixr_kjq5VA4qjH1gk0OyjkrYQ2rx4HNOtUqwtk2bQPijIEvUYKpynFQC_WxqmRDpYSiGVKiZQ_jwUqwVmjJuN_O56nByo51dlCo1nOkTNP1ngxRmfmYyLM3hP43H6mciPQ2umzlPGNMZ8OMipkysgTehCTc4UIm6CPpAUENr4cwBbbOgHbzUQy15hc/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3a.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixr_kjq5VA4qjH1gk0OyjkrYQ2rx4HNOtUqwtk2bQPijIEvUYKpynFQC_WxqmRDpYSiGVKiZQ_jwUqwVmjJuN_O56nByo51dlCo1nOkTNP1ngxRmfmYyLM3hP43H6mciPQ2umzlPGNMZ8OMipkysgTehCTc4UIm6CPpAUENr4cwBbbOgHbzUQy15hc/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3a.png"/></a></div>
<p>What's that mean? Buying emission units and surrendering them back to the Government annually is the essence of an emissions price.</p>
<p>Receiving free emission units and surrendering some of them back to the Government and keeping some each year (you are always a net seller) is the opposite of an emissions price.</p>
<p>Receiving free emission units is in fact payment of a subsidy for New Zealand Steel's emissions. </p>
<p>If New Zealand Steel increases it's emissions they receive more units</p>
<p>If New Zealand Steel reduces it's emissions they would receive fewer units</p>
<p>So if New Zealand Steel installed the electric arc furnace, and reduced emissions from its Glenbrook mill by 800,000 tonnes, they would be financially worse off as they would lose more than 800,000 emission units.</p>
<p>That is how insane the emissions trading scheme is.</p>
<p>This chart shows the $308 million value of the unit allocation subsidy to NZ Steel from 2010 to 2021 and highlighted is the Government's electric arc furnace grant of $140 million over three years 2022 to 2024.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifW6aSvTpk46CLAQZldjYfLrafauZlYqzbjRTNdd65piP6ejkByhVJLA4G9b_A_vhphHZhkkWUf9_1vdMwxVhq7eGh9j8XlW11lnypLouoJCv9c1oHcwae4uN2QP4zX_DD5pkzDnzi_RELPtiwB_-d-VUvjEFpWyJCo82RNl-wrD7SYXaIPjNu14zF/s1600/NZsteel-units-marketvalue-565by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="428" data-original-width="570" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifW6aSvTpk46CLAQZldjYfLrafauZlYqzbjRTNdd65piP6ejkByhVJLA4G9b_A_vhphHZhkkWUf9_1vdMwxVhq7eGh9j8XlW11lnypLouoJCv9c1oHcwae4uN2QP4zX_DD5pkzDnzi_RELPtiwB_-d-VUvjEFpWyJCo82RNl-wrD7SYXaIPjNu14zF/s1600/NZsteel-units-marketvalue-565by420.png"/></a></div>
<p>Our emissions pricing scheme is so flawed it incentivises maintaining and increasing emissions. It is 180 degrees in the wrong direction. This is emissions trading insanity.</p>
<p><b>If it's worth paying New Zealand Steel to reduce emissions shouldn't we first stop paying them to increase emissions?</b></p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-74783436687368270552023-05-25T18:38:00.012+12:002023-05-26T14:19:44.597+12:00Double dip Fonterra also wants to be paid for increasing emissions and paid for reducing emissions<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s286/trading.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="176" data-original-width="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s200/trading.png"/></a></div>
<p><a href="https://github.com/theecanmole/Fonterra-emission-units">Data and R code</a>.</p>
<p>Check this out from Radio New Zealand. No doubt following the <a href="https://rwmjohnson.blogspot.com/2023/05/new-zealand-steel-reduces-emissions.html">New Zealand Steel double dip precedent</a>, Fonterra has also got it's hand out to the Government to double dip government subsidies for both increasing and reducing emissions.</p>
<p><a href="https://www.rnz.co.nz/news/business/490569/fonterra-says-100m-in-carbon-credit-costs-could-help-pay-for-clean-energy">Fonterra says $100m in carbon credit costs could help pay for clean energy</a></p>
<blockquote><i><p>Fonterra chief operating officer Fraser Whineray told Morning Report today that it was working to reduce emissions, but more government assistance would help</i>.</blockquote>
<blockquote>At the moment, for each tonne of greenhouse gases the company must pay into the government's Emissions Trading Scheme, but Whineray said he would like to see more of that be <u>given back to Fonterra</u> to help it introduce more clean alternative energy sources.</blockquote>
<blockquote><i>"Our total off-farm emissions in New Zealand at the moment is about 1.5 - 1.6 million tonnes [per year], and so you times that by the carbon price, and that's roughly the cost of surrendering carbon for our emissions in New Zealand each year.</i></blockquote>
<blockquote><i>"The ETS is supposed to recycle funds back into decarbonisation. And if we're spending more than $100m a year on carbon credits, getting a little bit of that back to help pay for the actual projects - some of which we've got under way and some much larger ones in front of us, that sounds like a pretty reasonable starting point."</i></blockquote>
<p>But Fonterra has been paid and continues to be paid to increase their coal thermal emissions under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">'Industrial Allocation'</a> rules of the crazy <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a>.</p>
<p>Here is a bar chart of free emission units given to Fonterra under the 'Industrial Allocation' rules. The total number of units given to Fonterra over the 12 years since 2010 is 450,413 emission units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtqpA0qHRoYqXFWiErTTGjxa7jbY6DonfuA7j4zhP0wgcNWvlfRdRfdwlesW5625w2XvEhfKdMIUuC0Rmr16224J3QYYLfDKfmv3cGvsLlfCssx4CXxj3ScA7JHh_Q8U9hudSKTBKJ3Wdz8BBGlmteFMs31VmVe1ZuBvzh566VJCJgurqhi62gxVBX/s1600/Fonterra-2010-2021-560by420F12.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtqpA0qHRoYqXFWiErTTGjxa7jbY6DonfuA7j4zhP0wgcNWvlfRdRfdwlesW5625w2XvEhfKdMIUuC0Rmr16224J3QYYLfDKfmv3cGvsLlfCssx4CXxj3ScA7JHh_Q8U9hudSKTBKJ3Wdz8BBGlmteFMs31VmVe1ZuBvzh566VJCJgurqhi62gxVBX/s1600/Fonterra-2010-2021-560by420F12.png"/></a></div>
<p>Allocation of units is proportional to production. That method is called <a href="https://en.wikipedia.org/wiki/New_Zealand_Emissions_Trading_Scheme#Allocation_of_NZ_Units_to_trade-exposed_activities">"output intensity"</a> based allocation.</p>
<p>If Fonterra increases its production it gets more units. The allocation of units incentivises increasing emissions.</p>
<p>How come Fonterra doesn't mention its already being given a government hand out for maintaining and increasing its emissions?</p>
<p>Here is a chart of the year by year value of the free emission units given to Fonterra.
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPNlqj16Pryq_fyIa3pxRJCJYjr8AP971x4XIcaSyZSv1BM6w-ATGIfFsYqq0YrRVrR56sB4eKVKYVLH7sEj_-qY1clmkqmkJMZJHd8M8rS5OYk00RDSW2GoMJuIFs5TUnGA_WEJ-Tt4DAA4HKMqOXOiopCobWONW_J1_oVQFJUeksTBe4KCkUEQ1F/s1600/Fonterra-units-marketvalue-565by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="428" data-original-width="570" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPNlqj16Pryq_fyIa3pxRJCJYjr8AP971x4XIcaSyZSv1BM6w-ATGIfFsYqq0YrRVrR56sB4eKVKYVLH7sEj_-qY1clmkqmkJMZJHd8M8rS5OYk00RDSW2GoMJuIFs5TUnGA_WEJ-Tt4DAA4HKMqOXOiopCobWONW_J1_oVQFJUeksTBe4KCkUEQ1F/s1600/Fonterra-units-marketvalue-565by420.png"/></a></div>
<p>The U shaped dip reflects the collapse of carbon prices when the market was flooded by dodgy imported international 'hot air' emission units in 2012 and 2013.</p>
<p>The 2021 sharp upward increase in value of the allocations is caused by the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/changes-to-the-ets/">2020 changes to the emissions trading scheme</a>. Out went paying for unit surrender liabilities with unlimited volumes of units at a fixed price of $25 per tonne. In came auctions of units four time a year.</p>
<p><b>If it's worth paying Fonterra to reduce it's emissions shouldn't we first stop paying them to increase their emissions?</b></p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-1085989516919262692023-05-22T17:38:00.010+12:002023-05-25T18:55:00.748+12:00New Zealand Steel reduces emissions - gets paid millions: New Zealand Steel increases emissions - gets paid millions<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s286/trading.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="176" data-original-width="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s200/trading.png"/></a></div>
<p>The Government made an extremely exaggerated <a href="https://www.beehive.govt.nz/release/nz%E2%80%99s-biggest-ever-emissions-reduction-project-unveiled">announcement</a> on Sunday 21 May 2023 that it will contribute $140 million to a New Zealand Steel project to electrify (replace coal thermal heat) their steel and iron recycling process. Thus reducing future emissions of greenhouse gases.
<p><a href="https://www.beehive.govt.nz/release/nz%E2%80%99s-biggest-ever-emissions-reduction-project-unveiled"><b>NZ’s biggest ever emissions reduction project unveiled</b></a> the title breathlessly gushed.</p>
<p>If only the <a href="https://www.google.com/search?client=firefox-b-d&q=hyperbole+definition">hyperbole</a> flowing from the joint Government and <a href="https://www.eeca.govt.nz/about/news-and-corporate/news/nzs-biggest-ever-emissions-reduction-project-unveiled/">Te Tari Tiaki Pūngao/EECA announcement</a> matched the appalling reality of how dysfunctional <a href="https://rwmjohnson.blogspot.com/search/label/New%20Zealand%20Steel">New Zealand Steel's treatment</a> is under the emissions trading scheme.</p>
<p>New Zealand Steel has never faced an emissions price under the emissions trading scheme.</p>
<p>In every year since 2010, New Zealand Steel has been allocated far more free emissions units than the number it has had to surrender back to the Government.</p>
<p>Here is a chart of the allocated emissions units and the estimated emissions trading scheme liability to surrender units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh82BxrH0ZyzBwB0bvbJ_DN5w3LLe2g3dRo2nI7_9KqXIb-XEREyWJlgXJUcscdCBONahGzvUPpqQKXvg77-tGMqCAtECj91o7XHVnxmcp66u3koKlDEBifSfFNHIksQFQ_652tdCDQyz7YU_8ZzYRkr5twsZRigyAyaNQ_CliSy01e_srCyXvaeQfF/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3a.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh82BxrH0ZyzBwB0bvbJ_DN5w3LLe2g3dRo2nI7_9KqXIb-XEREyWJlgXJUcscdCBONahGzvUPpqQKXvg77-tGMqCAtECj91o7XHVnxmcp66u3koKlDEBifSfFNHIksQFQ_652tdCDQyz7YU_8ZzYRkr5twsZRigyAyaNQ_CliSy01e_srCyXvaeQfF/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3a.png"/></a></div>
<p>The effect of the excessively generous allocation of units is to completely insulate New Zealand Steel from an emissions price.</p>
<p>Notwithstanding this extremely generous subsidy, New Zealand Steel still engaged in <a href="http://bit.ly/1TQUr5C">windfall arbitrage profiteering</a> by buying international hot air emissions units back in 2012 and 2013.</p>
<p>The annual amount of free emissions units allocated is proportional to the steel production. If production and emissions increase, the amount of free emission units increases.</p>
<p>Conversely, if steel production and emissions decline, the amount of free emission units decreases. Free allocation of emission units incentivises increased emissions. And disincentivises reduced emissions.</p>
<p>New Zealand Steel has been allocated a total of 16 million emission units between 2010 to 2021.</p>
<p>New Zealand's emissions units now have an enhanced value due to the 2020 amendments to the Climate Change Response Act.</p>
<p>This is a chart of the annual values of the New Zealand Steel unit allocations when priced with a mean May price. May is the month when the units are transferred to New Zealand Steel's ownership.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZrPHMTaElKrEztPd0dEqa8ScJaKHlMZSVnTjNgP39EQL8IE6lZI_0pnndWdG4rjIKh19rGPkx2rqoAuoJJN68k8vcyTCetVRnmgfnvS_a4QP8D7GG8G3LZoncBBAw_XgPU2axee-hZXguhFCFM6IbmFUqKuAWJBoD9DBF6DY_7He3jP9-j7HDbVYd/s1600/NZsteel-units-marketvalue-565by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="428" data-original-width="570" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZrPHMTaElKrEztPd0dEqa8ScJaKHlMZSVnTjNgP39EQL8IE6lZI_0pnndWdG4rjIKh19rGPkx2rqoAuoJJN68k8vcyTCetVRnmgfnvS_a4QP8D7GG8G3LZoncBBAw_XgPU2axee-hZXguhFCFM6IbmFUqKuAWJBoD9DBF6DY_7He3jP9-j7HDbVYd/s1600/NZsteel-units-marketvalue-565by420.png"/></a></div>
<p>The 16 million emissions units allocated to New Zealand Steel have a total value of $308 million. The proposed grant to reduce steel recycling emissions by electrification, is $140 million.</p>
<p>New Zealand Steel has already received twice as much money ($308 million vs $140 million) to maintain it's emissions, as the value of the proposed electrification grant.</p>
<p><b>That's why I say that New Zealand Steel may be getting paid to reduce emissions but it has already been paid twice as much to keep emitting.</b></p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-52236066298962844422023-04-29T18:02:00.007+12:002023-05-12T17:11:58.767+12:00Industrial Allocation - free emission units for big business - is worse policy than 100% industry exemption from NZ ETS<p>In a recent post I argued that the New Zealand <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a> <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/how-to-apply/">industrial allocation</a> policy exempts from emissions pricing <a href="https://rwmjohnson.blogspot.com/2022/12/industrial-allocation-exempts-from.html">twice as many tonnes of emissions</a> than the total emissions counted in the <a href="https://environment.govt.nz/facts-and-science/climate-change/measuring-greenhouse-gas-emissions/about-new-zealands-greenhouse-gas-inventory/">Greenhouse Gas Inventory</a> for the New Zealand industrial sector.</p>
<p>I have a thought experiment. Can I look at the emissions 'footprint' of the free emissions units of industry allocation through the lens of the provisional <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/nz-ets-market/setting-unit-limits-in-the-nz-ets/">emissions budget?</a></p>
<p>The Climate Change Commission's recent recomendation on <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/our-advice-on-the-nz-ets/nz-ets-unit-limits-and-price-control-settings-2024-2028/">ETS settings</a> describes how industrial allocation is treated within the emission budgetting process (page 36).</p>
<blockquote><i>"Step 4: Account for industrial free allocation. Industrial free allocation refers to the amount of NZUs provided by the Government for free to entities whose activities are both emissions-intensive and trade-exposed (EITE). These units use up part of the emissions budget available to the NZ ETS and <u>reduce the total amount of NZUs that the Government can sell at auction</u>".</i></blockquote>
<p>Therefore the emission units given to emitters have to be subtracted from the emissions budget to get to the amount of emission units available to auction.</p>
<p>Here is a chart of the provisional emissions budget for the years 2021 to 2025. The emissions budget calculation involves subtracting parcels of emissions to get to the amount of units to auction. For Industry Allocation, 43 million tonnes of emissions are deducted. In other words, these units are 'unpriced' or 'exempt' from pricing, the same treatment as for pastoral agriculture emissions.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKgePnMPBCJTzIDVnHsV8eUEFUUE0ugUtXbEcXqU7aZVXRDWG6g7KucitnQF8MUsXT2If0mH4RWZVumb3JfaGwPA8t4J0NEmGRGfjmG_iTP7U38StD7BqZ0awoVAFWVRTNd4hZz_HRsFiWL-_2E5sDDAhJVyslAJ44z0GCQOmAeMxyX5vj8Xiuwph_/s1600/Emissionbudget1-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKgePnMPBCJTzIDVnHsV8eUEFUUE0ugUtXbEcXqU7aZVXRDWG6g7KucitnQF8MUsXT2If0mH4RWZVumb3JfaGwPA8t4J0NEmGRGfjmG_iTP7U38StD7BqZ0awoVAFWVRTNd4hZz_HRsFiWL-_2E5sDDAhJVyslAJ44z0GCQOmAeMxyX5vj8Xiuwph_/s1600/Emissionbudget1-560by420.png"/></a></div></p>
<p>What would the emissions budget look like if assumed all NZ industry emissions from the Greenhouse Gas Inventory are exempt from the emissions trading scheme?</p>
<p>There would be no subtraction of units for industrial allocation. Instead the emissions budget would subtract an amount of units equal to the industrial emissions from the Inventory.</p>
<p>This chart presents that scenario. An allocation of 27 million units is made from the emissions budget to account for all industry emissions being exempt from the emissions trading scheme. There is no allocation for industrial allocation.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipuLzz_zgE2qfO1oZ0PgAxMUv3Kfk8L5ryPZCetQRtWvNe86EE1bIQAhqszs1GF_LxEFVllnqAeAgT1azlSJDOxS96oYXQAISfTNKima5RiPicVmLAkLrrJC1ZL3tbRTVXS4Wqxwjab7Sp4ZEKpUYSMmJEwBFrORxIsto6LDsKFWDnOh9ojNiDzmG7/s1600/Emissionbudget2-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipuLzz_zgE2qfO1oZ0PgAxMUv3Kfk8L5ryPZCetQRtWvNe86EE1bIQAhqszs1GF_LxEFVllnqAeAgT1azlSJDOxS96oYXQAISfTNKima5RiPicVmLAkLrrJC1ZL3tbRTVXS4Wqxwjab7Sp4ZEKpUYSMmJEwBFrORxIsto6LDsKFWDnOh9ojNiDzmG7/s1600/Emissionbudget2-560by420.png"/></a></div>
<p>Completely exempting industry from the emissions trading scheme results in a higher amount of emissions units to auction. Ninety seven million tonnes compared to 90 million tonnes over the period 2021 to 2025.</p>
<p>This bar chart compares the two auction volumes under industry exemption and under the status quo of industrial allocation.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGV_qU_TG9TXWx1vMsZ7mq-gS_6ehFWzv20kwhFxEcca9U2m-1vvxgk3cUHdQpOqwk48W6bOnQvoUDj1xXXbOLkF1--KK-lPYrEJgj45xcFVlAe3muqcbNaeqDnwHPmaeBuLGQFHVBqC0GO8N404OddxQaQGrVo_k-asYP7wfuaTBruy7dZrY92shy/s1600/Emissionbudget3-560by420.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGV_qU_TG9TXWx1vMsZ7mq-gS_6ehFWzv20kwhFxEcca9U2m-1vvxgk3cUHdQpOqwk48W6bOnQvoUDj1xXXbOLkF1--KK-lPYrEJgj45xcFVlAe3muqcbNaeqDnwHPmaeBuLGQFHVBqC0GO8N404OddxQaQGrVo_k-asYP7wfuaTBruy7dZrY92shy/s1600/Emissionbudget3-560by420.png"/></a></div>
<p>As the units auctioned represents emissions priced under the emissions trading scheme, the industry exemption scenario is an unequivocally a better policy for reducing emissions than industrial allocation.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-2161006451055878222023-03-29T19:21:00.005+13:002023-04-30T20:31:12.693+12:00More of the endless cycle of incremental reform of the emissions trading scheme<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMtyHw6I4k4U5kIQISfVT9KGiz1P1MfdDzx4VNkluctPEA04drSZFL3OKOquTRhKzHtF29caijgFZVNOZVXnfa12GmmtFxZVBOFYYMEI0lm7SrYz_gRRky_EYoVTH9UpUi1Rhsfvu245juVyQdwL69SNYFYjHkL_gBOnPVfyo7YGsf6RUp1nTVosNH/s379/NZ%20Emissions%20Trading%20Scheme.jpg"
style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="" border="0" height="200" data-original-height="379" data-original-width="350" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMtyHw6I4k4U5kIQISfVT9KGiz1P1MfdDzx4VNkluctPEA04drSZFL3OKOquTRhKzHtF29caijgFZVNOZVXnfa12GmmtFxZVBOFYYMEI0lm7SrYz_gRRky_EYoVTH9UpUi1Rhsfvu245juVyQdwL69SNYFYjHkL_gBOnPVfyo7YGsf6RUp1nTVosNH/s200/NZ%20Emissions%20Trading%20Scheme.jpg"/></a>
<p>There is a new Cabinet paper to read; <a href="https://environment.govt.nz/assets/publications/cabinet-paper-and-minute-review-of-the-new-zealand-emissions-trading-scheme.pdf">"A Review of the Emissions Trading Scheme"</a>, 28 pages, by the Office of the Minister of Climate Change</p>
<p><b><i>What use is a Cabinet paper when the key policy options are redacted?</i></b></p></div>
<p>Last Wednesday 22 March 2023, the <a href="https://environment.govt.nz/news/review-underway-of-role-of-nz-ets-in-climate-response/">Ministry for the Environment announced</a> yet another <a href="https://environment.govt.nz/what-government-is-doing/cabinet-papers-and-regulatory-impact-statements/review-of-the-new-zealand-emissions-trading-scheme/">review</a> of the <a href="https://en.wiktionary.org/wiki/mego">My-Eyes-Glaze-Over</a> <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">New Zealand Emissions Trading Scheme</a>.</p>
<p>For some reason, I downloaded the Cabinet paper.</p>
<p>For some even more masochistic reason, I actually read all 28 pages.</p>
<p>It was largely a waste of time.</p>
<p>I can't even use the metaphor that the Cabinet paper was <a href="https://grammarist.com/usage/rearranging-deck-chairs-on-titanic/">"rearranging the deckchairs on the Titanic"</a> as I have already used that title on a blog post on a past consultation on
<a href="https://rwmjohnson.blogspot.com/2021/09/moving-deckchairs-on-titanic-ministry.html">industrial allocation</a>.</p>
<p>The first paragraph of the Cabinet paper tells us what the paper is about. So far so good.</p>
<p>
<blockquote><i>"This paper seeks agreement to the scope and process of a review of the New Zealand Emissions Trading Scheme (NZ ETS). This review is in response to Cabinet’s decision to <u>prioritise gross emissions reductions</u> in New Zealand’s first emissions reduction plan (ERP), and Cabinet’s in-principle decision to at agree to the Climate Change Commission’s recommendations to <u>strengthen the incentives for gross emissions reductions in the NZ ETS.</u>"</i></blockquote></p>
<p>The fourth paragraph states;</p>
<p>
<blockquote><i>"Enabling a just transition to a low-emissions, climate resilient future is a Government priority..."</i></blockquote>
</p>
<p>Okay. I am all for a just transition. I'd like the transition to help those with low incomes instead of being corporate welfare for emissions intensive industry as in the case of the dreaded <a href="https://rwmjohnson.blogspot.com/search/label/Industrial%20allocation">industrial allocation</a>.</p>
<p>Back to the Cabinet paper. Who is being mean to the emissions trading scheme saying it needs more reform? It's the naughty <a href="https://www.climatecommission.govt.nz/">He Pou a Rangi/Climate Change Commission</a>. The Cabinet paper says in paragraph 50 that:</p>
<p>
<blockquote><i>"In their <a href="https://ccc-production-media.s3.ap-southeast-2.amazonaws.com/public/evidence/advice-report-DRAFT-1ST-FEB/ADVICE/CCC-ADVICE-TO-GOVT-31-JAN-2021-pdf.pdf">2021 advice</a>, the Commission highlighted the risk that the NZ ETS would drive relatively low-cost net emission reductions through exotic forests, rather than gross emissions reductions needed to put us on track to net zero by 2050".</i></blockquote></p>
<p>For emissions nerds who have tracked the emissions trading scheme since it's inception in 2007, this isn't just a future risk. It is exactly what has already happened in the 2008 to 2012 period of the Kyoto Protocol. Gross emissions rose in proportion to economic growth but "Net Kyoto" emissions (that included "afforestation and reforestation" sequestration credits that were not in the 1990 baseline) were less than the baseline.</p>
<p>This was before the <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">fraudulent hot air emission units</a> from Russia and Ukraine flooded into New Zealand. Here is <a href="https://thespinoff.co.nz/politics/18-04-2016/dodgy-deals-with-climate-fraudsters-nzs-role-in-the-junk-carbon-scam">Geoff Simmons in the Spinoff</a>.</p>
<p>The Cabinet paper continues with a lot of background to the emissions trading scheme that is probably unnecessary. For example its not like Chris Hipkins would read that. He couldn't remember any details of other Cabinet papers where policies had consequences measurable in emissions.</p>
<p>Finally, I got to paragraph 79 on page 11. Maybe the officials who wrote the paper would finally mention where they see this reform proposal going. That would be new information. For example, what do the officials think are the possible high level options for amending the emissions trading scheme? Great, they are going to say what they think. Here is paragraph 79.</p>
<p>
<blockquote><i>"However, in my view there is value in identifying some of the <u>potential, high-level options</u> Ministers may be presented as an output of the review. This will help give a sense of the kinds of options that could support balancing gross and net emissions reductions in the NZ ETS."</i></blockquote></p>
<p>I turned the page expecting to be mildly enlightened. Okay that is sarcasm. It would have been nice to learn something new though.</p>
<p>This is paragraph 80. And 81 and 82.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCmZZ2_LuLeoHXmelI_fD7YxYkHKigo7ef3Hq5T0coZn4SAUU_VZAqzCKQV7Xpauvi9s2uUl-HKXoUdIbnjHEB7fj9odb9PTHuiLoi1vK-3u4zyQIF8NRbNNTnrhxAqW1K5FCZ65rvXCq5mzw9vY-ABRfpGmC2KEEKEAFLEJ7tDkaVcfmZkrhbtwqz/s1600/etscabinet4redacted.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="269" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCmZZ2_LuLeoHXmelI_fD7YxYkHKigo7ef3Hq5T0coZn4SAUU_VZAqzCKQV7Xpauvi9s2uUl-HKXoUdIbnjHEB7fj9odb9PTHuiLoi1vK-3u4zyQIF8NRbNNTnrhxAqW1K5FCZ65rvXCq5mzw9vY-ABRfpGmC2KEEKEAFLEJ7tDkaVcfmZkrhbtwqz/s1600/etscabinet4redacted.png"/></a></div>
<p>Yes the <u>potential, high-level options</u> have been redacted! The whole point of downloading and reading the Cabinet paper was really to find out the possible options or new directions for dealing with known problems.</p>
<p>I kept plowing my way through the paper. Several pages are dedicated to the peculiarities of the inter-departmental 'process' to be followed. Remember the emissions trading scheme involves several government departments: principally Ministry for the Environment on policy, but also the Environmental Protection Authority for operating the emissions trading scheme, the Ministry for Primary Industries for foresty, MBIE for energy sector emissions and Ministry of Foreign Affairs and Trade for international climate agreements.</p>
<p>These departments interact in accordance with the their own perceptions of relevant interests. I add the observation that such interactions may not be in the direction of 'no more than 1.5C warming' or 'net zero carbon by 2050. The Cabinet paper leaves that unsaid.</p>
<p>However, such interactions are implicit as on page 14 paragraph 100, as the paper proposes some 'governance terms of reference' to presumably make the public servants play nicely.</p>
<p>I am reminded of the italian novelist Umberto Eco's explanation of the behaviour of the crusading Knights Templar religious order. The historic reality of knightly behaviour in the Holy lands was best understood by considering the order's offical commandments. For example, <i>"thou shall not be drunk on a horse blaspheming the name of the Lord"</i> was in fact the proof that such behaviour was the rule and not the exception.</p>
<p>So yes I am mildly interested in the 'governance terms of reference'. Here are the relevant paragraphs.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHQDFUKWjZklvGlkSRfUlGC4G0Mc4IegsN710CgZBXgIbNjytuT27QP8dlVTrSTKLYg37EG5PF_czoNtw_k88nRUBQtW4VTkPztqCT4oYpZCozn4_ysX4ZS3QLNFAQ5R2Ngc2XFqsmJ8hNxIWUcdpbT6Pw5IxZ2sr1RPY6Ibnl-h8FEy740dAa36I9/s1600/etscabinet5redacted.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="413" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHQDFUKWjZklvGlkSRfUlGC4G0Mc4IegsN710CgZBXgIbNjytuT27QP8dlVTrSTKLYg37EG5PF_czoNtw_k88nRUBQtW4VTkPztqCT4oYpZCozn4_ysX4ZS3QLNFAQ5R2Ngc2XFqsmJ8hNxIWUcdpbT6Pw5IxZ2sr1RPY6Ibnl-h8FEy740dAa36I9/s1600/etscabinet5redacted.png"/></a></div>
<p>Yes the 'governance terms of reference' have been fucking redacted!</p>
<p>So I logged onto <a href="https://fyi.org.nz/">FYI.org.nz</a>, the online transparent and open portal for requesting official information from public agencies. And I requested a <a href="https://fyi.org.nz/request/22210-unredacted-copy-of-cabinet-paper-a-review-of-the-new-zealand-emissions-trading-scheme">complete copy of the Cabinet paper</a> with all 26 redactions restored all their improbable glory. The 26 redactions are probably not earth-shatteringly egregious but the point of principle is - do there need to be any redactions if the Government is pursuing emissions policies consistently with their own professed value statement of a "just transition"?</p>
<p>I was so mad about that point that I started writing an email to <a href="https://www.beehive.govt.nz/minister/hon-james-shaw">Minister for Climate Change James Shaw</a> asking him that exact question. The email turned into a three page letter. Oh well, push the send button, and try not to forget what the issue was when I finally get a reply after waiting a month or two for a reply. Of course, the same proviso applies to my Official Information Act request at FYI.org.nz. The Ministry may well extend the timeframe, or transfer the request to the Minister's office, or just ignore the timeframe - or a combination of all three.</p>
<p><b>Of course, in terms of climate change policy responses, we don't have time for this shit.</b></p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-85708110365401722342023-03-17T17:02:00.020+13:002023-04-20T19:31:57.965+12:00Explaining the emissions budget it's the bodge that gives the number of emissions units to auction<p><div padding: 1em; class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWTLKcUJIYJawWuj0KHCH0Ogw3Yrsb1tVmnZYVYM3nl1yZUB865Mgs2ZqNTrVxD8yZ6s-w1crLoDwzYR7la8YAE2KVNE6_E4HpUe4sJbIZqPF6QzwNsFy4eYEkX8EmKRBW2RubgbDpgRJ4O_jnYpLOni-HDPQ5-IIbAjLmv5pT_6_fXW9PUq6kIgSa/s1600/auction-4-180-120px.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="" border="0" data-original-height="120" data-original-width="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWTLKcUJIYJawWuj0KHCH0Ogw3Yrsb1tVmnZYVYM3nl1yZUB865Mgs2ZqNTrVxD8yZ6s-w1crLoDwzYR7la8YAE2KVNE6_E4HpUe4sJbIZqPF6QzwNsFy4eYEkX8EmKRBW2RubgbDpgRJ4O_jnYpLOni-HDPQ5-IIbAjLmv5pT_6_fXW9PUq6kIgSa/s1600/auction-4-180-120px.jpg"/></a></div>
<p></p>
<p><i>I feel I need to do a deep dive into emissions budgets.</i></p>
<p><i>The emissions budget is the <b>bodge</b> that papers over all the cracks and flaws in the emissions trading scheme. It calculates the <u>number emissions units to auction</u> into the New Zealand carbon market.</i></p>
<p><a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/emissions-budgets-and-the-emissions-reduction-plan/">Emissions budgets</a> are part of the huge blob that is New Zealand's climate policy framework, along with:</p>
<ul>
<li>the <a href="https://environment.govt.nz/acts-and-regulations/acts/climate-change-response-amendment-act-2019/">"Zero Carbon Act"</a> that was an amendment not an original statute.</li>
<li>the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/inaia-tonu-nei-a-low-emissions-future-for-aotearoa/">Climate Change Commission</a></li>
<li>the <a href="https://www.ipcc.ch/sr15/">Paris Agreement</a></li>
<li>the <a href="https://www.rnz.co.nz/news/national/454610/government-pledges-50-percent-emission-reduction-by-2030">Net Zero by 2050</a> goal</li>
<li>the <a href="https://www.beehive.govt.nz/release/govt-increases-contribution-global-climate-target">2030 emissions target</a></li>
</ul>
<p>Specifically emissions budgets are a relatively new tool (<a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/changes-to-the-ets/">added in the 2020 reforms</a>) to calculate the amount of emissions units that will be auctioned to emitters under the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">New Zealand Emissions Trading Scheme</a>. The <a href="https://www.etsauctions.govt.nz/public/auction_noticeboard/12">first auction</a> of emission units was in March 2021.</p>
<p>The Ministry for the Environment's web site has an explanation of how the <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/nz-ets-market/setting-unit-limits-in-the-nz-ets/#the-number-of-nzus-available-for-auction-over-2021-2027">emissions budgets help calculate</a> the amount of units to auction into the <a href="https://genless.govt.nz/climate-change/the-emissions-trading-scheme-explained/?gclid=CjwKCAjw_MqgBhAGEiwAnYOAeoEj_eTVdmMO4aR13rkuX6l2HLY8zRdRu1UbInsSpnJzKwjvQQL65BoC2DQQAvD_BwE">emissions trading scheme</a> each quarter.<p>
<p>The web page features this chart showing the working parts of the emissions budget.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhU6-p78VojgsnK6jvZoRGEsh9gbdZM-qNfKQzTXNdrHC_ODObIVFiqTZoV2eaSebMIhZ6o64fAKez6HFRIRS_fIzurkfxSwiy0hUTYCl395eGkw0pQ4Ezyeq7w8y2-MrvFpEdSpcXSochkcLKXFI-7c3j8E24oLLPu0z2TrHr2Zu8UX9vs3gw9mSlC/s1600/ETS-graph-2_0__FocusFillMaxWyIwLjAwIiwiMC4wMCIsNzk1LDQyOF0.jpg" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="306" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhU6-p78VojgsnK6jvZoRGEsh9gbdZM-qNfKQzTXNdrHC_ODObIVFiqTZoV2eaSebMIhZ6o64fAKez6HFRIRS_fIzurkfxSwiy0hUTYCl395eGkw0pQ4Ezyeq7w8y2-MrvFpEdSpcXSochkcLKXFI-7c3j8E24oLLPu0z2TrHr2Zu8UX9vs3gw9mSlC/s1600/ETS-graph-2_0__FocusFillMaxWyIwLjAwIiwiMC4wMCIsNzk1LDQyOF0.jpg"/></a></div></p>
<p>The web page then shows this table of the annual auction volumes.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9x5v1N7LL2AjuHw2WD-mJBhZb5Yb3XIvXzgWltyPV4Y1ElMidyjMtzRTCca1M4U0E-URiWa7msttDl4h99K5QaPp6sNcSONj-3LTT4U9aUbCZ4LGRViLHWS_aPzpHpExTDM18xR8DEbP9A36zg2rOzh8Fi1Ps3o8yj5JvTdB5iB64Bzn4sqSZHK8f/s1600/figure2-table-mismatchScreenshot_2023-03-10_16-53-51.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="275" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9x5v1N7LL2AjuHw2WD-mJBhZb5Yb3XIvXzgWltyPV4Y1ElMidyjMtzRTCca1M4U0E-URiWa7msttDl4h99K5QaPp6sNcSONj-3LTT4U9aUbCZ4LGRViLHWS_aPzpHpExTDM18xR8DEbP9A36zg2rOzh8Fi1Ps3o8yj5JvTdB5iB64Bzn4sqSZHK8f/s1600/figure2-table-mismatchScreenshot_2023-03-10_16-53-51.png"/></a></div>
<p>However, the table and the chart don't match. They cover different five year periods. There is also an error in the html code of the table. There is a blank cell missing in the first row and first column. And the column headings need to be moved one cell to the right so that 'TOTAL' is above '75.2'.</p>
<p>I emailed the Ministry back in mid February to let them know. However, nothing has changed.</p>
<p>I find that quite comical. The web site administrator and the external relations person just got so bored talking with the emission policy person that they fell to sleep. If it's comedy, it's really a tragedy-comedy. One day far in the future, alien anthropologists will discover that the planet Earth missed it's global warming goals because they were too <a href="https://en.wiktionary.org/wiki/mego">"My Eyes Glaze Over"</a> for any one to understand.</p>
<p>Specifically, the emissions budget is the 2020 provisional emissions budget for the years 2021 to 2025. This comes from a <a href="https://www.beehive.govt.nz/sites/default/files/2020-06/NZETS%20Q%26A.pdf">Q and A document</a> attached to a Government media release dated 2 June 2020 <a href="https://www.beehive.govt.nz/release/emission-trading-reforms-another-step-meeting-climate-targets">Emission trading reforms another step to meeting climate targets</a> by James Shaw Minister for Climate Change Issues.</p>
<p>These five year emissions budgets roll forward as each year passes. So the current emissions budget is 2023 to 2027.</p>
<p>What is the point of the five year emissions budget?</p>
<p>It is to drag down the trend line in New Zealand's gross and net emissions of greenhouse gases. This is helpfully shown by this chart from the Climate Change Commission's advice to the Government. We can see the three jaffa and blue coloured bars representing the three five year budgets 1 , 2 and 3 sequentially reducing and pulling down the trend line of emissions.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg73QHVAijpp_rO5z09z1Nk_nmum-URq3ZLdP7DkQuObuQWbm6gYZmX8OfP8CyYqPe80qJlBOjTEJV-7IJ7rrTR9Py-DzQe-e95fPe06-q9lPql1TfG5ZX-Xp_hNzZyXZ6rkQGmueYH6kXzlOdtGli90QA3rFFC52OcAyp4A3toc2huiFor96zQw-PB/s1600/CCC-fig5d.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="357" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg73QHVAijpp_rO5z09z1Nk_nmum-URq3ZLdP7DkQuObuQWbm6gYZmX8OfP8CyYqPe80qJlBOjTEJV-7IJ7rrTR9Py-DzQe-e95fPe06-q9lPql1TfG5ZX-Xp_hNzZyXZ6rkQGmueYH6kXzlOdtGli90QA3rFFC52OcAyp4A3toc2huiFor96zQw-PB/s1600/CCC-fig5d.png"/></a></div>
<p>This next chart, 'Figure 7' from the Ministry for the Environment presents what looks like an area chart (Except its actually a barplot of five time intervals). Look at the area underneath the black dashed line of net emissions and the solid red line of a trajectory towards the 2030 emissions target. A wedge shaped area of 'additional reductions' is needed to drag the forecast line down to the trajectory to the target. The area under the trajectory (to the target) is 354 million tonnes of net emissions. So the decreases in emissions are squeezed to the later years.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqc0W7ogpiVQ8dRhJJlEWG1NszJ2ES-kOMKb46sibzWb0-I3JZfLI0-dM7kXv5p2Zu2IFVVKoPWdJ-lIiZjeq18L46KxdqNECs8aKVWziQJZ7rNsL38GfRPt2z1qAXQ0N_jgWnH-fbc51EVC2SCUrIy0R5F87IbFP1-gUx-q7QVbwlCsZ8qLL6Zbhe/s1600/Fig-7-peb.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="319" data-original-width="598" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqc0W7ogpiVQ8dRhJJlEWG1NszJ2ES-kOMKb46sibzWb0-I3JZfLI0-dM7kXv5p2Zu2IFVVKoPWdJ-lIiZjeq18L46KxdqNECs8aKVWziQJZ7rNsL38GfRPt2z1qAXQ0N_jgWnH-fbc51EVC2SCUrIy0R5F87IbFP1-gUx-q7QVbwlCsZ8qLL6Zbhe/s1600/Fig-7-peb.png"/></a></div>
<p>Here is my version of the same bar chart of five years of emissions. It uses the same area 354 million tonnes of net emissions (derived from the 2030 target) and the same colours.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGUYGdcdBzgvS5cyr9GOsb22_WlrmAN2h55bNKqDBaNuGyorE3g3X3xG65219mJqX433-SozocrV_QMJA8VO5IEhl780wKrzq7I-AYH80v8xEdO-36uqfayJhIwHO7mFprQatke01lcbLKwfC61RZ26jqyN3Fmu7qAZZw3WD_d6jfBTkuCkImXxplp/s1600/Emissions-budget1-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGUYGdcdBzgvS5cyr9GOsb22_WlrmAN2h55bNKqDBaNuGyorE3g3X3xG65219mJqX433-SozocrV_QMJA8VO5IEhl780wKrzq7I-AYH80v8xEdO-36uqfayJhIwHO7mFprQatke01lcbLKwfC61RZ26jqyN3Fmu7qAZZw3WD_d6jfBTkuCkImXxplp/s1600/Emissions-budget1-560by420.png"/></a></div>
<p>The next step is to add the target trajectory red line and the annual amounts of net emissions from 72 million tonnes in 2022 to 68 million tonnes in 2025.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja812Xro_GCffgUTbHcuh59p3z559ofHkFDa6ZrO_tBscKkU6hPTLWNPBBQ9JJd1maNS0x8Kz7U_KumuOfhv0fDys878b_o6wuqSopPAW13XUSS_5-Mh77NWLqISdW4Y8gWbWf-aBXnAnUSbp2zfDxEY73Z99Z_6rPewdUgt758oD0B6g0TUYZIQnY/s1600/Emissions-budget2-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja812Xro_GCffgUTbHcuh59p3z559ofHkFDa6ZrO_tBscKkU6hPTLWNPBBQ9JJd1maNS0x8Kz7U_KumuOfhv0fDys878b_o6wuqSopPAW13XUSS_5-Mh77NWLqISdW4Y8gWbWf-aBXnAnUSbp2zfDxEY73Z99Z_6rPewdUgt758oD0B6g0TUYZIQnY/s1600/Emissions-budget2-560by420.png"/></a></div>
<p>So, okay, we have an <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a>. Those 354 million tonnes of greenhouse gases will be represented by 354 million emission units that could be auctioned to emitters. As basic economics says that will be the most efficient way of allocating the emissions to buyers.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj8gqw00HaJkXiY3CfU0w-ptHFG6vcwBthxcls98tUOFegyYjgCW2p43DQKijbaRh_9Uy0sqPAJZ-SeXt3HiKru0I8HdR92X4BtaSKVbulRR9RRTSsvUT6VkWIwSp1Y5XAFKCRZgA8qN54Ln4g1akEPh17JfNaEWJdfqX9eO-Xt1GxSd9OnKRp9IrP/s1600/Emissions-budget3-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj8gqw00HaJkXiY3CfU0w-ptHFG6vcwBthxcls98tUOFegyYjgCW2p43DQKijbaRh_9Uy0sqPAJZ-SeXt3HiKru0I8HdR92X4BtaSKVbulRR9RRTSsvUT6VkWIwSp1Y5XAFKCRZgA8qN54Ln4g1akEPh17JfNaEWJdfqX9eO-Xt1GxSd9OnKRp9IrP/s1600/Emissions-budget3-560by420.png"/></a></div>
<p>Ha ha ha! Of course that's not what is done! Instead we have to do a <a href="https://www.urbandictionary.com/define.php?term=bodge">'bodge'</a> and subtract millions of tonnes from the emissions budget to deal with the fundamental flaws in the emissions trading scheme.</p>
<p>This is the crux of the problem. However, neither James Shaw or the Ministry for the Environment discuss this 'budgetting' as the crude <a href="https://www.urbandictionary.com/define.php?term=bodge">bodge</a> that it is.<p>
<p>The emissions of pastoral agriculture are not yet subject either to a methane-based emissions levy or to the emissions trading scheme. And perhaps may never be subject to emissions pricing if Beef and Lamb NZ's latest <a href="https://www.stuff.co.nz/business/farming/opinion/131502555/farmers-are-under-pressure-and-all-new-zealanders-should-be-concerned">anti-regulation campaign</a> succeeds.</p>
<p>So the first step is a 'bodge' to subtract the emissions of agriculture. This is 194 million tonnes, more than half the emissions budget of 354 million tonnes.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFpyi_zO3M31J0ELO6UPl1rosrVOTLGXmQsnKythr1FyyelQelSLxhgJKFwJEE9sH8S2qbcvl9FEEt3Os1G58GpcDSRWcR98KlpLglLl-ih7vsJQHmO0wwcTiQSwyNLPmCANXiwDp8EuetG0VCumgynGm1AqhWOdnYq8qSk9QX9cLj3fbIJ0Le8rJY/s1600/Emissions-budget4-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFpyi_zO3M31J0ELO6UPl1rosrVOTLGXmQsnKythr1FyyelQelSLxhgJKFwJEE9sH8S2qbcvl9FEEt3Os1G58GpcDSRWcR98KlpLglLl-ih7vsJQHmO0wwcTiQSwyNLPmCANXiwDp8EuetG0VCumgynGm1AqhWOdnYq8qSk9QX9cLj3fbIJ0Le8rJY/s1600/Emissions-budget4-560by420.png"/></a></div>
<p>So are the remaining 160 million tonnes going to be auctioned? No, there's another subtraction. Under the emissions trading scheme <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">industrial allocation rules</a>, emissions-intensive industries are given free emissions units...which they then surrender back to the Government.</p>
<p>So those emissions are not priced. Free allocation of units has the same effect as the exemption of agriculture, the units have to be subtracted from the emissions budget as you can't auction units that have already been given for free to emitters. The numbers are 8.6 million units per year or 43 million for 2021 to 2025.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKPmiLclPrL7mU4APFbuX1AZQm5LLBrZAr1S7wIGwrqb8V6rSG_W4XI4pLP-N4rc-NLRvDNh3ThbpUC56SHy1R-dEA6J86ItKI1nU4sJgmp4bsSH6uye_OBKMLd6huH9b1fqy3IZL3qE6_FRezEXe1C9CeD4362h779D7-QBNygNyIklPF6W64KYfl/s1600/Emissions-budget5-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKPmiLclPrL7mU4APFbuX1AZQm5LLBrZAr1S7wIGwrqb8V6rSG_W4XI4pLP-N4rc-NLRvDNh3ThbpUC56SHy1R-dEA6J86ItKI1nU4sJgmp4bsSH6uye_OBKMLd6huH9b1fqy3IZL3qE6_FRezEXe1C9CeD4362h779D7-QBNygNyIklPF6W64KYfl/s1600/Emissions-budget5-560by420.png"/></a></div>
<p>Is that it? No, there's another bodge. There are too many emission units in private hands. There were <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/market-information/privately-held-units/">164,329,773 emission units</a> at 31 December 2022. This surplus is called the stockpile. These units could be sold into the market at any time. Which would allow more emissions. Thus emissions would exceed the emissions budgets. The Climate Change Commissions and the Government would like to reduce the stockpile. So another 27 million tonnes are subtracted.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8srfVp87Y334eI8Kbg0LV69TInaaY3ukh61CsLyMKcwJVzkazlEkq7Ta4XmMI8nFdYaxwN_yQayMEXdAE3TMkRDxU427wBZIN5xMcl8CAu7qoEjHUTBRV34gDbucD5pP51zdnqnG9-4jvBGQMRjJuN-MaZF7x55_BqCXMY3vl2k-ymhjGDixsHwS5/s1600/Emissions-budget6-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8srfVp87Y334eI8Kbg0LV69TInaaY3ukh61CsLyMKcwJVzkazlEkq7Ta4XmMI8nFdYaxwN_yQayMEXdAE3TMkRDxU427wBZIN5xMcl8CAu7qoEjHUTBRV34gDbucD5pP51zdnqnG9-4jvBGQMRjJuN-MaZF7x55_BqCXMY3vl2k-ymhjGDixsHwS5/s1600/Emissions-budget6-560by420.png"/></a></div>
<p>Now my chart of the 2020 provisional emissions budget is almost the same as the Ministry of the Environment's chart. That final bodge leaves a budget of 90 million tonnes left to auction into the carbon market. Or 18 million per year. Or 4.75 million emissions units to be auctioned from the <a href="https://www.etsauctions.govt.nz/public/auction_noticeboard/12">first quarterly auction</a> of emission units held on 17 March 2021.</p>
<p>This chart displays the same unit numbers and shows the sum of the bodges, how 264 million tonnes out of 354 million tonnes are not priced through the emissions budget process.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGbbPFZaztk-LSeMA3OyqI01dFstHaQpp5aiNFf9lBb0pPhkpv2NXzVuHbPiGe2YN0O35AoGSmSTDZSISnzbiqz0f_O3PeLpLgt8YQMeV7L8ROUH2zTWLKOwcfH-OC364YpAZcBaUu-WvFDMgbSqX8aPBwpwHtECpc8x1U5TPrT09eVIGIoHODJoqH/s1600/Emissions-budget7-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGbbPFZaztk-LSeMA3OyqI01dFstHaQpp5aiNFf9lBb0pPhkpv2NXzVuHbPiGe2YN0O35AoGSmSTDZSISnzbiqz0f_O3PeLpLgt8YQMeV7L8ROUH2zTWLKOwcfH-OC364YpAZcBaUu-WvFDMgbSqX8aPBwpwHtECpc8x1U5TPrT09eVIGIoHODJoqH/s1600/Emissions-budget7-560by420.png"/></a></div>
<p>This chart has the same axes as the previous chart but just shows the number of units to be auctioned. Only 90 out of 354 million tonnes of emissions are priced via the auctions.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEtYGXb2XD65sCVj796AAr_u0KEiJWOoX-3brhJ7A0vLt5RlLUEYy6LfBi-nlmj7_He_vsor6d9DtIb8FLDLZE2s0W-503C-lQXUf0cCV5b4kbODT6BS0-809P6qCrsTgugRB6806-YUCzasAhkjSS55vdBKBUpo7yngBQ1zpv7C6ZzXo4FPOax5PP/s1600/Emissions-budget8-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEtYGXb2XD65sCVj796AAr_u0KEiJWOoX-3brhJ7A0vLt5RlLUEYy6LfBi-nlmj7_He_vsor6d9DtIb8FLDLZE2s0W-503C-lQXUf0cCV5b4kbODT6BS0-809P6qCrsTgugRB6806-YUCzasAhkjSS55vdBKBUpo7yngBQ1zpv7C6ZzXo4FPOax5PP/s1600/Emissions-budget8-560by420.png"/></a></div>
<p>This chart now summarises the message of the two previous charts. Because the design flaws in the emissions trading scheme require bodges (by subtraction) to the emissions budget, only a quarter (25%) of the 2021 to 2025 emissions budget is expected to be priced via auction sales to emitters.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgI8XGHaRL9exEYk9ClHYix9cvDvucmMsazO9MkAqrtiUYVg7Z4KIiHIR7ILyfzkmZJ6_L-qYaD3cTScKe2cYRbq8tn8ZYNEVMJkP5eQXx9-UKyBdjhMtPiRRkBE6q5zkB0ws4V_hcsC-K5sR-MSFXd6vO33jJ8AafPegt6zSAcLIfGa-0nCa0F8kr-/s1600/Emissions-budget9-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgI8XGHaRL9exEYk9ClHYix9cvDvucmMsazO9MkAqrtiUYVg7Z4KIiHIR7ILyfzkmZJ6_L-qYaD3cTScKe2cYRbq8tn8ZYNEVMJkP5eQXx9-UKyBdjhMtPiRRkBE6q5zkB0ws4V_hcsC-K5sR-MSFXd6vO33jJ8AafPegt6zSAcLIfGa-0nCa0F8kr-/s1600/Emissions-budget9-560by420.png"/></a></div>
<div style="border-width:1px; border-style:solid; border-color:#F00000; padding: 1em;">
<p>Summary points to note. The emissions trading scheme has fundamental flaws in it's design:</p>
<ol>
<li>the exclusion of agricultural emissions from ETS obligation,</li>
<li>the excessively generous industrial allocation of free emissions units to emitters,</li>
<li>the excessive surplus of privately held emission units reflecting the importing of 'hot air' international units.</li></ol>
<p>These three flaws require bodges to the emissions budgetting process that reduce the quantity of emissions subject to an emissions price via auctions.</p>
</div>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-73315094777545116962023-03-04T11:24:00.009+13:002023-04-02T16:39:23.486+12:00End the industry allocation subsidized free emission units given to polluting industry to fund Cyclone Gabrielle recovery <div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJHBugV9lFCQt6sX_eJ6lZfjt0XN4jUg427eK3ITqjkZvgOif9abQNQ3xqyUQC5J-GFFTonC8Sbn-bVvfWdontZ51D2_RnP_MaG1UWyDYr4FIaXfvugP7HgeXG5gkLld9MiCqWPRg-CJZL2C5oM65nCj521qDnrmys1rRlVi8ZZaWnh_DK2ZT2Z8Si/s1600/dompostfloodindex200px.jpeg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" data-original-height="112" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJHBugV9lFCQt6sX_eJ6lZfjt0XN4jUg427eK3ITqjkZvgOif9abQNQ3xqyUQC5J-GFFTonC8Sbn-bVvfWdontZ51D2_RnP_MaG1UWyDYr4FIaXfvugP7HgeXG5gkLld9MiCqWPRg-CJZL2C5oM65nCj521qDnrmys1rRlVi8ZZaWnh_DK2ZT2Z8Si/s1600/dompostfloodindex200px.jpeg"/></a></div><p><i>Every year since 2010, emissions intensive emitters have received a subsidy of millions of free emissions units under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a> <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/decisions/">'industrial allocation'</a> rules.</i></p>
<p><i>Is it still morally conscionable for the emissions trading scheme to keep giving emitters millions of dollars worth of free emissions units, when the costs of recovery from the climate tragedy Cyclone Gabrielle are going to be billions of dollars?</i></p>
<p></p>
<p>I penned this message to Prime Minister Chris Hipkins, Finance Minister Grant Robertson and Minister for Climate Change James Shaw.</p>
<blockquote><i>"Tena koe Prime Minister Hipkins,</i></blockquote>
<blockquote><i>The Dominion Post has reporting that the Minister of Finance the Hon Grant Robertson has said that <a href="https://www.stuff.co.nz/business/opinion-analysis/131288785/tom-pullarstrecker-cyclone-leaves-less-room-to-deal-with-more-shocks">billions of dollars</a> will be needed for the recovery from Cyclone Gabrielle. I don't think anyone reasonable is disagreeing with him about the scale of the challenge helping impacted communities.</i></blockquote>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbyd1pC4sOIOlk8ICSgSJqnXLDDuoK57AL8Al-CEL4f85Cox12D2AoPWzIR6OvKvUev0jH_nba5u3gXsNlD8K2E_LXP5UFsvUXolAiFRjdUmdxgWU1fJ4FkH-V3LOAzheLx9Lk78hB-X4tdmcr244trjIIBQfyEF5N7BDvppKqZcPzrc4m443Tpkrq/s1600/beehive150px.jpeg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" data-original-height="200" data-original-width="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbyd1pC4sOIOlk8ICSgSJqnXLDDuoK57AL8Al-CEL4f85Cox12D2AoPWzIR6OvKvUev0jH_nba5u3gXsNlD8K2E_LXP5UFsvUXolAiFRjdUmdxgWU1fJ4FkH-V3LOAzheLx9Lk78hB-X4tdmcr244trjIIBQfyEF5N7BDvppKqZcPzrc4m443Tpkrq/s1600/beehive150px.jpeg"/></a></div>
<blockquote><i>I have a suggestion to help provide funds for Cyclone Gabrielle without either raising new taxes or new borrowing or by reducing funding of important existing programs.</i></blockquote>
<blockquote><i>The Ministry for the Environment and the Climate Change Commission both expect that in calendar year 2023, 6.4 million emissions units will be allocated at no cost to industries.</i></blockquote>
<blockquote><i>At <a href="https://www.carbonnews.co.nz/story.asp?storyID=27088">Tuesday's spot price of $67.50</a>, these units would be valued at $432 million. My suggestion is to quickly amend the Climate Change Response Act 2002 (or it's related regulations) and add the industrial allocation units to the quarterly auctions of emission units and commit the proceeds to recovery from Cyclone Gabrielle.</i></blockquote>
<blockquote><i>You will need to get officials to act promptly as emitters will be applying for units from January to April 2023.</i></blockquote>
<blockquote><i>As the amount of forecast allocation units is over 6 million units through to 2027, there is an ongoing stream of about 400 to 500 million dollars (depending on unit prices) available for another 5 years.</i></blockquote>
<blockquote><i>What could be a better source of funding for recovery from a climate crisis event than diverting funding from emitter industries?"</i></blockquote>
<p>The Climate Change Commission's estimate of the free emission units allocated is from page 38 of their report <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/our-advice-on-the-nz-ets/nz-ets-unit-limits-and-price-control-settings-for-2023-2027/">"Advice on NZ ETS unit limits and price control settings for 2023-2027".</a></p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiosPkU9OzkF5j6RgxUOm2INeupda7_rpgtK4500pmO5mkCka8RTKpHKoW1yDpdy7LYrunv73tQpmNvcihvG-nFQ7u37XwxTB35LNu3W0qidBiZwbkQa47J0F41ra5cZF2bgqfRbutRik8BoPkAKBIUJip6zgEMs8DsC17o4PzuPN_8z3JjnEIE1xe0/s1600/Findingsonfreeallocation.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="159" data-original-width="593" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiosPkU9OzkF5j6RgxUOm2INeupda7_rpgtK4500pmO5mkCka8RTKpHKoW1yDpdy7LYrunv73tQpmNvcihvG-nFQ7u37XwxTB35LNu3W0qidBiZwbkQa47J0F41ra5cZF2bgqfRbutRik8BoPkAKBIUJip6zgEMs8DsC17o4PzuPN_8z3JjnEIE1xe0/s1600/Findingsonfreeallocation.png"/></a></div>
<p>Let's make a bar plot of the free emission units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXzG0cPP-7HdapGEIJ2LRR7tekSqck_Q91bLeBKtd3gPJ3yAvXACwb6aFU2vfGErGNnECvCXqTig7NgwP9buKMQY-dlYXbq0sd70NDiDG7U8lAEk74xJVYhFzLha9mEJYYk-PDyST8_HDMu-S6eScGsvVTUrMRO7ZFab5K1xfQAZV3Ui6uR667CJip/s1600/Industrial-Allocation-barplot-2023-2027-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXzG0cPP-7HdapGEIJ2LRR7tekSqck_Q91bLeBKtd3gPJ3yAvXACwb6aFU2vfGErGNnECvCXqTig7NgwP9buKMQY-dlYXbq0sd70NDiDG7U8lAEk74xJVYhFzLha9mEJYYk-PDyST8_HDMu-S6eScGsvVTUrMRO7ZFab5K1xfQAZV3Ui6uR667CJip/s1600/Industrial-Allocation-barplot-2023-2027-560by420.png"/></a></div>
<p>The Ministry for the Environment says that the spot market NZU price has followed the cost containment reserve trigger price (<a href="https://environment.govt.nz/publications/proposed-changes-to-new-zealand-emissions-trading-scheme-limit-and-price-control-settings-for-units-2022-consultation-document/">page 25 of Proposed changes to New Zealand Emissions Trading Scheme limit and price control settings for units 2022: Consultation document</a>);</p>
<blockquote><i>Since the NZ ETS closed to international markets in 2015, the market price of NZUs has closely tracked the upper limit price controls, the $25 and then $35 fixed price option, and the more recent $50 and then $70 cost containment reserve trigger price.</i></blockquote>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaW1VIR2Qp6eBgCsKp3xgLFVRZeiuwPEFsMl5Lct128SU5RsXtCrVnwvmtu4dsUt1wd8eLyzSIvyuVQFFocC1BEd8QqvZXIJgjVFzHWcYLyB3TbcWt4AObXqqQI3hsLEN8aNN8bNVCTYcLukB6_To6hQ4GKzxNuV1izSSQi1S8A4d39gii3rPZzE2G/s1600/p25-MfE-proposedchanges-2022.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="133" data-original-width="607" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaW1VIR2Qp6eBgCsKp3xgLFVRZeiuwPEFsMl5Lct128SU5RsXtCrVnwvmtu4dsUt1wd8eLyzSIvyuVQFFocC1BEd8QqvZXIJgjVFzHWcYLyB3TbcWt4AObXqqQI3hsLEN8aNN8bNVCTYcLukB6_To6hQ4GKzxNuV1izSSQi1S8A4d39gii3rPZzE2G/s1600/p25-MfE-proposedchanges-2022.png"/></a></div>
<p>What is the cost containment reserve trigger price? The Climate Change Commission (Op cit) says: <i>"The cost containment reserve (CCR) is a reserve of NZUs available for sale if the auction clearing price is at or above a specified trigger price".</i></p>
<p>The cost containment reserve trigger price is set in <a href="https://legislation.govt.nz/regulation/public/2020/0264/latest/LMS376569.html">Schedule 3 of the Climate Change (Auctions, Limits, and Price Controls for Units) Regulations 2020.</a></p>
<p>The reserve trigger prices are also listed on the Ministry for the Environment's website <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/nz-ets-market/emission-unit-prices-and-controls/">Price control settings</a>.<p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgt5_cyGtnagVz7ZGVYMaEW6EMB20LXlwiHG7j3v1K1-zFq0iQr_q1AV9jUNZ7uv4TC8A9Ic60tJMImIrTfH0hUfHiFc8l4PSFGkH1y0fUFFbgSLu_6FKE6bJVHLTmS2W1GC0Qra3A74it3E4A3psFULuy7EWZ6iq-ErxnFgnJuVwErncrfDbjSAouo/s1600/triggerpriceScreenshot_2023-03-02_17-06-38.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="488" data-original-width="454" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgt5_cyGtnagVz7ZGVYMaEW6EMB20LXlwiHG7j3v1K1-zFq0iQr_q1AV9jUNZ7uv4TC8A9Ic60tJMImIrTfH0hUfHiFc8l4PSFGkH1y0fUFFbgSLu_6FKE6bJVHLTmS2W1GC0Qra3A74it3E4A3psFULuy7EWZ6iq-ErxnFgnJuVwErncrfDbjSAouo/s1600/triggerpriceScreenshot_2023-03-02_17-06-38.png"/></a></div>
<p>Clearly we need a bar plot of the cost containment reserve trigger prices.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghDdRQvr34j1N-Zj-UCy7K9rm1bK25YGhixCeRXJg9UeytZMqN68iiT8rQxKtRVdO3SVeiQZTMp-yb-zHCKBolsU9tioo91o15WstY_1eDDg7LiDmXFiv2-gG6ktfzKIJRNWd2eCFkS_77D3LY8diy4qgZMyMoy5P9OhfwA7ZuTGbgUIT1AqPOR7Kp/s1600/Unit-prices-barplot-2023-2027-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghDdRQvr34j1N-Zj-UCy7K9rm1bK25YGhixCeRXJg9UeytZMqN68iiT8rQxKtRVdO3SVeiQZTMp-yb-zHCKBolsU9tioo91o15WstY_1eDDg7LiDmXFiv2-gG6ktfzKIJRNWd2eCFkS_77D3LY8diy4qgZMyMoy5P9OhfwA7ZuTGbgUIT1AqPOR7Kp/s1600/Unit-prices-barplot-2023-2027-560by420.png"/></a></div>
<p>Assuming that from now until 2027 the spot price for NZUs follows the cost containment reserve trigger price as it did in 2022, then the market values of the 'industrial allocation' free emission units are the volumes (about 6 million units per annum) multiplied by the trigger prices.</p>
<p>Which results in about half a billion $NZD per year for recovery from Cyclone Gabrielle.</p>
2023 $516,096,000</br>
2024 $577,143,000</br>
2025 $650,412,000</br>
2026 $718,208,000</br>
2027 $792,817,000</p>
<p> By 2027 this will add up to a total fund of over $3 billion $NZD ($3,254,676,000).<p>
<p>We need to make another bar plot.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBuomKS4xGNLub9StK9JUEJfiOsuUTLm2tR0Tm8-1GBHHdqzkTM9QQhFIT1fnl2kQDij2Rgg3OopMqqI7MIgRN5wydRNGevyeCWkjiM7Vzp7wx5E7RV2NEZhFFB31-cQJkxFwYYWozn30FR8Lcjbm2GhQTK6cJ933FSeQWqS18VEmhMYB8dFG2OIwl/s1600/Unit-values-barplot-2023-2027-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBuomKS4xGNLub9StK9JUEJfiOsuUTLm2tR0Tm8-1GBHHdqzkTM9QQhFIT1fnl2kQDij2Rgg3OopMqqI7MIgRN5wydRNGevyeCWkjiM7Vzp7wx5E7RV2NEZhFFB31-cQJkxFwYYWozn30FR8Lcjbm2GhQTK6cJ933FSeQWqS18VEmhMYB8dFG2OIwl/s1600/Unit-values-barplot-2023-2027-560by420.png"/></a></div>
<p>While I have received automated email replies to my emails to Hipkins, Robertson and Shaw, I have not received a substantative reply.</p>
<p>It just seems a no brainer to me that it is morally unconscionable to have an emissions trading scheme that subsidizes emissions intensive industry with $3 billion worth of free emissions units when those funds could be put into recovery from Cyclone Gabrielle.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-55467731204118534882023-02-06T19:50:00.009+13:002023-02-08T17:34:26.572+13:00Kyoto Protocol carbon prices 2005 to 2015 used by New Zealand's Ministry for the Environment<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJfGmoLmpLiPGh39m0AS_FlzsBWZxr13xg1XRqDTd4OOxNCkTnauIZj1S4SqwykbtZPd90S7dn0rBrs8EL_ZEMC8zxDrk2GLQ0QCKlLmG-PpPvvSF07NtIjb3Gxq_2QswSN-uFqVkgOMg/s1600/nzkyotobreakup_wontcommit.jpg" imageanchor="1" style="clear:left; float:left;margin-right:1em; margin-bottom:1em"><img border="0" height="135" width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJfGmoLmpLiPGh39m0AS_FlzsBWZxr13xg1XRqDTd4OOxNCkTnauIZj1S4SqwykbtZPd90S7dn0rBrs8EL_ZEMC8zxDrk2GLQ0QCKlLmG-PpPvvSF07NtIjb3Gxq_2QswSN-uFqVkgOMg/s200/nzkyotobreakup_wontcommit.jpg" /></a></div><p>Perhaps the first data set of New Zealand carbon prices was the Ministry for the Environment's carbon prices used to calculate New Zealand's net position (either financial asset or liability) under the Kyoto Protocol.</p>
<p>The Ministry for the Environment had a web page <a href="https://web.archive.org/web/20160507070635/https://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-net-position-under-kyoto-protocol">About the 2008-2012 net position under the Kyoto Protocol</a></p>
<p>There was also a web page providing the <a href="https://web.archive.org/web/20160505075853/https://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-net-position-under-kyoto-protocol/update-net">Latest update on New Zealand's net position</a>.</p>
<p>The net position was updated monthly in the crown financial statements for New Zealand issued by Treasury. A monthly data set of carbon prices was needed. From 2005, international carbon prices from either the United States ($USD) or Europe (euro) were converted to New Zealand dollars using the relevant foreign currency rate.</p>
<p>Another web page displayed the historic updates of the Kyoto Protocol financial information in the form of a <a href="https://web.archive.org/web/20160503020232/http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-net-position-under-kyoto-protocol/historic">table of eight columns</a>. The seventh column was the carbon price in New Zealand dollars.</p>
<p>Here is what the table looked like.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5ullAJxEymNEaskGKkx4rRJ1mJqOuu6ryoxXE8lGyQo5yBrBr4A4ONCccqgr2jf21OAl8eNiulUx4NeAgMspVAoLviVkNeNh0F-Kk26WlEi2aWCxXrlfddZ1SKSbMvk1gj1HCka6yOxSF51WxT7asd4ngapkOHoeud4zPVMGwYWZ3Q0w8sIUos82y/s1600/Screenshot_2023-02-06_19-34-08.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="400" data-original-width="568" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5ullAJxEymNEaskGKkx4rRJ1mJqOuu6ryoxXE8lGyQo5yBrBr4A4ONCccqgr2jf21OAl8eNiulUx4NeAgMspVAoLviVkNeNh0F-Kk26WlEi2aWCxXrlfddZ1SKSbMvk1gj1HCka6yOxSF51WxT7asd4ngapkOHoeud4zPVMGwYWZ3Q0w8sIUos82y/s1600/Screenshot_2023-02-06_19-34-08.png"/></a></div>
<p>Some years ago I saved an html file of that web page. I read the html file into R and tidied it into a data set with one row for every month and seven columns of variables. I even made a couple of charts!</p>
<p>In 2017, the Ministry for the Environment redesigned their website and the net position pages and the data set disappeared. I had thought about preserving it for the public record. I didn't get around to it.</p>
<p>I have just noticed I still have a folder of my R analysis. So I created a Github repository called <a href="https://github.com/theecanmole/Historic-updates-of-the-Kyoto-Protocol-carbon-price">Historic updates of the Kyoto Protocol carbon price</a>. This now records the original .html file, some R script, the tidied data as a .csv file, a 'Readme' file and some charts.</p>
<p>I updated my chart!</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTXhyXhncrrwxN19x1tPRllKOOAgo3_LE0jpLnbsgShHpxa-uCYIJDF-dEokHXXXdFGAkZC1LkKTZd0JWniqsKmGbHUfd8xi_O7o7ISbUpNvnMkl8qKn3gIqETzaW-eFSJXYLFCrLNr92aV6mBAGxQjmrDQyUuISCUxWcruhBewqqvcg0ATQSt6Y81/s1600/NZ-Kyoto-Prices-560by420-v2.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTXhyXhncrrwxN19x1tPRllKOOAgo3_LE0jpLnbsgShHpxa-uCYIJDF-dEokHXXXdFGAkZC1LkKTZd0JWniqsKmGbHUfd8xi_O7o7ISbUpNvnMkl8qKn3gIqETzaW-eFSJXYLFCrLNr92aV6mBAGxQjmrDQyUuISCUxWcruhBewqqvcg0ATQSt6Y81/s1600/NZ-Kyoto-Prices-560by420-v2.png"/></a></div>
<p>I can't remember how I chose the colour of the line. It's "#D2691E" or "hot cinnamon".</p>
<p>What key point does the chart make?</p>
<p>The international market was flooded with "hot air" emission units from 2011. As the <a href="https://morganfoundation.org.nz/new-report-climate-cheats/">Morgan Foundation report Climate Cheats</a> sets out.</p>
<blockquote>One type of Kyoto carbon credit (the Emission Reduction Unit) was overcome by fraud and corruption in Ukraine and Russia. Virtually all of the credits issued by these countries are ‘hot air’ – they do not represent true emissions reductions. (Chapter 2)</blockquote>
<blockquote>Proportional to our emissions, New Zealand has been by far the largest purchaser of these Ukrainian and Russian credits through our Emissions Trading Scheme. This was due to deliberate decisions by the National-led Government to – unlike any other country – continue allowing unlimited use of these and other foreign credits for as long as the international community let us. (Chapter 3)</blockquote>
<blockquote>This fraud has had several nasty side-effects: It sent the price of carbon units in our Emissions Trading Scheme (ETS) to virtually zero, hammering our nascent carbon forestry industry.</blockquote>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-25297662224026682322023-01-24T18:39:00.007+13:002023-06-01T15:12:30.421+12:00New Zealand Steel Limited's annual surplus of emissions units to 2021<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s286/trading.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="176" data-original-width="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj48D4xkmVC-Mqx9xzAwLaU-qucya5MdKrTr-BqgzcW0Vfb3Pfkv9xsRaHblu5iSTDk7OkxEHnQ2b9vtxkkWZWBQ1WAjj_bbkcSd73fKUs5S7KMez4COOvTxdUhCaVIAtsBhf_3vAsn-ywtl51MAu22lURQ4WyZcSvmJqI6_hI6z2nvdqKzORUb0Cd9/s200/trading.png"/></a></div><p><i>Updated estimates of the over allocation of emission units to New Zealand Steel Limited to 2021.</i></p>
<p>There is an updated report on the <a href="https://www.epa.govt.nz">Environmental Protection Authority's</a> website. It is titled <a href="https://www.epa.govt.nz/assets/Uploads/Documents/Emissions-Trading-Scheme/Reports/Emissions-returns/Participant-Emissions-Report.pdf">ETS Participant Emissions</a> for the calendar year 2021.</p>
<p>This is the document that discloses the actual reported emissions of greenhouse gases of all <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/ets-reports/participants/">particpants</a> in the New Zealand <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a>.</p>
<p>This provides the actual emissions for 2021 of <a href="https://en.wikipedia.org/wiki/New_Zealand_Steel">New Zealand Steel Limited</a>.</p>
<p>Previously I charted the annual surplus and the <a href="https://rwmjohnson.blogspot.com/2022/06/should-major-emitter-like-new-zealand.html">accumulated surplus or 'stockpile'</a> of emissions units held by New Zealand Steel up to 2020. I have now updated my charts to include calendar year 2021.</p>
<p>All my data analysis scripts and data are in this <a href="https://github.com/theecanmole/NZ-Steel-emissions-units">Github repository NZ Steel emission units</a>.</p>
<p>As in 2020, New Zealand Steel's emissions are split between three categories;<p>
<ol><li>Importing coal 989,459 tonnes page 17</li><li>Producing iron or steel 43,466 tonnes page 21</li><li>Stationary energy purchasing coal 856,363 tonnes page 33</li></ol>
<p>43466 + 989459 + 856363 = 1889288 tonnes or 1,889,288 tonnes of emissions.</p>
<p>Here is my updated chart.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlMwbwEQpeVssVasdmTZijY-lxuxri7ZGYj4Nvqwbmt_lZEl6YSejCfjutkE1dWZdxX1fICohtQJf-3u9h_dlJebqyyc4j-NfetqB4GmLNtbz0pytYU3bYeTykTKsZyXTIVD_55DLN-g5dd2zAZZLMcr1tznKtOZUlzOq4WahIYBr-BUrV44gDbxKm/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v6.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlMwbwEQpeVssVasdmTZijY-lxuxri7ZGYj4Nvqwbmt_lZEl6YSejCfjutkE1dWZdxX1fICohtQJf-3u9h_dlJebqyyc4j-NfetqB4GmLNtbz0pytYU3bYeTykTKsZyXTIVD_55DLN-g5dd2zAZZLMcr1tznKtOZUlzOq4WahIYBr-BUrV44gDbxKm/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v6.png"/></a></div>
<p>The estimated accumulated stockpile of emission units is now 5 million units! (actually 4,998,943 units).</p>
<p>At today's <a href="https://www.carbonnews.co.nz/story.asp?storyID=26805">spot price of $73.00</a> the 5 million odd emission units are worth $364,922,839.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-29772171205745409802022-12-15T17:36:00.020+13:002023-05-28T16:59:54.277+12:00Industrial allocation exempts from pricing twice as many tonnes of emissions than the actual total for the Industry sector<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhp_Fm7p75bf8VXrqw9L8_IobSJg3Z8fegOHTK3mnH4aYMhDr__za07Yih11xmTDpnRISP0t34k3WsLiM7xEnKFyzscSkBFsZEgw6uzrk0IxLhR5cVb2Bm4Pxf_D6ZqRTCpBVZOcS4V3K-C_s82-1ocZRHmePk22qFC9YMX5U8-MNPHcJYMjBqO01ed/s112/nicksmiff-images.jpeg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="1" width="112" data-original-height="112" data-original-width="112" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhp_Fm7p75bf8VXrqw9L8_IobSJg3Z8fegOHTK3mnH4aYMhDr__za07Yih11xmTDpnRISP0t34k3WsLiM7xEnKFyzscSkBFsZEgw6uzrk0IxLhR5cVb2Bm4Pxf_D6ZqRTCpBVZOcS4V3K-C_s82-1ocZRHmePk22qFC9YMX5U8-MNPHcJYMjBqO01ed/s200/nicksmiff-images.jpeg"/></a></div><p><i>I reach back in time to 2009 when the Hon Dr Nick Smith was the Minister for Climate Changes Issues and his introduction to the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a> of the supermarket special the "two for one" deal.</i></p>
<p>I left the <a href="https://rwmjohnson.blogspot.com/2022/12/industrial-over-allocation-free.html">previous post on <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> noting that in the 11 years from 2010 to 2020 there were 162 entities that were given, at no cost, 55 million emission units as they are deemed to be <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">"emissions-intensive and trade-exposed".</a></p>
<p>In the same period the total actual emissions recorded in the <a href="https://environment.govt.nz/facts-and-science/climate-change/measuring-greenhouse-gas-emissions/about-new-zealands-greenhouse-gas-inventory/">Greenhouse Gas Inventory</a> for all industries was 53 million tonnes of carbon dioxide equivalent.</p>
<p>My data analysis is at this <a href="https://github.com/theecanmole/industry-allocation">Git hub page Industrial Allocation</a>.</p>
<p>Here is a barplot of the allocation (gifting, giving for free, donating) of the 55 million emission units to selected emitter industries.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUVhIKMgpQw-AoGgobzmHf0lj6pzNr1JGM1wUEbVhThK0uDIDE6OTxzjoojBJb6rOgm14xiwXzqh8z2H-7u6hvuTo9ugdJSi8oaT6jBZgoHva8A7Nn1t0h4pOdshQheQO6VQHLTsu9kpt8zG6qwn_8ZxGZI3FmnLD8yOmDj6CBtQd-URIw0TjL_Nbx/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUVhIKMgpQw-AoGgobzmHf0lj6pzNr1JGM1wUEbVhThK0uDIDE6OTxzjoojBJb6rOgm14xiwXzqh8z2H-7u6hvuTo9ugdJSi8oaT6jBZgoHva8A7Nn1t0h4pOdshQheQO6VQHLTsu9kpt8zG6qwn_8ZxGZI3FmnLD8yOmDj6CBtQd-URIw0TjL_Nbx/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png"/></a></div>
<p>Here is a barplot of the 53 million tonnes of actual emissions from the New Zealand industrial sector from the <a href="https://environment.govt.nz/facts-and-science/climate-change/measuring-greenhouse-gas-emissions/about-new-zealands-greenhouse-gas-inventory/">Greenhouse Gas Inventory</a>.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg27KnT3mInmVf9MKBklrlGSwzAhMsIz95tlvq0xlqrPT7ORKSNPrZJ1nXAKVQDPulzuIUdsvygQk77Pg2dLsN-UTCsA7yu_ZaIAZ1hScWkRIPLmXmKT-OF3Ab8mJbjEnBHXl3Xe8wIP2YMn6cVofeicjsJXaqh27qTB-8RVdu2O9OcDoJ2voNkiVlD/s1600/Industry-Emissions-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg27KnT3mInmVf9MKBklrlGSwzAhMsIz95tlvq0xlqrPT7ORKSNPrZJ1nXAKVQDPulzuIUdsvygQk77Pg2dLsN-UTCsA7yu_ZaIAZ1hScWkRIPLmXmKT-OF3Ab8mJbjEnBHXl3Xe8wIP2YMn6cVofeicjsJXaqh27qTB-8RVdu2O9OcDoJ2voNkiVlD/s1600/Industry-Emissions-2010-2020-560by420-v1.png"/></a></div>
<p>Here is a line chart of the 53 million tonnes of actual emissions and the <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/">Industrial Allocation</a> - the free allocation of the 55 million emission units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMZmrrh4XUiSBldrq5q0Fv49CrbQrR0bqq_kMzzVxxx7plYTd19AIfoUwLulfh1dFJ0fvlG7ICn6U-lKbHrdh1nwcfyWWJv58xPAsQXCjV4EEiGFbisz33G5hRMl1b4EnsgkjKluJUJPKy9HApy8JofkGSzxv7Qab4i7bxJv1KAHW9wZ57lru7zPj-/s1600/Industrial-Allocation-line-2010-2020-560by420-v2.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMZmrrh4XUiSBldrq5q0Fv49CrbQrR0bqq_kMzzVxxx7plYTd19AIfoUwLulfh1dFJ0fvlG7ICn6U-lKbHrdh1nwcfyWWJv58xPAsQXCjV4EEiGFbisz33G5hRMl1b4EnsgkjKluJUJPKy9HApy8JofkGSzxv7Qab4i7bxJv1KAHW9wZ57lru7zPj-/s1600/Industrial-Allocation-line-2010-2020-560by420-v2.png"/></a></div>
<p>So at first glance it appears that the amount of free emission units allocated cancel out the actual industry emissions. This suggests that in a net sense the industry sector emissions are not priced at all under the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a> They are more than 'offset' by the allocation of free units. So it's the same net result as if the industry sector was completely exempted from the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a> requirements to <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/surrendering-units/">surrender emission units</a> equal to their emissions.</p>
<p>However I am missing a step in my analysis. In my detailed examples for <a href="https://rwmjohnson.blogspot.com/2022/06/should-major-emitter-like-new-zealand.html">New Zealand Steel</a> and <a href="https://rwmjohnson.blogspot.com/2022/03/emissions-trading-scheme-subsidy-new.html">New Zealand Aluminium Smelters</a>, I estimated the actual liability to surrender units by multiplying the <a href="https://environment.govt.nz/facts-and-science/climate-change/measuring-greenhouse-gas-emissions/about-new-zealands-greenhouse-gas-inventory/">Greenhouse Gas Inventory</a> steel and aluminium emissions by a variable representing the "two for one" discount introduced in 2009 by the Hon Dr Nick Smith when he was the Minister for Climate Changes Issues.</p>
<p>On 1 September 2009 with Dr Smith's approval <a href="https://environment.govt.nz/publications/emissions-trading-bulletin-no-11-summary-of-the-proposed-changes-to-the-nz-ets/">"Emissions trading bulletin No 11: Summary of the proposed changes to the NZ ETS"</a> was published. It stated that the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a> would be amended by adding a transition phase lasting to 31 December 2012 which would feature a <i>"progressive obligation"</i>.</p>
<blockquote><a href="https://environment.govt.nz/publications/emissions-trading-bulletin-no-11-summary-of-the-proposed-changes-to-the-nz-ets/summary/">A transition phase will operate until December 2012. The transition phase will be implemented through....a <u>progressive obligation</u> requiring SEIP and LFF participants to surrender only one unit for every two tonnes of CO2-e emitted</a></blockquote>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHCUotm7mLFwBJLbmNoJBTFwbraYT6-GQMDceLnqUM5ckkuwN2oNmSR2NQ0hP3vMk7aUChEMnXbRc44XpMRKd-wJo8UxbJNNgSd9TstJ6-WjMT9LymvfujmiBvx_C9cWc1FVAAYQhfQC4QHLXrUofd0flH0ireDcHQbePGoYgzjoJerUd_M87JBtmo/s1600/E-Bull-11-Screenshot_2022-12-14_16-24-45.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="192" data-original-width="566" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHCUotm7mLFwBJLbmNoJBTFwbraYT6-GQMDceLnqUM5ckkuwN2oNmSR2NQ0hP3vMk7aUChEMnXbRc44XpMRKd-wJo8UxbJNNgSd9TstJ6-WjMT9LymvfujmiBvx_C9cWc1FVAAYQhfQC4QHLXrUofd0flH0ireDcHQbePGoYgzjoJerUd_M87JBtmo/s1600/E-Bull-11-Screenshot_2022-12-14_16-24-45.png"/></a></div>
<p>The 'progressive obligation' was effectively a 50% discount on the 'surrender obligation', the quantity of emissions units that emitters had to surrender. Each firms <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">industrial allocation</a> of emission units would in consequence also be halved as well.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicjrbq3F_d5jpM6cmso6vuf_0XJuaojf-3XCZIaNd670IU2rnRZZmkPo9PliifqQcTFXDqxpzcfRPqLR4MbNqm8XrVsegsygELY8l-FaWcHhWCqLvh0qTkhaJ5bXKIYR6zLA1T8lNVaG_BcmJT4QqRKb8_QCRwfVaB-zhe4fnGwwljQCxxXk12-n7F/s1600/E-Bull-50percent-Screenshot_2022-12-14_16-26-29.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="144" data-original-width="566" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicjrbq3F_d5jpM6cmso6vuf_0XJuaojf-3XCZIaNd670IU2rnRZZmkPo9PliifqQcTFXDqxpzcfRPqLR4MbNqm8XrVsegsygELY8l-FaWcHhWCqLvh0qTkhaJ5bXKIYR6zLA1T8lNVaG_BcmJT4QqRKb8_QCRwfVaB-zhe4fnGwwljQCxxXk12-n7F/s1600/E-Bull-50percent-Screenshot_2022-12-14_16-26-29.png"/></a></div>
<p>Then in 2012, Minister for Climate Change Issues Tim Groser introduced the <a href="https://www.legislation.govt.nz/bill/government/2012/0052/13.0/DLM4812000.html">Climate Change Response (Emissions Trading and Other Matters) Amendment Bill</a>. This bill extended the life of the "two for one" 'progressive obligation' indefinitely.</p>
<p>Finally, in 2016, Minister for Climate Change Issues Paula Bennett introduced a bill to "phase out" the 'progressive obligation' over three years from 2017 to 2019 by increments from the original "two for one" - 2 units per tonne to 1.5 to 1.2 to 1 unit per tonne of emissions. See the <a href="https://www.epa.govt.nz/assets/Uploads/Documents/Emissions-Trading-Scheme/Guidance/ETS-Surrender-Obligations-One-for-two-phase-out-factsheet.pdf">"EPA document ETS Surrender Obligations One for two phase out factsheet"</a></p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuztZ3jxoQL-jW3Z1T3LMMMCZWtQfu7slexuQ3O9l9rdlB25v844twJcGAB9pib7_5euWpD74H4LNhuxKJnzD3Y_68FZqUCEYt3ifEI7PPHDyst99hxJMNS_qsmZ6dMO-Hc2AHV3UfPN2Gyj9zpjFX0FH6bQMOQDXaw7w1BvzkboMpqp4WmfLFAoKc/s1600/PhaseOut-1for2-Screenshot_2022-10-02_19-49-17.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="208" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuztZ3jxoQL-jW3Z1T3LMMMCZWtQfu7slexuQ3O9l9rdlB25v844twJcGAB9pib7_5euWpD74H4LNhuxKJnzD3Y_68FZqUCEYt3ifEI7PPHDyst99hxJMNS_qsmZ6dMO-Hc2AHV3UfPN2Gyj9zpjFX0FH6bQMOQDXaw7w1BvzkboMpqp4WmfLFAoKc/s1600/PhaseOut-1for2-Screenshot_2022-10-02_19-49-17.png"/></a></div>
<p>So I need to include a discount variable that is applied to the free emission units allocated to result in the "emissions footprint" of the allocation of units. The discount variable is 0.25 for 2010 (half obligation for half a year),then 0.5 from 2011 to 2016, 0.67 in 2017 ,0.83 in 2018 and finally one for one for 2019 and 2020.</p>
<p>This allows me to estimate of the <a href="https://www.britannica.com/science/carbon-footprint">carbon footprint</a> or <a href="https://www.sciencedirect.com/topics/engineering/emission-footprint">emissions footprint</a> of all the units given under <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/">Industrial Allocation</a>. As in this chart.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_IFWkBp96Guo_c87PfHeTyQP6RbFekKAjAf-lMg6nsQg-sxcFFZxRCk8xPwK3XFpHhBcH80-o6z4KXNQ_lst50SbwAnPxRRwDRkyZbKIIrfvcUAPoQUQWha5wW-uFYIKKOX08JBU1yIR5Nx_tWPzSJKQOCqD32t9JO45034_zWM8oBLzX9JBgk_Zh/s1600/Industrial-Allocation-line-2010-2020-560by420-v3.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_IFWkBp96Guo_c87PfHeTyQP6RbFekKAjAf-lMg6nsQg-sxcFFZxRCk8xPwK3XFpHhBcH80-o6z4KXNQ_lst50SbwAnPxRRwDRkyZbKIIrfvcUAPoQUQWha5wW-uFYIKKOX08JBU1yIR5Nx_tWPzSJKQOCqD32t9JO45034_zWM8oBLzX9JBgk_Zh/s1600/Industrial-Allocation-line-2010-2020-560by420-v3.png"/></a></div>
<p>I can then add the 'emissions footprint' values or the emissions allowed by the free <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> units to the chart of allocated emission units and actual industry emissions.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJZXUxpDebxTX6bcyzWWcXjdFrQaFWAy-Dys-Fv92P4X0BF7mBuCuLjdI3UeM5WABJVIyVHNGPeESrYVzkKrHKXdb0kRqayEOldtbodFAdHKZ9yLmMkwUMQTSgrRfObXINztRSIBLDzo7k6A6L1crf9UqUM8gKG6zByzisx_eHA7U5o-dejhJUpw3z/s1600/Industrial-Allocation-line-2010-2020-560by420-v4.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJZXUxpDebxTX6bcyzWWcXjdFrQaFWAy-Dys-Fv92P4X0BF7mBuCuLjdI3UeM5WABJVIyVHNGPeESrYVzkKrHKXdb0kRqayEOldtbodFAdHKZ9yLmMkwUMQTSgrRfObXINztRSIBLDzo7k6A6L1crf9UqUM8gKG6zByzisx_eHA7U5o-dejhJUpw3z/s1600/Industrial-Allocation-line-2010-2020-560by420-v4.png"/></a></div>
<p>The chart shows a huge gap between the emissions footprint and the allocated units until 2017 when the two lines start to converge.</p>
<p>Then in 2019, the emissions foot print is the same as the units allocated as finally, under the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a>, one emission unit does in fact equate to one tonne of emissions.</p>
<p>The total of the Industrial Allocation 'emissions footprint' over 2010 to 2020 is 89 million tonnes. Meaning that those 89 million tonnes have been "de-priced" by the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a>.</p>
<p>Just a reminder. What is an <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/the-emissions-trading-register/emission-unit-trading/">emission unit</a>? It's a right to emit greenhouse gases to the atmosphere.</p>
<p>Owning an emission unit is the same as permission to emit a quantity of greenhouse gases whether from smelting or just from burning coal oil or gas.</p>
<p>Being allocated a unit is the same as being told "go for it - you can just burn coal or oil or gas without penalty until a tonne of carbon dioxide is in the atmosphere".</p>
<p>It's the opposite of a price on carbon. It's a permit or licence to burn carbon.</p>
<p>The emissions footprint of <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a>, from 2010 to 2020, at 89 million tonnes, is twice as much as the actual emissions of the whole industry sector for the same period.<p>
<p>How can that possibly be the case? It is because of the <a href="https://web.archive.org/web/20110712151351/http://www.climatechange.govt.nz/emissions-trading-scheme/building/regulatory-updates/eaf-update.html">energy allocation factor</a>.</p>
<p> <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> "de-prices" and removes the emissions price signal from some energy sector emissions in addition to the direct industry process emissions.</p>
<p>In a net sense <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> is worse as a policy to reduce industry emissions than a complete exemption of industry from the <a href="https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/about-the-nz-emissions-trading-scheme/what-is-the-nz-ets/">emissions trading scheme</a>. In a scenario of 100% exemption, at least all energy sector carbon emissions would in theory be priced.</p>
<p>Hence my headline conclusion <b>Industrial allocation exempts from pricing twice as many tonnes of emissions than the actual total emissions for the industry sector</b>.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-36733167925347895872022-12-07T19:30:00.019+13:002023-04-02T16:42:20.780+12:00Industrial over allocation - why were there 55 million free emission units when total industry sector emissions were 53 million tonnes?<p><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;" ><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s248/reality_turtles.gif" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="248" data-original-width="106" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s200/reality_turtles.gif"/></a></div><p><i>How does it make any sense that the 55 million free emission units gifted to big emitters under Industry Allocation exceed the total emissions of the industry sector, 53 million tonnes, from 2010 to 2020?</i>
<p>In my <a href="https://rwmjohnson.blogspot.com/2022/11/industrial-allocation-free-emissions.html">last post</a> I noted that 55 million free emission units had been allocated to industries over the eleven years from 2010 to 2020.</p>
<p>I presented a barplot of the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">'Industrial Allocation'</a> of free emissions units given to emitting industries by the <a href="https://www.epa.govt.nz">Environmental Protection Authority</a> under the <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/about-nz-ets/">New Zealand emissions trading scheme</a>.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzwwTIuyidZ4rNXALEKgUjZPzFRslcTS5bQeNkU4Bl_6bBmHUGfB5ikKyVcApiz6gCA32oiHS8ek1-J4E0b1GDTI6e5usD3w5Jf0uTsT1Sgc8VdNlmh0gQOFIOUGWB1ogbLV30dulFvwTDL6tOh0G39MBxIiKvMpQjt5MHrXMGaoh0vWSkgFhleEJb/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzwwTIuyidZ4rNXALEKgUjZPzFRslcTS5bQeNkU4Bl_6bBmHUGfB5ikKyVcApiz6gCA32oiHS8ek1-J4E0b1GDTI6e5usD3w5Jf0uTsT1Sgc8VdNlmh0gQOFIOUGWB1ogbLV30dulFvwTDL6tOh0G39MBxIiKvMpQjt5MHrXMGaoh0vWSkgFhleEJb/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png"/></a></div>
<p>I left open the question "is 55 million free emission units (over eleven years) a big number?"</p>
<p>The Ministry for the Environment doesn't seem to think so. Their <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/#scale-of-industrial-allocation-in-new-zealand">website page on Industrial Allocation</a> states the following</p>
<blockquote><b>Industrial allocation contributes to unit supply in the NZ ETS</b>
<p>Industrial allocation is a <u>relatively small proportion of unit supply</u> in the NZ ETS. In 2016, the total number of units provided through industrial allocation in the NZ ETS was 4.3 million.</p>
<p>The total number of units surrendered from sectors other than forestry was 19.5 million (i.e. industrial allocation amounted to about 22 per cent of annual unit demand).</p></blockquote>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHgdzkv_sber3m1qLUKrfRiAGlPhZEhvrFM8MB0Aodvj8Cl6nBQ_vXJXIYytszNR7jT07Tsc1n5Ldh2Dbeo_jVjBYpmA865BDLGxiVmTT9wHnR6XDQ4ZKNL7HtKtOYdfiFnAU0M2Fa7KZxyBXe8LYj_g69zpdTVBmaU-4w79KMPCATXSxB_tzeYCFe/s1600/Industrial%20allocation%20contributes%20to%20unit%20supply%20in%20the%20NZ%20ETS-Screenshot_2022-12-03_18-02-03.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="136" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHgdzkv_sber3m1qLUKrfRiAGlPhZEhvrFM8MB0Aodvj8Cl6nBQ_vXJXIYytszNR7jT07Tsc1n5Ldh2Dbeo_jVjBYpmA865BDLGxiVmTT9wHnR6XDQ4ZKNL7HtKtOYdfiFnAU0M2Fa7KZxyBXe8LYj_g69zpdTVBmaU-4w79KMPCATXSxB_tzeYCFe/s1600/Industrial%20allocation%20contributes%20to%20unit%20supply%20in%20the%20NZ%20ETS-Screenshot_2022-12-03_18-02-03.png"/></a></div>
<p>I call this the consultants fallacy. It has the form <i>"put small number next to big number"</i> and therefore <i>"effects are minor"</i> and grant me my resource consent.</p>
<p>You have a number you wish to defend; 4.3 million free units allocated in 2016. You compare it to a related bigger number; in 2016 emitters surrendered 19.5 million emission units under the emissions trading scheme. Premises then conclusion: 4.3 million is smaller (only 22 per cent of) than 19 million. A <u>relatively small proportion</u> therefore it's a small number of units being given away for free to dirty polluting emitters.</p>
<p>Wouldn't the actual emissions from the industry sector as recorded in the <a href="https://environment.govt.nz/publications/new-zealands-greenhouse-gas-inventory-1990-2020-snapshot/#new-zealands-emissions-profile-in-2020">Greenhouse Gas Inventory</a> be a better comparion with the actual free allocation of units? The inventory tells us the actual emissions from industries were 4.6 million tonnnes in 2016.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSQztw5ZYf2ubeL_M6fxn4bMSnDoaRVVMUnwi3w1JZ_tmVU-HTBpn9bXakwGjo0lBYRifPkbhwveWBtUsjUVd-1leOnaR9mPn8VXKcaxbaczk3CUFSR-SHSB7xbu1Kl1w_ZMDIDJOvm-bcWgYQmjOfJHSnV4k6gbQV4zu6WYeVlT04CvD9pTvUddoX/s1600/MFE-AoG-20357-DS-Greenhouse-Gas-Inventory-Figure-3__FocusFillMaxWyIwLjAwIiwiMC4wMCIsNzk1LDI5N10.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="297" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSQztw5ZYf2ubeL_M6fxn4bMSnDoaRVVMUnwi3w1JZ_tmVU-HTBpn9bXakwGjo0lBYRifPkbhwveWBtUsjUVd-1leOnaR9mPn8VXKcaxbaczk3CUFSR-SHSB7xbu1Kl1w_ZMDIDJOvm-bcWgYQmjOfJHSnV4k6gbQV4zu6WYeVlT04CvD9pTvUddoX/s1600/MFE-AoG-20357-DS-Greenhouse-Gas-Inventory-Figure-3__FocusFillMaxWyIwLjAwIiwiMC4wMCIsNzk1LDI5N10.png"/></a></div>
<p>How does that fit with my theory that industrial allocation is over allocation? Fewer units were allocated (4.3m) than the 2016 actual industry emissions! (4.6mt) Well at least 300,000 tonnes of industry emissions were in some sense 'priced' by the emissions trading scheme in 2016.</p>
<p>What's the result if we add up the inventory emissions from industry for the same period as the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/decisions/">Industrial allocation spreadsheet</a> from the EPA (11 years 2010 to 2020).<p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnlTIt2B9-agHKyVNpj8v5UHOie5z46fPLIePjkWZoNU1VUnvisSsX4FNW6zc0F_OhO0U37HLhJe1AKsG678YdwAcmm6vvZj1CDvt7sd8A7qWcy23EEGmWG1L_re9unNTSGrw08ApkyA1x2kKIllI6a-NWOHVzJQqugJJ_qCPYkhGGu-6XVVMk6-Sj/s1600/Industry-Emissions-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnlTIt2B9-agHKyVNpj8v5UHOie5z46fPLIePjkWZoNU1VUnvisSsX4FNW6zc0F_OhO0U37HLhJe1AKsG678YdwAcmm6vvZj1CDvt7sd8A7qWcy23EEGmWG1L_re9unNTSGrw08ApkyA1x2kKIllI6a-NWOHVzJQqugJJ_qCPYkhGGu-6XVVMk6-Sj/s1600/Industry-Emissions-2010-2020-560by420-v1.png"/></a></div>
<p>The result is that the industry emissions (from the inventory) were 53 million tonnes and the emissions units given away under Industrial Allocation were 55 million.</p>
<p>So to make it simple. The emissions trading scheme makes New Zealand industry liable to <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/about-nz-ets/#how-the-nz-ets-works">surrender emissions units for it's emissions</a>.</p>
<p>Okay we get it. It's "polluter pays". But the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> rules have given some industries more emission units than the emissions of the entire industry sector! It's almost equivalent to exempting the whole industrial sector from the emissions trading scheme.</p>
<p>But it's worse than that. The allocations of emissions units are heavily weighted towards the highest quantity emitters. The top ten recipients received 89% of the units. The other 152 recipients got 11% of the units. <a href="https://rwmjohnson.blogspot.com/search/label/NZ%20Aluminium%20Smelters">New Zealand Aluminium Smelters Limited</a> and <a href="https://rwmjohnson.blogspot.com/search/label/New%20Zealand%20Steel">New Zealand Steel Limited</a> received about 45% of all the allocated free units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXoalo485O7kwczNhFP6-zxOKSEBFt56FI7xVeWHHiAPXDvyFZrr4YhnL-sCvKQuXOvvzLKf67A0puqG6TZvUVTy7bqLx1TcgNP3N4snbper4VlB7XHOVXxCKoTN4WeXgsRqvvqDWyPyLHsapM185dUEdDsHAnPee8PC-jsdPX6HEH3I1-W7dj_NN6/s1600/Allocations-pie-percent-2010-2020-720.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="565" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXoalo485O7kwczNhFP6-zxOKSEBFt56FI7xVeWHHiAPXDvyFZrr4YhnL-sCvKQuXOvvzLKf67A0puqG6TZvUVTy7bqLx1TcgNP3N4snbper4VlB7XHOVXxCKoTN4WeXgsRqvvqDWyPyLHsapM185dUEdDsHAnPee8PC-jsdPX6HEH3I1-W7dj_NN6/s1600/Allocations-pie-percent-2010-2020-720.png"/></a></div>
<p>There is a little bit more to tease out. I will put that in a separate post.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-39683077966644060662022-11-22T19:35:00.016+13:002023-04-02T16:43:23.973+12:00Emissions trading scheme has created a 14 billion dollar asset for big emitting businesses<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzovHynjj8NHPuJYc3dPfQ7cBHkDZ_P7Bzn1zSRGoA75yy82WPQ8a8UWwxxUA32zMIVPxdKtK81DJ076VWBVvuhM0N7_-JrloFMEHobkt1jZKeL4qXIxt3mnHQEoqTR_zuimoukgaA2r2XUL5fhw_teKamizi1DFh_FzlJGDi5U17al2Ob-2T2oD4I/s286/trading.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="176" data-original-width="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzovHynjj8NHPuJYc3dPfQ7cBHkDZ_P7Bzn1zSRGoA75yy82WPQ8a8UWwxxUA32zMIVPxdKtK81DJ076VWBVvuhM0N7_-JrloFMEHobkt1jZKeL4qXIxt3mnHQEoqTR_zuimoukgaA2r2XUL5fhw_teKamizi1DFh_FzlJGDi5U17al2Ob-2T2oD4I/s200/trading.png"/></a></div>
<p>Last week the web site <a href="https://www.carbonnews.co.nz">Carbon News</a> pointed out two seemingly unrelated records achieved by New Zealand's <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/about-nz-ets/">emissions trading scheme.</a></p>
<p>On 15 November 2022, the New Zealand secondary carbon market reached a new record maximum price of <a href="https://www.carbonnews.co.nz//story.asp?storyID=26445">$88.50 per emission unit</a>.</p>
<p>On 19 October 2022, the Environmental Protection Authority released an update of the total number of privately owned emissions units held in the Emissions Unit Register. It was also a new record. Private firms who must mostly be <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/">ETS 'participants' (i.e. emitters)</a> held <a href="https://www.carbonnews.co.nz//story.asp?storyID=26215">158,897,263 emission units</a>.</p>
<p>This chart of NZU spot prices shows what we already know: that prices have tripled in the last 24 months.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRz6T0lWz_f9AlyzfaHdOsuGvuxDdHdPwYF9ab7Da5yyFZmc79fzrWmQMxZ5I6EGqP0SbZ5lsJh8yA8ESSAK3Ec4mW_kRT6nwv3HWVkhrVlpOoP4DJo4NPnVqsaLpA7vQTObG_fHi9Pu_gmOLJE5_Sy6NutM8lPWocEMYG1amvNUpI_D4dbcufWYGh/s1600/NZU-weekly-mean-price2-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRz6T0lWz_f9AlyzfaHdOsuGvuxDdHdPwYF9ab7Da5yyFZmc79fzrWmQMxZ5I6EGqP0SbZ5lsJh8yA8ESSAK3Ec4mW_kRT6nwv3HWVkhrVlpOoP4DJo4NPnVqsaLpA7vQTObG_fHi9Pu_gmOLJE5_Sy6NutM8lPWocEMYG1amvNUpI_D4dbcufWYGh/s1600/NZU-weekly-mean-price2-560by420-v1.png"/></a></div>
<p>I put the NZU price movements down to two factors.</p>
<p><b>First:</b> the emissions trading scheme price cap of the "fixed price option" <a href="https://www.epa.govt.nz/assets/Uploads/Documents/Emissions-Trading-Scheme/Guidance/Changes-to-the-Emissions-Trading-Scheme-Fixed-Price-Option.pdf">(unlimited units could be surrendered for $25.00 until the end of 2019 and then $35 for 2020)</a> was replaced by quarterly auctions of units from 17 March 2021 onwards.</p>
<p><b>Second:</b> the Climate Change Commission keeps advising the Government that the price floor and price caps should consistently track upwards. The most recent example is the July 2022 Climate Change Commission advice <a href="https://www.climatecommission.govt.nz/news/new-advice-on-nz-ets-unit-limits-and-price-control-settings/">NZ ETS unit limits and price control settings</a>. It again recommended an upward trajectory for the carbon price floors for the <a href="https://www.etsauctions.govt.nz/public/auction_noticeboard">emission unit auctions</a>. This is Figure 7 from page 56.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHEPAELzE3BQ2LXVziVP_3qXqFSh6IArZotCGQAdyGz6--nzfMapvZqS6LpQTsSftXBbyKaBayELj7wkta4dqiEpDVEypxA_sBoadFCfA7ixddo7fyuMbEkaV5B_79h3cvSOtb4MKUuiFjsYmV4vHU0ymEZasCWfc9XpO97V2JOIHF1Bnk5NMHvsH9/s1600/CCC-Fig7-ccr-prices.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="357" data-original-width="549" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHEPAELzE3BQ2LXVziVP_3qXqFSh6IArZotCGQAdyGz6--nzfMapvZqS6LpQTsSftXBbyKaBayELj7wkta4dqiEpDVEypxA_sBoadFCfA7ixddo7fyuMbEkaV5B_79h3cvSOtb4MKUuiFjsYmV4vHU0ymEZasCWfc9XpO97V2JOIHF1Bnk5NMHvsH9/s1600/CCC-Fig7-ccr-prices.png"/></a></div>
<p>Conventional thinking might be that a higher emission unit price is a good thing. A sign of the emissions trading scheme being finally fixed so that it reduces emissions. However, that is unlikely if the 'stockpile' of privately held emission units keeps growing. As this bar chart shows.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrOik5dILcLqA69ywJS-JZKfip54Z0chCMEwUFyDIeCnzSQz12Tn-SAt480yK_37OSoK1T8cUzBM13zn0yanA7-qnv7rpctLTGcoI7_Xb55ghq5CCDOCFeTh0QgXU1bnlrY3Ahqz31tYi19HyaQ2z62MzbLiuGJ1hNq6-vv1d62TjIhUEyWaf33VCj/s1600/Private-Unit-Holdings-barplot-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrOik5dILcLqA69ywJS-JZKfip54Z0chCMEwUFyDIeCnzSQz12Tn-SAt480yK_37OSoK1T8cUzBM13zn0yanA7-qnv7rpctLTGcoI7_Xb55ghq5CCDOCFeTh0QgXU1bnlrY3Ahqz31tYi19HyaQ2z62MzbLiuGJ1hNq6-vv1d62TjIhUEyWaf33VCj/s1600/Private-Unit-Holdings-barplot-2010-2020-560by420-v1.png"/></a></div>
<p>These holdings of units are current investment assets in the balance sheets of firms. That can be easily marked to market value by the latest record NZU price in the spot market. Which has just broken a record in reaching more than $88 per unit. And 158,897,263 privately held emission units valued at $88 each equals $14 billion dollars!</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMuIwKK9hJdMIrjqsfV5lK28Vl-91OpjphP4_lXrH112cIhXZ0XOmkLCL5T0QiLImxgS3F6PZ_dZAQ0FE2xjAojjUFNRHDEWfs050mAwq4OrzNQO8W6GkrOk2FnsG4zgnw8X9XXpRmVDVonj-9tI5COPYLLXuzUuMUhX19EIu5Qr1-uaT0Orso9tFP/s1600/Private-Unit-Holdings-MVbarplot-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMuIwKK9hJdMIrjqsfV5lK28Vl-91OpjphP4_lXrH112cIhXZ0XOmkLCL5T0QiLImxgS3F6PZ_dZAQ0FE2xjAojjUFNRHDEWfs050mAwq4OrzNQO8W6GkrOk2FnsG4zgnw8X9XXpRmVDVonj-9tI5COPYLLXuzUuMUhX19EIu5Qr1-uaT0Orso9tFP/s1600/Private-Unit-Holdings-MVbarplot-2010-2020-560by420-v1.png"/></a></div>
<p>The stockpile of emissions units isn't a good thing as it <a href="https://www.newsroom.co.nz/growing-emissions-stockpile-threatens-climate-targets">threatens climate targets</a> and the potential supply of emissions units to the market is just one of the <a href="https://rwmjohnson.blogspot.com/2021/12/six-ways-new-zealand-emissions-trading.html">many reasons why the emissions trading scheme does not cap emissions</a>.<p>
<p>Conventional thinking might be that a higher emission unit price should incentivise firms to sell their units. Thus reducing the stockpile. However, this is not happening. The stockpile is growing and is now worth a whopping 14 billion dollars! This $14 billion will be an investment asset on the balance sheets of firms participating in the emissions trading scheme.</p>
<p>Recall my <a href="https://rwmjohnson.blogspot.com/2022/06/should-major-emitter-like-new-zealand.html">recent post</a> about New Zealand Steel Limited consistently being allocated more units than they surrender. Their holding of units is <a href="https://rwmjohnson.blogspot.com/2022/06/should-major-emitter-like-new-zealand.html">always accumulating</a>.</p>
<p>They don't sell any of their units for two reasons:</p>
<ol>
<li>they don't need to because of the continual annual over-allocation of units under <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/">Industrial Allocation</a> and,</li>
<li>NZ Steel Limited, having read the Climate Change Commission's advice to Government, expects the price to continue to rise - further boosting the market value of their "investment asset".</li></ol>
<p>So why sell an investment asset when you expect it to appreciate? You don't. Your strategy is "hold"</p> Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-33397128127517727602022-11-03T18:07:00.016+13:002023-01-05T18:20:25.375+13:00Industrial allocation - free emissions units given to emitter industries in New Zealand<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s1600/godfather-350881-150x150.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s200/godfather-350881-150x150.jpg" width="200" height="200" data-original-width="150" data-original-height="150" /></a></div>
<p>What is <b>Industrial Allocation?</b></p>
<p>The Ministry for the Environment says <a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/"><blockquote>Allocations of New Zealand Units are given to businesses carrying out certain activities.</blockquote></a></p>
<p>I prefer what Motu Research say. That one (out of five) ways of allocating emissions units in an emissions trading scheme is <u>industrial allocation</u>; which Motu define as</p> <blockquote><b>"Receiving them (emissions units) for free"</b></blockquote>
<p><span style="font-size: x-small;">(See Leining, Catherine and Suzi Kerr. 2018. <i><a href="https://www.motu.nz/assets/Documents/our-research/environment/climate-change-mitigation/emissions-trading/A-Guide-to-the-New-Zealand-Emissions-Trading-System-2018-Motu-Research.pdf">A Guide to the New Zealand Emissions Trading Scheme</a></i>. Report prepared for the Ministry for the Environment. Wellington: Motu Economic and Public Policy Research)</span></p><p>
</p><p>I have posted in detail about industrial allocation to <a href="https://rwmjohnson.blogspot.com/search/label/New%20Zealand%20Steel">New Zealand Steel</a> and to <a href="https://rwmjohnson.blogspot.com/search/label/NZ%20Aluminium%20Smelters">New Zealand Aluminium Smelters Limited</a></p>
<p>In both cases I argued that both companies were being over-allocated units. That these transnational corporates were given far too many emission units, well in excess of their direct <a href="https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance">(or Scope 1 emissions)</a>. And that such excessive allocations of units not only removed any price signal, they <a href="https://rwmjohnson.blogspot.com/2016/11/free-windfall-allocations-of-nzets.html">insulated the emitter</a> from any emissions trading scheme price signal.</p>
<p>This over allocation is because the emissions factors used to calculate the unit allocations (allocation baseline) include overly generous compensation (extra units) for <a href="https://web.archive.org/web/20110712151351/http://www.climatechange.govt.nz/emissions-trading-scheme/building/regulatory-updates/eaf-update.html">upstream energy cost increases</a> caused by the NZ emissions trading scheme.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh91gmdR1_YP0nZR4pG8N4nLF4_A5LItXg3DZMONxLAbzU8b-oqQF6iU-IrWhQs6Js3kmQjY5cy1Gp8Hl8FMoo0W5VRWxJuosnpH39vWbMmoKndBKnSrU6dIorXRhgUKHq-Oefp3vS0FBZkQnISpSvmfBXlpUKydx7cESRN7oDoMCVUl1Ji72tAJScc/s1600/NZ-Al-Smelterbaseline-2010-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh91gmdR1_YP0nZR4pG8N4nLF4_A5LItXg3DZMONxLAbzU8b-oqQF6iU-IrWhQs6Js3kmQjY5cy1Gp8Hl8FMoo0W5VRWxJuosnpH39vWbMmoKndBKnSrU6dIorXRhgUKHq-Oefp3vS0FBZkQnISpSvmfBXlpUKydx7cESRN7oDoMCVUl1Ji72tAJScc/s1600/NZ-Al-Smelterbaseline-2010-560by420.png"/></a></div>
<p>This concept of emissions trading scheme costs embedded in energy or electricity supplies is called the <a href="https://web.archive.org/web/20110712151351/http://www.climatechange.govt.nz/emissions-trading-scheme/building/regulatory-updates/eaf-update.html">"Electricity Allocation Factor".</a></p>
<p>The Ministry for the Environment explicitly states that Industrial Allocation does not remove the price signal or result in over-allocation of units.</p><blockquote><a href="https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/participating-in-the-nz-ets/overview-industrial-allocation/#reducing-emissions-with-industrial-allocation">Businesses still face NZ ETS costs for a proportion of the emissions stemming from the activity. For example; highly emissions intensive firms face NZ ETS costs of 10% of their emissions</a>
</blockquote>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_hFgnWojpMKbnvTqjRB7zkjQOrcjrtR7noExnKQOS1UVHrENb8A-JRR7Xbkbnx2jr2A8q8Lp-Ml-CkkJSMXgEqn_ZWq6Nesa5rokbuUizN8Hh8BluDxeUAMh9S4QT-_WG-f-0J_pdrwtB5WJVkYwP2qoYePEPAe-2Qa6xSd8WTdwi1SWXW3OBXRYg/s1600/MfE-Screenshot_2022-11-27_16-03-06.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="318" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_hFgnWojpMKbnvTqjRB7zkjQOrcjrtR7noExnKQOS1UVHrENb8A-JRR7Xbkbnx2jr2A8q8Lp-Ml-CkkJSMXgEqn_ZWq6Nesa5rokbuUizN8Hh8BluDxeUAMh9S4QT-_WG-f-0J_pdrwtB5WJVkYwP2qoYePEPAe-2Qa6xSd8WTdwi1SWXW3OBXRYg/s1600/MfE-Screenshot_2022-11-27_16-03-06.png"/></a></div>
<p>That statement asks you to ignore the extra emissions units allocated for these upstream ETS related energy costs. In the cases of NZ Steel and NZ Aluminium the ETS energy cost calculations result in far more units than 10% being allocated. Both NZ Steel and NZ Aluminium receive more emissions units than they surrender. They are almost always net sellers of units and not net buyers.</p>
<p>However, I want to look at <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> in the round. How many emissions units have been given away since 2010? Is it a big number?</p>
<p>The Environmental Protection Authority annually publish data on the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/decisions/">final industrial allocation of emissions units</a>. So some <a href="https://github.com/theecanmole/industry-allocation">analysis</a> can be done.</p>
<p>How many units? The answer is fifty five million or 55,001,914 emissions units have been given away from 2010 to 2020.</p>
<p>This bar plot shows the 55 million emissions units year by year.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTHe_XNtEAlPMPcHLliDGWfVMuoWusZGn3SQUjqSoOArB3xKqa9hPHwysh53i9l3_n2Zm5RA4FPT3qfyjmJVysF-dtX6XZQBpWuVZM9Vy7P99mBz9zW_UWM8_dUu8-Ykm-aw2MWzl_bs2lDMflEdWb1DeHSaKkSW-3tHq-ynrudswH_4--17luCjF8/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0px; text-align: center;"><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTHe_XNtEAlPMPcHLliDGWfVMuoWusZGn3SQUjqSoOArB3xKqa9hPHwysh53i9l3_n2Zm5RA4FPT3qfyjmJVysF-dtX6XZQBpWuVZM9Vy7P99mBz9zW_UWM8_dUu8-Ykm-aw2MWzl_bs2lDMflEdWb1DeHSaKkSW-3tHq-ynrudswH_4--17luCjF8/s1600/Industrial-Allocation-barplot-2010-2020-560by420-v1.png" /></a></div>
<p>I will come back to the question 'is 55 million a big number?' in another post. Another question raised by the bar plot is 'why does the annual allocation increase after 2016? I will come back to that too.</p>
<p></p><p></p><p></p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-36913915397219171012022-06-25T19:01:00.018+12:002023-04-02T16:54:32.227+12:00Should a major emitter like New Zealand Steel Limited be accumulating emissions units under the emissions trading scheme?<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzovHynjj8NHPuJYc3dPfQ7cBHkDZ_P7Bzn1zSRGoA75yy82WPQ8a8UWwxxUA32zMIVPxdKtK81DJ076VWBVvuhM0N7_-JrloFMEHobkt1jZKeL4qXIxt3mnHQEoqTR_zuimoukgaA2r2XUL5fhw_teKamizi1DFh_FzlJGDi5U17al2Ob-2T2oD4I/s286/trading.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="176" data-original-width="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzovHynjj8NHPuJYc3dPfQ7cBHkDZ_P7Bzn1zSRGoA75yy82WPQ8a8UWwxxUA32zMIVPxdKtK81DJ076VWBVvuhM0N7_-JrloFMEHobkt1jZKeL4qXIxt3mnHQEoqTR_zuimoukgaA2r2XUL5fhw_teKamizi1DFh_FzlJGDi5U17al2Ob-2T2oD4I/s200/trading.png"/></a></div>
<p><i>In this post I revisit and update the analysis of the free emissions units received by New Zealand Steel Limited under the 'Industrial Allocation' rules of the New Zealand Emissions Trading Scheme</i>.</p>
<p>Every year since the <a href="https://en.wikipedia.org/wiki/New_Zealand_Emissions_Trading_Scheme">New Zealand Emissions Trading Scheme</a> (or "ETS") began, <a href="https://en.wikipedia.org/wiki/New_Zealand_Steel">New Zealand Steel Limited</a> has received more emissions units under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial Allocation</a> rules then it has had to <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/surrendering-units/">surrender to the Government</a> for it's emissions.</p>
<p>New Zealand Steel Limited is therefore always a net seller of emissions units (if it chooses to sell).</p>
<p>New Zealand Steel Limited also alway has an annual surplus of emissions units. This surplus may accumulate if New Zealand Steel Limited chooses to hold.</p>
<p>Should the emissions trading scheme result in New Zealand Steel Limited accumulating a stockpile of emissions units?</p>
<p>In a sensibly designed emissions trading scheme, shouldn't the 'flow' of emissions units be from the emitter, New Zealand Steel, to the Government?</p>
<p>Here is a graph of the greenhouse gas emissions of the New Zealand steel sector from the <a href="https://environment.govt.nz/facts-and-science/climate-change/measuring-greenhouse-gas-emissions/about-new-zealands-greenhouse-gas-inventory/">Greenhouse Gas Inventory</a>. The emissions do not vary much over time. I assume that is because production in the <a href="https://www.nzsteel.co.nz/new-zealand-steel/the-story-of-steel/the-history-of-ironsand/">Glenbrook steel smelter</a> is also consistent from year to year.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh3udGM_kSwgjVWMm36panOkf-D-2EacooXS3WePTlT8n67qcyDNDSe1JEexYzPQG1lFlTMKKnNnHKIHrsQGD3JzlRHkLMrH0w5HRwHPkF6lgSD5T3tRdOQ6UAS_WknfzIysNHXSO9cTeR1zXuQlPHOQkdYH43gAyzcbGAGb2UlB_MCi8PD2VBCsnA/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh3udGM_kSwgjVWMm36panOkf-D-2EacooXS3WePTlT8n67qcyDNDSe1JEexYzPQG1lFlTMKKnNnHKIHrsQGD3JzlRHkLMrH0w5HRwHPkF6lgSD5T3tRdOQ6UAS_WknfzIysNHXSO9cTeR1zXuQlPHOQkdYH43gAyzcbGAGb2UlB_MCi8PD2VBCsnA/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v1.png"/></a></div><p>
<p>I know these emissions are from the New Zealand Steel Limited's steel smelting plant in Glenbrook as I looked up New Zealand Steel's actual calendar year 2020 emissions in the EPA report <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/ets-reports/emissions-returns/">"ETS Participant Emissions" October 2021</a>. New Zealand Steel's reported emissions are (steel 54,431 + stationary energy 762,038 + coal purchase 736,875 equals) 1,553,344 tonnes.</p>
<p>I have marked that data point with a purple circle. The 2020 GHG Inventory steel emissions are 1,578,554; the green circle. The purple and green data points overlap on the graph. So I think it's reasonable to use the GHG Inventory steel industry emissions as an estimate of New Zealand Steel's actual emissions from 1990 to 2020.</p>
<p>Here is the same graph but with the industrial allocation of free emissions units added.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJeiS0eO6AKdfKLcwGIkqoCOsjFPHPaPX44JcVhrVjECy6xKMHbzcwnHb5eRhB-m8u4-3ily0rjQV1jeQUJLCyzQ5v40_16Pdl3JQ3wzujJcQC9Bspkxfkd7__r3AVWwVdq244AyxJz0FqFLMxwFaRmZ8QnqHECVmlEX8upRzDgUR3IPEDK1ZmcltZ/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v2.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJeiS0eO6AKdfKLcwGIkqoCOsjFPHPaPX44JcVhrVjECy6xKMHbzcwnHb5eRhB-m8u4-3ily0rjQV1jeQUJLCyzQ5v40_16Pdl3JQ3wzujJcQC9Bspkxfkd7__r3AVWwVdq244AyxJz0FqFLMxwFaRmZ8QnqHECVmlEX8upRzDgUR3IPEDK1ZmcltZ/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v2.png"/></a></div>
<p>The free emissions units don't seem to relate logically to the steel emissions. The free units seem to be roughly half of the emissions until 2016 then the free units increase anually until they are greater than the emissions in years 2018 2019 and 2020. What's going on?</p>
<p>There is another variable to take into account. In 2009 Minister for Climate Change Issues Nick Smith introduced the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/surrendering-units/"> '1 for 2' surrender obligation</a> which halved the unit surrender liability of emitters. It was part of the 'transitional measures' which were to end after 2012 (to coincide with the end of the Kyoto Protocol commitment). Here is a screen capture of a summary of Smith's amendment of the emissions trading scheme.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ21yy7Ap0_SAF6UltMX-tMi3rY-UUleWO_2QKV6y24Odk5FBYdnMinMsRJ4tu2KdivI6F0D43mfIhpYhViT3cqF4wYGVNMlQak5mVRfLERv6g8hMJauVEuHlw3yaEE2DUaqFjGhxEX1UThc1iuXvFSGUV_PfDqft0PCQRqPC_hbVv3B-9E_ggbFd7/s1600/Screenshot_2023-01-11_16-21-01.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="280" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ21yy7Ap0_SAF6UltMX-tMi3rY-UUleWO_2QKV6y24Odk5FBYdnMinMsRJ4tu2KdivI6F0D43mfIhpYhViT3cqF4wYGVNMlQak5mVRfLERv6g8hMJauVEuHlw3yaEE2DUaqFjGhxEX1UThc1iuXvFSGUV_PfDqft0PCQRqPC_hbVv3B-9E_ggbFd7/s1600/Screenshot_2023-01-11_16-21-01.png"/></a></div>
<p>In 2012, the then Minister Tim Groser indefinitely extended the "one for two" deal where non-forestry participants in the ETS had to surrender one eligible unit for every two tonnes of emissions.</p>
<p>After a 2016 review, this discount was phased out from 2017. See this screen capture from the EPA's website.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKC23nsIlPTJvlg0voJsUoISfhUOfv-B5VPwc9FBWGu7GIyl-KwiVxKbFy7FoKhgp3GvtmmdP7QrGKzpjIpJu_8y6ncTuNt5OH7aGCRrZknpL85nG1ljfOPk1cvk_8EVHJcUQLcus0AUWlM0az21S_FhQxfSG2LqUEA8B8sZ_3m0L3b3Ln9kySRo0Q/s1600/PhaseOut-1for2-Screenshot_2022-10-02_19-49-17.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="208" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKC23nsIlPTJvlg0voJsUoISfhUOfv-B5VPwc9FBWGu7GIyl-KwiVxKbFy7FoKhgp3GvtmmdP7QrGKzpjIpJu_8y6ncTuNt5OH7aGCRrZknpL85nG1ljfOPk1cvk_8EVHJcUQLcus0AUWlM0az21S_FhQxfSG2LqUEA8B8sZ_3m0L3b3Ln9kySRo0Q/s1600/PhaseOut-1for2-Screenshot_2022-10-02_19-49-17.png"/></a></div>
<p>The phase out; 2017; 1 unit for each 1.5 whole tonnes of emissions, 2018; - 1 unit for each 1.2 whole tonnes of emissions. And finally in 2019; the ETS gets to 1 unit for each 1 whole tonne of emissions.</p>
<p>So I need to factor in the discount to estimate the actual liability to surrender units under the Emissions Trading Scheme. That is steel emissions multiplied by a discount factor (0.25 units for a tonne of emissions in 2010 as the ETS applied for half of 2010, 0.5 for 2011 to 2016, 0.67 for 2017, 0.83 for 2018, 1 unit per tonne for 2019 and 2020). I have added the ETS liability in blue lines and square points</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvrz9MVe8yAwZB6_1jfpsJzYf-P3v2Q1ik298OezJf8XOTDYXmZY5MIlPAeqYPG61-OeWFpMesnu6IdqPvIv0NfYZ_UdDGLtKhVbhjKj01OL_mvDzfg7UD5RecrIz7RQNcJSUrJ_pr0hS8MBgoeph2KelpQzpdEzS9A0xJvps5nG0EzsahNYwyGqFS/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvrz9MVe8yAwZB6_1jfpsJzYf-P3v2Q1ik298OezJf8XOTDYXmZY5MIlPAeqYPG61-OeWFpMesnu6IdqPvIv0NfYZ_UdDGLtKhVbhjKj01OL_mvDzfg7UD5RecrIz7RQNcJSUrJ_pr0hS8MBgoeph2KelpQzpdEzS9A0xJvps5nG0EzsahNYwyGqFS/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v3.png"/></a></div></p>
<p>Well what do you know? The annual allocation of free emissions units always exceeds the ETS liability to surrender units. New Zealand Steel Limited has never had to surrender any emission units under the ETS. New Zealand Steel Limited is always a net seller of emissions units.</p>
<p>The rationalisation for the annual surplus of units over ETS liability is that New Zealand Steel Limited's 'Allocation Factor' for steel smelting includes an 'Electricity Allocation Factor'. This factor includes the <a href="https://web.archive.org/web/20110712151351/http://www.climatechange.govt.nz/emissions-trading-scheme/building/regulatory-updates/eaf-update.html">costs associated with the NZ ETS that are expected to flow to eligible firms through electricity prices</a>. So the industrial allocation of units exceeds direct steel smelting emissions. Therefore the carbon price that New Zealand Steel is exposed under the ETS is through the costs of it's electricity supply contracts.</p>
<p>I think that this electricity ETS pass-through cost is an imaginary artefact. It can only be detected by 'modelling'; that is to say fiddling numbers on a spreadsheet. It is confused with coal fired generation setting the marginal cost of electricity in the wholesale market. I think it is implausible that a high-volume contract for electricity supply negotiated by a large corporate such as New Zealand Steel with market power includes any carbon price pass-through cost.</p>
<p>The next graph shows the annual excess or surplus of allocated emission units over the estimated number of emissions units actually surrendered back to the Government.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8_O_yoGQ7EawsZqXYXOjXchQNbpREU5uO3_mEtwrLJMMe3bweWE7nHVueit0-WacH_38JzC2--JXSOuXP5lkPmct_VO76y193nNX2sIl30Q86hyZltf1hLy655TrHCIkSBCZBHI__NZXe626tZSRsg2sG27qXMIz5693RbWwoDn3oND5I5JUxBKgH/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v4.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8_O_yoGQ7EawsZqXYXOjXchQNbpREU5uO3_mEtwrLJMMe3bweWE7nHVueit0-WacH_38JzC2--JXSOuXP5lkPmct_VO76y193nNX2sIl30Q86hyZltf1hLy655TrHCIkSBCZBHI__NZXe626tZSRsg2sG27qXMIz5693RbWwoDn3oND5I5JUxBKgH/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v4.png"/></a></div>
<p>Back in 2016, I asked why does the Emissions Trading Register show that New Zealand Steel Limited owned over 1 million <a href="https://en.wikipedia.org/wiki/Emission_Reduction_Unit">emission reduction units</a> (internationally sourced, bargain priced and probably fraudulent 'hot air' units) at the end of 2013 and 2014, given it never needed to buy emissions units to meet it's ETS obligations?</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXka4X2uIq8wDugAlKDyftawO59NdmZtRW2WIPOuHomi5hbaBjcdbUN-YGeifBtV7FbRImE9t-GBEnT_cEgVvs0jSj1KrEbNQn-ddGtPaW7PhFo8p9jIBDY8OqmTO6dw3QJ5Gmb59U028iyMSOhIzKnYl6IciqbQN_h4zOuit0igKWvmpLjDW_S--g/s1600/Screenshot_2022-05-20_19-45-12.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="240" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXka4X2uIq8wDugAlKDyftawO59NdmZtRW2WIPOuHomi5hbaBjcdbUN-YGeifBtV7FbRImE9t-GBEnT_cEgVvs0jSj1KrEbNQn-ddGtPaW7PhFo8p9jIBDY8OqmTO6dw3QJ5Gmb59U028iyMSOhIzKnYl6IciqbQN_h4zOuit0igKWvmpLjDW_S--g/s1600/Screenshot_2022-05-20_19-45-12.png"/></a></div>
<p>The answer is that New Zealand Steel intentionally made windfall arbitrage profits. I argued they would have surrendered the much cheaper "hot air" emission reduction units to the Government for its steel emissions in 2013 and 2014 and stockpiled the more valuable (and permanent in duration) NZUs (New Zealand Units).</p>
<p>Lets add the emission reduction units to our chart as teal green points (and lines) in 2013, 2014 and 2015.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRdPp2pwtsk5M9vejWMw6Cyq0QpFm9gjlRYtYB2tXLT2_P8CVACv6ZjK1oCry8htT955dfNcZ9UVQzlMDliXh2LG3OXxybZ1DmjZAAlXz9XNuLu75PJFt-iu96FIajBgCunRySzMy26nlzW2dIPOB3vHqBaEAw8NDZGVhNxjTbh8kC0xvpQhhyo-4Z/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v5.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRdPp2pwtsk5M9vejWMw6Cyq0QpFm9gjlRYtYB2tXLT2_P8CVACv6ZjK1oCry8htT955dfNcZ9UVQzlMDliXh2LG3OXxybZ1DmjZAAlXz9XNuLu75PJFt-iu96FIajBgCunRySzMy26nlzW2dIPOB3vHqBaEAw8NDZGVhNxjTbh8kC0xvpQhhyo-4Z/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v5.png"/></a></div>
<p>The point being that these units just add to the growing 'stockpile' of units owned by New Zealand Steel. In this next chart I have added the growing stockpile as the red line, resized the Y axis and I have 'grayed out' the annual emissions, the allocations, the ETS surrender liability and the annual surplus of units.</p><p>The two biggest annual increases in the stockpile are 2013 and 2014 when New Zealand Steel bought the cheap ERUs and stockpiled the allocated NZUs. </p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9pVs7IpbUoOWoJnuK7YuMsfNmaSdUFm686EkkZM21-yojLkbVWtSAeiBZH4iEHGOr6ZVORHWqkIT33Zl8nXoIbRHbgpBq4K7dPh8mMi9WaxE07pJqZNPizkZcQgkdB4JsaiMfHI9DtPOPOFisw1H23dY1ah4nR3qiA1dOQiJqo6nBUpj7H-Wz1RVM/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v7.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9pVs7IpbUoOWoJnuK7YuMsfNmaSdUFm686EkkZM21-yojLkbVWtSAeiBZH4iEHGOr6ZVORHWqkIT33Zl8nXoIbRHbgpBq4K7dPh8mMi9WaxE07pJqZNPizkZcQgkdB4JsaiMfHI9DtPOPOFisw1H23dY1ah4nR3qiA1dOQiJqo6nBUpj7H-Wz1RVM/s1600/NZsteel-Allocation-GHGs-line-2010-2020-560by420-v7.png"/></a></div>
<p>If New Zealand Steel surrendered the cheaper ERUs for it's ETS liabilities and kept all surplus NZU emission units, they would own 4.7 million units at the end of 2020. For their 2022 stock of units that is an under estimate as New Zealand Steel has been allocated more units in May 2021 and in May 2022. The 4.7 million units will have a current market value of $364 million based on a <a href="https://www.carbonnews.co.nz/story.asp?storyID=23959">carbon price of $76.90</a></p>
<p>So my final question is: How can accumulating a holding of emission units worth $364 million possibly be a sensible outcome from a policy intended to incentivise the reduction of greenhouse gas emissions? Instead, the emitter ends up with a financial asset making considerable capital gains and unrealised capital gains income. The effect of the emissions trading scheme is extra annual income to New Zealand Steel - instead of a cost/carbon price. How is this possibly compatible with a net zero in 2050 policy?<p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-16015894239888428602022-05-15T18:44:00.004+12:002023-04-02T17:01:20.499+12:00The 'Zero Carbon' five year emissions budgets to 2035 will have no effect on emissions<p><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPatHvp5ojIUloXBIX2EhiVH9zdcujHGCVmQVJeMMnDvD8kSmrRguwNYJ2MeQ-kuWTiYVL4v7U3Mub0OKPp2j-MCdO3xxdKsEW6yejj2STcRLXklP7G1p9EUSnfpFf-OeRO4bV2EWZow_dkXRSUy2aCr59Jygm5hfEVM4_efOhvG_Q_krn5Ljkhmpu/s250/1_HoleInTheBucket.jpg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="250" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPatHvp5ojIUloXBIX2EhiVH9zdcujHGCVmQVJeMMnDvD8kSmrRguwNYJ2MeQ-kuWTiYVL4v7U3Mub0OKPp2j-MCdO3xxdKsEW6yejj2STcRLXklP7G1p9EUSnfpFf-OeRO4bV2EWZow_dkXRSUy2aCr59Jygm5hfEVM4_efOhvG_Q_krn5Ljkhmpu/s200/1_HoleInTheBucket.jpg"/></a></div>
<p>I have whipped up another chart for the five-year emissions budgets for 2022 to 2035.</p>
<p>Remember that the first emissions budget is for 2022 to 2025.</p>
<p>The second emissions budget is for 2026 to 2030.</p>
<p> The third emissions budget is for 2031 to 2036.</p>
<p>This shows both the gross budgets (excluding emissions from land use and forestry and the net budgets (including emissions from land use and forestry).</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg64Qju_IbE5Rs7mEX2nZApmsuSEv3jRCz26gWZyPZsig4VOtshpP4L2yRJsXPDLFbKZE7eNDUDQi0d9uDNC0Q63W4D9oWTwH5DCO7Csjaz4cC5Haa25wtpvnElt8eOd6ngeeAzuTXYdCjUb_bfTDkTzr3SrOpp-UPLIsdIZtyhgk4QGkJmrS7IkEpG/s1600/NZ-GHGbudget-2035-560by420v2.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg64Qju_IbE5Rs7mEX2nZApmsuSEv3jRCz26gWZyPZsig4VOtshpP4L2yRJsXPDLFbKZE7eNDUDQi0d9uDNC0Q63W4D9oWTwH5DCO7Csjaz4cC5Haa25wtpvnElt8eOd6ngeeAzuTXYdCjUb_bfTDkTzr3SrOpp-UPLIsdIZtyhgk4QGkJmrS7IkEpG/s1600/NZ-GHGbudget-2035-560by420v2.png"/></a></div><p>
<p>Where is the 'fat' in the budget? It's in the carbon removals from forestry and landuse in the 2022 to 2025 net budget.</p>
<p>If we look at the Climate Change Commission's breakdown of its recommended budget, we see that they budget for 6.6 million tonnes of emissions in CO<sup>2</sup>-e for removals or sequestration of carbon from the forests and landuse sector. That's a lowball number.</p>
<p>In calendar year 2020, the official Greenhouse Gas Inventory reports 23 million tonnes of carbon removals from the forests and landuse sector. That's almost four times the annual budget amount.</p>
<p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKwWZJrmwt2jnvBR-3M3EUudW5FN2l-X_lwtRMux3hXEUXXqlZXa02OhlFI1wIrhSLZJuyfV7zoGteVKfmk6bHUh6knRiPLL82cj8s7saYogrTRMjHBxNrfCP1YmG7-DGliZa8Jv-jAcIPRITVBdUrn07WbrlDrkGX1LSzMG3fUdeuG8LKhRzLk0Ec/s1600/CCC-budget1-page19Chapter5.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="616" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKwWZJrmwt2jnvBR-3M3EUudW5FN2l-X_lwtRMux3hXEUXXqlZXa02OhlFI1wIrhSLZJuyfV7zoGteVKfmk6bHUh6knRiPLL82cj8s7saYogrTRMjHBxNrfCP1YmG7-DGliZa8Jv-jAcIPRITVBdUrn07WbrlDrkGX1LSzMG3fUdeuG8LKhRzLk0Ec/s1600/CCC-budget1-page19Chapter5.png"/></a></div><p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-49490355927111106532022-05-09T20:27:00.017+12:002023-04-02T17:02:06.878+12:00Aotearoa sets course to net-zero with first three emissions budgets which are simply underwhelming<p><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPatHvp5ojIUloXBIX2EhiVH9zdcujHGCVmQVJeMMnDvD8kSmrRguwNYJ2MeQ-kuWTiYVL4v7U3Mub0OKPp2j-MCdO3xxdKsEW6yejj2STcRLXklP7G1p9EUSnfpFf-OeRO4bV2EWZow_dkXRSUy2aCr59Jygm5hfEVM4_efOhvG_Q_krn5Ljkhmpu/s250/1_HoleInTheBucket.jpg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="250" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPatHvp5ojIUloXBIX2EhiVH9zdcujHGCVmQVJeMMnDvD8kSmrRguwNYJ2MeQ-kuWTiYVL4v7U3Mub0OKPp2j-MCdO3xxdKsEW6yejj2STcRLXklP7G1p9EUSnfpFf-OeRO4bV2EWZow_dkXRSUy2aCr59Jygm5hfEVM4_efOhvG_Q_krn5Ljkhmpu/s200/1_HoleInTheBucket.jpg"/></a></div>James Shaw announced today announced today the five-year emissions budgets for 2022 to 2035 in a media statement <a href="https://www.beehive.govt.nz/release/aotearoa-sets-course-net-zero-first-three-emissions-budgets">Aotearoa sets course to net-zero with first three emissions budgets</a>.</p>
<p>The emissions budgets are;</p>
<ul style="text-align: left;">
<li>2022–2025: 290 million tonnes</li>
<li>2026–2030: 305 million tonnes</li>
<li>2031–2035: 240 million tonnes</li></ul>
<p>So I put the emissions budgets and their annual equivalents on a graph along with the latest actual gross and net emissions from the <a href="https://environment.govt.nz/publications/new-zealands-greenhouse-gas-inventory-1990-2020/">Greenhouse Gas Inventory from 1990 up to 2020</a>.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjP1bJFBjt9EC1JOofpoU9iSFjKmOwk1HJ0o3ZdTr3XiYHODEPV1BBdxbc6MrDcBLzbuqt78eGccsfr6aZb8PvurvTNvzTIIbYB-EuPrptym0uSlcpqtEUXOQMQwyqgyirsE-SIOlu429wEWp2CKSucuvx47quXcJaooPasgZ21jrTPXYSBOf85H_XQ/s1600/NZ-GHGbudget-2035-560by420.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjP1bJFBjt9EC1JOofpoU9iSFjKmOwk1HJ0o3ZdTr3XiYHODEPV1BBdxbc6MrDcBLzbuqt78eGccsfr6aZb8PvurvTNvzTIIbYB-EuPrptym0uSlcpqtEUXOQMQwyqgyirsE-SIOlu429wEWp2CKSucuvx47quXcJaooPasgZ21jrTPXYSBOf85H_XQ/s1600/NZ-GHGbudget-2035-560by420.png"/></a></div>
</p><p>Did you notice in his statement James Shaw only uses the word 'emissions'? He does not specify if he means gross emissions or net emissions.</p>
<p>Under the <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/LMS282029.html">Climate Change Response Act</a> the emissions budgets are expressly defined as net emissions. However, there is a conflicting section in the Act stating that the Climate Change Commission may advise the Government on <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/LMS282032.html">"the rules that will apply to measure progress towards meeting emissions budgets"</a> This was one of the issues the Lawyers For Climate Change Action raised in their recent <a href="https://www.lawyersforclimateaction.nz/projects-resources">judicial review of the Commissions advice</a>.</p>
<p>If we take the 2022 to 2025 budget of 290 million tonnes of net emissions and divide by four year we get 72 million tonnes for budget 2025. Comparing the 72 million tonnes of net emissions with 2020's 55.5 million tonnes that is a whopping great increase on 2020 net emissions of 16.5 million tonnes or thirty percent!</p>
<p>If we take the 2031 to 2035 budget of 240 million tonnes of net emissions and divide by five we get 48 million tonnes for 2035. Comparing the 48 million tonnes of net emissions with 1990's 44 million tonnes, that is still an increase on 1990 net emissions of nine percent!</p>
<p><b>So the three emissions budgets don't even represent reductions in emissions against any historic actual emissions baseline. I find the ambition of these five year budgets utterly underwhelming</b></p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-11355509151327790322022-04-26T19:55:00.025+12:002023-04-02T17:03:47.042+12:00Megan Woods announces grants to decarbonise industry coal and gas boilers that the ETS has subsidised for twelve years<p><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s248/reality_turtles.gif" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="248" data-original-width="106" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8cFpy6bmbylAixyhXHP7zojxybPnEHYp5pA0BoY_MLTykgA18issRA6auBJ4u-0J8_yKTGrVNnyQIr4hewpFaJxEHdZNgdoknR_E2vXXAsGHvZxPB7Pqt-f19xQf9qDPWTBlpY2DLBJu7K8rKKlQbecPFOfvo8Q8ueBFxM5GveQpgnysODD3ukbYR/s200/reality_turtles.gif"/></a></div><p><i>Why does New Zealand's emissions trading scheme (ETS) involve twelve years of subsidies to businesses to keep fossil fuel heat sources before the Government can provide a subsidy to replace the same fossil fuel heat sources with carbon-free renewable heat sources?</i></p>
<p><i>The curious case of the third round of grants under the Government Investment in Decarbonising Industry Fund.</i></p>
<p>Have you seen the Minister for Energy the Hon Dr Megan Woods' media statement of today?</p>
<p><a href="https://www.beehive.govt.nz/release/helping-some-new-zealand%E2%80%99s-highest-energy-users-slash-their-emissions">"Helping some of New Zealand’s highest energy users slash their emissions"</a></p>
<p>It's about the <a href="https://www.eeca.govt.nz/assets/EECA-Resources/Co-funding/GIDI-fund-round-3-approved-projects-summaries.pdf">third round of grants</a> under the <a href="https://www.eeca.govt.nz/co-funding/industry-decarbonisation/about-the-government-investment-in-decarbonising-industry-fund/">Government Investment in Decarbonising Industry Fund</a>. This is a subsidy to encourage energy users to move from fossil fuel thermal to renewable thermal energy sources. To help the recipient companies replace coal, oil or gas in their thermal boilers with renewable fuels. Fair enough! Great! What's not to like?</p>
<p>The "elephant in the room" level policy inconsistency is that three of the recipients Minister Woods mentions have also been receiving free allocations of emissions units since 2010 - which are an incentive to keep the same fossil fuel boilers that they are now getting grants to replace!</p>
<p>We can see which businesses from the Government Investment in Decarbonising Industry Fund grant scheme have also been receiving free emissions units by cross referencing the the Environmental Protection Authority spreadsheet of <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/decisions/">final industrial allocations</a>.
</p>
<p>The three are:<p>
<ol>
<li>Southern Paprika Limited, GIDI grant; $4,979,520, ETS free emissions units 83,061 2010 to 2020 worth $1,374,001, 14233 units in 2020.</li>
<li>Blue Sky Meats (N.Z.) Limited, GIDI grant; $377,250 ETS free emissions units 6134 units 2010 to 2020, 1122 units in 2020.</li>
<li>Gourmet Paprika Limited, GIDI grant; $575,250, 43962 units 2010 to 2020, 6909 units in 2020.</li></ol>
<p>We know from the <a href="https://www.eeca.govt.nz/assets/EECA-Resources/Co-funding/GIDI-fund-round-3-approved-projects-summaries.pdf">Government Investment in Decarbonising Industry Fund third round of grants</a> that:</p>
<blockquote>Southern Paprika is NZ’s largest single site capsicum grower near Auckland , privately owned by the Alexander
and Levarht families. Over the last 22 years, the site has grown to 26 hectares of glass houses, and employs
around 160 people locally and from the Pacific Islands.</blockquote>
<p>Southern Paprika's project is to install New Zealand’s first CO2 recovered biomass boiler.</p>
<p>Here is a barchart of the 83,061 emission units allocated to Southern Paprika Limited.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBZPtwQJ6jCb_7rb3FvOyHYVpj7mNrBqUrE0xIlwDHQ6u7WaekS9cFxFycqZzm7_h8BDh07JqnY7lKicRlPLu-r3bhTemoN7FUP4Apmc-3chc6B76R4y9WMThK948egF02gadcdtxXLR77Sk_M5NpMuphauejwuV5f8D53OR_CkvKiHwu9MZO-cXc5/s1600/southernpaprika-2010-2020-560by420F11.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBZPtwQJ6jCb_7rb3FvOyHYVpj7mNrBqUrE0xIlwDHQ6u7WaekS9cFxFycqZzm7_h8BDh07JqnY7lKicRlPLu-r3bhTemoN7FUP4Apmc-3chc6B76R4y9WMThK948egF02gadcdtxXLR77Sk_M5NpMuphauejwuV5f8D53OR_CkvKiHwu9MZO-cXc5/s1600/southernpaprika-2010-2020-560by420F11.png"/></a></div>
<p>Each of the three companies has probably received a 'provisional' allocation in 2021 and may still be eligible for another provisional allocation for 2022. So each company has been receiving free emissions units for the last twelve years because they have fossil fueled thermal boilers as a part of their operations. Usually as a heat source.</p>
<p>Two of the three companies are <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industries-in-the-emissions-trading-scheme/horticulture/">exporters of 'hothouse' grown vegetables</a>. They are deemed to be at a competitive disadvantage as in theory their energy costs have increased and as there is the very distant prospect that they have international competitors in a country with no emissions pricing.<p>
<p>They are not even <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/">participants</a> in the Emissions Trading Scheme who have an <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/emissions-reporting/">obligation to report emissions</a> and an <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/participating-in-the-ets/surrendering-units/">obligation to surrender units</a> to the Government.</p>
<p>The free allocation of emissions units is not balanced out by any return of emissions units back to the Government under the ETS. It is a straight-out transfer of economic value to the companies. It's a subsidy.</p>
<p>Here is a barchart of the market value of the emission units allocated to Southern Paprika Limited. I used a mid May spot price as that is the approximate date the EPA transfers the provisional allocation. The sum of the May priced allocations is $1,374,001.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfB8x3yUAOwSBvpTwZH6RiHoGN7KQoFNnP_iwqiPjpfTcxiaddR3TdQeCXZcGLHsoWlmhzXj2J0FT1iEBHkaCAr7ZUFnPvZZ_1Q5DJWO1fLRGAbOaInnzNBLtmGi94iljTruYTZoulz7HilescGZbd7Lgqf8XTGNjPRq53bWBmmpXuaAAHnPjZa6p5/s1600/southernpaprikaunitvalue-2010-2020-560by420F11.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfB8x3yUAOwSBvpTwZH6RiHoGN7KQoFNnP_iwqiPjpfTcxiaddR3TdQeCXZcGLHsoWlmhzXj2J0FT1iEBHkaCAr7ZUFnPvZZ_1Q5DJWO1fLRGAbOaInnzNBLtmGi94iljTruYTZoulz7HilescGZbd7Lgqf8XTGNjPRq53bWBmmpXuaAAHnPjZa6p5/s1600/southernpaprikaunitvalue-2010-2020-560by420F11.png"/></a></div>
<p>It is possible that Southern Paprika Limited has not sold any of it's 83,061 emission units and that they are part of the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/market-information/privately-held-units/">'stockpile' of 158 million surplus emissions units</a> recorded on the Emissions Units Register.</p>
<p>In that case the market value of the units is 83,061 x <a href="https://www.carbonnews.co.nz//story.asp?storyID=23912">$76.60</a>
equals $6,362,473.</p>
<p>I will just clarify what I mean by saying the emissions trading scheme rewards the maintenance of fossil fueled heat sources. If any of the three companies replaced a fossil thermal boiler with a renewable thermal boiler they would no longer be eligible for the free emissions units. They would lose the allocation of units and be worse off financially.</p>
<p>The freeby emissions units are in fact an incentive to keep the fossil thermal boilers. Yes, the emissions trading scheme is subsidizing the use of a fossil fueled industrial heat source by the three companies.</p>
<p>A question I might email the Minister is to ask is "how is it good emissions reducing policy to provide an incentive for keeping thermal boilers for 11 years then immediately move to a subsidy for replacing the thermal boilers with renewable energy?"</p>
<p>Or "will any of the three companies receive in the same year a subsidy of free units (incentivising keeping the fossil thermal boilers) and a subsidy to replace the boilers with renewables from the GIDI fund?"</p>
<p>Why couldn't the Government have gone straight to a subsidy to install renewable energy boilers in 2010?</p>
<p>Sometimes I can't believe how badly coordinated some of our climate change policies are.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-6456634355699695212022-03-27T16:32:00.027+13:002023-04-02T17:05:05.017+12:00Emissions trading scheme subsidy New Zealand Aluminium Smelters Limited were given 12 million emissions units worth $220 million since 2010<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s1600/godfather-350881-150x150.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s200/godfather-350881-150x150.jpg" width="200" height="200" data-original-width="150" data-original-height="150" /></a></div><p><i>The overly generous treatment of New Zealand Aluminium Smelters Limited under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">New Zealand emissions trading scheme</a> has been in the news lately. The subsidy of free emission units has been reduced by the Government. Some data exploration shows that New Zealand Aluminium Smelters Limited were given 12 million emissions units worth $220 million since 2010. Here is the data and some charts.</i></p>
<p>I have just been doing some charts of the latest data of <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">'industrial allocation'</a> of free <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/the-emissions-trading-register/emission-unit-trading/">emission units</a> to <a href="https://www.nzas.co.nz/pages/financial-results/">New Zealand Aluminium Smelters Limited</a>.</p>
<p>I have previously posted a few times about the <a href="https://rwmjohnson.blogspot.com/search/label/NZ%20Aluminium%20Smelters">generous over allocation of emissions units</a> to <a href="https://www.nzas.co.nz/pages/financial-results/">New Zealand Aluminium Smelters Limited</a>. There is a <a href="https://rwmjohnson.blogspot.com/2016/11/free-windfall-allocations-of-nzets.html">good summary in this post</a>.</p>
<p>Back on Thursday 24 March 2022, New Zealand Aluminium Smelters Limited and their emission unit allocations were again in the news.</p>
<p>Amazingly, the degree of the over-allocation of emissions units has just been reduced by Minister for Climate Change James Shaw and the Ministry for the Environment who have released a <a href="https://environment.govt.nz/assets/publications/cab-77-setting-an-electricity-allocation-factor-for-the-new-zealand-aluminium-smelters-limited.pdf">Cabinet paper</a> on the issue.</p>
<p>The <a href="http://hot-topic.co.nz/nick-smith-fails-the-smelter-spin-test/">Nick Smith National Government narrative</a> in 2011 for the free allocation is that New Zealand Aluminium Smelters Limited are "emissions intensive trade exposed" and they therefore qualify for a 90% "level of assistance". As indicated on the EPA webpage on <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/eligibility/">Eligibility for industrial allocations</a>.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx45hXkSB5MxeSlJ4NRDE4FVtd3k6zRe0srnUWBENjymu6SapX0r6hGNlc38riQIULQiqg-lPFothfrUdbIeJCDgNzS-AdJ0R9_SUO5HS7H7etH7zccSfdRfBxaT6mhGjyvOVqNQsY9OzRbuxlpIhfVub3-145HdMcIDWpbSn9drY3fSQjUXWpPpPq/s1600/NZAL-EPA-ABScreenshot2.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="140" data-original-width="565" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx45hXkSB5MxeSlJ4NRDE4FVtd3k6zRe0srnUWBENjymu6SapX0r6hGNlc38riQIULQiqg-lPFothfrUdbIeJCDgNzS-AdJ0R9_SUO5HS7H7etH7zccSfdRfBxaT6mhGjyvOVqNQsY9OzRbuxlpIhfVub3-145HdMcIDWpbSn9drY3fSQjUXWpPpPq/s1600/NZAL-EPA-ABScreenshot2.png"/></a></div>
<p>Which implies that the company still pays a 10% obligation when surrendering units under the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/">emissions trading scheme</a>.</p>
<p>But that doesn't happen as the allocation of units also includes compensation for fictitious emissions trading scheme electricity pass-through costs.</p>
<p>Which means that the free allocation of units has always exceeded the amount of units liable to be surrendered under the emissions trading scheme.</p>
<p>That means that NZ Aluminium Smelters has always been a net seller of emissions units. My initial calculations were that the over allocation ranges from <a href="http://hot-topic.co.nz/120-pure-subsidy-part-2/">120%</a> to <a href="https://rwmjohnson.blogspot.com/2012/09/rio-tinto-alcan-nz-do-godfather-nice.html">146%</a>.</p>
<p>The key point of the latest media attention is that James Shaw got a paper through Cabinet which set the "ETS carbon cost", of the recently renegotiated electricity supply contract with (100% renewable hydro powered) Meridian Energy and the company, at zero. That reduced the annual free allocation to the smelter company by 934,400 emissions units (see paragraph 38 of the <a href="https://environment.govt.nz/assets/publications/cab-77-setting-an-electricity-allocation-factor-for-the-new-zealand-aluminium-smelters-limited.pdf">Cabinet paper</a>). At a <a href="https://www.carbonnews.co.nz//story.asp?storyID=23501">24 March carbon price of 73.10</a> that's a market value of $68,304,640. Yes, $68 million dollars!</p>
<p><b>That makes the decision probably the most effective single decision ever taken to reform the woeful emissions trading scheme into a real emissions-reducing policy</b>.</p>
<p>Idiot/Savant posts at No Right Turn on 25 March 2022 that: <a href="http://norightturn.blogspot.com/2022/03/climate-change-ending-tiwais-subsidies.html"><i>"Under the ETS's industrial allocation provisions, it [NZ Aluminium Smelters Limited] receives far more carbon credits than it actually emits, which it can then sell to other polluters for profit."</i></a></p>
<p>Henry Cooke at the Dominion Post 25 March 2022 says; <a href="https://www.stuff.co.nz/national/politics/300550327/government-removes-60m-carbon-subsidy-from-tiwai-point-smelter-in-southland"><i>"The Government has removed a complex, subsidy worth about $60m, from New Zealand Aluminium, which runs the Tiwai Point Smelter in Southland"</i></a></p>
<p>Marc Daalder of Newsroom reported on 26 March that <a href="https://www.newsroom.co.nz/business/smelters-carbon-credit-subsidy-slashed"><i>"...the smelter receive around 600,000 New Zealand Units (NZUs) - carbon credits used in the Emissions Trading Scheme (ETS) - each year for the next four years, down from around 1.5 million that it would have otherwise been granted"</i>.</a></p>
<p>My analysis is on its own <a href="https://github.com/theecanmole/NZ-emission-units-industrial-allocation">github repository</a> along with the data, the 'R language' script and a couple of charts.</p>
<p>Here is the chart showing that New Zealand Aluminium Smelters Limited received 11,946,759 emissions units from 2010 to 2021. Lets call that 12 million emission units.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrA-W6w6v0ww_m4IUilUHFer2HuQjxUWqf2Usyv1VhD9tm8O2T8BLC2devoBUXKOejYTRLrdcUJH2T8G2g_edykluLbU0P-rcSSLMgkEHPyfEtspaE-7Kf55LE22TQ_D_3f8rwklr80MBthza667I6S0RhtzNcT1ukaxWCe-xS3nyHppv_iHk21_l5/s1600/NZAL-2010-2020-560by420F11.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrA-W6w6v0ww_m4IUilUHFer2HuQjxUWqf2Usyv1VhD9tm8O2T8BLC2devoBUXKOejYTRLrdcUJH2T8G2g_edykluLbU0P-rcSSLMgkEHPyfEtspaE-7Kf55LE22TQ_D_3f8rwklr80MBthza667I6S0RhtzNcT1ukaxWCe-xS3nyHppv_iHk21_l5/s1600/NZAL-2010-2020-560by420F11.png"/></a></div>
<p>My understanding is that New Zealand Aluminium Smelters Limited will have an application for a 'provisional' allocation of units approved after April each year by the EPA. The EPA <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/how-to-apply/">timeframe/deadline for these applications is 1 January to 30 April of each year</a>.</p>
<p>I have therefore assumed that the transfer of emissions units on the <a href"https://www.emissionsregister.govt.nz">
New Zealand Emissions Trading Register</a> happens in May of each year. So I valued the annual allocations with a mean mid May NZU price from <a href="http://doi.org/10.5281/zenodo.221328">Theecanmole. (2016). New Zealand emission unit (NZU) monthly prices 2010 to 2016: V1.0.01 [Data set]. Zenodo.</a></p>
<p>Obviously the NZU price has varied enormously from less than $3 in 2013 to $86 in mid February 2022. The sum of all the annual values is $220,533,810. Lets call that $220 million.</p>
<p>Here is the chart of the annual values of emissions units gifted to New Zealand Aluminium Smelters Limited.</p>
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV_K36tYUIEedorRUWVlIiSlZWSAGkOXZqZYUjArSyZTwfXlarvOP5-yk1i_p3V9e9W3S3uCXszuiqZknDucqgACppOzxMrz7x0WDSyijbQ2iSZpgY37GjBZgoEkTqUZSgz1zh-fspjXnH1mAE4gnXSC7_gNte93azoQhGTUvuRnzWXEc2guKVinOk/s1600/NZAL-allocation-value-560by420f12.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV_K36tYUIEedorRUWVlIiSlZWSAGkOXZqZYUjArSyZTwfXlarvOP5-yk1i_p3V9e9W3S3uCXszuiqZknDucqgACppOzxMrz7x0WDSyijbQ2iSZpgY37GjBZgoEkTqUZSgz1zh-fspjXnH1mAE4gnXSC7_gNte93azoQhGTUvuRnzWXEc2guKVinOk/s1600/NZAL-allocation-value-560by420f12.png"/></a></div>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-75878776274489032822021-12-10T16:36:00.041+13:002023-01-05T18:24:25.705+13:00Six ways the New Zealand emissions trading scheme fails to cap emissions<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s1600/godfather-350881-150x150.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAu7vJr1wdFi3VlUT0GgmF8NHbwFTGbmDylJ_BgBaYRZPU9mZqMahdr6PdAx2CbBGx5Vfu0DRhhDEclzezlhyphenhyphenQB7SxI1AEByqR9fcbUrnO93f0er51J7ZSAYOEt19vPaz2ENNfrTcgh3s/s200/godfather-350881-150x150.jpg" width="200" height="200" data-original-width="150" data-original-height="150" /></a></div>
<p>Back in June 2020, the Minister for Climate Change James Shaw released <a href="https://www.beehive.govt.nz/release/emission-trading-reforms-another-step-meeting-climate-targets">a statement</a> criticising previous (National) governments for their management of the <a href="https://www.tandfonline.com/doi/abs/10.1080/14693062.2019.1699773">New Zealand emissions trading scheme</a>. He said:</p>
<p><blockquote><a href="https://www.beehive.govt.nz/release/emission-trading-reforms-another-step-meeting-climate-targets">"the rules set by previous Governments left the scheme too weak to have any real impact on reducing our emissions."</a> </blockquote></p>
<p>Specifically Shaw said that the emissions trading scheme under National was <i><b>"a cap and trade system without a cap."</b></i></p>
<p>Shaw concluded;</p><blockquote><i>This has meant that emissions permitted under the scheme were, in effect, unlimited. I am delighted to say we are finally changing that</i>.</blockquote>
<p>So that's a great policy win isn't it? Cap and trade emissions trading is very simple really. And we have a Minister who 'gets it'.</p>
<p>Emissions trading schemes, although an exceedingly obtuse subject, can be explained in a single sentence.</p>
<p><a href="https://www.lse.ac.uk/granthaminstitute/explainers/which-is-better-carbon-tax-or-cap-and-trade/"><i>"Cap and trade sets a maximum level of pollution, a cap, and distributes emissions permits among firms that produce emissions"</i></a> (Grantham Institute).</p>
<p>Or;<p><p><a href="https://www.motu.nz/assets/Documents/our-work/environment-and-agriculture/climate-change-mitigation/emissions-trading/ETS-Explanation-August-2018.pdf"><i>"The government limits the supply of emission units into a trading market which then sets the emission price based on unit supply and demand"</i></a> (Motu Research).</p>
<p>So an emissions trading scheme is all about scarcity of emissions permits. The cap.</p>
<p>So hey we are lucky to have a Minister for Climate Change who is well informed and well prepared and who is pushing through the obvious fixes, such as the lack of a cap, to the National Party's woeful emissions trading scheme.</p>
<p>However, there is a problem with this narrative from James Shaw that he has introduced a cap into the emissions trading scheme. <b>It is factually wrong</b>.</p>
<p>The New Zealand emissions trading scheme is still awash with excessive quantities of emission units. While these surpluses of emissions units remain available to buyers, the emissions trading scheme can in no way be described as <b>capping emissions</b>.</p>
<p><b>There are far too many surplus units in the NZ emissions trading scheme</b></p>
<p>There are six ways the New Zealand emissions trading scheme has too many units. A real cap on units means scarcity and demand being constrained to a limit on supply to a market. The six ways all involve variations on the theme of too many emission units. The emissions trading scheme in 2022 is still "a cap and trade system without a cap". This post now lists the six ways the scheme fails to limit emissions.</p>
<p><b>One - the enormous quantity of privately held units in the New Zealand emissions trading register</b></p>
<p>There are <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/market-information/privately-held-units/">158 million privately owned emission units</a> recorded in the <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/the-emissions-trading-register/">New Zealand emissions trading register</a> run by the EPA.</p>
<div class="separator" style="clear: both;"><span style="font-size: smaller;">Here is a chart of international emissions units accumulating in the Emissions Units Register because of the unlimited importing of units up to 2014</span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1r3e_fbv8aExu8ArAanmH8zl8Xp7jbCbPH3q9BBdTTdpHP0956NGMyu4_hlz4C9qDCBX7ld-q8zfkpvxpAqU0BpZxs37AA3mCzB6C3RmlKBsq7h9u09qtlqNNImk0Irai4FG1oxaGYkKTLkvjch2VrdYGoHiFFp5OMyM-uxkdQ9cPJr55HP4518Oj/s1600/KP-units-2008-2014-560by420-v1.png" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" data-original-height="420" data-original-width="560" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1r3e_fbv8aExu8ArAanmH8zl8Xp7jbCbPH3q9BBdTTdpHP0956NGMyu4_hlz4C9qDCBX7ld-q8zfkpvxpAqU0BpZxs37AA3mCzB6C3RmlKBsq7h9u09qtlqNNImk0Irai4FG1oxaGYkKTLkvjch2VrdYGoHiFFp5OMyM-uxkdQ9cPJr55HP4518Oj/s1600/KP-units-2008-2014-560by420-v1.png"/></a></div>
<p>How did that happen?</p>
<p><a href="https://www.nzherald.co.nz/business/brian-fallow-anti-rort-law-hits-forest-good-guys/SSRZGIHBAALQ7MRVNYBYX467GY/?c_id=3&objectid=11263502">Brian Fallow of the Herald wrote on 28 May 2014 that:</a></p>
<p><blockquote>"..the collapse in international carbon prices has presented the smokestack sector with an arbitrage opportunity too. They have been able to hoard their NZUs, in the expectation they will be more valuable in the future, and meet their obligations in the meantime with cheap imported Kyoto units instead"</blockquote><p>
<p><a href="https://carbon-pulse.com/8273/">On 31 August 2015, Carbon forest consultant Ollie Belton said this;</a></p>
<p><blockquote>"In 2012-2015 when the flood of Russian and Ukrainian ERUs were released, the tiny NZ ETS became the last market accepting them. This collapsed the NZ ETS price of carbon from about NZ$20/unit to about 20c/unit. NZ emitters naturally responded by meeting their surrender obligations with ERUs at a negligible cost (while back pocketing NZUs and making big arbitrage profits)."</blockquote>
<blockquote>"..trade exposed industries that were gifted up to 90% of their surrender obligations were able to meet all their obligations with the super cheap ERUs and bank the gifted NZUs. Since 2012, NZUs have had much higher market value than ERUs, generally more than five times as high, hence the arbitrage opportunity. Never have polluters had it so good. They have made hundreds of millions in arbitrage profits." </blockquote>
<p>Dr Suzi Kerr of Motu said in 2016 that <blockquote><a hrf="https://www.motu.nz/about-us/news/for-taxpayers-arbitraged-carbon-credits-are-not-money-in-the-bank/">"because of arbitrage, ETS participants now hold an excessive number of units that the government is required to accept against future emissions,”</a> </blockquote></p>
<p>By "arbitrage", Dr Kerr means the importing of fraudulent Russion and Ukrainian 'hot air' units into the emissions trading scheme described in the Morgan Foundation's Climate Cheats report. <a href="https://rwmjohnson.blogspot.com/2016/04/did-new-zealand-steel-make-windfall.html">New Zealand Steel Limited were up to their necks in arbitrage</a>.</p>
<p>These units are available to be sold to emitters for surrendering back to the Government at any time. They trump the so-called "cap".</p>
<p><b>Two - industrial over allocation of free emissions units</b></p>
<p>The <a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">free allocation</a> of huge quantities of emissions units to large corporates like <a href="https://rwmjohnson.blogspot.com/2016/04/did-new-zealand-steel-make-windfall.html">New Zealand Steel Limited</a> and <a href="https://rwmjohnson.blogspot.com/2016/11/free-windfall-allocations-of-nzets.html">New Zealand Aluminium Smelter Limited</a> under <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662643.html">section 81</a> and <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662645.html">section 83</a> of the Climate Change Response Act 2002 is production or output based. The emitters have always received more units than they need to surrender. Way more than a 90% entitlement.</p>
<p>Each year they receive a <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662643.html">'provisional' allocation</a> of units which is calculated as their actual production from the previous year multiplied by the <a href="https://www.legislation.govt.nz/regulation/public/2010/0189/latest/DLM3075118.html">provisional allocative baseline</a>. At year end they submit a <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662645.html">'final adjustment' return</a> to the EPA once they know their actual output. The final units allocated to emitters equals their output multiplied by emissions factors. This process happens irrespective of any "cap" claimed by James Shaw. Free allocation trumps the "cap".</p>
<p><b>Three - price caps come at the expense of quantity caps - the cost containment reserve</b></p>
<p>The Ministry for the Environment's recent report <a href="https://environment.govt.nz/publications/emissions-reduction-plan-discussion-document/">"Te hau mārohi ki anamata | Transitioning to a low-emissions and climate-resilient future: Have your say and shape the emissions reduction plan."</a> states on page 37 in footnote 14 <blockquote>"The cost containment reserve (CCR) is a reserve volume of units available to be released to the NZ ETS market if the CCR trigger price is hit at auction."</blockquote></p>
<p><a href="https://www.bellgully.com/insights/planning-to-purchase-auction-nzus-simulated-test-auctions-to-run-this-month/">Auctioning of emissions units</a> was another measure introduced in the June 2020 amendments to the emissions trading scheme.</p>
<p>Stuff's Olivia Wannan describes the <a href="https://www.stuff.co.nz/environment/climate-news/125676561/are-we-about-to-blow-our-firstever-carbon-budget">cost containment reserve</a> as <blockquote>"a trigger to prevent the carbon price from going too high. If enough people place a unit bid above $50 during <a href="">the auctions</a>, the Government can sell an additional 7 million units. These equate to 7 million tonnes of additional climate pollution, which could be created this year or at any point in future."</blockquote></p>
<p>Sure enough, during the September 2021 auction, the <a href="https://www.al.nz/wp-content/uploads/Emissions-Trading-Scheme-auctions-and-how-they-work-September-2021.pdf">emissions unit price reached $50 per tonne</a> and the <a href="https://www.stuff.co.nz/environment/climate-news/126250903/soaring-demand-to-pollute-blows-governments-first-limit-on-carbon-units">additional 7 million units were released</a> and sold to bidders at a price of <a href="https://www.etsauctions.govt.nz/public/auction_noticeboard/16">$53.85</a>.</p>
<p>So, again, the cost containment reserve <a href="http://norightturn.blogspot.com/2022/01/climate-change-here-we-go-again.html">is a farce</a> that increased the supply of units to the market in spite of Minister Shaw's claim of a "cap" on units.</p>
<p><b>Four - The emissions budget is done backwards by subtracting the exceptions from the ETS</b></p>
<p>The New Zealand <a href="https://environment.govt.nz/what-government-is-doing/key-initiatives/ets/nz-ets-market/setting-unit-limits-in-the-nz-ets/">emissions budget for the 5 years 2021 to 2025</a>, required by the Zero Carbon bill, <a href="http://norightturn.blogspot.com/2020/06/climate-change-banking-failure.html">was done backwards</a>. It calculates by the sleight of hand of subtraction. It takes the emissions that should be capped and then <b>subtracts</b> the exceptions in the coverage of the emissions trading scheme. The exceptions gained by lobbying.</p>
<p>The Ministry for the Environment started with a gross emissions quantity of 354 million tonnes (mt) over 5 years (or 70.8 mt p.a.). They then subtract 194 mt for agriculture (outside the ETS, 39 mt p.a.), then 43 mt for free industrial allocation (8.6 mt p.a.) and then 27 mt for 'stockpile reduction (5.4 mt p.a.)'. By 'stockpile' they mean the 138 million units in private hands. And that they would like the 138 million units to reduce by less than 1% in 5 years.</p>
<p>The remaining number, 90 mt over 5 years becomes the indicative budget for the new auctions. It is therefore the amount to be auctioned.</p>
<p>The emissions budget under a plain ordinary vanilla cap'n'trade scheme should have been determined by <b>addition</b>. Add up the verified historic greenhouse gases from the inventory and the only subtraction should be the reduction amount to go from historic actual emission to enforceable limit or cap</p>
<p><b>Five - free industrial allocation of units included non-emitters.</b></p>
<p>Significant quantitles of emissions units were gifted to non-emitters as compensation or as a cost-reducing measure. The sectors are pre-1990 forest owners, the fishing boat owners and hothouse/glasshouse horticulture exporters. These allocations just lead to more stray units being supplied to the market for emitters to obtain for their increasing emissions. And more units in the private holdings of 138 million unit 'bank'.</p>
<p><b>Six - just run up an overdraft of emissions units with 'banking and borrowing'</b></p>
<p>Thanks to the Zero Carbon bill, the legislation provides for <a href="https://www.legislation.govt.nz/act/public/2002/0040/latest/LMS282041.html">'banking and borrowing' under Section 5ZF</a>. This gives the Minister for Climate Change the power to fail to meet an emissions budget and to make up the difference with 'borrowing' the shortfall from the next emissions budget period. Again that is contrary to the idea of a "cap".</p>
<p>In spite of Minister for Climate Change James Shaw's claim of including a "cap", and in spite of the inclusion of "auctions" and "emissions budgets", the emissions trading scheme is still awash with surplus units. That's the opposite of scarcity of units implied by the word "cap". The emissions trading scheme remains a mix of creative carbon accounting and 'future-eating': emissions growth today and emissions reductions in the future (or maybe not all).<p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-78284975088282270502021-09-17T09:26:00.009+12:002023-04-02T17:07:09.756+12:00Moving the deckchairs on the Titanic - the Ministry for the Environment's pathetic incremental reforms of industrial allocation in the NZ emissions trading scheme<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgG8KLjWjm1BOSTYcQ79S-Choa-alI-f1ARRbwTr_nV1sTkX46w6gn7_sCODRUtsRQeOvdsEDM83E7lTj97Z0_w95eWpIDYYte2G-KB1dC_DIsvvtqT5MO8Eqi0B9WeDnOWsMJRmmhQR4I/s379/NZ+Emissions+Trading+Scheme.jpg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" height="200" data-original-height="379" data-original-width="350" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgG8KLjWjm1BOSTYcQ79S-Choa-alI-f1ARRbwTr_nV1sTkX46w6gn7_sCODRUtsRQeOvdsEDM83E7lTj97Z0_w95eWpIDYYte2G-KB1dC_DIsvvtqT5MO8Eqi0B9WeDnOWsMJRmmhQR4I/s200/NZ+Emissions+Trading+Scheme.jpg"/></a></div>
<p>The Ministry for the Environment is running a <a href="https://consult.environment.govt.nz/climate/reforming-industrial-allocation-in-the-nz-ets/">consultation on reforming industrial allocation</a> in the NZ ETS. It closes for submissions today.</p>
<p><a href="https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industrial-allocations/">Industrial allocation</a> is the process where large trans-national emitters who have to surrender emissions units under the emissions trading scheme (that being the whole point of an ETS) are 'allocated' (given) free emissions units.</p>
<p>Remember that an emissions unit is the legal right in the form of a transferable permit to emit greenhouse gases. They are just like petrol vouchers. Or like a voucher to burn coal or a voucher to emit methane.</p>
<p>The units say in effect "the owner of this unit has the absolute right and permission to burn some fossil fuel, a tonne of carbon dioxide equivalent emissions per unit". So every emission unit allocated to an emitter says to those emitters just go burn some carbon.</p>
<p>The process doesn't just reduce the carbon price. It makes it a wealth transfer and therefore a carbon refund.</p>
<p><a href="http://hot-topic.co.nz/did-nz-steel-make-windfall-arbitrage-profits-from-the-ets/">New Zealand Steel Ltd</a> and <a href="https://rwmjohnson.blogspot.com/2019/10/rio-tinto-says-thats-nice-hydro-powered.html">New Zealand Aluminium Smelters Ltd</a> are allocated more emission units than they need to surrender. The net effect of industrial allocation is that the two trans-national high-emitting companies have been net sellers of emissions units in every year of the emissions trading scheme since 2010.</p>
<p>After nine years of National Government amendments to the emissions trading scheme, the industrial allocation settings were basicly "free over allocation of emissions units to emitters for ever"</p>
<p>Since 2017 the Minister for Cimate Change James Shaw and the Ministry for the Environment have made <a href="https://rwmjohnson.blogspot.com/2020/06/dear-james-shaw-continued-excessive.html">one pathetically minor tweak</a> to the industrial allocation settings. The eternal and un-ending entitlement to free units will decline by 1% a year from 2020.</p>
<p>Now the latest consultation proposes refining some of the minor detail of the baselines used for industrial processes that have the privilege of being eligible for industrial allocation free unit giveaway</p>
<p>I have just sent in my submission. So here it is. I argue a couple of basic points. There is a climate emergency. The only issue that matters is to rapidly reduce NZ's emissions of greenhouse gases. But MfE proposes incremental tweaks to industrial allocation settings in the ETS. This is just moving the deckchairs on the Titanic.</p>
<p>The industrial allocation rules should not be refined, they should be abolished. They have no place in an ETS designed to rapidly reduce emissions. I state that the only Government policy programme for reducing emissions that is worse than the ETS is the incremental process to reform the ETS</p>
<p><b>Submission to Ministry for the Environment on Reforming industrial allocation in the NZ ETS 17/09/2021</b></p>
<p>The world is facing a climate emergency. According to the IPCC Sixth Assessment Report (WG1), in order to limit warming to 1.5C with no or a limited overshoot, net global carbon dioxide emissions need to fall by 45% from 2010 quantities by 2030 and to then achieve net-zero emissions by 2050.</p><p>
Given that urgency, the only issue or question that matters for emissions reduction policy is “does it reduce anthropogenic emissions of greenhouse gases rapidly and effectively”?</p><p>
Based on that criteria, the New Zealand emissions trading scheme (NZETS) completely fails as a policy. The only other NZ Government policy programme that also fails to this same catastrophic extent is - the Ministry for the Environment’s current process of incrementally amending minute details of the NZETS. This consultation is no exception. </p><p>
Therefore I disagree with and completely reject the minimalist scope of this consultation. I am deliberately going outside the scope of the consultation as the Ministry needs to be called out for this inadequate and frankly egregious approach.</p><p>
When the critical and urgent need is for policies that rapidly reduce emissions of greenhouse gases, proposals such as this consultation for minimalist incremental changes to the deeply flawed industrial allocation rules are merely “rearranging the deckchairs on the Titanic”. </p><p>
I am appalled that officials have proposed such limited policy actions that are so obviously not commensurate with the magnitude and severity of the climate emergency. I am appalled that the Government and the Minister have allowed this pathetically incremental approach.</p>
<p>I consider it is well understood what is wrong with the NZETS industrial allocation policy. I will list a few points.</p><p>
<ul>
<li>The industrial allocation results in the gross overallocation of emissions units to emitters,</li>
<li>It is a process that assumes existing allocations are property rights of emitters,</li>
<li>There is an implicit assumption that existing allocations have some logical basis in good policy rather than it being the result of vested interest political lobbying and compromise,</li>
<li>There is no fixed cap on emissions because of production-based allocation of emission units,</li>
<li>The baselines show no logical relationship to the established IPCC emissions factors used in the Greenhouse Gas Inventory reporting and unit surrenders, </li>
<li>The baselines include the Electricity Allocation Factor - which is an empirically invalid proxy for unverified and unproven energy and electricity pass-through costs,</li>
<li>Major industrial emitters such as NZ Steel and NZ Aluminium Smelters Ltd are net sellers of units as they receive so many free emissions units,</li>
<li>Units are allocated to non-participants of the ETS who have no surrender obligations (the hothouse horticulture sector),</li>
<li>The 30-year timeline of incremental 1% or 2% or 3% annual phase-out of allocations is completely inadequate as an emitter could maintain the same allocation of units, despite the 1% phase down, by simply producing more output each year.</li>
</ul>
<p>In summary, the New Zealnd Emissions Trading Scheme is grossly deficient to the extent that it deviates from a simple and transparent design of a capped number of emission units applied without exception across all relevant economic sectors as in the Greenhouse Gas Inventory - with units to be surrendered by emitters with no free allocation.</p>
<b><p>Recommendations</p></b>
<p>The first-and-best policy recommendation I wish to make is that; "industrial allocation of free emission units should be immediately terminated".</p><p>
The second best policy recommendation I would make is that “all industrial allocation of units is phased out within three years or a similar very short timeframe (much as the "two-for-one" units surrender discount was phased out from 2017 to 2019).</p><p>
The third best policy recommendation I would make is that “any short-term industrial allocation of units must immediately exclude energy costs (the EAF) so that no emitters are net sellers of units under industrial allocation”.</p><p>
The fourth best policy recommendation I would make is that “if there is a limited and short term period of rapid phase out of industrial allocation, and if baselines are validly needed, then the emissions baselines used should be the relevant emissions factors from the Greenhouse Gas Inventory”.</p>
<p><b>Consultation questions</b></p><p>
<i>Question 1: Do you agree with the five criteria to assess the proposals in this consultation document? Why, or why not?</i></p><p>
I strongly disagree with the criteria. This sort of policy minutiae is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible. </p><p>
<i>Question 2: Should allocative baselines be updated using new base years? Why, or why not?</i></p><p>
I strongly disagree. This sort of policy minutiae is rearranging the deckchairs on the Titanic. When allocations are being eliminated as rapidly as possible, it will be irrelevant what baseline is used. Grandparenting allocations will be adequate if the public can see that all free allocation will end in the short term e.g. over three years. </p><p>
<i>Question 3: Should the reassessment be a one-off update, or a periodic update? Why, or why not?</i></p><p>
I strongly disagree. Reassessment is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 4: If periodic reassessment is legislated, what would be an appropriate period – every year, 5 years, 10 years, or something else? Why?</i></p><p>
I strongly disagree. Periodic reassessment is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 5: Do you agree the financial years 2016/17, 2017/18 and 2018/19 should be used as new base years to update allocative baselines? Why, or why not?</i>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 6: Should the financial years 2019/20 and 2020/21 be included, but with a weighting provision? Why, or why not?</i></p><p>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 7: Should eligibility be reassessed using new base years?</i></p><p>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 8: Should new emissions intensity thresholds for New Zealand industry be developed? Why, or why not?</i></p><p>
Strongly no. Developing new thresholds is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 9: Should more thresholds be added into the eligibility criteria? Why, or why not? How many would be appropriate?</i>
</p><p>I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 10: Would a sliding scale threshold system better target eligibility and assistance? Why, or why not?</i></p><p>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 11: Should the New Zealand EAF be used when determining eligibility? Why, or why not?</i></p><p>
I strongly disagree. The first best policy is elimination of free industrial allocation of units over the shortest time period possible. Even if there is retention of allocation for a short period, the EAF should be immediately abolished so that no emitter receives more units than they are required to surrender.</p><p>
<i>Question 12: Should periodic updates of the EAF trigger a recalculation of eligibility? Why, or why not?</i>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The EAF should be abolished and not included in any very short phase-out term. If industrial allocation is to continue for even a short term, the rules must ensure no emitter is a net seller of units after allocation.</p><p>
<i>Question 13: Should the trade exposure test be changed? Why, or why not?</i></p><p>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. The trade exposure test should be abolished even if industrial allocation continues for a very short limited period.</p><p>
<i>Question 14: What would be a more appropriate method to determine trade exposure?</i></p><p>
This is completely pointless. It is rearranging the deckchairs on the Titanic. The trade exposure test should be abolished.</p><p>
<i>Question 15: Do you agree with the proposal to simplify the process to update allocative baselines, to reflect changes to emissions factors, EAF or other changes to methodology? Why, or why not?</i></p><p>
I strongly disagree. This is completely pointless. It is rearranging the deckchairs on the Titanic. In the context of the need to rapidly phase out allocation (if not immediate cessation) there is no point updating baselines. The EAF should be abolished and not included in any very short phase-out term. If industrial allocation is to continue for even a short term, the rules must ensure no emitter is a net seller of units after allocation.</p><p>
<i>Question 16: Are there other changes to sections 161A-E of the Act that could better streamline IA processes?</i></p><p>
It is absolutely too late to be ‘streamlining’ sections 161A-E of the Act. All sections of the Climate Change Response Act providing for free allocation should be repealed.</p><p>
<i>Question 17: Do you agree with the proposal to clarify the eligibility process for new activities? Why, or why not?</i></p><p>
I strongly disagree. Free industrial allocation should be terminated as quickly as possible. No new entrants should be permitted.</p><p>
<i>Question 18: Should new activities be able to seek eligibility? Why, or why not?</i></p><p>
I strongly disagree. Free industrial allocation should be terminated as quickly as possible. No new entrants should be permitted.</p><p>
<i>Question 19: Should there be any caveats on new activities seeking eligibility, such as proof of environmental benefits compared to existing activities?</i></p><p>
Free industrial allocation should be terminated as quickly as possible. Future eligibility should be irrelevant. No new entrants should be permitted.</p><p>
<i>Question 20: Should firms that receive IA be required to report their emissions, revenue and production data annually? Why, or why not?</i></p><p>
Yes. And unit surrenders should be reported. That is simple transparency and good governance of a market. It speaks volumes as to the inadequacy of the NZETS and it’s lack of transparency that firms receiving industrial allocation have not to date been required to report their emissions, revenues and production data.</p><p>
<i>Question 21: Would voluntary reporting be more appropriate, and still provide some oversight of leakage and over-allocation risk? Why, or why not?</i></p><p>
I strongly disagree. That would be an abuse of transparency. That is the opposite of oversight.</p><p>
<i>Question 22: Should the five-year transition period for changes in eligibility status remain, or be changed? Why, or why not? </i></p><p>
This is completely pointless. A five year period for changes in eligibility is a nonsense in the context of a rapid phase out of allocation. It is rearranging the deckchairs on the Titanic. The first best policy is elimination of free industrial allocation of units over the shortest time period possible.</p><p>
<i>Question 23: Should we look at an alternative mechanism to address emissions leakage? Why, or why not?</i></p><p>
No, this is completely pointless. "Emissions leakage" is just the NZ Initiative policy of "fast follower" (e.g. climate policy laggard) dressed in sheep's clothing. Emissions leakage should be irrelevant now that the world has a universally agreed international treaty - the Paris Agreement - to reduce emissions to net zero near 2050. Under the Paris Agreement NZ is only responsible for its own emissions. Other countries are responsible for their sovereign emissions.</p><p>
<i>Question 24: What alternative mechanisms to IA would better address the risk of emissions leakage, and support domestic and international emissions reduction targets? </i></p><p>
Emissions leakage should be irrelevant now that the world has a universally agreed international treaty - the Paris Agreement - to reduce emissions to net zero near 2050. Under the Paris Agreement NZ is only responsible for its own emissions. Other countries are responsible for their sovereign emissions.</p><p>
<i>Question 25: Should IA policy or any alternative explicitly encourage firms to reduce emissions? Why, or why not?</i></p><p>
Frankly, given the state of the climate emergency, I can’t even understand why Ministry officials would even ask that question in a NZETS consultation. Reducing emissions is the only point of emissions trading.</p><p>
<i>Question 26: What method could be used to encourage emissions reductions?</i></p><p>
A well designed, capped, no-industrial-allocation, all sectors all-auctions NZETS would encourage emissions reductions.</p><p>
<i>Question 27: Should IA decisions or any alternative include wider considerations – such as economic, social, cultural and environmental factors – when determining support for industry? Why, or why not?</i></p><p>
No, absolutely not. Why on Earth would NZETS policy be based on any criteria other than reducing emissions? NZ has had 10 years of "wider considerations" in the NZETS and the result has been excessive wealth-transferring free industrial allocation to emitters. Effective policy incentivising rapid reduction in emissions must start immediately.</p><p>
<i>Question 28: How would these new considerations interact with the goal of reducing emissions leakage?</i></p><p>
Honestly, this is ridiculous. See previous comment.</p><p>
<i>Question 29: Do you have any other comments, ideas or critical feedback that could help support the Government form final policy decisions?</i></p><p>
Just to repeat. The world is facing a climate emergency. According to the IPCC Sixth Assessment Report (WG1), in order to limit warming to 1.5C with no or a limited overshoot, net global carbon dioxide emissions need to fall by 45% from 2010 quantities by 2030 and to then achieve net-zero emissions by 2050.</p><p>
Given that urgency, the only issue or question that matters for emissions reduction policy is “does it reduce anthropogenic emissions of greenhouse gases rapidly and effectively”?</p><p>
Based on that criteria, the New Zealand emissions trading scheme (NZETS) completely fails as a policy. The only other NZ Government policy programme that also fails to this same catastrophic extent is - the Ministry for the Environment’s current process of incrementally amending minute details of the NZETS. This consultation is no exception. </p><p>
Therefore I disagree with and completely reject the minimalist scope of this consultation. I am deliberately going outside the scope of the consultation as the Ministry needs to be called out for this inadequate and frankly egregious approach.</p><p>
When the critical and urgent need is for policies that rapidly reduce emissions of greenhouse gases, proposals such as this consultation for minimalist incremental changes to the deeply flawed industrial allocation rules are merely “rearranging the deckchairs on the Titanic”. </p>
<p>I am appalled that officials have proposed such limited policy actions that are so obviously not commensurate with the magnitude and severity of the climate emergency. I am appalled that the Government and the Minister for Climate Change Issues have allowed this pathetically incremental approach.</p><p> Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-78221334837804333852021-08-21T15:43:00.020+12:002023-04-02T17:07:26.891+12:00 Overseer: greenwashing nutrient pollution from intensive agriculture for 20 years<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQzDa1cE6uJvZm3MisBEIbhJSBLzvblvcuEtQSIjnYr2hCvG0MkWlxBV_Ew7kmTtfpTCEAHQy8qdv7sHTA_5dk1M3CPBBya-ps9wPXdda0k-UVqx4VtF2XzajI7Kee-ue5MEKVYnIZvJ0/s200/dairy-cow.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="112" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQzDa1cE6uJvZm3MisBEIbhJSBLzvblvcuEtQSIjnYr2hCvG0MkWlxBV_Ew7kmTtfpTCEAHQy8qdv7sHTA_5dk1M3CPBBya-ps9wPXdda0k-UVqx4VtF2XzajI7Kee-ue5MEKVYnIZvJ0/s200/dairy-cow.png"/></a></div>
<p>“Overseer” and dairy farming have been in the news a lot lately. (<a href="https://www.rnz.co.nz/tags/Overseer">"Govt to assist development of next-gen waterways protection tool"</a>, Radio NZ, 11 August 2021, <a href="https://www.nzherald.co.nz/nz/hawkes-bay-farmers-frustrated-by-review-of-regulatory-tool-overseer/IDUFEQGHJRM5MLT3PKE3Q77YPA/">"Hawke's Bay farmers 'frustrated' by review of regulatory tool Overseer"</a>, NZ Herald, 11 August 2021 and <a href="https://www.stuff.co.nz/environment/climate-news/125907504/major-tool-for-managing-farm-pollution-gets-a-fail-from-reviewers">"Major tool for managing farm pollution gets a fail from reviewers"</a>, Stuff, 11 August 2021) <p>
<p><b>What is <a href="https://www.overseer.org.nz/">Overseer?</b></a></p>
<p>According to a <a href="https://www.beehive.govt.nz/release/work-improving-tools-manage-nutrient-losses-farms">Government media release of 11/08/21</a>;</p>
<blockquote><i>"Overseer and its predecessors have been used for 30 years by many New Zealand (dairy) farmers to estimate nutrient budgets and understand how nutrients are cycled on-farm. Recently, it has been used by a number of Regional Councils as part of their plans and consents to manage nutrient loss to rivers and groundwater.“</i></blockquote>
<p>An <a href="https://www.mpi.govt.nz/dmsdocument/46360-Overseer-whole-model-review-Assessment-of-the-model-approach">independent expert peer review</a> of Overseer has just been completed and it’s conclusion is that Overseer is not fit for purpose and is unfixable.<p>
<p>The Review conclusion (pages 95 and 96) is;.</p>
<blockquote><i>"...we do not have confidence that Overseer’s modelled outputs tell us whether changes in farm management reduce or increase the losses of nutrients, or what the magnitude or error of these losses might be."</i></blockquote>
<p><b>Why was there an independent expert peer review?</b></p>
<p>Because the Parliamentary Commissioner for the Environment Simon Upton wrote a <a href="https://www.pce.parliament.nz/publications/overseer-and-regulatory-oversight-models-uncertainty-and-cleaning-up-our-waterways">report asking for a review in 2018</a>.</p>
<p><b>What was the original concern of Simon Upton?</b> </p>
<p><a href="https://www.pce.parliament.nz/publications/overseer-and-regulatory-oversight-models-uncertainty-and-cleaning-up-our-waterways">Simon Upton said (on page 7)</a>;</p>
<blockquote><i>“This investigation is about Overseer’s fitness for purpose in a regulatory context. Can we be confident that its estimates of nutrient loss provide regional councils with a basis for making regulatory decisions, notwithstanding the simplifications and approximations that are inevitable in having recourse to models?”</i></blockquote>
<p>Upton was also concerned that privately owned proprietary software was not transparent and neither it’s model structure or results had been independently verified.</p>
<p><b>So what’s the big issue now this independent peer review has been released?</b></p>
<p>Well the answer is “No” to Simon Upton’s question; can there be confidence in Overseer’s estimates of nutrient losses when regulating agricultural intensification under the RMA?</p>
<p>However, the <a href="https://www.mpi.govt.nz/agriculture/farm-management-the-environment-and-land-use/overseer-a-nutrient-management-tool-for-farmers-and-growers/overseer-model-technical-review-reports-and-documents/">Government response</a> is to fudge the issue. In the <a href="https://www.beehive.govt.nz/release/work-improving-tools-manage-nutrient-losses-farms">Beehive media release</a> they down play the peer review conclusion in bullet points.</p>
<blockquote><ul>
<li>Report finds shortcomings in Overseer nutrient management tool</li>
<li>Overseer will be supported while a next generation of the tool is developed and/or additional tools are made available</li></ul></blockquote>
<p>Minister for the Environment David Parker states;</p>
<blockquote><i>“Despite its shortcomings Overseer has been a useful tool to build awareness and influence practices to manage nutrient loss at the farm and catchment level”</i></blockquote>
<p>Minister for the Environment David Parker is minimising and therefore denying the peer review's conclusion. Parker in an <a href="https://www.rnz.co.nz/national/programmes/morningreport/audio/2018807896/environment-minister-on-panel-finding-overseer-contributed-to-continued-pollution">interview with Radio NZ</a> stated that Overseer isn't fatally flawed. Look for my underlining</p>
<blockquote><i>"The Overseer tool has been used by Regional Councils to estimate what the nutrient pollution coming from a farm into water ways and it turns out there's some problems with it. <u>That doesn't necessarily make it fatally flawed</u> but those problems are significant."</i></blockquote>
<p>And he states that Overseer can indicate the relative change in nutrient flows after a change of farm practise:</p>
<p><blockquote><i>"We need to look at whether its still got really sound utility as a regulatory tool on say on a flat dairy farm on which it probably is quite accurate on and lets face it that's where most of our dairying is on flat land but there are some councils who instead of using it just to measure the relative performance of a change on farm because even if its not accurate as to the absolute number <u>it does give you an indication if you change your practice of things getting better or worse and that's very useful</u>."</i></blockquote></p>
<p><b>What’s wrong with what David Parker is saying?</b><p>
<p>The peer review gave a black and white answer. Overseer can't give reliable estimates of either relative or absolute nutrient losses from farms. Yet David Parker made a 180 degree contrary statement to Radio NZ that Overseer can usefully estimate relative nutrient losses from farms.<p>
<p>Parker and the Government need to accept that Overseer is fatally flawed. It isn't fit for purpose for regulating agricultural intensification. Parker is treating the issue as shades of grey. There are problems, but these can be addressed, work can be done, and Overseer can be supported and improved.<p>
<p>Parker's assertions completely fly in the face of the peer review's conclusions. I don't see how any sufficiently informed reader of the peer review could possibly see the Government work program and Parker's statements as logical and valid responses to the peer review's conclusion.</p>
<p><b>So how does this fit in with the context of resource consents and RMA regional plans?</b></p>
<p>In terms of the regulatory context that Simon Upton was concerned about, I draw three conclusions;</p>
<ol><li>Any resource consents that have Overseer conditions - those conditions are now unenforceable on the consent holder.</li>
<li>The regional council process that led to the granting of consents for agricultural intensification relied for their conclusion of "adverse effects mitigated" on the inappropriate use of a fatally flawed model.</li>
<li>Any regional plan rules (i.e. Manawatu Whanganui Regional Council’s One Plan) where Overseer was used to manage and therefore allow intensification were based again on the inappropriate use of a fatally flawed model.</li></ol>
<p><b>What are the environmental organisations saying?</b></p>
<p>I agree with <a href="https://www.stuff.co.nz/national/126045572/problems-with-tool-used-to-map-farm-nutrient-losses-could-trigger-court-action">Greenpeace who said</a> that Overseer had supported dairy conversions and intensification. Overseer was an excuse for allowing too much synthetic nitrogen fertiliser and too many cows to be crammed onto the land, despite worsening freshwater quality and drinking water contamination. Overseer justified the over-application of synthetic nitrogen fertiliser and had been embedded in resource consents.</p>
<blockquote><i>“From the start, Overseer has been peddled by fertiliser companies as a means to sell more fertiliser – the very thing that is wrecking rivers and driving intensive dairying.”</i>
</blockquote>
<blockquote><i>“That’s no surprise given that Overseer is managed by the fertiliser companies that make a killing off farmers dumping synthetic nitrogen fertiliser onto the land,”</i></blockquote>
<p>Overseer has been unequivocally unmasked as not just an imperfect tool used inappropriately in the RMA context to justify more intensive horticulture and dairy farming, but as propaganda for environmentally damaging agricultural intensification.</p>
<p>David Parker’s statements and intentions to continue with Overseer with incremental improvements show he is just a cheerleader for agricultural intensification and it’s ensuing adverse nutrient pollution of our freshwater bodies.</p>
<p><b>Well that sucks. What should be done about it?</b></p>
<p>I think the environmental NGOs need to get a declaration from the Environment Court that Overseer is unusable in any consenting or planning context. The Government needs to be stopped from propping Overseer up with incremental fudges so it can still act as a fig-leaf of faked mitigation for agricultural intensification.</p>
<p><b>An appendix on the independent peer review of Overseer</b></p>
<p>The citation for the independent peer review is <a href="https://www.mpi.govt.nz/dmsdocument/46360-Overseer-whole-model-review-Assessment-of-the-model-approach">Overseer whole-model review Assessment of the model approach, MPI Technical Paper no: 2021/12 Prepared for the Ministry for Primary Industries and the Ministry for the Environment by the Science Advisory Panel ISBN No: 978-1-99-100936-4 (online) ISSN No: 2253-3923 (online)</a>
<p>Here are the relevant conclusions from the independent review.</p>
<p>On page 90 in para 10.2.3 "The limitations of the overarching structure of Overseer notably impair the ability of the model to produce trustworthy absolute or relative predictions (see 10.2.1). These challenges with the overarching model structure are likely to overshadow any appropriately modelled behaviours represented by the model microstructure."<p>
<p>On page 93 "As highlighted in 10.2, Overseer’s structure, data, and behaviour suggest predictions of absolute and relative nutrient losses are likely inaccurate."</p>
<p>On pages 95 and 96 a summary of the panel's findings and conclusion.</p>
<blockquote>"Our core concerns are that Overseer:</p>
<ul>
<li> Is a steady state model attempting to simulate a dynamic, continually varying system;</li>
<li>Uses monthly time-steps;</li>
<li>Uses average climate data and, therefore, cannot model episodic events, or capture responses to climate variation;</li>
<li>Does not balance mass;</li>
<li>Does not account for variation in water and nutrient distribution in the soil profile;</li>
<li>Does not adequately accommodate deep-rooting plants;</li>
<li>Focuses on nitrate and omits ammoniacal nitrogen and organic matter dynamics; and</li>
<li>Lacks consideration of surface water and nutrient transport, as well as critical landscape factors.</li></ul>
</blockquote>
<p>As a result of these concerns, we do not have confidence that Overseer’s modelled outputs tell us whether changes in farm management reduce or increase the losses of nutrients, or what the magnitude or error of these losses might be."</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com1tag:blogger.com,1999:blog-8118775296439951597.post-54083656397193369362021-06-07T16:42:00.009+12:002023-04-02T17:09:13.266+12:00No mining on conservation land promise broken - mining greenwashed and greenlighted for 30% of conservation estate<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghwOJTetOXjOjlnvZ6W4p3UjO11EMWqqVZ7f350QFjrPzlZSqcJLdb5T-HleZKjjNTeFLZZ4V5rVzn38otwIVaDXDx3hWCpD_NwsSxgCTMBSaTuPmNXU-N9AwAmj7IAiMaVzCe93b0Mkw/s340/prcf.jpg" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" width="200" data-original-height="210" data-original-width="340" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghwOJTetOXjOjlnvZ6W4p3UjO11EMWqqVZ7f350QFjrPzlZSqcJLdb5T-HleZKjjNTeFLZZ4V5rVzn38otwIVaDXDx3hWCpD_NwsSxgCTMBSaTuPmNXU-N9AwAmj7IAiMaVzCe93b0Mkw/s200/prcf.jpg"/></a></div><p><b>No mining on conservation land promise broken - mining greenwashed and greenlighted for 30% of conservation estate.</b></p>
<p>Have you seen this?</p>
<p>An announcement by Acting Minister of Conservation Verrall <a href="https://www.beehive.govt.nz/release/government-speeds-stewardship-land-reclassification">"Government speeds up stewardship land reclassification"</a>.<p>
<p>It seems <a href="https://www.rnz.co.nz/news/national/443732/law-changes-considered-to-protect-ecologically-significant-land">bureaucratic and innocuous</a>. <a href="https://www.doc.govt.nz/about-us/our-role/managing-conservation/stewardship-land/reclassification-national-panels/">"National panels of independent experts will assess stewardship land areas and provide recommendations on land classification to the Minister of Conservation."</a></p>
<p>I am really appalled by it.</p>
<p>Verrall states:</p>
<blockquote>“It’s vital that land with high conservation value is classified correctly to ensure it is protected for its natural and cultural heritage and safeguarded for the future."</blockquote>
<blockquote>“Reclassification fits with the Government’s manifesto commitment to protect, preserve and restore our natural heritage and biodiversity and is one of the Department of Conservation’s (DOC) core roles and responsibilities.</blockquote>
<p>Both these statements are unequivocally false. </p>
<p>First, reclassification is not a means to the end of protecting all stewardship conservation areas. It is allocating the stewardship areas to mining - except the exceptions that make it through a bureaucratic RMA-style hearing panel process. This is like making existing protected conservation areas get resource consent - i.e. go through a tortuous resource consent process run by a hearing panel - just to have the status they already have - protected conservation land.</p>
<p>Secondly, breaking a clear and repeated promise <a href="https://www.beehive.govt.nz/speech/speech-throne-2017">"There will be no new mines on conservation land."</a> (in the Speech from the Throne when Parliament convened on 8 November 2017 and <a href="https://www.beehive.govt.nz/release/no-new-mines-conservation-land-signalled">confirmed by Minister of Conservation Eugenie Sage<a/>) can never be consistent with a Government's manifesto commitment.</p>
<p>Some background.</p>
<p>The Department of Conservation has a web page on <a href="https://www.doc.govt.nz/about-us/our-role/managing-conservation/stewardship-land/">Stewardship land</a> which completely omits the fact that mining access can be approved on it.</p>
<p>The "backdoor" for access is under the Crown Minerals Act 1991. Under <a href="https://www.legislation.govt.nz/act/public/1991/0070/latest/DLM246714.html">Section 61</a>, mining companies can obtain mining access to any crown land after applying to the relevant Minister. That includes the conservation estate and the Minister of Conservation.</p>
<p>However, under Section 61A, a Minister "must not accept any application" for mining access for any area described in <a href="https://www.legislation.govt.nz/act/public/1991/0070/latest/DLM247378.html">Schedule 4</a> of the Crown Minerals Act 1991.</p> <p>Stewardship conservation land is not included in Schedule 4. The Minister may grant mining access agreements to stewardship areas in spite of the statutory purpose of management is conservation. This acts as a "back door" access route outside of the Conservation Act 1987. Pike River Coal Company is an example of a company that has (or had obtained) an access agreement.</p>
<p>I am appalled at the substance of this - confirming the minerals sector's ability to get mining access to stewardship land - and the PR spin given - that some conservation areas will be better protected when the opposite is true - a complete capitulation to the minerals sector that of today they are invited back to apply for mining access to 30% of the conservation estate.</p>
<p>I have a thought experiment/counterfactual to show how devious I think this is.</p>
<p>Say the Government had announced a process to allocate some stewardship land to mining. That panels of independent experts will provide recommendations on land parcels to be allocated to mining. That would go down with the ENGOs and the public like a cup of cold sick. That would be 40,000 people marching down Queen Street against <a href="https://www.nzherald.co.nz/business/govt-plans-mining-stocktake-of-conservation-land/FTLQDFLWEDP6ZR6C7TQDFJGNEY/">Gerry Brownlee's 2009 proposal to allow more mining in other conservation areas</a>. At least <a href="https://www.beehive.govt.nz/release/no-land-be-removed-schedule-4">Brownlee had the honesty to back down in 2010</a>.</p>
<p>But this counterfactual will have exactly the same overall result as Verrall's proposal. Mining access will be allocated to conservation areas. Except that in the counterfactual, the burden of proof is on mining and not conservation. </p>
<p>In the reclassification option, the burden of proof is on establishing conservation values. As of today, the mining industry is returned to the policy settings prior to Jacinda's promise "Mining on conservation land will be ended" - mining can have a go at mining access for all stewardship land - 30% of the conservation estate - with no risk of policy change. The burden of proof has been reversed and is now on conservation. </p>
<p>This is politically a classic trick of natural resource exploiters - reframe the narrative and reverse the burden of proof that applies. And then spin this as protection and promotion of conservation when it is destruction. That's why I am calling this egregious greenwashing and greenlighting of mining access to conservation areas.</p>
<p>The 'worthys' who have been nominated to these mining allocation panels, like the former PCE Dr Jan Wright, should resign from these panels, rather than be complicit in allocating conservation areas to mining all the while greenwashing that result as protection of conservation.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-81810230906151877192021-02-10T17:22:00.016+13:002023-04-02T17:11:08.923+12:00Summary of the Climate Change Commission's emissions budgets and policy '2021 Draft Advice for Consultation'<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYLenw7Ahxug6fx0bmikShG1cGShDVI2qb-n_gm09DlUI-uGVK1gJOJWVfmXPgFekfKeaCdK9SLaaNLA8Zvg6iLUaJkFs7l9x_JTNYcjG5ilWIpncJu_7sdh_zEfS5t83VmTkGnSP_ENE/s0/CCC-Title-citation-Screenshot150px.png" style="clear: left; display: block; float: left; padding: 1em 0px; text-align: center;"><img alt="" border="0" data-original-height="133" data-original-width="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYLenw7Ahxug6fx0bmikShG1cGShDVI2qb-n_gm09DlUI-uGVK1gJOJWVfmXPgFekfKeaCdK9SLaaNLA8Zvg6iLUaJkFs7l9x_JTNYcjG5ilWIpncJu_7sdh_zEfS5t83VmTkGnSP_ENE/s0/CCC-Title-citation-Screenshot150px.png" /></a></div>
<p><b><i>He Pou a Rangi/Climate Change Commission's report 2021 Draft Advice in graphics</i></b>.</p>
<p>I mentioned the <a href="https://www.climatecommission.govt.nz/">He Pou a Rangi/Climate Change Commission's</a> report <a get-involved="" href="" https:="" our-advice-and-evidence="" www.climatecommission.govt.nz="">2021 Draft Advice for Consultation"</a> published on 31 January 2021 to my millenial colleague.</p>
<p>She asked if it has infographics?</p>
<p>Yes it does and hopefully they can help assist in providing a summary without anyone having to read either the 188 pages of the <a href="https://ccc-production-media.s3.ap-southeast-2.amazonaws.com/public/evidence/advice-report-DRAFT-1ST-FEB/ADVICE/CCC-ADVICE-TO-GOVT-31-JAN-2021-pdf.pdf">advice document</a> or the hundreds of pages of the <a href="https://www.climatecommission.govt.nz/get-involved/our-advice-and-evidence/">supporting evidence chapters</a>.</p><p>
</p><p>First thing, let's get the citation right. <a href="https://www.climatecommission.govt.nz/get-involved/our-advice-and-evidence/"><i>"2021 Draft Advice for Consultation", He Pou a Rangi/Climate Change Commission, 31 January 2021.</i></a></p>
<p>It is a draft for public consultation until 14 March 2021. The report recommends three 5-year greenhouse gas emissions budgets to 2035 (and relevant policy) to the Government. To be finalised after submissions by 31 May 2021. The Government has to respond to it by 31 December 2021. So it will take all year.</p>
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<p>The report adopts the Zero Carbon Act's <a href="https://rwmjohnson.blogspot.com/2019/07/new-zealands-biogenic-methane-emissions.html">approach of having a separate target for biogenic methane</a>. Which is basically all of New Zealand's emissions from pastoral agriculture.</p> <p>For the 'long-lived' gases (excluding methane from agriculture and waste), they recommend three 5-year emissions budgets out to 2035 and lots of policies to achieve them. The budgets mean a 26% decline in gross gases (excluding methane) and a decline of 36% in net gases (excluding methane) by 2035 from 2018. The ten percent difference being offset by exotic forestry carbon sequestration.</p>
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<p>For 'short-lived' gases (agricultural methane plus waste methane), they recommend three separate 5-year emissions budgets to 2035. These represent less ambitious reductions in emissions - minus 16% to 2035 from the 2018 baseline</p>
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<p>The summary 5-year budgets are to put Aotearoa on a path to 'net zero carbon' emissions by 2050. Absolute carbon emissions in 2050 will be millions of tonnes but they will be 'offset' to 'net zero' by forests storing carbon. There will be another round of three 5-year budgets for 2035 to 2050 to sort out the exact trajectory.</p>
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<p>The forecast emissions pathways show a major decrease in transport emissions, modest decreases in agriculture and industry emissions, and major increases in carbon stored in forests.</p>
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<p>The Commission have two emissions 'scenarios' to 2050; optimistic 'tailwind' and pessimistic 'headwind'. Both lead to net zero carbon by 2050.</p>
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<p>For electricity generation, coal and oil have to be gone by 2030, gas is to be minimised, and wind generation increased a lot.</p>
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<p>For food processing energy, coal is gone by 2035, diesel is squeezed, gas is halved and electricity and biomass generation are increased a lot.</p>
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</div>
<p>For the dairy sector, methane emissions decrease marginally, milk fat production is stable, stock numbers drop very slightly through efficiency gains for each unit of dry feed. But - the Commission doesn't seem to know if dairying should be in the emissions trading scheme. Their recommendation to the Government is "Review regulatory regimes". This is very vague. A kick-for-touch response.</p>
<p>The whole point of having the Commission as an independent Crown agency is that it can make "free and frank" recommendations about applying politically sensitive policies such as carbon pricing to politically sensitive sectors such as the dairy industry. I find this quite disappointing.</p>
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<p>For sheep and beef, methane decreases, meat production increases slightly, stock numbers drop through efficiency gains.
But, again, the Commission doesn't seem to know if sheep and beef should be in the emissions trading scheme. They say "Review regulatory regimes". This is again a bit disappointing and a vague kick-for-touch.</p>
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<p>Finally, James Shaw had asked the Commission how should Aotearoa's <a href="https://www.mfe.govt.nz/climate-change/why-climate-change-matters/global-response/paris-agreement/new-zealand%E2%80%99s-nationally">2030 emission reduction target</a> under the Paris Agreement work?</p><p></p><p></p> <p>It's 30% below 2005 levels by 2030. The Commission says the target could be more stringent than the 5-year emissions budgets because credible international carbon credits could be imported. 'Credible' credits, they have to say that to distinguish them from the <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">fake and fraudulent Russian and Ukrainian credits</a> imported from 2013 as noted by the Morgan Foundation.</p><p>
</p><p>At the moment, there is no operative international carbon market. It also seems unlikely to happen under the Paris Agreement. The 'net zero by 2050' target incentivises countries to hold on to domestic carbon removals for offsetting their most emission intensive sectors. Any international sales (such as to Aotearoa) would only happen once domestic demand is met. A reliable credible supply of credits seems either unlikely to eventuate or alternatively be extremely expensive.</p> <p></p><p></p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-8118775296439951597.post-15253291472656225882021-01-19T20:11:00.003+13:002023-04-02T17:12:11.678+12:00Dear Federated Famers and Dairy NZ Pasture grazing livestock do not mitigate climate change<div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiILSC1eCBAVbD3GDVEMbNBlZ0LmKGhbo_5k_N5LBOWOdwIkhszZe1t2GZADN87OWrxmHwtkhKeaSC8piuagDoFVXVxa2IcCb7IIBXam9Sv-GzZ2OCQ1AlEzCC-K_yy2foUSt_HOKGiuTM/s0/dairy-cow.png" style="display: block; padding: 1em 0; text-align: center; clear: left; float: left;"><img alt="" border="0" data-original-height="112" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiILSC1eCBAVbD3GDVEMbNBlZ0LmKGhbo_5k_N5LBOWOdwIkhszZe1t2GZADN87OWrxmHwtkhKeaSC8piuagDoFVXVxa2IcCb7IIBXam9Sv-GzZ2OCQ1AlEzCC-K_yy2foUSt_HOKGiuTM/s0/dairy-cow.png"/></a></div><a href="https://tabledebates.org/node/12335">Grazed and Confused? How much can grazing livestock help to mitigate climate change?</a> was a research report prepared by the FCRN in 2017.<p>
<p>FCRN’s coordinator and the lead researcher Dr Tara Garnett further explains the argument in a post titled <a href="https://theconversation.com/why-eating-grass-fed-beef-isnt-going-to-help-fight-climate-change-84237">Why eating grass-fed beef isn’t going to help fight climate change</a> hosted by <a href="https://theconversation.com/">The Conversation</a>.
<p>Here is the video explainer which I dedicate to New Zealand's industrial pastoral agricultural lobby - Federated Famers and Dairy NZ.</p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/nub7pToY3jU" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0