19 January 2021

Dear Federated Famers and Dairy NZ Pasture grazing livestock do not mitigate climate change

Grazed and Confused? How much can grazing livestock help to mitigate climate change? was a research report prepared by the FCRN in 2017.

FCRN’s coordinator and the lead researcher Dr Tara Garnett further explains the argument in a post titled Why eating grass-fed beef isn’t going to help fight climate change hosted by The Conversation.

Here is the video explainer which I dedicate to New Zealand's industrial pastoral agricultural lobby - Federated Famers and Dairy NZ.

02 June 2020

Dear James Shaw - continued excessive free allocation of units to big emitters is not a reform of the NZ Emissions Trading Scheme

Hon James Shaw
Minister of Climate Change
Contact Email j.shaw@ministers.govt.nz

Dear Minister Shaw,

I am writing to you to express my strong disappointment with your policy announcement "Emission trading reforms another step to meeting climate targets" of 2 June 2020.

This policy is a complete failure in terms of correcting the flaws in the New Zealand emissions trading scheme so that it prices emissions instead of insulating emitters from them.

The proposed "reforms" do not end the near-permanent excessive free allocation of emissions units to industrial emitters that the National Government introduced into the emissions trading scheme in 2012.

The reform proposed that I particularly object to is the Phase down of industrial allocation from 2021;

"Phase-out of industrial allocation at a rate of 1 per cent each year would start from 2021 and continue until 2030. The annual phase-out rate would increase to 2 per cent from 2031-2040 and to 3 per cent from 2041-2050."

Frankly this rate of phase out is a joke. It is not consistent with the Zero Carbon Amendment Act's 'Net Zero by 2050' goal.

Given that the free allocations are based on actual production, the quantity of units given to the biggest emitters like NZ Steel Development Limited and NZ Aluminium Smelter Limited, will in fact continue to increase out to 2050, in spite of the diminutive phase out rates you propose.

Let me estimate the phase out on an assumption of constant production at 2018 volumes.

I estimate that NZ Steel Development Limited (who were allocated 1,782,366 units in 2018 and if they maintain production at 2018 quantities) would still be allocated over 1 million units in 2048. They would still be allocated 942,202 units in 2050. That is only a reduction over the 30 years of 47%.

I estimate that NZ Aluminium Smelter Limited (who were allocated 1,324,556 units in 2018 and if they maintain production at 2018 quantities) would still be allocated over 1 million units in 2037. They would still be allocated 707,410 units in 2050. That is only a reduction over the 30 years of 47%.

As the free allocation of units (under Section 81 "Entitlement to provisional allocation for eligible industrial activities") is based on actual production quantities, emitters like NZ Steel and NZ Aluminium only need to increase annual production by 1% per annum in order to cancel out the 2021 to 2030 "phase down".

That seems quite likely as the free units allocated to NZ Steel Development Limited from 2011 to 2018 increased by 793,062 units. That equates to a growth rate in production of 6.35% per annum.

NZ Aluminium Smelter Limited's free allocation grew over the same period by 886,875 units or a growth rate of 9.56% per annum.

So to conclude, the proposed phase out rates of free allocation are not even likely to produce an absolute reduction in the free allocations to big emitters. As a policy for reducing emissions, this is completely perverse.

I also remind you that free allocations were only meant to be 'transitional' arrangements. That is to say, of a temporary nature. Of a finite duration. If the 2008 Labour Government version of the emissions trading scheme had been left as enacted, the industrial emitters would only be two years away from 0% free allocation. That scheme as you no doubt recall had a linear phase out of free allocations over a 12 year period. Transitional free allocations should not be 'phased out', they should just end.

I consider it completely egregious that you are proposing the continuation of free allocations to the big industries out to 2050.

It just completely undermines the good reputation you have earned with New Zealanders over your success in enacting the Zero Carbon Amendment Act and the Climate Commission. Frankly, what is the point of having either the Net Zero goal or the Climate Commission if the free allocations to industries continue to grow out to 2050?

Yours sincerely

01 June 2020

Ministers Sepuloni and Robertson announce discriminatory COVID 19 pseudo-unemployment benefit.

Hon Carmel Sepuloni
Minister of Social Development
Email c.sepuloni@ministers.govt.nz
Phone +64 4 817 8708

Dear Minister Sepuloni,

I am writing to you to express my strong disappointment with your policy of a new COVID 19 Income Relief Payment "a new temporary payment to support New Zealanders who lose their jobs due to the global COVID-19 pandemic" that you announced on 25 May 2020.

This is obviously a "Claytons" unemployment benefit/job-seeker payment targeted at people who can attribute their unemployment to the economic consequences of the pandemic.

As many welfare and community NGOs have noted, the proposed payment is significantly higher than the standard job-seeker benefit. Why are not all unemployed people deserving of the higher level of payment? You have retreated into right-wing prejudices of "deserving poor" and the "less deserving poor". I find that contemptible.

This arbitrary difference in the value of the payment is obviously unfair and discriminatory, I can't believe that it is happening under a Labour-led Government. "All this under a Labour Government" as Denis O'Reilly once said.

This ad-hoc policy is all the more galling given that you have rushed special legislation through Parliament to enact the policy. Where was the special legislation to enact all the majority of the 120 recommendations by the Welfare Expert Advisory Group that you have failed to adopt?

I do not see much "he waka eke noa" or "team of 5 million" or "be kind" in this policy. I think you are letting down the Prime Minister and everything she stands for in enacting such a discriminatory and anti-beneficiary policy.

Yours sincerely

29 March 2020

NZ emissions unit price chart Datawapper style

This is an experiment in embedding a chart created in Data Wrapper. That's Data Wrapper style, not doggy style.

It looks alright.

The Zenodo citation for the data source is "New Zealand emission unit (NZU) monthly prices 2010 to 2016: V1.0.01".

The annotation from the citation is "This data and R code repository provides a reproducible public domain data series of mean monthly spot prices of the New Zealand emission unit (or "NZU"), the domestic emission unit in the New Zealand emissions trading scheme (https://en.wikipedia.org/wiki/New_Zealand_Emissions_Trading_Scheme/). Version 1.0.01".

12 December 2019

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

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

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

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

Why international carbon markets are a waste of time

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

Buckle up.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

30 October 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

09 September 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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