Six ways the New Zealand emissions trading scheme fails to cap emissions

Back in June 2020, the Minister for Climate Change James Shaw released a statement criticising previous (National) governments for their management of the New Zealand emissions trading scheme. He said:

"the rules set by previous Governments left the scheme too weak to have any real impact on reducing our emissions."

Specifically Shaw said that the emissions trading scheme under National was "a cap and trade system without a cap."

Shaw concluded;

This has meant that emissions permitted under the scheme were, in effect, unlimited. I am delighted to say we are finally changing that.

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'.

Emissions trading schemes, although an exceedingly obtuse subject, can be explained in a single sentence.

"Cap and trade sets a maximum level of pollution, a cap, and distributes emissions permits among firms that produce emissions" (Grantham Institute).

Or;

"The government limits the supply of emission units into a trading market which then sets the emission price based on unit supply and demand" (Motu Research).

So an emissions trading scheme is all about scarcity of emissions permits. The cap.

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.

However, there is a problem with this narrative from James Shaw that he has introduced a cap into the emissions trading scheme. It is factually wrong.

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 capping emissions.

There are far too many surplus units in the NZ emissions trading scheme

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.

One - the enormous quantity of privately held units in the New Zealand emissions trading register

There are 158 million privately owned emission units recorded in the New Zealand emissions trading register run by the EPA.

Here is a chart of international emissions units accumulating in the Emissions Units Register because of the unlimited importing of units up to 2014

How did that happen?

Brian Fallow of the Herald wrote on 28 May 2014 that:

"..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"

On 31 August 2015, Carbon forest consultant Ollie Belton said this;

"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)."

"..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."

Dr Suzi Kerr of Motu said in 2016 that

"because of arbitrage, ETS participants now hold an excessive number of units that the government is required to accept against future emissions,”

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. New Zealand Steel Limited were up to their necks in arbitrage.

These units are available to be sold to emitters for surrendering back to the Government at any time. They trump the so-called "cap".

Two - industrial over allocation of free emissions units

The free allocation of huge quantities of emissions units to large corporates like New Zealand Steel Limited and New Zealand Aluminium Smelter Limited under section 81 and section 83 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.

Each year they receive a 'provisional' allocation of units which is calculated as their actual production from the previous year multiplied by the provisional allocative baseline. At year end they submit a 'final adjustment' return 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".

Three - price caps come at the expense of quantity caps - the cost containment reserve

The Ministry for the Environment's recent report "Te hau mārohi ki anamata | Transitioning to a low-emissions and climate-resilient future: Have your say and shape the emissions reduction plan." states on page 37 in footnote 14

"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."

Auctioning of emissions units was another measure introduced in the June 2020 amendments to the emissions trading scheme.

Stuff's Olivia Wannan describes the cost containment reserve as

"a trigger to prevent the carbon price from going too high. If enough people place a unit bid above $50 during the auctions, 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."

Sure enough, during the September 2021 auction, the emissions unit price reached $50 per tonne and the additional 7 million units were released and sold to bidders at a price of $53.85.

So, again, the cost containment reserve is a farce that increased the supply of units to the market in spite of Minister Shaw's claim of a "cap" on units.

Four - The emissions budget is done backwards by subtracting the exceptions from the ETS

The New Zealand emissions budget for the 5 years 2021 to 2025, required by the Zero Carbon bill, was done backwards. It calculates by the sleight of hand of subtraction. It takes the emissions that should be capped and then subtracts the exceptions in the coverage of the emissions trading scheme. The exceptions gained by lobbying.

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.

The remaining number, 90 mt over 5 years becomes the indicative budget for the new auctions. It is therefore the amount to be auctioned.

The emissions budget under a plain ordinary vanilla cap'n'trade scheme should have been determined by addition. 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

Five - free industrial allocation of units included non-emitters.

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'.

Six - just run up an overdraft of emissions units with 'banking and borrowing'

Thanks to the Zero Carbon bill, the legislation provides for 'banking and borrowing' under Section 5ZF. 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".

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).

Moving the deckchairs on the Titanic - the Ministry for the Environment's pathetic incremental reforms of industrial allocation in the NZ emissions trading scheme

The Ministry for the Environment is running a consultation on reforming industrial allocation in the NZ ETS. It closes for submissions today.

Industrial allocation 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.

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.

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.

The process doesn't just reduce the carbon price. It makes it a wealth transfer and therefore a carbon refund.

New Zealand Steel Ltd and New Zealand Aluminium Smelters Ltd 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.

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"

Since 2017 the Minister for Cimate Change James Shaw and the Ministry for the Environment have made one pathetically minor tweak to the industrial allocation settings. The eternal and un-ending entitlement to free units will decline by 1% a year from 2020.

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

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.

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

Submission to Ministry for the Environment on Reforming industrial allocation in the NZ ETS 17/09/2021

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.

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”?

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.

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.

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”.

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.

I consider it is well understood what is wrong with the NZETS industrial allocation policy. I will list a few points.

• The industrial allocation results in the gross overallocation of emissions units to emitters,
• It is a process that assumes existing allocations are property rights of emitters,
• 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,
• There is no fixed cap on emissions because of production-based allocation of emission units,
• The baselines show no logical relationship to the established IPCC emissions factors used in the Greenhouse Gas Inventory reporting and unit surrenders,
• The baselines include the Electricity Allocation Factor - which is an empirically invalid proxy for unverified and unproven energy and electricity pass-through costs,
• 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,
• Units are allocated to non-participants of the ETS who have no surrender obligations (the hothouse horticulture sector),
• 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.

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.

Recommendations

The first-and-best policy recommendation I wish to make is that; "industrial allocation of free emission units should be immediately terminated".

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).

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”.

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”.

Consultation questions

Question 1: Do you agree with the five criteria to assess the proposals in this consultation document? Why, or why not?

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.

Question 2: Should allocative baselines be updated using new base years? Why, or why not?

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.

Question 3: Should the reassessment be a one-off update, or a periodic update? Why, or why not?

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.

Question 4: If periodic reassessment is legislated, what would be an appropriate period – every year, 5 years, 10 years, or something else? Why?

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.

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 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.

Question 6: Should the financial years 2019/20 and 2020/21 be included, but with a weighting provision? Why, or why not?

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.

Question 7: Should eligibility be reassessed using new base years?

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.

Question 8: Should new emissions intensity thresholds for New Zealand industry be developed? Why, or why not?

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.

Question 9: Should more thresholds be added into the eligibility criteria? Why, or why not? How many would be appropriate?

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.

Question 10: Would a sliding scale threshold system better target eligibility and assistance? Why, or why not?

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.

Question 11: Should the New Zealand EAF be used when determining eligibility? Why, or why not?

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.

Question 12: Should periodic updates of the EAF trigger a recalculation of eligibility? Why, or why not? 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.

Question 13: Should the trade exposure test be changed? Why, or why not?

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.

Question 14: What would be a more appropriate method to determine trade exposure?

This is completely pointless. It is rearranging the deckchairs on the Titanic. The trade exposure test should be abolished.

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 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.

Question 16: Are there other changes to sections 161A-E of the Act that could better streamline IA processes?

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.

Question 17: Do you agree with the proposal to clarify the eligibility process for new activities? Why, or why not?

I strongly disagree. Free industrial allocation should be terminated as quickly as possible. No new entrants should be permitted.

Question 18: Should new activities be able to seek eligibility? Why, or why not?

I strongly disagree. Free industrial allocation should be terminated as quickly as possible. No new entrants should be permitted.

Question 19: Should there be any caveats on new activities seeking eligibility, such as proof of environmental benefits compared to existing activities?

Free industrial allocation should be terminated as quickly as possible. Future eligibility should be irrelevant. No new entrants should be permitted.

Question 20: Should firms that receive IA be required to report their emissions, revenue and production data annually? Why, or why not?

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.

Question 21: Would voluntary reporting be more appropriate, and still provide some oversight of leakage and over-allocation risk? Why, or why not?

I strongly disagree. That would be an abuse of transparency. That is the opposite of oversight.

Question 22: Should the five-year transition period for changes in eligibility status remain, or be changed? Why, or why not?

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.

Question 23: Should we look at an alternative mechanism to address emissions leakage? Why, or why not?

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.

Question 24: What alternative mechanisms to IA would better address the risk of emissions leakage, and support domestic and international emissions reduction targets?

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.

Question 25: Should IA policy or any alternative explicitly encourage firms to reduce emissions? Why, or why not?

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.

Question 26: What method could be used to encourage emissions reductions?

A well designed, capped, no-industrial-allocation, all sectors all-auctions NZETS would encourage emissions reductions.

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?

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.

Question 28: How would these new considerations interact with the goal of reducing emissions leakage?

Honestly, this is ridiculous. See previous comment.

Question 29: Do you have any other comments, ideas or critical feedback that could help support the Government form final policy decisions?

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.

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”?

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.

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.

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”.

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.

Overseer: greenwashing nutrient pollution from intensive agriculture for 20 years

“Overseer” and dairy farming have been in the news a lot lately. ("Govt to assist development of next-gen waterways protection tool", Radio NZ, 11 August 2021, "Hawke's Bay farmers 'frustrated' by review of regulatory tool Overseer", NZ Herald, 11 August 2021 and "Major tool for managing farm pollution gets a fail from reviewers", Stuff, 11 August 2021)

What is Overseer?

According to a Government media release of 11/08/21;

"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.“

An independent expert peer review of Overseer has just been completed and it’s conclusion is that Overseer is not fit for purpose and is unfixable.

The Review conclusion (pages 95 and 96) is;.

"...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."

Why was there an independent expert peer review?

Because the Parliamentary Commissioner for the Environment Simon Upton wrote a report asking for a review in 2018.

What was the original concern of Simon Upton?

Simon Upton said (on page 7);

“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?”

Upton was also concerned that privately owned proprietary software was not transparent and neither it’s model structure or results had been independently verified.

So what’s the big issue now this independent peer review has been released?

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?

However, the Government response is to fudge the issue. In the Beehive media release they down play the peer review conclusion in bullet points.

• Report finds shortcomings in Overseer nutrient management tool
• Overseer will be supported while a next generation of the tool is developed and/or additional tools are made available

Minister for the Environment David Parker states;

“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”

Minister for the Environment David Parker is minimising and therefore denying the peer review's conclusion. Parker in an interview with Radio NZ stated that Overseer isn't fatally flawed. Look for my underlining

"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. That doesn't necessarily make it fatally flawed but those problems are significant."

And he states that Overseer can indicate the relative change in nutrient flows after a change of farm practise:

"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 it does give you an indication if you change your practice of things getting better or worse and that's very useful."

What’s wrong with what David Parker is saying?

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.

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.

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.

So how does this fit in with the context of resource consents and RMA regional plans?

In terms of the regulatory context that Simon Upton was concerned about, I draw three conclusions;

1. Any resource consents that have Overseer conditions - those conditions are now unenforceable on the consent holder.
2. 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.
3. 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.

What are the environmental organisations saying?

I agree with Greenpeace who said 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.

“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.”

“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,”

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.

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.

Well that sucks. What should be done about it?

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.

An appendix on the independent peer review of Overseer

The citation for the independent peer review is 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)

Here are the relevant conclusions from the independent review.

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."

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."

On pages 95 and 96 a summary of the panel's findings and conclusion.

"Our core concerns are that Overseer:

• Is a steady state model attempting to simulate a dynamic, continually varying system;
• Uses monthly time-steps;
• Uses average climate data and, therefore, cannot model episodic events, or capture responses to climate variation;
• Does not balance mass;
• Does not account for variation in water and nutrient distribution in the soil profile;
• Does not adequately accommodate deep-rooting plants;
• Focuses on nitrate and omits ammoniacal nitrogen and organic matter dynamics; and
• Lacks consideration of surface water and nutrient transport, as well as critical landscape factors.

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."

No mining on conservation land promise broken - mining greenwashed and greenlighted for 30% of conservation estate

No mining on conservation land promise broken - mining greenwashed and greenlighted for 30% of conservation estate.

Have you seen this?

An announcement by Acting Minister of Conservation Verrall "Government speeds up stewardship land reclassification".

It seems bureaucratic and innocuous. "National panels of independent experts will assess stewardship land areas and provide recommendations on land classification to the Minister of Conservation."

I am really appalled by it.

Verrall states:

“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."

“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.

Both these statements are unequivocally false.

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.

Secondly, breaking a clear and repeated promise "There will be no new mines on conservation land." (in the Speech from the Throne when Parliament convened on 8 November 2017 and confirmed by Minister of Conservation Eugenie Sage) can never be consistent with a Government's manifesto commitment.

Some background.

The Department of Conservation has a web page on Stewardship land which completely omits the fact that mining access can be approved on it.

The "backdoor" for access is under the Crown Minerals Act 1991. Under Section 61, 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.

However, under Section 61A, a Minister "must not accept any application" for mining access for any area described in Schedule 4 of the Crown Minerals Act 1991.

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.

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.

I have a thought experiment/counterfactual to show how devious I think this is.

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 Gerry Brownlee's 2009 proposal to allow more mining in other conservation areas. At least Brownlee had the honesty to back down in 2010.

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.

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.

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.

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.

Summary of the Climate Change Commission's emissions budgets and policy '2021 Draft Advice for Consultation'

He Pou a Rangi/Climate Change Commission's report 2021 Draft Advice in graphics.

I mentioned the He Pou a Rangi/Climate Change Commission's report 2021 Draft Advice for Consultation" published on 31 January 2021 to my millenial colleague.

She asked if it has infographics?

Yes it does and hopefully they can help assist in providing a summary without anyone having to read either the 188 pages of the advice document or the hundreds of pages of the supporting evidence chapters.

First thing, let's get the citation right. "2021 Draft Advice for Consultation", He Pou a Rangi/Climate Change Commission, 31 January 2021.

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.

The report adopts the Zero Carbon Act's approach of having a separate target for biogenic methane. Which is basically all of New Zealand's emissions from pastoral agriculture.

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.

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

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.

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.

The Commission have two emissions 'scenarios' to 2050; optimistic 'tailwind' and pessimistic 'headwind'. Both lead to net zero carbon by 2050.

For electricity generation, coal and oil have to be gone by 2030, gas is to be minimised, and wind generation increased a lot.

For food processing energy, coal is gone by 2035, diesel is squeezed, gas is halved and electricity and biomass generation are increased a lot.

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.

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.

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.

Finally, James Shaw had asked the Commission how should Aotearoa's 2030 emission reduction target under the Paris Agreement work?

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 fake and fraudulent Russian and Ukrainian credits imported from 2013 as noted by the Morgan Foundation.

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.

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.