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

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

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

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

Dodgy uncle Trev's fake twenty dollar note.

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

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

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

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

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

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

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

Dip 1: the Kyoto Protocol 2008 - 2012 target

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

Dip 3: the Paris Agreement 2020 - 2030 target.

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

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

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

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

An open letter to Minister for Climate Change Issues Paula Bennett cancel the dubious surplus units

In which I write to Paula Bennett and ask her to cancel the 124 million surplus emission units.

Paula Bennett's first act as the new Minister for Climate Change Issues was to announce that yes indeed New Zealand would be using creative carbon accounting and shuffling of dubious 'surplus' emissions units to meet the 2020 climate change target without actually reducing any emissions of greenhouse gases.

That approach became unstuck for Paula Bennett with the release of the Morgan Foundation's 'Climate Cheats' report.

Report author Geoff Simmons pretty convincingly put the case that if New Zealand has unethically benefited from buying dubious Ukrainian emission units, then Paula Bennett is ethically bound to cancel the remaining surplus units. I have heard no response, so I thought I would ask her myself. Hence this letter.

Hey why don't you write or email her too? Her email address is p.bennett@parliament.govt.nz

The Hon Paula Bennett
Minister for Climate Change Issues
Parliament Office
Private Bag 18888
Parliament Buildings, Wellington 6160

23 May 2016

Your ethical duty to cancel 124 million surplus assigned amount units

Dear Minister,

I see that last Friday (20 May 2016) the Ministry for the Environment released New Zealand's Greenhouse Gas Inventory 1990–2014 and the summary 'Snapshot'.

I see that in the Snapshot summary on Figure 5, page 5, that New Zealand is still intending to use 123.7 million emission units (Assigned Amount Units or 'AAUs') that were 'surplus' from the Kyoto Protocol first Commitment Period to meet the 2020 emissions reduction target and still have a surplus of 92.6 million units.

You are aware that the Morgan Foundation's report 'Climate Cheats' and the Stockholm Environment Institute report (Kollmuss, Schneider and Zhezherin 2015) set out a persuasive case that the 97 million Emission Reduction Units ('ERUs') that were imported to New Zealand were “questionable or of low environmental integrity”. Those ERUs were surrendered by NZETS participants into Crown holding accounts.

According to the Kyoto Protocol 'True-Up' Report, in December 2015, the Ministry for the Environment cancelled (transferred Crown-owned units to cancellation accounts) 373 million emission units to comply with the Kyoto Protocol. The numbers and types of units cancelled were: the 97 million imported ERUs, 16 million imported Certified Emission Reduction units ('CERs'), 81 million removal units ('RMUs'), and 179 million AAUs . The 'surplus' units remaining in Crown holding accounts were 124 million AAUs.

In a nutshell, the only reason New Zealand (the Crown) has so many 'surplus' AAUs is because of the inflow and use of the dubious ERUs in the NZETS. Each dubious imported ERU has allowed one additional AAU to be carried forward in a Crown holding account as a 'surplus' unit. Because the ERUs have no credibility, the AAUs no longer represent carbon safely stored out of the atmosphere. No emissions were reduced. Therefore to use these surplus AAUs to comply with the national 2020 emission reduction target is simply an exercise in creative carbon accounting. It is simply unethical.

I put it to you that as Minister for Climate Change Issues, you are morally obliged to cancel these surplus units owned by the Crown. Will you cancel the units? It may hopefully to some small extent restore New Zealand’s very tarnished reputation with respect to mitigating climate change policy.

Yours sincerely

The Huntly power station decision - projected energy emission reductions to 2020 up in coal smoke

The decision to keep the Huntly coal thermal power station open for another four years is not only contrary to all New Zealand's commitments and climate targets, it also sends the Ministry for the Environment's projections of stabilising energy emissions to 2020 up in a cloud of coal smoke. NB this post is also features on Hot Topic.

We seem to have had an extra dose of announcements and activities about climate change in an action-packed month of April.

We have had our Minister, Paula Bennett, signing the UN Paris Agreement. The Morgan Foundation's "Climate Cheats" report made a big splash. That lead to Jack Tame's grilling interview of Paula Bennett. Then the Royal Society of New Zealand released two major reports on climate change; one on impacts and another on policy responses. The business-backed Pure Advantage group released a report on enhancing forestry sequestration.

So what did the New Zealand energy industry do to elbow it's way into the climate change spotlight? How do you beat signing the Paris Agreement or compete with climate fraud?

Well, you just say you are going to burn more coal!

On 28th April 2016, Genesis Energy and Meridian Energy announced they had reached an 'arrangement' that would keep the coal-burning Huntly thermal power station open for an extra four years. This deal postpones the expected shut down from the planned 2018 date to 2022.

Patrick Smellie notes two interesting details of the story. First, the irony that the "100% renewable" generator Meridian Energy has led the process of negotiating with Genesis. And second, that the public announcement of the shut-down by Genesis was just 'code' for negotiating a higher price from other generators.

The Green Party's Gareth Hughes points out that on the basis of Huntly's generation of 1,277 GWh of energy in 2015, the closing of Huntly would have lifted New Zealand's proportion of renewable electricity generation from 79.9 percent to 84.5 percent. So unsurprisingly the Meridian-Genesis deal is just 180 degrees in the wrong direction in terms of the 90 percent renewable target and the need to reduce greenhouse gas emissions.

Greenpeace has given us ten reasons to shut Huntly and have started an on-line petition to keep to the plan and shut Huntly.

But what effect will this have on the Ministry for the Environment's projections of energy emissions out to 2030? These are part of the December 2015 report "NZ’s Second Biennial Report under the UNFCCC". This chart shows projected "with measures" emissions and "without measures" (i.e. business as usual).

In the chart, the projected "with measure" emissions for each sector are the circles and lines. The projected 'business as usual'/'without measures' emissions are the lines between the data points marked by triangles on 2020 and 2030. That's because the without measures projections are for only two years! It is almost as if they are an after-thought.

The other thing to note is that for agriculture, transport and industry, there is no difference between "with measures" and "without" projections. This is of course because the Ministry is reflecting the Government's intention to exempt those three sectors of the economy from any climate change policy.

However, have a close look at the energy sector projections. There is some 'daylight' visible between the 'with' and 'without' projections. The "without" trends ever so slightly upward and the "with" trend is a plateauing. So something is expected to change the slight upward emissions trend to a plateau. The Biennial Report states on page 39;

"Energy emissions are expected to increase between 2013 and 2015, but then fall between 2015 and 2020. The remaining coal-fired power plant in New Zealand is expected to be decommissioned by 2018, reducing emissions from coal. Coal-fired electricity generation is expected to be replaced mainly by a combination of hydroelectricity, geothermal, wind, and gas-fired peaking plants in the modelled scenario".

In other words, the 'something' was the closing of Huntly. The Ministry for the Environment was relying on Genesis Energy to honour its public statement that it was closing Huntly. Which of course would then be attributed to the New Zealand emissions trading scheme. However it looks like the projections are now out-dated.

Conclusion

The 2030 emissions projections show that New Zealand's climate change policies are intentionally not affecting three out of five sectors of the economy. Now with two power generators reaching a private agreement to keep an non competitive asset, Huntly thermal power station, emitting for four extra years, the projected savings in energy emissions out to 2030 have gone up in a puff of coal smoke.

Minister for Climate Change Paula Bennett's first act is confirming 'Hot Air' creative accounting with surplus Kyoto Protocol units

New Zealand's new Minister for Climate Change Issues, Paula Bennett, has just confirmed New Zealand will be "carrying forward" 127 million "Hot Air" emissions units (or offsets) under the Kyoto Protocol rules. These units mostly do not represent a tonne of carbon dioxide equivalent reduced somewhere else and yet the Government intends to use them to allow New Zealand's greenhouse gas emissions to continue to increase.

On Thursday 17 December 2015, Ms Bennett released a statement stating that New Zealand had met it's 2008 to 2012 Kyoto Protocol emissions reduction target and was well on the way to meeting the 2013 to 2020 target.

The Minister's statement linked to four reports on the Ministry for the Environment's website;

1. the Biennial report and net position snapshot 2015,
2. the Biennial Report to the United Nations Framework Convention on Climate Change,
3. the Report upon expiration of the additional period for fulfilling commitments by New Zealand and finally
4. the updated Latest update on New Zealand's 2020 net position

.

In two scathing posts No Right Turn assesses the dubious use of the Ukrainian and Russian units derived from coal stockpile projects; Climate change: A policy based on fraud and Climate change: How bad is New Zealand's climate fraud?.

My previous estimate of the amount of surplus units was 86 million units. The reports confirm 127 million units. I did a back-of-envelope calculation to relate the numbers of units cancelled (to match 2008 2012 emissions) and the numbers left over as 'surplus' which may be carried forward.

The updated Latest update on New Zealand's 2020 net position explicitly confirms that New Zealand is 're-using' the surplus units in assessing compliance with the 2020 target of a 5% reduction in emissions from a 1990 gross emissions base. So we will 'meet' the 2020 target in spite of projected increases in both gross emissions and net emissions. Gross emissions in 2020 are estimated to be 83 million tonnes, or 24% higher than 1990's 67 million tonnes of carbon dioxide equivalent. Net emissions in 2020 are estimated to be 59 million tonnes, or 54% higher than 1990's 38 million tonnes.

Manipulating accounting rules like this, so that an adverse trend is systematically misrepresented is as it's opposite, a positive trend - is the text-book definition of creative accounting. I agree with No Right Turn that this is another example of New Zealand's completely unethical climate change policy.

Tim Groser and New Zealand's impersonation of a 2030 Climate Change Target

Gareth Renowden at Hot Topic covers the release by Minister for Climate Change Issues Tim Groser of the New Zealand 2030 Climate Change Target.

I think we need to understand that this target, just like its predecessors, is a complete fiction. Groser and National have no intention of ever adopting any measure that will make NZ’s greenhouse gases deviate from continued ‘business as usual’ growth.

Note that the Ministry for the Environment's website says; “New Zealand will meet these responsibility targets through a mix of domestic emission reductions, the removal of carbon dioxide by forests and participation in international carbon markets.”

Brian Fallow says the MFE’s (dodgy) economic modelling assumes 80% of the “reduction” will be “met” by buying international carbon units.

On that basis, they can then just repeat the Kyoto Gross-Net forest accounting fudge of saying the baseline is ‘gross’ or total emissions and that the target will be ‘net’ including credits for afforestation and reforestation. There we have it! Zero domestic reductions in emissions.

Note also the very conditional language in the INDC sent to the UNFCCC and in Groser’s press release.

The target is provisional and conditional on 1) access to carbon markets, 2) land use and forest rules NZ agrees with (presumably to keep the Kyoto Gross Net fudge), and 3) effective and affordable mitigation technology for agriculture.

On that basis, New Zealand might start to reduce domestic emissions but only if the rest of the world at the UNFCCC Paris December 2015 meeting bends over backwards to meet Tim Groser’s unattainable provisos.

Whatever approach Paris 2015 takes and whether it “succeeds” or not, the rules of whatever agreement, if there is one, will probably take several more years to thrash out. All of which enables New Zealand to claim the conditions haven’t been met, so no reductions. Even if some perfect rules appear, NZ can say “Sorry our little-battling-punching-above-its-weight Agricultural Research Centre still hasn’t given us affordable mitigation for pastoral agriculture.

This is real “heads we win, tails the atmosphere loses” approach.

Is it ‘doing our fair share’ to use creative accounting to meet the 2020 climate change target?

I look at how the National Government intends to use creative carbon accounting to ensure that New Zealand meets it’s 2020 climate change target (a five percent reduction from 1990) in spite of a projected trend of increasing emissions of greenhouse gases (GHG) to 2020.

On 10 April 2015, when he was releasing the latest inventory of greenhouse gases, the Minister for Climate Change Issues Tim Groser made this very confident statement about the New Zealand 2020 climate change target; “We’re well on track to meet our 2020 target"

That target is to reduce greenhouse gas emissions to five per cent below 1990 levels by 2020.

When this was announced in 2013 the ambition (-5%) of the target was criticised as useless, pathetic and inadequate.

The five percent reduction stands in stark contrast to the Ministry for the Environments projections of increasing emissions out to 2020. The Ministry estimates that the increase in gross (total) emissions in 2020 will be 29% above the 1990 baseline (from 60 to 77 million tonnes) and the increase in net emissions (gross less any increase in the stock of carbon stored in forests) to 2020 will be 130% (from 33 to 75 million tonnes). So why is Tim Groser so confident that the target will be achieved?

Simon Terry of the Sustainability Council has commented on the ‘kicking the can down the road’ features of the Government’s climate change policies: the mismatch between the emissions target and the predicted emissions, the absence of a credible plan or carbon budget approach and the deferring of liabilities into the future.

Taking Simon Terry’s work as a starting point, I am going to look at how the Government intends to apply the accounting rules for carbon credits to achieve the 2020 target in spite of the likely predicted increase in gross and net greenhouse gas emissions.

So how is New Zealand going to reduce emissions by five percent by 2020?

In December 2014, at the Lima, Peru, climate change conference, the New Zealand climate ambassador Jo Tyndall was asked that specific question. Her answer was that New Zealand plans to meet its 2020 target through a combination of;

1. domestic emissions reductions,
2. removal of carbon dioxide by forests,
3. participation in international carbon markets and,
4. recognising surplus achieved during the first commitment period of the Kyoto Protocol.

Domestic emissions reductions are unlikely. In 2013, Tim Groser told the Herald that his "strong advice" from officials was that the 2020 target could be met without any changes to settings of the NZ emissions trading scheme (ETS). The relevant Cabinet Paper for the 2020 target also states that the 2020 target can be met without changing policies or ETS costs. In other words, the New Zealand Emissions Trading Scheme will remain in its current induced coma, and stay ineffective in reducing domestic emissions.

New Zealand can’t meet the target by buying carbon credits from international carbon markets as access was blocked at the Doha meeting because we didn’t sign up to a formal Kyoto Protocol second commitment period target.

That leaves two ways of meeting the 2020 target; removal of carbon dioxide by forests, and recognising surplus units from the first commitment period of the Kyoto Protocol. I will look at the removal of carbon dioxide by forests next.

Forest carbon and Kyoto gross-net carbon accounting

By saying “removal of carbon dioxide by forests”, politicians and officials actually mean that carbon credits will be accounted for using the Kyoto Protocol’s gross-net forest carbon accounting rule. This sounds innocuous, if a bit sleep-inducing. It is in fact a method of creative accounting that New Zealand has already relied on to meet the 2008-2012 Kyoto first commitment period target.

The 'baseline’, 1990 emissions, is “gross” - the sum of all emissions without subtracting any “credit” for carbon absorbed into sinks such as growing forests and land use changes. The target (2008 to 2012) emissions are “net", as credits for carbon absorbed in growing forests are recognised and are subtracted from the gross emissions. This is called gross-net accounting. This makes the comparison between baseline and target inconsistent - it is not an “apples with apples” comparison.

I have blogged on this before but Professor Martin Manning, an IPCC author and formerly of the Climate Change Research Institute at Victoria University of Wellington, explained it better in 2012.

..achieving the Kyoto Protocol target can be quite misleading because it compares net emissions over the first commitment period, 2008 – 2012, with the gross emissions in 1990. If one compares the net emissions in 2012 with those for 1990, then the increase in New Zealand has actually been more than 100%.

The National Government intends to repeat this gross net accounting for the 2013 to 2020 target. As long as forest growth exceeds deforestation, this will allow both net and gross emissions to increase up to the quantity of carbon absorbed in forests that was ignored in the 1990 baseline.

The Climate Action Tracker website thinks the credit for carbon absorbed in forests could be up to 25 million tonnes CO2e a year and the ‘recognition’ (under Kyoto rules) of all the units would allow New Zealand gross emissions to increase up to 35% above the 1990 baseline.

Surplus Kyoto units from first Commitment Period 2008 - 2012

Jo Tyndall’s final method of achieving the 2020 target is to recognise surplus units from the first commitment period of the Kyoto Protocol. According to the latest Ministry for the Environment’s net position statement for the Kyoto Protocol, New Zealand will finish the first commitment period (2008-2012) with a surplus of 123.7 million units.

Even though New Zealand has no formal 2013-2020 Kyoto ‘commitment’, the Government intends to ‘carry over’ millions of these surplus Kyoto units to the 2013-2020 period in accordance with the Kyoto Protocol rules.

The carry-over rules are of course complicated, but I calculate that New Zealand will be able to ‘carry over’ almost all of them - 86 million units of the various types of units (see final paragraph - Appendix ‘Carry-over’ of Kyoto first period units).

What’s wrong with having a surplus of units? An effective emissions trading scheme with a real cap would never have surplus units. Units would be scarce and realistically priced. A surplus of units is of itself evidence of a failed implementation of cap and trade frameworks such as Kyoto and the EU ETS.

A surplus of units is one consequence of emissions trading with no cap, unlimited access to international carbon markets and over-allocation of units to industry and a rock-bottom unit price. Which is exactly what we have had with the NZ ETS.

We need to remind ourselves why New Zealand has a surplus of units for the Kyoto Protocol first period. Although net and gross emissions increased, New Zealand gained surplus units by using the gross-net forest carbon accounting rule and allowing the nearly unlimited import of low-priced international units with dubious integrity which were surrendered by ETS participants to match their emissions.

According to Climate Analytics, internationally, the Kyoto first commitment period ended with 14 billion surplus units; enough to allow all the signatory countries to “comply” with their 2020 targets without restricting business as usual emissions growth.

And this is exactly what the Government intends to do.

Each Kyoto unit carried forward will be counted towards New Zealand’s 2020 target and will allow an additional tonne of domestic greenhouse gas emissions above the 1990 baseline.

Similarly, each carbon credit recognised for carbon absorbed in forests between 2013 and 20120 will be counted towards New Zealand’s 2020 target and will allow an additional tonne of domestic greenhouse as emissions above the 1990 baseline.

Conclusion

Our politicians and bureaucrats could have focused on policies to reduce domestic emissions to meet the 2020 target. Achieving the 2020 target won’t be an outcome of policies to reduce emissions. Like fixing the emissions trading system. It will be an outcome of the accounting rules chosen for the carbon credits the Government can hold. That’s called creative accounting.

Appendix “Carry-over” of Kyoto first period units

The Kyoto Protocol has “carry-over” rules for unused units at the end of the 2008 - 2012 first commitment period. Some surplus units may be 'carried over’ to the second commitment period and then be used to comply with a country’s official commitment. Although New Zealand has not taken up a Kyoto second period commitment, New Zealand none the less intends to mimic the application of Kyoto rules designed to carry over surplus units from CP1 to CP2.

New Zealand will have a surplus of 91 million units after transferring 378 million units to a cancellation account for the 378 million tonnes of emissions between 2008 and 2012.

There are limits on which and how many units can be “carried over”. All assigned amount units (AAUs) can be carried over; forest removal units (RMUs) cannot be carried over, carry-over of Certified Emission Reduction units (CERS) and Emission Reduction Units (ERUs) are limited to 2.5% of New Zealand’s initial assigned amount or 7.7 million each. See the UNFCCC Reference Manual

The Government will probably prefer to retire units that cannot be carried over in order to maximise the number it may carry forward.

On that basis, all 72 million RMUs will be cancelled, 37.3 million CERs and 37.3 million ERUs will be cancelled, leaving 7.7 million each of CERs and ERUs carried forward. Then only 231.4 million AAUs need to be cancelled to make up to 378 million units.

The total carried over will be 86 million units composed of 7.7 million CERs, 7.7 million ERUs and 70.6 million AAUs.