More of the endless cycle of incremental reform of the emissions trading scheme

There is a new Cabinet paper to read; "A Review of the Emissions Trading Scheme", 28 pages, by the Office of the Minister of Climate Change

What use is a Cabinet paper when the key policy options are redacted?

Last Wednesday 22 March 2023, the Ministry for the Environment announced yet another review of the My-Eyes-Glaze-Over New Zealand Emissions Trading Scheme.

For some reason, I downloaded the Cabinet paper.

For some even more masochistic reason, I actually read all 28 pages.

It was largely a waste of time.

I can't even use the metaphor that the Cabinet paper was "rearranging the deckchairs on the Titanic" as I have already used that title on a blog post on a past consultation on industrial allocation.

The first paragraph of the Cabinet paper tells us what the paper is about. So far so good.

"This paper seeks agreement to the scope and process of a review of the New Zealand Emissions Trading Scheme (NZ ETS). This review is in response to Cabinet’s decision to prioritise gross emissions reductions in New Zealand’s first emissions reduction plan (ERP), and Cabinet’s in-principle decision to at agree to the Climate Change Commission’s recommendations to strengthen the incentives for gross emissions reductions in the NZ ETS."

The fourth paragraph states;

"Enabling a just transition to a low-emissions, climate resilient future is a Government priority..."

Okay. I am all for a just transition. I'd like the transition to help those with low incomes instead of being corporate welfare for emissions intensive industry as in the case of the dreaded industrial allocation.

Back to the Cabinet paper. Who is being mean to the emissions trading scheme saying it needs more reform? It's the naughty He Pou a Rangi/Climate Change Commission. The Cabinet paper says in paragraph 50 that:

"In their 2021 advice, the Commission highlighted the risk that the NZ ETS would drive relatively low-cost net emission reductions through exotic forests, rather than gross emissions reductions needed to put us on track to net zero by 2050".

For emissions nerds who have tracked the emissions trading scheme since it's inception in 2007, this isn't just a future risk. It is exactly what has already happened in the 2008 to 2012 period of the Kyoto Protocol. Gross emissions rose in proportion to economic growth but "Net Kyoto" emissions (that included "afforestation and reforestation" sequestration credits that were not in the 1990 baseline) were less than the baseline.

This was before the fraudulent hot air emission units from Russia and Ukraine flooded into New Zealand. Here is Geoff Simmons in the Spinoff.

The Cabinet paper continues with a lot of background to the emissions trading scheme that is probably unnecessary. For example its not like Chris Hipkins would read that. He couldn't remember any details of other Cabinet papers where policies had consequences measurable in emissions.

Finally, I got to paragraph 79 on page 11. Maybe the officials who wrote the paper would finally mention where they see this reform proposal going. That would be new information. For example, what do the officials think are the possible high level options for amending the emissions trading scheme? Great, they are going to say what they think. Here is paragraph 79.

"However, in my view there is value in identifying some of the potential, high-level options Ministers may be presented as an output of the review. This will help give a sense of the kinds of options that could support balancing gross and net emissions reductions in the NZ ETS."

I turned the page expecting to be mildly enlightened. Okay that is sarcasm. It would have been nice to learn something new though.

This is paragraph 80. And 81 and 82.

Yes the potential, high-level options have been redacted! The whole point of downloading and reading the Cabinet paper was really to find out the possible options or new directions for dealing with known problems.

I kept plowing my way through the paper. Several pages are dedicated to the peculiarities of the inter-departmental 'process' to be followed. Remember the emissions trading scheme involves several government departments: principally Ministry for the Environment on policy, but also the Environmental Protection Authority for operating the emissions trading scheme, the Ministry for Primary Industries for foresty, MBIE for energy sector emissions and Ministry of Foreign Affairs and Trade for international climate agreements.

These departments interact in accordance with the their own perceptions of relevant interests. I add the observation that such interactions may not be in the direction of 'no more than 1.5C warming' or 'net zero carbon by 2050. The Cabinet paper leaves that unsaid.

However, such interactions are implicit as on page 14 paragraph 100, as the paper proposes some 'governance terms of reference' to presumably make the public servants play nicely.

I am reminded of the italian novelist Umberto Eco's explanation of the behaviour of the crusading Knights Templar religious order. The historic reality of knightly behaviour in the Holy lands was best understood by considering the order's offical commandments. For example, "thou shall not be drunk on a horse blaspheming the name of the Lord" was in fact the proof that such behaviour was the rule and not the exception.

So yes I am mildly interested in the 'governance terms of reference'. Here are the relevant paragraphs.

Yes the 'governance terms of reference' have been fucking redacted!

So I logged onto FYI.org.nz, the online transparent and open portal for requesting official information from public agencies. And I requested a complete copy of the Cabinet paper with all 26 redactions restored all their improbable glory. The 26 redactions are probably not earth-shatteringly egregious but the point of principle is - do there need to be any redactions if the Government is pursuing emissions policies consistently with their own professed value statement of a "just transition"?

I was so mad about that point that I started writing an email to Minister for Climate Change James Shaw asking him that exact question. The email turned into a three page letter. Oh well, push the send button, and try not to forget what the issue was when I finally get a reply after waiting a month or two for a reply. Of course, the same proviso applies to my Official Information Act request at FYI.org.nz. The Ministry may well extend the timeframe, or transfer the request to the Minister's office, or just ignore the timeframe - or a combination of all three.

Of course, in terms of climate change policy responses, we don't have time for this shit.

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.

Dont forget to submit on the Climate Change Response (Zero Carbon) Amendment Bill

Submissions of the Climate Change Response (Zero Carbon) Amendment Bill can be made til the end of tomorrow via the New Zealand Parliament Pāremata Aotearoa

By far the best submission I have seen so far is the submission from Generation Zero. Its very good.

Here is my submission

Detailed comments and recommendations

I wish to start my submission with this point from ‘Global Warming of 1.5°C. An IPCC Special Report’ which states:

"Reaching and sustaining net zero global anthropogenic CO2 emissions and declining net non-CO2 radiative forcing would halt anthropogenic global warming on multi-decadal time scales (high confidence). The maximum temperature reached is then determined by cumulative net global anthropogenic CO2 emissions up to the time of net zero CO2 emissions (high confidence) and the level of non-CO2 radiative forcing in the decades prior to the time that maximum temperatures are reached (medium confidence). On longer time scales, sustained net negative global anthropogenic CO2 emissions and/ or further reductions in non-CO2 radiative forcing may still be required to prevent further warming due to Earth system feedbacks and to reverse ocean acidification (medium confidence) and will be required to minimize sea level rise (high confidence)."

To me the IPCC 1.5°C Report makes it clear that while emissions of the greenhouse gas methane need not be reduced to zero emissions, they must nonetheless be significantly reduced in conjunction with net zero carbon dioxide emissions in order to halt warming and to prevent future warming. There is no credible argument grounded in science for methane to have either no target or a target of zero.

Purpose of the legislation

The purpose of the bill should be explicitly consistent with Paris Agreement 1.5C goal that New Zealand has agreed to via our ratification of that agreement. I do not think the suggested new subclause (aa) is sufficiently clear in stating the purpose of the bill.

In Section 3 amended (Purpose) of the bill, I request that before section 3(1)(a), sub-clause: (aa)

"provide a framework by which New Zealand can develop and implement clear and stable climate change policies that contribute to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5° Celsius above pre-industrial levels"

be replaced with:

"The purpose of the act is to;
a) to limit the global average temperature increase to 1.5° Celsius above pre- industrial levels; and
b) to provide a framework by which New Zealand can develop and implement clear and stable climate change policies that give effect to the Paris Agreement and
c) to establish finite cumulative greenhouse gas budgets for New Zealand that are an equitable and fair share of a global finite cumulative greenhouse gas budget consistent with limiting the global average temperature increase to 1.5° Celsius above pre-industrial levels, and
d) to establish a 2050 net zero target and a series of five year emissions pathway budgets consistent with these purposes."

Inclusion of waste sector methane in the definition of biogenic methane

The draft bill in Section 4 amended (Interpretation) defines biogenic methane as:

"...all methane greenhouse gases produced from the agriculture and waste sectors (as those sectors are defined in the New Zealand Greenhouse Gas Inventory)".

The New Zealand annual greenhouse gas inventory records at least three sub- categories of methane; methane from enteric rumination, methane from agricultural soils and methane from the waste sector.

Waste sector emissions in 2017 were 95% methane, 4.12475 million tonnes and 5% of total gross emissions. These are significant quantities of New Zealand's greenhouse gas emissions.

Why is the waste sector methane included in the biogenic methane target? It's not sourced from agriculture. None of the advocates of the split-gas target, like David Frame or Simon Upton, made any arguments about waste sector methane.

Also, the Productivity Commission, in it's 2018 report "Low Emissions Economy" thought waste sector emissions could be feasibly reduced (See page 451 of their final report; "Waste also represents a major mitigation opportunity"). If waste methane can be better addressed by improved recording and pricing policies as the Productivity Commission stated then there is no reason why it should not be in the net emissions budgets/targets.

I request that the words "the agriculture and waste sectors" be replaced with "the agriculture sector" so that the waste sector methane is not included in the lesser biogenic methane target/budget.

Remove all options for importing of international emission units/carbon credits for use in meeting emissions budgets by offsetting

Section "5S Interpretation" mentions the term 'offshore mitigation'. This term is not defined but is part of the definition of net budget emissions. 'net budget emissions means gross emissions, offset by removals and offshore mitigation' By context from the following sections, 'offshore mitigation' actually means the importing of international emissions units from linked emissions trading schemes (should there be any willing to link to New Zealand's emissions trading scheme.

Section "5W How emissions budgets to be met" states;

(1) Emissions budgets must be met, as far as possible, through domestic emissions reductions and domestic removals.

Section 5X (1)(d) & (e) allow importing of international emission units ('offshore mitigation') to meet emissions budgets.

This is a graph of the NZ emissions unit price showing how the price crashed from over $20 to a few dollars due to the influx of fraudulent Russian and Ukrainian units as described in "Climate Cheats" (Young, P. and G Simmons (2016). "Climate Cheats How New Zealand is cheating on our climate change commitments, and what we can do to set it right" The Morgan Foundation, April 2016).

If a future New Zealand government allows international importing of units with the same negligence as the former 2008-2016 National Government, then another price collapse will be repeated. Emitters would increase absolute emissions due to the minimal price incentive to reduce them. That will delay reductions and therefore undermine one of the purposes of the bill - to provide long term certainty and clarity of the emissions budgets to the private sector. It would allow a less committed Government to defer real reductions in absolute emissions in favour of creative accounting with emissions units.

I request that all references to 'offshore mitigation' and the importing of international emissions units to meet emissions budgets be removed from the bill so that emissions reduction budgets require absolute reductions in domestic New Zealand emissions.

For example; Section "5W How emissions budgets to be met", amend subsection (1) from;

(1) Emissions budgets must be met, as far as possible, through domestic emissions reductions and domestic removals.

to;

(1) Emissions budgets shall be met through reductions in gross domestic emissions.

Remove all references to meeting emissions budgets by domestic offsetting via removals

Section "5S Interpretation" gives the definition of net budget emissions.

'net budget emissions means gross emissions, offset by removals and offshore mitigation'

In other sections, emissions budgets are to be stated in terms of 'net' emissions. In the NZ Greenhouse Gas Inventory, net emissions are defined as absolute (or gross) emissions less carbon dioxide removed or stored or sequestered by the sector called 'Land use, land use change and forestry' (LULUCF). These 'removals' are stored in commercial pine forests, protected native forests and soil. Under an (simplified) ideal form of emissions trading, all owners of forest would accrue valuable emissions units equal to the growth of carbon stock. An efficient market under a fixed cap or emissions budget, would set a price that incentivised sufficient foresters to sell units to industrial or other emitters to allow their absolute emissions exceed the net cap.

The Hon. Simon Upton, the Parliamentary Commissioner for the Environment, has reminded us that the original plan for the Kyoto Protocol and the NZ emissions trading scheme (where he played a role as a Minister) allowed New Zealand to use forestry credits to allow growth in absolute emissions for the 2008-2012 period (compared to a 1990 gross emissions baseline). These forestry credits would allow New Zealand to have 'form over substance' compliance with its Kyoto 2008-2012 zero growth goal, while absolute emissions increased. (In retrospect, New Zealand ended up with a multi-million unit 'surplus' of emissions units for the Kyoto Protocol period 2008-2012 made up mostly of the Russian/Ukrainian emissions units as well as the domestic forestry credits.)

Allowing absolute domestic emissions to be 'offset' in each emissions budget period by removals from the land use and forestry sector invites a less committed future government or Minister to tinker with emissions trading scheme settings and again allow absolute domestic emissions to increase in the short term. Also the scientific equivalence of fossil carbon dioxide released to the atmosphere with carbon stored in forestry is questionable. One fifth of carbon dioxide released to the atmosphere stays for millennia with an accumulating climate forcing, but carbon stored in forests, particularly commercial rotation forests, is only stored for a harvest cycle which may be as short as 25 years for pinus radiata.

This domestic offsetting will also undermine one of the purposes of the bill - to provide long term certainty and clarity of the emissions budgets to the private sector.

I request that all references to net budgets and to meeting emissions budgets by domestic offsetting via domestic removals, be removed from the bill. And are replaced with separate emissions budgets for gross or absolute emissions and for removals/storage from the landuse, landuse change and forestry sectors.

Remove "banking and borrowing" provisions from "Section 5ZC Power to bank or borrow"

Section 5ZC "Power to bank or borrow" allows emissions budgets to be exceeded by either 'borrowing' emissions from future budgets to cover deficits or by carrying forward 'surpluses' from earlier budgets to cover deficits. This "banking and borrowing" option undermines one of the purposes of the bill - to provide long term certainty and clarity of the emissions budgets to the private sector. It would allow a less committed Government to defer real reductions in absolute emissions in favour of creative accounting with emissions units.

As the Morgan Foundation point out in their report "Climate Cheats" (Young & Simmons 2016) as how the National Government allowed the influx of low-priced fraudulent Russian and Ukrainian units into the NZ emissions trading scheme. I request that all references to banking and borrowing of units in Section 5ZC Power to bank or borrow and else where in the bill be deleted.

Make the Climate change committee an independent office of parliament

As some past governments have failed to enact either scientifically informed emissions targets or effective emissions reduction policies, I consider that the Climate change committee will inevitably at some stage have to give politically unpalatable advice to a recalcitrant future government. For that reason, the independence of the Climate change committee will not just be important but will be crucial. I request that the bill is amended to make the independent Climate change committee an office of parliament not an entity reporting to the Minister.

Remove S99 the secrecy clause from Climate Change Response Act

Clause 10 of the bill reads as follows:

Section 99 amended (Obligation to maintain confidentiality) (1) "After section 99(1)(a), insert: (ab) to the Climate Change Commission, in respect of the performance of its functions or exercise of its powers under Parts 1A to 1C; and..."

This appears an innocuous clause. It is not. Section 99 of the Climate Change Response Act 2002 is a secrecy provision. For the EPA's functions, the section ousts the jurisdiction of the Official Information Act 1982.

Several years ago I asked the EPA to provide me the number of emission units surrendered under the ETS by several large New Zealand companies. The EPA refused to provide that information. The Office of the Ombudsmen formally advised they had no jurisdiction to review the refusal decision under the Official Information Act 1982 because Section 99 ousted the jurisdiction of the OIA. This is in contrast to allocations of free emissions units to the same industries which are openly published on the EPA website.

Clause 10 therefore will prevent the application of the OIA to the climate change committee's powers under Parts 1A to 1C, from Section 5A to 5Z, meaning all sections of the bill describing the committee, emissions targets and budgets.

This is secrecy can be invoked which is not reviewable by the Office of the Ombudsman. This is entirely contrary to the principles of accountability, transparency and open government. It is the opposite of transparency accountability and fairness.

I request that the clause 10 of the bill be amended so that Section 99 is removed in it's entirety from the Climate Change Response Act 2002.

The emissions budget must include the "memo" gases recorded in the Greenhouse Gas Inventory but not "accounted for" as New Zealand's emissions

The Greenhouse Gas Inventory records emissions from international aviation fuel marine transport fuel and thermal biomass burning. But these emissions are not "accounted for" as New Zealand's emissions in accordance with the 2006 IPCC Greenhouse Gas Inventory Guidelines. In 2017, emissions from these sources were 3.7 million tonnes, 0.9 million tonnes and 5.7 million tonnes.

The United Kingdom's Climate Change Act includes emissions from international aviation fuel and marine transport fuel and the UK Climate Change Committee includes these emissions in it's advice to government on emissions budgets.

I request that the definitions sections of the bill be rewritten to include emissions from international aviation fuel, marine transport fuel and biomass burning as defined in the Greenhouse Gas Inventory.

Delete Section "5ZJ Effect of failure to meet 2050 target and emissions budgets"

This section states that

"No remedy or relief is available for failure to meet the 2050 target or an emissions budget."

In other words, the emissions targets and budgets are not legally enforceable. Given the probability of a future Government of the centre-right being antithetical to 1.5 degrees Celsius policies, I think that the budgets and targets must be legally enforceable. I request that this section be either deleted or replaced with a clause that makes the targets and emissions budgets legally binding.

Section "5ZK 2050 target and emissions budget are permissive considerations"

I support deleting the second clause

"(2) However, a failure by any person or body to take the 2050 target, an emissions budget, or guidance issued under section 5ZL into account does not invalidate anything done by that person or body."

If the second clause is not removed, it has the effect of providing a perfect legal defence for decision-makers under other statutes, e.g. the RMA, ignoring the 2050 target when considering such activities such as coal extraction or airport expansion. Planning and infrastructure decision-making needs to be aligned with the 1.5 degree Celsius goal.

I request that the second clause of 5ZK "(2) However, a failure by any person or body to take the 2050 target, an emissions budget, or guidance issued under section 5ZL into account does not invalidate anything done by that person or body" be deleted.

Kevin Anderson presentation Ireland Climate Change Laggard

Here is a new Kevin Anderson presentation titled "Ireland Climate Change Leader or Laggard?"

I can't see New Zealand as anything else but just as implicated as Ireland, due to our growth in both gross and net green house gas emissions since 1990.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Fixing the NZ Emissions Trading Scheme is just flogging the dead horse

I look at 'fix the ETS' metaphors and argue that trying to incrementally 'save' or 'fix' the NZ Emissions Trading Scheme will ensure it remains ineffective in reducing domestic emissions for decades. Politically, its just flogging the dead horse. We don't have time for a unending institutionalised cultural conflict over 'fixing the NZETS' like the one we have had for 'fixing' the Resource Management Act.

So, in my last post I used the metaphor or framing of 'arguing over the gears while accelerating towards a cliff' for the latest review of the New Zealand Emissions Trading Scheme.

Other commentators are using a very different framing for the review; that of 'fixing the NZETS'. For me that raises some fundamental questions. What are the political advantages and disadvantages of the two framings? Where will each framing lead us? Which framing is more 'science-informed'?

Brian Fallow, Generation Zero and Geoff Simmons are all accepting the 'fix the NZETS' framing in their comments on the review. Geoff Simmons heads up his second post in two days on the NZETS review How do we save the Emissions Trading Scheme?.

Brian Fallow starts his Herald column "Possible adjustments to the Emissions Trading Scheme aren't much, but at least they'd be a start".

Geoff Simmons and Brian Fallow do a double act of analysis on the NZETS review. I totally respect both Geoff and Brian in their intentions and views and understanding of the NZETS. However they both accept this inherently incremental 'fix the NZETS' framing of the politics. Here's their discussion.

I think this framing, 'fixing the NZETS' is fundamentally wrong in it's politics.

One key point from my last post was that this NZETS review has reversed the burden of proof. The allegedly temporary and allegedly transitional 'moderating features' are now the status quo or the default settings in the NZETS.

Policy analysis and assessment now has to be prepared and presented to show that each flawed 'moderating feature' of the NZETS won’t harm business interests. Queue the technical report Economic impacts of removing NZ ETS transitional measures by New Zealand Institute of Economic Research.

We need to remember there are a lots of 'cost moderating' features (flaws) still in the NZETS: unlimited international linkage and importing of overseas units (access to which officials are trying to restore), overly generous free allocation of units, the hang-over of surplus units in the market, the lack of auctioning (well there is no point having an auction if there is a huge surplus of units).

And the ultimate flaw in the NZETS is that half of New Zealand's greenhouse gas emissions, those from pastoral agriculture, seem to have a permanent get-out-of jail card.

So we have an emissions trading scheme with multiple flaws. The politically selected burden of proof provides a high hurdle for change each time the hapless officials attempt to remove the flaws. All the lobbyists join in as they already have the dates in their calendars.

Also, what is the messaging you need to do if you are promoting long-term incremental reform of the NZETS?

Well, first of all and before explaining your 'fix', you have to try to explain the NZETS from square one for each increment (again and again!). Geoff Simmons gets this as one of his other recent NZETS posts is white board Friday emissions trading for dummies.

The trouble with this is that explaining the NZETS is 95% impossible! I suggest from my own experience that most people find the NZETS the ultimate "My Eyes Glaze Over" topic. Poor old Geoff Simmons better to be ready to do another decade's worth of 'emissions trading for dummies! To borrow a metaphor from the centenary of the First World War, incrementally fixing the NZETS is like winning the trench warfare one shell hole at a time.

Compare that with the explicit message from the fast-car-to-cliff NZETS metaphor. The NZETS is not effective. It is not worth saving. It's got to go. Three four or five word sentences. Message transmitted loud and clear, over.

You need more convincing?. Let's look at one of Tim Groser's last statements as Minister for Climate Change.

First Groser praises Labour for their shared consensus on having an emissions trading scheme.

We have an understanding that there are certain policy frameworks in New Zealand which take decades to put in place, and where you need a very high degree of consensus - particularly amongst the two major parties of Labour and National - on at least a structure of a policy response.

Labour have supped the kool-aid and have bought into this framing. As shown by this statement to Forest and Bird during the 2014 election campaign.

Labour's preferred means of pricing is to fix the the existing ETS. Using an ETS to price carbon is the only broad area of agreement in climate change policy, particularly particularly between the two largest parties (despite National's lip service for an ETS). Labour would not throw that agreement away lightly to start again with a carbon tax.

In other words, Labour will flog the dead horse better than National. As I noted in 2014:

National and Labour in effect have the same policy narrative that explains the problem; 'THEY undermined the NZETS', and a narrative solution, 'WE will fix the NZETS'. This creates the on-going cycle of the 'horse is under performing' and the narrative solution (keep flogging the horse). But beneath the impenetrable detail and complexity of the arguments about fixing the NZETS, it will remain ineffective.

Groser saves his well-known invective for Russel Norman and the Greens and their carbon tax policy. And stretches a very long bow to equate that policy with the Rudd-Gillard-Rudd Australian Labor Prime Ministers' revolving door.

What I didn't appreciate was that Russel Norman - then leader of the Green Party - saying you want to throw the policy structure away and have a carbon tax... I can guarantee you what that would have done - it would have set us back on a cycle of internal political conflict, which would have repeated exactly the problem in Australia.

Groser concluded:

I do not believe there is anything fundamentally wrong with the emissions trading scheme'.

I rest my case that the best science-based and ethically based climate mitigation policy is the opposite of what Groser says!

A 'horse-flogging' process of 'fixing the NZETS' will last a very long time - if it ever concludes. It could just become an social and cultural institution like the never-ending debate over the Resource Management Act. In a previous post I used the metaphor of flogging the dead horse after the snake swallows the elephant in the room to describe this possibility.

Applying the maths of our carbon budgets, Kevin Anderson's analysis and the Paris Agreement, we just don’t have enough time for a never-ending institutionalised horse flogging debate over the NZ emissions trading scheme. The political goal must be to remove the social licence of the NZETS, to de-legitimize it in the eyes of the public and then to scrap it so a simple carbon tax can be adopted instead.

How fast over the cliff? tinkering with the train-wreck NZ Emissions Trading Scheme

I look at at the Government's latest token consultation about tinkering with the train-wreck New Zealand Emissions Trading Scheme. We are still driving fast towards a cliff but the argument has moved from which gear to air-con versus heater. The Government has kindly given us the opportunity to make a submission about how hot or cold we should be as we go over the emissions cliff.

Back in September 2012, when Tim Groser and the National Government were last watering down the New Zealand Emissions Trading Scheme (NZETS), I wrote a post that used an excellent metaphor for amending the NZETS, tinkering with the gears while driving a car fast towards a cliff.

All credit should go to former Greens co-leader Jeanette Fitzsimons who had absolutely nailed her answer to questions from TVNZ about the relevance of amendments to the NZETS.

"Look, its like we are in a very fast car, we are heading towards a cliff, which is getting really close, and we are arguing whether to change from fifth to fourth gear".

Now we roll forward and there is another review of the woeful NZETS.

For all that has happened in the last three years, such as the Doha COP meeting, the Poland COP meeting, New Zealand opting out of a binding second Kyoto commitment, New Zealand being excluded from the international carbon markets, the 2020 target and 2030 target and the recent Paris Agreement, the fast-car-over-the-cliff metaphor still nails the state of the NZETS; that it is so far from being an effective emissions mitigation policy that 'reviews' are merely futile tinkering in the face of the impending threat of climate change. Especially when the scope of the review deliberately excludes the option of including agriculture in the NZETS.

The first stage of the review is a perfect example of futile tinkering. It is very narrowly focused on just two of the many 'cost-moderating' measures inserted in the NZETS in 2009 and extended in 2012.

1. Should we end the two tonnes-for-one unit deal, so that energy and industry emitters have to surrender one unit for every tonne of GHG emissions, rather than one unit for two tonne of emissions?
2. Should we adjust the existing $25 price cap or fixed price surrender option?

The role of these 'cost-moderating' features is discussed in Jessika Luth Richter's 2012 masters thesis Institutional Feasibility the end or the means in emissions trading Evaluating the New Zealand Emissions Trading Scheme (106 pages, 1.8MB pdf) with the University of Lund.

Richter makes several interesting observations (No really! The thesis is worth a read if you are a ETS wonk). In some ways the political influences on the NZETS design were typical of the international experience (page 60): "allocation is nearly always contentious, often free, and often heavily influenced by lobbying".

In other ways, the NZETS experience of these 'cost-moderating' features is unique to New Zealand. During the 2007 design stage, Treasury and the Ministry for the Environment assembled a complete smorgasbord of possible 'cost-moderating' features (free allocation, access to international markets, safety-valve price caps, two-for-one obligations). As these measures all had the same function (reducing cost and therefore price impacts), they felt only some were necessary in the 2008 NZETS. However, the 2009 amendments added all the cost-reducing measures into the NZETS. As Richter notes with understatement

"Additional moderating design features in the NZ ETS are also mentioned in literature and have been used in other schemes; however New Zealand is unique in the range of these features all incorporated into one ETS."

In other words, the National Government threw the whole kitchen sink of cost-moderating features into the NZETS. They said to New Zealand's big businesses "Forget your diets, just try and eat everything on the buffet".

Let's get back to the review discussion document. It describes the two-for-one deal as follows:

The one-for-two surrender obligation allows participants from the liquid fossil fuels, industrial processes, stationary energy and waste sectors to surrender one unit for every two tonnes of emissions (ie, a 50 per cent surrender obligation). This means that these participants do not face a full obligation for their emissions. As a result, the effective carbon price they pay is half the unit price. For example, with a New Zealand Unit (NZU) price of $7, these emitters pay an effective carbon price of $3.50 for each tonne of emissions, with a maximum effective carbon price set at $12.50 due to the $25 fixed price surrender option (page 12).

What to do with the two-for-one deal. This is just a no-brainer. Of course, the two-for-one deal should just end! It was meant to end in 2012, and the 2012 extension was flagged at the time as being temporary and ending in 2015.

So why are we even consulting about this non-issue? Surely the policy default is that any well-designed transitional measure should simply end on the date specified in the original policy? Of course, from the point of view of political economy, such things as policy defaults and burdens of proof can be influenced by political interests.

We can view the Ministry for the Environment's decision to have a consultation over the end of a transitional measure (such as the two-for-one deal) as changing the burden of proof. Instead of the transitional measures (of which there are many in the NZETS) simply expiring, a process must be held to arrive at that decision. This involves policy assessment and consultation. The expected end-point of the two-for-one deal changes in character from that of an automatic expiry, to an open "yes/no" decision where the default is the status quo of indefinite extension.

And so the burden of proof now falls on the advocates of change (to a tighter ETS) and is removed from the advocates of the status quo who want an eternal transition.

The discussion document even expands the unnecessary scope of the decision by presenting three options (page 13); maintain the 2-for-1 deal indefinitely, or extend the term then review it, or scrap it and make emitters pay for each tonne of greenhouse gases. The document at least states the real world implication of keeping the 2-for-1 deal indefinitely: NZ unit prices would remain less than $NZ12.50 per unit, i.e. half of the price cap of $NZD25.

The discussion document describes the second issue about the $25 price cap/fixed price option as follows:

The $25 fixed price surrender option allows businesses to surrender an NZU by paying the Government $25 per unit. It was established as a transition measure in 2009 to protect firms and the economy from price spikes or excessive costs. It acts to cap the maximum carbon price in the NZ ETS, and in combination with the one-for-two surrender obligation, it currently ensures that the maximum effective carbon price any non-forestry participant will face is $12.50 per tonne (page 14).

Again it is a no-brainer that this price cap should be removed. It was always obvious that in the long-term it would cap NZ unit prices at $12.50 per tonne. However, to the best of my recollection, this is the first time the Ministry for the Environment has explicitly said so. The inclusion of the price cap in itself indicates a lack of real commitment to an emissions trading approach. If the Government was that concerned about upward volatility in emission unit prices, they should have implemented a carbon tax and not an emissions trading scheme.

Rather than discouraging me, writing this post has made me more determined to make a submission. Perhaps even two, as the trustees of carbon forest project I am involved in, also want to make a submission. Both submissions will probably use the expression "no brainer" several times.

Submissions on these two issues close at 5pm on 19 February 2016. Submissions can be made online, by emailing nzetsreview@mfe.govt.nz or writing to the Ministry for the Environment, PO Box 10362, Wellington 6143.

To end this post I give you this cultural mash-up by the under-rated American performance artist Vin Diesel which blends car crashes, train wrecks, cliffs and even a bit of Butch Cassidy and the Sundance Kid.

An intelligent and observant Martian would be entitled to believe the human race insane.

Australian Robert Manne has written an excellent long-form overview of the problem of climate change policy.

I have shamelessly abbreviated one sentence for the title of this post. The full sentence is.

An intelligent and observant Martian visiting the Earth and learning of our climate problem would be entitled to believe the human race insane

.

Manne has name-checked pretty much most of the key people we associate with the discourse on climate policy.

• Svante Arrhenius the Swedish chemist.
• Garrett_Hardin who coined the term Tragedy of the Commons.
• Stephen Gardiner who wrote the book A Perfect Moral Storm: The Ethical Tragedy of Climate Change.
• Martin Weitzman the Harvard economist.
• James Hansen, no explanation necessary.
• Naomi Oreskes author of Merchants of Doubt.
• Bill McKibben.
• Dan Kahan who studies cultural cognition.
• Clive Hamilton.
• George Marshall (the British climate communicator.
• Naomi Klein
• Nicholas Stern.
David Victor

Its a really good read. I recommend it.

The Burning Question debunks peak fossil fuels

I recently met a certain Green Party councillor of a nearby local council who said he thought New Zealand's greenhouse gas emissions would decline by 10 percent in the next twelve months. The decline would be caused partly by restrictions on the availability of oil and gas and partly by the recent decline in the global whole milk powder prices.

I proposed a bet of one thousand dollars (to be given to a climate change project) that there would be no decline in either net or gross greenhouse gas emissions from 2015 to 2016, let alone a decline of 10 percent. In other words I was happy to bet against 'peak oil'. Because don't see how any one can claim to understand anthropogenic climate change as an issue and still hold the view that declining supply of liquid fossil fuels will damage the world's economies.

So I am very pleased to find this talk by Duncan Clark given at University College London on 2 July 2013 about the book The Burning Question co-authored with Mike Berners-Lee.

Their simple thesis is that the available proven reserves of oil gas and coal, that are already recognised as assets on the balance sheets of fossil-fuel companies, exceed a 'likely' carbon budget consistent with limiting average global warming to two degrees Celsius by 2100. And therefore the policy question is "how do we keep trillions of dollars of fossil fuels in the ground?"

The Guardian has a good review of The Burning Question.

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.

Labour's climate change policy - Something borrowed something blue something old not much new

As I was saying in my previous post Labour do have a seven page climate change policy that is at first look pretty comprehensive.

Labour will

• begin the transition to a low carbon clean energy economy
• set ambitious greenhouse gas reduction targets and plans to achieve them
• set up an independent climate change commission
• will implement a comprehensive risk assessment framework in order to develop a comprehensive climate change response plan
• establish a carbon budget process
• achieve 90% renewable electricity generation target by 2025
• reduce per capita domestic transport emissions 50% by 2040 from a base year of 2007
• ensure that there is no retail carbon price gouging of consumers
• manage the transition to ensure social justice particularly with respect to low income families
• restore the carbon price to the NZETS (NZ Emissions Trading Scheme)
• require emitters to cover at least half their emissions with NZ issued Units (not the cheap international 'hot air' units).
• bring agriculture into the NZETS from 1 January 2016
• give agriculture a free allocation of NZ units equal to 90% of 2007 production

Something borrowed

This really does appear to be a great list of policies. Interestingly, some of these policies have been borrowed from a variety of people.

The carbon budget idea is borrowed from the Sustainability Council back in 2011 and in 2012 and from Generation Zero's "Big Ask" Report of July 2014.

The independent climate commission idea is also borrowed from the Sustainability Council in 2012 and from Generation Zero's "Big Ask" Report of July 2014.

The comprehensive risk assessment framework and climate change response plan is borrowed from the Wise Group.

The policy requiring ETS emitters to use at least 50% NZ units is borrowed from the long-suffering carbon forest industry who in 2012 asked for limits on the amount of ultra cheap 'hot air' imported units that emitters can use to meet their ETS obligations.

Labour's policy also has a swipe at National for ignoring the foresters request to do something about the catastrophic decline in the NZ carbon price.

"Also, National sat on its hands as an influx of cheap, imported, international emission units collapsed the price of NZUs.

So, Labour's fix for the price collapse is to;

"..restrict international units by requiring at least 50% of all units surrendered to meet obligations under the ETS to be NZUs (on an ongoing basis).

The problem with this measure is that it won't work. It won't stop the cheap dumpster diver international units holding down the NZ unit price. If its compulsory for 50% of units surrendered to be NZ units, then thats the same as permitting 50% to be cheap international units. So the international units will still drag down the NZ unit price.

I have argued in a previous post that allowing use of international units was a fundamental flaw in the design of the NZETS (along with the lack of a cap). Previous partial restrictions on international units have not had any impact on prices.

The ironic thing about the Labour policy swipe at National "sitting on its hands", given that their 50% restriction fix won't work, is that that the unlimited importing of international units into the NZETS was hardwired into the original design of the NZETS in the Labour government's 2007 Framework for a New Zealand Emissions Trading Scheme document. In other words, it was originally Labour's idea that the NZETS be so open to international units that they set the NZ carbon price.

The only way to set a "real" carbon price in the NZETS is to ban the use of all international units and manage the supply of NZ units and assigned amount units so that the carbon price is sufficient to incentivise changes in behaviour. If Labour won't do that, then their position is closer to Tim Groser's view that the international price should set the NZ price than to the views of the environmental NGOs and foresters who want an effective carbon price.

Something old

The rest of Labour's policy to "fix" the emissions trading scheme is to largely return it to the 2008 version Labour originally enacted.

Labour's "something old" policies on the ETS are to:

• strengthen the ETS by bringing agriculture in on 1 January 2016
• base the amount of free emissions units allocated to agriculture on 90 per cent of its 2005 emissions
• continue with free allocations for carbon-intensive industries exposed to export competition, such as steel and aluminium.

This means that Labour will continue gifting excessive amounts of carbon credits to major polluters like Tiwai Point smelter owner Rio Tinto Alcan NZ and Norske Skog Tasman. The base for allocation will change from past production intensity to historic 2005 production levels - which may end up being pre-Global Financial Crisis peaks.

Forestry lecturer Euan Mason points out that once agriculture is in the ETS with 90% free allocation, they too will be able to take advantage of the price differences in the ETS, just like the carbon intensive industries have. They will be able to surrender half of their free NZ units back to the government, with the other half of their obligation satisfied by buying 11c international units. They can then sell their remaining NZ units for say $4.00 each. They then pocket the arbitrage difference between the prices of the units.

It's important to remember that Labour's original NZETS wasn't particularly well designed or effective. As Jeanette Fitzsimons said in the documentary "Hot Air", the Greens only unwillingly voted for it as it was "the only game in town", a first step and better than nothing.

In 2009, economist Geoff Bertram gave one of those Victoria University Institute of Policy Studies talks about the Labour and National emissions trading schemes. After about 30 minutes of carbon supply and demand curves, some one asked Geoff to sum up in plain language. Geoff Bertram's reply is the only part of the lecture I can remember to the letter. He explained that both schemes were patchwork quilts of exemptions and loopholes and delays. Both schemes lacked caps on emissions. Both schemes introduced unnecessary NZ units whose pricing would be at the whim of the international markets. He concluded:

"Well the Labour ETS is a dog, and the National ETS is a complete dog"

Something blue

Are you surprised that I am saying that Labour's climate change policy includes "something blue', as in from the National Party? I am surprised as well. Any climate change policy in common with National would seem almost to be logically impossible given that National's list of policies does not even include a climate change policy.

This statement from the the third page is what I mean.

"Labour is committed to achieving a lasting consensus among New Zealand’s main political parties on an ETS. We have consistently tried to work with the National Party to reach common ground. But we aren’t prepared to compromise our fundamental principles to do so.

Labour also gave a similar answer to Forest and Bird in their "Polling the Pollies 2014" report. Forest and Bird asked why Labour wasn't supporting the Green's 'carbon tax cut' policy.

"Labour's preferred means of pricing is to fix the the existing ETS. Using an ETS to price carbon is the only broad area of agreement in climate change policy, particularly particularly between the two largest parties (despite National's lip service for an ETS). Labour would not throw that agreement away lightly to start again with a carbon tax."

Reading these statements removes any doubts I may have had about being too hard on Labour's climate change policy. Ultimately Labour are just borrowing the headline ideas of the NGOs to make their policy appear effective. The truth is that in terms of how they intend to price carbon via an ETS, they would rather be "something blue", closer to National than to the Greens. This is just raw political expedience masquerading as high principle. A compromise being justified on the grounds we can't let the perfect be the enemy of the good.

In an enigmatically named post I wrote three years ago for the 2011 election, The snake swallows the elephant in the room and then flogs a dead horse, I suggested that climate change politics and particularly the NZETS could potentially descend into a politically institutionalised ritual of "flogging the dead horse".

My fears appear to have been realised. National and Labour in effect have the same policy narrative that explains the problem; "THEY undermined the NZETS", and a narrative solution, "WE will fix the NZETS". This creates the on-going cycle of the 'horse is underperforming' and the narrative’ solution (keep flogging the horse). But beneath the impenetratable detail and complexity of the arguments about fixing the NZETS, it will remain ineffective.

In summary, it is not enough for Labour's climate change policy to borrow some good policies from the NGO's when the fundamental problems of the NZETS are not addressed. It needs a cap on emissions. The number of units or carbon credits or permits must be limited to the cap. It needs to exclude all international units. There should be no free allocation of units. It should apply to all sectors. All the ducks must be in a row. All the cogs must turn in the same direction. Returning the NZETS settings to the 2008 design doesn't achieve this. Seeking a 'flog the dead horse' consensus with National also doesn't achieve this. Isn't climate change important enough to warrant policies better than something old, something blue, something borrowed and not much new?

Labour's climate change and energy policies - labelling oil and gas developments as 'transitional' does not make them carbon neutral

The New Zealand Labour Party announced their climate change policy on 24 August; the Sunday before last Sunday.

At first glance, it sounds refreshingly like a policy that takes anthropogenic global warming seriously.

A Labour Government will put in place a comprehensive climate change strategy focusing on both mitigation and adaptation, establish an independent Climate Commission and implement carbon budgeting, says Labour Climate Change spokesperson Moana Mackey.

"This is about future-proofing our economy. Making the transition to a low-carbon clean technology economy is not a 'nice to have' as the current Government would have us believe. It is a transition we must make and the sooner we begin, the easier that transition will be."

How did the media respond? Well they ignored it. I haven't seen any reporting of Labour's climate change policy in the Herald, or Stuff/Fairfax, or Radio NZ or TV1 or TV3. I only stumbled onto it via Scoop a week after the release.

Like the 2011 election, the issue of climate change has been notable for it's absense (the snake swallowing the elephant in the room).

However, some of climate change focused NGOs responded positively to Labour's policy. Simon Terry at the Sustainability Council said a carbon budget was the single most important reform. Generation Zero and the Iwi Leaders Group and forest owners welcomed the policy. The mainstream media of course also ignored these NGO views.

However, before I get into the detail of Labour's climate change policy (a topic for another post), it's important to ask "are the dots connected with Labour's energy policy?" Unfortunately, the dots are not connected and the energy policy is 180 degrees contrary to the concept of a carbon budget.

Let's look first at the sixth paragraph of Labour's energy policy.

"It is internationally agreed that the average global temperature increase must be kept below 2 degrees Celsius if the worst effects of climate change are to be avoided. That means two-thirds of currently identified fossil fuel reserves cannot be consumed before 2050, in the absence of widely-deployed (and still unproven) carbon capture and storage technology."

This is fantastic, isn't it? Labour get it! They have read up on the Meinhausen et al Two Degrees Nature paper, the Carbon Tracker Unburnable Carbon Report, Bill McKibbin's Do the Math and the IPCC's Sixth Assessment Report.

They understand that the carbon in existing fossil fuel reserves will when consumed produce significantly more carbon dioxide than the quantity compatible with keeping average global warming to two degrees.

If only that were so. The next sentence tells us that Labour don't get climate change.

"This does not mean that New Zealand should stop developing its own petroleum resources in a world still heavily dependent on oil. But this will be in the context of transitioning to renewable energy, which New Zealand and the rest of the world needs rapidly to do."

This is inconsistent and nonsense. This is pure spin. Someone else somewhere else must keep their fossil fuel reserves in the ground to avoid dangerous climate change. But not New Zealand. Under a Labour-led government, the private sector will develop New Zealand's oil and gas reserves and invest in oil and gas infrastructure, with say a 40 or 50 year life span, over which they will expect to get a market return. Thats most of the years until 2100. The very time frame that the IPCC low emissions pathways say we need to reduce greenhouse gas emissions by 70%.

What is Labour thinking here? Where does Labour think the carbon dioxide from NZ's new hydrocarbon reserves will end up? Is Labour saying that only the world hydrocarbon reserves contain carbon and New Zealand's hydrocarbon reserves don't? Or maybe if you label the NZ hydrocarbons as "transition" fuels there are fewer carbon atoms? Again this is nonsense.

I can only guess that Labour, in stating that their policy is in "the context of transitioning to renewable energy", are arguing that oil and gas are now "transition fuels" to renewable energy supplies. Again this is nonsense. Are Labour now agreeing with Nick Smith?

I am not the only person to note the inherent contradiction in Labour's policy. Bryan Walker has already noted that the intellectual hollowness is plain in Labour's policy. Walker said;

"Political parties and governments which support expanded exploration and development of fossil resources either do not understand the severity of the scientific message or are so consumed by the prospects of economic wealth that they are determined not to heed it."

Ditto Forest and Bird's Kevin Hackwell;

"If Labour is taking climate change seriously it would realise that its fossil fuels policy is at odds with the party's overarching policy statements on sustainability and climate change."

Labour really need to be challenged on this. It's as if Labour has set a compass bearing for the destination and then headed off in the exact opposite direction. If there isn't an understanding of the limited carbon budget in both your energy policy and your climate change policy, then it's pretty much a 'fail' before even looking at the detail of the climate change policy.