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

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

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

She asked if it has infographics?

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

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

It is a draft for public consultation until 14 March 2021. The report recommends three 5-year greenhouse gas emissions budgets to 2035 (and relevant policy) to the Government. To be finalised after submissions by 31 May 2021. The Government has to respond to it by 31 December 2021. So it will take all year.

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

For the 'long-lived' gases (excluding methane from agriculture and waste), they recommend three 5-year emissions budgets out to 2035 and lots of policies to achieve them. The budgets mean a 26% decline in gross gases (excluding methane) and a decline of 36% in net gases (excluding methane) by 2035 from 2018. The ten percent difference being offset by exotic forestry carbon sequestration.

For 'short-lived' gases (agricultural methane plus waste methane), they recommend three separate 5-year emissions budgets to 2035. These represent less ambitious reductions in emissions - minus 16% to 2035 from the 2018 baseline

The summary 5-year budgets are to put Aotearoa on a path to 'net zero carbon' emissions by 2050. Absolute carbon emissions in 2050 will be millions of tonnes but they will be 'offset' to 'net zero' by forests storing carbon. There will be another round of three 5-year budgets for 2035 to 2050 to sort out the exact trajectory.

The forecast emissions pathways show a major decrease in transport emissions, modest decreases in agriculture and industry emissions, and major increases in carbon stored in forests.

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

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

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

For the dairy sector, methane emissions decrease marginally, milk fat production is stable, stock numbers drop very slightly through efficiency gains for each unit of dry feed. But - the Commission doesn't seem to know if dairying should be in the emissions trading scheme. Their recommendation to the Government is "Review regulatory regimes". This is very vague. A kick-for-touch response.

The whole point of having the Commission as an independent Crown agency is that it can make "free and frank" recommendations about applying politically sensitive policies such as carbon pricing to politically sensitive sectors such as the dairy industry. I find this quite disappointing.

For sheep and beef, methane decreases, meat production increases slightly, stock numbers drop through efficiency gains. But, again, the Commission doesn't seem to know if sheep and beef should be in the emissions trading scheme. They say "Review regulatory regimes". This is again a bit disappointing and a vague kick-for-touch.

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

It's 30% below 2005 levels by 2030. The Commission says the target could be more stringent than the 5-year emissions budgets because credible international carbon credits could be imported. 'Credible' credits, they have to say that to distinguish them from the fake and fraudulent Russian and Ukrainian credits imported from 2013 as noted by the Morgan Foundation.

At the moment, there is no operative international carbon market. It also seems unlikely to happen under the Paris Agreement. The 'net zero by 2050' target incentivises countries to hold on to domestic carbon removals for offsetting their most emission intensive sectors. Any international sales (such as to Aotearoa) would only happen once domestic demand is met. A reliable credible supply of credits seems either unlikely to eventuate or alternatively be extremely expensive.

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

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

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

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

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

Hon James Shaw

Minister of Climate Change

Contact Email j.shaw@ministers.govt.nz

Dear Minister Shaw,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yours sincerely

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

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

Dear Minister Sepuloni,

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

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

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

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

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

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

Yours sincerely

NZ emissions unit price chart Datawapper style

This is an experiment in embedding a chart created in Data Wrapper. That's Data Wrapper style.

It looks alright.

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

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

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.

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

Another threat to close the Tiwai Point aluminium smelter. I better finish up my data project on the free gift industrial allocation of NZETS emissions units to the big high emitting industries.

Over nine years the Tiwai Point smelter alias New Zealand Aluminium Smelters/Rio Tinto Alcan received $82 million worth of free emissions units under the NZ emissions trading scheme

The Tiwai Point aluminium smelter, which is owned by New Zealand Aluminium Smelters Limited, which is majority owned by the multi-national corporate Rio Tinto Alcan, has been in the news over the last few days.

As welcome as a flurry of cold westerly fronts arriving from the Tasman Sea, the company's threat to close the smelter has consumed column inches of media coverage.

• 23/10/19; Rio Tinto considering closing Tiwai Aluminium Smelter
• 23/10/19; Bluff aluminium smelter could close taking power prices tumbling
• 24/10/19; Standard and Poor warns of potential risk to electricity generators in the event of a closure at Tiwai smelter
• 24/10/19; The Southland Times Editorial; Smelter review sets up an anxious wait for Southland
• 24/10/19; Rio Tinto's Tiwai Point aluminium smelter - should it stay or should it go?

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

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

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

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

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

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

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

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

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

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

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