16 March 2015
The Ministry of Business Innovation & Employment has a page on weekly oil price monitoring and some week by week data on petrol prices. I made a R chart from that data.
The NZETS component of the NZ retail price of petrol pretty much just hugs the zero point on the vertical axis.
A note lower down the web page states "The costs associated with the ETS are provided by Hale & Twomey based on the prevailing carbon price from the New Zealand Carbon Market". So we need to note that this data is an estimate.
Over the four and a half years of the NZETS, the estimated NZETS component has ranged from a maximum of 2.4 cents per litre from late 2010 to June 2011 to a minimum of half a cent from July 2013 to December 2014.
As far back as 2007, the Labour Government predicted that petrol prices may rise up to 4 cents a litre possibly based on carbon price of $25 per tonne. From memory, the early 2011 price for a NZ unit was about $21 a tonne.
Wikimedia Commons has the R script I wrote for the chart (except it's a .svg file, not a .png).
10 September 2014
- 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
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 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.
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"
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?
06 September 2014
Labour's climate change and energy policies - labelling oil and gas developments as 'transitional' does not make them carbon neutral
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.
29 May 2014
According to Brian Fallow writing in the NZ Herald its a bit too late for Minister for Climate Change Tim Groser to be trying to save the integrity of the NZETS because it lies somewhere in an unmarked grave.
23 May 2014
Bill McKibben has followed up his Maths of global warming with a great new article in Rolling Stone titled A Call to Arms: An Invitation to Demand Action on Climate Change.
McKibben and 350.org.nz are planning a huge demonstration in New York to coincide with the September meeting of the United Nations.
McKibben on Barack Obama.
Sure, he's imposed new mileage standards for cars, but he's also opened vast swaths of territory to oil drilling and coal mining, which will take us past Saudi Arabia and Russia as the world's biggest petro producer.
McKibben on deniers and delayers.
In a rational world, no one would need to march. In a rational world, policymakers would have heeded scientists when they first sounded the alarm 25 years ago. But in this world, reason, having won the argument, has so far lost the fight. The fossil-fuel industry, by virtue of being perhaps the richest enterprise in human history, has been able to delay effective action, almost to the point where it's too late.
McKibben on the message from the scientists
"What exactly don't you understand about what we've been telling you for a quarter-century?"