09 September 2014

Labour's climate change policy; something old something blue somethings borrowed 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 in National's list of policies has no 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 ETS 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?

04 September 2014

Labour's carbon budget policy great but their energy policy is 180 degrees in the opposite direction

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 the Scoop a week after the release. However, some of climate change focused NGOs responded positively. 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 McGibbin'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. That oil and gas are "bridge fuels" to renewables. 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.

02 February 2013

John Key and Tim Groser on the wrong side of history - Kennedy Graham

Kennedy Graham gave a great speech in response to the annual Prime Minister's statement. This is the full speech

"Lord Nicholas Stern acknowledged just days ago that he had "got it wrong". Climate change is already far worse than he thought it would be only 6 years ago when he released his report."

"We are no longer likely to achieve the 2 degrees Celsius limit that the international community set for itself only 2 years ago. We are now on target for 3.5 degrees to 6 degrees. That takes us beyond the dangerous dimension of climate change, which the 1992 UN Framework Convention on Climate Change sought to prevent, and into what the World Bank calls "cataclysmic" climate change."

"What to say to a Government that in face of these developments guts its domestic climate legislation and refuses to enter a second binding international commitment period?"

"What to say to a Prime Minister who, in his annual statement to Parliament, omits climate change on the grounds that he touched on it last year?"

"What to say to a Minister for Climate Change Issues who says that New Zealand is ahead of the curve, that it is time to move beyond the Kyoto Protocol and join the largest polluters of the world, and who derides the global civil society when it criticises New Zealand for being one of the chief obstacles to progress at the UN conference in Doha?"

"We say this to John Key and Tim Groser. We say this: you are on the wrong side of history, both of you, in your respective ways."

Kia kaha, Kennedy!

Friday night climate change and emissions trading reading

What do economists think is the best policy to adopt to respond to climate change? Hat-tip to the Environmental Economics blog.

The New York Times discusses energy taxes as tools to help tackle climate change. Hat tip again to the Environmental Economics blog.

The Davos World Economic Forum is not ignoring climate change. They have commissioned a report saying that curbing climate change will cost $700 billion a year.

Leo Hickman of the Guardian concludes you can't assume your flying emissions are 'offset' just because the EU has an ETS.

A UBS analyst concludes that the emission allowances (emission permits/units/credit) in the European Union emissions trading scheme are “worthless” without a change in the rules to tighten supply and curb the record glut of excess allowances.

According to UBS, the European Commission’s strategy for the glut is to reduce the supply of allowances into the market by postponing the sale of 900 million allowances from the 2013-2015 period to 2019-2020. This is being called "backloading".

However, "The European Commission, the bloc’s regulatory arm, will not get support from governments for its plan to temporarily cut oversupply by delaying auctions of some permits"

Consequently, the "EU nations and the region’s parliament have two options now: to “sit back and do nothing and see the market crash” or to support the short-term rescue plan to backload allowances".

16 January 2013

The Kyoto New Zealand break-up - when New Zealand said 'commitment' he never meant it

In this post I argue the best analogy for New Zealand's choice to opt out of a second commitment period (of reducing emissions) under the Kyoto Protocol - is: unfaithful men who won't commit to their partners!

New Zealand governments have behaved faithlessly towards Kyoto. The current National Government under Climate Minister Tim Groser won't commit to Kyoto stage 2. And the 1990s National Government gave a commitment they had no intention of being faithful to. New Zealand politicians and diplomats intentionally negotiated Kyoto so that New Zealand's Kyoto target would be met without reducing either gross or net emissions of greenhouse gases

I have argued before that New Zealand did not sign the Kyoto Protocol in good faith. As we seem unable to commit to Kyoto stage 2 in good faith, I have had another look at how faithful New Zealand's position was at the beginnings of Kyoto and at ratification in 2002.

According to a UNFCCC account of the Kyoto negotiations 'Tracing the Origins of the Kyoto Protocol: An Article-by-Article Textual History' on page 48;

"New Zealand was the only Party which made an early, more comprehensive proposal on the treatment of sinks, suggesting that sequestration of greenhouse gases from certain listed categories should be added to a Party's emission budget" (paragraph 226)
"New Zealand...faxed through a proposal for the treatment of sinks...sinks would not be included in a Party's baseline, but removals would be credited to a Partys budget (the so-called 'gross-net' approach)." (para 227)

(NB 'Sinks' meaning forests or land-use or land-use-change that sequesters carbon dioxide from the atmosphere. So the New Zealand diplomats were 'ahead of the curve' in negotiating to get forest sinks recognised so they could offset other emissions.)

In October 1997,three weeks before the UNFCCC meeting in Kyoto, Simon Upton, the Minister for the Environment in Jim Bolger's National Government said in a speech:

"New Zealand has long been advocating" for Kyoto rules where "removing carbon from the atmosphere in future years will earn us credits"

Let's look at the advice the Ministry of Foreign Affairs and Trade gave the government in February 2002, prior to New Zealand ratifying Kyoto that year. It was in a document called National Interest Analyses - Kyoto Protocol Part II

.
"New Zealand has an initial assigned amount for the first commitment period currently estimated to be 365 million tonnes of carbon dioxide-equivalent. That is, New Zealand is allowed to emit 365 Mt of carbon dioxide (or equivalent in other gases) over the years 2008 to 2012...New Zealand is expected to emit between 50 and 75 million tonnes over its 365 Mt initial assigned amount during the commitment period...."
"Current estimates are that, during the commitment period: New Zealand will emit between 415 million and 440 million tonnes of carbon dioxide equivalent, and New Zealand sink activities (derived from forests planted from 1990 onwards) will provide an additional 110 million units of assigned amount, in the form of removal units."
"At a national level, New Zealand is therefore expected to have a surplus of assigned amount over emissions of between 35 and 60 million units over the five years of the first commitment period."

MFAT were saying:
(1) New Zealand's greenhouse gas emissions would increase (not reduce) through to 2012.
(2) New Zealand would meet its Kyoto target by issuing itself additional forest sink removal units.
(3) New Zealand would make an economic gain from having a surplus of emission units.
So New Zealand would meet a 'trifecta' of Kyoto-related goals, none of which were reduced gross or net emissions.

MFAT were especially proud of that last point, making a profit. "New Zealand’s effectiveness in climate change negotiations means it is one of the few developed countries that stands to make a small net economic gain from the first Kyoto Protocol commitment period."

So what would MFAT's predicted increased emissions and forest removal units look like on a chart? Assuming the maximum 75 million tonnes of carbon dioxide equivalent greenhouse gases is represented by a linear increase of 0.94% p.a. from a base of 73 million tonnes in 1990, and the forest removal units are issued equally over 2008 to 2012, it looks like this.

This is what 'gross-net Kyoto accounting' of emissions and emission units looks like. From 1990 to 2007, gross or total emissions (blue dots) are the same as "Kyoto" emissions (the red dots). However, from 2008, you get the "Kyoto" emissions by subtracting carbon dioxide removed by 'human induced afforestation, reforestation and deforestation' (the violet dots) from the gross emissions. And the red dot Kyoto emissions suddenly dive under the 1990 baseline, even though both net and gross emissions have increased.

Except for the straight line, which is from my linear growth assumption, that looks very much like the current gross, net and Kyoto emissions, which I update below in a brand new animated 'Kyoto Escalator' chart

It's interesting to note that in the Ministry for the Environment's November 2012 calculation of the net Kyoto Protocol position, that although the ministry predicts a surplus of units (exceeding the target), this will happen in spite of an estimated 80% increase in annual net emissions since 1990 and a 27% increase in gross emissions. The actual gross and net emissions to 2010 have grown by 19% and 59% respectively, as shown in this chart

This is why whenever we hear Tim Groser or Nick Smith claim the New Zealand is meeting it's Kyoto target, we need to realise they are being the ultimate uncommitted unfaithful partner; in spite of their smooth rhetoric of caring about global warming, New Zealand's gross and net greenhouse emissions are showing an increasing trend. New Zealand needs to adopt policies that really do just stop emissions.

NB The original meme is Kyoto New Zealand break-up and all the images are at Picasa at Kyoto's Break-up with New Zealand where they can be viewed as a slide show. Feel free to use them and make up some more.

Kyoto's break-up with New Zealand at Picasa

I have just uploaded all the 'Kyoto's break-up with New Zealand ' images from the quickmeme website to Picasa

14 January 2013

New Zealand and Kyoto Protocol The break-up

I have made up a meme using a meme generator.

It's about break-up of New Zealand and the Kyoto Protocol.

They were a nice couple. They met back in the mid 1990s at the United Nations Framework Convention on Climate Change. They set an example for the rest of the world.

But..after five years, New Zealand broke up with Kyoto Protocol. Kyoto says New Zealand wouldn't give a second commitment...even though they set up an emissions trading scheme and a greenhouse gas emissions inventory together. New Zealand just didn't seem interested after the Durban Platform. Lately New Zealand is believed to be hanging around with Canada, the USA, and China

New Zealand just won't commit.

But we had an Emissions Trading Scheme together.

He's left me for China, India and the USA.

He's been so difficult since the Durban Platform.

I only asked him to reduce his net and gross emissions.

I only asked him to stop fiddling with his forest sinks.

The collection is called the Kyoto New Zealand break-up. It's been so much fun!