15 March 2017

New Zealand Aluminium Smelters Ltd and their excessive free allocations of emission units

This post is sort of a 'review article' post synthesizing all my previous posts about New Zealand Aluminium Smelters Limited and how their overly generous free allocation of emission units under the emissions trading scheme shields them from a carbon price. NB also posted at Robin Johnson's Economics Web page..

In each year that New Zealand has had an emissions trading scheme, the trans-national company New Zealand Aluminium Smelters Limited was given a very generous 'free allocation' of emission units. First, back in 2010, and in the years following and, bringing us up to date, in 2015.

I have written several blog posts about these free allocations. In the very beginning, back on 7 October 2011, I wrote 150% Pure Subsidy which was also posted at Hot Topic as 120% Pure Subsidy.

In that post I argued that New Zealand Aluminium Smelters Limited, the operator of the Tiwai Point aluminium smelter, was being 'over-allocated' emission units under the New Zealand Emissions Trading Scheme (the "ETS"). That the company was being given more free emission units than the emission units it was required to surrender for it's emissions. And therefore the company was not 'facing a carbon price' under the emissions trading scheme. It was being shielded from the carbon price. In other words, the allocation of free emissions units acted as an 'insurance policy' against ever facing a carbon price.

The company was given an industrial allocation of 210,421 units for the six months from 1 July to 31 December 2010. I estimated that the smelter company was required to surrender between 143,000 and 172,000 emissions units for the six months to 31 December 2010. Therefore the estimated degree of over-allocation of units was between 120% and 147%.

The over allocation is obvious, I thought, when we compare the emissions factor (as used in our greenhouse gas inventories) of producing a tonne of aluminium, with the allocation 'baseline', the number of emission units allocated per tonne of aluminium produced.

In the CRF tables/spreadsheets (20MB zip file) released with New Zealand's Greenhouse Gas Inventory 1990–2014, the 2010 emissions factor for producing a tonne of aluminium is 1.67 tonnes of carbon dioxide with an additional 0.14 tonnes of carbon dioxide equivalent for perfluorocarbon (PFC).

In October 2011, the Climate Change (Eligible Industrial Activities) Regulations 2010 specified that New Zealand Aluminium Smelters Limited was allocated 2.556 emission units per tonne of aluminium produced in 2010.

That allocation 'baseline', 2.556 units per tonne of production, exceeded the 'inventory' emissions factor in carbon dioxide equivalent (1.67 + 0.14 = 1.81) by a factor of 1.4. As indicated in this bar chart, which you could say represents a mental model of how the free allocation works.

Then, on 20 October 2011, I wrote 120% Pure Subsidy: Part 2 which was also cross-posted at Hot Topic.

In that post, I was given feedback that the free allocation of units to emitting industries included extra units for "ETS electricity pass-through costs".

As the report "Development of industrial allocation regulations under the New Zealand emissions trading scheme: Consultation document, (MfE December 2009, ME 984) stated;

"A number of energy-intensive firms will face higher costs of production because of the electricity used in their production"
because, Q.E.D.
"The NZ ETS will increase the costs of generating electricity from fossil fuels and geothermal sources".

This was also explicit in the original Labour Government report "The Framework for a New Zealand Emissions Trading Scheme" of 2007.

It stated in the fourth bullet point to subsection '5.3.1 In-principle decision on levels of assistance through free allocation' (with my underlining), that;

indirect emissions associated with the consumption of electricity, as well as direct emissions from ... industrial processes will be included in the concept of emissions from industrial producers ... The basis for allocation for electricity consumption will be one that compensates firms for the cost impact”.

However, the total free allocation for both direct emissions and the 'ETS electricity pass-through costs' "would operate within a total envelope of assistance to industry defined as 90 per cent of 2005 emission levels", (subsection 6.5.2.1 Free allocation Level of total assistance to industry).

This allocation 'envelope' (almost a 'cap') of 90 percent of 2005 emissions was dropped in the 2010 Cabinet Paper "EGI Min (10) 14/9".

For highly emissions-intensive trade-exposed emitters, the allocations would be based on actual production (i.e. an 'intensity' basis where allocation would increase if production increased) for the industry (Paragraph 14). The 90 percent (of historic emissions) became a "90% level of assistance" (Paragraph 20) which then became an input to the formula for calculating the allocation number; 'Allocation (in units) = Level of Assistance × Quantity of Production × Allocative Baseline' (Paragraph 32).

The 2010 Cabinet Paper "EGI Min (10) 14/9" established a proxy for the 'ETS electricity pass-through costs', the electricity allocation factor (to calculate ‘emissions’ per megawatt hour of electricity used, paragraph 8) as stated in paragraph 37:

An electricity allocation factor of 0.52 tCO2-e/MWh has been used to calculate proposed allocative baselines. This was the factor proposed in 2008 by the Stationary Energy and Industrial Process Technical Advisory Group (SEIP TAG) to offset the expected increase in electricity price as a result of the introduction of the NZ ETS. This factor was intended to reflect increases in electricity price to the end of 2012 and will need to be periodically updated.

So the counter argument is that New Zealand Aluminium Smelters Limited faces a carbon price through increased electricity costs rather than through the number of emission units surrendered for it's direct emissions.

We may say the allocation baseline has two parts; a direct emissions baseline and and an electricity/(energy) baseline. The free allocation of additional units for the ETS electricity costs lessens the impact of that carbon price (without removing it entirely). This bar chart, where the allocation baseline is less than the sum of the various emissions costs, is the mental model for this narrative for the free allocation.

However, the bar chart isn't the last word. I just made up the numbers to show the idea.

Free allocation to the smelter includes ETS electricity costs. What could possibly go wrong?

Back in the mid-2000s, when the ETS was being developed, what else did we know about the New Zealand Aluminium Smelters Limited electricity contract with Meridian?

We knew it was secret, controversial and far too cheap. Brian Fallow in 2004 estimated the electricity price to be just over 5c a kilowatt hour. Another 2008 cost estimate was $52-$54 a MWh (5.2c - 5.4c a kilowatt hour. CAFCA thought the cost in 2007 was 4.7 c a kilowatt hour.

Brian Fallow also points out the pre-2013 contract exposed perhaps 10 per cent of the supply to the floating wholesale price and that New Zealand Aluminium Smelters were very sensitive about varying wholesale costs when the hydro lakes had low storage levels.

The design of the generous free allocation regime moved the 'discounted' (but apparently still real) ETS 'carbon' price away from the direct emissions and to the ETS electricity pass through costs of an aggressive transnational company with the largest volume, cheapest and most secretive electricity contract in New Zealand. It would be harder to think of a policy more likely to result in regulatory capture and rent-seeking.

Allocations including indirect energy costs may make emitters net sellers of units

There is one other important implication of upstream (ETS-related) energy costs being included in the 'allocation baseline'. The total allocation may well be greater than 100% of their direct emissions. But that doesn't matter if the emitter still faces some reduced electricity ETS cost pass-through.

The big 'emission intensive' and 'trade exposed' emitters will always be net sellers of emission units. It very hard to see how a net seller of emission units is, as Nick Smith liked to say, "facing a carbon price".

As an example, there wasn't much doubt that New Zealand Steel's direct allocation of units exceeded their emissions liability.

As Jan Wright observed in her submission on the electricity allocation factor:

"The pertinent question, then, is how much electricity prices will increase as a result of carbon pricing. But electricity price increases are very hard to predict, due to the complexities of the New Zealand electricity market and the need to cater for rising electricity demand. Despite the difficulty, it is imperative the number of credits given to industry to offset electricity price increases should be accurately - and transparently - determined."

The critical questions are therefore "What are the extra costs to the smelter of thermally generated electricity caused specifically by the emissions trading scheme? How are these extra costs measured? Are the costs and method of measurement transparently disclosed?"

It's not classic cap and trade its a double-dip

Let's just be very clear that this idea of the allocation base including upstream ETS energy costs is conceptually a departure from the classic 'cap and trade' model of emissions trading. In strict cap and trade, with a real cap on emissions, and with 'grand-parented' free allocation of the 'capped' units to emitters, the energy sector would be allocated a share of the cap to reflect their direct emissions from energy generation. That allocation, being a part of the finite cap, could not go to both the energy companies with thermal fossil-fuel generation and to the 'downstream' industrial emitters.

In other words, the allocation of extra units to industries because of additional 'up-stream' carbon-intensive energy costs caused by the emissions trading scheme, is the allocation that would have gone to the energy companies in the classic model. That would not be possible in true 'all-sectors' emissions trading scheme with a real cap. It's only possible in our emissions trading scheme because it only applies to parts of the economy and as it is uncapped.

But lets get back to the issue of the 'ETS electricity pass-through costs'. At the time of 120% Pure Subsidy: Part 2 I argued that it was a nonsense for the free allocation of units to a smelter to include a compensation factor for upstream carbon-intensive electricity costs, when that smelter owed it's existence to a dedicated source of hydroelectric generation from Lake Manapōuri. Also the generator the smelter contracts it's electricity from is the 100% renewable Meridian Energy.

The counter argument is that that the contract (or contracts) with Meridian prices some proportion of the electricity supplied at the whatever the wholesale price is at a point in time. And as explained by Brian Fallow, the wholesale price may include an ETS component when coal generation is setting the marginal price.

Then, on 2 November 2011, I wrote Nick Smith fails the smelter spin test, also cross-posted at Hot Topic.

In that post, I argued that the then Minister for Climate Change Issues Nick Smith was incorrect in saying that New Zealand Aluminium Smelters faced a carbon price and that European aluminium smelters did not. Even though the European smelters were not (at that time) participants in the European emissions trading system, the (upstream) electricity sector was and therefore there was a carbon price passed 'downstream' to the smelters from the more carbon-intensive European electricity generators.

On 23 April 2012, I reported that New Zealand Aluminium Smelters Limited had won the 2011 Roger Award for being the worst transnational company operating in New Zealand.

On 9 September 2012, I wrote Power to the smelter? New Zealand Aluminium Smelters Limited wants to pay less for electricity for the Tiwai Point aluminium smelter. That post noted that New Zealand Aluminium Smelters Limited was renegotiating the electricity supply contract with Meridian Energy.

I concluded that New Zealand Aluminium Smelter Limited had breathtaking audacity in threatening to close the Tiwai Point Smelter if they didn't get lower electricity costs, when they already enjoyed the lowest electricity cost of any sector in New Zealand. In 2011 New Zealand Aluminium Smelter Limited paid the very lowest average rate for electricity in New Zealand; 5.03 cents per kilowatt-hour! Residential users paid 22.6 cents per kilowatt-hour, or four times as much.

On 11 September 2012, I riffed off a gangster meme and wrote the evocatively-titled Rio Tinto Alcan New Zealand Ltd plays godfather: nice aluminium smelter you got, be a shame if something happened to it, also at Hot Topic.

I noted that New Zealand Aluminium Smelter Limited was again threatening to close the smelter and in effect saying "Shame if something happens to" the smelter workforce, the Southland economy, the New Zealand electricity market, Meridian Energy and the conservation program for the critically endangered kakapo.

For a couple of years, I didn't really think about smelter until I looked at the Official Information Act releases by the NZ Treasury about the New Zealand Government's payment of $30 million to New Zealand Aluminium Smelters Limited in 2013.

Amongst the dozens of documents was an email between officials with a familiar title which made me laugh; Email to Officials: Rio Tinto Alcan NZ Plays Godfather: Nice Aluminium Smelter you got, be a shame if something happened to it.

In this email, one official noted to another that Meridian Chief Executive Mark Binns had emailed them asking if the electricity costs mentioned in my Hot Topic blog post were correct and that yes the numbers were correct!

Another couple of years went by. As they tend to. Then, on 9 April 2016 of this year, I wrote Opening up the data on emissions units in the NZ emissions trading scheme. In that post I noted with some surprise that the updated data on free emissions unit allocations showed that New Zealand Aluminium Smelter's 2013 allocation had increased by a factor of five from the 2012 allocation. And of course I made a bar chart.

So what happened in 2013? The free allocation increased from 301,244 units in 2012 to 1,524,172 units.

What happened was that the 2013 allocative baseline for aluminium production changed from 2.062 units per tonne to 10.441 units per tonne. As you can see from this bar chart.

Wrapping it all up

In hindsight, it's obvious from the June 2010 Cabinet paper Industrial Allocation under the New Zealand Emissions Trading Scheme: Group One Activities, Ref no: EGI Min (10) 14/9 that although there was a generic 'electricity allocation factor' of of 0.52 tCO2-e/MWh, that would not apply to New Zealand Aluminium Smelters Limited.

They would instead have a 'bespoke' arrangement for the electricity component of the allocation baseline.

This apparently involves an annual "reading" of the highly confidential ultra-cheap electricity supply contract with Meridian. There are a number of potentially ambiguous statements about how this is done.

Paragraph 38 states;

"Specific electricity supply arrangements mean it is appropriate to prescribe specific allocative baselines for aluminium smelting. The Act contains the ability to adjust allocative baselines where particular electricity supply arrangements affect the electricity price increase a particular firm faces. The rationale for this power is to prevent large over-allocations where electricity related contracts prevent a full pass-through of electricity costs."

Paragraphs 40 is in first-person and active tense (think of Nick Smith speaking confidently) and it states (with my underlining)

"I have since used my powers under section 161D of the Act to request electricity contracts and related information from NZAS. [Deleted] In particular the analysis suggests:
  1. An average pass-through of electricity costs to NZAS during the transition phase (until 2013) of [Deleted] compared with the pass through of 0.52 tCO2-e/MWh that would otherwise be assumed.
  2. Using the default pass-through of 0.52 tCO2-e/MWh would result in an average over-allocation to NZAS of [Deleted] during the transition phase.
  3. The actual pass-through to NZAS during the 2010 to 2012 period is likely to be significantly higher or lower than the average value above".

So it's not just a matter of reading the contract. There is also "related information" from New Zealand Aluminium Smelters Limited. There is also an "analysis". This "analysis" suggests that actual annual pass-through electricity costs vary from year to year and may be more or less than than the electricity allocation baseline. However, in spite of this variability, the average pass-through electricity costs for the years 2010 to 2012 is known (but has been deleted to keep it confidential) and is less than 0.52 tCO2-e/MWh.

Paragraph 9 of the Executive Summary states a fairly firm conclusion;

"Information obtained from New Zealand Aluminium Smelters Limited (NZAS) enables electricity pass-through costs that NZAS faces for 2010 to be determined with reasonable certainty at this point."

Paragraph 41 states; "to reflect the actual electricity costs to NZAS, the allocative baseline for NZAS would need to be amended at the beginning of 2011, 2012 and 2013 to ensure that final allocations more accurately reflect the pass-through of electricity costs to NZAS".

So, in conclusion, the Ministry for the Environment has set up a regulatory process where New Zealand Aluminium Smelters Limited is enabled and encouraged to annually provide the Ministry with "related information" and "analysis" of the electricity contract - in order to set the allocation baseline and therefore the number of free units they will be allocated. And this information analysis is not disclosed. It's hard not to conclude that this bespoke process allows New Zealand Aluminium Smelters to annually nominate it's preferred free allocation of emission units.

16 January 2017

2016 the warmest year on record via a cool self-updating data package of global temperature

Radio New Zealand reports that 2016 was the new record warmest year in the instrumental record, so I will pitch in too. But with an extra touch of open data and reproducible research.

It's been a while since I uploaded a chart of global temperature data. Not since I made this graph in 2011 and then before that was this graph from 2010. So it's about time for some graphs. Especially since 2016 was the world's warmest year as well as New Zealand's warmest year.

When I made those charts, I had to do some 'data cleaning' to convert the raw data to tidy data (Wickham, H. 2014 Sept 12. Tidy Data. Journal of Statistical Software. [Online] 59:10), where each variable is a column, each observation is a row, and each type of observational unit is a table. And to convert that table from text format to comma separated values format.

I would have used a spreadsheet program to manually edit and 'tidy' the data files so I could easily use them with the R language. As Roger Peng says, the one rule of reproducible research is "Dont do things by hand! Editing spreadsheet data manually is not reproducible".

There is no 'audit trail' left of how I manipulated the data and created the chart. So after a few years even I can't remember the steps I made back then to clean the data! That then can be a disincentive to update and improve the charts.

However, I have found a couple of cool open and 'tidy' data packages of global temperatures that solve the reproducibility problem. The non-profit Open Knowledge International provides these packages as as part of their core data sets.

One package is the Global Temperature Time Series. From it's web page you can download two temperature data series at monthly or annual intervals in 'tidy' csv format. It's almost up to date with October 2016 the most recent data point. So that's a pretty good head start for my R charts.

But it is better than that. The data is held in a Github repository. From there the data package can be downloaded as a zip file. After unzipping, this includes the csv data files, an open data licence, a read-me file, a .json file and a cool Python script that updates the data from source! I can run the script file on my laptop and it goes off by itself and gets the latest data to November 2016 and formats it into 'tidy' csv format files. This just seems like magic at first! Very cool! No manual data cleaning! Very reproducible!

Here is a screen shot of the Python script running in a an X-terminal window on my Debian Jessie MX-16 operating system on my Dell Inspiron 6000 laptop.

The file "monthly.csv" includes two data series; the NOAA National Climatic Data Center (NCDC), global component of Climate at a Glance (GCAG) and the perhaps more well-known NASA Goddard Institute for Space Studies (GISS) Surface Temperature Analysis, Global Land-Ocean Temperature Index.

I just want to use the NASA GISTEMP data, so there is some R code to separate it out into its own dataframe. The annual data stops at 2015, so I am going to make a new annual data vector with 2016 as the mean of the eleven months to November 2016. And 2016 is surprise surprise the warmest year.

Here is a simple line chart of the annual means.

Here is a another line chart of the annual means with an additional data series, an eleven-year lowess-smoothed data series.

Here is the R code for the two graphs.

28 September 2016

Opening up the data or webscrape the 2015 free allocation of emission units from MfE

Let's look at the latest data on the very generous free give-aways of emissions units to emitters made by the Ministry for the Environment
(N.B. Update on 10 December 2016. The allocation decisions have moved to the web page of the Environmental Protection Authority. And the "importHTML" function in Google sheets does not work on the EPA pages.)

The Ministry for the Environment has up dated its webpage 2015 Industrial Allocation Decisions to show the final 2015 free allocation of emission units to emitters under the New Zealand Emissions Trading Scheme.

I looked at the 2010 to 2014 data in my post Opening up the data on emissions units in the NZ emissions trading scheme. So in this post I am will repeat my steps in web-scraping the freebie emissions unit data into a sensible open format.

The url of the webpage is http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/participatin-4

Go to Google and open a new Google sheet.

Enter this text in cell A1 of the Google sheet.

=importHTML("http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/participatin-4","table",1)

That worked perfectly! We have a Google sheet of the 2015 free unit allocation to NZ emissions trading scheme emitters.

I have saved it as NZETS-2015-final-allocations-for-eligible-activities.

However, the first column includes both industry names and types of industries classified by the type of emissions the industry produces. And lots of asterisks. Any sensible format would have these attributes as separate columns so that each company/emitter would have a row each.

So I used a programme called Open Refine to data-wrangle the data into that format and to save it as a comma-separated values file which is this Google sheet NZETS-2015-final-allocations-for-eligible-activities. Its a bit fiddly using Open Refine, so I won't describe how I did it.

This is the updated free emission unit allocation data from 2010 to 2015.

As usual, the big emitters get the most emission units! Of 4.417 million units allocated to industries, 90% went to 11 large companies. New Zealand Steel Development Limited, of arbitrage profits fame, gets 1,067,501 free units. New Zealand Aluminium Smelters Limited gets 772,706 free units.

I did a bit of data visualising and created this pie-chart in R programming language.

The R script for that is

Did I not get the End the Rainbow memo? So I picked a better colour scale from Colour Brewer.

The R script for this non-rainbow pie chart is:

27 September 2016

What are we waiting for?

In this guest post, the non - flying Wellington barrister and solicitor Tom Bennion writes about the International Civil Aviation Organization (ICAO) proposals for 'carbon-neutral' growth of greenhouse gas emissions from the fast-growing aviation industry.

New Zealand parents often tell their children not to eat too many sweets. Our primary schools spend a lot of time talking about suitable diets. We do this because we have the long term interests of our children at heart.

I find the contrast between that and how we currently approach climate change disheartening and distressing and especially when I consider all the families I know who are now taking flying holidays with their children.

This is a really uncomfortable topic. But we have to talk about it, and do so urgently.

We should, by now, all know the math. There isnt any personal activity we or our children can engage in that is even remotely close to air travel in terms of the sheer volume of greenhouse gas emissions it produces.

Google tells me that a Boeing 747 burns roughly 12 litres of aviation gas per kilometer. That is pretty good economy for carrying 500 people a short distance. But not if you are flying 18,819 km, the distance from Wellington to London and back. In that case, every person on the flight is responsible for consuming 450 litres of fuel. To put that in perspective, imagine if, instead of taking that trip, you revved up an average family car in your driveway to 100km/hr and at 6 litres per 100km you would need to leave it running for 75 hours or 3 days. Then repeat that for each family member that took the trip.

If you did that in your neighbourhood, you would be called a crass and thoughtless person, and people might wonder what sort of children you were raising.

In addition, these figures dont address the fact that the warming effect of aviation gas burned at altitude is around 2-3 times the impact when burned at sea level. So make that 6-9 days of car revving for each family member.

We also know that the emissions from our plane trips this year and this decade will continue to heat the planet for hundreds of years.

It isnt necessary to bang on about how bad things will get if we keep doing this. We already have an inkling from worldwide weather trends in the last 12 months. The thing to bear in mind is that the emissions we are contributing so hugely to through air travel are a severe threat to the future lives of our children, a much greater threat than a bad diet.

In the face of all of this, we have to accept, I think, that at the moment we are responding essentially with the instincts of small children: 
* We can see that we should stop this behaviour but wont because it would inconvenience us, be 'too hard' and 'everyone else is doing it'.
* We dont like to talk about it. We mumble an excuse and move away if it comes up.
* If we have to confront it, conversations quickly get tense as we get defensive about our reasons for keeping on with this clearly inappropriate behaviour.
* We avoid mentioning the issue with our own children because we know they would instantly spot our hypocrisy. In addition, and maybe this is the worst of it, by taking them on a flying holiday with us, we implicate them in our bad behaviour.

In uncomfortable situations like this we are anxious for good news. Here it is. All the members of the International Civil Aviation Organisation (ICAO), that is, essentially all UN member states, five years ago adopted a goal of carbon neutral growth after 2020.

You may wonder how or why the ICAO picked on 2020 as a benchmark in the first place. I dont know. No one does. It has no bearing on reality, no bearing on trying to avoid dangerous climate change by keeping within the global average temperature rise within 1.5 of 2 degrees, and isnt intended to.

It's the best that can be politically extracted from 190 odd nation states who know that their home populations are acting like children and wont forgive them if they try to have a serious conversation about reducing airline emissions.

Here are some of the problems with the ICAO goal:
* the ICAO has been promising action for ages. It got the mandate to work on reducing aviation greenhouse gases in the 1997 Kyoto Protocol.
* The ICAO plan doesnt cover domestic aviation - thats about 30% of aviation emissions.
* By 2020 annual emissions will be around 1000 megatonnes. And there is no plan to reduce them at all, just to hold the annual level to about 1000 megatonnes.
* Even after making heroic assumptions about how much new airplane developments can cut back on some emissions, the ICAO has calculated that it can only meet its target with offsets.

That's right, the emissions from our holiday flights in 2020 will be fine because someone else somewhere else (the details dont need to concern us) is going to promise to grow some trees and keep them growing until around 2400 or so. I dont think hubris really captures it. Its the sort of fantasy that only children could indulge in.

And lastly, and here is the real kicker, the ICAO isn't going to do pretty much any of this. Its just announced that its about to reset the start date of its proposal so it wont be compulsory for any nations until 2027, and will allow for whole sectors of aviation to aggregate their emissions. So there will be lots of delay and massaging of numbers. We all know what happened with the fraudulent carbon credits under New Zealand's emissions trading scheme, and, with the fantasy thinking of offsets thrown in, I expect you can see where all of this is heading.

No surprises that the New Zealand Government has announced that its happy with the scheme, provided everyone else signs on with them of course.

This also means, obviously, that when your local airline tells you it supports the ICAO approach, has purchased some electric cars or is putting solar panels on the roof of the airport, or planting some trees for you to fly over in their planes, but hasnt yet switched its entire air fleet to biofuels or done something as blindingly obvious as stopping its airpoints programme, you can just politely ignore them.

There is a technical term for this refusal to face reality. Its called cognitive dissonance. That is, juxtaposing two contradictory ideas and finding ways to manage the mental chasm between them. In this case its not just the contradiction between our personal carbon emissions from air travel and stated concern about climate change, its the fact that as parents we care for our kids while managing the secret knowledge that we risk literally shortening their lives and most certainly the lives of their own children.

I am selfish. My worry is that future children will look at our thousands of travel photos alongside the news headlines about record-setting heat, storms, floods etc, and wont just label us childish. Sociopaths is the terms we use for people with a sense of entitlement so strong that they would prefer mass death over personal discomfort and unease. But maybe they will just call us cowards. Then again, they might get inventive and call us child abusers.

I think we need to be uncomfortable for a little bit. We are adults. Adults can examine the situation rationally, and tell our kids that the hypermobile life of flying holidays we have been creating for ourselves and them is going to put us all in danger and has to go on hold. We all have a habitable planet to save right now.

So get out your airpoints statement. Explain to the kids you are donating all of them to forest planting. Tell them that holidays from now on will be a bit closer to home, and that overseas flights are special, rare things, that we will reserve for them when they are older, when they are adults and we have made sure the world is safe again.

22 September 2016

Is it in the spirit of the Paris Agreement to ratify it with more emissions and more creative accounting?

Is the New Zealand Government's plan to ratify the Paris Agreement in 2016 consistent with a two degrees Celsius (2C) carbon budget?

Since the December 2015 Paris Agreement, the British climate scientist Kevin Anderson has given a couple of talks with the title Beyond Dangerous Climate Change: Does Paris Lock-out 2 Degrees?

Anderson's message is that although the Paris Agreement was a diplomatic triumph, it relies on speculative utopian technological fixes (bio-energy carbon capture and storage) in the future in order to reconcile the now extremely limited carbon budgets consistent with the desired 2C (and 1.5C) temperature limits with business-as-usual economics and politics. In other words, the Paris Agreement locks out the 2C target.

Why do I mention that? Because I want to run a 'Kevin Anderson' ruler over the New Zealand Government's recently announced ratification of the Paris Agreement. To conduct a bare assessment of New Zealand's emissions taking account that it is the cumulative emissions that determine warming. I want to ask the question 'does the New Zealand ratification also lock out any policies for emissions reductions consistent with a fair share of a 2 degrees Celsius carbon budget?'

To set the context, I'll set out some of the mechanics of what ratification of the Paris Agreement will require in New Zealand. Then in true Kevin Anderson style there will be a look at projected emissions and some graphs.

As we know, last month, on 17 August 2016, Minister for Climate Change Issues Paula Bennett announced that New Zealand would ratify the Paris Agreement this year.

Bennett's announcement represented a change in position as in April she had told Fairfax's Tracy Watkins that she was not rushing to ratify the agreement in the next couple of months

A cabinet paper from Paula Bennett "Paris Climate Change Agreement - Report back to Cabinet and Approval for Signature" has been on the Ministry for the Environment website since April 2016.

We also know from the Ministry of Foreign Affairs and Trade (MFAT) that ratification of the Paris Agreement will involve:

"..presenting the agreement and a national interest analysis to Parliament for examination by a select committee, after which the select committee tables a report in the House. After this, legislation may be passed and then New Zealand may ratify the Agreement".

The "Paris Agreement National Interest Analysis" was very briefly open for submissions on the New Zealand Parliament website until 2 September 2016.

The Ministry of the Environment has a Paris Agreement webpage. This confirms that once Parliament agrees to ratification (and enacts legislation), the Government will deposit the ‘instrument of ratification’ with the UN Secretary General before the next international UNFCCC climate change meeting in Morocco (COP22) in November 2016.

Therefore, some stepping stones are apparent. There will be a Parliamentary Select Committee considering the National Interest Analysis and submissions. That Parliamentary process has its shadow process, the Ministry for the Environment driven, and therefore more Government-controlled, review of the New Zealand Emissions Trading Scheme. Some amending legislation will probably be presented as the outcome of both processes.

A crucial point will of course be the detail of this amending legislation.

Paula Bennett has stated that the Government has "absolutely no intention of changing our target" (the New Zealand 2030 climate change target), and that the required 'Paris' legislation will be nothing major. Therefore, as she stated to Radio New Zealand, the New Zealand Emissions Trading Scheme will only need to be tweaked to meet the commitments under the Paris Agreement.

So the amendments will be to the Climate Change Response Act 2002 which is the statute that incorporates the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol into New Zealand law. The UNFCCC is included as the first schedule to the act and the Kyoto Protocol is included as the second schedule.

The amendments will probably affect the provisions describing the operation of the New Zealand Emissions Trading Scheme (which has been under review all of 2016). Perhaps the Paris Agreement will be incorporated as a further schedule.

The current highly conditional New Zealand INDC (Intended National Determined Contribution), otherwise known as the 2030 climate change target, will become a NDC National Determined Contribution. Professor Ralph Sims notes that the NDCs "will need to be based largely on domestic mitigation actions" but "they are not legally binding".

Ralph Sims, who was writing back in February, was hopeful that the New Zealand NDC would be strengthened to be more ambitious, given that the sum of the 2015 INDCs "collectively would lead to an untenable 2.7 – 3 degrees Celsius future, rather than restrict global warming below the internationally agreed 2 degrees Celsius above pre-industrial levels" He seemed to have some hope that the then yet-to-be published Royal Society climate mitigation report would contribute to that.

So does that mean the Government will actually do something to reduce domestic emissions? Perhaps toughen up the emissions trading scheme, so that it uses only New Zealand units and has a fixed cap (as in 'cap and trade'), and auctioning units instead of free generous allocation of units to industry? No, of course not!

The National Interest Analysis continues on paragraph 104 on page 30:

"We have assumed that New Zealand will be able to purchase sufficient international emissions reductions in the 2020s".

So instead of domestic emissions reductions, we are betting the farm on the magic of the market, more speculative emissions trading, open access to and availability of international emission units from international carbon markets. However, this is no sure thing. Table 5 on page 15 states (my emphasis):

"The (Paris) Agreement provides for a centralised market mechanism and also allows other approaches to be developed by Parties. When and how the centralised market mechanism will be operationalised is unclear, and it may not provide a timely and sufficient supply of emission reductions to be economically practical for New Zealand’s use.".

So no pressure, New Zealand! The analysis then lists the many steps/obstacles on and in the way of New Zealand having access to functioning international carbon markets.

"This means that New Zealand will likely need to build future international markets from the bottom up in cooperation with other willing participants. New Zealand must: find willing trading partners, develop standards (including working with others) to ensure international carbon markets can function effectively (eg, on environmental integrity and unit registries), ensure that its trading activities are consistent with any future accounting requirements".

Paragraph 64 on page 19 of the Paris Agreement National Interest Analysis then states:

"New Zealand’s first nationally determined contribution (i.e. the 2030 target) was developed on the basis that New Zealand will achieve the 2030 target through a combination of domestic emission reductions, forestry growth and participation in international carbon markets."

Where have we heard that before? Back when I looked at the creative accounting for the 2020 emissions reduction target.

Surely, if the Government says it intends to adopt a mix of policies, one of which is domestic emission reductions, then some domestic emission reductions will actually happen?

Well perhaps we could look for the reductions in domestic emissions in the Ministry for the Environment's projections of future emissions "with measures" and "without measures" out to 2030. These are in the report New Zealand’s Second Biennial Report under the United Nations Framework Convention on Climate Change released in December 2015. This is the report where the only substantive differences between the with and without energy sector projections were the closure of the Huntly Thermal Power Station which then got reversed. Thus cancelling the projected decline.

At the time of their release in late December 2015, Radio New Zealand reported the complete inconsistency with the freshly-signed Paris Agreement; Emissions set to far outstrip Paris target. And they quoted an expert.

"Suzi Kerr, a senior fellow at economic research institute Motu, said the projections were completely incompatible with the target New Zealand took to the Paris climate change talks"

Here is a chart of these incompatible projected emissions from 2013 to 2030 by sector. The emissions for all sectors are all expected to increase. For the land-use, land-use change and forests (LULUCF) sector, the net carbon absorbed (or sequestered) is displayed as negative emissions and is projected to decline.

Here is another chart of the projected gross emissions (without LULUCF) and the LULUCF carbon sequestration (shown as negative emissions). The LULUCF 'credits' are subtracted from the gross emissions to get net emissions (the red line and dots) which is the real measure of what gets into the atmosphere. Note that the forestry sequestration is declining towards zero through the 2020s, but is still a net 'sink' of emissions.

However, wasn't there meant to be a 'wall of wood' in the 2020s? Of wholescale harvesting or land-use change of the 1990s pine forests that would tip the net carbon sequestration from the forests into being a net source of deforestation emissions in the 2020s.

Paul Young of the Morgan Foundation has looked at the issue and has concluded that the Government is pushing to change the rules used for accounting for forest carbon.

"They intend to switch to an 'averaging' approach, which will completely remove the planting and harvest cycle once a plantation forest reaches maturity. This change actually seems sensible; the problem is that we are changing the rules halfway through the game, in a way that directly favours us. If we had used the proposed rules from the beginning, New Zealand would receive far fewer forestry credits up to 2020"

We can look at this issue by comparing the current (December 2015) projections for the forests/LULUCF sector with the previous projections that were in the 2013 Sixth National Communication.

It seems very obvious that the Ministry for the Environment have used a very different definition of sequestered forest carbon in 2015 from the definition used in 2013. By my calculation they have found an extra 248 million tonnes of carbon in the decade from 2020 to 2030. That change in accounting treatment has changed the 'sign' of the signal. A decade of net deforestation has changed into a decade of net storage. That is inspite of the fact that the wall of wood of harvesting is still expected in the 2020s.

Paul Young is also still concerned the the Government has not ruled out using the surplus emissions units to comply with the 2030 target. Its not mentioned in either the Cabinet paper or the National Interest Analysis, so I asked Minister Bennett's office that question and I am waiting for a response.

Time for a conclusion. Is the New Zealand ratification of the Paris Agreement going to help or hinder the agreement's ambitious goals?

The ratification reveals that New Zealand will be doing what it's always done under the UNFCCC. New Zealand's greenhouse gas emissions are expected to rise and our policy response is more creative accounting and forest fudging. Our speculative utopian techno-fix is emissions trading. The New Zealand Government simply has no policies for reducing domestic emissions, let alone have policies that are consistent with a fair share of a 2 degrees Celsius carbon budget.

11 September 2016

The Ministry for the Environment's disavowed orphan carbon budget

Did you know that the Ministry for the Environment prepared a 'two degrees' carbon budget in 2014?

The relevant report "Potential long-term pathways to a low carbon economy for New Zealand", Wellington, Ministry for the Environment, August 2014, is not available from the Ministry's web page. However, I requested it from the Ministry via the 'For Your Information' website.

Incredibly, Idiot Savant had a blog post about it up at No Right Turn on Friday titled Climate change: No path to lower emissions under National before I had even updated the status of my Official Information Act request on FYI.

The paper explicitly sets out to explore a New Zealand carbon dioxide budget consistent with limiting eventual global warming to two degrees Celsius, using the contraction and convergence method.

Presumably because of that aim, the paper appears to have been completely disavowed by the Ministry for the Environment. The cover letter replying to my request at FYI states that the report is neither formal advice to the Government nor is it Ministry policy. The report has a header stating that it is 'sensitive' and 'Not Government or Ministry policy'. There is an italicised inserted 'Note' saying that Treasury does not agree that contraction and convergence is an appropriate measure of a 'fair share'.

The guts of the report are three carbon budgets (a 10th percentile, a median and a 90th percentile) based on applying contraction and convergence to one of the IPCC two degrees-consistent carbon budgets. Oddly, the working calculations and the actual budget amounts are omitted. I guess I can just make another request for them. The budgets are only presented in this graph.

28 August 2016

Geoff Simmons fact checks Paula Bennett's claim that the surplus units are clean

Geoff Simmons fact-checks Paula Bennett on the integrity of the surplus emission units. But has Geoff had a reverse make-over? Contact lenses instead of glasses? Whats happened to the wild shirts?

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

Geoff explains the issue very well and has the numbers right. You can verify for yourself that the Government intends to use the surplus units to allow greenhouse gas emissions to increase out to 2020 while claiming that New Zealand is 'meeting' it's "minus 5%" emission reduction target. Just go to Latest update on New Zealand's 2020 net position on the Ministry for the Environment's website.

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

Further down the page is this barchart that shows that New Zealand's gross emissions from 2013 to 2020 are expected to be 655.9 million tonnes and that the baseline is 509.8 million tonnes.