24 May 2011

Goff: agriculture in NZ ETS in 2013 not 2015

Danyl of the Dim-Post argues that Phil Goff’s plan to fund a research and development tax credit by bringing the agricultural sector into the NZ ETS in 2013 instead of 2015 is smart wedge politics.

In our office yesterday, non-flying Tom was saying the Labour tactic reflects a societal inflection point; extreme climate events such as the Pakistan and Queensland floods and the Russian heat-wave are accepted as symptoms of AGW - except by Don Nicholson and the Tea Party. Labour can leverage off this each time there is another extreme climate event. Every ballistic emotive response from Federated Farmers paints them as the NZ Tea Party; and John Key and National will suffer guilt by association.

However, it is quite another issue whether the NZ ETS, as tweaked to include agriculture from 2013 with free allocation of units ending in 2025, is an effective policy to reduce GHG emissions. Matthew Hooton has been having great fun playing with other Dim-Post commenters on this.

Economist Geoff Bertram would probably say that the design of the NZETS is still stuffed, as it has no Cap on emissions and no auctions of units.

Even with agriculture starting in 2013 and being given slightly less free units (90% of 2005 emissions vs 90% of 2015 average output ), the basic NZETS design is still: 1) over-allocate compensation units to fishing and forestry, 2) over-allocate units on output-base to emissions-intensive trade-exposed industry and agriculture 3) allow unlimited importing of cheap Chinese Kyoto units 4) have no auctions of units and therefore no crown revenue.

So the very small extra carbon price placed on agriculture from 2013 will be likely to end up with net sellers of NZ units and not with Government. And there fore there would be no crown revenue to fund and R & D credits.

I wonder if Goff and co have really thought this through. It may be good 'politics' but it sure isn't good climate change mitigation policy.

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