Geoff Bertram puts the Cap back in Cap and Trade

Speaking of the economist Geoff Bertram, as I was in the previous post, here he is on 10 June 2011 writing a letter to the Editor reminding the Wellington Fairfax-owned newspaper The Dominion Post that the New Zealand Emissions Trading Scheme (NZ ETS) does not have a cap so it's not a Cap and Trade emissions trading scheme.

OPINION: I was sorry to see that The Dominion Post failed to do the most basic homework on how New Zealand's emissions trading scheme works.

In the box on A4 on Tuesday, the paper reported that "the Government sets a cap on how much carbon can be emitted for different sectors". Alas, our Government does no such thing.

The ETS is not a cap-and-trade scheme because it puts no cap on greenhouse gas emissions at either sectoral or national level. Because no cap exists, the scheme is basically a money-go-round, with emission units traded in a policy vacuum.

Roll on a proper carbon tax, with the money recycled to protecting household budgets and promoting renewables.

Supporters of serious climate- change policy just have to hope that the Australian Government will manage to push through its carbon tax without too many of the special-interest subsidies and exemptions that make New Zealand's ETS so wasteful and ineffective.

GEOFF BERTRAM

Climate Change Research Institute, Victoria University

Geoff Bertram is completely correct. Here is the chapter and verse on the absence of a cap in the NZ ETS.

Ministry for the Environment Fact Sheet 16 (2008) stated There is no cap on the emissions that occur within New Zealand. That was referring to Labour's Climate Change Response (Emissions Trading) Amendment Act 2008.

Ministry for the Environment Emissions trading Bulletin No 12, INFO 441 (September 2009) states "The Bill (the Climate Change Response (Moderated Emissions Trading) Amendment Act 2009) changes the allocation provisions of the existing (Climate Change Response Act 2002) from allocating a fixed pool of emissions to an uncapped approach to allocation. There is no longer an explicit limit on the number of New Zealand units (NZUs) that can be allocated to the industrial sector"