tag:blogger.com,1999:blog-18774179399597786612024-02-22T06:41:25.588+13:00The Worlds Worst Emissions Trading SchemeA blog written to explain that the New Zealand Emissions Trading Scheme will not effectively reduce greenhouse gas emissions.<br>
<a href="http://creativecommons.org/licenses/by/4.0/" rel="license"><img alt="Creative Commons License" src="https://i.creativecommons.org/l/by/4.0/88x31.png"></a>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.comBlogger146125tag:blogger.com,1999:blog-1877417939959778661.post-74917950399492248872017-06-06T20:44:00.001+12:002017-06-06T21:19:27.548+12:00The latest inventory of New Zealand's greenhouse gases<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7ZvPXHpweh4k-cHmj5NIYfF0WaTg1Puip51dJSTcHdVg8EvSLPbs45IEyy9k4RlMIJO9x3FrKzWtMYE3YnnVkj2K5ma8XjoxIgiYW4qFonlEzIKVi4q2dsutwQp8En1z44hyphenhyphenEl1OlH7o/s1600/BSL-note6otherincome2015Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7ZvPXHpweh4k-cHmj5NIYfF0WaTg1Puip51dJSTcHdVg8EvSLPbs45IEyy9k4RlMIJO9x3FrKzWtMYE3YnnVkj2K5ma8XjoxIgiYW4qFonlEzIKVi4q2dsutwQp8En1z44hyphenhyphenEl1OlH7o/s200/BSL-note6otherincome2015Screenshot.png" width="128" height="130" data-original-width="106" data-original-height="107" /></a></div>Minister for Climate Change Issues, <a href="https://www.beehive.govt.nz/release/greenhouse-gas-emissions-decline">Paula Bennett</a> and the Ministry for the Environment have released the latest <a hef="http://www.mfe.govt.nz/node/23304/">inventory of New Zealand's greenhouse gases</a>.</p>
<p>Minister Bennett and the Ministry have as their headline <a href="http://www.mfe.govt.nz/news-events/greenhouse-gas-emissions-decline">Greenhouse gas emissions decline</a>.</p>
<p>I thought would I whip up a quick chart from the new data with <a href="https://cran.r-project.org/doc/manuals/r-release/R-intro.html">R</a>.</p>
<p>I pretty much doubted that there had been any discernible decline in New Zealand's greenhouse gas emissions to justify Bennett's statement. We should always look at the data. Here is the chart of emissions from 1990 to 2015.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMMbTvnH6-3agN-aCUQjYyT9Dyl6KoDkfhdLjr_4NVZqg1KYFgpeTF4qfxE9Abbu0pzhyphenhyphengQKPrx1NwJH3DOC2KGHQaIauMRxENjFUjg2WMH4YlHEmjJduF200gwf2hw4cpzlcMT9FSxv8/s1600/NZ-ghg-2015-560.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMMbTvnH6-3agN-aCUQjYyT9Dyl6KoDkfhdLjr_4NVZqg1KYFgpeTF4qfxE9Abbu0pzhyphenhyphengQKPrx1NwJH3DOC2KGHQaIauMRxENjFUjg2WMH4YlHEmjJduF200gwf2hw4cpzlcMT9FSxv8/s1600/NZ-ghg-2015-560.png" data-original-width="560" data-original-height="420" /></a></div>
<p>Although gross emissions (emissions excluding the carbon removals from <a href="https://en.wikipedia.org/wiki/Land_use,_land-use_change_and_forestry">Land Use Land Use Change and Forestry (LULUCF)</a>) show a plateauing since the mid 2000s, with the actual gross emissions for the last few years sitting just below the linear trend line.<p>
<p>Gross 2015 emissions are still 24% greater than gross 1990 emissions.</p>
<p>For net emissions (emissions including the carbon removals from <a href="https://en.wikipedia.org/wiki/Land_use,_land-use_change_and_forestry">Land Use Land Use Change and Forestry</a> the data points for the years since 2012 sit exactly on the linear trend line. Net 2015 emissions are still 64% greater than net 1990 emissions.</p>
<p>There was of course more data wrangling and cleaning than I remembered from when I last made a chart of emissions!</p>
<p>The Ministry for the Environment's <a href="http://www.mfe.govt.nz/node/23304/">webpage for the Greenhouse Gas Inventory 2015</a> includes a link to a <a href="http://www.mfe.govt.nz/sites/default/files/media/2017%20CRF%20Summary%20data.xlsx">summary Excel spreadsheet</a>. The Excel file includes two work-sheets.</p>
<p>One method of data-cleaning would be to save the two work sheets as two comma-separated values files after removing any formatting. I also like to reformat column headings by either adding double-speech marks or by concatenating the text into one text string with no spaces or by having a one-word header, say 'Gross' or 'Net'.</p>
<p>Of course, that's not what I did in the first instance!</p>
<p>Instead, I copied columns of data from the summary Excel sheet and pasted them into <a href="https://convert.town/column-to-comma-separated-list">Convert Town's column to comma-separated list</a> online tool. I then pasted the comma-separated lists into my R script file for the very simple step of assigning them into numeric vectors in R. Which looks like this.</p>
<script src="https://gist.github.com/theecanmole/10bb436c6063e0d3211f6c91825cda14.js"></script>
<p>Then the script for the chart is:</p>
<script src="https://gist.github.com/theecanmole/decc34394948fa05e670a18afb15095d.js"></script>
<p>The result is that the two pieces of R script meet a standard of <a href="http://simplystatistics.org/2016/08/24/replication-crisis/">reproducible research</a>, they contain all the data and code necessary to replicate the chart. <a href="http://danielmarcelino.github.io/blog/2016/reproducible-research.html">Same data + Same script = Same results</a>.</p>
<p>I also uploaded the chart to <a href="https://commons.wikimedia.org/wiki/File:NZ-ghg-2015.svg">Wikimedia Commons</a> and included the R script. Wikimedia Commons facilitates the use of R script by providing templates for syntax highlighting. So with the script included, the Wikimedia page for the chart is also <a href="https://github.com/kbroman/steps2rr">reproducible</a>.</p>
<a title="By Mrfebruary (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons" href="https://commons.wikimedia.org/wiki/File%3ANZ-ghg-2015.svg"><img width="560" alt="NZ-ghg-2015" src="https://upload.wikimedia.org/wikipedia/commons/thumb/a/a3/NZ-ghg-2015.svg/512px-NZ-ghg-2015.svg.png"/></a>
<p>For comparison, here is my equivalent chart of greenhouse gas emissions for 1990 to 2010.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWHoLgj87qfUter0l8XyNxVJPLQCfuDfAhtq6t1gk3BIQUsM_cP2xkC6t3kDWZafIfmCPnvizZn9qhTqvMeEMh-MN7k8BduB91Q3cFgf5LmnErZZZkwX7BMTtxAqQqzejkk-mvAHDL_hI/s1600/NZ-ghg-2010-560-14pt.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWHoLgj87qfUter0l8XyNxVJPLQCfuDfAhtq6t1gk3BIQUsM_cP2xkC6t3kDWZafIfmCPnvizZn9qhTqvMeEMh-MN7k8BduB91Q3cFgf5LmnErZZZkwX7BMTtxAqQqzejkk-mvAHDL_hI/s1600/NZ-ghg-2010-560-14pt.png" data-original-width="560" data-original-height="420" /></a></div>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-44984318704103300272017-03-25T19:20:00.000+13:002017-03-25T19:23:53.595+13:00Graph of atmospheric carbon dioxide concentrations from another cool data package<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwVdGD5H_ItEzF5Af_WHB1eadp5Ksk1XeLGXLWW0JwlT6PiLlXEJzNAOPlIkURkXvFHv3qcbeiNlWWOp_geaFk1c71zWHJIPJYsgoxwzTxipIlKisXzLURUv6AwAiWtJLaFS1zcul96No/s1600/TrendsinCarbonDioxideMaunaLoa187px.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwVdGD5H_ItEzF5Af_WHB1eadp5Ksk1XeLGXLWW0JwlT6PiLlXEJzNAOPlIkURkXvFHv3qcbeiNlWWOp_geaFk1c71zWHJIPJYsgoxwzTxipIlKisXzLURUv6AwAiWtJLaFS1zcul96No/s1600/TrendsinCarbonDioxideMaunaLoa187px.png" /></a></div><em>I feature another cool self-updating data package, this time of concentrations of atmospheric carbon dioxide recorded from the well-known <a href="https://www.esrl.noaa.gov/gmd/obop/mlo/">Mauna Loa Observatory</a>, in Hawaii</em>. Graphs of this data are perhaps the most <a href="https://www.google.co.nz/search?q=keeling+curve+iconic+climate+change+image&client=firefox-b-ab&biw=1242&bih=674&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjxgJOr2KrSAhXKGZQKHRFrDcsQ_AUIBigB">iconic images of anthropogenic climate change</a>.</p>
<p>This post features the <a href="https://github.com/datasets/co2-ppm">atmospheric carbon dioxide</a> data package. Again, it is one of the <a href="https://okfn.org/about/">Open Knowledge International (OKFN)</a> <a href="http://frictionlessdata.io/">Frictionless Data</a> <a href="http://data.okfn.org/roadmap/core-datasets">core data packages</a>, that is to say it is one of the <blockquote><i>"Important, commonly-used datasets in high quality, easy-to-use & open form"</i>.</blockquote></p>
<p>The data is known as the <a href="https://en.wikipedia.org/wiki/Keeling_Curve">Keeling Curve</a> after the American chemist and oceanographer <a href="https://en.wikipedia.org/wiki/Charles_David_Keeling">Charles Keeling</a>. It is an <a href="https://www.acs.org/content/acs/en/education/whatischemistry/landmarks/keeling-curve.html">iconic</a> <a href="http://www.climatecentral.org/gallery/graphics/keeling_curve">image</a> for anthropogenic climate change.</p>
<p>Like the <a href="http://rwmjohnson.blogspot.com/2017/01/2016-warmest-year-on-record-via-cool.html">global temperature</a> data package, the atmospheric carbon dioxide data package is open and tidy and self-updating and resides in an underlying <a href="https://github.com/datasets">Github data package</a> .</p>
<p>Similarly, the data package can be downloaded as a zip file and unzipped into a folder. That will include the data files in <a href="https://en.wikipedia.org/wiki/Comma-separated_values">.csv format</a>, an <a href="http://opendatacommons.org/guide/">open data</a> licence, a read-me file, a <a href="https://en.wikipedia.org/wiki/JSON">json file</a> and a <a href="https://en.wikipedia.org/wiki/Bash_(Unix_shell)">Bash</a> script that updates the data from source.</p>
<p>I can run the Bash script file on my laptop in an <a href="https://en.wikipedia.org/wiki/X_terminal">X-terminal</a> window and it goes off and gets the latest data and formats it into 'tidy' csv format files.</p>
<p>Here is a screenshot of the script file updating and formatting the data.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXFv40fLB6KiBkxTqzXBrLEf2ceBsFn8NnnL2msuBn5fxbKOrOf30vCFRi1etFJAp09WtOijAxSgjnWOudg6OoCLfNaFjeRqYhYEdcxX_8UPIqhokieeAqRwDwEH7CAd87KFMdE8PzM6w/s1600/Screenshot.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img width =560px, border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXFv40fLB6KiBkxTqzXBrLEf2ceBsFn8NnnL2msuBn5fxbKOrOf30vCFRi1etFJAp09WtOijAxSgjnWOudg6OoCLfNaFjeRqYhYEdcxX_8UPIqhokieeAqRwDwEH7CAd87KFMdE8PzM6w/s1600/Screenshot.png" /></a></div>
</p>
<p>Here is my chart.
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnv26hp2rMvLUieTK8-uEn9LFAsNdtYJleR7Snyw6S3lq4zN64pkhi5HzTgTS_tuzDk25h7gfKqpmqoEwrC-VpwKKuD32ogvFY7lTEvRs1IPkUp5sJRrRyLxE49giJrG9lg1LwsAkLkrc/s1600/TrendsinCarbonDioxideMaunaLoa560.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnv26hp2rMvLUieTK8-uEn9LFAsNdtYJleR7Snyw6S3lq4zN64pkhi5HzTgTS_tuzDk25h7gfKqpmqoEwrC-VpwKKuD32ogvFY7lTEvRs1IPkUp5sJRrRyLxE49giJrG9lg1LwsAkLkrc/s1600/TrendsinCarbonDioxideMaunaLoa560.png" /></a></div></p>
<p>Here is the R code for the chart.</p>
<script src="https://gist.github.com/theecanmole/04d81e88a8047bad20ecc801734bf40c.js"></script>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-22675812495549649282017-03-15T21:17:00.001+13:002018-01-03T20:37:23.153+13:00New Zealand Aluminium Smelters Ltd and their excessive free allocations of emission units<p><div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcS9GdVBRcxY-C80GJJFHlebaHQXE_ISrx6RcYqxzwjne6bHEDMeW5fCRCiULZMMMHwgbuBzh3czw74f1jnQHyD8bvt4po69MQfLUHfF1u39HWmyScHt0BL7QL8UQAKffpvPCobod1jRY/s1600/godfather-350881-150x150.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcS9GdVBRcxY-C80GJJFHlebaHQXE_ISrx6RcYqxzwjne6bHEDMeW5fCRCiULZMMMHwgbuBzh3czw74f1jnQHyD8bvt4po69MQfLUHfF1u39HWmyScHt0BL7QL8UQAKffpvPCobod1jRY/s200/godfather-350881-150x150.jpg" width="200" height="200" /></a><em>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 <a href="http://rwmjohnson.blogspot.co.nz/2016/11/free-windfall-allocations-of-nzets.html">Robin Johnson's Economics Web page</a>.</em>.</div>
<p>In each year that New Zealand has had an <a href="http://www.epa.govt.nz/e-m-t/Pages/About-ets.aspx">emissions trading scheme</a>, the trans-national company <a href="http://www.nzas.co.nz/">New Zealand Aluminium Smelters Limited</a> was given a very generous <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/Pages/default.aspx">'free allocation'</a> of emission units. First, <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/allocations-decisions/Pages/decisions-2010.aspx">back in 2010</a>, and in the <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/allocations-decisions/Pages/default.aspx">years following</a> and, bringing us up to date, <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/allocations-decisions/Pages/2015-final-allocation-decisions.aspx">in 2015</a>.</p>
<p>I have written several blog posts about these free allocations. In the very beginning, back on 7 October 2011, I wrote <a href="http://rwmjohnson.blogspot.co.nz/2011/10/150-pure-subsidy-nzets-gives-rio-tinto.html">150% Pure Subsidy</a> which was also posted at Hot Topic as <a href="http://hot-topic.co.nz/120-pure-subsidy/">120% Pure Subsidy</a>.</p>
<p>In that post I argued that <a href="http://www.nzas.co.nz/">New Zealand Aluminium Smelters Limited</a>, the operator of the <a href="https://en.wikipedia.org/wiki/Tiwai_Point_Aluminium_Smelter">Tiwai Point aluminium smelter</a>, was being 'over-allocated' emission units under the <a href="http://en.wikipedia.org/wiki/New_Zealand_Emissions_Trading_Scheme">New Zealand Emissions Trading Scheme</a> (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.</p>
<p>The company was given an <a href="http://www.mfe.govt.nz/publications/climate-change/development-industrial-allocation-regulations-under-new-zealand-5">industrial allocation</a> of <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/allocations-decisions/Pages/decisions-2010.aspx">210,421 units for the six months from 1 July to 31 December 2010</a>. 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%.</p>
<p>The over allocation is obvious, I thought, when we compare the emissions factor (as used in our <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-greenhouse-gas-inventory">greenhouse gas inventories</a>) of producing a tonne of aluminium, with the <a href="http://www.mfe.govt.nz/publications/climate/development-industrial-allocation-regulation-ets/page4.html">allocation 'baseline'</a>, the number of emission units allocated per tonne of aluminium produced.</p>
<p>In the <a href="http://www.mfe.govt.nz/sites/default/files/media/NZL_2016__19052016_085421_submitted%20-%20for%20MfE%20website.zip">CRF tables/spreadsheets (20MB zip file)</a> released with <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-greenhouse-gas-inventory-1990-2014">New Zealand's Greenhouse Gas Inventory 1990–2014</a>, 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).</p>
<p>In October 2011, the <a href="http://www.legislation.govt.nz/regulation/public/2010/0189/latest/DLM3075101.html">Climate Change (Eligible Industrial Activities) Regulations 2010</a> specified that New Zealand Aluminium Smelters Limited was allocated <a href="http://www.legislation.govt.nz/regulation/public/2010/0189/17.0/whole.html#DLM3075118">2.556 emission units per tonne of aluminium</a> produced in 2010.</p>
<p>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.</p>
<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyqBQm1Mezd-s5G2r0GQCXNRUSlseWKWXu_FcCcEjpni7vURXm9d4jEo_6rzyzhGrB3ilH_31s0d3oi3S8fknQ9RWhs6BXkUf87SaHmqzoBHOKLYNt-ck0IvlBVuAIxXp3XmhV_wCxW4U/s1600/NZ-Al-Smelterbaseline-2010-560by420.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyqBQm1Mezd-s5G2r0GQCXNRUSlseWKWXu_FcCcEjpni7vURXm9d4jEo_6rzyzhGrB3ilH_31s0d3oi3S8fknQ9RWhs6BXkUf87SaHmqzoBHOKLYNt-ck0IvlBVuAIxXp3XmhV_wCxW4U/s1600/NZ-Al-Smelterbaseline-2010-560by420.png" /></a></div>
<p>Then, on 20 October 2011, I wrote <a href="http://rwmjohnson.blogspot.co.nz/2011/10/120-pure-subsidy-nz-aluminium-smelters.html">120% Pure Subsidy: Part 2</a> which was also cross-posted at <a href="http://hot-topic.co.nz/120-pure-subsidy-part-2/">Hot Topic</a>.</p>
<p>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".</p>
<p>As the report <a href="http://www.mfe.govt.nz/publications/climate-change/development-industrial-allocation-regulations-under-new-zealand-13">"Development of industrial allocation regulations under the New Zealand emissions trading scheme: Consultation document</a>, (MfE December 2009, ME 984) stated; <blockquote><a href="http://www.mfe.govt.nz/publications/climate-change/development-industrial-allocation-regulations-under-new-zealand-16"><i>"A number of energy-intensive firms will face higher costs of production because of the electricity used in their production"</i></a></blockquote> because, Q.E.D. <blockquote><i>"The NZ ETS will increase the costs of generating electricity from fossil fuels and geothermal sources"</i>.</blockquote></p>
<p>This was also explicit in the original Labour Government report <a href="http://www.mfe.govt.nz/publications/climate-change/framework-new-zealand-emissions-trading-scheme">"The Framework for a New Zealand Emissions Trading Scheme"</a> of 2007.</p>
<p>It stated in the fourth bullet point to subsection <a href="http://www.mfe.govt.nz/publications/climate-change/framework-new-zealand-emissions-trading-scheme/5-how-emission-units-are">'5.3.1 In-principle decision on levels of assistance through free allocation'</a> (with my underlining), that; <blockquote><i>“<u>indirect emissions associated with the consumption of electricity</u>, 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”.</i></blockquote></p>
<p>However, the total free allocation for both direct emissions and the 'ETS electricity pass-through costs' <i>"would operate within a total envelope of assistance to industry defined as 90 per cent of 2005 emission levels"</i>, (<a href="http://www.mfe.govt.nz/publications/climate-change/framework-new-zealand-emissions-trading-scheme/6-design-features-0">subsection 6.5.2.1 Free allocation Level of total assistance to industry</a>).</p>
<p>This allocation 'envelope' (almost a 'cap') of 90 percent of 2005 emissions was dropped in the <a href="http://www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/cabinet-papers/climate-change/climate-change-and-1">2010 Cabinet Paper "EGI Min (10) 14/9"</a>.</p>
<p>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; <i>'Allocation (in units) = Level of Assistance × Quantity of Production × Allocative Baseline'</i> (Paragraph 32).</p>
<p>The <a href="http://www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/cabinet-papers/climate-change/climate-change-and-1">2010 Cabinet Paper "EGI Min (10) 14/9"</a> established a <u>proxy</u> for the 'ETS electricity pass-through costs', the <u>electricity allocation factor</u> (to calculate ‘emissions’ per megawatt hour of electricity used, paragraph 8) as stated in paragraph 37:</p>
<blockquote><i>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.</i></blockquote>
<p>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.</p>
<p>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.</p>
<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhB5BHAnIa_hnSmkMtybaLJerfpKL2I7r10VoXeDy03jqah5M6IkBg2o_ls3riWyz6GNYw6MVRsK7rtkt6wDPL2EhhgLmZcwmyo-0XbJdzRIOjJzXhpyjKfNyYWuO61b9IFAOAXUMSyQaY/s1600/SmelterEAFS-2010-2015-560by420-v6.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhB5BHAnIa_hnSmkMtybaLJerfpKL2I7r10VoXeDy03jqah5M6IkBg2o_ls3riWyz6GNYw6MVRsK7rtkt6wDPL2EhhgLmZcwmyo-0XbJdzRIOjJzXhpyjKfNyYWuO61b9IFAOAXUMSyQaY/s1600/SmelterEAFS-2010-2015-560by420-v6.png" /></a></div>
<p>However, the bar chart isn't the last word. I just made up the numbers to show the idea.</p>
<p><b>Free allocation to the smelter includes ETS electricity costs. What could possibly go wrong?</b></p>
<p>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?</p>
<p>We knew it was <a href="http://www.scoop.co.nz/stories/PO0710/S00036.htm">secret</a>, <a href="http://www.scoop.co.nz/stories/PO0710/S00036.htm">controversial</a> and <a href="http://www.minesandcommunities.org/article.php?a=8413">far too cheap</a>. Brian Fallow in 2004 estimated the electricity price to be <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3550031">just over 5c a kilowatt hour</a>. Another 2008 cost estimate was <a href="http://www.minesandcommunities.org/article.php?a=8413">$52-$54 a MWh</a> (5.2c - 5.4c a kilowatt hour. CAFCA thought the cost in 2007 was <a href="http://www.scoop.co.nz/stories/PO0710/S00036.htm">4.7 c a kilowatt hour</a>.</p>
<p>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 <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=3550031">very sensitive about varying wholesale costs</a> when the hydro lakes had low storage levels.</p>
<p>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 <a href="https://www.mercatus.org/expert_commentary/regulatory-capture-what-experts-have-found">regulatory capture</a> (See <a href="https://web.archive.org/web/20110106163908/https://techliberation.com/2010/12/19/regulatory-capture-what-the-experts-have-found/">Internet Archive</a>) and <a href="https://en.wikipedia.org/wiki/Rent-seeking">rent-seeking</a>.</p>
<p><b>The fact that unit allocations include indirect energy costs may make emitters net sellers of units</b></p>
<p>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.</p>
<p>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".</p>
<p>As an example, there wasn't much doubt that <a href="http://rwmjohnson.blogspot.co.nz/2016/04/did-new-zealand-steel-make-windfall.html">New Zealand Steel's direct allocation of units exceeded their emissions liability</a>.</p>
<p>As <a href="http://www.pce.parliament.nz/">Jan Wright</a> observed in her <a href="http://www.pce.parliament.nz/media/1417/pce-submission-industrial-allocation-final.pdf">submission on the electricity allocation factor</a>:</p>
<blockquote><i>"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."</i></blockquote>
<p>The critical questions are therefore <i>"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?"</i></p>
<p><b>It's not classic cap and trade its a double-dip</b></p>
<p>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 <a href="http://whatis.techtarget.com/definition/cap-and-trade-system">'cap and trade' model of emissions trading</a>. In strict cap and trade, with a real cap on emissions, and with <a href="https://www.theguardian.com/environment/2013/jan/31/carbon-tax-cap-and-trade">'grand-parented' free allocation of the 'capped' units to emitters</a>, 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.</p>
<p>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.</p>
<p>But lets get back to the issue of the 'ETS electricity pass-through costs'. At the time of <a href="http://rwmjohnson.blogspot.co.nz/2011/10/120-pure-subsidy-nz-aluminium-smelters.html">120% Pure Subsidy: Part 2</a> 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 <a href="http://www.teara.govt.nz/en/pulp-and-paper-aluminium-and-steel-industries/page-3">dedicated source of hydroelectric generation from Lake Manapōuri</a>. Also the generator the smelter contracts it's electricity from is the 100% renewable Meridian Energy.</p>
<p>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 <u>may</u> include an ETS component when <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10531376">coal generation is setting the marginal price</a>.</p>
<p>Then, on 2 November 2011, I wrote <a href="http://rwmjohnson.blogspot.co.nz/2011/11/nick-smith-fails-smelter-spin-test.html">Nick Smith fails the smelter spin test</a>, also cross-posted at <a href="http://hot-topic.co.nz/nick-smith-fails-the-smelter-spin-test/">Hot Topic</a>.</p>
<p>In that post, I argued that the then <a href="https://en.wikipedia.org/wiki/Nick_Smith_(New_Zealand_politician)">Minister for Climate Change Issues Nick Smith</a> 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.</p>
<p>On 23 April 2012, I reported that <a href="http://hot-topic.co.nz/helter-smelter-nz-aluminium-smelters-wins-the-2011-roger-award/">New Zealand Aluminium Smelters Limited had won</a> the <a href="https://en.wikipedia.org/wiki/Roger_Award">2011 Roger Award</a> for being the <a href="http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Roger/">worst transnational company</a> operating in New Zealand.</p>
<p>On 9 September 2012, I wrote <a href="http://rwmjohnson.blogspot.co.nz/2012/09/power-to-smelter-rio-tinto-alcan-nz-ltd.html">Power to the smelter? New Zealand Aluminium Smelters Limited wants to pay less for electricity for the Tiwai Point aluminium smelter</a>. That post noted that New Zealand Aluminium Smelters Limited was renegotiating the electricity supply contract with Meridian Energy.</p>
<p>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; <a href="http://rwmjohnson.blogspot.co.nz/2012/09/power-to-smelter-rio-tinto-alcan-nz-ltd.html">5.03 cents per kilowatt-hour!</a> Residential users paid 22.6 cents per kilowatt-hour, or four times as much.</p>
<p>On 11 September 2012, I riffed off a <a href="http://www.huffingtonpost.com/charles-h-green/nice-business-you-got-her_b_3779915.html">gangster meme</a> and wrote the evocatively-titled <a href="http://rwmjohnson.blogspot.co.nz/2012/09/rio-tinto-alcan-nz-do-godfather-nice.html">Rio Tinto Alcan New Zealand Ltd plays godfather: nice aluminium smelter you got, be a shame if something happened to it</a>, also <a href="http://hot-topic.co.nz/rio-tinto-alcan-nz-plays-godfather-nice-aluminium-smelter-you-got-be-a-shame-if-something-happened-to-it/">at Hot Topic</a>.</p>
<p>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.<p>
<p>For a couple of years, I didn't really think about smelter until I looked at the <a href="http://www.treasury.govt.nz/publications/informationreleases/nzas">Official Information Act releases</a> by the NZ Treasury about the <a href="http://www.stuff.co.nz/business/industries/9016725/Govt-pays-30-million-to-Tiwai-Pt">New Zealand Government's payment of $30 million</a> to New Zealand Aluminium Smelters Limited in 2013.</p>
<p>Amongst the dozens of documents was an email between officials with a familiar title which made me laugh; <a href="http://www.treasury.govt.nz/publications/informationreleases/nzas/pdfs/nzas-2596468.pdf">Email to Officials: Rio Tinto Alcan NZ Plays Godfather: Nice Aluminium Smelter you got, be a shame if something happened to it</a>.</p>
<p>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!</p>
<p>Another couple of years went by. As they tend to. Then, on 9 April 2016 of this year, I wrote <a href="http://rwmjohnson.blogspot.co.nz/2016/04/opening-up-data-on-emissions-units-in.html">Opening up the data on emissions units in the NZ emissions trading scheme</a>. 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.</p>
<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd4Z12daYGg2rCIeZ-U7PdzqCP4EzR6-zjC5PDqUK18zDber3zPH6VKinEZhCd8J5W-_w2fUfRRO96qJaO9CHrNPT051SYRsF6p4DAGKPUp4G-UnS8ncQ6zgg1j-IQ72cJPF6EWz9qZ4/s1600/Smelter-2010-2014-560by420-v1.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd4Z12daYGg2rCIeZ-U7PdzqCP4EzR6-zjC5PDqUK18zDber3zPH6VKinEZhCd8J5W-_w2fUfRRO96qJaO9CHrNPT051SYRsF6p4DAGKPUp4G-UnS8ncQ6zgg1j-IQ72cJPF6EWz9qZ4/s1600/Smelter-2010-2014-560by420-v1.png" /></a></div>
<p>So what happened in 2013? The free allocation increased from 301,244 units in 2012 to 1,524,172 units.</p>
<p>What happened was that the 2013 <a href="http://www.legislation.govt.nz/regulation/public/2010/0189/latest/DLM3075118.html">allocative baseline</a> for aluminium production changed from 2.062 units per tonne to 10.441 units per tonne. As you can see from this bar chart.</p>
<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSIxs8Dk2gAJjR0y4rmLeh2-1Es43uqJkvhyJ09_MmJIcPk3hlhFVQrrTIYKJ_rS2TFv14lolP9VkRlRd7-J-vIklBNfP2ypKWKfojP2rnALKoqXOXelz8V5ftUOfGsgKgOT3KhGJyMzU/s1600/NZ-Al-Smelter-2010-2015-560by420-v2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSIxs8Dk2gAJjR0y4rmLeh2-1Es43uqJkvhyJ09_MmJIcPk3hlhFVQrrTIYKJ_rS2TFv14lolP9VkRlRd7-J-vIklBNfP2ypKWKfojP2rnALKoqXOXelz8V5ftUOfGsgKgOT3KhGJyMzU/s1600/NZ-Al-Smelter-2010-2015-560by420-v2.png" /></a></div>
<p><b>Wrapping it all up</b></p>
<p>In hindsight, it's obvious from the June 2010 Cabinet paper <a href="http://www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/cabinet-papers/climate-change/climate-change-and-1">Industrial Allocation under the New Zealand Emissions Trading Scheme: Group One Activities, Ref no: EGI Min (10) 14/9</a> 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.</p>
<p>They would instead have a 'bespoke' arrangement for the electricity component of the allocation baseline.</p>
<p>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.</p>
<p>Paragraph 38 states; <blockquote><em>"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."</em></blockquote></p>
<p>Paragraphs 40 is in first-person and active tense (think of Nick Smith speaking confidently) and it states (with my underlining) <blockquote><em>"I have since used my powers under section 161D of the Act to request electricity contracts and <u>related information</u> from NZAS. [Deleted] In particular <u>the analysis</u> suggests:
<ol><li>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.</li>
<li>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.</li>
<li>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".</li></ol></em></blockquote><p>
<p>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.</p>
<p>Paragraph 9 of the Executive Summary states a fairly firm conclusion; <blockquote><em>"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."</em></blockquote></p>
<p>Paragraph 41 states; <em>"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"</em>.<p>
<p>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 <u>annually</u> 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.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-30031975533081118512017-01-16T19:36:00.000+13:002017-03-25T19:23:21.153+13:002016 the warmest year on record via a cool self-updating data package of global temperature<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0Kvs4MI_rz6JqCsGwnlykBWZnwUfH4IwBJYKVh7u0FX6LUMbG90VflmyLMVNtlcNqPz9VsQ5bNzbO3x_4AFX3lttA6DIuthGGJA8g3dk33vNwr743ZybFEmhNYn9JAGDNUeWkBpDFL30/s1600/gistempsyearly-150by112-2016-12.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0Kvs4MI_rz6JqCsGwnlykBWZnwUfH4IwBJYKVh7u0FX6LUMbG90VflmyLMVNtlcNqPz9VsQ5bNzbO3x_4AFX3lttA6DIuthGGJA8g3dk33vNwr743ZybFEmhNYn9JAGDNUeWkBpDFL30/s200/gistempsyearly-150by112-2016-12.png" width="200" height="151" /></a><i>Radio New Zealand reports that <a href="http://www.radionz.co.nz/news/world/321865/2016-officially-the-warmest-year-on-record">2016 was the new record warmest year</a> in the instrumental record, so I will pitch in too. But with an extra touch of open data and reproducible research.</i></div>
<p>It's been a while since I uploaded a chart of global temperature data. Not since I made this <a href="http://rwmjohnson.blogspot.co.nz/2011/07/global-mean-land-temperature-chart.html">graph in 2011</a> and then before that was this <a href="http://rwmjohnson.blogspot.co.nz/2010/12/world-temperature-trends.html">graph from 2010</a>. So it's about time for some graphs. Especially since <a href="http://www.radionz.co.nz/news/world/321865/2016-officially-the-warmest-year-on-record">2016 was the world's warmest year</a> as well as <a href="http://www.radionz.co.nz/news/national/322024/2016-the-hottest-year-on-record">New Zealand's warmest year</a>.</p>
<p>When I made those charts, I had to do some 'data cleaning' to convert the raw data to <em>tidy data</em> (<a href="https://www.jstatsoft.org/article/view/v059i10">Wickham, H. 2014 Sept 12. Tidy Data. Journal of Statistical Software. [Online] 59:10</a>), 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.</p>
<p>I would have used a spreadsheet program to manually edit and 'tidy' the data files so I could easily use them with the <a href="https://www.r-project.org/about.html">R language</a>. As <a href="https://leanpub.com/u/rdpeng">Roger Peng</a> says, the one rule of <a href="http://simplystatistics.org/2016/08/24/replication-crisis/">reproducible research</a> is <a href="https://www.youtube.com/watch?v=pjL2uP-fmPY"><em>"Dont do things by hand! Editing spreadsheet data manually is not reproducible"</em></a>.</p>
<p>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.</p>
<p>However, I have found a couple of cool <a href="http://opendatacommons.org/guide/">open</a> and 'tidy' <a href="http://data.okfn.org/data">data packages</a> of global temperatures that solve the reproducibility problem. The non-profit <a href="https://okfn.org/about/">Open Knowledge International</a> provides these packages as as part of their <a href="http://data.okfn.org/roadmap/core-datasets">core data sets</a>.</p>
<p>One package is the <a href="http://data.okfn.org/data/core/global-temp">Global Temperature Time Series</a>. 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.</p>
<p>But it is better than that. The data is held in a <a href="https://github.com/datasets/global-temp">Github repository</a>. From there the data package can be downloaded as a zip file. After unzipping, this includes the csv data files, an <a href="http://opendatacommons.org/guide/">open data</a> licence, a read-me file, a .json file and a cool <a href="https://en.wikipedia.org/wiki/Python_(programming_language)">Python</a> 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!</p>
<p>Here is a screen shot of the Python script running in a an <a href="https://en.wikipedia.org/wiki/Terminal_(Xfce)">X-terminal</a> window on my <a href="https://mxlinux.org/index.php">Debian Jessie MX-16</a> operating system on my Dell Inspiron 6000 laptop.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs4fu9_ui_dlbuhJaH-E3FawqRrC0e6HMfbCQ-xpgB1UI06iRaA-XF7ACym9VxXk-t_AP0_mBFZxBa1EfZ0BUQwcYDIouMkzvPVlZ8alXI_NlUaScPlLmEGyBEP_rXfcS9XO7G81V2DY8/s1600/Screenshot2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs4fu9_ui_dlbuhJaH-E3FawqRrC0e6HMfbCQ-xpgB1UI06iRaA-XF7ACym9VxXk-t_AP0_mBFZxBa1EfZ0BUQwcYDIouMkzvPVlZ8alXI_NlUaScPlLmEGyBEP_rXfcS9XO7G81V2DY8/s1600/Screenshot2.png" /></a></div>
<p>The file "monthly.csv" includes two data series; the NOAA National Climatic Data Center (NCDC), global component of <a href="http://www.ncdc.noaa.gov/cag/data-info/global">Climate at a Glance (GCAG)</a> and the perhaps more well-known NASA Goddard Institute for Space Studies (GISS) Surface Temperature Analysis, <a href="http://data.giss.nasa.gov/gistemp">Global Land-Ocean Temperature Index</a>.</p>
<p>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.</p>
<script src="https://gist.github.com/theecanmole/efa6e40b527405414515c8a34f58f2c6.js"></script>
<p>Here is a simple line chart of the annual means.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxY_IRW6gc4Vg4zLUMYuHPfAoHY-MhRIXGsYRZIsrDyAUUEQx99_jbqTVVF-OzCTTt2YEQdsGMkyTFMbyvRkfXvF6rdg979pPWR_hcLSXaa-k25iuFbQ5DOU5Y0dJ0VjoU9ToDYXMFhDE/s1600/gistempsyearly-560by420-2016-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxY_IRW6gc4Vg4zLUMYuHPfAoHY-MhRIXGsYRZIsrDyAUUEQx99_jbqTVVF-OzCTTt2YEQdsGMkyTFMbyvRkfXvF6rdg979pPWR_hcLSXaa-k25iuFbQ5DOU5Y0dJ0VjoU9ToDYXMFhDE/s1600/gistempsyearly-560by420-2016-12.png" /></a></div>
<p>Here is a another line chart of the annual means with an additional data series, an eleven-year <a href="http://www.statisticshowto.com/lowess-smoothing/">lowess-smoothed</a> data series.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSOpKiqzGgGmroyfYxiK3XJONQgYfyl8HUq_KOc5W15kTj58I29mXNlInXglrD17TvEaazpEejGpzzLtehvMoBnhXy6CCJWUOTGSXMSmMlKsdkZzFJW4df8DbsUpdnC6KQ1tm87hBZeVI/s1600/gistempsyearlylowess-560by420-2016.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSOpKiqzGgGmroyfYxiK3XJONQgYfyl8HUq_KOc5W15kTj58I29mXNlInXglrD17TvEaazpEejGpzzLtehvMoBnhXy6CCJWUOTGSXMSmMlKsdkZzFJW4df8DbsUpdnC6KQ1tm87hBZeVI/s1600/gistempsyearlylowess-560by420-2016.png" /></a></div>
<p>Here is the R code for the two graphs.</p>
<script src="https://gist.github.com/theecanmole/6e37f71bb7d690a9de39b3f821065761.js"></script>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-59059032363251089932016-09-28T19:43:00.002+13:002017-01-21T17:53:48.020+13:00Opening up the data or webscrape the 2015 free allocation of emission units from MfE<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-mOD_mSFy7rfp45I4r2w0_OMyGYaxcUKBeXyx7lAji6svmuIkpI3I_5ceHATt6MpTJnobaP35AIKCGgI1aIfjn9Qr4U4gUVTzfY8avXXG1hl_o3oTqu2XMihtHwqidfPG_eNN_7PUjcw/s1600/MfE_Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-mOD_mSFy7rfp45I4r2w0_OMyGYaxcUKBeXyx7lAji6svmuIkpI3I_5ceHATt6MpTJnobaP35AIKCGgI1aIfjn9Qr4U4gUVTzfY8avXXG1hl_o3oTqu2XMihtHwqidfPG_eNN_7PUjcw/s200/MfE_Screenshot.png" width="200" height="134" /></a></div><em>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</em> </br>(N.B. Update on 10 December 2016. The allocation decisions have moved to the web page of the <a href="http://www.epa.govt.nz/e-m-t/taking-part/Industrial-allocations/allocations-decisions/Pages/decisions-2010.aspx">Environmental Protection Authority</a>. And the "importHTML" function in Google sheets does not work on the EPA pages.)</p>
<p>The Ministry for the Environment has up dated its webpage <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/participatin-4">2015 Industrial Allocation Decisions</a> to show the final 2015 free allocation of emission units to emitters under the <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/about-nz-emissions-trading-scheme">New Zealand Emissions Trading Scheme</a>.</p>
<p>I looked at the 2010 to 2014 data in my post <a href="http://rwmjohnson.blogspot.co.nz/2016/04/opening-up-data-on-emissions-units-in.html">Opening up the data on emissions units in the NZ emissions trading scheme</a>. So in this post I am will repeat my steps in web-scraping the freebie emissions unit data into a sensible open format.</p>
<p>The url of the webpage is http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/participatin-4</p>
<p>Go to Google and open a new Google sheet.</p>
<p>Enter this text in cell A1 of the Google sheet.</p>
<p>=importHTML("http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/participatin-4","table",1)</p>
<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgi0mMI8Nc4__9s5RDoehElJsZGGkekW9BxVs6dFegS9m9q8bfoZ0BweFd8kTmtOu3g5rlsgPxhN2Zrc3bjhEglKcz4evO4gPD1XUFqBbdIC5ZQExbvnw3vG-NilK_gWM4lhhcPZxh_Pzk/s1600/GoogleSheet-scrapeScreenshot.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgi0mMI8Nc4__9s5RDoehElJsZGGkekW9BxVs6dFegS9m9q8bfoZ0BweFd8kTmtOu3g5rlsgPxhN2Zrc3bjhEglKcz4evO4gPD1XUFqBbdIC5ZQExbvnw3vG-NilK_gWM4lhhcPZxh_Pzk/s1600/GoogleSheet-scrapeScreenshot.png" width="560" height="265" /></a></div></p>
<p>That worked perfectly! We have a Google sheet of the 2015 free unit allocation to NZ emissions trading scheme emitters.</p>
<p>I have saved it as <a href="https://docs.google.com/spreadsheets/d/1pgGMXTq0ImXXHzCCAjB7o2BdScvNvkzRxzD7PPa0EXE/edit?usp=sharing">NZETS-2015-final-allocations-for-eligible-activities</a>.</p>
<p>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.</p>
<p>So I used a programme called <a href="http://github.com/OpenRefine/OpenRefine/wiki">Open Refine</a> to data-wrangle the data into that format and to save it as a comma-separated values file which is this Google sheet <a href="https://docs.google.com/spreadsheets/d/1knXszhuJfQBAAxGcaWxWzY4QzY6dZibmAIaB1OReYzM/edit?usp=sharing">NZETS-2015-final-allocations-for-eligible-activities</a>. Its a bit fiddly using Open Refine, so I won't describe how I did it.</p>
<p>This is the updated <a href="https://docs.google.com/spreadsheets/d/1w13-ihPxP84PcErdgcCPBGVDgxhIXPtUHmnpVp6w1Tc/edit#gid=2095532404">free emission unit allocation data from 2010 to 2015</a>.
</p>
<p>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 <a href="http://rwmjohnson.blogspot.com/2016/04/did-new-zealand-steel-make-windfall.html">arbitrage profits fame</a>, gets 1,067,501 free units. New Zealand Aluminium Smelters Limited gets 772,706 free units.</p>
</p>I did a bit of data visualising and created this pie-chart in <a href="https://en.wikipedia.org/wiki/R_(programming_language)">R programming language</a>.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiK1x80nX1lJpMQabIchWxR4xWfc3RkOxsPzWwO4gDZGQht5S_ZM25Os8DCgoJ3ctJzktlIfTQrfYE9y0OM5ntbhO_vVW5BqPdPG-jUElgkehQHgF2JiI4KFwRyKnx5p1VZZjdhWtFRxPc/s1600/nzu-allocations-pie-2015-680.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiK1x80nX1lJpMQabIchWxR4xWfc3RkOxsPzWwO4gDZGQht5S_ZM25Os8DCgoJ3ctJzktlIfTQrfYE9y0OM5ntbhO_vVW5BqPdPG-jUElgkehQHgF2JiI4KFwRyKnx5p1VZZjdhWtFRxPc/s400/nzu-allocations-pie-2015-680.png" width="560" height="420" /></a></div>
<p>The R script for that is</p>
<script width =560px, src="https://gist.github.com/theecanmole/3f41270a5e82eda0bd074ee114214c16.js"></script>
</p>
<p>Did I not get the <a href="https://betterfigures.org/2014/11/18/end-of-the-rainbow/">End the Rainbow memo</a>? So I <a href="https://betterfigures.org/2015/06/23/picking-a-colour-scale-for-scientific-graphics/">picked a better colour scale</a> from Colour Brewer.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNVERDAj2w4B3OKQEnsX8tjb2zLu4C3pPJex1nCTdFw4cK72aig2W1oMpY1l3FiCKfdsiTasmzXhEfit0BBteGQ5YQWkd_B4vivwmL2ofYvK4POM8FLMBuN809QOlw6rDNbUjvHYN83u8/s1600/nzu-allocations-pie2-2015-680.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNVERDAj2w4B3OKQEnsX8tjb2zLu4C3pPJex1nCTdFw4cK72aig2W1oMpY1l3FiCKfdsiTasmzXhEfit0BBteGQ5YQWkd_B4vivwmL2ofYvK4POM8FLMBuN809QOlw6rDNbUjvHYN83u8/s400/nzu-allocations-pie2-2015-680.png" width="560" height="420" /></a></div>
<p>The R script for this non-rainbow pie chart is:</p>
<script src="https://gist.github.com/theecanmole/f2a1b5b0495134d6e0dbc97f23bdf3c4.js"></script>
</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-91837574293693581112016-09-27T12:28:00.001+13:002016-09-29T18:54:29.719+13:00What are we waiting for?<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7QR43gTZ10VCFayFFKGqNb6HGjiPp7pTvGzEcwzpiM1vCK94qN5pdTJJ4t5qDTcAB2Z0aZVryM0ui02UpumMGK1cFEfJ6wJf1vlAzwKpsgbxbEsnA7BGCbqbWCrHFDLUZW1JYbmr65G8/s1600/Tom3379.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7QR43gTZ10VCFayFFKGqNb6HGjiPp7pTvGzEcwzpiM1vCK94qN5pdTJJ4t5qDTcAB2Z0aZVryM0ui02UpumMGK1cFEfJ6wJf1vlAzwKpsgbxbEsnA7BGCbqbWCrHFDLUZW1JYbmr65G8/s200/Tom3379.jpg" width="99" height="132" /></a></div><em>In this guest post, the <a href="http://wellington.scoop.co.nz/?p=27269">non</a> - <a href="http://hot-topic.co.nz/walking-back-to-happiness/">flying</a> Wellington barrister and solicitor <a href="https://bennion.co.nz/">Tom Bennion</a> writes about the <a href="https://en.wikipedia.org/wiki/International_Civil_Aviation_Organization">International Civil Aviation Organization (ICAO)</a> proposals for 'carbon-neutral' growth of greenhouse gas emissions from the fast-growing aviation industry.</em></p>
<p>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.</p>
<p>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.</p>
<p>This is a really uncomfortable topic. But we have to talk about it, and do so urgently.</p>
<p>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.</p>
<p><a href="http://science.howstuffworks.com/transport/flight/modern/question192.htm">Google tells me</a> 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, <a href="https://www.flight-durations.com/London-to-Wellington">the distance from Wellington to London and back</a>. 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.</p>
<p>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.<br />
<br />In addition, these figures dont address the fact that the warming effect of aviation gas burned at altitude <a
href="http://www.treehugger.com/aviation/what-the-heck-is-radiative-forcing-why-should-my-aviation-carbon-offset-include-it.html">is around 2-3 times the impact when burned at sea level</a>. So make that 6-9 days of car revving for each family member.</p>
<p>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.</p>
<p>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.</p>
<p>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: <br />
* 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'.<br />
* We dont like to talk about it. We mumble an excuse and move away if it comes up.<br />
* 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.<br />
* 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.</p>
<p>In uncomfortable situations like this we are anxious for good news. Here it is. All the members of the <a href="http://www.icao.int/Pages/default.aspx">International Civil Aviation Organisation (ICAO)</a>, that is, essentially all UN member states, five years ago adopted a goal of <a
href="http://icsa-aviation.org/wp-content/uploads/2016/08/ICSA_AviationBackgrounder.pdf">carbon neutral growth after 2020</a>.</p>
<p>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.</p>
<p>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.</p>
<p>Here are some of the problems with the ICAO goal:<br />
* the ICAO has been promising action for ages. It got the mandate to work on reducing aviation greenhouse gases in the 1997 Kyoto Protocol.<br />
* The ICAO plan doesnt cover domestic aviation - thats about 30% of aviation emissions.<br />
* 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.<br />
* 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.</p>
<p>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.<br />
</p>
<p>And lastly, and here is the real kicker, <a
href="https://www.theguardian.com/environment/2016/sep/26/planes-need-to-stop-existing-in-a-parallel-universe-when-it-comes-to-the-climate-fight?CMP=twt_a-environment_b-gdneco">the ICAO isn't going to do pretty much any of this</a>. 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 <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">fraudulent carbon credits</a> 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.</p>
<p>No surprises that the New Zealand Government has <a
href="http://business.scoop.co.nz/2016/09/23/government-backs-global-aviation-climate-change-measure/">announced
that its happy with the scheme</a>, provided <a
href="http://aviationbenefits.org/blog/2016/09/volunteers-needed!/">everyone else signs on with them of course</a>.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com1tag:blogger.com,1999:blog-1877417939959778661.post-4929286101322194812016-09-22T18:21:00.000+12:002016-09-22T18:27:03.104+12:00Is it in the spirit of the Paris Agreement to ratify it with more emissions and more creative accounting?<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6BApbjnIUHvC7yIShMAKHO9oeBFr9HO0VkvqmavuizreYh9ARxieFIQK-jlJQnHokyzQr5cvsPIHFAsh4PEe0M5R_vRZgayakUprPOvPWOuzzTiGX7V4a19zqP-HSmdhv_dE0C7ld_dY/s1600/KA-Screenshot2.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6BApbjnIUHvC7yIShMAKHO9oeBFr9HO0VkvqmavuizreYh9ARxieFIQK-jlJQnHokyzQr5cvsPIHFAsh4PEe0M5R_vRZgayakUprPOvPWOuzzTiGX7V4a19zqP-HSmdhv_dE0C7ld_dY/s200/KA-Screenshot2.png" width="200" height="128" /></a></div><em>Is the New Zealand Government's plan to ratify the Paris Agreement in 2016 consistent with a two degrees Celsius (2C) carbon budget?</em></p>
<p>Since the December 2015 <a href="http://pureadvantage.org/news/2016/02/11/the-paris-climate-agreement-implications-for-new-zealand-businesses/">Paris Agreement</a>, the British climate scientist <a href="https://t.co/QmtWpMa0S7">Kevin Anderson</a> has given a couple of talks with the title <a href="http://www.iiea.com/event/archive_view?urlKey=beyond-dangerous-climate-change-does-paris-lock-out-2-degrees">Beyond Dangerous Climate Change: Does Paris Lock-out 2 Degrees?</a></p>
<p>Anderson's message is that although the Paris Agreement was a <a href="http://kevinanderson.info/blog/the-paris-agreement-1010-for-presentation-410-for-content-shows-promise/">diplomatic triumph</a>, it relies on <a href="http://kevinanderson.info/blog/the-hidden-agenda-how-veiled-techno-utopias-shore-up-the-paris-agreement/">speculative utopian technological fixes</a> (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.</p>
<p>Why do I mention that? Because I want to run a 'Kevin Anderson' ruler over the New Zealand Government's recently announced <a href="https://www.beehive.govt.nz/release/new-zealand-ratify-paris-agreement-year">ratification of the Paris Agreement</a>. 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 <i>'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?'</i></p>
<p>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.</p>
<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_ha1jaQZcnj8askTSDFuLaab2ZP-6OcA6467cMr0fqdFuGcbYQa-N4YDh31g7rKyiPEi3HwfiZ4mcvyi1zq2wS8eABrTH492ivqbi9jRIDN1E7lS6k1woB2538enNIkKoiW1tAN5DVQA/s1600/BennettPaula2015Screenshot.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_ha1jaQZcnj8askTSDFuLaab2ZP-6OcA6467cMr0fqdFuGcbYQa-N4YDh31g7rKyiPEi3HwfiZ4mcvyi1zq2wS8eABrTH492ivqbi9jRIDN1E7lS6k1woB2538enNIkKoiW1tAN5DVQA/s200/BennettPaula2015Screenshot.png" width="99" height="100" /></a></div>As we know, last month, on 17 August 2016, Minister for Climate Change Issues <a href="https://www.beehive.govt.nz/minister/paula-bennett">Paula Bennett</a> announced that New Zealand <a href="https://www.beehive.govt.nz/release/new-zealand-ratify-paris-agreement-year">would ratify the Paris Agreement this year</a>.</p>
<p>Bennett's announcement represented a change in position as in April she had told Fairfax's Tracy Watkins that <a href="http://www.stuff.co.nz/business/79272705/No-rush-to-sign-on-the-dotted-line-of-climate-accord">she was not rushing to ratify the agreement in the next couple of months</a><p>
<p>A cabinet paper from Paula Bennett <a href="https://www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/cabinet-papers/cabinet-paper-paris-climate-change">"Paris Climate Change Agreement - Report back to Cabinet and Approval for Signature"</a> has been on the Ministry for the Environment website since April 2016.</p>
<p>We also know from the Ministry of Foreign Affairs and Trade (MFAT) that <a href="https://www.mfat.govt.nz/en/media-and-resources/news/minister-bennett-signs-paris-agreement/">ratification of the Paris Agreement will involve</a>:</p> <blockquote><i>"..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"</i>.</blockquote>
<p>The <a href="https://www.parliament.nz/en/pb/papers-presented/current-papers/document/51DBHOH_PAP69732_1/paris-agreement-together-with-the-national-interest-analysis">"Paris Agreement National Interest Analysis"</a> was very briefly open for submissions on the New Zealand Parliament website until 2 September 2016.</p>
<p>The Ministry of the Environment has a <a href="https://www.mfe.govt.nz/climate-change/international-forums-and-agreements/united-nations-framework-convention-climate-0">Paris Agreement webpage</a>. 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 <a href="http://climate-l.iisd.org/events/unfccc-cop-22">UNFCCC climate change meeting in Morocco (COP22)</a> in November 2016.</p>
<p>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 <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/about-nz-emissions-trading-scheme">New Zealand Emissions Trading Scheme</a>. Some amending legislation will probably be presented as the outcome of both processes.</p>
<p>A crucial point will of course be the detail of this amending legislation.</p>
<p>Paula Bennett has stated that the Government has <i>"absolutely no intention of changing our target"</i> (the <a href="https://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand%E2%80%99s-post-2020-climate-change-target">New Zealand 2030 climate change target</a>), and that the required 'Paris' legislation will be nothing major. Therefore, as she stated to Radio New Zealand, the <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/about-nz-emissions-trading-scheme">New Zealand Emissions Trading Scheme</a> will only need to be <a href="http://www.radionz.co.nz/news/national/311235/ets-changes-needed-to-meet-paris-agreement">tweaked</a> to meet the commitments under the Paris Agreement.</p>
<p>So the amendments will be to the <a href="http://www.mfe.govt.nz/more/acts-and-regulations/climate-change-response-act-2002">Climate Change Response Act 2002</a> which is the statute that <a href="http://www.climatechangelaw.co.nz/new-zealand-emissions-trading/">incorporates the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol into New Zealand law</a>. The UNFCCC is included as the <a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM160014.html">first schedule</a> to the act and the Kyoto Protocol is included as the <a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM160087.html">second schedule</a>.</p>
<p>The amendments will probably affect the <a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662481.html">provisions describing the operation</a> of the New Zealand Emissions Trading Scheme (which has been <a href="http://www.rmreform.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/about-nz-ets">under review all of 2016</a>). Perhaps the Paris Agreement will be incorporated as a further schedule.</p>
<p>The current highly conditional New Zealand INDC (Intended National Determined Contribution), otherwise known as the <a href="https://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand%E2%80%99s-post-2020-climate-change-target">2030 climate change target</a>, will become a NDC National Determined Contribution. Professor Ralph Sims notes that the NDCs <a href="http://pureadvantage.org/news/2016/02/11/the-paris-climate-agreement-implications-for-new-zealand-businesses/">"will need to be based largely on domestic mitigation actions"</a> but <a href="http://pureadvantage.org/news/2016/02/11/the-paris-climate-agreement-implications-for-new-zealand-businesses/">"they are not legally binding"</a>.</p>
<p>Ralph Sims, who was <a href="http://pureadvantage.org/news/2016/02/11/the-paris-climate-agreement-implications-for-new-zealand-businesses/">writing back in February</a>, was hopeful that the New Zealand NDC would be strengthened to be more ambitious, given that the sum of the 2015 INDCs <i>"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"</i> He seemed to have some hope that the then yet-to-be published <a href="http://www.royalsociety.org.nz/expert-advice/papers/yr2016/mitigation-options-for-new-zealand/">Royal Society climate mitigation report</a> would contribute to that.</p>
<p>So does that mean the Government will <u>actually do something</u> 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!</p>
<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtqDMkj-HsmLPglAJmRozFmmTukGgL7sFq5odw8-fn_GgIYNoWH0NKrpWdsdg4gcCM30N98B2hNr5Jofn_oNmzkW74JKpQy1sncTw_wbMXQNMHHJS5J1ybcwvthrsijzKXUmC763fM2U8/s1600/trading.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtqDMkj-HsmLPglAJmRozFmmTukGgL7sFq5odw8-fn_GgIYNoWH0NKrpWdsdg4gcCM30N98B2hNr5Jofn_oNmzkW74JKpQy1sncTw_wbMXQNMHHJS5J1ybcwvthrsijzKXUmC763fM2U8/s200/trading.png" width="200" height="123" /></a></div>The National Interest Analysis continues on paragraph 104 on page 30:</p>
<blockquote><i>"We have assumed that New Zealand will be able to purchase sufficient international emissions reductions in the 2020s"</i>.</blockquote>
<p>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):</p>
<p><blockquote><i>"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 <u>it may not provide a timely and sufficient supply of emission reductions</u> to be economically practical for New Zealand’s use."</i>.</blockquote></p>
<p>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.</p>
<p><blockquote><i>"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"</i>.</blockquote></p>
<p>Paragraph 64 on page 19 of the Paris Agreement National Interest Analysis then states:</p>
<blockquote><i>"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."</i></blockquote></p>
<p>Where have we heard that before? Back when I looked at the <a href="http://rwmjohnson.blogspot.co.nz/2015/04/is-it-doing-our-fair-share-to-use.html">creative accounting for the 2020 emissions reduction target</a>.</p>
<p>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?</p>
<p>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 <a href="http://www.mfe.govt.nz/publications/climate-change/nz-second-biennial-report-under-unfccc">New Zealand’s Second Biennial Report under the United Nations Framework Convention on Climate Change</a> 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 <a href="http://hot-topic.co.nz/nzs-emissions-reductions-go-up-in-smoke-as-generators-keep-huntly-coal-burning/">Huntly Thermal Power Station</a> which then got reversed. Thus cancelling the projected decline.</p>
<p>At the time of their release in late December 2015, Radio New Zealand reported the complete inconsistency with the freshly-signed Paris Agreement; <a href="http://www.radionz.co.nz/news/political/292405/emissions-set-to-far-outstrip-paris-target">Emissions set to far outstrip Paris target</a>. And they quoted an expert.</p>
<p><blockquote><i>"Suzi Kerr, a senior fellow at economic research institute Motu, said the projections <u>were completely incompatible with the target New Zealand took to the Paris climate change talks</u>"</i></blockquote></p>
<p>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. <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjG_rq5a9j8ZIxnpt73hDAr_mokxJAT5BhjiFj5GCdMQ14D8vRPGzeRCzbU03RZPnxOYhqZQuSSBiIxPRhiAvtw6niWEA1t0eF11mUmEuv7DF9OueGsZ_fcrSj7Qsnkgn4jRlybTDz2bn8/s1600/nz-sector-ghg2030-560wv7.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjG_rq5a9j8ZIxnpt73hDAr_mokxJAT5BhjiFj5GCdMQ14D8vRPGzeRCzbU03RZPnxOYhqZQuSSBiIxPRhiAvtw6niWEA1t0eF11mUmEuv7DF9OueGsZ_fcrSj7Qsnkgn4jRlybTDz2bn8/s1600/nz-sector-ghg2030-560wv7.png" /></a></div></p>
<p>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.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZrOFPVerfkLGL07ZkNtQLEA0gcPjr3tEMrQAYWPIBaE-nvGyBsQ9iSUYI5CF33MarkCSUsLYe0Sz6rG-SFQu1GYt6QBCF5DLr7tNl7T6NjyppQCqJ4TKAcRKtXrGzfRg-4Bc4yDi_bSQ/s1600/nz-ghg-lulucf-2030-560by420-v3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZrOFPVerfkLGL07ZkNtQLEA0gcPjr3tEMrQAYWPIBaE-nvGyBsQ9iSUYI5CF33MarkCSUsLYe0Sz6rG-SFQu1GYt6QBCF5DLr7tNl7T6NjyppQCqJ4TKAcRKtXrGzfRg-4Bc4yDi_bSQ/s1600/nz-ghg-lulucf-2030-560by420-v3.png" /></a></div></p>
<p>However, wasn't there meant to be a <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11361280">'wall of wood'</a> 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.</p>
<p>Paul Young of the <a href="http://morganfoundation.org.nz/">Morgan Foundation</a> has looked at the issue and has concluded that the Government is <a href="http://morganfoundation.org.nz/forests-junk-credits-cast-shadow-paris-ratification/">pushing to change the rules</a> used for accounting for forest carbon.</p>
<blockquote><i>"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"</i></blockquote>
<p>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 <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-sixth-national-communication-under-united-nations-framework">Sixth National Communication</a>.</p>
<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKw9c-76fDrezx-u-BdSisi3dt3C4vZLYipEzknohIiGvGJI3MbKaheNv1zThuNqY2sOXWdX1koopSdQkALaXrri_wRZABHCh0jqmTvC-_dxHd-ZegyBR9nMVRKejA4LRPoAfVKtpgMWs/s1600/nz-ghg-lulucf-2030-560by420-v4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKw9c-76fDrezx-u-BdSisi3dt3C4vZLYipEzknohIiGvGJI3MbKaheNv1zThuNqY2sOXWdX1koopSdQkALaXrri_wRZABHCh0jqmTvC-_dxHd-ZegyBR9nMVRKejA4LRPoAfVKtpgMWs/s1600/nz-ghg-lulucf-2030-560by420-v4.png" /></a></div></p>
<p>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 <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11692463">wall of wood of harvesting</a> is still <a href="https://nz.pfolsen.com/market-info-news/wood-matters/2015/july/the-wall-of-wood-maturing-1990s-plantings/">expected in the 2020s</a>.</p>
<p>Paul Young is also still concerned the the Government <a href="http://morganfoundation.org.nz/forests-junk-credits-cast-shadow-paris-ratification/">has not ruled out using the surplus emissions units to comply with the 2030 target</a>. 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.</p>
<p>Time for a conclusion. Is the New Zealand ratification of the Paris Agreement going to help or hinder the agreement's ambitious goals?</p>
<p>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.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-64272575042903048172016-09-11T18:41:00.000+12:002016-09-12T20:39:09.834+12:00The Ministry for the Environment's disavowed orphan carbon budget<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNcQyXCc8UH8a4HM5y1qzS8FF1SDtwFgZJGPn-Epe55bR-gOItvTzr0oDHUJgx_ITRH6vP5CIVeh8A_hXZFO7EPJMt-9E0_R_89CCE108lFWedi1u8OP_xF7fybonlSt7bhNcdRGutH4s/s1600/c-c-model-2.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNcQyXCc8UH8a4HM5y1qzS8FF1SDtwFgZJGPn-Epe55bR-gOItvTzr0oDHUJgx_ITRH6vP5CIVeh8A_hXZFO7EPJMt-9E0_R_89CCE108lFWedi1u8OP_xF7fybonlSt7bhNcdRGutH4s/s200/c-c-model-2.jpg" width="200" height="178" /></a></div>Did you know that the <a href="https://www.mfe.govt.nz/">Ministry for the Environment</a> prepared a 'two degrees' carbon budget in 2014?</p>
<p>The relevant report <a href="https://fyi.org.nz/request/4458/response/14735/attach/3/16%20D%2001102%20Simon%20Johnson.pdf">"Potential long-term pathways to a low carbon economy for New Zealand", Wellington, Ministry for the Environment, August 2014</a>, is <a href="https://www.mfe.govt.nz/site-search?search_api_views_fulltext=Potential+long-term+pathways+to+a+low+carbon+economy+for+New+Zealand">not available</a> from the Ministry's web page. However, I requested it from the Ministry via the <a href="https://fyi.org.nz/request/4458-potential-long-term-pathways-to-a-low-carbon-economy-for-new-zealand#outgoing-8995">'For Your Information'</a> website.</p>
<p>Incredibly, Idiot Savant had a blog post about it up at <a href="http://norightturn.blogspot.co.nz">No Right Turn</a> on Friday titled <a href="http://norightturn.blogspot.co.nz/2016/09/climate-change-no-path-to-lower.html">Climate change: No path to lower emissions under National</a> before I had even updated the status of my Official Information Act request on <a href="https://fyi.org.nz">FYI</a>.</p>
<p>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 <a href="http://news.bbc.co.uk/2/hi/science/nature/4994296.stm">contraction and convergence method</a>.</p>
<p>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 <a href="http://www.treasury.govt.nz/">Treasury</a> does not agree that contraction and convergence is an appropriate measure of a 'fair share'.</p>
<p>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 <a href="https://fyi.org.nz/request/4587-calculation-of-budgets-in-potential-long-term-pathways-to-a-low-carbon-economy-for-new-zealand">another request for them</a>. The budgets are only presented in this graph.</p>
<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijVg0KAgEGvy-XrPyUQZClmq7czs-akiF_G8l5c4t-ZVXVRwLuf9lPKtwDzGcqu4KkTLcm8dGd9Qd4HS4wE6deaZX2dPAIHROOWuhG5Pur8AsryqLq-R2GsBwoAz5PiDprhHA2lwX1Cs4/s1600/Fig1MfECarbonBudget.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijVg0KAgEGvy-XrPyUQZClmq7czs-akiF_G8l5c4t-ZVXVRwLuf9lPKtwDzGcqu4KkTLcm8dGd9Qd4HS4wE6deaZX2dPAIHROOWuhG5Pur8AsryqLq-R2GsBwoAz5PiDprhHA2lwX1Cs4/s1600/Fig1MfECarbonBudget.png" /></a></div><p> Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-14071400163427774322016-08-28T19:57:00.000+12:002016-08-28T20:02:28.155+12:00Geoff Simmons fact checks Paula Bennett's claim that the surplus units are clean<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4UkDiA-e5nEq8s_UpPi9E61jjNwwfofOjZ3VyqqhCuFodD1hUNLDrOXfiSQ-g9oioNy4ZeT_zLwFqXaGRVKEmgt5FCKv3BYcRsge0eukv3_LuSCrHdMd6Ch0rv3jfFUezKleTFQm6m4o/s1600/GeoffSimmons-Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4UkDiA-e5nEq8s_UpPi9E61jjNwwfofOjZ3VyqqhCuFodD1hUNLDrOXfiSQ-g9oioNy4ZeT_zLwFqXaGRVKEmgt5FCKv3BYcRsge0eukv3_LuSCrHdMd6Ch0rv3jfFUezKleTFQm6m4o/s200/GeoffSimmons-Screenshot.png" width="200" height="184" /></a></div><em>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?</em></p>
The Morgan Foundation's Geoff Simmons has done a <a href="http://morganfoundation.org.nz/fact-check-surplus-carbon-credits-clean-whiteboard-friday/">whiteboard Friday video</a> on <a href="http://worldsworstemissionstradingscheme.blogspot.co.nz/2016/07/minister-for-climate-change-issues.html">Minister for Climate Change Issues Paula Bennett's claim</a> that the <a href="http://worldsworstemissionstradingscheme.blogspot.co.nz/2016/03/surplus-emission-units-in-new-zealands.html">surplus emission units</a> are not tainted by the 97 million fake Russian and Ukrainian emission reduction units that the <a href="http://morganfoundation.org.nz/six-things-paula-bennett-must-save-emissions-trading-scheme/">Climate Cheats report of April 2016</a> showed had been handed to the Government under the NZ emissions trading scheme.</p>
<p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/ezorBTHBuGo" frameborder="0" allowfullscreen></iframe></p>
<p>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 <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/latest-2020-net-position">Latest update on New Zealand's 2020 net position</a> on the Ministry for the Environment's website.</p>
<p>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.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCn_8zjFvsrIjM-1XI3joRdk_qI9jUMcmbJ1VJzcivio6bQBQaSYaiCCW8NuuHHMs4YohaRPMQvux9vpvnsg-VA4PSYUErE67P_p3-7mfnUpm4FCR3EAgwWohiVoplGd_4Vs8AdutKw7Y/s1600/NetPosScreenshot.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCn_8zjFvsrIjM-1XI3joRdk_qI9jUMcmbJ1VJzcivio6bQBQaSYaiCCW8NuuHHMs4YohaRPMQvux9vpvnsg-VA4PSYUErE67P_p3-7mfnUpm4FCR3EAgwWohiVoplGd_4Vs8AdutKw7Y/s1600/NetPosScreenshot.png" /></a></div>
<p>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.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPU5Leraxtwc_du7b1inYIp15AvHn9pZkzYYyfbaE38mNydzzGrb2tELYATJmXS_KXBMu3XkAI8tGLBgP-WygTX0WEhboTKCxLBOMXJPkpnkomutrBHoX5l1vIXfhYUqyPco6sYv68WBY/s1600/NetPosBarScreenshot-1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPU5Leraxtwc_du7b1inYIp15AvHn9pZkzYYyfbaE38mNydzzGrb2tELYATJmXS_KXBMu3XkAI8tGLBgP-WygTX0WEhboTKCxLBOMXJPkpnkomutrBHoX5l1vIXfhYUqyPco6sYv68WBY/s1600/NetPosBarScreenshot-1.png" /></a></div>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-486860776190526102016-08-15T20:32:00.000+12:002016-08-15T20:41:50.183+12:00Morgan Foundation's Climate Cheats II: Who’s the Real Cheat Here? The Dozen Dirty Now thats a title!<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4UkDiA-e5nEq8s_UpPi9E61jjNwwfofOjZ3VyqqhCuFodD1hUNLDrOXfiSQ-g9oioNy4ZeT_zLwFqXaGRVKEmgt5FCKv3BYcRsge0eukv3_LuSCrHdMd6Ch0rv3jfFUezKleTFQm6m4o/s1600/GeoffSimmons-Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4UkDiA-e5nEq8s_UpPi9E61jjNwwfofOjZ3VyqqhCuFodD1hUNLDrOXfiSQ-g9oioNy4ZeT_zLwFqXaGRVKEmgt5FCKv3BYcRsge0eukv3_LuSCrHdMd6Ch0rv3jfFUezKleTFQm6m4o/s200/GeoffSimmons-Screenshot.png" width="200" height="184" /></a></div>Geoff Simmons and the Morgan Foundation have done it again! They have just released a sequel to <i>'Climate Cheats'</i>, the fantastically-named <i>'Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses'</i>. Simon Johnson breathlessly reviews Climate Cheats II and concludes that while it's about time we had some transparency over Government and corporate shenanigans with emissions trading, we mustn't forget that these are symptoms of the root problem - the uncapped design of the New Zealand emissions trading scheme.</p>
<p>Shock Newsflash Horror! The Morgan Foundation and Geoff "Wild-Shirt" Simmons have done it again! They have just released another tell-all critique of corporate emissions trading shenanigans! A sequel in the franchise they started in April 2016 with the report <a href="http://cdn.morganfoundation.org.nz/wp-content/uploads/2016/04/ClimateCheat_Report10.pdf">Climate Cheats</a>. As we know, 'Cheats I' outlined this sad course of events:</p>
<p><ul><li>
the 'flood' of low-cost and low-integrity Russian and Ukrainian emissions reduction units into the NZ emission unit market</li> <li>
which then crashed the domestic emission unit price</li> <li>
which allowed NZ emitters to meet emissions trading obligations for next to nothing</li> <li>
which allowed the Government to own surplus (but dodgy) units</li> <li>
which meant Paula Bennett could claim 'form over substance' compliance with climate charge targets out to 2020</li> <li>
not withstanding the real increases in both gross and net NZ emissions of greenhouse gases.</li></ul></p>
<p>Weighing in at a thankfully concise 16 pages, the wonderfully named <i><a href="http://cdn.morganfoundation.org.nz/wp-content/uploads/2016/08/ClimateCheat2_Report_V8.pdf">'Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses'</a></i> starts with a simple question. Which companies had the most dodgy Russian and Ukrainian emission units? Well, here they are.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOF4SY-NUMr4PZVqizGg0e4-HQmKZsdWN5a5wKKh8genOLg3IsBcJ-2Ws_1oh4iHim6mSS0OunIrKwxpOblznmlDrglhy2aaGQGFflA2fB6IzQfWjtVPngqaUmBuGQNEhrQnbXZ1KUQ8g/s1600/dirtydozen.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOF4SY-NUMr4PZVqizGg0e4-HQmKZsdWN5a5wKKh8genOLg3IsBcJ-2Ws_1oh4iHim6mSS0OunIrKwxpOblznmlDrglhy2aaGQGFflA2fB6IzQfWjtVPngqaUmBuGQNEhrQnbXZ1KUQ8g/s400/dirtydozen.png" width="363" height="400" /></a></div>
<p>Simmons and co then note that Minister Bennett has refused requests to cancel the surplus dodgy units the Government holds, giving the excuse she is 'seeking advice' (That would seem to be a perpetually applicable excuse!). So they ask 'who owned and used dodgy emission reduction units?' The dirty dozen corporates, of course. <p>
<p>The report then discusses three types of liability (physical, liability and transition) that may fall on companies who used the emission reduction units. To paraphrase, Simmons is thinking 'did they really think this would never come back and bit them?' And he is making the point that if Government is failing to act ethically, then why don't we shine a spotlight on our corporate citizens and ask them to shoulder some of the responsibility for the dodgy unit fiasco?</p>
<p>Simmons assigns highest culpability to New Zealand Steel and Fonterra. Because they are emitters who received generous free allocations of NZ units but who also owned dodgy emission reduction units. Referencing a <a href="http://hot-topic.co.nz/did-nz-steel-make-windfall-arbitrage-profits-from-the-ets/">blogger (meaning me!)</a>, the report notes New Zealand Steel booked $4.4 million Australian dollars of profit from emissions trading that is probably from arbitrage trading of their free NZ units while also owning dodgy units.</p>
<p>Five forestry companies are on the dozen list. Some sympathy is due to some of them as the unit price crash devalued their allocations of units. But none is due to any foresters who carried out 'forest re-registration arbitrage' in the ETS. This was exiting and re-entering the same forest in and out of the ETS several times. For each ETS 'exit', the forester would 'square-up' the refund of carbon liabilities with emission reduction units costing several cents each. For each 're-entry' to the ETS, the forester would be given an allocation of free NZ emissions units worth a few dollars each. The result being instant no-effort windfall profits. The Government took far to long to clamp down on this practice.</p>
<p>Finally, energy companies get their turn in the spotlight. BP, Chevron, Z Energy, Contact Energy and Genesis Energy all owned and used some dodgy international units. Did these companies price their products to NZ customers on the basis of the higher NZ unit prices or the lower dodgy unit price? The Morgan Foundation approached the energy companies for comment which is in an appendix. All give worthy statements saying they followed the rules and of course they put customers first. However, Mobil shows up the fine words of the others. Mobil never owned any dodgy international units and managed to supply fuel just as competitively as the others.</p>
<p>Climate Cheats II concludes by suggesting that the companies who owned dodgy international units and lowered their costs (as well as those who made windfall profits) have two options to put things right.</p>
<p><ol><li>They could voluntarily cancel NZ units to match the dodgy units used</li>
<li>They could alternatively pressure Paula Bennett to cancel the surplus units the Government holds.</li></ol><p>
<p>With NZ emission unit prices now hovering between $17 and $18 per tonne, the latter option will hurt much less than the former.</p>
<p>In summary, it's hard not to like a Morgan Foundation report that references me! But leaving that bias/good taste aside, Climate Cheats II is a concise readable summary of the abject state of New Zealand's emissions targets and trading policies and practices. As Kevin Anderson would say, we need to see clearly where our rose-tinted spectacles have brought us. Climate Cheats II mostly does that.</p>
<p>However, if anything, the report, by focusing on the top dozen owners of the dodgy international units, underplays the persuasiveness of the ownership and use of those international units. Most entities with emissions trading accounts owned some dodgy units. In 2013, more than 400 entities (out of 496 account holders) owned some share of the almost 35 million emission reduction units in private hands. You can check this with this <a href="https://docs.google.com/spreadsheets/d/1JsTw7e1ucA8nERfnVvz7tIw3ajqas-h22AgFLkNeBT4/">Google sheet</a> of Kyoto Units obtained from the Emission Unit Register at the EPA.</p>
<p>Finally, I have one concern which is perhaps more about how 'Climate Cheats II' will be received rather than what message it has. It seemed to me that the media response to initial splash of 'Climate Cheats I' (they loved the emotive framing - 'fraud!' - 'cheating!') really missed the fundamental point that I think both reports support, and that other assessments of the ETS support, that an emissions trading scheme that has no cap on emissions, that earns no revenue and that isn't economy-wide, is an excuse and rationalisation for doing nothing and not an effective mitigation policy at all.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-81643428306022320382016-08-08T20:10:00.001+12:002016-08-13T12:55:44.475+12:00Where is the Two Degrees Celsius Carbon Budget for New Zealand? <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5fpT-ACsLrdvnccruYcyNq3O0AvtszF6Oc1mHlmCNVw0GphgP_vYWHw-68Df0ojCJmLy_s2OSaktAas58V3NJQsZ3bRDYbaEdzmXwMH8gncBapuzDskEVe561zadMsIRH_jNAXfPC9FE/s1600/Donner-figure-CO2only-shaded.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5fpT-ACsLrdvnccruYcyNq3O0AvtszF6Oc1mHlmCNVw0GphgP_vYWHw-68Df0ojCJmLy_s2OSaktAas58V3NJQsZ3bRDYbaEdzmXwMH8gncBapuzDskEVe561zadMsIRH_jNAXfPC9FE/s320/Donner-figure-CO2only-shaded.jpg" width="320" height="260" /></a></div><p>I have been reading up about <a href="https://theconversation.com/setting-a-carbon-budget-to-keep-below-two-degrees-18841">carbon budgets</a> on and off since the Paris Agreement at COP21 last December.</p>
<p>By 'carbon budget' I mean <a href="https://www.carbonbrief.org/carbon-briefing-making-sense-of-the-ipccs-new-carbon-budget"><i>"a finite amount of carbon that can be burnt before it becomes unlikely we can avoid more than two degrees of global warming"</i></a>. And I have been asking myself "where is New Zealand's carbon budget that is consistent with no more than two degrees Celsius of average global warming"?</p>
<p>I see that Canadians <a href="http://blogs.ubc.ca/sdonner/">Simon Donner</a> and <a href="https://www.sfu.ca/geography/news-and-events/news-archives/news-2016/20160407-kirsten-climate-agreement.html">Kirsten Zickfield</a> asked themselves similar questions about <a href="http://blogs.ubc.ca/maribo/2016/03/02/canadas-contribution-to-meeting-the-paris-temperature-targets/">Canadas contribution to meeting the Paris temperature targets</a> and <a href="http://blogs.ubc.ca/maribo/2016/04/04/can-canada-live-up-to-the-promise-of-the-paris-climate-agreement/">Can Canada live up to the promise of the Paris Agreement</a>? The chart on the left shows three Canadian 'temperature' budgets/emission pathways under a share of emissions approach.</p>
<p>In short, Donner and Zickfield have calculated several "2C"-consistent carbon budgets, based on a range of temperature goals, a range of probabilities of success, and a range of sharing principles used for allocating part of the global carbon budget to Canada. They wrapped that up in a short 3-page paper <a href="http://blogs.ubc.ca/sdonner/files/2016/02/Donner-and-Zickfeld-Canada-and-the-Paris-Climate-Agreement.pdf">"Canada’s Contribution to meeting the temperature limits in the Paris Climate Agreement"</a>.</p>
<p>Simon Donner also wrote a more policy-oriented summary <a href="http://policyoptions.irpp.org/magazines/march-2016/what-do-the-temperature-targets-mean-for-canada/">What do the temperature targets mean for Canada</a>?</p>
<p>This is their summary table of budgets by temperature targets and probabilities. <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTxOkxixxZ-i63LDWfpZ2QhyrgTBuuJ2o7zLQykMbRX7MxUag1FWAk2cjhZwV6brdbaF5_UUv8-D8UC3ije1nbaFAB2-FWNY_s2UC9rp7XIhDEbMWa98tfz1zK_tbRFc2qwiqbAahXNJs/s1600/Donner-table.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTxOkxixxZ-i63LDWfpZ2QhyrgTBuuJ2o7zLQykMbRX7MxUag1FWAk2cjhZwV6brdbaF5_UUv8-D8UC3ije1nbaFAB2-FWNY_s2UC9rp7XIhDEbMWa98tfz1zK_tbRFc2qwiqbAahXNJs/s400/Donner-table.jpg" width="400" height="116" /></a></div></p>
<p>Simon Donner's conclusion from <a href="http://blogs.ubc.ca/maribo/2016/04/04/can-canada-live-up-to-the-promise-of-the-paris-climate-agreement/">Can Canada live up to the promise of the Paris Agreement</a> is:</p>
<blockquote><i>The analysis in our report suggests that the current Canadian target of a 30% reduction below 2005 levels by 2030 could be consistent with maintaining a likely chance (66%) of limiting warming to less than 2°C globally, but only if Canada is given a generous allocation of the world’s “remaining” future carbon budget (based on the present fraction of the world’s emissions). A target consistent with a likely (66%) chance of avoiding 1.5°C of warming globally is extremely limited regardless of the method of allocation. Even under a generous allocation to Canada, national net CO2 emissions would need to decline 90-99% below 2005 levels by 2030.</i></blockquote>
<p>Simon Donner also notes that <i>"The 1.5°C limit is “at best unrealistic, at worst politically impossible.”</i></p>
<p>Simon Donner is also highly aware that 'sharing-on-current-emissions' unfairly favours developed highly carbon-intensive OECD countries like Canada (or New Zealand) over the developing countries with much lower greenhouse gas emissions per capita.</p>
<blockquote><i>Allocating the remaining carbon budget based on present-day emissions places an unfair burden on developing and rapidly industrializing countries that historically have had low per-capita emissions. Despite being far less responsible for climate change to date, and currently having low per-capita emissions, countries like India would essentially be asked to bear an equal part of future mitigation efforts.</i>
</blockquote>
<p>Good work Canada! But where the bloody hell is New Zealand's 2C consistent carbon budget?</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-78862482037594454972016-07-25T20:37:00.000+12:002016-07-25T20:37:32.139+12:00Kevin Anderson Beyond Dangerous Climate Change Does Paris Lock-out 2 Degrees?<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6BApbjnIUHvC7yIShMAKHO9oeBFr9HO0VkvqmavuizreYh9ARxieFIQK-jlJQnHokyzQr5cvsPIHFAsh4PEe0M5R_vRZgayakUprPOvPWOuzzTiGX7V4a19zqP-HSmdhv_dE0C7ld_dY/s1600/KA-Screenshot2.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6BApbjnIUHvC7yIShMAKHO9oeBFr9HO0VkvqmavuizreYh9ARxieFIQK-jlJQnHokyzQr5cvsPIHFAsh4PEe0M5R_vRZgayakUprPOvPWOuzzTiGX7V4a19zqP-HSmdhv_dE0C7ld_dY/s200/KA-Screenshot2.png" width="200" height="128" /></a></div><p>There is another new talk by Kevin Anderson. The image is his title page and the title is <b><a href="http://www.iiea.com/events/beyond-dangerous-climate-change-does-paris-lock-out-2-degrees">Beyond Dangerous Climate Change: Does Paris Lock-out 2 Degrees?</a></b>.</p>
<p>Kevin Anderson gave the talk on 9th of March 2016 to the <a href="http://www.iiea.com/">Institute of International and European Affairs</a> which is Ireland’s leading think tank on European and International affairs. They describe his message in this way.</p>
<p>
<blockquote><i>In his presentation, Kevin Anderson revisited the scale of the climate challenge, arguing that whilst the science of climate change has progressed, there has been no corresponding acknowledgement of the rate at which our emissions from energy need to be reduced. He suggested that the Paris Agreement exemplifies this duality. Similarly, he argued that the focus on green growth continues to eclipse analysis which demonstrates the need for radical social as well as technical change. Prof. Anderson developed a quantitative framing of mitigation, based on IPCC carbon budgets, before finishing with more qualitative examples of what a genuine low-carbon future may contain.</i></blockquote></p>
<p>Anderson's key message is that due to the constant privileging of economic analysis over physics, the finite carbon budget consistent with no more than two degrees Celsius of average global warming will only be achievable with an "outside" probability of 33% if the developed countries suppress energy demand and reduce carbon dioxide emissions by 10% each year and fully de-carbonise their energy sectors by 2035.</p>
<p>The talk is available as a <a href="http://www.iiea.com/ftp/Podcasts/Podcasts%20and%20PDFs%202015%20Temp/Kevin_Anderson_Podcast.mp3">podcast in mp3 format</a>. Also available is Kevin Anderson's <a href="http://www.iiea.com/ftp/Podcasts/Podcasts%20and%20PDFs%202015%20Temp/Anderson_IIEA_seminar_Ireland_%20March_2016.pdf">slide presentation</a>.</p>
<p>The talk is also available on Youtube in two parts. <a href="https://youtu.be/i6Huz1a1lXI">Part One</a> has had 1,975 views. <a href="https://youtu.be/dMUzKe0NTns">Part Two</a> has had 664 views.</p>
<p><iframe width="560" height="315" src="https://www.youtube.com/embed/i6Huz1a1lXI" frameborder="0" allowfullscreen></iframe></p>
<p><iframe width="560" height="315" src="https://www.youtube.com/embed/dMUzKe0NTns" frameborder="0" allowfullscreen></iframe>
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<p>I usually browse with Firefox and I have installed an <a href="https://addons.mozilla.org/en-US/firefox/addon/video-downloadhelper/">add-on</a> called <a href="https://www.downloadhelper.net/">Down load helper</a>. That enables me to download talks as mp4 files I can listen to later.</p>
<p>There are two differences from the talk given to the University of Sheffield. The sound is a bit boomy and not as clear as the University of Sheffield recording. And when Kevin Anderson says "people with grey hair or no hair have failed the generation born since the IPCC was established", the grey-hairs seems to be the audience from the two in the foreground.</p> Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-59851113992097908582016-07-19T19:59:00.001+12:002016-07-19T20:05:35.974+12:00New Kevin Anderson talk Delivering 2 Degrees Triumph and Tragedy in Paris<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSDKS9tyOGVLKc20tKEqGWje840AX5Spg5HZxHGv3VcyD1eY7nnJgs5fvj__WVkfzmSnydeFrw85lIi1R9FDK0-pnCkHOmMK3Xv2E2YrSOKhpB7ScJpyT4K3muMVtr5giKY4w7WdfMAOk/s1600/ParistriumphScreenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSDKS9tyOGVLKc20tKEqGWje840AX5Spg5HZxHGv3VcyD1eY7nnJgs5fvj__WVkfzmSnydeFrw85lIi1R9FDK0-pnCkHOmMK3Xv2E2YrSOKhpB7ScJpyT4K3muMVtr5giKY4w7WdfMAOk/s200/ParistriumphScreenshot.png" width="200" height="192" /></a></div><p>The other day I noticed that <a href="http://t.co/ovKv2o4Bcb">Kevin Anderson</a> has <a href="https://twitter.com/KevinClimate/status/752479904650919936">tweeted a new talk</a>.</p>
<p>Anderson spoke at the University of Sheffield on 28 April 2016. Anderson's host was the <a href="http://carbonneutralshef.weebly.com">Carbon Neutral University Network Sheffield</a> and they provide a fulsome description of <a href="http://carbonneutralshef.weebly.com/delivering-on-2-degrees---kevin-anderson.html">Anderson's 47 minute talk</a>. However, you should watch it for yourself or better still download the talk from <a href="https://www.youtube.com/watch?v=9gJ78vDU17Y">Youtube</a>. The sound quality is very good.</p>
<p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/9gJ78vDU17Y" frameborder="0" allowfullscreen></iframe>
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Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-22525175880994377572016-07-06T20:03:00.001+12:002016-07-06T20:03:51.474+12:00Minister for Climate Change Issues Paula Bennett and the surplus emission units<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" /></a></div><p><p>A wee while ago, back on 23 May to be precise, I wrote an <a href="http://rwmjohnson.blogspot.co.nz/2016/05/an-open-letter-to-minister-for-climate.html">open letter to Minister for Climate Change Issues Paula Bennett</a> calling on her to cancel the surplus Kyoto emission units held by the Crown.</p>
<p>I received an <a href="https://drive.google.com/file/d/0B8LhMBA3NXL4Q3JmQmZDMTE2Rm8/view?usp=sharing">undated reply from Bennett</a> on Monday 4 July 2016.</p>
<p>To crudely sum it up, Bennett's reply is <b>"No we won't cancel any units. Those bad bad Ukrainian units! It was bad. But we stopped being bad, we won't bad again, at any rate no more bad than any one else!"</b></p>
<p>Here is the text of Bennett's letter. For reference, I have put the text of my open letter at the bottom of this post.</p>
<blockquote><i><p>Thank you for your letter of 23 May 2016 about surplus Kyoto Protocol assigned amount units.</p>
<p>As you say, the Government has a surplus of 123.7 million Kyoto Protocol emission units which were left over after we retired units to meet our target for the first Kyoto commitment period.</p>
<p>I accept that there were up to 97 million Emission Reduction Units (ERUs) bought and surrendered in the New Zealand Emissions Trading Scheme (NZ ETS) before the Government stopped accepting them. That was within the rules, but we now know many of the ERUs are likely to have had poor environmental integrity. We are not accepting international units now, and we are working hard to make sure any international units traded in the NZ ETS in the future are of high environmental integrity. We are reviewing the NZ ETS to make sure it will be fit for purpose in the future.</p>
<p>As we have said in the past, we will meet our target of -5 per cent by 2020 using a combination of domestic abatement, forestry removals, and some international purchasing. There is information about the target on the Ministry for the Environment website at www.mfe.govt.nz.</p>
<p>We have not made a decision about what to do with any Kyoto units that are left over after we have met the 2020 target.</p>
<p>Nearly all other Kyoto developed countries also have surpluses. Some of them have said they will cancel units, but haven't actually cancelled them yet. There is no urgency to do anything with these units, and the fact that we are not cancelling them at this stage doesn't put us out of step with other countries.</p></i></blockquote>
<hr/>
<p>Let's look a little harder at three statements in Bennett's letter.</p>
<ol><li><i>"We are not accepting international units now"</i> </br>Bennett is implying that the New Zealand Government made an express decision to stop the importing of some low-integrity international emission units. In fact, New Zealand ended up with no access to international carbon markets when Tim Groser told the UNFCCC that New Zealand was not going to have a formal emissions reduction commitment under the Kyoto Protocol for 2013 to 2020. Ms Bennett and the Ministry for the Environment should stop implying that some positive decision was made. Its just not true.
</li>
<li><i>"we will meet our target of -5 per cent by 2020 using a combination of domestic abatement, forestry removals, and some international purchasing."</i> </br> The translation of this spin back into plain language is <a href="http://rwmjohnson.blogspot.com/2015/04/is-it-doing-our-fair-share-to-use.html">'we will still be using creative carbon accounting'</a> to pretend we are reducing emissions when we know we are not. Bennett should really stop saying such a disingenuous statement. The <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/latest-2020-net-position">Ministry for the Environment's 2020 Net Position Statement</a> still explicitly shows the 123.7 million surplus units plugging the gap.
</li>
<li><i>"not cancelling them... doesn't put us out of step with other countries"</i> </br> Heaven forbid that New Zealand should be out of step with the many other countries who are also doing nothing about climate change!
</li>
</ol>
<p></p>
<p><b>My open letter to Paula Bennett - Your ethical duty to cancel 124 million surplus assigned amount units</b></p>
<p>Dear Minister,</p>
<p>I see that last Friday (20 May 2016) the Ministry for the Environment released <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-greenhouse-gas-inventory-1990-2014">New Zealand's Greenhouse Gas Inventory 1990–2014</a> and the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990%E2%80%932014-snapshot">summary 'Snapshot'</a>.</p>
<p>I see that in the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990%E2%80%932014-snapshot">Snapshot summary</a> on Figure 5, page 5, that New Zealand is still intending to use 123.7 million emission units (Assigned Amount Units or 'AAUs') that were 'surplus' from the Kyoto Protocol first Commitment Period to meet the 2020 emissions reduction target and still have a surplus of 92.6 million units. </p>
<p>You are aware that the Morgan Foundation's report <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">'Climate Cheats'</a> and the Stockholm Environment Institute report <a href="https://www.sei-international.org/publications?pid=2802">(Kollmuss, Schneider and Zhezherin 2015)</a> set out a persuasive case that the 97 million Emission Reduction Units ('ERUs') that were imported to New Zealand were “questionable or of low environmental integrity”. Those ERUs were surrendered by NZETS participants into Crown holding accounts.</p>
<p>According to the <a href="http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/true-up_period_report_by_New_Zealand_2015.pdf">Kyoto Protocol 'True-Up' Report</a>, in December 2015, the Ministry for the Environment cancelled (transferred Crown-owned units to cancellation accounts) 373 million emission units to comply with the Kyoto Protocol. The numbers and types of units cancelled were: the 97 million imported ERUs, 16 million imported Certified Emission Reduction units ('CERs'), 81 million removal units ('RMUs'), and 179 million AAUs . The 'surplus' units remaining in Crown holding accounts were 124 million AAUs.</p>
<p>In a nutshell, the only reason New Zealand (the Crown) has so many 'surplus' AAUs is because of the inflow and use of the dubious ERUs in the NZETS. Each dubious imported ERU has allowed one additional AAU to be carried forward in a Crown holding account as a 'surplus' unit. Because the ERUs have no credibility, the AAUs no longer represent carbon safely stored out of the atmosphere. No emissions were reduced. Therefore to use these surplus AAUs to comply with the national 2020 emission reduction target is simply an exercise in creative carbon accounting. It is simply unethical.</p>
<p>I put it to you that as Minister for Climate Change Issues, you are morally obliged to cancel these surplus units owned by the Crown. Will you cancel the units? It may hopefully to some small extent restore New Zealand’s very tarnished reputation with respect to mitigating climate change policy.</p>
<p>Yours sincerely</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-86257934319118891472016-06-30T20:27:00.000+12:002016-06-30T20:27:07.657+12:00Turn off Meridian open letter to Mark Binns on why I am divesting from coal-pushing Meridian Energy <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlVOUMvd4qz5yOLBkyecqK4Mdj6ElJ6wXNcCVg0TC4barOhBpEa7L51_qYMkLvrQtNYp2vNAwtgNZ2lvMC8dBZaQPn-usQgEAcrjPeTKuuEgydDSFV-ASzFHpfEAVpARj069-d6mVECNM/s1600/JermeyWells-Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlVOUMvd4qz5yOLBkyecqK4Mdj6ElJ6wXNcCVg0TC4barOhBpEa7L51_qYMkLvrQtNYp2vNAwtgNZ2lvMC8dBZaQPn-usQgEAcrjPeTKuuEgydDSFV-ASzFHpfEAVpARj069-d6mVECNM/s200/JermeyWells-Screenshot.png" /></a></div><p>When is a renewable electricity generator not a renewable electricity generator? Or what do you do when the electricity generator who are claiming to supply your home with <a href="https://www.meridianenergy.co.nz/about-us/sustainability/renewable-energy">100% renewable electricity</a> enters into a commercial contract that keeps a coal-thermal power station emitting carbon dioxide for an additional four years?</p>
<p>Meridian Energy has recently signed a <a href="https://www.meridianenergy.co.nz/news-and-events/meridian-energy-signs-swaption-contract-with-genesis-energy">contract with Genesis Energy</a> to keep the <a href="https://en.wikipedia.org/wiki/Huntly_Power_Station">Huntly coal thermal power station</a> open for four more years instead of closing in 2018.</p>
<p>New Zealand has made some predictions of <a href="http://www.mfe.govt.nz/publications/climate-change/nz-second-biennial-report-under-unfccc">future reductions in emissions</a> that we have confidently sent off to the <a href="https://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change">United Nations Framework Convention on Climate Change (UNFCCC)</a>. Unfortunately Meridian's action has had the effect of sending the emissions savings <a href="http://hot-topic.co.nz/nzs-emissions-reductions-go-up-in-smoke-as-generators-keep-huntly-coal-burning/">up in a puff of coal smoke</a>.</p>
<p>So I decided to divest from Meridian Energy and move my account to electricity supplier to <a href="https://ecotricity.co.nz/about/">Ecotricity</a> who own only 100% renewable generation capacity and who are certified as carbon neutral. I used the <a href="https://www.powerswitch.org.nz/powerswitch/site-info/about-powerswitch">Consumer Power Switch</a> website. There is also <a href="http://www.whatsmynumber.org.nz/">Whats my number</a> web site.</p>
<p>I thought I should let Meridian Energy know I was voting with my account so I sent this open letter to Meridian Energy two weeks ago on 16 June 2016. I have not yet received a reply.</p>
<p>Mark Binns</br>
Chief Executive</br>
Meridian Energy Limited</br>
PO Box 2128</br>
Christchurch 8140</p>
<p>16 June 2016</p>
<p><b>Re: Meridian Energy’s support for four more years of thermal coal electricity carbon dioxide emissions from Huntly Power Station</b></p>
<p>Dear Mr Binns,</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRA509ugbvTytGh2wlym4Q7-qbDj2k3xmWSK9ZJ7fD8-ehIhSsA79GgQvJ9hjYbcSpmz4G9Z-KioybADa56o6SDBQLTwL2hyg8nNbzElbktv0_rbS01hwJ5foiOfVFz6E5l54YbYm4gDs/s1600/RenewCommittScreenshot.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRA509ugbvTytGh2wlym4Q7-qbDj2k3xmWSK9ZJ7fD8-ehIhSsA79GgQvJ9hjYbcSpmz4G9Z-KioybADa56o6SDBQLTwL2hyg8nNbzElbktv0_rbS01hwJ5foiOfVFz6E5l54YbYm4gDs/s200/RenewCommittScreenshot.png" /></a></div><p>I am a Meridian retail customer. My customer number is TrJ5I19vcteK2 My account number is 1.h@"]41Y6x#5-r.</p>
<p>I consider climate change to be a serious risk that we are all morally obliged to respond to. In 2012 I deliberately chose Meridian as my electricity retailer because of it's <a href="https://www.meridianenergy.co.nz/about-us/sustainability/renewable-energy">100% renewable generation</a>.</p>
<p>I am aware that to some extent the electricity I consume inevitably draws on some fossil-fueled capacity due to the networked nature of the grid. However, I was satisfied that choosing Meridian as my retailer was the best I could do in terms of reducing carbon dioxide emissions as I would not be contributing my money to any fossil-fueled thermal generation. In the past four years I have been very happy with that choice and with the service I have received from Meridian. Unfortunately, I did not know that Meridian had a contract with Genesis to keep the <a href="https://en.wikipedia.org/wiki/Huntly_Power_Station">Huntly coal thermal power station</a> operating to 2018.</p>
<p>On 28th April 2016, Meridian Energy announced that <a href="https://www.meridianenergy.co.nz/news-and-events/meridian-energy-signs-swaption-contract-with-genesis-energy">it had signed a new contract</a> with <a href="https://www.nzx.com/companies/GNE/announcements/281406">Genesis Energy</a> that would keep the Huntly coal thermal power station operating for an extra four years. This contract therefore postpones the expected closure from the <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11492939">planned 2018 date</a> to 2022. I have read the <a href="https://www.meridianenergy.co.nz/news-and-events/future-of-new-zealands-electricity-supply">statement on the Meridian website</a> explaining the contract as a means of reducing the risk of low levels in the hydro lakes. The explanation fails to take climate change seriously.</p>
<p>The Fifth Assessment Report of the IPCC sets out very simply the carbon budget consistent with limiting global warming to less than two degrees Celsius. The global warming we will experience will be linearly proportional to the cumulative volume of carbon dioxide emissions emitted by humanity. To prevent further dangerous levels of warming with a reasonable probability, cumulative emissions cannot exceed the carbon budget. At that point, emissions must not exceed net zero.</p>
<p>As a matter of physics, the additional emissions that will come from Huntly for the extra four years will result in higher and more dangerous eventual global warming. Meridian Energy's actions have facilitated these additional emissions.</p>
<p>I find Meridian’s actions to be completely contrary to the IPCC's finite carbon budget conception of mitigation and with Meridian’s previous statements on renewable electricity. Those statements now appear very shallow and insincerely held to say the least.</p>
<p>Therefore, it gives me some satisfaction to inform you I am moving my electricity account to a <a href="https://ecotricity.co.nz/about/">100% renewable electricity generator</a> who has carbon neutral certification and who is not a party of the Huntly contract. It is my sincere wish that as many customers as possible who are concerned about climate change also leave Meridian.</p>
<p>Yours sincerely</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-79497407140326942032016-06-18T20:18:00.000+12:002016-06-18T20:36:23.607+12:00Emissions Trading Scheme unit allocations are open data but units surrendered and actual emissions are state secrets<p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiprSwGWFGvioP6fqQg39XauPDvTDvi9dq_cmg-08GrC-7t1H9Kqj67KWdWewzh_3zRUsjS-rCS1c-glZMae852sZFZdhyphenhyphenw0F-SOTNzQQPt__8xF1Aer3xzaYFRh92EV18dxhtv7QFwRL0/s1600/NZ+Emissions+Trading+Scheme.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiprSwGWFGvioP6fqQg39XauPDvTDvi9dq_cmg-08GrC-7t1H9Kqj67KWdWewzh_3zRUsjS-rCS1c-glZMae852sZFZdhyphenhyphenw0F-SOTNzQQPt__8xF1Aer3xzaYFRh92EV18dxhtv7QFwRL0/s200/NZ+Emissions+Trading+Scheme.jpg" /></a></div><p><em>It would be good if we could compare actual company emissions under the NZETS to the generous free allocations of unit some entities receive. But we can't. It's half secret. So how will we ever know if allocations are excessive?</em>
</p>
<p>Someone recently asked me if there was enough publicly available information to be able to tell how the <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/allocations">free allocation of NZ emission units</a> to <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/industry-17">some privileged ETS participants</a> under the <a href="http://www.epa.govt.nz/publications-resources/faqs/Pages/Emissions-Trading-faqs.aspx">NZ Emissions Trading Scheme</a> related to the emitters actual emissions of greenhouse gases.</p>
<p>This information would be the number of emission units <a href="http://www.mfe.govt.nz/node/21813">allocated to some emitters</a> on the one hand, and on the other hand, the actual emissions of the emitters as reported to the <a href="http://www.epa.govt.nz/Pages/default.aspx">Environmental Protection Authority</a> and the actual numbers of corresponding emission units they <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme/industry-1">surrender</a> to the Environmental Protection Authority.</p>
<p>I replied "No, the data is not available". A response which, although it contains a grain of truth, still doesn't reflect the whole story. So this post is an attempt at that story.</p>
<p>In the past few years, I have written several posts about the significance of the free allocation of emission units to <a href="http://rwmjohnson.blogspot.co.nz/2012/09/rio-tinto-alcan-nz-do-godfather-nice.html">New Zealand Aluminium Smelters Ltd</a>, <a href="http://rwmjohnson.blogspot.co.nz/2012/11/godfather-part-5-exporter-had-flown.html">Norske Skog Tasman</a> and <a href="http://rwmjohnson.blogspot.co.nz/2016/04/did-new-zealand-steel-make-windfall.html">New Zealand Steel</a>. In each case I concluded that the free allocation of units (including units for energy costs) were excessive. That these were cases of 'over-allocation'.</p>
<p>In those posts I had to make estimates of the actual emissions and actual units surrendered. Although the Ministry for the Environment completely discloses the annual <a href="http://www.mfe.govt.nz/node/21813">free allocation of units</a>, neither the Ministry or the Environmental Protection Authority report the emissions and units surrendered by entity.</p>
<p>As <a href="http://rwmjohnson.blogspot.co.nz/2016/04/opening-up-data-on-emissions-units-in.html">I noted recently</a> I have compiled a <a href="https://docs.google.com/spreadsheets/d/1JQidgRGYs44OyzjxBv2cpowI2kempRgF1R7yIQUwpjk/">Google sheet of all units allocated to emitters from 2010 to 2014</a>.</p>
<p>So good on the Ministry for the Environment. A while ago I made this pie chart of the 2011 allocations from the Ministry. Yes, awful rainbow colours I know! But it still makes it clear that the vast bulk of free units get allocated to the top ten or so emitters - who happen to also be some of New Zealand's largest and most influential companies.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_9lp8SpPplT1pwEncCeovZSDneEXqptu9Q1lgVgNMVJQ4IMkarzSKcq2xJmDYjEkB5bRuU2FtbW3ka94edQYWq17k-5ZIXPC4ZTC8p9CSRi9JjwI_x1NrRFdfE1LcP6pqEWrYLqNtsPU/s1600/nzu-allocations-pie-2011-675.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_9lp8SpPplT1pwEncCeovZSDneEXqptu9Q1lgVgNMVJQ4IMkarzSKcq2xJmDYjEkB5bRuU2FtbW3ka94edQYWq17k-5ZIXPC4ZTC8p9CSRi9JjwI_x1NrRFdfE1LcP6pqEWrYLqNtsPU/s1600/nzu-allocations-pie-2011-675.png" /></a></div>
<p>I was running out of emitters like <a href="https://en.wikipedia.org/wiki/New_Zealand_Steel">NZ Steel</a> and <a href="https://en.wikipedia.org/wiki/Tiwai_Point_Aluminium_Smelter">NZ Aluminium Smelters Ltd</a> who both have unique operations. Both are the only example of their industry in New Zealand. So I could look at 'category' emissions for 'aluminium smelting' and 'steel making from iron sands' in the Ministry for the Environment's <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-greenhouse-gas-inventory">greenhouse gas inventory reports</a> and be confident the category emissions were the same as the company emissions.</p>
<p>So, back on 28 March 2013, I made a request under the <a href="http://www.legislation.govt.nz/act/public/1982/0156/latest/DLM64785.html?src=qs">Official Information Act (OIA)</a> to the Environmental Protection Authority, who administer the reporting of emissions and surrendering of units in the ETS.</p>
<p>I asked for number of <a href="https://fyi.org.nz/request/emission_units_surrendered_by_el">
units surrendered by the top eleven ETS participants</a> (New Zealand Steel Limited, New Zealand Aluminium Smelters Limited, Methanex New Zealand Limited, Fletcher Concrete and Infrastructure Limited, Ballance Agri-Nutrients Limited, Holcim (New Zealand) Limited, Carter Holt Harvey Pulp & Paper Limited, Pan Pac Forest Products Limited, McDonalds Lime Limited, Winstone Pulp International Limited, Whakatane Mill Limited) for 2010 and 2011.</p>
<p>On 18 April 2013, the <a href="https://fyi.org.nz/request/802/response/3844/attach/3/Simon%20Johnson%20OIA%20Letter.pdf">Environmental Protection Authority declined</a> my request.</p>
<p>On 19 April 2013 I <a href="https://fyi.org.nz/request/emission_units_surrendered_by_el#comment-246">made a complaint</a> about the EPA decision to the <a href="http://www.ombudsman.parliament.nz/">Office of the Ombudsman</a>.</p>
<p>Almost a year later, on 8 April 2014, the Ombudsman <a href="https://fyi.org.nz/request/emission_units_surrendered_by_el#comment-510">concluded his investigation</a> and said that the EPA were correct in refusing to give me the information as the <a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM158584.html?src=qs">Climate Change Response Act 2002</a> explicitly applies to the surrender of units in priority to the <a href="http://www.legislation.govt.nz/act/public/1982/0156/latest/DLM64785.html?src=qs">Official Information Act 1982</a>.</p>
<p>The Deputy Ombudsman Leo Donnelly advised that he agreed with the EPA view that they did not have to provide the information on units surrendered. This is the key passage from his letter dated 8 April 2014.</p>
<blockquote><i>"I am not persuaded that the Official Information Act is an Act that provides for the disclosure of information in s 99(2)(a) of the Climate Change Response Act.
</br>The Official Information Act confers a right to request official information and requires that such requests be processed in accordance with its provisions, but those provisions do not provide for the disclosure of information under the Climate Change Response Act (or any other Act that imposes restrictions on the availability of official information).
</br>Instead, section 52(3)(b)(i) of the Official Information Act provides that nothing in that Act derogates from any provision which is contained in any other Act which imposes a prohibition or restriction in relation to the availability of official information. Section 99 is such a section.
</br>Accordingly, the Official Information Act does not override the restrictions imposed by section 99 of the Climate Change Response Act and it would be contrary to that section for the requested information to be made available to you. Consequently, section 18(c)(1) of the Official Information Act provides a reason to refuse your request on that basis."</i></blockquote>
<p>I was bloody disappointed with that response. Here is the
<a href="https://drive.google.com/file/d/0B8LhMBA3NXL4M1pqUjd0Y0pFbjg/">Ombudsman's letter</a>. I also didn't know that the Official Information Act only applies if another statute allows it too. I will look at the relevant sections in detail.</p>
<p><a href="http://www.legislation.govt.nz/act/public/1982/0156/latest/DLM65917.html">Section 52(3)(b)(i) of the Official Information Act</a> states;</p>
<blockquote><i>
(3) Except as provided in sections 50 and 51, nothing in this Act derogates from—</br>
(a) ....</br>
(b) any provision which is contained in any other Act of Parliament or in any regulations within the meaning of the Regulations (Disallowance) Act 1989 (made by Order in Council and in force immediately before 1 July 1983) and which—</br>
(i) <u>imposes a prohibition or restriction in relation to the availability of official information</u>;...
</i></blockquote>
<p>So if another statute (or regulation) prohibits or restricts the availability of official information, then that statute or regulation applies irrespective of the Official Information Act.</p>
<p><a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM1662665.html">Section 99 of the Climate Change Response Act</a> certainly appears to prohibit the availability of information. It states;</p>
<blockquote><i>This section applies—</br>
(a) to the chief executive, the EPA, an enforcement officer, and any other person who performs functions or exercises powers of the chief executive, the EPA, or an enforcement officer under this Part and Part 5; and</br>
(b) at the time during which, and any time after which, those functions are performed or those powers are exercised.</br>
(2) A person to whom this section applies—</br>
(a) <u>must keep confidential all information that comes into the person’s knowledge</u> when performing any function or exercising any power under this Part and Part 5; and</br>
(b) <u>may not disclose any information specified in paragraph (a)</u>, except—</br>
(i) with the consent of the person to whom the information relates or of the person to whom the information is confidential; or</br>
(ii) to the extent that the information is already in the public domain; or</br>
(iii) for the purposes of, or in connection with, the exercise of powers conferred by this Part or for the administration of this Act; or</br>
(iiia) for the purposes of, or in connection with, reporting requirements of the Public Finance Act 1989; or
(iv) as provided under this Act or any other Act; or</br>
(v) in connection with any investigation or inquiry (whether or not preliminary to any proceedings) in respect of, or any proceedings for, an offence against this Act or any other Act; or</br>
(vi) for the purpose of complying with any obligation under the Convention or the Protocol.</br>
(3) A person to whom this section applies commits an offence under section 130 if the person knowingly contravenes this section.....</i></blockquote>
<p>So why does the Ministry for the Environment publish the annual allocations of units on its website? Why is the policy for unit allocation effectively open data (with complete public disclosure) when the policy for emissions and units surrendered in the ETS, the policy is 'Official Secrets Act?<p>
<p>The answer is the perfect bureaucrat's answer, because the Act says so. <a href="http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM2643107.html">Section 86B Decisions on applications for allocations of New Zealand units to industry and agriculture</a> of the Climate Change Response Act states:</p><blockquote><i>
(5) The EPA must, as soon as practicable, after deciding an eligible person’s final allocation for an eligible activity in respect of a year,—</br>
(a) publish the decision in the Gazette; and</br>
(b) ensure it is accessible via the Internet site of the EPA</i>.</blockquote>
<p>Where does this leave us? It's the old story of the three-handed forestry consultant. 'On the one hand, on the second hand, but on the third hand..' Its great that the data on free allocation of units to emitters is fully disclosed. I am sure many of them wouldn't want that. However, without data on units surrendered and actual annual emissions under the ETS, no one can make much of an assessment of whether the units allocated are reasonable or over-allocated in terms of exceeding actual emissions. Transparency (and legitimacy) would be very much improved if the actual emissions and unit surrenders were just as open as the unit allocations</p> Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-24040882297416692642016-06-18T20:15:00.001+12:002016-06-18T20:15:17.242+12:00Saturday night listening White Valiant The Muttonbirds live in 1994<div align="center"><iframe width="420" height="315" src="https://www.youtube.com/embed/KuwYdHXXAlc" frameborder="0" allowfullscreen></iframe></div>
<p><a href="https://en.wikipedia.org/wiki/The_Mutton_Birds">The Muttonbirds</a> are a terrific band led by the indefatigable <a href="http://www.donmcglashan.com/">Don McGlashan</a> in the 1990s.</p>
<p>Although <a href="https://en.wikipedia.org/wiki/Nature_(The_Fourmyula_song)">Nature</a> and <a href="https://en.wikipedia.org/wiki/The_Heater">The Heater</a> are arguably better-known songs, this is the subtly disturbing 'White Valiant' played live in 1994.</p>
<p>Ah, that's great! I can't get enough! So here is another! It is the official video of 'Dominion Road', which was a single from their first album 'The Muttonbirds'.</p>
<div align="center"><iframe width="420" height="315" src="https://www.youtube.com/embed/PfdvAVkg1X0" frameborder="0" allowfullscreen></iframe></div>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-81028319898318976332016-05-23T20:23:00.000+12:002016-05-23T20:23:16.801+12:00An open letter to Minister for Climate Change Issues Paula Bennett cancel the dubious surplus units<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" /></a></div><p><em>In which I write to Paula Bennett and ask her to cancel the 124 million surplus emission units</em>.</p>
<p>Paula Bennett's <a href="http://www.scoop.co.nz/stories/PA1512/S00380/new-zealand-meets-kyoto-climate-target.htm">first act</a> as the new Minister for Climate Change Issues was to announce that yes indeed New Zealand would be using <a href="http://rwmjohnson.blogspot.co.nz/2015/12/minister-for-climate-change-paula.html">creative carbon accounting</a> and shuffling of dubious 'surplus' emissions units to meet the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-2020-emissions-target/new-zealands-2020-emissions-target">2020 climate change target</a> without actually reducing any emissions of greenhouse gases.</p>
<p>That approach became unstuck for Paula Bennett with the release of the <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">Morgan Foundation's 'Climate Cheats' report</a>.</p>
<p>Report author Geoff Simmons pretty <a href="http://thespinoff.co.nz/politics-media/18-04-2016/dodgy-deals-with-climate-fraudsters-nzs-role-in-the-junk-carbon-scam/">convincingly put the case</a> that if New Zealand has unethically benefited from buying dubious Ukrainian emission units, then Paula Bennett is ethically bound to cancel the remaining surplus units. I have heard no response, so I thought I would ask her myself. Hence this letter.</p>
<blockquote><i>
Hey why don't you write or email her too? Her email address is paula.bennett@parliament.govt.nz</i>
</blockquote>
<p>The Hon Paula Bennett</br>
Minister for Climate Change Issues</br>
Parliament Office</br>
Private Bag 18888</br>
Parliament Buildings, Wellington 6160</p>
<p>23 May 2016</p>
<p><b>Your ethical duty to cancel 124 million surplus assigned amount units</b></p>
<p>Dear Minister,</p>
<p>I see that last Friday (20 May 2016) the Ministry for the Environment released <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-greenhouse-gas-inventory-1990-2014">New Zealand's Greenhouse Gas Inventory 1990–2014</a> and the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990%E2%80%932014-snapshot">summary 'Snapshot'</a>.</p>
<p>I see that in the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990%E2%80%932014-snapshot">Snapshot summary</a> on Figure 5, page 5, that New Zealand is still intending to use 123.7 million emission units (Assigned Amount Units or 'AAUs') that were 'surplus' from the Kyoto Protocol first Commitment Period to meet the 2020 emissions reduction target and still have a surplus of 92.6 million units. </p>
<p>You are aware that the Morgan Foundation's report <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">'Climate Cheats'</a> and the Stockholm Environment Institute report <a href="https://www.sei-international.org/publications?pid=2802">(Kollmuss, Schneider and Zhezherin 2015)</a> set out a persuasive case that the 97 million Emission Reduction Units ('ERUs') that were imported to New Zealand were “questionable or of low environmental integrity”. Those ERUs were surrendered by NZETS participants into Crown holding accounts.</p>
<p>According to the <a href="http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/true-up_period_report_by_New_Zealand_2015.pdf">Kyoto Protocol 'True-Up' Report</a>, in December 2015, the Ministry for the Environment cancelled (transferred Crown-owned units to cancellation accounts) 373 million emission units to comply with the Kyoto Protocol. The numbers and types of units cancelled were: the 97 million imported ERUs, 16 million imported Certified Emission Reduction units ('CERs'), 81 million removal units ('RMUs'), and 179 million AAUs . The 'surplus' units remaining in Crown holding accounts were 124 million AAUs.</p>
<p>In a nutshell, the only reason New Zealand (the Crown) has so many 'surplus' AAUs is because of the inflow and use of the dubious ERUs in the NZETS. Each dubious imported ERU has allowed one additional AAU to be carried forward in a Crown holding account as a 'surplus' unit. Because the ERUs have no credibility, the AAUs no longer represent carbon safely stored out of the atmosphere. No emissions were reduced. Therefore to use these surplus AAUs to comply with the national 2020 emission reduction target is simply an exercise in creative carbon accounting. It is simply unethical.</p>
<p>I put it to you that as Minister for Climate Change Issues, you are morally obliged to cancel these surplus units owned by the Crown. Will you cancel the units? It may hopefully to some small extent restore New Zealand’s very tarnished reputation with respect to mitigating climate change policy.</p>
<p>Yours sincerely</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com1tag:blogger.com,1999:blog-1877417939959778661.post-30027824310803850732016-05-21T18:46:00.004+12:002016-05-21T18:46:47.923+12:00Helter smelter deja vu Tiwai Point smelter uncertainty stalls renewables for more Huntly coal<p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLZoDyWF8KLO0bgKtz5fIT3KOos8kXfDCZoFfGvbQWGMQuAYhKLFJPSkyetU8Qv0d7A545Y4cbRR1LCkYQ1-We8YQ8ggRV5c1X_b7dn0EkKVx_buwGKn3bzRWiyLjKoRLJ1pAfYR5UIdM/s1600/Huntly_Power_Stationwikicommons.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLZoDyWF8KLO0bgKtz5fIT3KOos8kXfDCZoFfGvbQWGMQuAYhKLFJPSkyetU8Qv0d7A545Y4cbRR1LCkYQ1-We8YQ8ggRV5c1X_b7dn0EkKVx_buwGKn3bzRWiyLjKoRLJ1pAfYR5UIdM/s200/Huntly_Power_Stationwikicommons.jpg" /></a></div><em>I look at how unethical behaviour by New Zealand Aluminium Smelter Limited is behind the Meridian/Genesis deal keeping the <a href="http://hot-topic.co.nz/nzs-emissions-reductions-go-up-in-smoke-as-generators-keep-huntly-coal-burning/">Huntly Thermal Power Station burning coal</a> as the threat of closing the Tiwai Point smelter is stalling the construction of consented renewable energy projects.</em></p>
<p>My last post at <a href="http://hot-topic.co.nz/nzs-emissions-reductions-go-up-in-smoke-as-generators-keep-huntly-coal-burning/">Hot Topic was about energy companies Meridian and Genesis</a> doing a deal to keep the Huntly Thermal Power Station open (and burning coal) for an extra four years.</p>
<p>My post really just noted how backwards the decision was in terms of reducing emissions of greenhouse gases. And that the expected shut-down of Huntly represented the only predicted drop in energy emissions New Zealand had advised to the UNFCCC. And that reduction has just gone up in smoke.</p>
<p>However, New Zealand Aluminium Smelters Limited and the Tiwai Point smelter have a malignant background role in the Huntly deal. Meridian Energy said the deal was necessary to <a href="https://www.meridianenergy.co.nz/news-and-events/future-of-new-zealands-electricity-supply">provide security of energy supply if the hydro lakes are low</a>. That is only the case if the next 'cab off the rank' of renewable energy capacity is not built to replace Huntly. The generators don't want to build any new renewable capacity if the smelter closes and Meridian then releases cheaper Manapouri hydro electricity onto the grid.</p> <p>Hence helter smelter deja vu all over again.</p>
<p>The last time I blogged about the smelter was in late 2012, when the Government was rolling out the partial privatisation and float of Meridian Energy. New Zealand Aluminium Smelters Limited chose that moment to threaten to close the 'unprofitable' smelter and to <a href="http://hot-topic.co.nz/rio-tinto-alcan-nz-plays-godfather-nice-aluminium-smelter-you-got-be-a-shame-if-something-happened-to-it/">demand cheaper electricity from Meridian.</a></p>
<p>For a re-cap of the issue, see this <a href="http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10875625">summary by Bryce Edwards</a> as of April 2013. The conclusion was in August 2013 with a <a href="http://www.stuff.co.nz/business/industries/9020341/Rio-ditches-plans-to-sell-smelter">new (secret) power deal with Meridian</a> with the Government putting in a $30 million subsidy on the promise of no plant closure before the end of 2017.</p>
<p>In terms of climate change policy, <a href="http://thedailyblog.co.nz/2013/04/03/smelt-a-rat/">Gareth Renowden</a> pointed out that the closure of the smelter would be a good thing.</p>
<p>Electricity prices would fall as Meridian's cheaper Manapouri hydro power would enter the wholesale electricity market. The most expensive generation, from coal and gas thermal plants (such as Huntly) would be forced out of the market by price. Electricity security would be better, as Lake Manapouri's storage would be available as a buffer for droughts instead of being committed to the smelter.</p>
<p>Cheaper power, less emissions, more renewables, more security. That sounds like the right strategy on a planet with a finite carbon budget consistent with no more than two degrees celsius of warming. What's not to like?</p>
<p>Now fast forward to April 2015. Meridian has been partially floated. New Zealand Aluminium Smelters Limited is yet again stating that its electricity transmission costs are too high and linking that to the smelter's future.</p>
<p><a href=http://www.stuff.co.nz/business/industries/67726996/new-zealand-aluminium-smelters-calls-for-cheaper-power">Board Chair Brian Cooper said</a> <blockquote><em>"No decision had been made about the future of the smelter, and we are doing everything we can to secure a long-term commercially competitive electricity price for the smelter."</em></blockquote></p>
<p>So back to square one. New Zealand Aluminium Smelters saying yet again "Nice smelter, you got there. Shame if something happens to it". So who do they expect to give them a handout this time? Transpower, actually. The opportunity being the Electricity Authority's review of transmission costs, in which a draft proposal was expected to give New Zealand Aluminium Smelters a <a href="http://pureadvantage.org/news/2015/07/21/90-renewable-electricity-by-2017/">windfall of fifty million dollars</a>.</p>
<p>I suppose I should not be surprised by more unethical business behaviour. However, I am more interested in the electricity demand implications of a smelter closure.</p>
<p><a href="http://pureadvantage.org/news/2015/07/21/90-renewable-electricity-by-2017/">Belinda Storey of Pure Advantage</a> says that the threats to close the smelter have made future predictions of electricity demand uncertain. And therefore <blockquote><i>"Electricity companies have delayed investments in wind, solar, and geothermal energy while the Tiwai negotiations hold to ransom the forecasting of future demand."</i></blockquote></p>
<p>In November 2015, Meridian CEO Mark Binns confirmed that <a href="http://www.newshub.co.nz/nznews/meridian-energy-mulling-wind-farm-possibility-2015111214#axzz48o4Bpg18">new electricity investments had been stalled by the possibility of the smelter closing</a> <blockquote><em>"because nobody wants to build a new plant if Tiwai Point can go on 12 months notice"</em>.</blockquote></p>
<p>In December 2015, Binns confirmed to <a href="http://www.stuff.co.nz/business/industries/74603271/Paris-talks-NZs-electricity-industry-reluctant-to-flick-the-switch-on-fossil-fuels">Tom Pullar-Strecker</a> that a smelter shut-down would release about 1.15GW of electricity, which would drop wholesale electricity prices and that none of the generators wanted to build the power station that would stop first when electricity demand dropped below supply. Binns even said <blockquote><i>"No-one wants to spend a lot of money and have a stranded asset".</i></blockquote></p>
<p>So, in 2016, in New Zealand's electricity market, renewable electricity projects will be stranded assets. Pretty much because of New Zealand Aluminium Smelter Limited's preferred mode of corporate behaviour.</p>
<p>The only thing more bizarre are the completely contradictory media releases from Energy Minister Simon Bridges.</p>
<p>In August 2015 Bridges was celebrating the 2018 Huntly closure as <a href="https://www.beehive.govt.nz/release/genesis-decision-creates-renewable-opportunities">creating renewable opportunities</a>. In April 2016, Bridges commended the reversal of the Huntly closure as a <a href="https://www.beehive.govt.nz/release/govt-acknowledges-genesis-commitment-removing-coal-fired-generation">'transition' 'down the path of greater renewable generation'</a>.</p>
<p>Is there no use of fossil fuels that Bridges won't describe as 'transitional'? Is there any other explanation for Bridges contradictory statements than the assumption that he is a complete political weather vane?</p>
<p><b>Conclusion</b></p>
<p>With that last comment of Binns, we enter a <a href="http://www.urbandictionary.com/define.php?term=bizarro%20world">"Bizarro World"</a> of contradiction and ridiculousness. In the rest of the world, Nicholas Stern and Mark Carney and Carbon Tracker have laid out the case that coal, oil and gas reserves are stranded assets. But in New Zealand, it is new renewable electricity generation that will be stranded assets.</p>
<p>All because of consistently unethical behaviour by one trans-national company. And the Minister of Energy views the situation as within his very elastic definition of 'transition' and is happy to leave direction of the market to the partially privatised generating industry. Never mind carbon budgets and the Paris Agreement.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-47710591618027732122016-05-01T16:41:00.000+12:002016-05-01T16:41:05.609+12:00The Huntly power station decision - energy emission reductions to 2020 up in coal smoke<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTqrOiCaWbcWVe9LfWkJN3pNvcdvujKGr6aqqqrB-eJH6HqtAVqOrcRCDCMbrlf8OcwfkiVCkf_wEuRHRKmKaa5Ug-60L9duO2zPjEx5zQ1zUTcaRx9YcAmlBMaJMBnY6lCLZqBNovNiI/s1600/Huntly_Power_Stationwikicommons.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTqrOiCaWbcWVe9LfWkJN3pNvcdvujKGr6aqqqrB-eJH6HqtAVqOrcRCDCMbrlf8OcwfkiVCkf_wEuRHRKmKaa5Ug-60L9duO2zPjEx5zQ1zUTcaRx9YcAmlBMaJMBnY6lCLZqBNovNiI/s1600/Huntly_Power_Stationwikicommons.jpg" caption="Huntly thermal power station via Wikimedia Commons" /></a></div><p><em>The decision to keep the Huntly coal thermal power station open for another four years is not only contrary to all New Zealand's commitments and climate targets, it also sends the Ministry for the Environment's projections of stabilising energy emissions to 2020 up in a cloud of coal smoke.</em></p>
<p>We seem to have had an extra dose of announcements and activities about climate change in an action-packed month of April.</p>
<p>We have had our Minister, Paula Bennett, <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11627515">signing the UN Paris Agreement</a>. The Morgan Foundation's <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">"Climate Cheats" report made a big splash</a>. That lead to Jack Tame's <a href="http://tvnz.co.nz/q-and-a-news/climate-change-paris-agreement-signed-video-6464414">grilling interview of Paula Bennett</a>. Then the Royal Society of New Zealand released two major reports on climate change; <a href="http://www.royalsociety.org.nz/expert-advice/papers/yr2016/climate-change-implications-for-new-zealand/">one on impacts</a> and another on <a href="http://www.royalsociety.org.nz/expert-advice/papers/yr2016/mitigation-options-for-new-zealand/">policy responses</a>. The business-backed Pure Advantage group released a report on <a href="http://pureadvantage.org/news/2016/04/22/our-forest-future/">enhancing forestry sequestration</a>.</p>
<p>So what did the New Zealand energy industry do to elbow it's way into the climate change spotlight? How do you beat signing the Paris Agreement or compete with climate fraud?</p>
<p>Well, you just say you are going to burn more coal!</p>
<p>On 28th April 2016, <a href="https://www.nzx.com/companies/GNE/announcements/281406">Genesis Energy</a> and <a href="https://www.meridianenergy.co.nz/news-and-events/meridian-energy-signs-swaption-contract-with-genesis-energy">Meridian Energy</a> announced they had reached an 'arrangement' that would keep the coal-burning <a href="https://en.wikipedia.org/wiki/Huntly_Power_Station">Huntly thermal power station</a> open for an extra four years. This deal postpones the expected shut down from the <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11492939">planned 2018 date</a> to 2022.</p>
<p>Patrick Smellie notes <a href="http://www.scoop.co.nz/stories/BU1604/S00826/genesis-extends-life-of-coal-fuelled-power-station-to-2022.htm">two interesting details</a> of the story. First, the irony that the "100% renewable" generator Meridian Energy has led the process of negotiating with Genesis. And second, that the public announcement of the shut-down by Genesis was just 'code' for negotiating a higher price from other generators.</p>
<p>The Green Party's Gareth Hughes <a href="http://www.scoop.co.nz/stories/PA1604/S00405/ending-huntly-coal-key-step-towards-renewable-target.htm">points out</a> that on the basis of Huntly's generation of 1,277 GWh of energy in 2015, the closing of Huntly would have lifted New Zealand's proportion of renewable electricity generation from 79.9 percent to 84.5 percent</a>. So unsurprisingly the Meridian-Genesis deal is just 180 degrees in the wrong direction in terms of the 90 percent renewable target and the need to reduce greenhouse gas emissions.</p>
<p>Greenpeace has given us <a href="http://www.greenpeace.org/new-zealand/en/blog/coal-is-not-lol-10-reasons-to-shut-huntly-coa/blog/55970/">ten reasons to shut Huntly</a> and have started an on-line petition <a href="https://act.greenpeace.org/ea-action/action">to keep to the plan and shut Huntly</a>.</p>
<p>But what effect will this have on the Ministry for the Environment's projections of energy emissions out to 2030? These are part of the December 2015 report <a href="http://www.mfe.govt.nz/publications/climate-change/nz-second-biennial-report-under-unfccc">"NZ’s Second Biennial Report under the UNFCCC"</a>. This chart shows projected "with measures" emissions and "without measures" (i.e. business as usual).</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMrdYUiBN8xzWdMZun32200U28i4KNCgOXcKgKPZPZmHQzZ916YpCnE3ofsNMgmlB-8Cg-5b9blKt8H7rh1HbRAU0uuSaV4GWIemaGaqKfUYsUHO70e1fWEmp_6pkhQj6-MQ0Stk8e5UY/s1600/nz-sector-ghg2030-v8.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMrdYUiBN8xzWdMZun32200U28i4KNCgOXcKgKPZPZmHQzZ916YpCnE3ofsNMgmlB-8Cg-5b9blKt8H7rh1HbRAU0uuSaV4GWIemaGaqKfUYsUHO70e1fWEmp_6pkhQj6-MQ0Stk8e5UY/s1600/nz-sector-ghg2030-v8.png" /></a></div>
<p>In the chart, the projected "with measure" emissions for each sector are the circles and lines. The projected 'business as usual'/'without measures' emissions are the lines between the data points marked by triangles on 2020 and 2030. That's because the without measures projections are for only two years! It is almost as if they are an after-thought.</p>
<p>The other thing to note is that for agriculture, transport and industry, there is no difference between "with measures" and "without" projections. This is of course because the Ministry is reflecting the Government's intention to exempt those three sectors of the economy from any climate change policy.</p>
<p>However, have a close look at the energy sector projections. There is some 'daylight' visible between the 'with' and 'without' projections. The "without" trends ever so slightly upward and the "with" trend is a plateauing. So something is expected to change the slight upward emissions trend to a plateau. The Biennial Report states on page 39;</p>
<p> <blockquote><i>"Energy emissions are expected to increase between 2013 and 2015, but then fall between 2015 and 2020. The remaining coal-fired power plant in New Zealand is expected to be decommissioned by 2018, reducing emissions from coal. Coal-fired electricity generation is expected to be replaced mainly by a combination of hydroelectricity, geothermal, wind, and gas-fired peaking plants in the modelled scenario".</i></blockquote></p>
<p>In other words, the 'something' was the closing of Huntly. The Ministry for the Environment was relying on Genesis Energy to honour its public statement that it was closing Huntly. Which of course would then be attributed to the New Zealand emissions trading scheme. However it looks like the projections are now out-dated.</p>
<p><b>Conclusion</b></p><p>The 2030 emissions projections show that New Zealand's climate change policies are intentionally not affecting three out of five sectors of the economy. Now with two power generators reaching a private agreement to keep an non competitive asset, Huntly thermal power station, emitting for four extra years, the projected savings in energy emissions out to 2030 have gone up in a puff of coal smoke.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-66181722603305412082016-04-25T20:15:00.003+12:002016-04-25T20:15:51.963+12:00Minister for Climate Change Paula Bennett denies climate cheating with dodgy Ukrainian carbon credits<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1r1TmuPODWLhDXbL78Jcne35pso0X3XcgJ9Er09VBkdKJc5RHDRAp4Vh0HZIDGK51k86qlOWm6r-5Au4LiPBSs00M1uKt-Y33evibmR12LMs6YgOiFH_UilGozZsaZ-yJpM22MxkKvM4/s1600/BSL-note6otherincome2015Screenshot.png" /></a></div>
<p><em>In which Jack Tame conducts the toughest interview ever with a New Zealand Minister for Climate Change and Paula Bennett ends up denying that the Government cheated on it's climate change commitments.</em></p>
<p>Minister for Climate Change Paula Bennett has just been in New York <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11627515">signing the UN Paris Agreement</a>. While in New York, Bennett was interviewed by TV One USA correspondent and general nice guy Jack Tame for <a href="http://tvnz.co.nz/q-and-a-news/climate-change-paris-agreement-signed-video-6464414">Television NZ's Q + A news show</a>. And we can read a <a href="http://www.scoop.co.nz/stories/PO1604/S00321/paris-agreement-could-be-ratified-this-year-bennett.htm">full transcript</a>.<p>
<p>I wonder if Paula Bennett thought she would get a soft jokey interview with that nice young man Jack Tame. She certainly didn't. Tame takes the interview 110% seriously. He does not smile. He delivers his questions and his interruptions through a taught stone-face. And his questions are good questions.</p>
<p>We perhaps need to remember about a year ago, Jack Tame stood in for Mike Hoskins on 'Mike's Minute' and gave us a month of refreshingly different short pieces to camera. In that month, Jack Tame talked about climate change in two of them. So Tame takes climate change and climate change policy seriously.</p>
<p>Tame gives Bennett a couple of minutes to gush enthusiastically about the signing of the Paris Agreement. Then he cuts straight to the Morgan Foundation's Climate Cheats report which alleges that the New Zealand Government was complicit in allowing dubious international carbon credits (Russian and Ukrainian and emission reduction units or 'ERUs') into the New Zealand Emissions Trading Scheme.</p>
<p><b>JACK</b> <blockquote>"I want to pivot quickly to the ETS. As you know, a report by the Morgan
Foundation has concluded New Zealand, in their words, effectively 'cheated' its way to commitments made under Kyoto by trading in international carbon credits that were of dubious integrity at best. Do you accept that term? Cheating?"</blockquote></p>
<p><b>PAULA</b> <blockquote>"I accept, actually, that there were dubious carbon credits last year when the Stockholm report came out. So, actually, the Morgan report's nothing new. So half of it is kind of right, you know? Yes, there were dubious credits. We found out. We're not using them now. We don't hold any of them. And we definitely won't again. And then, quite frankly, the other half of his report is factually incorrect."</blockquote></p>
<p>Bennett's answer is mostly spin and I'll come back to that. But what happened next was that Jack Tame peppered her with about a half dozen really pertinent follow-up questions about the New Zealand Government's failure to stop the inflow of dodgy units.</p>
<p><ul>
<li>"what part of 'Climate Cheats' report is factually incorrect?"</li>
<li>"we did continue trading on those credits for a long period when other countries abandoned them"</li>
<li>"but the government allowed that trading"</li>
<li>"So you don't accept that was cheating?"</li>
<li>"it wasn't in the spirit of the commitments made under Kyoto"</li>
<li>"but I think the question is how do we make up for that shortfall?"</li>
</li></ul></p>
<p>Bennett eventually tries to 'flip' the questions onto a diversionary track; the undefined way forward with the Paris Agreement. Tame then flips her diversion back on her by implying she is being a hypocrite in grandstanding over the signing of the Paris Agreement when she knows that New Zealand has 124 million surplus emission units in the bank because of the influx of the dodgy Ukrainian units into the emissions trading scheme.</p>
<p><b>JACK</b><blockquote>"But how do you come to New York and say, 'These are our commitments. Yeah, sure, the last time we had commitments, we reached them by purchasing credits of dubious quality when internationally, these things were slagged off.' Now you come here and say, 'Believe us this time. We're not gonna buy credits of dubious quality.'"</blockquote></p>
<p>Bennett then hides behind a false statistic - that 80% of the units were okay. I have no idea where she gets that number from. And tries, again unsuccessfully, to move the interview on. Tame goes to the ethics of the matter in his next question and focuses on what would be the right thing to do.</p>
<p><b>JACK</b> <blockquote>"Would it not be a stronger thing for the government to come to New York and say, 'Yes, we've made a mistake. We're going to rectify this by either making up that shortfall in credits that were of dubious quality by purchasing extra ones, or making greater commitments in the future.' Wouldn't that be in the spirit of the Paris agreement and in the previous commitments under Kyoto?"</blockquote></p>
<p>Bennett resorts finally to an old trick often used by Nick Smith and Tim Groser. She invokes the old canard that New Zealand is one of the few countries that has an emissions trading scheme! then some more waffle about what a big job it is. Which seems to be her preferred form of discourse. See for example her <a href="http://www.scoop.co.nz/stories/SP1602/S00002/speech-to-the-bluegreens-conference.htm">first speech as Minister for Climate Change</a> to the National Blue-Greens.</p>
<p>I could keep going. Tame asks if she accepts that doing nothing will lead to 3 or 4 degrees Celsius of global warming. And if she accepts the New Zealand's targets match avoiding that. But you should really watch and read Jack Tame's interview for your self.</p>
<p>So I say <b>"Bloody well done, Jack Tame, that's the best interview a New Zealand journalist has ever given a New Zealand Minister of Climate Change. Keep it up!"</b></p>
<p><br /> </p>
<p>Appendix (wonky) on surplus emission units.</p>
<p>Now I will come back to this statement by Bennett.</p>
<blockquote>"I accept, actually, that there were dubious carbon credits last year when the Stockholm report came out. So, actually, the Morgan report's nothing new. So half of it is kind of right, you know? Yes, there were dubious credits. We found out. <u>We're not using them now. We don't hold any of them. And we definitely won't again</u>. And then, quite frankly, the other half of his report is factually incorrect."</blockquote></p>
<p><u>"We are not using them. We don't hold any of them"</u> (the dodgy international units)</p>
<p>According to the <a href="http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/true-up_period_report_by_New_Zealand_2015.pdf">Kyoto Protocol 'True-Up' Report</a>, of December 2015, New Zealand cancelled 373 million units to comply with the Kyoto Protocol. The numbers and types of units cancelled were: dodgy ERUs; 97 million, imported Certified Emission Reduction units ("CERs"); 16 million, removal units ("RMUs"); 81 million and Assigned Amount Units ("AAUs"). The surplus units kept by the Government, after the cancelling, were 124 million AAUs.</p>
<p>Back in 2014, the <a href="http://www.sciencemediacentre.co.nz/2014/04/11/greenhouse-gas-inventory-takes-stock-of-emissions/">Greenhouse Gas Inventory</a> ignored the dodgy imported units completely and showed that New Zealand would comply with the Kyoto Protocol and have a small surplus of only 8 million units (which would be AAUs).</p>
<p>The 97 million dodgy imported ERUs, 16 million imported CERs, and 10 million RMUs ended up in the Government's accounts as emitters imported them and gave them ('surrendered' them) to the Government to meet their NZ emissions trading scheme obligation.</p>
<p>Every unit imported and surrendered enabled the Government's 'Kyoto position' to grow significantly from the 8 million unit surplus as noted in 2014 above, to the December 2015 surplus of 124 million Assigned Amount Units.</p>
<p>The Government had a little flexibility in which units could be kept as a surplus. There was a limit on ERUs, a prohibition on having surplus RMUs and no limits on surplus AAUs. So the Government preferentially cancelled all the ERUs, all the CERs and all the RMUs and kept (as surplus) as many AAUs as possible.</p>
<p>So every dodgy Ukrainian ERU that entered the NZ emissions trading scheme allowed the New Zealand Government to have an extra 'credible' AAU in the number of surplus units carried forward. To use an analogy, the Kyoto cancellation process allowed the Government to 'launder' the dodgy international units into a 'credible' currency, the Assigned Amount Units.</p>
<p>The Ministry for the Environment's <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/latest-2020-net-position">2020 position report</a> shows that the Government intends to use 123.7 million surplus units from Kyoto's Commitment Period 1 to plug the gap as expected emissions will be above the 2020 emission target.</p>
<p>So back to Bennett's statement on the dodgy units <i>"we are not holding them"</i>. That is spin and semantics. The Government is holding an extra large surplus of 'credible' AAUs ONLY because millions of ERUs were cancelled.</p>
<p>And the statement <i>"We are not using them"</i>. That is double spin. Firstly, the Government used the dodgy units to comply with the Kyoto Protocol. And secondly, the Government is using the surplus of AAUs, which it has in such large numbers only because of the dodgy units, to claim compliance with the 2020 target even while emissions increase.</p>
Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-11615034776088172802016-04-23T12:21:00.000+12:002016-06-18T20:49:13.987+12:00Did New Zealand Steel make windfall arbitrage profits from the New Zealand emissions trading scheme?<p><img style="float: left;margin-right: 10px;padding-top: 5px" src="http://hot-topic.co.nz/wp-content/uploads/2012/09/godfather-350881-150x150.jpg" alt="The Godfather" width="150" height="150" /></a> <em>In the wake of the Morgan Foundations hard-hitting report "Climate Cheats", Simon Johnson (aka Mr February) asks if New Zealand Steel received millions of emission units for free under the New Zealand Emissions Trading Scheme industrial allocation provisions and yet still bought millions of the dubious international Russian units (ERUs) to make windfall arbitrage profits.</em></p>
<p>The Morgan Foundation's latest report <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">"Climate Cheats"</a> has been sizzling across the <a href="http://www.listener.co.nz/archive/april-23-2016/">various media</a> in the last four days.</p>
<p>The language of the report is refreshingly non-neutral and unashamedly emotive. It is in equal parts compelling and condemning.</p>
<p>Carbon credit scheme a <a href="http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11624441">farce</a>, reported the Herald. Climate change <a href="http://www.radionz.co.nz/news/national/301739/nz-accused-of-climate-change-'cheating'">cheating</a>, said Radio New Zealand. Dodgy deals, climate swindle, climate fraudsters, junk carbon scam, said report author <a href="http://thespinoff.co.nz/18-04-2016/dodgy-deals-with-climate-fraudsters-nzs-role-in-the-junk-carbon-scam/">Geoff Simmons</a>.<p>
<p>As a consequence, <a href="http://morganfoundation.org.nz/wp-content/uploads/2016/04/ClimateCheat_Report9.pdf">"Climate Cheats"</a> is an easy and engaging read - no mean feat given the topic - that is also thoroughly well-researched. It really is a 'high integrity' credit to it's authors (if you pardon the pun).</p>
<p>In this post I want to look specifically at one particular type of corporate conduct - <a href="http://financial-dictionary.thefreedictionary.com/arbitrage">arbitrage profiteering</a> - covered in "Climate Cheats".</p>
<p>Geoff Simmons, on page 28, describes arbitrage like this: <blockquote><i>"Meanwhile polluters in New Zealand benefited through a collapse in the price of emissions, while some even creamed off profits by exploiting the price difference between different types of carbon credits."</i></blockquote></p>
<p>How does an emitting company make an <a href="http://financial-dictionary.thefreedictionary.com/arbitrage">arbitrage profit</a> in an emissions trading scheme? I think a data-driven worked example might be informative.</p>
<p>I will look at <a href="https://en.wikipedia.org/wiki/New_Zealand_Steel">New Zealand Steel</a> because their CEO was recently whining to Radio NZ that the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-emissions-trading-scheme-review-2015-16-discussion-document">NZ emissions trading scheme review</a> would lead to <a href="http://www.radionz.co.nz/national/programmes/businessnews/audio/201793536/higher-carbon-costs-make-business-less-viable">higher carbon costs which would make the business less viable</a>.</p>
<p>The data. I need to have the following:</p>
<ul>
<li>the number of <a href="https://docs.google.com/spreadsheets/d/1ngWRklXlKl6fSQcxMiop2Wuo-58UI_v0D7CpSr5vOjU/edit#gid=1584810035">free emission units</a> allocated by the <a href="https://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/decisions/index.html">Ministry for the Environment</a> to New Zealand Steel</li>
<li>the quantity of New Zealand Steel's greenhouse gas emissions from processing steel from iron sands from the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990-2013">New Zealand's Greenhouse Gas Inventory 1990–2013</a></li>
<li> the number emission units to surrender under the NZETS, I estimate as half of the emissions under the "two-for-one" deal</li>
<li>and the number of any of Geoff Simmons favourite dodgy Ukrainian or Russian <a href="https://docs.google.com/spreadsheets/d/1JsTw7e1ucA8nERfnVvz7tIw3ajqas-h22AgFLkNeBT4/edit#gid=367609746">Emission Reduction Units</a> owned by New Zealand Steel, as compiled from the EPA Emission Unit Register.</li></ul></p>
<p>Let me sum that up in a table.</p>
<table border="border" style="border:1px;border-collapse:collapse;" cellpadding="5"><tbody align="right"><tr><th colspan="6" align="center">New Zealand Steel free unit allocation, greenhouse gas emissions,</br> and NZETS surrender liability and ERUs</th></tr>
<tr ><td align="left">Year</td><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td></tr>
<tr><td align="left">Units allocated</td><td>494,704</td><td>989,304</td><td>1,003,730</td><td>1,029,352</td><td>1,073,489</td></tr>
<tr><td align="left">GHG emissions (t)</td><td>1,646,890</td><td>1,736,250</td><td>1,718,930</td><td>1,747,500</td><td>N/a</td></tr>
<tr><td align="left">Estimate of units to surrender</td><td>411,722</td><td>868,125</td><td>868,125</td><td>873,750</td><td>N/a</td></tr>
<tr><td align="left">Allocation less surrenders</td><td>82,982</td><td>121,179</td><td>135,605</td><td>155,602
</td><td>N/a</td></tr>
<tr><td align="left">Allocation/Liability (per cent)</td><td>120%</td><td>114%</td><td>116%</td><td>118%</td><td>N/a</td></tr>
<tr><td align="left">Emission Reduction Units owned at 31 December</td><td>0</td><td>0</td><td>0</td><td>1,022,527</td><td>1,001,714</td></tr>
</tbody></table>
<p>Let's visualise that dense data into a bar chart.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAXJzxChw4S3kB3svEVYwJeR97-HZJs0sDGvR5rAC0zyCOetKFrtgwC9XfcqvEZNil6h76t86T22DnhH4W9WOp4TDZjb5s-QZKNXcgkVn222he3H1V4Sri8WO_CiyXxR-3yqtcAgQ_3tg/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v3a.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAXJzxChw4S3kB3svEVYwJeR97-HZJs0sDGvR5rAC0zyCOetKFrtgwC9XfcqvEZNil6h76t86T22DnhH4W9WOp4TDZjb5s-QZKNXcgkVn222he3H1V4Sri8WO_CiyXxR-3yqtcAgQ_3tg/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v3a.png" /></a></div>
<p>The first conclusion I draw from the chart is that from 2010 to 2014 New Zealand Steel's free allocation of emission units (the purple bars) materially exceeded their estimated liability to surrender units (the mid-pink bars) to match actual emissions.</p>
<p>The surplus units were not needed to compensate for increased energy costs caused by the NZETS as the <a href="https://www.climatechange.govt.nz/emissions-trading-scheme/ets-review-2011/supporting-info/impacts-of-actual-vs-expected-effects.pdf">NZETS did not cause any energy costs to increase</a>. The free unit allocation was and is simply a transfer of wealth to New Zealand Steel in the form of a tradable right or voucher (the NZU emission unit) that is highly liquid.</p>
<p>The second conclusion is that although New Zealand Steel never needed to buy any extra emissions units to surrender under the NZETS, New Zealand Steel still owned about a million Emission Reduction Units at the end of both 2013 and 2014</p>
<p>So if New Zealand Steel always had more than enough free units to meet it's obligation to surrender units under the NZETS, why would it also buy international units? There is only one plausible answer. It is to make an <a href="http://financial-dictionary.thefreedictionary.com/arbitrage">arbitrage profit</a>.</p>
<p>Why am I so sure New Zealand Steel carried out arbitrage trades with its NZUs and surrendered cheap dubious ERUs rather than the free gifted NZUs for 2013 and 2014? It's the maths.</p>
<p>Data from the Emissions Unit Register, <a href="https://app.eur.govt.nz/eats/nz/index.cfm?fuseaction=search.nzeur_holding_transaction_summary&clearfuseattribs=true">NZEUR Holding & Transaction Summary</a>, which I have summed into a <a href="https://docs.google.com/spreadsheets/d/14k2GMCWuH3-qe18ubYzBXUcWwRRI5Wn6grbachcgB-s/">Google sheet</a>, tells us that for 2013 the total numbers of NZUs surrendered by all emitters was 732,667 and 576,470 NZUs were surrendered for 2014.</p>
<p>If New Zealand Steel had used its free NZUs to meet its 2013 unit surrender obligation, the number of NZUs would have to be roughly consistent with my estimate of half of it's emissions or 873,750 units. All NZETS emitters collectively surrendered fewer units (732,667) for 2013! It is mathematically impossible for New Zealand Steel to have met those surrender obligations with NZUs. It must have used ERUs.</p>
<p>Here is a hypothetical example of what New Zealand Steel might have done.</p>
<p>According to a Carbon Forest Services webpage that <a href="http://www.carbonforestservices.co.nz/nzueru-chart.html"> tracks emission unit prices</a>, on 11 October 2013, New Zealand units (NZUs) had a market price of $4.20 each and the Russian or Ukrainian Emission Reduction Units (ERUs) had a market price of 35 cents each. One NZU was worth 12 times as much as an ERU.</p>
<p>If New Zealand Steel had purchased 1 million ERUs on 11 October 2013 at 35 cents each or $350,000, it could then surrender 873,750 of them to the Government to match it's 2013 emissions.</p>
<p>Based on that 'if', New Zealand Steel would then be in a position to sell all the 1,029,352 New Zealand units of the 2013 allocation at $4.20 each for a possible value of $4,323,278. The hypothetical profit would be $3,973,278.</p>
<p>Alternatively New Zealand Steel would keep the 1,029,352 NZUs and wait for their price to appreciate. In that case, the hypothetical but unrealised profit would be greater than $3,973,278.</p>
<p>That is just one possibility based on NZU and ERU prices on one date. I suggest you browse over to the Carbon Forest Services <a href="http://www.carbonforestservices.co.nz/nzueru-chart.html">emission unit price chart</a> and hover over it to see the differences between ERU and NZU prices from early 2013 to 2015.</p>
<p>Even when NZUs hit a historic low price of $1.60 in February 2013, they were still 9 times more valuable than ERUs. Choose your own combination of price difference and possible profit from buying ERUs and selling NZUs.</p>
<p>My final piece of evidence is Bluescope Steel Australia's <a href="http://s3-ap-southeast-2.amazonaws.com/bluescope-corporate-umbraco-media/reports/annualreport2015/index.html#60">2015 concise annual financial report</a> which includes New Zealand Steel's finances.</p>
<p><a href="http://s3-ap-southeast-2.amazonaws.com/bluescope-corporate-umbraco-media/reports/annualreport2015/index.html#60">Note 6 Other Income</a> says that in 2015 Carbon Permit income was $AUD 4.4 million. Footnote (a) says that the income is from the NZETS as the Australian Carbon Pricing scheme was abolished in July 2014.</p>
<p><a href="http://s3-ap-southeast-2.amazonaws.com/bluescope-corporate-umbraco-media/reports/annualreport2015/index.html#63">Note 7 on page 63</a> says that 'Direct carbon emission expense' was a credit of $AUD 1 million.</p>
<p><a href="http://s3-ap-southeast-2.amazonaws.com/bluescope-corporate-umbraco-media/reports/annualreport2015/index.html#64">Footnote (d) page 64</a> says that the current year carbon emission credit was due to the carbon 'true-up' of the Port Kembla steelworks.</p>
<p>So Bluescope Steel Australia made a carbon profit both sides of the Tasman! New Zealand Steel made $AUD 4.4 million out of the NZETS. So much for facing a carbon price at the margin!</p>
<p><b>Conclusion</b></p>
<p>New Zealand Steel really have achieved the ultimate emission trading scheme <a href="http://www.urbandictionary.com/define.php?term=two-for">"two-for"</a>.</p>
<p>New Zealand Steel received a free allocation of emission units that is greater than the number needed to surrender for emissions. The availability of the cheaper imported Russian and Ukrainian international units highlighted by <a href="http://morganfoundation.org.nz/new-report-climate-cheats/">"Climate Cheats"</a> gave New Zealand Steel the opportunity to make windfall arbitrage profits. New Zealand Steel did not pay a carbon price at the margin. New Zealand Steel probably made windfall arbitrage profits.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-16946667948852165782016-04-14T20:16:00.000+12:002016-07-06T20:09:02.598+12:00New Zealand Steel and the unethical two-for-one - free emission units and arbitrage profits from cheap Russian units<p><img style="float: left;margin-right: 10px;padding-top: 5px" src="http://hot-topic.co.nz/wp-content/uploads/2012/09/godfather-350881-150x150.jpg" alt="The Godfather" width="150" height="150" /></a> <em>In this post there is still a gratuitous image of Marlon Brandon as the Godfather but the post is about one of New Zealand's biggest companies; New Zealand Steel. They just opposed the possible ending of the supposedly temporary "two-tonnes-for-one-unit" deal. That's a bit rich when their idea of the ideal "two-for" is to receive millions of emission units for free under the NZETS industrial allocation provisions and yet buy millions of the dubious international Russian units (ERUs) and make windfall arbitrage profits.</em></p>
<p>Well, back on 17 March we had <a href="https://en.wikipedia.org/wiki/New_Zealand_Steel">the Chief Executive of New Zealand Steel</a> whining to Radio NZ that the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-emissions-trading-scheme-review-2015-16-discussion-document">NZ emissions trading scheme review</a> would lead to <a href="http://www.radionz.co.nz/national/programmes/businessnews/audio/201793536/higher-carbon-costs-make-business-less-viable">higher carbon costs which would make their business less viable</a></p>
<p>Chief Executive Andrew Garey told Radio New Zealand <blockquote><i>"the removal of the 2 for 1 provison for big carbon dioxide emitters will undermine the viability of the business"</i></blockquote></p>
<p>What is this two for one deal? On page 12 of the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-emissions-trading-scheme-review-2015-16-discussion-document">NZETS review discussion document</a>, it states;</p>
<blockquote><i>"The one-for-two surrender obligation allows participants from the liquid fossil fuels, industrial processes, stationary energy and waste sectors to surrender one unit for every two tonnes of emissions (ie, a 50 per cent surrender obligation)."</i></blockquote>
<p>However, Garey has his facts wrong in assuming the loss of the two-for-one deal will increase his NZETS liability. On page 13 of the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-emissions-trading-scheme-review-2015-16-discussion-document">NZETS review discussion document</a>, it states;</p>
<blockquote><i>"It should be noted that if the one-for-two surrender obligation is removed, the amount of free allocation provided to emissions-intensive and trade-exposed activities will automatically be increased to correspond with the increased surrender obligation."</i></blockquote>
<p>So New Zealand Steel will have to surrender twice as many units. But its free allocation of units will double. One bit of corporate welfare in the NZETS is removed and another takes its place! Talk about the NZETS as an insurance policy for big emitters that protects them from any incentive to reduce emissions!</p>
<p>I could respond by saying I sympathise with Mr Garey. I mean, really, who does understand the NZETS? However in his interview with Radio NZ he goes on to indicate that if the NZETS is toughened up, then his parent company, Bluescope Steel, may just decide to close the Glenbrook Steel Mill. Nice steel mill you got. Shame if something happens to it. That is just typical <a href="http://hot-topic.co.nz/rio-tinto-alcan-nz-plays-godfather-nice-aluminium-smelter-you-got-be-a-shame-if-something-happened-to-it/">arrogant big business behaviour</a>. So I have no sympathy for Mr Garey.</p>
<p>There are some obvious questions to try to answer with actual emission unit data from the New Zealand <a href="http://www.eur.govt.nz/">Emission Unit Register</a>, which records legal title for all valid carbon credits/emissions units in the New Zealand. How many units were NZ Steel given for free under the industry allocation plans? What were NZ Steel's NZETS-liable greenhouse gas emissions from processing steel from iron sands? Were they allocated more units than they had to surrender? Did they also make arbitrage trades in any of the dubious <a href="http://norightturn.blogspot.co.nz/2015/12/climate-change-how-bad-is-nzs-climate.html">Russian or Ukrainian emission units?</a></p>
<p>We know that New Zealand Steel has been receiving free allocations of emission units as the allocations are listed on the Ministry for the Environment's web page <a href="https://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/decisions/index.html">Industrial allocation decisions</a>.</p>
<p>Another MfE web page <a href="http://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/eligible-activities/">Eligible industrial activities</a> tells us the formula for the unit allocation is (LA × ∑ (PDCT × AB)) ÷ 2.</p>
<p>The level of assistance (LA) for New Zealand Steel is 90%. There are four products (PDCT) each with it's own allocative baseline (AB). The products and allocative baselines are 3.2613 units for each tonne of iron or steel, 0.119 units for each tonne of cast carbon steel, 0.28 units for each tonne of vanadium-bearing steel and 0.163 units for each tonne of flat hot-rolled carbon steel.</p>
<p>That page is just repeating what is in <a href=http://www.legislation.govt.nz/regulation/public/2010/0189/latest/DLM3258736.html">Regulation 23</a> and the <a href="http://www.legislation.govt.nz/regulation/public/2010/0189/latest/DLM3075143.html">Schedule Prescribed emissions intensity and allocative baselines</a> of the Climate Change (Eligible Industrial Activities) Regulations 2010.</a></p>
<p>I have already compiled a <a href="https://docs.google.com/spreadsheets/d/1JQidgRGYs44OyzjxBv2cpowI2kempRgF1R7yIQUwpjk/">Google sheet</a> of all units allocated to emitters from 2010 to 2014. It was compiled from the year by year <a href="https://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/decisions/index.html">Industrial allocation decisions</a></p>
<p>We add a <a href="https://docs.google.com/spreadsheets/d/1ngWRklXlKl6fSQcxMiop2Wuo-58UI_v0D7CpSr5vOjU/edit#gid=1584810035">'filter' to the Google sheet</a> on the top row of the column headers and set the filter on the 'Applicants.Name' column header to 'NZ Steel'.</p>
<p>This tells us that New Zealand Steel Development Limited (account holder NZ-1903) received these free NZ units.</p>
2010 494,704</br>
2011 989,304</br>
2012 1,003,730</br>
2013 1,029,352</br>
2014 1,073,489</p>
<p>Or a total of 4,590,579 units over the five years. NZ Steel received more units than any other industry. More than smelter operator NZ Aluminium Smelters Limited. I know this as back in 2012 I made a pie chart of the 2011 free unit allocation data. That showed that of the 3.472 million units allocated to industry in 2011, 90% went to thirteen NZ companies. Here is that pie chart.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1hebtf88BFLW9RYInQ5u_B68mS8GwEmdKkw7zGkt7dR6wNzzcLiJ3KuBJGolgCaTdYATL6Ng30zPF3RPQSaxP_7nb2IlmYEjj5gloiZVjmO3T-4jzQAwNGyaEo-VVZjNWVpZwAsROpNI/s1600/nzu-allocations-pie-2011-675.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1hebtf88BFLW9RYInQ5u_B68mS8GwEmdKkw7zGkt7dR6wNzzcLiJ3KuBJGolgCaTdYATL6Ng30zPF3RPQSaxP_7nb2IlmYEjj5gloiZVjmO3T-4jzQAwNGyaEo-VVZjNWVpZwAsROpNI/s1600/nzu-allocations-pie-2011-675.png" /></a></div>
<p>Now I want data on the greenhouse gas emissions from processing steel from iron sands. The <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990-2013">New Zealand's Greenhouse Gas Inventory 1990–2013</a> reports the greenhouse gas emissions from steel production from iron sands in tonnes of CO<sub>2</sub>-e. New Zealand Steel is the only iron sands processor so these are New Zealand Steel's emissions. The emissions are;</p>
2010 1,646,890</br>
2011 1,736,250</br>
2012 1,718,930</br>
2013 1,747,500</br>
<p>(There is no total for 2014 as we won't see the next greenhouse gas inventory for the 2014 year until later this year)</p>
<p>I want to compare the number of emissions surrendered with the number of units given as free allocation. Ideally, I would have the number of units actually surrendered by New Zealand Steel each year. In a transparent system we would know that, would we not? Unfortunately, the NZETS is not transparent and the units surrendered are not available to the public.</p>
<p>In 2013, I asked the Environmental Protection Authority (EPA) under the Official Information Act for the numbers of units surrendered by <a href="https://fyi.org.nz/request/emission_units_surrendered_by_el">New Zealand Steel and some other companies</a>. The EPA refused my request on the grounds that the Climate Change Response Act trumped the Official Information Act. In May 2014, after a delay of a year, the Ombudsmens Office <a href="https://drive.google.com/file/d/0B8LhMBA3NXL4M1pqUjd0Y0pFbjg/">agreed with the EPA</a>. So much for transparency.</p>
<p>So I have to estimate the unit surrender obligation. I keep in mind the two-for-one deal. So my annual estimate of the number of units New Zealand Steel is required to surrender under the NZETS is half of the actual emissions (one unit covers two tonnes). Also NZETS surrender obligations started on 1 July 2010. So 2010 was a half year for free allocation and unit surrenders. So I take half of the 2010 actual emissions.</p>
<p>My data now looks like this</p>
<pre> 2010 2011 2012 2013 2014
Greenhouse gas emissions 823,445 1,736,250 1,718,930 1,747,500 NA
NZETS surrender obligations 411,722 868,125 859,465 873,750 NA
Free allocations of units 494,704 989,304 1,003,730 1,029,352 1,073,489</pre>
<p>Lets make a chart. I think a bar chart will be a suitable choice. The colour scheme is lightest pink for actual emissions, mid-pink for my estimate of the units surrendered (emissions x 50%) and purple for the free allocation of units. The purple bars (free units) are noticeably larger than the surrender estimates. It appears that New Zealand Steel are consistently being allocated more free units than they need to surrender to match their direct emissions.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizV2mtA8_HTXV-I9vDG8bZg782E_lgCndfb9Lz6aFAlsAt3JK_pEAF-bbdR0jxVNJ_u2i0zh_4qLcqN9bmbhE0FH-KbQZckjhB-KLx7-nNTbFQS2rWnopfRtEKDIQwBwxF5LNsTgcSau8/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v2.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizV2mtA8_HTXV-I9vDG8bZg782E_lgCndfb9Lz6aFAlsAt3JK_pEAF-bbdR0jxVNJ_u2i0zh_4qLcqN9bmbhE0FH-KbQZckjhB-KLx7-nNTbFQS2rWnopfRtEKDIQwBwxF5LNsTgcSau8/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v2.png" /></a></div>
<p>In summary, in the years 2010 to 2103, the actual number of units given to New Zealand Steel exceeded the estimated number to be surrendered by 82,982, 121,179, 144,265 and 155,602.</p>
<p>Does the free allocation of units include compensation for any other carbon-intensive energy inputs I have not taken into account? In principle, yes, as the original September 2007 <a href="http://www.mfe.govt.nz/publications/climate-change/framework-new-zealand-emissions-trading-scheme/5-how-emission-units-are">Framework for a New Zealand Emissions Trading Scheme</a> document makes this statement about free allocation to emitters;
<blockquote><i>"indirect emissions associated with the consumption of electricity, as well as direct emissions from stationary energy and direct emissions from non-energy industrial processes will be included in the concept of emissions from industrial producers".</i></blockquote></p>
<p>Also the <a href="http://hot-topic.co.nz/rio-tinto-alcan-nz-plays-godfather-nice-aluminium-smelter-you-got-be-a-shame-if-something-happened-to-it/">NZ Aluminium Smelter free allocation</a> included an undisclosed quantum of units for the fictional coal content of electricity inherent in their energy supply from Lake Manapouri. Yes, I know that last sentence seems to make no sense at all. You really need to read the linked blog post!</p>
<p>The <a href="http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/technical-papers/pdf-library/Heavy%20Industry%20Energy%20Demand.pdf">Heavy Industry Energy Demand Update Report</a> (by Covec, Feb 2009) provides estimates of the carbon dioxide emissions from each energy input (except electricity) used by New Zealand Steel.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilDarwMSVTKepqxxLHGf8FmGQY0aeDlfrmU3WWs11lMdwCudzsUMkfTAr4dh6GEMyv7z5wIwsj11efiHnsE9P8qB-1rM663gNBRTSK-EXWLJpcnM5UftsgOc_diZlV_xxP_xjrv2M8gyg/s1600/NZ-Steel-covec-table-9.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilDarwMSVTKepqxxLHGf8FmGQY0aeDlfrmU3WWs11lMdwCudzsUMkfTAr4dh6GEMyv7z5wIwsj11efiHnsE9P8qB-1rM663gNBRTSK-EXWLJpcnM5UftsgOc_diZlV_xxP_xjrv2M8gyg/s1600/NZ-Steel-covec-table-9.png" /></a></div>
<p>The Covec report estimates that in 2008 the coal emissions were 1,615,100 tonnes (93%), the natural gas emissions were 106,200 tonnes (6%), the coke emissions were 18,100 tonnes (1%) and the diesel emissions were 3,800 tonnes (0.22%). Adding up to 1,743,200 tonnes of direct emissions. Covec don't calculate the emissions content of the 426 GWh of grid electricity used in 2008.</p>
<p>The estimated natural gas emissions at about 100,000 tonnes per annum almost adds up to the 'surplus' allocated units which are between 120,000 to 155,000 tonnes annually. So its arguably plausible that part of the free allocation of units is to compensate New Zealand Steel for the increase in the cost of natural gas caused by the NZETS.</p>
<p>Except that there is no evidence that the price of natural gas or electricity or coal has increased because of the NZETS. And we have known that since 2011.</p>
<p>Covec's 2011 report <a href="https://www.climatechange.govt.nz/emissions-trading-scheme/ets-review-2011/supporting-info/impacts-of-actual-vs-expected-effects.pdf">'Impacts of the NZ ETS: Actual vs Expected Effects'</a> prepared for the 2011 ETS Review Panel could not find any increases in electricity, natural gas or coal prices caused by the NZETS.</p>
<p>Officials supporting the 2012 Finance and Expenditure Select Committee queried the five major electricity generating companies about NZETS costs flowing through into wholesale electricity prices. <a href="http://www.parliament.nz/en-nz/pb/sc/documents/advice/50SCFE_ADV_00DBHOH_BILL11566_1_A281916/responses-to-questions-from-meeting-on-26-september">Their reply was;</a> <blockquote><i>"costs being passed through directly from the NZETS are not visible or distinguishable due to the wholesale market pricing mechanism and these costs are not directly passed through due to competition factors".</i></blockquote></p>
<p>As the <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealand-emissions-trading-scheme-evaluation-report-2016">New Zealand Emissions Trading Scheme evaluation report 2016</a> states on page 38;<blockquote><i>The prices of emission units have been too low to affect business costs either for participants or those who receive costs passed down from participants.</i></blockquote></p>
<p>So from 2010 to 2014 New Zealand Steel consistently received a free allocation of emission units that materially exceeded their estimated liability to surrender units to match actual emissions. The surplus units were not needed to compensate for increased energy costs caused by the NZETS as the NZETS did not cause any energy costs to increase. The free unit allocation was and is simply a transfer of wealth to New Zealand Steel in the form of a tradable right or voucher (unit) that is highly liquid.</p>
<p>So New Zealand Steel, the emitter receiving the most free units in the NZETS, has faced no NZETS-related carbon price at the margin or in any sense. Instead of acting as a carbon price at the margin, the free unit industrial allocation regime in conjunction with the lack of energy cost pass-through has acted as an insurance policy or hedge contract - protecting New Zealand Steel from the carbon price!</p>
<p>This is the embodiment of fundamentally flawed design in the NZETS and it is symptomatic of the National Government's unethical approach of rewriting the NZETS to suit the whims of big business. It's also symptomatic of the earlier big business campaign that pressured the earlier Labour Government to drop a carbon tax and move to the inherently less transparent NZETS.</p>
<p>You would think that this case study into New Zealand Steel could not get worse. However, it does get worse. From 2013 to 2015 New Zealand Steel engaged in arbitrage profiteering using the most dubious international emission units, the <a href="http://norightturn.blogspot.co.nz/2015/12/climate-change-how-bad-is-nzs-climate.html">Emission Reduction Units</a>.</p>
<p>To see if New Zealand Steel has owned any Emission Reduction Units, we go to another Google sheet <a href="https://docs.google.com/spreadsheets/d/1JsTw7e1ucA8nERfnVvz7tIw3ajqas-h22AgFLkNeBT4/">Kyoto Unit Holdings by Account 2008 - 2014</a> which compiles data from the EPA Emission Unit Register. We add a 'filter' to the Google sheet on the top row for 'NZ Steel Limited' on the 'Account.Holder' column of the <a href="https://docs.google.com/spreadsheets/d/1JsTw7e1ucA8nERfnVvz7tIw3ajqas-h22AgFLkNeBT4/edit#gid=367609746">Google sheet</a>.</p>
<p>We find that New Zealand Steel Limited did own some Emission Reduction Units.</p><p>
2013 1,022,527</br>
2014 1,001,714</p>
<p>I have amended the bar chart and added the Emission Reduction Units owned by New Zealand Steel as extra orange bars. It is interesting to note that the number of ERUs is fairly close to the number of free NZUs. Both were more or less 1 million for 2013 and 2014.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAXJzxChw4S3kB3svEVYwJeR97-HZJs0sDGvR5rAC0zyCOetKFrtgwC9XfcqvEZNil6h76t86T22DnhH4W9WOp4TDZjb5s-QZKNXcgkVn222he3H1V4Sri8WO_CiyXxR-3yqtcAgQ_3tg/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v3a.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAXJzxChw4S3kB3svEVYwJeR97-HZJs0sDGvR5rAC0zyCOetKFrtgwC9XfcqvEZNil6h76t86T22DnhH4W9WOp4TDZjb5s-QZKNXcgkVn222he3H1V4Sri8WO_CiyXxR-3yqtcAgQ_3tg/s1600/NZ-Steel-ghgs-units-2010-2014-560by420-v3a.png" /></a></div>
<p>We have fairly persuasive evidence that New Zealand Steel was consistently allocated more free units than it needed to surrender for its actual emissions. Therefore New Zealand Steel never needed to buy any extra emissions units to surrender under the NZETS. Yet New Zealand Steel owned about a million Emission Reduction Units at the end of both 2013 and 2014</p>
<p>So if New Zealand Steel always had more than enough free units to meet it's obligation to surrender units under the NZETS, why would it also buy international units? There is only one plausible answer. It is to make an <a href="http://financial-dictionary.thefreedictionary.com/arbitrage">arbitrage profit</a>.</p>
<p>Why am I so sure New Zealand Steel surrendered cheap dubious ERUs rather than the free gifted NZUs for 2013 and 2014? It's the maths.</p>
<p>Data from the Emissions Unit Register, <a href="https://app.eur.govt.nz/eats/nz/index.cfm?fuseaction=search.nzeur_holding_transaction_summary&clearfuseattribs=true">NZEUR Holding & Transaction Summary</a>, which I have summed into another <a href="https://docs.google.com/spreadsheets/d/14k2GMCWuH3-qe18ubYzBXUcWwRRI5Wn6grbachcgB-s/">Google sheet</a>, tells us that the total numbers of NZUs surrendered by all emitters were 732,667 in 2013 and 576,470 in 2014.</p>
<p>As those numbers (for the whole of the NZETS) are less than New Zealand Steel's estimated surrender obligations, it is mathmatically impossible for New Zealand Steel to have met its surrender obligations without having used ERUs.</p>
<p>Here is a hypothetical example of an arbitrage trade similar to what New Zealand Steel might have done. According to a Carbon Forest Services webpage <a href="http://www.carbonforestservices.co.nz/nzueru-chart.html">that tracks emission unit prices</a>, on 11 October 2013, New Zealand units (NZUs) (the same type of units allocated to New Zealand Steel) had a market price of $4.20 each. On the same day the Russian or Ukrainian Emission Reduction Units had a market price of 35 cents each. One ERU was worth only one twelfth the price of an NZU.</p>
<p>If New Zealand Steel had purchased 1 million ERUs on 11 October 2013 at 35 cents each or $350,000, it could then surrender 873,750 of them to the Government to match it's 2013 emissions. Based on that 'if', New Zealand Steel would then be in a position to sell all the 1,029,352 New Zealand units of the 2013 allocation at $4.20 each for a possible value of $4,323,278. The hypothetical profit would be $3,973,278.</p>
<p>That is just one possibility based on NZU and ERU prices on one date. I suggest you browse over to the Carbon Forest Services <a href="http://www.carbonforestservices.co.nz/nzueru-chart.html">New Zealand Unit & Emission Reduction unit Chart</a> and hover over the chart to see the differences between ERU and NZU prices from early 2013 to 2015. Even when NZUs hit a historic low price of $1.60 in February 2013, they were still 9 times more valuable than ERUs. Choose your own combination of price difference and possible profit from buying ERUs and selling NZUs.</p>
<p>It's not just me saying that this is unethical profiteering. Here are statements from forest consultant Ollie Belton, Herald Economics Editor Brian Fallow and Green MP Kennedy Graham.</p>
<p>Carbon forest consultant <a href="http://carbon-pulse.com/8273/">Ollie Belton</a> said this;<blockquote><i>"..trade exposed industries that were gifted up to 90% of their surrender obligations were able to meet all their obligations with the super cheap ERUs and bank the gifted NZUs. Since 2012, NZUs have had much higher market value than ERUs, generally more than five times as high, hence the arbitrage opportunity. Never have polluters had it so good. They have made hundreds of millions in arbitrage profits."</i></blockquote></p>
<p>Brian Fallow of the Herald described the arbitrage trades as <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11263502">corporate welfare</a>.<blockquote><i>"This is where the corporate welfare comes in. The ETS is designed to ensure that large emissions-intensive trade-exposed operations like the Tiwai Point smelter or the Glenbrook steel mill are only exposed to a carbon price at the margin - and a pretty narrow margin at that...But the collapse in international carbon prices has presented the smokestack sector with an arbitrage opportunity too.
</br>They have been able to hoard their NZUs, in the expectation they will be more valuable in the future, and meet their obligations in the meantime with cheap imported Kyoto units instead".</i></blockquote>.</p>
<p>Kennedy Graham placed it on the record at Parliament that he regarded the arbitrage trades as <a href="https://home.greens.org.nz/speeches/kennedy-grahams-general-debate-speech-emissions-trading-scheme"> morally reprehensible</a>.</p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/FFmSOtV0GKA" frameborder="0" allowfullscreen></iframe>
<p><blockquote><i>"Emission-intensive, trade-exposed entities, which include aluminium, iron, steel, cement, whey, wood, and paper, are free to bank profits from the emissions trading scheme — cash for pollution. They receive free allocations of New Zealand Units as compensation for any energy price rises brought about by the emissions trading scheme...</br>
These industries are also required to surrender units to clear liabilities. This is dependent on calculations based on their emissions profile. They can surrender New Zealand Units or Kyoto Units, such as emission reduction units and certified emission reduction units. These overseas units are valued between 10c and 40c.</br>
They are engaging in the arbitrage by receiving free New Zealand Units from the Government, then selling them at market prices of $3 to $4, then buying cheaper overseas units such as the certified emission reduction units and emission reduction units for anything from 10c to 40c to surrender back to the Government.</br>
They bank the profit. In some cases, this is in addition to existing tax-paid subsidies running into the tens of millions of dollars. Let me acknowledge that these activities are entirely legally, but they are morally reprehensible and they reflect Government stupidity and cynicism of the highest order".</i></blockquote></p>
<p><b>Conclusion</b></p>
<p>New Zealand Steel really have achieved the ultimate emission trading scheme <a href="http://www.urbandictionary.com/define.php?term=two-for">"two-fer"</a>. The NZETS's free allocation regime over allocates them more emission units than they need to surrender for their emissions and the availability of the imported international units gave them the opportunity to make windfall arbitrage profits. So instead of a carbon price there were unearned windfall profits.</p>
<p>I agree completely with Ollie Belton, Brian Fallow and Kennedy Graham that such arbitrage profiteering is morally reprehensible corporate welfare where the polluters have never had it so good. It seems that the more free emission units you give a company, the more it abuses the privilege of having an emissions trading scheme. This is just one example of how deeply unethical the implementation of the New Zealand Emissions Trading Scheme has been. The scheme is now so morally tainted it has no valid ethical basis to continue. The New Zealand Emissions Trading Scheme should be abandoned.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-39362044979713882502016-04-09T14:40:00.000+12:002016-09-29T18:31:10.145+13:00Opening up the data on emissions units in the NZ emissions trading scheme<p><img style="float: left;margin-right: 10px;padding-top: 5px" src="http://hot-topic.co.nz/wp-content/uploads/2012/09/godfather-350881-150x150.jpg" alt="The Godfather" width="150" height="150" /></a> <em>In this post I include a gratuitous image of Marlon Brandon as the Godfather because all this wonky <a href="http://rwmjohnson.blogspot.co.nz/2016/03/google-sheets-of-owners-of-russian-and.html">open data stuff</a> I have been doing lately might be a bit boring. But I do eventually get around to a worked example of how to find out how many free units were given to NZ Aluminium Smelters Ltd.</em></p>
<p>Following on from the <a href="http://rwmjohnson.blogspot.co.nz/2016/03/google-sheets-of-owners-of-russian-and.html">post about the data</a> on internationally-sourced emission units that have been imported into New Zealand, I have uploaded more two data files to Google Sheets. They are in comma separated values (CSV) format.</p>
<p>The first sheet is <a href="https://docs.google.com/spreadsheets/d/1JQidgRGYs44OyzjxBv2cpowI2kempRgF1R7yIQUwpjk/">NZETS-2010-2014-final-allocations-for-eligible-activities-csv</a> which is five years of data on the <a href="">free allocation</a> (gifting) of New Zealand Units (NZUs) to emitting industries under the <a href="http://climatechange.govt.nz/emissions-trading-scheme/">New Zealand emissions trading scheme</a> (or NZETS).</p>
<p>This file combines into one sheet the numbers of allocated units (which are recorded in separate 'by year' tables) from the <a href="http://climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/decisions/">'Industrial allocation decisions'</a> pages on the Ministry for the Environment's climate change website.</p>
<p>The second sheet is <a href="https://docs.google.com/spreadsheets/d/1JsTw7e1ucA8nERfnVvz7tIw3ajqas-h22AgFLkNeBT4/">Kyoto Unit Holdings by Account 2008 - 2014</a> which is seven years worth of data listing all account holders in the Emission Unit Register who held a balance of Kyoto Protocol emission units at 31 December of each year. This sheet combines all the seven year by year sheets linked to on the <a href="http://rwmjohnson.blogspot.co.nz/2016/03/google-sheets-of-owners-of-russian-and.html">post about Kyoto emission units</a></p>
<p>The Kypto units are the <a href="https://en.wikipedia.org/wiki/Assigned_Amount_Units">Assigned Amount Units (AAUs)</a>, the <a href="https://en.wikipedia.org/wiki/Emission_Reduction_Unit">Emission Reduction Units</a> (which are otherwise known as the the dubious Russian or Ukrainian emission units), the <a href="https://en.wikipedia.org/wiki/Removal_Units">Removal Units (RMUs)</a> and the <a href="https://en.wikipedia.org/wiki/Certified_Emission_Reduction">Certified Emission Reduction units (CERs)</a>. Oddly, there is no requirement for the Emission Unit Register to disclose the year end balances of NZUs held by account holders.</p>
<p>How do we use this data? We need a worked example.</p>
<p>Let's assume we are interested in <a href="http://rwmjohnson.blogspot.co.nz/search/label/Aluminium">New Zealand Aluminium Smelters Limited</a>, the operator of the <a href="https://en.wikipedia.org/wiki/Tiwai_Point_Aluminium_Smelter">Tiwai Point aluminium smelter</a>. I mean, who isn't interested in the <a href="http://rwmjohnson.blogspot.co.nz/2012/09/rio-tinto-alcan-nz-do-godfather-nice.html">Godfather</a> of the NZ emissions trading scheme?</p>
<p>All we have to do with our Google sheet is apply a filter to the top row, the column headings, select the third or 'C' column 'Activity', and then open a drop down dialogue box and then hit 'clear selection' then select <a href="https://docs.google.com/spreadsheets/d/1JQidgRGYs44OyzjxBv2cpowI2kempRgF1R7yIQUwpjk/edit#gid=1584810035">'Aluminium smelting'</a>.</p>
<p>That tells us that New Zealand Aluminium Smelters Limited were given the following emission units</p>
<p>
2010 210,421</br>
2011 437,681</br>
2012 301,244</br>
2013 1,524,172</br>
2014 755,987</p>
<p>In other words, NZ Aluminium Smelters were given millions of NZ emission units for free from 2010 to 2014. A total of 3,229,505 to be exact. A bar plot of the annual allocations looks like this.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd4Z12daYGg2rCIeZ-U7PdzqCP4EzR6-zjC5PDqUK18zDber3zPH6VKinEZhCd8J5W-_w2fUfRRO96qJaO9CHrNPT051SYRsF6p4DAGKPUp4G-UnS8ncQ6zgg1j-IQ72cJPF6EWz9qZ4/s1600/Smelter-2010-2014-560by420-v1.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd4Z12daYGg2rCIeZ-U7PdzqCP4EzR6-zjC5PDqUK18zDber3zPH6VKinEZhCd8J5W-_w2fUfRRO96qJaO9CHrNPT051SYRsF6p4DAGKPUp4G-UnS8ncQ6zgg1j-IQ72cJPF6EWz9qZ4/s1600/Smelter-2010-2014-560by420-v1.png" /></a></div>
<p>So what happened in 2013? NZ Aluminium Smelters free allocation increased by a factor of five. Maybe that can wait for another post.</p>
<p>Here is the <a href="http://mazamascience.com/WorkingWithData/?p=619">R</a> <a href="http://mazamascience.com/WorkingWithData/?p=958">script</a> for the bar chart.</p>
<script src="https://gist.github.com/theecanmole/336b421f2d16364bd7f6a9875cd5802f.js"></script>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0tag:blogger.com,1999:blog-1877417939959778661.post-10768774973131167452016-03-28T18:01:00.000+13:002016-04-07T20:44:43.189+12:00Kevin Anderson on Irelands agriculture and climate change a lesson for New Zealand as well<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGzU2rl1op9_Ujl7TJhyVWL_kcfB5iNvVa0skorJ6xBTCCRNMZ34rSldzE44oxzWdjq0PRUjHja1is2fd0itWWmVmfjCCVG6PJuv3Rk9I3yYiMFApq6xQqmg1UXPrydyYuLfreHJiAYIA/s1600/KevinAndersonScreenshot2.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGzU2rl1op9_Ujl7TJhyVWL_kcfB5iNvVa0skorJ6xBTCCRNMZ34rSldzE44oxzWdjq0PRUjHja1is2fd0itWWmVmfjCCVG6PJuv3Rk9I3yYiMFApq6xQqmg1UXPrydyYuLfreHJiAYIA/s200/KevinAndersonScreenshot2.png" /></a></div> <p>While recently in Ireland <a href="http://t.co/ovKv2o4Bcb">Kevin Anderson</a> also gave <a href="http://www.thinkorswim.ie/choosing-to-fail-prof-kevin-anderson-interviewed/">an interview</a> to John Gibbons of the Irish website called <a href="http://www.thinkorswim.ie/">Think or Swim</a>.</p>
The <a href="https://vimeo.com/159299824">interview was recorded on Vimeo</a> and is not on You Tube.</p>
<p>I am highlighting the first six minutes, because Anderson provides some direct answers to questions about giving agriculture special treatment such as leaving the sector out of emissions reduction policy. I would say that John Gibbons the interviewer is running domestic Irish narratives past Anderson. These narratives of inaction ("we are efficient", "we are too small", "the world needs food") are exactly the same in New Zealand. And Anderson's answers are just as relevant to New Zealand as Ireland.</p>
<p>These quotes start with the time in the interview and then the speaker.</p>
<p>2:11 John Gibbons. Many politicians in Ireland, for example for the agricultural sector, would feel that we are a small country and we are recovering from the recession, so climate change is something we can deal with in 20 years time.</p>
<p>2:28 Kevin Anderson. It completely misunderstands the science. It is the emissions that we put in the atmosphere now that matter. What really matters from the science perspective for temperature is the total quantity of carbon dioxide we put inthe atmosphere; the carbon budget.</p>
<p>3:22 Kevin Anderson. Ireland is a small part of the problem. Every part of the world is a small part of the problem. We hear that from every sector, the aviation says this, shipping says that, UK says this...You can divide the 100% of all emissions into amy small numbers you want to. Using that as an argument is very false and very misleading.</p>
<p>3:58 John Gibbons. A large portion of our emissions are attributable to the agriculture sector and under <a href="https://www.agriculture.gov.ie/agri-foodindustry/foodharvest2020/">Food Harvest 2020</a> and <a href="https://www.agriculture.gov.ie/foodwise2025/">Foodwise 2025</a> the Irish Government is undertaking a really large scale expansion of our ruminant-based agriculture. Their argument is that we can do it more efficiently than for example than the Brazilians who are clearing rainforest for beef and dairy. Is that a reasonable argument?</p>
<p>4:30 Kevin Anderson. From a climate change perspective it is clearly is not a reasonable argument. I am sure that any one who is making that argument is aware of the science, You cannot hold those arguments and keep to the commitments signed up for in Paris. The climate does not care about efficiency it only cares about absolute levels of emissions.</p>
<p>5:28 Kevin Anderson. If we are really concerned about feeding the world then you would measure greenhouse gases in terms of nutrition or calories. What units of carbon dioxide per useful calory do you produce? You would almost certainly have to move away from types of agriculture you have now that have innately high emissions to other forms of agriculture that have much lower emissions of greenhouse gases per unit of output.</p>
<p><iframe src="https://player.vimeo.com/video/159299824?title=0&byline=0&portrait=0" width="560" height="315" frameborder="0" webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe>
<p><a href="https://vimeo.com/159299824">Kevin Anderson interviewed by John Gibbons on 16 March 2016</a> on <a href="https://vimeo.com">Vimeo</a>.</p>
<p>N.B. Yes Ireland really does have agricultural policies called <a href="https://www.agriculture.gov.ie/agri-foodindustry/foodharvest2020/">Food Harvest 2020</a> and <a href="https://www.agriculture.gov.ie/foodwise2025/">Foodwise 2025</a> and yes these are all about expanding production just like the New Zealand Government's Business Growth Agenda.</p>Robin Johnson's Economics Web Pagehttp://www.blogger.com/profile/12924305800986441792noreply@blogger.com0