Who bears the biggest and smallest carbon price under the NZETS?

Who bears the biggest and smallest carbon price under the New Zealand Emissions Trading Scheme?

Geoff Bertram and Simon Terry in their book The Carbon Challenge New Zealands Emissions Trading Scheme, point out that the effect of the delayed entry dates for different sectors of the economy (agriculture) into the NZ ETS combined with 100% plus free gifting of NZ emission units to emitters, will be an unfair carbon price between sectors.

This chart shows who is and is not bearing their share of the carbon price imposed by the NZETS. The left hand end of each line represents the sectors share of New Zealands greenhouse gas emissions. The right hand end of each line represents the share of the carbon price each sector will bear under the NZ ETS in the period 2008 to 2012. This type of chart is a 'Bump' chart. It has been popularised by the blog Junk Charts.



Here is the R-programming language script for the chart.

ag<-c(48.4,3.2)
li<-c(14.8,1.2)
mv<-c(14.5,29)
ct<-c(4.2,9)
hh<-c(4.1,23.3)
yy<-c(2008,2009)
png(file="etsprice.png",pointsize = 14,width=650,height=550)
plot(yy,ag,type='n',axes=F,xlim=c(2008,2009.4),ylim=c(0,48),main="",xlab="", ylab="Percent of total")
axis(side=1, las=0,at=c(2008.3,2009), labels=c("share of greenhouse gases", "share of carbon price in NZETS"))
axis(side=2)
box(lwd=2)
lines(yy,ag,lwd=2,col="red")
text(2009.1,3.2,"Agriculture",adj=0,col=1)
lines(yy,li,lwd=2,col="red1")
text(2009.1,1,"Large industry",adj=0,col=1)
lines(yy,mv,lwd=2,col="blue")
text(2009.1,29,"Private vehicles",adj=0,col=1)
lines(yy,ct,lwd=2,col="blue1")
text(2009.1,9,"Transport",adj=0,col=1)
lines(yy,hh,lwd=2,col="violetred")
text(2009.1,23.3,"Households",adj=0,col=1)
mtext(side=3,line=-2.8,cex=1.3,"Sectoral shares of NZ greenhouse gases \nvs share of carbon price under NZETS")
dev.off()

What is New Zealand's fair share of GHG emissions?

I was playing with this widget on the World Bank's website.
I have graphed New Zealand's carbon dioxide emissions per capita⁽¹⁾ against per capita for World, the European Union, China and sub-Saharan Africa.

New Zealand very much has a developed country consumption pattern.

CO2 emissions (metric tons per capita)

Data from World Bank

(1) CO₂ only and not all greenhouse gases expressed as CO₂ equivalent. So methane and nitrous oxide are not included.

Human-Made Climate Change: A Moral, Political and Legal Issue

Dr James Hansen is giving a lecture in Wellington. The details Monday 16 May 2011, 5.45pm -7.30pm, Rutherford House, Lecture Theatre 1, 23 Lambton Quay, Wellington, No RSVP required - all welcome.

Here is Hansen talking recently about phasing out coal powered thermal power stations.



Here is the full detail of Hansen's public talk in Wellington.

Human-Made Climate Change: A Moral, Political and Legal Issue

Dr James Hansen is Director of the NASA Goddard Institute for Space Studies in New York and Adjunct Professor at Columbia University's Earth Institute. He is the author of Storms of my Grandchildren (2010), and is probably best known for being one of the first scientists to bring global warming to the world's attention, when he delivered Congressional testimony on climate change in the 1980s.

Trained in physics and astronomy in Dr James Van Allen's space science program at the University of Iowa, Dr Hansen has been an active researcher in planetary atmospheres and climate science for nearly 40 years, with the last 30 years focused on climate research, publishing more than 100 scholarly articles on the latter topic.

Elected to the U.S. National Academy of Sciences in 1995, Dr Hansen has received numerous awards, including the WWF Conservation Medal from the Duke of Edinburgh, the American Geophysical Union?s Roger Revelle Medal, and the Heinz Environment Award.

In addition to numerous testimonies given to the United States Senate and House of Representatives, Dr Hansen twice made presentations to President George W. Bush Administration's cabinet level Climate and Energy Task Force, chaired by Vice President Dick Cheney.

While Dr Hansen's work has evolved from space science to climate science, it has constantly sought to make the results of that work widely available to the public. Time Magazine designated Dr. Hansen as one of the world's 100 most influential people in 2006, a tribute to his continuing efforts to serve the public through his scientific work.

Dr Hansen's Wellington lecture will focus on human-made climate change as a moral, political and legal issue. To quote:

'Human-made climate change is a moral issue. It pits the rich and the powerful against the young and the unborn, against the defenseless and against nature. Climate change is a political issue. But politics fails when there is a revolving door between government and the fossil fuel-industrial complex. Climate change is a legal issue. The judiciary provides the possibility of holding our governments accountable for their duty to protect the public interest.'

The Mayor of Wellington, Celia Wade-Brown will be present to welcome and introduce Dr Hansen.

History of Modern Climate Science

This video condenses the history of modern climate science into 1 minute and 40 seconds.



* 1824 - Joseph Fourier discovered the greenhouse effect.
* 1859 - John Tyndall discovered that H₂O and CO₂ absorb infrared confirming the Fourier greenhouse effect.
* 1896 - Svante Arrhenius proposed human CO₂ emissions would prevent earth from entering next ice age (challenged 1906).
* 1950’s - Guy Callendar found H₂O and CO₂ did not overlap all spectra bands, therefore warming from CO₂ expected (countered the 1906 objections against Arrhenius).
* 1955 - Hans Suess identified the isotopic signature of industrial based CO₂ emissions.
* 1956 - Gilbert Plass calculated adding CO₂ would significantly change radiation balance.
* 1957 - Roger Revelle and Suess suggested oceans would absorb less CO₂ causing more global warming than predicted.
* 1958/60’s - Charles David Keeling proved CO₂ was increasing in the atmosphere.
* 1970’s/1980’s Syukuro Manabe and James Hansen began modeling climate projections.
* 1990s - instrumental temperature records from NCAR, GISS, Hadley, CRU, UAH, MSU, all confirm models of warming global climate. So do trends in glacier melt and retreat, sea level rise and latitudinal shift.

James Hansen Tokyo 2008

Here is interview with James Hansen recorded in July 2008 in Tokyo, at an event called the United Nations University G8 symposium on innovation and climate change.

CLIMATE CHANGE - James Hansen from UNUChannel on Vimeo.

Coming Clean - New Zealand's Emissions Trading Scheme Explained

There is a new video available on-line explaining the NZ Emissions Trading Scheme.

Its called Coming Clean - New Zealand's Emissions Trading Scheme Explained and the film maker is Lindsay Horner.

Its very good. It hammers the key points well;

• that the NZETS will increased emissions of GHGs as it lacks a real cap on greenhouse gas emissions that is an essential part of a textbook 'cap-and-trade' scheme.
• that relying on post-1990 forestry carbon credits to match growth in GHGs since 1990 is the same as borrowing on a credit card, as the forestry carbon credits will have to be surrendered when the forests are eventually logged.

Coming Clean - New Zealand's Emissions Trading Scheme Explained from Lindsay Horner on Vimeo.

Submission to the NZ ETS Review 2011

I am a bit puzzled that the usual ENGOs (Greenpeace, Oxfam, Forest and Bird) don't have any thing on their websites about the NZ ETS Review 2011.

Its the one chance for the public to tell somebody hopefully arms length from Nick Smith that the New Zealand Emissions Trading Scheme is crap!

Here is my submission. Please feel free to copy and change and submit it. The deadline is 5:00 p.m. Wednesday 6 April 2011.

ETS Review 2011 Consultation
Ministry for the Environment
PO Box 10362
Wellington 6143
By email to etsreview2011@climatechange.govt.nz

6 April 2011

Submission to the NZ ETS Review 2011

Dear Sir/Madam,

I attach my submission to the NZ ETS Review 2011. I am addressing only Question 12.d. of the Issues Paper; "Should the ETS design be changed in order to strengthen the incentives for domestic abatement? If so, how"?

The NZ ETS has exceedingly weak incentives for domestic abatement of greenhouse gases (GHGs).
Firstly, this is because the NZ ETS does not cap or limit GHG emissions in any compliance period. The NZ ETS is not a "Cap-and-Trade" emissions trading scheme as understood in the environmental economics literature (N.B. refer to Footnote 1).

The single most important change that should be made to the design of the NZ ETS to strengthen the incentive for emissions abatement is to include a real “cap” or limit on greenhouse gas (GHG) emissions made within New Zealand.

Economists have stated that emissions trading will result in the least-cost solution for reducing pollution (Footnote 2). However, that conclusion is always based on the premise that emissions trading is within a fixed limit. As the NZ ETS does not have a fixed cap, it cannot be considered to be the the least-cost solution. The uncapped NZ ETS is not economically efficient.

Therefore I request that the Review recommend that the NZ ETS design be changed by including explicitly stated legally enforceable absolute limit or cap on the volume of emissions of GHGs emitted and for the number of units issued.

The second important cause of the NZ ETS's exceedingly weak incentives for domestic abatement of GHGs is the issuing of emissions units into the market by free allocation largely to emitters.

The Garnaut Climate Change Review noted that units allocated for free are not 'free'. The cost is imposed elsewhere in the economy, typically on consumers, who do not make direct decisions to invest in either clean renewable energy plant or carbon-intensive energy plant. Garnaut considers that free permit allocation has several disadvantages; high complexity, high transaction costs, value-based judgments, and the use of arbitrary emissions baselines. It acts to shield emitters from the incentive of the carbon price

Garnaut prefers auctioning of emissions units to emitters to provide greater transparency and accountability and lower implementation and transaction costs as governments retain control over the permit revenue (Footnote 3). Auctions of units are more flexible in distributing costs, they provide more incentives for innovation, and they lessen political arguments over the allocation of economic rents.(Footnote 4) Finally revenue from unit auctions would offset a significant proportion of the economy-wide social costs of a cap and trade scheme.(Stavins 2001, Footnote 1)

Therefore I request that the Review recommend that the NZ ETS design be changed by ending free allocation of emission units in favour of regular periodic auctions.

Footnote 1
Three examples from the literature that define “Cap-and-Trade” emissions trading as including an absolute cap are as follows.
“A cap-and-trade system constrains the aggregate emissions of regulated sources by creating a limited number of tradable emission allowances, which emission sources must secure and surrender in number equal to their emissions.”
(Jaffe,J, Matthew Ranson,M, and Stavins, R.N, (2009) 'Linking Tradable Permit Systems: A Key Element of Emerging International Climate Policy Architecture', Ecology Law Quarterly 36:789
http://www.boalt.org/elq/documents/elq36-4-01-jaffe-2009-1209.pdf)

“In an emissions trading or cap-and-trade scheme, a limit on access to a resource (the cap) is defined and then allocated among users in the form of permits. Compliance is established by comparing actual emissions with permits surrendered including any permits traded within the cap.” (Tietenberg T (2003) 'The Tradable-Permits Approach to Protecting the Commons: Lessons for Climate Change', Oxford Review of Economic Policy 19:3, pages 400-419, http://oxrep.oxfordjournals.org/cgi/reprint/19/3/400?ijkey=324rjCyD25Jfk&keytype=ref)

“Under a tradable permit system, an allowable overall level of pollution is established and allocated among firms in the form of permits. Firms that keep their emission levels below their allotted level may sell their surplus permits to other firms or use them to offset excess emissions in other parts of their facilities.” (Stavins, R.N. (November 2001) 'Experience with Market-Based Environmental Policy Instruments', Discussion Paper 01-58, Resources for the Future, Washington, D.C. p 4 http://www.rff.org/documents/RFF-DP-01-58.pdf)

Footnote 2
The American economist WJ Baumol gave a mathematical proof that for a given fixed pollution volume, and assuming competition and varying costs of abatement of pollution, trading in pollution rights would result in the least-cost solution for reducing pollution to the fixed volume.
Baumol, W.J. and Oates, W.E. (1971) “The Use of Standards and Prices for Protection of the Environment”, Swedish Journal of Economics, 73: 42-54 http://www.jstor.org/pss/3439132
Baumol, W. J. (1972) "On Taxation and the Control of Externalities", American Economic Review 62 (3): 307–322, http://www.jstor.org/stable/1803378

Footnote 3
Garnaut, Ross (2008). "Releasing permits into the market". The Garnaut Climate Change Review. Cambridge University Press. ISBN 9780521744447. http://www.garnautreview.org.au/chp14.htm#14_3

Footnote 4
Kerr, S; Cramton, P, (1998) "Tradable Carbon Permit Auctions: How and Why to Auction Not Grandfather". Discussion Paper 98-34, Resources For the Future