Did anyone sign the Kyoto Protocol in good faith? The Kyoto Escalator shows that New Zealand certainly didn't

Robin Johnson's Economics Web Page introduces the Kyoto Escalator chart and argues that New Zealand was just as complicit as the major European countries in negotiating the Kyoto Protocol so that they complied with it without reducing either gross or net emissions.

New Zealand's Gross greenhouse gas emissions (blue) net emissions (brown) and 'Kyoto' emissions (red) 1990 to 2012. Double click on the chart to see it at 100% and in good resolution.

Professor Dave Frame is the new director of the Climate Change Research Institute at Victoria University of Wellington. He is a University of Canterbury-trained scientist who has worked for some years in Britain. He has just joined the climate change fray with a very interesting opinion editorial "International focus needed over climate" in the Dominion Post. Welcome to climate change issues back in New Zealand, David.

David Frame writes that New Zealand does not want to be thought of as the country that reneges on international treaties.

"Reputationally, accepting commitments and then failing to deliver on them is not a look New Zealand likes. "Doesn't honour the treaties it's signed" is not one of the few sentences we want people to remember about us."

So, yes, I agree, New Zealand should honour the treaties it signs. I hate to nitpick but, isn't New Zealand the country that was explicitly founded in 1840 on a treaty that was not honoured?

David Frame describes the history of the Kyoto Protocol climate negotiations

"...the Kyoto Protocol was a no-win situation for places like New Zealand. In the 1990s Britain and Germany were reducing their emissions of greenhouse gases for non-climate-related reasons (declining manufacturing and the collapse of the coal industry in Britain; technological substitution in the case of post-reunification Germany)."

"Kyoto's structure, reductions of emissions by some specific fraction compared with 1990 levels, were designed with this in mind, since it allowed Europe to appear to "take the lead" without actually doing anything very different from what they were going to do anyway. It was an approach so clearly aligned with the near-term reputational interests of some stakeholders that the Nobel prize-winning strategist Tom Schelling wrote of it: 'I cannot help believing that adoption of such a commitment is an indication of insincerity'."

Frame believes New Zealand's negotiators were innocent parties who acquiesced in these machinations while Britain and Germany portrayed themselves as "leaders" on climate change, even though their emissions reductions basically consisted of doing what they were going to do anyway.

While I am a little disappointed that Britain and Germany acted in such a self-serving way, I don't doubt that David Frame is correct about their motives. However, I don't think he is correct to say New Zealand was innocent. On 31 October 2007, the then Minister of Climate Change Simon Upton gave a speech about New Zealand's negotiating position three weeks before the UNFCCC meeting in Kyoto.

Upton stated that within New Zealand's negotiating position, using forest sinks to offset increases in emissions was just as important as the Protocol including international emissions trading, an all-gases approach and prompt acceptance of commitments by developed countries.

"Sequestration of carbon in sinks (such as forests) should qualify alongside emission reductions for the purposes of counting progress towards any targets that are agreed."

Upton contines.

"I want to say why sinks are important - spelling out in broad terms the economic benefits to New Zealand of counting sinks - and explain briefly how New Zealand considers they ought to be treated. Then I want to say why - even though the correct treatment of sinks is both fair in terms of the Convention, and good for New Zealand's economy - sinks nevertheless do not and cannot protect New Zealand emitters of greenhouse gases from adjustment."

"Adding to carbon stocks through afforestation should count positively; reducing stocks (through forest harvest, land clearance and such like) should count negatively."

"If - and I emphasise if - sequestration is treated in the way New Zealand has long been advocating, then the major contribution we expect to make to removing carbon from the atmosphere in future years will earn us 'credits'."

Upton and the New Zealand negotiators got what they wanted. Forest carbon sink credits were included as offsets. However, Upton provided several cautionary notes. If NZ's forest carbon credits were recognised in Kyoto, it may be perceived as special pleading. Also fairness suggested that forest owners should receive them, and be able to sell them. As opposed to the Government keeping them for compliance with Kyoto.

"New Zealand's stance on sinks has been treated with scepticism by some because, superficially, it looks as though it may be special pleading by New Zealand to take advantage of our sinks to reduce the pressure on emitters to make adjustments. We do not see it that way. New Zealand has been clear in responding to other countries that we do not see the accrual of sink credits as a way to insulate New Zealand from acting to reduce emissions. We see New Zealand's sink credits being an integral part of the international emission trading market. As such, we see New Zealand emitters facing the world price for carbon emissions provided that price is generated by a free market in emission permits."

"Let me now turn to a related question: why recognition of sinks nevertheless does not and cannot protect New Zealand emitters of greenhouse gases from adjustment. It might be suggested that New Zealand's interest in sinks stems purely from a desire to secure for itself a large buffer that would allow for significant growth in greenhouse gas emissions. That is not the case -- nor do I believe would it be credible to pursue such an objective."

"It would simply not be credible to advocate least cost tradeable mechanisms for the world and then seek to keep New Zealand's forest credits for domestic use only. Sequestration credits should accrue to the forest growers who earn them, and they should be free to place them on the world market."

So Simon Upton foresaw two problems with using the credits from forest carbon sequestration as a buffer to allow growth of GHG emissions. There was the reputational problem of New Zealand's insincere negotiating position in the Kyoto discussions. And there was the problem that the credits should accrue to the owners of the forests, not the Government.

New Zealand's climate change officials solved the "who's credits?" problem by inventing a new 'junk' currency to be issued to the commercial foresters instead of Kyoto units (and to buy off greedy emitters); the New Zealand Unit. The real Kyoto forest carbon removal units were kept "off the balance sheet". In the New Zealand Greenhouse Gas Inventory 1990 2009 and in the Kyoto Protocol net position report, the carbon sequestration from 2008 to 2012 is estimated from forest surveys. The actual Kyoto removal units will not be recognised until after 2012. It is these as-yet unissued units that offset the 19% increase in New Zealand's gross GHG emissions since 1990.

It seems since Simon Upton's time, we have developed collective amnesia about intentionally negotiating the Kyoto Protocol so that we could rely on forest carbon sinks to buffer increases in greenhouse gases. Has any one of the Kyoto Protocol parties negotiated and acted in good faith? New Zealand certainly hasn't

Pure Advantage pushes 'New Zealand’s Position in the Green Race' but is silent on carbon pricing

I look at the latest Pure Advantage report promoting green economics. It's all great sustainability stuff except that it fails to mention carbon pricing (emissions trading schemes or carbon taxes). How seriously can we take the Pure Advantage "green growth" message on climate change, when they are not upfront about their position on a price on carbon?

Pure Advantage, the green business advocacy group, have just released another green growth report 'New Zealand’s Position in the Green Race'. Hot Topic blog has posted about Pure Advantage before and Phillip Mills guest-posted on how NZ needs a bold low-carbon business strategy too.

The report has three goals: to define green growth, to summarise New Zealand's uninspiring environmental and economic performance, and to propose "a process for developing a green growth recipe for NZ and a strategy for delivering it" (page 27).

The basic idea of the report is clear from this graphic - where 'Green Growth' starts as an amorphous brain storm of idea, which then gets focused through the 'NZ Green Race' report and an economic analysis, before emerging like a butterfly from a chrysalis as a number of strategies and policies.

Pure Advantage believes that "corporates need to step up to provide the necessary leadership" because "New Zealand’s political leadership has successively failed to make the distinction between greening our current dirty industries, and creating new forms of high-value growth in a green economy" (page 11). Hear hear for both observations!

Climate change features strongly in their definition of green growth (as does flowery language).

Green Growth is:

"the aggregated economic benefit that comes from minimising waste and the inefficient use of energy, reducing pollution and greenhouse gas emissions, enhancing natural resources and biodiversity"
"is an economic progression driven by a series of interrelated and unprecedented global commercial imperatives, including the geopolitical drive for domestic energy security, exploding population growth, changing social demographics, mounting climate obligations, rapid decarbonisation of economies towards renewable energy..."
"is a global economic revolution driven by a series of interrelated global mega-trends, including rapid decarbonisation of economies towards renewable energy"

The report works well on the first two goals, but it fails in terms of the the third goal as their 'recipe' for dealing with climate change does not include carbon pricing. The New Zealand Emissions Trading Scheme (ETS) is mentioned twice in the report. On page 27 there is a brief mention of the ETS in discussion of NZ's growth in greenhouse gases. And in a quote from the OECD on page 34.

So what? Should Pure Advantage mention the ETS or carbon taxes/prices? The ETS is probably perceived to be most boring topic ever. Discussing the ETS is usually flogging the dead horse to swallow the elephant in the room.

But how do Pure Advantage think we can achieve a rapid decarbonisation of the economy without carbon pricing? As James Hansen says there needs to be a rising carbon fee on all emissions of carbon dioxide and greenhouse gases. Or, as the economist William Nordhaus says

"If economics provides a single bottom line for policy, it is that we need to correct this market failure by ensuring that all people, everywhere, and for the indefinite future are confronted with a market price for the use of carbon that reflects the social costs of their activities. Economic participants—thousands of governments, millions of firms, billions of people, all making trillions of decisions each year—need to face realistic prices for the use of carbon if their decisions about consumption, investment, and innovation are to be appropriate."

It is very unlikely that Pure Advantage don't have an opinion on emissions trading and carbon pricing. Its also very unlikely that they think they know better than either Hansen or Nordhaus. They are after all successful intelligent business people who have identified with sustainability. So its highly improbable that the Pure Advantage team think that decarbonising the economy can be done without effective carbon pricing.

So why don't they mention carbon pricing explicitly as an essential method to decarbonise? I suspect the answer is in this quote from the executive summary;

"To date much of the green debate in New Zealand has focused on the downside: costs and enforced obligations. Pure Advantage has been formed to focus on the economic upside of being green..."

"Costs and enforced obligations": that sounds more like the more traditional business view of the ETS. The Pure Advantage team seems to view the ETS as a downside, just like the rest of the business community who are not-so green-growth. And they only want to push the upside of green growth. So in promoting green growth (and decarbonising) to their business colleagues, Pure Advantage feel they have to downplay the ETS.

I have problems with this approach. It is less then completely transparent. Its also not showing leadership.

Wouldn't real green growth leadership involve openly stating that New Zealand must have a carbon price? That New Zealand needs to have an effective no-exception no-subsidies ETS or carbon tax instead of the ineffective NZETS?

William Nordhaus has made this comment on global warming eloquence without carbon pricing.

Whether someone is serious about tackling the global-warming problem can be readily gauged by listening to what he or she says about the carbon price. Suppose you hear a public figure who speaks eloquently of the perils of global warming and proposes that the nation should move urgently to slow climate change. Suppose that person proposes regulating the fuel efficiency of cars, or requiring high-efficiency lightbulbs, or subsidizing ethanol, or providing research support for solar power—but nowhere does the proposal raise the price of carbon. You should conclude that the proposal is not really serious and does not recognize the central economic message about how to slow climate change. To a first approximation, raising the price of carbon is a necessary and sufficient step for tackling global warming. The rest is at best rhetoric and may actually be harmful in inducing economic inefficiencies.

I'd love to hear from a spokesperson from Pure Advantage who can tell me that they are not just "eloquent speakers" on global warming - who do not propose a carbon price.

Here are some questions for Pure Advantage.

* Do they recognise the economic point that decarbonising must involve carbon pricing?

* Do they accept that the NZETS is an ineffective carbon price scheme?

* If yes to both these questions, why don't they show leadership and stand publicly for what they believe in?