dispatch from St Johnnysburg
David Farrar
David Farrar: ETS a balancing act
The government is under fire from all sides over its proposed changes to the emissions trading scheme and associated Copenhagen position. When you are being criticised for both doing too much, and also not doing enough, it normally means one of two things:
- You’ve got it about right
- You’ve managed to piss everyone off, and will lose votes over it
Sometimes it can be both, and in this case it probably is – but scenario 1 is only theoretical, while scenario 2 is becoming a rapid reality.
Let’s look at those claiming the government is doing too much and moving too fast in trying to have the ETS amended before Copenhagen.
You have Federated Farmers protesting agriculture is even in the scheme. And they point to Australia where Kevin Rudd has just dropped agriculture from its ETS to win Senate approval. Federated Farmers is very unhappy, and mostly doesn’t accept the argument that it will face trade barriers if NZ does not reduce emissions.
The average cost per farm (under National’s ETS) is less than farmers' average ACC levy but what riles the farmers is one can take measures to make your workplace or farm safer, but no one has yet found a way to stop cows belching.
The Greenhouse Policy Coalition says the current 2020 target of an emissions reduction to 15% will cost each New Zealander $1400 a year. They say that the proposed legislation in the US will cost a US family around $1 a day, while the NZ target will be at least $10 a day. They also point out NZ’s emissions growth has been largely population driven and a 20% reduction by 2020 means per capita an average reduction of 50%.
And of course a significant segment of the population doesn’t accept that those greenhouse gas emissions are increasing temperatures.
On the other side environmental groups and the Opposition claim the ETS gives “polluters” too easy a ride. Being the only country in the world to include agriculture is not enough, they are upset agriculture won’t come in until 2015, and also want the full costs to be borne by farmers earlier.
According to John Key, the cost for the average farm by 2030 under National’s scheme would be $3000 a year, and under Labour’s existing ETS, it would be $30,000 a year. And remember the Greens say even Labour’s ETS is not good enough. In fact the Greens have advocated that NZ should get rid of 20% of its cow stocks, in order to lead the world in climate change.
Labour has pounced on a report by Treasury which says by 2050, the ETS may have added $100 billion to NZ’s debt, due to the cost on taxpayers in meeting the target of a 50% reduction by 2050. This sounds shocking of course, but the alternative is either not reduce emissions (which would incur trade barriers) or to have the average farm paying tens of thousands of dollars in carbon credits, which will push down national income, reducing tax revenue – and also increasing public debt.
The ETS is one of those areas where there is no good option. There are not even any neutral options. It is just a matter of choosing between three equally unpalatable options:
- Do nothing and face trade sanctions (and also risk the world actually does heat up quickly as projected) with exports dropping
- Have an ETS which doesn’t protect “polluters” in areas where we face global competition, and have exports also drop as some industries move off-shore
- Have an ETS (or carbon tax) where the Government picks up a fair chunk of the costs of emissions, leading to an increase in public debt over time
So it is not a matter of choosing the right option, and not choosing the wrong option. All options around the ETS will lead to a decrease in living standards for New Zealanders. And that means that regardless of what happens, the government is likely to end up getting blamed.
In hindsight, maybe the smarter thing politically (but not economically) for National would have been to support Labour’s ETS, so Labour then gets the blame as motorists face higher petrol prices, households higher power prices, and farmers reduced returns.
Interim results season
Most Popular
Sponsored Links
- Talk to FleetPartners now and make the right decision about your vehicle fleet solution.
- Meet the SpaceseatTM, a new way to fly long-haul with Air NZ from November 2010
- Aviemore: " Grab an exclusive lake frontage land in South Island"
- Get your business banking up and running with Bizpac Essentials. Click here to find out more.
- Get 2.99%p.a. for 6 months on balances transferred to The Warehouse Rewards MasterCard. Conditions apply
.jpg)
NBR Services
By this author
.jpg)
Latest
The Star-Times bombs- New low for Telecom depresses NZ sharemarket
- NZ dollar wafts higher on RBA updraft
- Air NZ ups domestic capacity ahead of 2011
- Gattung appointed chair of Australian company
- Some Vodafone users blocked from mobile broadband
- PwC withdraws McKenna court action
- Horn to use shoe leather in bid to save strong wool industry
- Recession eats into labour productivity
- Telecom shares hit all-time low
Comments
ETS
the whole thing is a massive scam
we should drop it
clark has got her UN job & gore has got his millions so there are no good reasons to continue with it
rodney hide has the right idea:just scrub the whole thing
Take The Do Nothing Option
"All options around the ETS will lead to a decrease in living standards for New Zealanders."
There will be no decrease if we do nothing, because in spite of the mountain of left wing propaganda from the mainstream media, and an assault on the minds of our children reminiscent of the Hitler Jugend, thanks to the free exchange of ideas on the internet, the world is fast awakening to the fact that climate change is a scam, Al Gore is a charlatan, Obama is a fraud, and the UN is a bunch of self serving crooks. Copenhagen is over before it starts.
Carbon Tax doesn't have those disadvantages
You say all the options are equally unpalatable. However, a carbon tax isn't - you should have it as a separate fourth option.
Why is that?
1. A carbon tax doesn't require funding by the govt if the tax level is high enough. I'm not sure why you put the carbon tax in the third group - as a carbon tax increases revenue to govt, not decreases it. Arguably if it is set too low then the govt makes up the difference by buying carbon credits, maybe that's what you're thinking? This is quite different to an ETS, where much of the "tax" actually goes to traders and big corporates (hence why they prefer one).
2. A carbon tax doesn't impact the trade exposed sector. The carbon tax is applied to all imports, so offshore manufacturers don't get an advantage in NZ. And it is refunded on all exports, so our exporters don't pay a penalty.
3. A carbon tax doesn't have to reduce our national wealth if we reduce income and/or consumption taxes to compensate. There is a lot of evidence that people with a large carbon footprint are also wealth people - to a large extent a carbon tax is a consumption tax. It also has the advantage of being a tax you can quite lawfully avoid (by purchasing goods and services with low embedded carbon).
4. A carbon tax gives business certainty, increasing the likelihood of business investing in carbon reductions as compared to an ETS
5. A carbon tax requires no carve outs for special groups - agriculture, Maori forests, large power generators. It works fine when applied to all groups.
This means that I think your second scenario is the most likely here - National are choosing the wrong policy option, and because of that they are disliked by everyone.
Kyoto means ETS
An ETS is a system of production controls, of course these don't work - they didn't work for the Soviets, they won't work for us.
Tax and Spend
National putting taxes up and saying they have no choice but to reduce our living standards.
No surprise there then I guess...
ETS BS
I still don't see why we need an ETS. 70% of the country's electricity is generated by renewable energy, we are more than pulling our weight already, even if it is accidentally.
In the process, they have destroyed the forestry sector and created more uncertainty for those doing business in New Zealand.
Trade sanctions?
The idea that we would face trade sanctions for failing to worship at the altar of Green religion is simple commercial naivete. No country could impose sanctions, because no country (other than New Zealand) will actually inflict deliberate damage on its economy to appease the global warming gods. They'll just pretend to do so until the ideological assault from the Left abates in the face of science and the facts.
The Wall Street Journal got it in one when it said, "To the annals of global warming lunacy, add this gem from New Zealand: According to a parliamentary committee, Kiwis should accept lower standards of living to protect the national image abroad."
Like the ACC, our ETS will be a world leader and other countries will beat a path to Wellington to copy it. Any time now.
Have I got it right when I
Have I got it right when I say that
1 - NZ has the most ambitious ETS of any country
2 - No matter how effective it is, as we only contribute 0.02% of world emissions, it is only there for show and won't make a difference to anything?
"All options around the ETS
"All options around the ETS will lead to a decrease in living standards for New Zealanders."
Exactly - and National's ETS will mean it just keeps getting worse and worse. Emitters have close-to-zero (1.3% I believe) incentive (National LOVES that word when it comes to social welfare) to actually, ya know, decrease emissions (that being the point of the whole thing). So they will merrily continue as is, and the taxpayer will fund that. Awesome, we all get to pay to for an ETS while legislating to remove any of the intended benefits of it.
ETS
Who is doing the work on the effect of the adoption (or not) of an ETS on our exports? MFAT? Trade is the elephant in the corner that's only occasionally mentioned, but it's what this is all about. Australia has called the world's bluff by not including agriculture and look set to ride it out without any real adverse effects at all.
PaulL he means under Kyoto
PaulL,
An ETS is indeed completely enviromentally worthless, costly and inefficient. It will severly hurt Nationals chances of reelection. BUT it is the most efficient adoption of Kyoto Protocols, because under a carbon tax system NZ might undergo enviromentally efficient, export led, productive growth and then where would we be? NZs carbon-emissions might increase as the carbon-footprint of NZ is reduced - a carbon tax could risk us saving the planet in total violation of our Kyoto commitments.
Waste of our money
CO2 has only a minute effect on the climate and man-made CO2 (of course) has even less. Climate science is now clearly pointing to natural variation as the only significant driver of climate change on a global scale (land use can have a local effect).
An ETS (or carbon tax) is entirely wrong. It will make us poorer while enriching the schemers who can manipulate the market and create credits.
I am surprised at you David, for going along with this. Your experience with statistics should place you in a better position than most to see how the AGW cheerleaders manipulate the scientific method.
Look up Steve McIntyre (www.climateaudit.org) sometime and read about the sterling work a fellow statistician has done to expose the shamelessly faulty work done in the name of science.
Oliver: 1. No, you haven't
Oliver:
1. No, you haven't got that right I'm afraid
2. As with anything, we join the rest of the world in responding to global issues rather than isolating ourselves from it
Red herring
The threat of trade sanctions is a red herring (put about John Key et al) designed to scare us into conforming.
In an open competitive market New Zealand will always be able to sell its commodity based produce.
ETS - Do Nothing Option
• Do nothing and face trade sanctions (and also risk the world actually does heat up quickly as projected) with exports dropping.
The fact that the ETS is based on pseudo science, is being pushed by the corrupt UN, and by socialist ideologues is MORE than reason enough to do nothing. NZers are idiots if we think we have to lead the charge on this. Ultimately the ETS is just a means of funding a non elected, non representative global government which will, among others things, remove the national sovereignty of nation states.
Reject the ETS if you value your freedom and independence!
We are missing a major opportunity
Scare stories about old ladies at Harrods not buying New Zealand products is green propaganda. There is no independent evidence to support this stance, only scare stories designed to blackmail us into doing something stupid. John key should come to his senses about this. Has he forgotten that most of the bureaucrats he has inherited have been carefully sifted through nine long years under a socialist regime, where anyone who had some independent thinking was sidelined? In fact, everyone I talk to overseas says they choose to purchase New Zealand products because they are produced in 100% natural conditions. We do not need to have an ETS scheme on any agricultural produce. Finally, does anyone REALLY believe that the Chinese would stop buying our coal, lamb, dairy etc because we, like them, don't have an agricultural ETS scheme? I don't think so.
Yeah, lets abandon the ETS.
Yeah, lets abandon the ETS. So that the Kyoto liability is paid for by taxpayers only. Real geniuses around here.
National rushing ETS to avoid ACT's Fiscal Responsibility Bill
Key and Smith are in a panic to pass this ETS legislation in advance of the Fiscal Responsibility Bill. They know that the ETS would spectacularly fail to pass any test of responsibility. And so it should: It is based on junk-science, and the dream of our political elite to accumulate sufficient kudos ascend to a larger, climate change driven trough at the UN
The EU
If the small percentage of extreme greenies in the EU don't won't our products.
Then too bad, we have a enormous market of billions of people right on our doorstep in Asia.
I am sick of the Chavezista logic we are being fed.
He thought he could choke off the lifeblood of the American economy by refusing to sell oil to them. They just bought from other suppliers and other countries took the Venezuelan oil. It didn't affect the market at all.
Tax on air
Ignore IPCC and other pseudo-scientists who pretend that we can stop natural forces (King Canute, played by Al Gore).
Our trading partners will still want to buy the best products at the best price. They still want to eat!
As long as we don't price ourselves out of the market with taxes disguised as carbon credits, we will survive. Besides, I'd rather have a lower standard of living and keep my principles, than have a lower standard of living because of what others might think of us.
Kyoto = Bad
It all comes back to signing the Kyoto Protocol, we shouldn't have. The EU complies with Kyoto through the lowest cost ETS methods, but doing so increases the growth of the EUs carbon footprint. It takes real genius to design protocols that makes the problem worse and cost an arm & a leg to do so.
Shooting our feet off.
How does giving money away in any way help us to reduce
our so-called harmful emissions. We have less money to
spend on whatever technology there is for reducing emissions.
It boils down to penalizing ourselves for said "crime" and at the
same time handicapping our ability to stop "offending".
Boycotts?
Both John Key and Tim Groser have now made it plain that formal trade sanctions on GHG grounds are not an issue. They are clearly illegal, impossibly complex and would simply promote trade wars. Despite the muscle-flexing of the US Congress, the President won't sign up to it.
The new scare is an occasional boycott by green consumer groups or retailers. So if this going to drive billion-dollar policymaking, let's get some research done on it. How likely? How damaging? How much "worse" than competitors before NZ is targeted? Precedents? Cost/benefits?
Even without research, it's hard to believe anybody would want to single out NZ for not being the first UN country to include agriculture. By voluntarily including it, we make the whole idea seem reasonable.
Oliver, yes you are right -
Oliver, yes you are right - New Zealand is the only country in the world implementing an all-gases/all-sectors ETS. No other country is even considering doing anything as stupid as including food production and forestry in such a scheme.
The EU ETS, which has been
The EU ETS, which has been in operation for over four years, is moving to an all gases, all sectors approach long before ours would.
Al Gore
Stop rubbishing Al Gore. The man is brilliant. Most of us learned in high school that the earth’s interior was several thousand degrees – hot enough to melt most metals. Al Baby has discovered the interior of the earth is actually several millions of degrees. The man is not just brilliant but a genius. We can stop burning fossil fuels and tap this endless source of energy.
http://newsbusters.org/blogs/noel-sheppard/2009/11/18/al-gore-earths-int...
Al Gore
Stop rubbishing Al Gore. The man is brilliant. Most of us learned in high school that the earth’s interior was several thousand degrees – hot enough to melt most metals. Al Baby has discovered the interior of the earth is actually several millions of degrees. The man is not just brilliant but a genius. We can stop burning fossil fuels and tap this endless source of energy.
http://newsbusters.org/blogs/noel-sheppard/2009/11/18/al-gore-earths-int...
Models 4 Oxfam
Here is somebody even like more cleverer than Al Gore
http://news.bbc.co.uk/2/hi/entertainment/arts_and_culture/8367039.stm
See like climate change must be an undeniable fact because a model like took some photos up a mountain.
Post new comment