NZIER on Emission Trading Scheme

April 30th, 2008 at 5:29 pm by David Farrar

The NZ Institute of Economic Research has done a report on the impact of the proposed Emissions Trading Scheme. The report is 77 pages long. For those who don’t read the whole thing, here are some key points:

  • The ETS will reduce GDP by $900 million by 2012
  • The average household will have $600 less spending
  • A reduction in employment equivalent to 22,000 jobs
  • By 2025, GDP will be $5.9 billion less than without an ETS
  • The average household will have $3,000 less by 2025
  • Hourly wages will be $2.30 an hour less by 2025 than they would be without an ETS
  • The ETS will reduce emissions by 5% less than merely funding emissions reductions directly
  • The ETS may be bad for the climate as some NZ production will become uncompetitive and shift to countries where their increase in emissions will be greater than if they stayed in New Zealand. This is known as “leakage”
  • The ETS will see by 2025 a 12.9% reduction in dairy farming, a 41% drop in diary land prices and a 6.6% reduction in sheep and beef farming.
  • As the decline in pastoral production in NZ will lead to greater pastoral production elsewhere, the increas in will be 3 million tonnes – around 25% of the reductions from the total ETS.
  • Southland and Northland would be most affected by the ETS with a 3% drop in GDP, with Auckland and Wellington less affected.
  • Paying for emissions reduction out of general taxation would be cheaper and more effective.

So they are not saying we should not be in . They are saying the ETS, as proposed, will cost us more than alternative ways of meeting our obligations. And also leakage due to industry relocating to non countries will actually be worse for the environment than the alternative of direct funding of emissions reductions.

So one can say slow down with the ETS and don’t rush it into law just because of the election, without being a climate changer “denier” or “sceptic”. This is about how best to meet the Kyoto obligation, and it seems apparent there is a lot more work needed to be sure we have the right model. What will be interesting is what model Australia adopt as there could be considerable merit in harmonising between the two countries.

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26 Responses to “NZIER on Emission Trading Scheme”

  1. george (269 comments) says:

    It is time for National to call a halt to this. There is no case for New Zealand to be the world’s leader on climate change. Surely we could be number two? Then at least we could learn from others’ mistakes. Imagine if New Zealand had “led” on biofuels!

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  2. Johnboy (17,015 comments) says:

    Sigh, it may be time for the Macgillicudy Serious party to make a comeback though Im not sure if going back to ox carts as the main means of transport is a positive move or not due to the increased methane production.

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  3. Rodney Hide (63 comments) says:

    The ETS is economic vandalism.

    The Treasury’s low cost scenario for buying credits post 2012 (assuming we are trying to get emissions to 1990 levels, and not 50 percent of 1990 levels, which is National’s stated goal) is $1.3 billion a year. That’s the low cost scenario.

    Heaven only knows what trying to achieve emissions at fifty percent of 1990 levels would cost.

    It’s a huge cost for no tangible benefit.

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  4. sonic (1,995 comments) says:

    ” They are saying the ETS, as proposed, will cost us more than alternative ways of meeting our Kyoto obligations”

    For example?

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  5. Bob (445 comments) says:

    The NZIER is wrong. David Parker has said so.

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  6. baxter (753 comments) says:

    The important outcome is that Helen CLARK has been recognised as a saviour of the planet along with other rather dubious indivduals..
    One important point you miss out is that NEW ZEALAND is the only country in the world which is counting emissions from livestock as part of their liability.

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  7. Duxton (658 comments) says:

    David Parker is a tax cheat. I would believe the NZIER before I believed anything he said.

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  8. Captain Crab (336 comments) says:

    sonic,
    How about spending our money on actually reducing the pollution instead of sucking all the cash out, destroying our families livelihoods just to send the money offshore and have nothing left to decrease pollution.
    Simple things like health regs to make sure dairy farmers ensure runoff doesnt get into the water, LED lighting etc etc

    How about coming up with ideas of your own?
    Nah, never happen. The Left have never had an original thought and its well proven they cant add.

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  9. Paul W (198 comments) says:

    The ETS is economic vandalism.

    The Treasury’s low cost scenario for buying credits post 2012 (assuming we are trying to get emissions to 1990 levels, and not 50 percent of 1990 levels, which is National’s stated goal) is $1.3 billion a year. That’s the low cost scenario.

    Heaven only knows what trying to achieve emissions at fifty percent of 1990 levels would cost.

    It’s a huge cost for no tangible benefit.

    And your solution what exactly Rodney?

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  10. emmess (1,398 comments) says:

    For example?

    Using the Kyoto protocol for toilet paper

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  11. side show bob (3,410 comments) says:

    What a huge price to pay so our beloved slag can get that heavy duty tit sucking job at the UN, shit what a fucking have. I note we had some socialist shiny arse on the tele tonight suggesting the agricultrual sector should be paying up for their carbon emissions. Fuck where do they find these drones?. If it wasn’t for the agricultrual sector I have no doubt this individual would have been left out in the snow when he was born, whats the bet this fool’s degree was paid for by taxes from farmers. The said individual questioned why farmers were not carrying the burden the rest of society carrys i.e fuel tax. I wish this tosser would pay my fuel bill, the townie prick. What does he think, farmers are exempt from fuel taxes, prehaps he would like to run a tractor for a few days, or drive to the city, idiot. I’m starting to hope these fucked up grasshoppers implyment all their stupid polices. I will take great comfort in knowing that this moron will be one of the first to starve.

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  12. Southern Raider (1,777 comments) says:

    Parker looked like such a smug little prick on the news.

    How can even die hard lefties like Sonic trust the bastards? It even looks like the promise to provide relief for families when the food prices start to rise because of the carbon tax was just hot air.

    Wanker, fuckin wankers.

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  13. getstaffed (8,040 comments) says:

    This will happen over the next 10 years as it becomes increasingly obvious that the world is cooling, not warming.

    Then we can expect governments to fabricate a new enemy (post communism, post global warming) to keep the populace fearful and willing – if reluctantly – to part with more conscience assuaging tax.

    Gotta step out now – off to buy a set of thermals.

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  14. David Farrar (1,436 comments) says:

    Sonic: The alternative is to simply pay the cost of the carbon debits by way of funding emission reduction programmes in other countries. It might not sound as “good” but according to the report it will cost NZ only 10% or so of the cost of an ETS, and actually be better for the environment as one won’t get carbon leakage as production shifts offshore due to the ETS.

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  15. mavxp (483 comments) says:

    C’mon people. Lets make this work for us. Lets sit down and work out a way turn this to our advantage so we can:

    1) Milk this baby so we can make money from it

    2) Reduce our CO2 and help the environment.

    3) Improve our crappy infrastructure and reduce our risk to energy price fluctuations

    4) Provide jobs locally

    5) Increase our national productivity

    6) Increase our reputation for forward thinking, clean & green, and smart R&D investment.

    Lets reduce our carbon by:

    1) Investing in carbon sequestration – Lets use the now/soon defunct Maui reservoir to store our C02. Lets talk to Shell NZ now.

    2) Then lets burn NZ Black Gold like there is no tomorrow. Pipe our current CO2 producing thermal plants into the gas-network to send CO2 back to the Naki. Lets get NZ coal mining, shipping, ports, rail, power and gas industries working. Providing power for NZ industry.

    3) Send the C02 back into the ground where it came from. Reduce our CO2 emissions to pre-1990 levels and watch the money roll in from others via Kyoto.

    We need to invest in this now. Lets be world leaders on this issue and make some money from it!

    Ironically, in order to achieve this sensible way forward where everyone wins, we need to ignore the bleeting from the Greens.

    sigh… i can dream.

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  16. AGW-HAHAHAHA (22 comments) says:

    The thing that would laughable, if it wasn’t so sad and destructive, is that this is all built on the myth that CO2 is actually a problem.

    CO2 in the atmosphere is less than 4 parts per 10,000. It is not physically possible for this to cause the warming attributed to it. Water vapour is far and away the dominant reason for the so-called greenhouse effect.

    Consider this:

    What happens in a desert at night – it gets cold of course. And what happens at night in a tropical region (at the same latitude)? It stays warm. What’s the difference? It’s certainly not the level of CO2, as this is well mixed in the atmosphere and only varies a little around the world. The difference is the water vapour! A desert has none but tropical regions have heaps. If the CO2 was so marvellous at raising atmospheric temperatures wouldn’t it keep the desert air and the tropical air at the same temperature after the sun goes down?

    Trying to affect global climate by limiting CO2 emissions is like trying to stop a train by blowing at it! It ain’t going to happen, ever!

    Soon the preposterous myth of AGW will be exposed and how we’ll all laugh then! HAHAHAHA – SOB!

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  17. Owen McShane (1,182 comments) says:

    ACtually we may have met all our Kyoto obligations by our recent massive increase in the area of New ZEaland by extending our territorial waters.
    Oceans are massive carbon sinks so we should just do the sums and announce that we are now in carbon credit and Putin and his gang can buy from us.

    The downside is that if we go into cooling the new fear will be ocean acidification from CO2.
    They are warming us up for it already.

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  18. stephen (3,981 comments) says:

    Owen, the fear is *already* ocean acidification http://royalsociety.org/news.asp?latest=1&id=3250
    If the earth was cooling, then acidification would be *less* of a problem – it is well known that cool water is able to absorb more CO2 than warm water.

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  19. Owen McShane (1,182 comments) says:

    Stephen
    You are correct but they will not let the science get in the way of a good scare.

    The other contradiction is that CO2 stimulates plant growth and the plants need less water (as any commercial greenhouse operator will tell you – the pump the stuff into their greenhouses to increase their yield.) So – we have a food crisis and need to increase food production all around the world.
    So what are we being told to do?
    Reduce the level of CO2 in the atmosphere!
    Go figure.

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  20. stephen (3,981 comments) says:

    On the contrary, I would say that the science is a good base for the cause of this particular scare, ocean acidification, as far as I can see = bad, though of course it has happened before, but nowhere near the current rate of increase.

    The plant growth thing has been done to death http://environment.newscientist.com/channel/earth/climate-change/dn11655

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  21. PhilBest (4,757 comments) says:

    Some great posts here. RODNEY HIDE, GO FOR IT, MAN. Who else do all us AGW sceptics vote for? “Labour Lite” John Key National? Why oh WHY can’t Rod and Co scoop up 10-20% OR MORE of the votes now?

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  22. PhilBest (4,757 comments) says:

    INTERESTING:

    The Real Cost of Tackling Climate Change
    By STEVEN F. HAYWARD
    April 28, 2008; Page A19

    “The usual chorus of environmentalists and editorial writers has chimed in to attack President Bush’s recent speech on climate change. In his address of April 23, he put forth a goal of stopping the growth of U.S. greenhouse gas emissions by the year 2025.

    “Way too little and way too late,” runs the refrain, followed by the claim that nothing less than an 80% reduction in emissions by the year 2050 will suffice – what I call the “80 by 50″ target. Both Hillary Clinton and Barack Obama have endorsed it. John McCain is not far behind, calling for a 65% reduction.

    We all ought to reflect on what an 80% reduction of greenhouse gas emissions by the year 2050 really means. When we do, it becomes clear that the president’s target has one overwhelming virtue: Assuming emissions curbs are even necessary, his goal is at least realistic.

    The same cannot be said for the carbon emissions targets espoused by the three presidential candidates and environmentalists. Indeed, these targets would send us back to emissions levels last witnessed when the cotton gin was in daily use.

    Begin with the current inventory of carbon dioxide emissions – CO2 being the principal greenhouse gas generated almost entirely by energy use. According to the Department of Energy’s most recent data on greenhouse gas emissions, in 2006 the U.S. emitted 5.8 billion metric tons of carbon dioxide, or just under 20 tons per capita. An 80% reduction in these emissions from 1990 levels means that the U.S. cannot emit more than about one billion metric tons of CO2 in 2050.

    Were man-made carbon dioxide emissions in this country ever that low? The answer is probably yes – from historical energy data it is possible to estimate that the U.S. last emitted one billion metric tons around 1910. But in 1910, the U.S. had 92 million people, and per capita income, in current dollars, was about $6,000.

    By the year 2050, the Census Bureau projects that our population will be around 420 million. This means per capita emissions will have to fall to about 2.5 tons in order to meet the goal of 80% reduction.

    It is likely that U.S. per capita emissions were never that low – even back in colonial days when the only fuel we burned was wood. The only nations in the world today that emit at this low level are all poor developing nations, such as Belize, Mauritius, Jordan, Haiti and Somalia.

    If that comparison seems unfair, consider that even the least-CO2 emitting industrialized nations do not come close to the 2050 target. France and Switzerland, compact nations that generate almost all of their electricity from nonfossil fuel sources (nuclear for France, hydro for Switzerland) emit about 6.5 metric tons of CO2 per capita.

    The daunting task of reaching one billion metric tons of CO2 emissions by 2050 comes into even greater relief when we look at the American economy, sector-by-sector. The Energy Department breaks down emissions into residential, commercial (office buildings, etc.), industrial, and transportation (planes, trains and automobiles); electricity consumption is apportioned to each.

    Consider the residential sector. At the present time, American households emit 1.2 billion tons of CO2 – 20% higher than the entire nation’s emissions must be in 2050. If households are to emit no more than their present share of CO2, emissions will have to be reduced to 204 million tons by 2050. But in 2050, there will be another 40 million residential households in the U.S.

    Today, the average residence in the U.S. uses about 10,500 kilowatt hours of electricity and emits 11.4 tons of CO2 per year (much more if you are Al Gore or John Edwards and live in a mansion). To stay within the magic number, average household emissions will have to fall to no more than 1.5 tons per year. In our current electricity infrastructure, this would mean using no more than about 2,500 KwH per year. This is not enough juice to run the average hot water heater.

    You can forget refrigerators, microwaves, clothes dryers and flat screen TVs. Even a house tricked out with all the latest high-efficiency EnergyStar appliances and compact fluorescent lights won’t come close. The same daunting energy math applies to the industrial, commercial and transportation sectors as well. The clear implication is that we shall have to replace virtually the entire fossil fuel electricity infrastructure over the next four decades with CO2-free sources – a multitrillion dollar proposition, if it can be done at all.

    Natural gas – the preferred coal substitute of the moment – won’t come close. If we replaced every single existing coal plant with a natural gas plant, CO2 emissions from electric power generation alone would still be more than twice the 2050 target. Most environmentalists remain opposed to nuclear power, of course. It is unlikely that renewables – wind, solar, and biomass – can ever make up more than about 20% of our electricity supply.

    Suppose, however, that a breakthrough in carbon sequestration, a revival of nuclear power, and a significant improvement in the cost and effectiveness of renewables were to enable us to reduce the carbon footprint of electricity production. That would still leave transportation.

    Right now our cars and trucks consume about 180 billion gallons of motor fuel. To meet the 2050 target, we shall have to limit consumption of gasoline to about 31 billion gallons, unless a genuine carbon-neutral liquid fuel can be produced. (Ethanol isn’t it.) To show how unrealistic this is, if the entire nation drove nothing but Toyota Priuses in 2050, we’d still overshoot the transportation emissions target by 40%.

    The enthusiasm for an 80% reduction target is often justified on grounds that national policy should set an ambitious goal. However, claims on behalf of alternative energy sources – biofuels, hydrogen, windpower and so forth – either do not match up to the scale of the energy required, or are not cost-competitive in current form.

    How on God’s green earth will we make up the difference? Someone should put this question to the candidates. And not let them slide past it with glittering generalities.”

    Mr. Hayward is a fellow at the American Enterprise Institute and the author of the annual “Index of Leading Environmental Indicators,” from which this article is adapted.

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  23. Owen McShane (1,182 comments) says:

    Relax – and read this:
    BREAKING NEWS: Global Warming Will ‘Stop’, New Peer-Reviewed Study Says
    Global Warming Takes a Break for Nearly 20 Years?
    http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2008/04/30/eaclimate130.xml

    This indicates two important points. The first is that natural climate variation means that there will be no warming until 2015. This is wonderful news, because it gives us lots of time to stop and think before we leap.

    The next point is that all the climate models failed to predict this — until now! That means that all the climate models have grossly underestimated natural variation and they are all must be regarded with extreme suspicion. As the man from Hadley said in the release it is difficult to predict climate 10 years ahead, so we can only assume that the prediction that man-made global warming will rear its ugly head beyond 2015 is also very uncertain.

    Therefore we need a Royal Commission to look at the whole thing before we completely destroy our economy for something that may not exist and is certainly not imminent.

    Time for a cup of tea. Green tea of course. And Al Gore can save his three hundred million.

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  24. stephen (3,981 comments) says:

    Since AGW doesn’t exist/earth is cooling etc, surely all these guys have to do is write an opinion piece in the WSJ or frontpagemag.com that says so and we won’t HAVE to worry about the cost of reducing emissions, right?

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  25. stephen (3,981 comments) says:

    Yes, misleading post times…

    The BBC article http://news.bbc.co.uk/2/hi/science/nature/7376301.stm said:

    The projection does not come as a surprise to climate scientists, though it may to a public that has perhaps become used to the idea that the rapid temperature rises seen through the 1990s are a permanent phenomenon.

    “We’ve always known that the climate varies naturally from year to year and decade to decade,” said Richard Wood from the UK’s Hadley Centre, who reviewed the new research for Nature.

    “We expect man-made global warming to be superimposed on those natural variations; and this kind of research is important to make sure we don’t get distracted from the longer term changes that will happen in the climate (as a result of greenhouse gas emissions).”

    I know almost zero about models, but surely adding this knowledge to them would make the models stronger.

    There was nothing to suggest that GHGs don’t affect climate as you say ‘may’ be the case and the NZIER has not said that the economy is going to be wrecked.

    Does this mean you won’t be using non-peer reviewed studies any more?

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