Kiwiblog

Peter McCaffrey at ACT on Campus blogged last night:

I didn’t have a chance to blog about this before heading to the privileges committee to watch Winston Peters, but that story has been covered to (Winston’s) death.

Tonight there was perhaps an even bigger story down at Parliament.

At around 7:10pm – just after parliament had gone back from the dinner break – I was hanging around the office, with the parliament video stream playing in the background, when I heard Te Ururoa Flavell take a point of order to seek leave to send the ETS back to select committee. Surely just a little grandstanding, no? It would never actually get the support of the house…

But then I heard perhaps one of the craziest things i’ve heard in the last three years of parliament.

New Zealand Labour, 49 votes against, New Zealand National, 48 votes against, New Zealand First, 7 votes against, Greens, 6 votes in favour, Maori Party, 4 votes in favour, United Future, 2 votes in favour, ACT, 2 votes in favour, Progressives, 1 vote against.

I didn’t catch how TPF and GC voted, but by that stage my head was buzzing with the realisation that National just missed an opportunity to sink the ETS (and the party that was being thrown tonight too!).

Others got excited by this. So I decided to make some inquiries. I would be very concerned if National voted against sending it back to select committee.

However the motion was not to send the ETS Bill back to “select committee” but to “committee”, being the committee of the whole stage that had just concluded.

And the reason for the motion, was so that a Treaty of Waitangi clause could be inserted into the Bill. That is why the Greens voted for it and the Maori Party proposed it.

So National voting for the motion would not have delayed the ETS by week or months. It would not have given the public another chance to submit on the bill (something National has argued for). It would have merely delayed the ETS Bill by one day – and it would have passed into law today instead of yesterday.

And voting for it, might have led to one of those awful “principles of the Treaty of Waitangi clauses” that no-one understands being inserted into the Bill.

To be fair to Peter McC, and others, I can understand in the heat of the moment not realising the difference between sending the bill back to select committee, and to committee. They sound alike, but are massively different things.

How lovely. David Parker has a big champagne party planned for tonight to celebrate the passing of the ETS. Will they also be celebrating how Helen kept Winston on board just long enough to pass it, and then sacking him? And what will be the carbon footprint of the party? I hear there have been invites to all corners of New Zealand.

Matthew Hooton has taken to blogging like Madonna to sex. Lots of goodies today.

First Matthew highlights the item in Sideswipe about how a candidate’ financial agent had a brick thrown through a window at their home. The Electoral Finance Act has forced residential addresses to be used on all advertising, which is ridicolous overkill for registered political parties and their candidate.

Then Matthew calls on National to fillibuster the ETS third reading today. He think Clark will sack Peters tonight so if it is delayed until tomorrow, then there will not be the numbers for it.

He also speculated on what role Mike Williams may have played in the $250,000 offer to the Maori Party to support Labour, and calls on Tariana Turia to reveal all.

Brian Fallow looks at the costs of an ETS. It all depends on the price of carbon. Treasury is budgeting $23 a tonne, but a last minute change to the scheme has pushed this up to a likely $50 per tonne, and by 2020 it is predicted the cost will be $70 a tonne. For now we will go with $50 a tonne.

• Inflation to increase by around 0.7% per year for the next two years
• Retail electricity prices to increase by 20%
• Petrol prices to increase by 12c/litre
• Reduce payout to dairy farmers by 50c/kilo (once agriculture fully in the scheme) or 6%

As Fallow notes:

It would be a perverse outcome for the global climate if growth of the pastoral farming sector in New Zealand were hobbled by climate change policy here, only for the demand for dairy products and meat it might have satisfied to be met instead by production elsewhere in the world whose carbon hoof-print (emissions per litre of milk or kilogram of meat) is greater.

So the ETS exempts livestock emissions altogether until 2013 and taxpayers will continue to pick up the great majority of the bill (up to 90 per cent) until at least 2019.

Agriculture is not the only sector where the NZ ETS may simply lead to production transferring off shore, which will result in even worst environmental outcomes, and a drop in income for New Zealand.

A very useful editorial from the Dominion Post on the ETS:

There is one certainty in the global warming debate: the problem of climate change is not one that will be solved by an overnight fix, writes The Dominion Post. That’s why it is absurd that Labour believed it needed to stitch together a series of backroom deals and then pull out all the stops to rush through an emissions trading scheme in the final few days of Parliament before the election.

Especially as Labour had delayed the entrance into the scheme of major sectors anyway.

That comes at a cost. Labour is proposing 785 amendments to the scheme – which will not begin to be implemented till 2010 – as it completes its gallop through Parliament. Those amendments are a symptom of the complexity of the scheme. It is ridiculous to believe that they will receive the careful consideration they should before they are written into law, and in a scheme where the devil will be in the detail, that is dangerous.

Fonterra have already identified one mistake that will cost it $13 million a year. The Government has agreed they are mistakes, but those clauses of the ETS Bill have already been agreed to and can not now be amended without special leave.

There is no question that Labour is well-intentioned. Despite that, the legislation is part of a strategy that remains deeply flawed. It risks concentrating on the accountancy of who ends up picking up the bill for carbon emissions, rather than on reducing those emissions.

Guess how much emissions will be reduced by 2012 under the ETS? Anyone care to guess?

The reality is that the scheme, designed to meet New Zealand’s Kyoto protocol commitment, will end up increasing the prices that consumers pay for all manner of things, and damage the economy, without necessarily doing anything about reducing the amount of carbon emitted in New Zealand.

The impact on emissions by the end of the Kyoto 1st commitment period will be minimal.

The New Zealand scheme needs to be seen in that context. New Zealand is responsible for about 0.2 per cent of the world’s greenhouse gas emissions. Meanwhile Chinese emissions are growing at a prodigious rate – according to some projections, by 2.3 billion tonnes in the next five years, far in excess of what the West is supposed to save under the Kyoto protocol.

The world will gain little fron New Zealand’s rush, but New Zealand risks losing a lot through a flawed scheme.

Unless China and India join in, the impact of the rest of the world reducing emissions will be nil.

National Business Review has this weeks Dispatch From Helengrad.

• Best Play of the Week – Sir Roger Douglas gets an A for his policy of increasing Government spending at no more than the rate of inflation and population growth.
• Worst Play of the Week – The Greens get a D on behalf of the planet for rejecting forestry offsetting in the Emissions Trading Scheme, despite the fact it would have resulted in less carbon emissions. They put money before the environment.
• The Winston scandal gets downgraded to a B+ as there is no longer any real question of credibility left to be resolved.
• NZ First do get the EFA Breach of the Week with their false donations returns. An A grade offence.
• Bernard Hickey gets the blog analysis of the week for his scary tales of debt and credit in NZ.

Comments and feedback can be made over at NBR.

NBR reports that Ngai Tahu is seeking compensation for a loss in value of forests it received as part of its historic Treaty claim.

This is due to the Emissions Trading Scheme legislation about to be passed into law.

How much value?

The Hive heard Mark Solomon say on Morning Report:

PRESENTER: Right, so the ETS has essentially robbed you of value from that settlement.
SOLOMON: Over $100 million.
PRESENTER: From that full and final settlement.
SOLOMON: Yes.

The Hive also explains how much households will get stung by the ETS:

1) The decision to block hot air AAUs has roughly doubled the price of carbon in the scheme from $20-$25 to $40-$50 (Radio NZ Morning Report http://www.radionz.co.nz/audio/national/mnr/2008/09/02/emmisions_trading_scheme_bill_debate ) .

2) The Government’s own numbers (from the explanatory note to the Bill) show the impacts on households (when fully implemented – now 2011) to be:

$100-$200 p.a. at C-Price of $15 / tCO2e
$170-$350 p.a. at C-Price of $25 / tCO2e
$330-$660 p.a. at C-Price of $50 / tCO2e

3) So at the Minister’s spokesperson’s C-price basis of $25 / tCO2e, the “good news of an electricity $120 rebate in 2010” is little comfort for the real cost in the years that follow!

Peter Dunne is also very unimpressed with the “compensation” of $2.50 a week.

It is also worth noting that the Government has just introduced 77 pages of amendments to the ETS legislation!!

Well it was obvious from day one the consultation was a sham. I feel sorry for all those who actually took the time to write in. The Greens have announced they will be voting for the ETS Bill. I wish it had been legal for me to bet $1,000 on that outcome – it was so obvious.

NZ First are in the bag also, so the ETS will be passed into law.

Now I’m not one of those who thinks having an ETS is necessarily bad. My preferred approach would be a carbion tax initially, but an ETS is probably inevitable. Of course the actual design of the ETS is very important – this is effectively about legislation for a complex new set of taxes and permits and issues such as forestry offsets, the profit the state stands to make from it etc should be worked out, before it is passed. They won’t be, so it will be a flawed beast and I suspect Parliament will have to revisit it often.

As previously stated, I think the Greens have informally already decided to back the ETS, despite the failure to get any significant concessions.

The PM has said:

If the emissions trading scheme did not pass into law, the Prime Minister said she would make it a “major election issue”.

Now if I were the Greens, I’d be thinking about why on Earth they would possibly want to remove the biggest most important issue as an election issue? They are hovering just above 5%, and are about to take away their biggest issue and basically portray themselves as no different to Labour. Have they thought about the message it gives to Green supporters? It is, vote for us and achieve the same as voting for Labour on the most important environmental issue of our lifetime?

Clark does not want climate change as a major election issue. Her record on emissions is so hollow, Nicky Hager could turn it into a sequel. Emissions under Helen Clark have grown faster (in relative terms) than under George W Bush or John Howard, The last thing she wants is climate change as an issue. National will quietly probably be quite glad if the Greens back it, and it goes through. So it will be good for Labour and National, and bad for the Greens politically.

Have the Greens considered what they could grow their vote to, if they said the ETS doesn’t achieve enough, and we won’t back it. They could campaign on Labour’s disasterous record with carbon emissions, how National would be little different and only a vote for the Greens will make a difference on climate change. With a good campaign manager they could get 10% of the vote I reckon.

Toad makes similiar points of g.blog. I’d also point out that under Labour’s ETS no major emitting sector comes in until 2011 anyway, so a year’s delay in the legislation is not the same as a year’s delay in a sector coming into an ETS.

My advice enough is not Trojan Horse advice – it is the advice I would give the Greens if I was their campaign manager. I don’t actually have a strong concern about the differences between the desired Greens ETS, Labour’s ETS and a National ETS. The ETS is a very long term game, and I don’t get too excited over a year’s delay or not for a sector.  NZ’s actual impact on carbon emissions is close to zero. We need an ETS so we do our part as a good global citizen, and so we do not get affected by environmental trade barriers. But let us not think that transport coming into the ETS in 2009 or 2011 will affect global temperatures at all.

Some people have suggested I am too cynical in thinking the Greens consultation is a charade, and it is a PR stunt for a decision already made. However Bill Ralston points out an interesting aspect:

I suspect it is largely a stunt to gain them more publicity because they are languishing in the polls and urgently need to galvanise some voter support.

This suspicion was reinforced when Jeanette Fitzsimons was asked if her caucus was split on how the party should vote.

She replied she would not know until next Tuesday’s caucus because she had not spoken to her MPs.

Good grief. There are only half a dozen of them and the carbon footprint from six phone calls to find out what they thought would not be too great, surely?

Fitzsimons and her cunning co-leader Russel Norman are trying to drag out the issue with this bit of theatre to gain maximum media coverage in the run-up to the election.

Can there be any credibility around the statement that the six Greens MPs have not even discussed what their position should be? I mean seriously? So who decided to ask the public for consultation? Wouldn’t that have been a Caucus decision?

I am so convinced they have already decided to back the scheme, despite their failure to get any meaningful concessions, that I was planning to offer $1,000 to someone willing to bet that they would decide not to back the ETS Bill.

I was going to let the market decide the odds, by letting people state how much they would be willing to pay me if the Greens announce they are backing the ETS Bill, and the highest bidder wins. So if someone was willing to give me $100 (and that was the highest bid) if the Greens back the scheme I’d give them $1,000 if the Greens do not back the scheme. I suspect no one would be willing to go much over $100, or 10:1 odds as they near certain to lose.

Sadly however such a harmless little bet would land me in breach of the Gambling Act 2003, so I can’t do it. However people are welcome to post how much they would have been willing to bid as a bet for a chance to get $1,000.  But you would have lost that money to me should the Greens announce on Tuesday they will be backing the ETS Bill despite gaining no significant concessions.

As I blogged at NBR, I think the Green Party consultation is a sham, and the decision is already effectively made.

Chris Trotter is assuming it is genuine, and unimpressed with the leap away from Burkian principles:

Basically, this is avoidance behaviour on a truly disreputable scale. The Greens know that the ETS falls well short of what they believe (and what all the evidence suggests) is necessary. Equally, they know that nothing better is on offer from any party with the power to deliver on its promises. They have bitter memories of what happened to them the last time they took a stand on principle against Labour (over the issue of genetic modification) and don’t want to repeat the experience. Realistically, they appreciate that backing the ETS is the only viable political decision they can make. But they don’t want to make it. So, in a politician’s version of making another cup of coffee instead of going out to dig the garden as promised, they have appealed to “the people” for guidance.

Trotter then uses one of my favourites quotes from Edmund Burke:

Your representative owes you, not his industry only, but his judgment; and he betrays instead of serving you if he sacrifices it to your opinion.

Chris goes on to ask where was this commitment to follow the people when they foisted the anti-smacking law on a populace that didn’t want it. So he concludes:

Really, the whole Green Party deserves a damn good smacking!

And Danyl at the Dim Post in unimpressed:

Aren’t the Green MP’s supposed to be experts in this very area? Don’t they claim to know more about it than almost everyone in the country? And haven’t they specifically been elected on the basis of this expertise with the expectation that they can make informed decisions about environmental policy?

They’ve spent the last three years lecturing the country in a condescending manner to ‘buy kiwi made’ and not to smack your kids – but when it comes to the issue that is the raison d’etre for their party they’re little lost sheep.

As Paula points out this might just be a stunt, or a bargaining strategy. If that’s the case its a conspicuously stupid one.

It is a stunt, and I feel sorry for all the people who take the time to e-mail in their views on a decision that has already been made in substance, if not in form.

The Press reports:

The Ministry of Agriculture and Forestry has received an assessment of the impact of the Government’s flagship climate-change policy on the value of land handed to iwi under Treaty of Waitangi settlements.

Officials are refusing to divulge the monetary figure placed on the estimated loss in value contained in the assessment by senior Christchurch-based valuer Donn Armstrong, of Forest Land Consultants.

However, Maori say they could be owed as much as $2 billion in compensation, because land currently in forests will not be able to be converted to other potentially more profitable uses.

So we are starting to get to the beginning of the end of settling historic grievances, with compensation likely to be around $1.5 billion.

And the ETS could create a new contemporary grievance of up to $2 billion?

This is why NZ needs to be very careful as we proceed with an ETS. Again, we need to develop one or risk trade sanctions, but need to ensure the costs are proportional to the benefits.

Also we should consider what our Kyoto obligations mean in light of Russia’s invasion of Georgia. You see there is a high possibility that we would have to purchase carbon credits off Russia as we will be well above our 1990 emissions levels. So we may end up giving Russia hundreds of milllions of dollars of hard cash, which they can use to fund their war in Georgia. Yep, there is no mechanism for excluding Russia because they have gone nasty – if they have the carbon credits, they will get billions of dollars in hard currency for them.

A very funny take-off of Kevin Rudd tying to explain the Australian Emissions Trading Scheme can be viewed as video here, or a transcript here.

Also I am sure Frog Blog will love the latest contest between two Australian PR agencies. Last week it was selling the invasion of New Zealand. This week it is selling the benefits of global warming.

The Loud agency goes for the emotions with the plight of a poor bird struggling to survive winter but there is hope if enough fossil fuels are burnt to warm the planet and rejuvenate plant life. Ursa however pushes the plight of the 100,000 homeless and how every mle you drive will help warm up the winter for homeless people.

I voted for Loud.

Exceltium have released a poll on the Emissions Trading Scheme they commissioned from Digipoll.

It is very detailed, running to 14 pages of results and the full data is over on Curiablog. There is a mass of data there for politicians and policy makers. I thought I would comment on some of the results:

Support for ETS Legislation – 34% in favour, 24% against

A plurality in favour of the legislation, but with 41% neutral it is not a heart and minds issue for most NZers.

View on climate change – 20% say world’s most important issue, 45% say an important issue, 15% say not a major issue and 16% say it is natural not manmade.

That’s a fairly big chunk in what I call the moderate middle position – it is important but not the most important issue. A significant number at 31% saying it is not a major issue at all.

Preferred policy response – 10% say NZ should be the world leader, 49% say NZ should be one of the world’s leaders and 29% say a fast follower, plus 8% say do nothing.

Again the moderate middle position is well supported.

Willingness to pay – 43% would be willing to pay an extra $10 a week in energy costs, 16% willing to pay $20 a week, 5% willing to pay $40 a week and 1% willing to pay $100 a week.

$10 a week seems to be the limit for the vast majority in terms of paying extra.

Integration with Australia – 62% say wait a month to see Australian scheme, 34% say proceed now with legislation.

Seems a no brainer to me.

Wait for other countries – 40% agree the legislation should only be passed as other countries pass such legislation to prevent job losses offshore, while 31% disagree.

This gets a bit murky as the key issue is what countries do you wait for? US? China? India? Or just Australia?

Will the ETS be effective – 34% agree that the ETS as written will not cut carbon emissions enough to make a difference while 27% disagree.

This shoud give the Greens food for thought – only 27% are saying they think the current scheme will cut emissions enough.

Non Labour Voters – If the Government passes the scheme ahead of the Australian one it will make 7% of non Labour voters more likely to vote Labour and 13% less likely.

A net 6% less likely. And if they do wait to see details of the Australian scheme the numbers reverse with 13% more likely to vote Labour and 6% less likely.

NZ First potential voters – 19% say best option is to pass the ETS before the Australians, 62% say encourage Helen Clark to begin multi-party talks after she talks to the Australian PM and 13% say don’t support ETS at all.

I predict Winston will back it regardless in exchange for a big lump of cash for the election campaign.

Potential Green supporters – are asked even if scheme is not made tougher, and Greens vote for it, how will that affect support – and 23% say more likely to support Greens and only 8% less likely.

Based on that the Greens can vote for it,even if they get no improvements.

If they do hold out though, they also do not get punished with 16% saying they are more likely to vote Green and only 14% less likely if the ETS doesn’t pass because the Greens refuse to support it unless made tougher.

Brian Fallow makes some very sensible points on the move by both countries towards an ETS:

Australian professor Ross Garnaut has some good advice for our Government as well as his own.

“The review suggests that prior to the indelible conclusion of [emissions trading] scheme design in either country, the Australian and New Zealand Governments meet at ministerial level to discuss linking and to identify any impediments to linking that may warrant adjustment to one or both scheme designs.”

This is sensible, and it is in fact quite vital that the NZ and Australian schemes are as compatible as possible as Australia is our largest trading partner. This is one reason I think we should be slightly less hasty with pushing our ETS into law. Having trans-Tasman harmony is more important than artifical dates such as the election.

Its draft report was released last Friday and a government green paper is due soon. Climate Change Minister Penny Wong is standing by a timetable that has legislation introduced by the end of this year and an emissions trading scheme up and running in 2010.

Which is compatible with NZ – esp that Clark has delayed all sectors but forestry until 2011.

If Australia’s scheme is along the lines recommended by the Garnaut review there will be a family resemblance with the New Zealand scheme, but there are notable differences.

They need not constitute a barrier to linkage between the schemes – a common carbon market, if you will. The environmental integrity of both schemes should be the determining factor there.

But it would be prudent to be sure the differences do not pre-empt linking before anything is set in concrete.

Absolutely.

Labour has 49 votes and needs 61. Add on Jim Anderton and you are at 50.

NZ First will back the scheme. They will mainly be looking for some payoffs for their support base. This gets Labour to 57 votes.

The only way to get to 61 from there is either the Maori Party (4) or the Green Party (6). Taito Phillip Field by himself makes no difference.

The Maori Party is facing great pressure from Maori forest and land owners. The select committee has said it agrees with some of their concerns but has mainly left it to future Ministers to set regulations, rather than guarantee things in the legislation- and I am not sure that will be enough.

The Greens are asking for agriculture and energy sectors to enter the ETS at an earlier date. It is hard to see the Government agreeing to either of these, so the question is will the Greens blink first and support the scheme even if they gain only tokenistic changes?

The Herald covers some of the issues.

Colin Espiner in The Press labels the ETS a “big green cash machine”

Treasury figures released yesterday show officials expect the Government to reap $21 billion from its controversial emissions trading scheme (ETS) over the next 20 years and it could make as much as $42.6b under some scenarios. …

The projections show that by 2030 the Government’s coffers could swell by up to $42b assuming a carbon price of $100 a tonne. …

Ironically, the worse the country performs at meeting its Kyoto commitments the more money the Government makes, since industry would be forced to buy more carbon credits.

NZ has no chance at all of meeting its Kyoto commitments, so I would look for those windfall profits to occur, if it is passed in its current form.

Barnsley Bill blogs on the 35 kg stone which was flown first class to China as it was culturally insensitive to have it in the hold.

Frog Blog has a look at parties on Facebook. Frog has even found a Winston for PM group – but with slightly less members than the Bring back the Good Night Kiwi group.

American Thinker mentions NZ’s Trevor Loudon, and his work on Obama’s past.

Dim-Post looks at the options for Labour with the ETS:

1. Rush the hastily amended, highly complex legislation into law by buying off the Greens and Winston Peters, paying a high political price now and ensuring at least six months of dire headlines as horrible mistakes and unintended consequences in the law are bought to light repeatedly embarrassing the government right in the middle of an election campaign they’re already losing.
2. Admit the bill is dead and face a couple of days bad news focusing on the failure (which you can mostly blame on National).

And his prediction:

Scenarios like this are when Clark’s ultra-competitive personality undermine her own self-interest and that of her party – she’ll press for a parliamentary victory even if it is spectacularly pyrrhic one.

Some quotes and comments from National’s minority report (included in the select committee report):

The National Cabinet in 1999 decided that an ETS was the right way forward on climate change policy. We expressed concern when the ETS approach was dropped in favour of a carbon tax when the current Government took office. We promoted an ETS in our Bluegreen Vision document in 2006. We supported the Government’s decision, in principle, in favour of an ETS last year and voted for the first reading of this Bill. However, the rushed legislative process has resulted in a Bill that has major deficiencies.

I have to say that I am not sure a carbon tax wouldn’t have been the better short-term measure. The problem with the one the Government proposed is it was punishing people for their debits and refusing to give people anything for their credits (ie forestry).

The importance of getting this legislation right cannot be overstated. This Bill represents the most significant economic reform since the deregulation of the economy in the late 1980s. The NZIER analysis indicates that the ETS in its current form will cost 22,000 jobs and a loss of $900 million to the economy by 2012 and a loss of $5.9 billion in GDP by 2025. The Government’s own analysis by Infometrics concludes job losses of 50,000 from the scheme.

And unemployment is forecast to reach 6%, even without this.

Committee members received over 1000 amendments to this 237 page Bill only three days prior to its final deliberation. There has been no serious engagement by Government members on the critical issues to New Zealand in this Bill, as evidenced by the 24 different Government members that have subbed onto the Committee throughout the process.

Just like the EFA.

ETS should be designed around the more modest goal of ensuring New Zealand does its fair share in reducing global greenhouse gas emissions.

That is why National has advocated, in contrast to the Government’s goal of carbon neutrality, a 50% reduction in New Zealand’s 1990 greenhouse gas emissions by 2050. This goal is in line with that of the new Australian Government which is committed to a 60% reduction in emissions from 2000 levels by 2050, and that proposed by US presidential candidates. National believes our -50% by 2050 goal should be included in the purpose clause of the Bill.

There is zero benefit in being more pure than the rest of the world. We absolutely do not want to be a laggard, as there are serious trade risks with doing so. But punishing NZ families just so one canpick up UN awards is crazy.

National’s second concern is the windfall profits to the Government from the way this ETS is designed. Officials have advised the committee that the scheme will generate an estimated $21 billion in revenue to the Government from the sale of emission permits. This is double that provided in the Budget 2008 tax reductions.

He giveth with one hand and taketh away with the other. To be fair I think the $21 billion is over a longer period than the tax reduction costing. But nevertheless it should be revenue neutral in my opinion.

There are also additional indirect windfall gains to Government from its electricity State Owned Enterprises. Meridian has advised the Committee of an increase of $750 million in its valuation as a consequence of the ETS. Including Mighty River Power, the windfall gain to the Government from it SOEs will be in excess of $1 billion. This is significantly greater than the latest projection of New Zealand’s Kyoto liability at $481.6 million.

Down with the greedy power generator owners. Oh, wait – they’re the Government.

Climate change is not an excuse for the Government to profit at the expense of businesses and consumers who are already under budgetary pressure. The scheme can and should be redesigned to be fiscally neutral by transparently returning any windfall profits from the ETS to consumers and taxpayers.

Sounds a good principle

National’s fifth concern is that the Bill discriminates against SMEs that will not be eligible for free allocation of emissions units. New Zealand is very dependent on SMEs for its economic strength and the design of the ETS needs to better recognise them. The initial proposal of a 50,000 annual tonne threshold would eliminate all but New Zealand’s largest emitting industries. The Committee discussed a lower threshold but no decision was made and the question has been left to regulations. This issue is too important to the successful functioning of New Zealand’s ETS to be deferred. Parliament needs to take a direct interest in the competitiveness and survival of our SMEs.

Hmmn so Labour and Greens are supporting a bill which gives free allocations to big businesses but nothing to small businesses. Will Winston vote for this also?

The Bill fails to resolve the issue of how to deal with the uncertainties in the estimate of animal emissions that officials advised may vary from 50% above or below estimates. A market cannot function efficiently with this level of estimate uncertainty. The Bill fails to resolve the issue of whether the point of obligation is to be at farmer or processor level. This is a fundamental design issue that needs resolution by Parliament rather than being deferred to regulations. It is as though New Zealand wants the international accolades for a comprehensive ETS when it is just a shell with none of the necessary machinery to make it function. It is all very well in theory to have agriculture included in the ETS but the detail needs to be worked through so Parliament can be confident it will work in practice.

In other words we just want to pass the law before the election, even though vital details are being left undecided.

New Zealand’s fishing industry exports 92% of its output, earning $1.3 billion per annum. It is an energy intensive sector with fuel making up around 40% of the operating costs of vessels. The Bill provides for an allocation of units to sectors such as dairy, meat, cement, steel, forestry and aluminium, but excludes the fishing industry. This arbitrary exclusion does not seem well justified.

A further concern is the incentive to use foreign fishing vessels that will not face the cost of the ETS for imported fuel. The 1980s and 1990s saw a decline in the use of foreign fishing vessels and crew to New Zealand’s advantage. This has reversed over the last five years. This Bill may inadvertently encourage ongoing job losses for New Zealanders and the replacement by foreign vessels. The last minute amendments to address this problem are inadequate.

Our ETS is going to be great news for foreign competitors.

Electricity is a sector in which the Government’s climate change policies have failed. Far from moving New Zealand towards the goal of 90% renewables, the proportion has fallen from 72% in 1999 to 66% in 2007.

Yep.

National’s first concern is security of supply. Many submitters from industry believed the moratorium would put this in jeopardy. That these provisions are being advanced in the middle of a winter power crisis defies common sense.

Repeat after Mr Parker – there is no crisis.

The distinction in the Bill between new power stations being either base load or peak load is nonsensical. Ironically, New Zealand’s biggest greenhouse gas emitter, Huntly, was built as a peak load station in 1987, and technically another could be built under the exemptions in this Bill.

The Greens have said much the same thing, even though they support the ban.

National sees no place in New Zealand for any new coal generation until such time as carbon sequestration technology becomes viable.

Makes sense.

The smart way to provide an incentive for renewable energy over thermal generation is through the price signal of an ETS. That is why we have consistently advocated that electricity be the first sector to be introduced to an ETS. It provides a signal every day to the electricity sector to favour renewable over thermal, and not just when building. It avoids the artificial distinctions between peak and base load stations. The ETS will encourage substitution for more efficient thermal generation where possible, and for the earlier retirement of old, dirty technology. It is noteworthy that renewable generator Meridian and the Parliamentary Commissioner for the Environment have rejected the moratorium.

The trouble is having a ban fits much better on a pledge card.

National supports the 90% renewable energy target. We have confidence that the pricing signal of the ETS, as well as National’s proposed reforms of the Resource Management Act, will give the impetus to new renewable generation without the arbitrary and inefficient moratorium proposal in this Bill.

Once the RMA is reformed, then renewable energy projects can be built quicker, and that will be the best way to reduce demand for thermal power.

This Bill requires substantial amendment if New Zealand is to have a workable emissions trading scheme. National cannot support it in its current form. The Government decision to defer implementation by two years means there is time to get this legislation right without having to delay implementation.

Exactly – there is no rush.

The correct way forward is for the Government to table a substantive amending SOP in Parliament to address the major concerns with the Bill. These amendments should be sent alongside the existing Bill back to the Select Committee for submissions, careful analysis and final deliberation. The Bill should then be advanced through its second and third readings. It would be possible to conclude this process prior to the General Election but it is more likely to be done properly in the less politically charged post election period.

Politically it would be easier for National to have the ETS passed under Labour as it could blame them for anything that goes wrong.

National will proceed with an ETS amended in line with this minority report if we are successful at this year’s general election. We would work as co-operatively as possible with other political parties to achieve this. Our objective is a widely supported and robust ETS that will deliver on New Zealand’s ambitions for a responsible approach to climate change and a strong economy.

Even if Labour passes the ETS before the election, it would make sense for National to amend it afterwards to cover those areas of concern such as Government profiteering from it.

The Government’s Climate Change (Emissions Trading and Renewable Preference) bill has been reported back by the Finance and Expenditure Select Committee.  It is 328 pages long and has over 1,000 amendments which means the Government will of course try and pass it as quickly as possible.

Even the commentary to explain the changes takes up over 50 pages. This is the biggest change to our economy since GST I would say, and it is silly to rush it through because of the election, instead of making sure it is right.

Look what happened to the Electoral Finance Act when they didn’t allow submissions on the revised bill? They are going to make the same mistake again. The changes from the original bill are significant enough that stakeholders should be given a chance to have their say on them.

It is worth remembering that the Government has already delayed the effective implementation of the ETS until 2011 (except for Foresty), so we have lots of time to get the ETS right. There is a difference between delaying the Bill and delaying the ETS itself.

The ODT reports that the Greens have spotted what appears to be a unilateral agreement by the Government to reduce the carbon equivalent emissions target for the agricultural industry from a 20% reduction to a 10% reduction.

What will be interesting to watch is how the Greens will end up still voting for the Government’s Emissions Trading Scheme despite it being watered down repeatedly. Even the original scheme was derided by Greenpeace as achieving almost nothing.

But I predict the Greens will still vote for it. They have never shown an ability to play hard ball, which is why they keep getting taken for granted.

The Hive has the first of a weekly series – a short essay on an issue.

This week is on why they prefer a carbon tax to a cap and trade emissions trading scheme:

Imagine a country that had a business tax. The size of the business tax varied daily, and was subject to international forces – global supply and demand and exchange rate variation. No one therefore knows the size of the tax but estimates suggests that the size will be somewhere between $15 and $75 per tonne of carbon emission equivalent (in the short term, long term prices in the $100 plus range are regarded as conservative).

Investors don’t like uncertainty. This tax would add considerable uncertainty. Would investors invest in a country that had such a regime?

And the alternative:

Compare the cap and trade regime with a carbon tax – it is simple, predictable and the size of the tax in the immediate future doesn’t need to be large to meet our liabilities under the Kyoto Protocol. $3 a tonne starting 1 January 2009 is all that is needed.

A number of think tanks, which are normally anti tax, say a carbon tax is preferable. They also suggest that the level of the tax be tied to the increase in global temperature so if things do heat up more quickly than expected, then the tax rises proportionally, and if the increases don’t happen, the tax drops.

The Hive concludes:

So at The Hive, we agree fully with the policy that the Green Party has been advocating since the early 1990s. A carbon tax offset against reductions in general taxation is the best way forward. We just can’t understand why so many people have decided to support the cap and trade alternative. Those on the left, we understand – it will screw the economy. But on the centre and right?

I am not sure an ETS is not a better solution in the long term, but agree that in the short to medium term a carbon tax would be preferable – especially with the price of carbon credits so variable.

It is very odd. Many, many members of the Business Council for Sustainable Development have been calling for an opportunity to have input into the revised ETS which the Government is finalising. You see it will be very different to the current one before select committee.

However the NZBCSD is against their own members having further input into the legislation and has attacked National’s call for another round of submissions on the revised scheme. The CEO, Peter Neilsen, is a former Labour Cabinet Minister.

It would be useful for someone to ask the members of the NZBCSD whether or not they agree with the press statement gone out. I daresay very few would. Many of their members have pleaded for input into the revised scheme that the Government and Select Committee are working on. Their members include:

BMW Group New Zealand
BP Oil New Zealand Limited
Contact Energy Limited
Deloitte
Fletcher Building Ltd
Fonterra Co-operative Group Ltd
Honda New Zealand Limited
Meridian Energy Ltd
Mighty River Power Limited
Rio Tinto Aluminium (New Zealand) Limited
Shell New Zealand Limited
Solid Energy New Zealand Limited
Toyota New Zealand Limited
Transpower NZ Ltd
TrustPower Limited
Vector Limited

I would be amazed if many, if not all, of those firms do not want the ability to be able to do a submission on the revised scheme. Labour has delayed every sector bar forestry from coming in until 2011 anyway, so an extra three or four months is of minor consequence.

And I may be wrong, but I suspect many do not support the Government making a profit of $22 billion from the scheme, as would currently be the case.

That’s my generous term for the Government’s claim that if one doesn’t rush the ETS into law in June, it increase our emissions and cost us more.

The reason it is bullshit is because Labour itself had already announced that the transport sector would not come into the scheme until 2011 instead of 2009. No sector (except forestry which soaks up emissions, no produces them) is in before 2011 now, so taking 3 to 4 more months to get the scheme right has almost no downside.

The hypocrisy of Labour delaying the transport sector coming into the scheme by two years, and then complaining about a delay of just a few months, is as usual quite large.

It is interesting to look at the Government’s resonse to Key’s six areas of concern:

Key: The ETS should be fiscally neutral rather than providing billions of dollars in windfall gains to the government accounts at the expense of businesses and consumers. National does not think it is responsible for the Government to use green initiatives to swell the Crown coffers at the expense of Kiwis’ wallets.
Parker: The ETS would not result in a surplus of credits for the Government in the short term, and any surplus that might result later depends on New Zealand’s target under future international agreements. The five-yearly reviews of the scheme are the way to take account of that.

First of all, note the weasel words – in the short term. That may just means the first couple of years. Now government officials have admitted a profit for the Government of up to $22 billion. There is no requirement in the current law for this to be refunded to consumers and businesses. Now if anyone really believes the Government would voluntarily reduce the amount of money the scheme makes, then I have a bridge they may wish to buy.

After all, remember how it has taken nine years to get tax cuts – and that has been with some of the highest surpluses in the world.

Key: The ETS should encourage the use of technologies that improve efficiency and reduce emissions intensity, rather than encourage an exodus of industries and their skilled staff to other countries.
Parker: The select committee and the Government are already considering intensity-based allocation within a cap.

Now this is absolute proof positive that any revised bill needs to be opened up to a second round of submissions. A change to intensity based allocations would be a major major change, and the impact on stakeholders would be very different to the current proposed law. It would be economic vandalism to make such major changes without any ability to have comment and input on the new model.

John Key devoted most of his speech at National’s LNI conference today to the legislation setting up an Emissions Trading Scheme (ETS). He made very clear on numerous occassions that he supports an ETS as the best response to the challenges of climate change:

It is to that end that we consider a well-designed, carefully balanced Emissions Trading Scheme (ETS) to be the best tool available for efficiently reducing emissions across the economy.

He then pointed out some issues with the current legislation:

• Submitters on the bill have had their speaking time cut drastically short.
• There’s been little transparency about the effects the ETS will have on already struggling Kiwi households.
  
• Officials have admitted that the Government will profit by between $6 billion and $22 billion from the tendering of emissions permits.
• No clear analysis of exactly how much the scheme will reduce emissions, and
• The scheme has been subject to last-minute changes, including the decision to push out the date for inclusion of the transport sector. This decision has flow-on effects that the Select Committee has been given no opportunity to analyse.

Now this legislation is incredibly complex. It took years for the EU to get their scheme worked out. In fact it is so complex that a lobbyist involved with the scheme remarked to me he figured there were only three MPs in Parliament who truly understood it. They were Jeanette Fitzsimons, Michael Cullen and Nick Smith. I inquired as to their view of the understanding of the Minister on charge of the legislation, David Parker, and they were adamant he is truly out of his depth. But they reassured me this was not a problem as he has been cut out of the decision making loop on it.

Labour has been racing towards a political deadline – the 2008 election – and has been prepared to cut corners to get there.

National is not prepared to cut those corners. Not when the financial security of Kiwis is at risk. Not when getting this wrong means exporting jobs, ratcheting up inflation, and viciously squeezing household budgets.

We believe that the current rushed timetable for the design of the ETS and the Select Committee process is reckless, given the importance of the issue. National thinks that this process, left unchecked, is likely to lead to an ETS that will meet neither New Zealand’s economic needs nor our environmental obligations. In particular, it could well have negative and unintended consequences.

So today, I am calling for a delay in the passage of this legislation.

The fact there is an election later this year is no reason to rush the scheme into law. Hell Labour signed up to Kyoto in 2000 and have had eight years to get policy on place. Just because they left it so long is no reason to sacrifice good decision making in a mad rush. And look at the last law pushed through with lots of last minute changes – the Electoral Finance Act.

Now some will say that Key is being populist or playing it safe by calling for a delay. Far from it – his move is in face very much against what is best for him politically. Assuming National wins the election, he will have prime responsibility for getting an ETS into law as soon as possible, and in a way which actually will reduce emissions but not drive industry offshore. There is no way the Greens and environment groups would allow National to do nothing, even if they wanted to.

It would in fact have been politically far easier to let the hapless David Parker rush through the legislation in June and July, and then Key could just blame the previous Government for it, as problems emerged. But by having it pass when he is Prime Minister, Key will be responsible for its implementation.

Let me state clearly: National has not given up on this legislation. We are committed to a well-considered, carefully balanced Emissions Trading Scheme for New Zealand.  We believe this bill can be amended and progressed to that end, and we believe it can be done in a timely fashion.  But the New Zealand Parliament must take the time needed to get it right. New Zealanders’ livelihoods depend on us taking that time.

I have no doubt there will be some mindless abuse which will probably try to paint this as something it is not. But talk to anyone involved with this legislation and you would know the folly of trying to have it reported back to Parliament next month. It is the biggest change to the NZ tax system in 20 years. It is incredibly complex and the current bill will have to be so amended that it is only common sense to allow affected parties a chance to resubmit on the amended law.

National believes that getting it right means adhering to the following principles:

1. The ETS must strike a balance between New Zealand’s environmental and economic interests. It should not attempt to make New Zealand a world leader on climate change. Kiwis simply can’t afford to pay the price for that particular experiment.
2. The ETS should be fiscally neutral rather than providing billions of dollars in windfall gains to the government accounts at the expense of businesses and consumers.  National does not think it’s responsible for government to use green initiatives to pad the Crown coffers while thinning out Kiwis’ wallets.
3. The ETS should be as closely aligned as possible with the planned Australian ETS, with common compliance regimes and tradability.  In my second speech as National Party Leader, I called for close co-operation with our biggest trading partner on this issue, and I continue to call for it.  Given the Australian timetable for developing an ETS, I believe it’s still possible.
4. The ETS should encourage the use of technologies that improve efficiency and reduce emissions intensity, rather than encourage an exodus of industries and their skilled staff to other countries.
5. The ETS needs to recognise the importance of small and medium enterprise to New Zealand and not discriminate against them in allocating emission permits.
6. The ETS should have the flexibility to respond to progress in international negotiations rather than setting a rigid schedule. This way, industry obligations can be kept in line with those of foreign competitors.

I think No 2 and No 3 are key. The ETS should not be a get rich scheme for Dr Cullen at the expense of consumers. But having it tied into the scheme of our largest trading partner is quite vital. No 5 is also important – big businesses should not get an unfair advantage over smaller businesses with the allocation of permits.

Key also touches on the proposed ban on new thermal power, and that as 75% of new power generation under Labour has been thermal, it is dangerous to assume one can suddenly go to 0% thermal for further generation. With the massive delays in getting RMA consent for renewable power projects, there would be a real risk of NZ having insufficient power in the future. The best thing one could do for the environment would be to reform the RMA so one can get renewable power projects built more easily. Until you do that, you can’t ban more thermal.

And finally Key touched on the biofuels legislation, which the Parliamentary Commission for the Environment said should be voted down. Key says:

The Parliamentary Commissioner for the Environment has spoken out against the Biofuels Bill, saying it will damage our clean, green image.

National is opposed to a mandatory biofuels obligation until there is a sustainability standard. This standard needs to deal with the lifecycle emissions savings, the effects on the food supply, and the biodiversity impacts.

New Zealanders want to ensure that their efforts to tackle climate change are doing more good than harm. Paying an extra 7 cents a litre for a flawed biofuels policy is not the way forward.  So National will not support the Biofuels Bill in its current form.

Even the Greens say the biofuels bill should not pass in its current form.

So a key speech on environmental issues, and good to see a commitment to getting the policy right, even though it would be politically expedient to let Labour pass a flawed ETS and then just blame them when it goes wrong.

Stephen Franks has ordered a book: Nudge: Improving Decisions About Health, Wealth, and Happiness. I must borrow it after he gets it!

Jeanette Fitzsimons blogs, asking whether the wheels are falling off the ETS. She addresses the issue of the so called thermal moratorium and how Genesis, an SEO, is using a loophole to get around this.

Whale Oil has photos of more potential EFA breaches. Russell Fairbrother’s caravan certainly looks like an advertisement with statements about proud to support interest free loans, nuclear free NZ.

Blair Mulholland asks whether it is worse to have a swastika on your roof, or preventing someone from doing it. While I think Councils go way overboard with their controls on what you can do on your house, I think there is a property rights argument that there should be some restrictions. Put it like this. If you buy your place for $500,000 and someone buys the house either side of you and covers them in swastikas, or even paintings of men’s penises, then your house value will drop significantly as there won’t be many buyers. Note in this case the swastika was the Hindu one, not the Nazi one.

The Visible Hand in Economics looks at the case for and againgst a tax free threshold.

Jordan Carter looks at the travails of Gordon Brown in the UK.