Kyoto Costs

An article by Brian Fallow covers issues around the proposed ETS:

Taxpayers will be stuck with 84 per cent of the bill for meeting New Zealand’s obligation under the Kyoto Protocol, while farmers and large industrial emitters get hefty subsidies, according to a report out today.

The report on the Government’s planned changes to the emissions trading scheme by the Sustainability Council’s executive director Simon Terry and economist Geoff Bertram says farmers will be subsidised to the tune of $1.1 billion by the end of 2012, while large emitters get nearly $500 million.

Sounds awful doesn’t it. Certain bloggers rant on about how people are getting paid to pollute etc, But the situation is far more complex than slogans.

Kyoto requires New Zealand to take financial responsibility for any increase in its emissions over 1990 levels during the five years from 2008 to 2012 inclusive. Current estimates are that we will exceed that target by 76 million tonnes, which would cost $2.3 billion (at the carbon price of $30 a tonne the report assumes).

At present we actually (as at 2009) have net emissions that are 10 million less than our 1990 levels – thanks to forestry plantings.  Also the current price of carbon is $20.35 a tonne, not $30. So the projections for 2008 to 2012 are some way from the current situation.

Changes to the ETS being considered by a parliamentary select committee lighten the burden on “trade-exposed” sectors, including farming, which account for around two-thirds of the country’s emissions, to protect their competitiveness when most of the world has yet to impose a price on carbon emissions.

Climate Change Minister Nick Smith said the Government was providing allocations of free emissions units more generously for those emitters because they were trade-exposed.

“It has nothing to do with favouring big over small,” he said.

And this is key. Making trade exposed industries pay straight away the full cost of carbon will merely see them lose production to other countries. And those other countries will often be more carbon intensive. So the net effect is bad for the environment and bad for our economy.

When No Right Turn thunders on about subsidising polluters, he is actually calling for something that will lead to increased carbon emissions.

Dr Smith said it was misleading to talk about subsidies to farmers on the basis that they are not paying for their emissions during Kyoto’s first commitment period (2008 to 2012).

“No country … is imposing a cost on their agriculture industry in the first commitment period. We are likely to be the first in 2015.”

Again this is where the purists just have no idea. They want us to tax (through the ETS) our farmers, in advance of any inclusion of agriculture by any other country. Again if we do what they want, then it is a lose-lose – bad for our economy and bad for the environment.

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