"New Zealand's Greenhouse Gas Inventory 1990-2012 and net position"
makes grim reading. Our emissions per capita are the fifth highest in
the world, and as the report notes, emissions from deforestation began
to accelerate in 2011 and our overall emissions are not being reduced.
Deforestation resumed when we began to import large numbers of cheap,
"hot air" credits in 2011.
We met our target for the first Kyoto commitment period between 2008 and 2012, but that was a very soft target; to set our net greenhouse gas (GHG) emissions to what our gross emissions were in 1990. Had we been required to reduce our net emissions to 1990 net emissions or our gross emissions to 1990 gross emissions then we would have failed by a very large margin. This is clear from the graphs presented in the Greenhouse Gas Inventory.
The report states that, "New Zealand has fewer low-cost options to reduce emissions compared with most other developed countries, with three-quarters of electricity generated from renewable energy, a growing and dispersed population, and around half of its emissions from agriculture.", but this statement is arguably false. Other countries have taken more strides than we have to generate total energy from renewables, such as Sweden's 50% versus New Zealand's 35%. Moreover, with a relatively inexpensive programme of afforestation on marginal lands we could very much reduce our net emissions while solving erosion problems and reducing damage from floods. In fact we easily could go much further and become completely GHG neutral for between 60 and 100 years by planting a further 9% of our land area in forest. This could be done on marginal land; without destocking our farms.
We have withdrawn from Kyoto's second commitment period. It is clear that had we remained in the Kyoto process then we would have failed to meet our future commitments, especially because harvesting of forests planted during the 1990s planting boom will see our net position sharply deteriorate during the 2020s. In order to forestall this deterioration we need to have an effective ETS with New Zealand Unit (our domestic carbon credit, NZU) prices more in the $20 range (current range is ~ $3/credit). The forestry sector has lost interest in the ETS because NZU prices are too low.
New Zealand's climate change response lacks policy settings that would make our Emissions Trading Scheme actually work. The current price of NZUs is just over $3. Imported Emission Reduction Unit (ERU, "Hot Air") credits are worth just 19 cents. 82% of surrendered credits in our ETS were "hot air" ERUs last year while less than 2% were NZUs. New Zealand's emitters can surrender ERUs to "offset" their emissions, while hoarding or selling higher priced NZUs that we taxpayers have given them to account for "allowed emissions". Grandfathering of credits allows for 50% of energy-related emissions, and 90% of "trade-exposed" enterprises' emissions. The latter includes companies such as Rio Tinto. The net worth of grandfathered NZUs that are replaced by imported ERUs runs into many millions of dollars per year. Forestry companies who have earned or have been gifted NZU's are able to pay off their liabilities with ERUs and make instant profits. The scheme is currently dysfunctional because it is rife with people making money for nothing and with speculative hoarding of NZUs, thereby lowering credit prices to such an extent that we New Zealanders are not pulling our weight in global climate change mitigation.
What we need to do in order to fix our scheme is:
1) Stop all imports of credits.
2) Disallow ERUs within our ETS, and allow New Zealanders with ERUs to sell them back on the international market.
3) Stop grandfathering credits.
4) Cease random, "fiscally neutral" gifting from Government to selected companies and individuals.
5) Apply the ETS equally and fairly to all sectors, including agriculture.
6) Allow trading only between sequesterers and emitters (if you overpollute you pay someone else to clean up).
7) Manage our domestic NZU "currency" in a similar way to the Reserve Bank's management of our coinage. This could be achieved by setting reduction targets each year in response to NZU market conditions, requiring surrenders only for “over target” GHG emissions, and ensuring that annual targets stabilised the NZU price at an effective level.
For more, fully referenced, peer-reviewed information about why New Zealand's ETS has failed, see http://euanmason.blogspot.co.nz/2013/12/why-our-emissions-trading-scheme-is.html
We met our target for the first Kyoto commitment period between 2008 and 2012, but that was a very soft target; to set our net greenhouse gas (GHG) emissions to what our gross emissions were in 1990. Had we been required to reduce our net emissions to 1990 net emissions or our gross emissions to 1990 gross emissions then we would have failed by a very large margin. This is clear from the graphs presented in the Greenhouse Gas Inventory.
The report states that, "New Zealand has fewer low-cost options to reduce emissions compared with most other developed countries, with three-quarters of electricity generated from renewable energy, a growing and dispersed population, and around half of its emissions from agriculture.", but this statement is arguably false. Other countries have taken more strides than we have to generate total energy from renewables, such as Sweden's 50% versus New Zealand's 35%. Moreover, with a relatively inexpensive programme of afforestation on marginal lands we could very much reduce our net emissions while solving erosion problems and reducing damage from floods. In fact we easily could go much further and become completely GHG neutral for between 60 and 100 years by planting a further 9% of our land area in forest. This could be done on marginal land; without destocking our farms.
We have withdrawn from Kyoto's second commitment period. It is clear that had we remained in the Kyoto process then we would have failed to meet our future commitments, especially because harvesting of forests planted during the 1990s planting boom will see our net position sharply deteriorate during the 2020s. In order to forestall this deterioration we need to have an effective ETS with New Zealand Unit (our domestic carbon credit, NZU) prices more in the $20 range (current range is ~ $3/credit). The forestry sector has lost interest in the ETS because NZU prices are too low.
New Zealand's climate change response lacks policy settings that would make our Emissions Trading Scheme actually work. The current price of NZUs is just over $3. Imported Emission Reduction Unit (ERU, "Hot Air") credits are worth just 19 cents. 82% of surrendered credits in our ETS were "hot air" ERUs last year while less than 2% were NZUs. New Zealand's emitters can surrender ERUs to "offset" their emissions, while hoarding or selling higher priced NZUs that we taxpayers have given them to account for "allowed emissions". Grandfathering of credits allows for 50% of energy-related emissions, and 90% of "trade-exposed" enterprises' emissions. The latter includes companies such as Rio Tinto. The net worth of grandfathered NZUs that are replaced by imported ERUs runs into many millions of dollars per year. Forestry companies who have earned or have been gifted NZU's are able to pay off their liabilities with ERUs and make instant profits. The scheme is currently dysfunctional because it is rife with people making money for nothing and with speculative hoarding of NZUs, thereby lowering credit prices to such an extent that we New Zealanders are not pulling our weight in global climate change mitigation.
What we need to do in order to fix our scheme is:
1) Stop all imports of credits.
2) Disallow ERUs within our ETS, and allow New Zealanders with ERUs to sell them back on the international market.
3) Stop grandfathering credits.
4) Cease random, "fiscally neutral" gifting from Government to selected companies and individuals.
5) Apply the ETS equally and fairly to all sectors, including agriculture.
6) Allow trading only between sequesterers and emitters (if you overpollute you pay someone else to clean up).
7) Manage our domestic NZU "currency" in a similar way to the Reserve Bank's management of our coinage. This could be achieved by setting reduction targets each year in response to NZU market conditions, requiring surrenders only for “over target” GHG emissions, and ensuring that annual targets stabilised the NZU price at an effective level.
For more, fully referenced, peer-reviewed information about why New Zealand's ETS has failed, see http://euanmason.blogspot.co.nz/2013/12/why-our-emissions-trading-scheme-is.html
