20 December 2012

New Zealand's double dealing and special pleading over the Kyoto Protocol second period and the Doha hooha Part 1

Is Tim Groser a Kyoto pariah? Or a Kyoto visonary? A global emissions reduction emissary or is he tar-sanded with a Canadian brush? I try to make sense of New Zealand's double dealing and special pleading over the Kyoto Protocol second commitment period and the Doha climate change talks hooha.

I am very confused about New Zealand's climate change policy since the Doha international climate change talks (COP18) and New Zealand opting out of a second period of the Kyoto Protocol back on 9 November 2012.

The Kyoto part two opt-out is described as a lose-lose decision that shuts New Zealand out of the Kyoto international carbon markets and is a shambles and a disgrace.

So I have a question for all you climate change blog readers.

If Minister of Climate Change Tim Groser is serious about New Zealand's 2020 greenhouse gas target, why would he forego formally lodging the 2020 target into the existing Kyoto Protocol framework (where the national institutions and arrangements are already up and running), in favour of pledging to meet the target on a voluntary basis?

Let me break that question down into several parts.

  1. Imagine you are the Minister for Climate Change in the government of a small developed nation.
  2. This nation has signed an international treaty with a few other nations which states a short-term national target for emissions of greenhouse gases (GHGs).
  3. This nation enacts the treaty by creating some new institutions; a national register for emissions units, national inventories of GHG emissions, national surveys of afforestation, and public servants to report the predicted progress towards the national target.
  4. The nation has adopted several policies relying on the treaty institutions; an emissions trading scheme, forest sink schemes, research alliances, and international trading of emissions units.
  5. The nation has a second publicly stated medium-term target for GHGs for the years following the expiry of the first target.

If you are serious about that second GHG target, why would you pledge the target on a voluntary basis, when you could have formally lodged your target into the existing treaty (where the national institutions and arrangements already exist)?

Any answers? Anyone? Would you like to phone a friend?

Okay, here's a hint. The Parliamentary Commissioner for the Environment has said that we are on track to exceed the 1990 GHGs baseline by 30% rather than meet the 2020 target of reducing GHGs by 10 to 20% compared to 1990.

Now just because New Zealand's net emissions are likely to consistently increase through to 2020 doesn't automatically mean New Zealand would not meet the 2020 target if translated into a Kyoto second commitment period target. We could just buy extra emissions units from the international Kyoto carbon markets.

That is, if there was a sensibly designed emissions trading scheme. Such a scheme would be 100% "emitter pays", with emitters making their own market-based decisions to either reduce emissions or to buy the emissions units. Well we certainly don't have that.

So my conclusion is that it is not just that Tim Groser has absolutely no intention doing anything domestically to achieve the 2020 target of a 10 to 20% reduction in GHGs. Groser and National also have absolutely no intention of imposing any real carbon price on New Zealand's industrial and agricultural emitters.

18 December 2012

Gerry Brownlee's anti-carbon tax

Gerry Brownlee, formerly a minister of energy and fossil fuel, and currently the Minister for Transport and for bulldozing democracy, heritage and social order in Christchurch, today announced that petrol duty will be increasing by 3 cents a litre annually for the next 3 years.

Specifically mentioned are the Rangiriri and Tamahere-Cambridge sections of the Waikato Expressway, the Mackays to Peka Peka section of the Wellington Northern Corridor and the four-laning of the Groynes to Sawyers Arms (Johns Road) section of the Western Corridor in Christchurch.

The reason given for this policy is that the funding is needed for the Roads of National Significance programme and some upper North Island transport projects. I guess that means more spaghetti motorway in Auckland.

This is crazy policy.

The first level of craziness of the petrol duty hike is that it will affect the benefit-cost analysis (BCA) of each Roads of National Significance (RONS) project. Projects like Transmission Gully Expressway, have already been justified to hearings before the Environment Protection Authority on very marginal benefit/cost ratios. Julie-Anne Genter of the Greens said the benefit/cost ratio of Transmission Gully was 0.6. The RONS don't even break even in BCA terms. Now with the added petrol duty, the marginal benefit/cost ratio would be even worse. However, I bet that won't make Gerry Brownlee or Steven Joyce any less obsessed with them.

The second level of craziness with the petrol duty increase is the Government's complete failure to understand carbon pricing (which is what a petrol duty is) and to anchor their transport, energy and infrastructure policy with effective carbon pricing.

I have no problem with the price of petrol or diesel increasing. Road transport has many externalities that are not priced. It is "elephant in the room" obvious that the most important unpriced externality of liquid fossil fuels is global warming. And not a lack of four-lane expressways.

"But we have an emissions trading scheme!" I hear some one say. "Surely, road transport fuels are included in the NZETS?"

Yes we sort of have an emissions trading scheme which sort of prices carbon. But NZ carbon prices have crashed 72% in 2012.

According to estimates by the Energy and Data part of Joyce's mega-ministry MoBIE, in the three months ended on 30 September 2012, the NZ emissions trading scheme accounted for 0.93 cents out of the regular petrol price of $209.

So we may describe New Zealand's petrol pricing policy as having two mutually conflicting parts. The price includes a component for revenue gathering for unneeded four-lane RONS expressways part (3 cents/litre). The price also includes the NZETS carbon price (0.93 cents/litre).

And the four-lane expressways part exceeds the carbon-pricing emissions reducing ETS part by a factor of 3.

This is the complete opposite of effective carbon pricing. Brownlees's petrol duty, to coin an expression, is an anti-carbon tax.

Keep it real - Carbon offsets from a permanent forest sink project

In this post, I guest-post as myself! This post describes a carbon forest sink project that I am involved in and our debate about whether we should provide carbon offsets to anyone as part of the project. I originally wrote this for the Greens Frogblog

I am one of the trustees of a small 47-hectare carbon forest sink and native re-vegetation project and mountain bike park; "Project Rameka" in the east Takaka hills in Golden Bay.

It's really a response to climate change made by two of my old friends, Bronwen Wall and Jonathan Kennett, who bought the land in 2008. Bronwen and Jonathan decided to apply their experience organising native planting projects in Wellington to climate change after reading the 2007 fourth report of the International Panel on Climate Change (IPCC).

It's been embraced enthusiastically by the Golden Bay community who do the planting, pest control and track work through Project Rameka Inc.

The land is owned by a trust and I am one of the trustees. I did the early accounting for the trust and prepared the application to get the land into the Permanent Forest Sinks Initiative (PFSI).

In return for a 50-year covenant restricting the land use to forest, we receive about 800 carbon credits (assigned amount units) per year for Project Rameka. These units started life as part of New Zealand's 1990 baseline amount of carbon credits under the Kyoto Protocol.

How many credits we get is based on the amount of carbon withdrawn from the atmosphere by the trees. Thanks to the Golden Bay weather, plants grow really quickly. So we really are storing carbon. We have seen 3cm annual growth rings in the few pines we have removed.

For a couple of years we didn't do anything with the units. They sat in our account at the NZ Emissions Unit Register (the 'bank' for carbon credits). We initially thought the units could be a revenue stream to fund more traps or native seedlings. However the many donations to the project have always kept ahead of the costs.

We also thought that if we owned these units then we would be keeping them out of the hands of emitters so possibly we might even be reducing New Zealand's emissions as well as sequestering carbon.

As we began to understand the New Zealand emissions trading scheme (NZETS), we realised that the good done by the Permanent Forest Sink Initiative couldn't make up for the design flaws in the NZETS, as they are joined at the hip. Both schemes create and use carbon credits that are bought, sold and have prices. We could say that the PFSI and the NZETS are both limbs connected by the blood flow of carbon credits to the body, the international carbon trading market.

So when we were approached by Green Party MP Kevin Hague, to offset his greenhouse gas emissions, we didn't say yes straight away. We had a bit of a discussion about it. Trying of course to avoid MEGO; "My Eyes Glaze Over", as we would rather be talking about this winter's planting plan than carbon trading. After much discussion we had two options.

One option was to say no we don't want a bar of carbon offsetting.

We were aware that the Tyndall Centre's Kevin Anderson has said that "offsets are worse than doing nothing".

Selling our units as "offsets" could imply that we accept that international Kyoto-style emissions trading and offsetting and schemes like the NZETS are sufficient responses to climate change. That clearly isn't the case. We would agree with James Hansen that the UNFCCC and Kyoto processes have not and will not achieve the magnitude of emissions reductions the science tells us is necessary.

We think the NZETS is a joke as it has no cap on the number of units given free to emitters and it allows unlimited use of cheap units from the much larger international carbon market.

The other option was acknowledge the problems with the NZETS, and come up with our own version of offsetting in negotiation with Kevin Hague. And that's what we did.

Why did we do this? Well, we know that Kevin's flying is not for a weekend of shopping in Melbourne, but part of the essential price of putting the Green message to the public. We support the Greens as the only party with good policy on climate change. The fact that the Green MPs offset their flying emissions does have real political value.

This struck home to me back in June this year when I went to a talk about the 'Rio+20' conference. Kennedy Graham described the conference's failure to address climate change as a double crisis, an environmental crisis and a crisis of international governance.

Neophyte Minister of the Environment Amy Adams defended business-as-usual and patronised Kennedy, saying he was too idealistic. Some one asked Adams if she offset her flying and what she did personally to reduce her emissions. She completely fluffed her answer. Moral victory to Kennedy who we know had offset his air travel to Rio.

What does this offsetting look like?

We cancel, not sell, our assigned amount units, in return for payment from Kevin. A sale means the unit can be resold many times before being used by an emitter in the NZETS to allow emissions. 'Cancelling' means the unit legally ceases to exist. It can never be used by an emitter. We could insist on a higher price per tonne of GHGs than the current NZ market price which has recently been less than the price of a cup of coffee. With Kevin we settled on $25 per tonne, which was the price discussed when the NZETS was being amended in 2009.

We also let our Golden Bay network know we are getting money for offsetting from Kevin Hague. The Project Rameka team had no problem and immediately came up with new trapping and planting projects for the money. As ever they exceeded expectations. They went out and bought the traps and installed them before any money had changed hands!

So far we have not agreed to provide any offsetting service to anyone but Kevin Hague. We have been asked a few times to offset discretionary personal overseas travel and we have said no. Flying that doesn't seem that essential doesn't tick all the boxes the same as our arrangement with Kevin Hague.

Since we started our offsetting arrangement with Kevin, the price of carbon has continued to decline and the NZETS has been made even more ineffective. The Government has permanently excluded agriculture from the NZETS and has extended the two-tonne-for-one-unit discount for emitters. Tim Groser remains welded to the idea of "lowest international cost".

As far as commercial carbon foresters are concerned, the NZETS has gone pear-shaped because of the price collapse.

Carbon foresters have seen the value of their forests decline by 90%. Pine seedling planting in nurseries has declined by millions and forest clearance for dairy conversions in the North Island looks like starting all over again.

Brian Fallow the Herald economics editor describes the NZETS and National's climate change policies as a shambles and a disgrace.

It appears the only people trading forest carbon in New Zealand that are happy at the moment are the Rameka Trustees and Kevin Hague.

We are happy as we are supporting the Greens, getting a realistic carbon price for our units and recycling the proceeds into more carbon-sequestering re-vegetation.

Kevin has said to us that he appreciates being able to go for a bike ride at Rameka where his flying is offset, and he also appreciates that we let him know what his money was spent on. He said to us "It felt real".

If only we could get the rest of New Zealand's climate change and emissions trading policies just as real in terms of being the right incentive at the right price to really reduce greenhouse gas emissions.

09 November 2012

Will the last business lobbyist to leave please turn out the light at the end of the tunnel to an effective NZ emissions trading scheme?

Bruce Crandall's UH-1D Channel your inner General Westmoreland and your Vietnam flashbacks and look at National's latest change to the New Zealand Emissions Trading Scheme (NZETS). Parliament has just (8 November) passed amendments that indefinitely defer any greenhouse gas obligations for agriculture and indefinitely discount obligations to industries. This is a 'last helicopters off the Saigon hotel roof' point in the sad history of the always-doomed-to-fail New Zealand Emissions Trading Scheme.

According to cultural folklore the humiliating end of American engagement in the Vietnam war was foreshadowed by graffiti;

Will the last person out of the tunnel please turn out the light?

Or, alternatively

Would the last Marine to leave Vietnam please turn out the light at the end of the tunnel?

This was in frank contrast to the early (with hindsight, unjustified) optimism of General Westmoreland, who had said in 1968 that he could see the light at the end of the tunnel of the war in Vietnam.

So why am I writing about graffiti from a war that ended 37 years ago? Well, to make a 'bonkers' analogy with the New Zealand Emissions Trading Scheme, of course! Getting the NZETS established was of course more or less a civil war, and when the Labour Government in its final days in office in late 2008 finally coalesced a coalition of compromise to pass the Climate Change Response (Emissions Trading) Amendment Act 2008, it seemed there was 'light at the end of the tunnel' in terms of reducing GHG emissions in New Zealand.

However, with the adoption last night (8 November) of National's latest emitter-inspired fiddle; the Climate Change Response (Emissions Trading and Other Matters) Amendment Act, I believe we can now just be honest with ourselves and see the latest amendments to the NZETS as the last helicopter off the hotel roof and the last act of the NZ emissions trading approach, which was futile from the beginning.

I have posted before about the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, noting that the amendments will;

  1. indefinitely exclude emissions from pastoral agriculture from the NZETS, instead of including them from 2015, which was already a delay from 2013.
  2. extend indefinitely the discount to industries, the 'surrender one unit for two tonnes' of emissions (half price!) that was to end this year (“maintain the 1-for-2 surrender obligation after 2012, without specifying an end date in legislation”)
  3. extend indefinitely the price cap, (“maintain the $25-a-unit fixed price option after 2012, without specifying an end date in legislation”)

And I have previously posted that the worst aspect of the NZETS is not the corporate welfare in the form of excessive free allocation to industries.

For me the worst aspect of the NZETS is it's absolute exposure to the international carbon markets which has the effect of knee-capping the NZ carbon price down to the rock-bottom international carbon price. Today, the highest offer for a NZU for a tonne of CO2-e is $2.55 (See today's price record and the trend chart from OMF Ltd).

NZU price per tonne 9 November 2012

So I concluded I agree with Jeanette Fitzsimons that the NZETS is so bad at reducing GHG emissions, it no longer matters what amendments are made to it.

That is why I think that the light at the end of the NZETS tunnel was always going to be eventually turned out. The final bit of the Vietnam analogy is who was going to turn out the light. I give that role to the professional big emitter's lobby groups, led by Business New Zealand and its astro-turf subsidiary the Greenhouse Policy Coalition.

Nicky Hager in his Bruce Jesson lecture, describes how lobbyists such as Business NZ and the Greenhouse Gas Coalition have manipulated the under-resourced media to give prominence to ideas pushed by their clients;

"...the public spaces are cluttered with paid spokespeople and commercial agendas" whose technique is to establish "usefully biased ideas" by creating “some common lines that become the ‘mantra’” and then, 'keep repeating it endlessly' " so that "the angle, timing and quotes (in the media), do not come from journalists’ observations or journalists’ questions, but from the calculated efforts of PR and marketing people", and, as a consequence, the political debate is dominated by "endless hectoring from the business lobby groups"

The media 'mantra' pushed by the lobbyists is that if the NZETS establishes an effective carbon price on emitters, then jobs and exports and GDP will be lost (See GPCNZ 2008 and Business NZ 2012). Over the years of the debate over the NZETS, we have been endlessly hectored by business lobbyists that business trade competitiveness will be affected by the NZETS. Ministers Nick Smith and Tim Groser have long ago joined in and 'costs on businesses' is now routinely given as the reason for the lack of any real bite in the NZETS.

The endless hectoring that the "NZETS will affect exports and jobs" has been so successful that the big emitters wound up the the Greenhouse Policy Coalition back in March 2012. I guess they had a helicopter to catch, after they turned out that light in the tunnel.

06 November 2012

New James Hansen talk from 10 October

Here is a new talk by James Hansen on climate change and tipping points. It has been uploaded by Cornell University.

Dr. James Hansen of NASA's Goddard Institute addresses 75 international union leaders about the urgency of the climate crisis. The presentation was given in NYC on 10/10/12, and was part of the Energy Emergency, Energy Transition round table convened by Cornell University's Global Labor Institute (GLI), a program of the Worker Institute at Cornell, and the Rosa Luxemburg Foundation.

02 November 2012

I was alone the exporter had flown Norwegian Wood isn't it good

Geothermal Power Plant on Tasman Mill site, Kawerau NZ Norwegian wood and newsprint transnational Norske Skog Tasman (NZ) Ltd 'exports itself'. Mr February looks at the flight of another manufacturer and CO2 emitter and exporter as it lays off staff and reduces production. Wasn't the very generous free allocation of units in the New Zealand Emissions Trading Scheme meant to keep exporters like Norske Skog Tasman in New Zealand? Or have we just removed the price signal from exporters for no valid reason and stuffed the NZETS?

The other week Gareth tweeted about a good article in the Herald by Chris Barton.

Chris Barton reported that the Norwegian-owned newsprint-maker and transnational Norske Skog Tasman NZ had joined the ranks of export businesses like Rio Tinto Alcan NZ/NZ Aluminium Smelters who are exporting jobs off shore.

Norske Skog is shutting down one of two newsprint machines at the Tasman Mill, in Kawerau, due to lowered demand for newsprint.

At the same time Norske Skog is building a new $A84 million plant in Tasmania with some substantial help from the Australian Federal government (A$28 million grant) and State government (A$13 million loan).

Chris Barton noted some strong questions asked of the Government such as "what is being done for jobs"? And strong criticisms of the Government's naive "market will take care of everything" approach.

Chris Barton mentioned the NZ emissions trading scheme (NZETS) only briefly in passing, as he noted the rock-bottom NZ carbon price and the poor despairing carbon foresters.

So that prompted me to look at how Norske Skog Tasman NZ fits into the NZETS. What are the greenhouse gas emissions of the Norske Skog Tasman pulp mill? Is Norske Skog Tasman regulated by the NZETS? Have they ended up with a large free allocation of emission units (like NZ Aluminium Smelters Ltd) ostensibly to protect their international competitiveness and to keep the jobs in NZ?

Norske Skog Tasman uses geothermal steam from the Kawerau geothermal field for heating and electricity generation in its newsprint mill. Geothermal steam naturally contains carbon dioxide and methane which are released when the heat energy is transformed.

The use of geothermal steam for energy is covered by the NZETS as an energy sector emission. So Norske Skog Tasman must report its greenhouse gas emissions and obtain and surrender emissions units.

There is a specific emissions factor in the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 for Kauwerau's geothermal steam. The factor is 0.0275 tonnes CO2-2 per tonne of geothermal steam used.

Norske Skog Tasman's production of newsprint is included as an emissions-intensive trade-exposed activity eligible for a free allocation of 0.4911 emission units per tonne of uncoated newsprint, at the highest level of assistance; 90%.

So far, so much like NZ Aluminum Smelters/Rio Tinto Alcan NZ.

Let's start with a 'back of envelope' calculation of the units Norske Skog Tasman should surrender (the NZETS gross carbon price).

According to the Kawerau Geothermal Field Background Study, Mighty River Power supplies 285 tonnes of geothermal steam per hour to Norske Skog Tasman, who on-sell 26 tonnes to Carter Holt Harvey Wood Products. So net use is 259 tonnes per hour.

Assuming 24/7 production, the annual use is 259 * 24 * 365 = 2,268,840 tonnes of steam per annum. And 2,268,840 * 0.0275 = 62,393.1 tonnes CO2-e. So in a typical year, Norske Skog Tasman should be surrendering very roughly about 62,000 emission units under the NZETS.

How many free emission units were allocated to Norske Skog Tasman? In both 2010 and 2011, Norske Skog Tasman received the fifth largest free allocation of units (after the Smelter, NZ Steel, Methanex and Fletcher Concrete). In 2010, Norske Skog Tasman received 122,826 New Zealand Units (NZUs) for the six-month 2010 NZETS compliance period. In 2011 Norske Skog Tasman received 237,752 NZUs.

Assuming 24/7 production in 2011, Norske Skog Tasman was allocated 381% more units than it needed to surrender (237752/62393.1 * 100 = 381.0550). Thats a way more excessive free allocation than NZ Aluminium Smelters!

However, I might not have the right numbers. My calculation may be wrong. Why don't I ask the Environmental Protection Authority under the Official Information Act for the exact number of units surrendered by Norske Skog Tasman. Watch this space.

Alternatively lets look at Norske Skog Tasman's annual financial statements (PDF) for the 2011 calendar year.

Note 24 helpfully records that Norske Skog Tasman received 119,646 units in 2010 and 241,825 units in 2011. They surrendered only 10,754 units and sold 160,000 units, and had 190,717 units left at 31 December 2011.

The accounts show that in 2011 Norske Skog Tasman was allocated 22 times more units than it needed (241,825/10,754 = 22.49). The units allocated to protect jobs and export competitiveness, were not 90% of units surrendered. They were not 100% of units surrendered. The units allocated exceeded the units surrendered by a factor of 22!.

I can still here an echo of voice saying "You have left out the electricity allocation factor! You are wrong wrong wrong!" Well, yes, the industrial free allocation factor of 0.49 units per tonne of newsprint allegedly includes compensation for NZETS-related electricity price increases our manufacturing emitter is subject to. This rationale and the factor of 0.49 units per tonne were approved in this Cabinet paper. However, the cabinet paper provides no explanation of how the factor of 0.49 units per tonne of newsprint was calculated.

The electricity allocation factor has also been the subject of a consulation process and there is an emitters contact group for it as well.

However I think the idea that manufacturing emitters need compensation for NZETS-related electricity price increases is a smoke-screen. Norske Skog Tasman has not had its electricity price increased by the NZETS.

According to the Kawerau Geothermal Field Background Study (PDF), Norske Skog Tasman and Mighty River Power (MRP) have "..a power purchase agreement whereby NST (Norske Skog Tasman) contracted to take a majority of MRPs generation. Due to the fact that MRPs plant is grid tied, this is effectively a financial agreement offering NST price certainty and MRP a customer contracted to take the majority of supply."

The Tasman Mill is not just a plant connected to the grid. It was built to use geothermal power, just as Tiwai Point Smelter was built to use Lake Manapouri's hydro power. The Tasman Mill is joined at the hip to the Kawerau geothermal field. The newest Mighty River Kawerau geothermal generation plant was built on the Tasman Mill site. Norske Skog is buying geothermal steam from Mighty River Power and paying MRP as if it was electricity via a financial derivative contract.

To conclude the free allocation part of the analysis; in the example of Norske Skog Tasman, the NZETS free unit allocations are not just a discount of the full NZETS carbon price, the allocations are a transfer of substantial corporate welfare. The units allocated exceed the units they have to surrender by an estimated factor of 22.

And in terms of protecting the international competitiveness of Norske Skog Tasman and keeping jobs in New Zealand, the free allocations have not made the slightest difference. Thats in spite of National Party scaremongering back in 2008 that the NZETS would cause the mill to close. And Catherine Beard of Business New Zealand (formerly boss of the Greenhouse Policy Coalition) still scaremongering in October 2012 that any real cap in the NZETS will cause more job losses Talk about slamming the stable door after the horse has bolted.

Lets look at the real factors affecting whether a commodity manufacturer stays in New Zealand.

If you are a transnational like Norske Skog, you always have the choice of playing off more than one jurisdiction. The country with the smaller economy, like New Zealand, can't match the money of a larger economy like Australia. If Norske Skog had not purchased the Tasman Mill from Fletcher Challenge in 2000, this 'regulatory arbitrage' would not be possible.

Corporate aquisitions that seemed a good idea before the Global Financial Crisis, look much more risky after the Global Financial Crisis. Norske Skog paid $NZ5 billion for Fletcher Challenge's paper and pulp assets. In 2011, Norske Skog was faced with falling international demand and prices and it was considering selling some assets to avoid default on its debt.

Incidentally, Rio Tinto Alcan shares most of these international commodity trader issues; the over-priced debt-funded purchase of Alcan and Comalco by Rio Tinto before the GFC, the Rio Tinto's plan to sell Pacific Aluminium (including NZ Aluminium Smelters Ltd), the low demand for aluminium from the stagnant economies of the Eurozone and the USA and the price and supply competition from Chinese smelters in the huge and growing Chinese market.

Imagine a fictional conversation between John Key and the CEO of Norske Skog.

"So, Yon, you don't mind if I call you Yon? For the Tasman Mill, you kiwis are all online, the demand for newsprint is down. You give me quarter of million of these NZ units that are worth $NZ3 each. No other ETS accepts them. Thats pretty low quality carbon credit, Yon. Now, Yulia Gillard, she gives us $A28 million for new plant at the Boyer mill in Tasmania. Can you match that, Yon? Can you?"

That is the bottom-line, isn't it? New Zealand could never have matched $A28 million, either as a direct grant, or through manipulation of the NZETS free allocation provisions.

To me, the Norske Skog Tasman job losses are a good demonstration of how futile it was to have an NZETS designed mainly to completely avoid any carbon price on transnational exporters. The carbon price has not just been reduced or discounted to Norske Skog, the sign has been reversed so that its an off-balance sheet transfer of corporate welfare to them in the form of emission units. Such transfers are no doubt sought by local managers who are rent-seeking, but they will be irrelevant to the international commodity trade movements that will ultimately determine whether these transnationals stay or go.

28 October 2012

Brother, can you spare $NZ3.10 for a tonne of carbon dioxide?

In which Robin Johnson's Economics Web Page laments the homelessness and begging now seen each day on Lambton Quay in Wellington. And a lament for both the downward spiral of the NZ Emissions Trading Scheme and the downward spiral of the New Zealand spot price for a tonne of carbon dioxide - now less than the cost of a flat white. Brother, can you spare $NZ3.10 for a tonne of carbon dioxide?

The other day I looked up the old Tin Pan Alley song "Brother can you spare a dime?" The experience of poverty and the Depression in America summed up in a popular song. The lyrics were written by Yip Harburg in 1931, and the music was composed by Jay Gorney. The version by Al Jolson is very well known, but I like this version by Charlie Palloy and his Orchestra.

I looked up "Brother can you spare a dime?" as I was thinking about homelessness and poverty in New Zealand. I am not the only one. Churchs, charities, politicians, experts and academics are also concerned about poverty in New Zealand.

I see homelessness and poverty every weekday in Wellington's main CBD thoroughfare, Lambton Quay. I walk along Lambton Quay looking forward to the first coffee of the day. I usually note how many people are begging. There are almost always a few people begging on Lambton Quay. 'Brother can you spare a dime' is alive and well even on Lambton Quay.

Except it's sad cardboard signs saying 'Homeless and need help'. Also its at least $3 to $4 for a coffee, not a dime. Not for a long time.

The other price thats less than the cost of a flat white is the spot price of carbon dioxide in NZ. The carbon trader OMF reports NZ spot prices each day at CommTrade Carbon. Guess what? On 17 October, the day Parliament's Finance and Expenditure Select Committee reported on the latest amendments to the NZETS, the last trade of a New Zealand Unit ('NZU', a tonne of carbon dioxide) was at $3.10.

OMF also display a chart. It shows the collapse of the international carbon price reflected in our own plucky little battler NZETS. It certainly looks pear-shaped.

As the political philosopher Simon Caney and economist Cameron Hepburn note with a little British understatement, when the demand for permits falls to the extent that the permit price approaches zero, it is difficult to conclude that an ETS is working to reduce emissions.

Can any sane person look at this chart and reach any other conclusion than the NZETS has completely failed as a carbon price policy incentivising reduction in GHG emissions?

OMF originally committed the chart sin of not starting the vertical (price) axis at $0. However, reality has intruded. As the New Zealand Unit (NZU) price has relentlessly declined towards $0, they keep having to move the bottom of their chart closer to zero. That would almost be a small bit of humour in a pretty sad story. If it wasn't the empirical evidence of the failure of the design of the NZ emissions trading scheme as a policy to price greenhouse gas emissions.

If the $3.10/tonne NZU price is the death notice of the NZETS, the funeral must be the latest Finance and Expenditure Select Committee process to amend the NZETS. On 17 October 2012, this committee released its report Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

This is the National Government's bill to further weaken the NZ Emissions Trading Scheme. You know, indefinitely delay the entry of agriculture, make the half-price "two-for-one" transition permanent.

If you can quickly recover your will to live after digesting page after page of bureaucratic and political policy denial and excuse-making, and the complete failure of the National Government majority to engage at all with the minority political parties or submitters or ENGOs or the Parliamentary Commissioner for the Environment, download and read the 117-page report.

Otherwise, just read Patrick Smellie's report of 17 October 2012 "No restrictions on foreign-sourced carbon credits confirmed"

"The Climate Change Response (Emissions Trading and Other Matters) Bill was reported back to parliament by the finance and expenditure select committee with only technical amendments, and a decision that capping the use of foreign credits would compromise the emissions trading scheme principle of "least cost of compliance".
The policy has seen major emitters such as oil and electricity companies snap up some of the lowest cost carbon units available on global markets, where prices have slumped to as little as $2 a tonne.
New Zealand Units, issued by the government, continue to be worth slightly more, at around $3 a tonne, but well below the $25 a tonne maximum price put on carbon when the ETS was introduced in 2009."

Or just read the press release from Peter Hardstaff, Climate Change Programme Manager at WWF-New Zealand.

This is another nail in the coffin for New Zealand's credibility on climate change and suggests the government has no intention of trying to set this country's emissions on a downward path. Other parties in the UN climate talks will rightly see New Zealand's claims to be doing something to reduce emissions as all spin and no substance."

What a complete shambles! Why didn't we just have a no-exceptions carbon tax in the first place?

They used to tell me I was building a dream,
and so I followed the mob,
When there was earth to plow, or guns to bear,
I was always there right on the job.
They used to tell me I was building a dream,
with peace and glory ahead,
Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?

Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!

Say, don't you remember, they called me Al; it was Al all the time.
Why don't you remember, I'm your pal? Buddy, can you spare a dime?

26 September 2012

Solid Energy and the declining price of coal; neither unforeseen or dramatic or a crash

On Monday Don Elder the Chief Executive of New Zealand's Solid Energy confirmed that a major restructuring of the NZ coal miner would require closure of the Spring Creek underground mine and the loss of 460 jobs over the company.

This move had been signaled in advance, but it is still making most news broadcasts today. Elder attributes the need to downsize to trends in international coal prices. For example Elder told Radio New Zealand;

an unforeseen, and dramatic, global price crash had rocked the industry.
"In the second week of July the markets tanked, demand fell through the floor," he said. In up to six weeks the price plummeted 40 to 50 percent and did not show any sign of bouncing back anytime soon."
The new chair of the board of directors, Mark Ford, said in a press release;
“The price for Spring Creek’s semi-soft coking coal would need to be somewhere from NZ$180-200 a tonne for the operation to deliver a profit and pay off the investment made in it,” Mr Ford said. “International semi-soft contracts are now being made at around NZ$120 a tonne.”

New Zealand PM John Key seems to have accepted the Elder view that prices are to blame.

"The issue isn't that we're not on their side, the issue is that international coal prices aren't on their side."

"In the case of Solid Energy it's a victim of falling commodity prices."

The NZ media seem to have uncritically accepted the price explanation. In one story, Fairfax reported the reason for the mine closure and job losses as being due to a severe downturn in global coal prices

Not so, "Chalkie", of the Fairfax NZ business section. "Chalkie" took Solid Energy to task for blaming their troubles entirely on the international coal price. Chalkie also satirised Elder's cornucopian Think Big-style lignite and coal-gas proposals.

Chalkie says he doesn't believe Elder has credibility when he says current coal prices in NZ$ are 20% lower than at the bottom of the 2008 global financial crisis. Chalkie points out that Elder's quoting of a coal price of $330 USD per tonne, as the top of the price mountain that the price has now fallen off, is just unrealistic.

In June 2011, a record price of $US330 a tonne for Australian hard coking coal, was reached because of supply shortages following the January 2011 Queensland floods which drowned most of Queensland's coal mines.

Chalkie also notes that a coking coal price of $USD126 a tonne is still well above the norm before the GFC. I have complied some prices for Australian hard coking coal. Data at Google Docs. Coking or metallurgical coal is used in steel making, and usually trades at a premium price above 'thermal' coal supplied to power stations. I prepared a chart of prices per tonne in $USD from 2006 to 2012. Spring Creek Mine coal is 'semi-soft' coking coal, which I think means its price is not quite the same as coking coal, but still more than thermal coal.

The post Queensland flood price of $USD330 a tonne sticks out as a spike or outlier as does the 2008 high of $USD250 tonne, which also followed a La Nina mine flooding event. Coal producers might not want to know about global warming, but global warming certainly knows about Queensland's coal mines.

And here is a chart of 2012 monthly hard coking prices in $USD. The data.

The price for Aussie had coking coal has fallen consistently in 2012. However,there is no cliff the price has fallen off in July 2012. The hard coking coal price did not plummet 40 to 50 percent in 6 weeks as Dr Elder says. The price trend is neither "unforeseen" nor "dramatic" and nor is it a "crash".

It's not hard to find reasons for the decline in the price. of coal. Reuters reports a number of reasons. Demand for coal is down in China. While the floods stopped the Aussie supply, steel makers looked to substitute other suppliers. Mongolia is increasingly eating into Australia's share of coal exports to China.

Chalkie also notes that the Huntly East underground mine has had some safety issues. Work to install a $NZ40 million ventilation tunnel, the sort of thing Dr Elder criticised Pike River Coal for not having, stopped in August 2012. Could it be that Solid Energy is using the international coal price as an excuse to avoid spending the money needed to make its underground mines as safe as the public now expect in a post-Pike River Coal disaster world?

Chalkie also notes a "field of dreams" approach to the Taupo wood pellet plant, (later written down in value by $NZ30 million) and delays in the Mataura lignite briquette plant. Given the execution of these smaller projects, Chalkie questions Solid Energy's ability to deliver on the grander lignite conversion plans.

I will leave the last word to Chalkie.

Every day at 8.30am sharp, management at Solid Energy would gather for morning prayers at the company shrine.
The small room was dominated by a huge gleaming slab of coking coal, etched with phrases from an early foreign exchange hedge contract. The dozens of executives stood facing it, arms by their sides, palms turned towards the slab in unison.
It was always a brief, uplifting affair. The CEO would begin with a chant: "Every day in every way, we expect coal prices to rise."
The executives would respond: "And rise they shall."
CEO: "With wood pellets and lignite we will rule."
Response: "Nothing bad will happen."
CEO: "Our big ideas are worth squillions."
Response: "Yes, probably more."
CEO: "Gentlemen, make it so."
And with that they would shuffle out shiny-cheeked into the morn

16 September 2012

James Hansen talks to a very young economist

This is James Hansen talking to a very youthful-looking interviewer from The Economist. I am assuming the interviewer had not been born when Hansen gave his well-known testimony to a committee of the US Congress.

The interview is 7 and a half minutes long. Hansen has his loaded climate dice and he talks about how extremely low the probability of recent extreme weather events would be if there was no trend of global warming.

Hansen also puts the case for a carbon price as a market-consistent policy that still lets markets decide the allocation of resources between competing uses. He warns that failure to adopt a steadily rising carbon price will inevitably lead to intrusive and additional Government regulation in order to achieve the same aim.

12 September 2012

My submission on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

Here is my submission on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

Committee Secretariat
Finance and Expenditure Committee
Parliament Buildings

4 September 2012

Submission on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

Dear Sir/Madam,

I oppose this bill. It weakens the existing very weak New Zealand Emissions Trading Scheme (NZETS) to the point of irrelevance.

I oppose the current design of the NZETS.

I oppose the NZETS because its fundamental design flaws make it completely ineffective in reducing New Zealand’s greenhouse gas emissions.

I submit that the design flaws are:

  1. the use of unlimited international junk credits,
  2. the indefinite delay in obligations for agriculture,
  3. the lack of a cap,
  4. the price ceiling with no price floor,
  5. the lack of revenue recycling via the tax system to consumers
  6. the excessive free allocation to industrial emitters such as NZ Aluminum Smelters Ltd.

I consider the NZETS should be replaced by a no-exceptions, no offsets, tax on greenhouse gas emissions with income compensation to citizens via the tax system.

Thank you

Yours faithfully

11 September 2012

New Zealand Aluminium Smelter Ltd do a Godfather; Nice smelter you got. Be a shame if something happened to it

The Godfather Robin Johnson's Economics Web Page argues that Rio Tinto-owned New Zealand Aluminium Smelters Ltd, the owner of the Tiwai Point aluminium smelter, is "Godfathering" the smelter, its workforce, the Southland economy, the NZ electricity market, Meridan Energy and the poor critically endangered slow-breeding kakapo, as well as "Godfathering" the NZ emissions trading scheme to get excessive free allocations of emissions units.

I have invented a new term for climate change blogging.


Its a bit like Grandfathering, which is a bit of jargon from emissions trading. But different. Grandfathering in an emissions trading scheme (an ETS), is giving the emission units for free to the existing emitters in the ETS on a historic pro-rata calculation.

The units of course representing the desired cap on emissions. Alternatively the units could be sold by auction to emitters which is logical if we treat the units as shares in a public commons owned by the Government on behalf of citizens.

Of course our NZETS is not so simple. If our NZETS just applied simple "grandfathering" as outlined, then it would have a real cap, it would not allow importing of unlimited international units, and it would be impossible for any emitter to receive more units than their emissions.

Thats not the case under the NZETS, at least for some emitters. In 2010, the Rio Tinto Alcan subsidiary NZ Aluminium Smelters Ltd, which is roughly New Zealand's third largest point source of greenhouse gas emissions, was a net seller of units, not a net payer. Their free allocation of units was 135% more than the units they needed to surrender for their emissions.

That's excessive. The justification given for this is that in order to maintain their export competitiveness, NZ Aluminium Smelters Ltd needed to be compensated for the rather unfathomable and diluted ETS costs that may flow through their secret contract with Meridian Energy and the electricity wholesale market. I will come back to this later in the post.

Let me update the smelter emissions and unit allocations for the 2011 year.

In 2011, NZ Aluminium Smelter Limited produced 354,030 saleable tonnes of aluminium. The 2011 Ministry of Economic Development Chief Executive's Report shows that the New Zealand aluminium manufacturing sector (a.k.a. NZ Aluminium Smelter Ltd) reported emissions of 601,370 tonnes CO2-e for the 2011 year. We divide by two for the 'two tonnes for one unit' deal, and that results in 300,685 units to surrender.

The NZ Ministry for the Environment allocated 437,681 units to NZ Aluminium Smelter Ltd for the 2011 calendar year.

That's 136,996 more units allocated than surrendered or alternatively the units allocated to NZ Aluminium Smelter Ltd exceeded the units surrendered by 146%.

So that's even more excessive than 2010's 135% over-allocation!

How did NZ Aluminium Smelter Ltd/Rio Tinto Alcan NZ Ltd achieve that? Simple really. They threatened to close the smelter and move production offshore if the NZETS really imposed a real carbon price on them.

"Thats a nice aluminium smelter you got. Be a shame if something happened to it."

Now thats what I call "Godfathering"! But wait there is more.

In July, NZ Aluminium Smelters announced an annual loss.

The smelter CEO Ryan Cavanagh said the smelter's financial difficulties were due to falling world aluminium prices. And that they needed to revise their electricity supply contract with Meridian Energy to get input costs down.

A day later, the parent company Rio Tinto Alcan indicated what may happen to it's unprofitable smelters. They will be shut down. No pressure, Meridian Energy!

"Thats a nice aluminium smelter you got. Be a shame if something happened to it."

According to New Zealand Herald economics editor Brian Fallow, if the smelter closes, there could be a "seismic" knock-on effect on the electricity market. Supply would exceed demand by the 14% of New Zealand's electricity generation used by the smelter. Wholesale electricity prices would react. Some generation assets might be crowded out.

"Thats a nice wholesale electricity market you got. Be a shame if something happened to it."

Brian Fallow notes the electricity contract with Meridian Energy, that the smelter wishes to renegotiate, represents 40% of Meridian's sales. Closure of the smelter or renegotiation of the contract put the spanner of uncertainty into the Government's planned partial sale of Meridian and the other generators.

"Nice plan for partial privatising some state-owned power generators you got. Shame if something happened to it."

The closure of the smelter would also have an impact on the local Invercargill and Southland regional economy.

"Nice regional economy you got. Shame if something happened to it."

Next we hear that the smelter is fast-tracking the redundancies of it's highly-trained and highly-paid workforce.

"Nice well-trained professional smelter labour force you got. Shame if something happened to it."

Strigops_habroptilusAnd NZ Aluminium Smelter also wants to withdraw from partly funding the successful Kakapo Recovery Programme.

"Nice charismatic endangered species programme you got. Shame if something happened to it."

That's a lot of Godfathering!

Let's look at New Zealand Aluminium Smelter's electricity use and costs in 2011. How much do they use? How much do they pay? Does their power cost justify extra allocations of emissions units? Is it realistic for New Zealand Aluminium Smelter to try to get Meridian Energy to give them cheaper power?

New Zealand electricity use data is available from the Energy Data File 2012. The specific data is Spreadsheet G worksheet G.6.a. now at stored Google Docs.

Electricity use by sector 2011

This dotchart is of electricity use data from the sheet G worksheet G.6.a.

The chart makes it very clear that the Tiwai Point Smelter is, by a huge margin, the biggest single consumer of electricity in New Zealand. A single company at a single plant used 5.3 million MWh out of 38.8 million MWh consumed in 2011, or 13.67% of the total consumption. Only the combined 4.4 million people in homes (the residential sector) used more, with 13 million MWh or 33% of the total. If we just look at industrial use of electricity, and leave out the residential sector, the smelter uses 20.6% of all electricity used by industry.

Electricity sales price by sector 2011

This chart shows industrial electricity sectors sorted by average rate (including line costs) in cents per kilowatt hour (i.e. its MWh divided by sales $$ times 100). You need to look at the bottom left hand corner for aluminium smelting, not the top. Thats because NZ Aluminium Smelter Ltd pays the very lowest average rate for electricity in New Zealand; 5.03 cents! Residential users pay 22.6 cents per KWh, or four times as much.

No industry in New Zealand uses more electricity than New Zealand Aluminium Smelters. No industry pays less per unit for electricity than they do. They even get excessively allocated emissions units to help with the lowest priced power contract in New Zealand. And now New Zealand Aluminium Smelters are going for "Godfather" gold by trying to bully their power price even lower.

10 September 2012

Ten minutes of Naomi Oreskes on her book Merchants of Doubt the strategy of manufactured doubt over climate change science

Here is Naomi Oreskes talking about the deliberately manufactured doubt over climate change science


Here is the description of the video from Youtube.

"On October 28, 2010 historian of science Naomi Oreskes gave a presentation at Forum Lectures (US Embassy Brussels), based on her new book, Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming, about how right wing scientists founded the George Marshall Institute which has become a key hub for successfully spreading fear, uncertainty and doubt about climate change, along with other environmental issues, and how myths about science enable these political strategies to work."

04 September 2012

How fast to the cliff? a submission on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

How fast shall we drive over the cliff

Following up from yesterday's post where I said the proposed amendments to the New Zealand Emissions Trading Scheme are as useful as arguing over what speed to go while driving over a cliff, I have written a very brief submission. I have submitted it via the Parliament website.

It was almost exactly the same as leaving a comment on a blog where there is an anti-bot security step. You know, where you read some letters on an image file and type them in a dialog box. So its pretty easy.

Also there's an option to upload a PDF or other document. So there is really no excuse not to let the Government know what you think of the NZETS.

Committee Secretariat
Finance and Expenditure Committee
Parliament Buildings
4 September 2012

Submission on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

Dear Sir/Madam,

I oppose this bill. It weakens the existing very weak New Zealand Emissions Trading Scheme (NZETS) to the point of irrelevance.

I oppose the current design of the NZETS.

I oppose the NZETS because its fundamental design flaws make it completely ineffective in reducing New Zealand’s greenhouse gas emissions.

I submit that the design flaws are:

  • the use of unlimited international junk credits,
  • the indefinite delay in obligations for agriculture,
  • the lack of a cap,
  • the price ceiling with no price floor,
  • the lack of revenue recycling via the tax system to consumers, and
  • the excessive free allocation to industrial emitters such as NZ Aluminum Smelters Ltd.

I consider the NZETS should be replaced by a no-exceptions, no offsets, tax on greenhouse gas emissions with income compensation to citizens via the tax system.

Thank you
Yours faithfully,
Robin Johnson's Economics Web Page

How fast shall we drive over the cliff? More amendments to the New Zealand Emissions Trading Scheme

How fast shall we drive over the cliff

I look at at the Government's amendments to the New Zealand Emissions Trading Scheme and conclude we are arguing about what gear to drive in as we speed towards the cliff. The Government has kindly given us the opportunity to make a submission about how fast fast we should go over the emissions cliff. Time to fasten your seatbelts.

Back in July, Minister for Climate Change Issues Tim Groser announced more watering-down of the New Zealand Emissions Trading Scheme (NZETS).

About a week ago, on 23 August 2012, Groser introduced the amending legislation - the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill.

Consistent with previous emissions trading scheme legislation, the bill will be fully and rationally considered by Parliament's Finance and Expenditure Select Committee in an insultingly short period of time - ten working days. The closing date for public submissions is Monday, 10 September 2012.

What does this ETS amending bill do?

  • It indefinitely postpones the entry of pastoral agriculture into the NZETS.
  • The 'two-for-one' deal, which halved the number of carbon credits each emitter had to surrender for a tonne of carbon dioxide equivalent greenhouse gases, is extended for another three years. It was to end on 31 December 2012, but will now run on at least to 2015.
  • The price cap of $12.50 per tonne ($25 for two tonnes) will also extended. It was to end on 31 December 2012, but will now run on at least to 2015.

What doesn't the bill do?

  • It ignores the recommendation from the 2011 ETS review committee to stop the unlimited use of international carbon credits by New Zealand emitters. Which as we know, makes the NZETS the weakest link.

Whats the cliff we are driving off? Well, it's climate change. And it's the price of the New Zealand emissions unit.

NZ Unit price 2009 to 2012 from OMF Financial Ltd

Who said what about the bill?

Simon Terry of the Sustainability Council said that the NZETS is now in a state of eternal transition".

Helen Clark stated the obvious, that pastoral agriculture must be in the NZETS; “You can’t have your major sector generating greenhouse gases outside the scheme."

Federated Farmers said the deferral of agriculture was huge win for New Zealand's farmers

Business New Zealand seem unusually silent. I guess for them it is all going to plan. Back in July they welcomed Tim Groser's announcement of the delays to the NZETS. So why waste space repeating the message?

However, I do offer some relief from this dreary "business-as-usualism".

Green MP Kennedy Graham has given some strong speeches accurately reflecting both the scientific reality of the cumulative carbon dioxide emissions and the ethical challenge of the failure of politics and governance to respond.

None more so than in his 'first reading' speech in which he summed up the bill thusly.

"Today's bill will defer agriculture indefinitely, defer any increase in the price cap, defer the one-for-one surrender obligation, allow a greater switch from forestry to dairying, and enable importers to increasingly use dangerous synthetic gases. What remarkable, steel-like resolve!"

I do recommend you read Kennedy Graham's speech in full.

Graham, a much more experienced diplomat than Tim Groser, walks us through more than 20 years worth of futile international climate change negotiations, all the while as the relentless accumulation of emissions in the atmosphere uses up the carbon budget consistent with limiting warming to two degrees. And with no faux-realist "get people on the bus" cliches we have come to expect from Tim Groser.

Kennedy Graham concludes that we don't have to accept this state of affairs. He calls on us to make a submission to the Finance and Expenditure Select Committee.

Greenpeace are also saying get stuck in with a submission. What to say?

How about "the NZETS is completely ineffective in reducing GHG emissions due to it's many design flaws - the use of unlimited international junk credits, the delays and exemptions, the partial coverage, the lack of a cap, the price ceiling, the lack of revenue recycling due to the excessive free allocation to emitters."

Something brief and to the point.

However, I will leave the last word to Jeanette Fitzsimons speaking on TV Ones's Q+A: Panel after a Nick Smith/Russel Norman debate back in September 2011.

"Look, its like we are in a very fast car, we are heading towards a cliff, which is getting really close, and we are arguing whether to change from fifth to fourth gear".

28 August 2012

Neil Armstrong coal mines and global warming the NZ High Court moon walks us to a very hot place

On the same day as the death of Neil Armstrong, the first astronaut to step onto the Moon, became public, the New Zealand High Court moon-walked its way to it's own off-the-world moment. It decided that greenhouse gas emissions and global warming are off-limits in the planning for an open cast coal mine. That's as just as 'out of this world' as denying that the Moon landings ever happened.

On Saturday, two bits of news struck home to me very strongly. The first was the death of moon-landing astronaut Neil Armstrong. The second was the decision of the New Zealand High Court that for new open-cast coal mines, their carbon dioxide emissions and global warming are legally and jurisdictionally unrelated in the Resource Management Act.

The moon landing. I remember very well as a seven year old listening attentively to the 'one small step' broadcast in 1969. The whole class was silent under the spell of our teacher's scratchy transistor radio.

It's one of my most strongly held memories of my childhood. I guess that reflects well on that class of seven-year olds. They stopped playing bullrush, sniffing with colds, and fighting over play-lunchs to listen attentively to the unfolding of one of humanity's most historic moments.

While I was still fondly remembering the Moon landing, the next news item struck.

It was the New Zealand High Court decision barring discussion of carbon dioxide emissions when coal mines seek Resource Management Act consents (see Radio NZ, NBR and TV3 and the Otago Daily Times).

Of course this is about the Perth coal company Bathurst Resources and their Escarpment Mine Project.

Bryan Walker of Hot Topic has posted that this project represents New Zealand doing a Pontius Pilate and washing its hands of the emissions.

I have previously posted that the decisions by councils and the Environment Court to date reflect the zombie ETS infecting the Resource Management Act with climate madness.

My Saturday morning reverie of the Moon landing was rudely stopped and I sort of grumbled to myself;

"Open-cast coal mines and global warming are unrelated!! Thats about as sensible as saying the Moon landings were faked by NASA. Neil Armstrong would just have smacked someone in the face!"

From small half-asleep reactions, blog posts do grow. With the wee footnote that it was actually Buzz Aldrin who punched the Moon landing denier.

I could do a review of the legal issues, but that would be just more legal-climate yadda yadda. I will just note that back in the early 1990s, the Bolger National Government not only considered that greenhouse gas emissions were an adverse effect under the Resource Management Act; they also considered the RMA to be one of the main tools to deal with global warming.

As for the science of it, I will just point to a couple James Hansen charts from his The Case for Young People paper.

The first is cumulative emissions of carbon dioxide. Approving new coal mines adds to cumulative global emissions of carbon dioxide. The second chart shows likely scenarios for temperature. The more carbon dioxide accumulates, the higher the likely temperature.

The facts are that each time a new coal mine is approved, we are just adding to the temperature overshoot above two degrees.

Why is it that the High Court can't apply this simple logic? Why are we even in a position where the High Court can sever the undeniable link between new coal mines, the volumes of carbon dioxide accumulating globally, and the inevitable temperature rise? What has has happened to our legal and planning systems to make this sort of decision possible?

To me this outcome - where the global effects of more GHG emissions are legally severed from approval of a new coal mine - is just as 'out of this world' as denying that the Moon landings even happened.

17 August 2012

David Roberts TED talk climate change is simple

Grist.org energy and climate change blogger David Roberts has given a brilliant relatively short 17-minute talk "Climate change is simple".

At Grist Roberts walks you through his talk and his slides too.

His bottomline: 2 degrees celsius of warming is too high to be safe and too low to be possible

Or watch at You tube.

Highly recommneded.

16 August 2012

Dr Nick Smith promotes global warming via hydraulic fracturing for unconventional gas

What has happened to the former New Zealand Minister of Climate Change Issues, the hon Dr Nick Smith? In March he resigned from all his ministerial offices when his conflict of interest in the accident compensation case of his National-insider friend Brownyn Pullar became public.

Well Nick Smith is back in the public spotlight and is promoting the extraction of unconventional gas via hydraulic fracturing.

Smith has written an op-ed in the New Zealand Herald Fracking the sensible choice for NZ.

Fracking technologies are underpinning an energy revolution in the United States. Huge unconventional shale gas resources in Louisiana and Pennsylvania are coming on stream, enabling gas to replace coal-fired electricity generation. Gas emits one-third the greenhouse gas emissions of coal.
If we do not find new natural gas resources in the next decade, energy prices will rise and we will inevitably burn more coal. New Zealand must be open to responsibly using fracking to access our unconventional gas resources.

So, according to Smith, from a global warming perspective, unconventional gas is implicitly okay as its emits one-third the greenhouse gas emissions of coal.

Smith concludes that NZ needs;

a strong economy and a clean environment. That will only be possible if we take a rational and science-based approach to our natural resources and risk management.

But promoting unconventional gas development is not the climate science based approach.

Thats abundantly clear from James Hansen's talks in New Zealand in 2011. Did Dr Smith miss these?

Kharecha and Hansen, in their 2008 paper Implications of "peak oil" for atmospheric CO2 and climate. Global Biogeochem. Cycles, 22, GB3012, doi:10.1029/2007GB003142, have clearly told us that we can only keep carbon dioxide concentrations from exceeding about 450 ppm by 2100, if emissions from coal, unconventional fossil fuels, and land use are constrained.

The specific issue of whether a transition to conventional natural gas will actually reduce future greenhouse gas emissions is dealt with in Myhrvold and Caldeira (2012) Greenhouse gases, climate change and the transition from coal to low-carbon electricity.

The Carnegie Institute explains Caldeira and Myhrvold's conclusion; Only the lowest CO2 emitting technologies can avoid a hot end-of-century.

..in the case of natural gas—increasingly the power industry’s fuel of choice, because gas reserves have been growing and prices have been falling—the study finds that warming would continue even if over the next 40 years every coal-fired power plant in the world were replaced with a gas-fueled plant.

As Joe Romm says natural gas is a bridge to nowhere

07 August 2012

This is not cool the 2012 US drought

This is a brilliant video about global warming and the current United States drought. It is by Peter Sinclair of Climate Crocks fame and the Yale Climate Forum. It starts with James Hansen's 1988 testimony to Congress and then fast forwards to his 2012 TED talk.

New Zealand emissions trading scheme you are the weakest international link Goodbye

This post argues that the New Zealand Emissions Trading Scheme (NZETS) is "the weakest link" due to it's high exposure to the international carbon market. The strong "international linkage" is the the other side of the coin of the uncapped design of the NZETS. Both features reinforce just how ineffective the NZETS is in providing an incentive to reduce greenhouse gas emissions.

Who remembers the The Weakest Link? The quiz show with Anne Robinson the disciplinarian female host with the popular catchphrase "You are the weakest link. Goodbye!"

Yes that's today's bonkers metaphor for another wonky post on the NZETS. In addition to the observation that I would love to say "NZETS you are the weakest link. Goodbye!" there really is a relevant connection to the economics literature.

"Linking" of emissions trading schemes means that units from one ETS can be imported and surrendered by emitters regulated by a different ETS. There are papers and blog posts about international linkage.

The key economic benefit claimed for linking two or more ETS, assuming that they are otherwise sensibly designed, is that the lowest-cost ways of reducing emissions within the linked schemes become available (via emissions trading) to the emitters of the linked schemes.

An example. Pastoral agriculture may or may not have low-cost ways of reducing emissions. If agriculture has relatively high mitigation costs, then you are doing agriculture a favour by including it within a national all-sectors ETS, rather than just in an agriculture ETS. Agriculture can then just buy 'ways of reducing emissions' in the form of units from the cheapest seller - the emitter who can reduce emissions at a lower cost.

Not surprisingly, National's Minister for Climate Change (and Trade), Tim Groser, is very keen on linking international emissions trading schemes. Groser also does not want the New Zealand price for emissions units to be "dislodged" from the international price. Well that wouldn't be lowest-cost, would it?

However, this is all context for two recent reports on the NZETS in the 2011 calendar year. Last Friday, the Ministry for the Environment (MfE) released 'NZ ETS 2011 Facts and figures'. Earlier, in July, the Environmental Protection Authority (EPA) released its report on 2011 unit surrenders and allocations, the Section 89 Climate Change Response Act report.

This table sums up the MfE report.

In 2011, 16.3 million units were surrendered by New Zealand emitters. Of which, 11.7 million units were imported international units (being 4.2 million CERs, 4.3 million ERUs and 3.2 million RMUs.)

Reaction to the Friday's MfE report was swift. Carbon foresters decried the fact that foreign units were swamping the NZ ETS in 2011 at the expense of units from NZ forestry. "..foreign carbon was the credit of choice for emitters in 2011. International credits comprised a whopping 71% of all units surrendered for compliance.."

BusinessDesk noted the that big emitters had chased the cheap foreign carbon units in preference to NZ units as European carbon prices dropped to historic lows, dragging NZU prices as low as low as $4.50 to $5 per tonne of carbon last week.

Another forester said the NZETS was now a Claytons ETS (no doubt having forgotten that Colin James said 'Claytons emissions trading scheme' first).

Kennedy Graham of the Greens said there was no incentive for NZ polluters to reduce emissions. Kennedy hits the nail on the head.

I don't disagree with any of these sentiments. The importing of 11.7 million international units really spells out the "weakest international link" design flaw of the NZETS.

But for me the key point is not the number of units imported, it is that the unlimited importing of international units has been hardwired into the design of the NZETS since the Labour government's 2007 The Framework for a New Zealand Emissions Trading Scheme document.

And if a small market where the compliance demand is 16 million units can import units from the international market where 977 million units exist, then a cap on domestic emissions is never going to be possible.

Thats why the New Zealand Emissions Trading Scheme really is the weakest (international) link.