Money talks on climate change

If you've been keeping an eye on climate change issues and New Zealand's response to them, you'd probably be a bit bemused at the government's lack of progress in any of the areas required to reduce carbon emissions.

Not only has National failed to ensure a proper carbon price is placed on emissions, they've also been actively promoting polluting industries without any regard for New Zealand's long-term economic viability, which as we should all know by now is closely tied to our environmental sustainability.

Today, Brian Fallow in the NZ Herald reports:

Emissions scheme a real stinker

We may have just voted for the status quo in government but keeping the climate policy as is is not an option.

A key decision for the new Climate Change Minister will be who will conduct a review of the emissions trading scheme next year and what its terms of reference will be. The Government has already indicated it will include consideration of progress made in completing a new comprehensive international agreement.

The BIM three years ago said the first priority was to ensure the ETS was fit for purpose.

It is now clear that it is not. Not even close.

In fact the current ETS in New Zealand encourages businesses to pollute more.

Unless, that is, the purpose of the scheme is not to provide a carbon price signal that will set the economy on a path to a low-carbon future, but merely to be a placeholder for a carbon price, to be filled in when the rest of the world gets serious about the issue.

It is telling that the carbon price used in the Crown's most recent financial statements, based on market prices prevailing last March, is just 30c a tonne.

That is about 1 per cent of the carbon price it was assumed the ETS would deliver when it was set up.

It is fatuous for the Government to pretend that this is "the world price of carbon", more than which New Zealand emitters should not have to pay.

It is only the world price of a particular kind of carbon credit - emission reduction units - generated by the likes of Ukraine and Russia under the Kyoto Protocol's Clean Development Mechanism. Their price is so low because most jurisdictions with an ETS will not have a bar of them.

But New Zealand does and for the past two years emitters with obligations under the ETS have used them to meet almost all of their liability, while hoarding the New Zealand units the Government has doled out free under various measures intended to soften the impact of carbon pricing.

As a result, of the 26 emissions trading schemes the World Bank reports on New Zealand's has the lowest prices by a long way. And only a fraction of the country's emissions are subject to a carbon price.

Nearly half of national emissions consist of methane and nitrous oxide arising from the bodily functions of livestock. They are entirely exempt.

Only half the emissions from transport fuels or from the natural gas or coal electricity generators burn incur a carbon price.

And trade-exposed industrial emitters only face a carbon price on 20 or 5 per cent of their emissions, depending on how emissions-intensive they are.

Consequently officials estimate that current policy measures mean that by 2020 New Zealand's gross emissions will be just 0.6 per cent lower than they would have been without them.

Emissions are projected to be 25 per cent higher than they were in 1990 - a figure starkly at odds with the unconditional pledge of a cut to 5 per cent below 1990 levels by 2020 which New Zealand has tabled in the international negotiations now under way.

Clearly New Zealand is not going to cut its gross emissions by a more than a quarter over the next five years.

I have to disagree there. It's not impossible that New Zealand, with the help of a proactive government, could cut its emissions by 25% in five years. The systems required to do this are ready and waiting, they simply need a bit of investment and a government who will get out of the way.

Like most countries, the ability of New Zealand to cut its emissions has a lot to do with people's fears that such a change would negatively impact existing industries. Many investors prefer not to move money into new areas, especially when their investments are already providing a reasonable return.

This is the key area where those sitting on old money can be convinced that a change isn't just beneficial to the planet, but also beneficial to their bottom lines as well. Over time, the cost of climate change will negatively effect all investments, which is something that must be made clear to all those wanting to maximize their profits.

In fact the sooner people divest from polluting industries, the more likely they will secure their funds in the long-term. The real problem here is that investors are still focusing on short-term gains, when by all accounts the short-term is dwindling by the day.