Thursday, November 10, 2011

Self-inflicted wounds

A year ago, I asked whether New Zealand is the only country facing a costly and binding Kyoto obligation and taking that obligation sufficiently seriously that sectors failing to abate are viewed as imposing costs on the fisc. I asked the same thing two years ago. I think that we're the only ones. But please tell me if I'm wrong.

Recall that the penalty for non-compliance is a tougher target in the second Kyoto period, and that it's looking less and less likely that there will be any second agreement [update: or less and less likely that one will happen soon.]

Canada seems on track to ignore its failure to meet Kyoto obligations; nobody seems to be budgeting for buying a big pile of international credits to fill the gap. They've signed on for Copenhagen, but I can see neither any binding penalty system nor any action consistent with taking the commitment seriously.

I'll ask again: is any country other than New Zealand both facing a binding Kyoto cap, by which I mean one that can only be met by costly efforts, and planning on meeting its obligations by buying international credits? If we're the only ones in the world, it's nuts to think we'd take a reputation hit by just doing what everybody else is doing - waving our hands about all the great stuff we've done thus far, promising to do better in future, and not buying credits to make up the difference.

Here's what I'd recommended, two years ago now, that Key announce. I think it still works.
Hey, folks, we're doing our share here. We've just implemented an emissions trading regime but it'll take us some time to get it all up and running. And know what? In the meantime, we don't see any point in paying the folks who managed to get the rights to carbon credits from decommissioned old Soviet factories. It's not like they'll start running those plants again in the absence of our paying them not to. So, for now we've got a domestic trading system that we're working to coordinate with the Australians if they decide to have a carbon trading system
So, we're cutting emissions in a few sectors with a trading regime that'll eventually expand to cover the whole country. And once it does, then we'll start thinking about whether it makes sense to buy credits internationally. In the meantime, we're not going to be giving the finger to Kyoto the way those horrible Canadians have. We're trying, and we'll get there, so don't start boycotting tourist visits or anything crazy like that. And it's not like most of the rest of you have gotten any farther than we have anyway. Heck, we're even researching ways to make our cows and sheep fart less. We just don't see much point in paying this sin tax right now. Thanks very much.
If this is a feasible strategy, it's more than a bit nuts to talk about how agriculture is imposing costs on the country with extensions of the date by which it enters the ETS; it's only a cost because we want it to be a cost.

Recall also that New Zealand's initial Kyoto targets were set lower than they otherwise would have been precisely because agricultural abatement is difficult: where other countries were required to go below start-point emissions, we only needed to get back to baseline. Our target was set in recognition that agriculture couldn't do much - blaming agriculture then for our failure to meet that target is a bit odd where we were intended to meet it through transport and energy.

Note that nothing in this post denies global warming or that climate policy is a good idea. My most preferred policy would be a low carbon tax applied across all sectors in synch with our major trading partners, with the tax ramping up over time on a pre-determined path. I just can't see how it makes any damned sense that we go out spending a huge amount of money buying carbon credits internationally if nobody else is bothering and when we've a city to rebuild.

I'm reminded of the old Python sketch where Sergeant-Major marches, alone, around the square when everybody else has buggered off to the cinema. New Zealand would be the sole idiot soldier deciding to stick around around to march with him. Then again, New Zealand's a country where cold houses are deemed desirable as they give folks a reason for wearing itchy woollen sweaters.


6 comments:

  1. Hi Eric,

    I think Norway has a carbon cap and it has been buying international credits, including from New Zealand companies.

    ReplyDelete
  2. Fair points.

    I have one issue with the ETS at the moment - the fact it doesn't have cross party support.

    We are expecting a binding agreement in the future so we want an ETS to pay for it, fine. But given that we want to provide certainty by not changing the ETS around all the time - how can we give people certainty to invest unless we have cross-party support for the scheme?

    Both parties are fluffing around the edges and not actually defining why we have the scheme in the first place - and as a result, its definitely doing damage to business confidence by creating uncertainty.

    ReplyDelete
  3. @Luis: What's the total expected cost as percent GDP, as compared to NZ's though? I expect this where it's reasonably cheap, but not where it's expensive.

    @Matt: All true. And backing away now would be damn near impossible without compensating forestry owners.

    ReplyDelete
  4. Eric says:

    "Note that nothing in this post denies global warming or that climate policy is a good idea. My most preferred policy would be a low carbon tax applied across all sectors in synch with our major trading partners, with the tax ramping up over time on a pre-determined path. I just can't see how it makes any damned sense that we go out spending a huge amount of money buying carbon credits internationally if nobody else is bothering and when we've a city to rebuild".

    As you know Eric, be brave, New Zealand even with NAT government sucks KyOto.
    Where were the marksmen when Helen was here.
    take action

    ReplyDelete
  5. @Eric You asked is any country other than New Zealand both facing a binding Kyoto cap, by which I mean one that can only be met by costly efforts, and planning on meeting its obligations by buying international credits? There are a few countries, Finland is another example, that budget for carbon credits. You are right though in that those expenses are marginal as a proportion of GDP, particularly when compared to the self-flagellating position of our government.

    ReplyDelete
  6. We are spoilt for choice between this and the opposition who probably thinks instituting the Ministry of Silly Walks is a good idea for a job creation.

    http://www.youtube.com/watch?v=b558kjihQQg

    ReplyDelete

As I randomly delete anonymous comments, please use a handle. Comments on older posts go into moderation; sorry if there are delays in hoisting your comment from the moderation pool.