Saturday 14 November 2020

Boiling credits

The price of carbon dioxide emissions in the ETS is $35/tonne. The scheme has a binding cap. If you buy a tonne of credit and then refuse to use it, you have reduced New Zealand's net emissions by one tonne. Somebody, somewhere, will not be able to buy that tonne. That person or company will emit less. 

Every time the government does something through regulation or other spending that costs more than $35/tonne to abate emissions, it is forgoing the opportunity to do even more good by buying credits and running them through the shredder. 

The waste documented in Marc Daadler's story is just infuriating.

Cleaner boilers in government buildings have a 20 year lifespan, a cost of $80m, and an annual emission reduction of 26,000 tonnes. Assume a zero discount rate, that's 520,000 tonnes abated at $80m, or $153.8 per tonne. The same amount of money put toward buying and scrapping carbon emission rights would have stopped 2.29 million tonnes of emissions, if the move didn't push carbon prices up much from the current $35/tonne.

But it gets even worse. Remember that the ETS exists. If the government isn't buying ETS credits to run boilers, somebody else buys those credits instead. Actual emission reductions aren't 520,000, they're zero because somebody else increases their emissions by 520,000 tonnes, using up the now-available credits.

The story notes that other process heat reductions cost $110/tonne, in shifting to biomass from fossil fuels, or $250/tonne, in shifting to electric. Both are much much higher than the current ETS price. 

I simply don't get why journalists on this beat aren't comparing the cost of a measure, and what it achieved, with what could have been achieved by buying and retiring ETS credits. 

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