Monday 9 November 2020

Things that don't make sense when you have an ETS

RNZ reports on the potential effects of the ban on coal in industrial heating.

Fonterra supported the ban. Smaller industrial users didn't:

Horticulture New Zealand said in its submission that the consultation document did not appear to consider impacts of the proposals on greenhouse-grown crops.

It said phasing out existing coal boilers used for space heating of greenhouses would be "devastating" to indoor vegetable crop production.

Barnes said food production in New Zealand could be dramatically affected.

"If things move too fast we could end up seeing some of our members go out of business before they're able to implement new alternatives, which would mean you would be getting potentially more imports and less locally produced product, particularly in the South Island."

We have an Emissions Trading Scheme with a binding cap. Industrial process heat is covered. Every lump of coal that's burned in the covered sector has to buy an emission credit. If that credit doesn't get purchased to cover the emissions from an industrial heating plant, it'll get purchased instead by someone else for some other bit of emission. The binding cap binds. 

If it happens to be the case that the lowest cost way of stopping the next bit of carbon emissions is in industrial process heat, then those will be the uses that stop as the binding cap binds and emission prices go up. At best, the ban gets you the same outcome that the ETS would give you. But there's no particular reason to believe that those plants are the cheapest spots for reducing carbon emissions. The ban in that alternative case just means forcing higher-cost ways of abating emissions.

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