Ozone-Like Hole in Government’s Climate Change Policy

By SMALL, Vernon

OVER at Te Papa, they are discussing how world climate disaster may be just a few degrees and a melting ice shelf away. In the Beehive, they are wondering how their world-acclaimed climate change policy dissolved, and whether they can build a new and coherent model.

When Victoria University mooted the high-powered climate change conference, with British Prime Minister Tony Blair as its star attraction, New Zealand was arguably a beacon to other countries. We had signed up to the Kyoto protocol and had the prospect of a financial gain from selling surplus carbon credits, thanks to our forests silently soaking up carbon.

On the drawing board was a carbon tax that would have sent consumers a clear sign about the actual cost of emitting carbon from burning petrol and generating energy from fossil fuels. And there was a well established regime to provide financial incentives to make projects, such as wind power, viable. Then, in a public relations disaster, the best political selling point for the Government — the expected $500 million carbon credit surplus — turned into a $500 million-plus deficit thanks to a stronger economy and a cock-up over which forests could be counted as carbon sinks.

The Government will spin till it is blue in the face that many elements of its policy are still delivering benefits and reducing emissions. However, the decision to scrap the carbon tax has left an ozone-like hole in its policy; namely how to establish a price for carbon, and, in analyst-speak, “internalise the external costs” of emissions.

If you believe the Government’s line, the carbon tax was scrapped because, after the election, it simply did not have enough support in the House. That is a moot point.

It obviously had the Greens on board, though there was no affection for the tax within United Future or NZ First.

On the other hand, the four Maori Party votes would have been enough to see the carbon tax survive, yet the effort to persuade them was nugatory.

There was, on Labour’s part, an extreme reluctance to rely on the Maori Party for such a pivotal price of fiscal and environmental policy.

But the clincher, taking into account the amazing disappearing carbon surplus, was that the political costs outweighed the benefits of defending the carbon impost.

Green leader Jeanette Fitzsimons’ bill, which passed its first hurdle last night with the backing of the Government, has highlighted just how messy the Government’s current climate change hiatus is.

Ms Fitzsimons’ Resource Management Act amendment would allow regional councils to consider climate change when they grant air discharge emissions, something deemed unnecessary while a carbon tax was in prospect.

The harbingers of a new climate change policy will be evident next month when officials from transport, agriculture, environment, foreign affairs and treasury present a series of papers to Cabinet.

They provided a foretaste to a select committee briefing last week.

As background, New Zealand is the 55th biggest emitter in the world, and accounts for just 0.2 per cent of total global greenhouse gas emissions. But we are 11th in the world for emissions per head (19 tonnes of CO2 equivalent per person) against an average of 5.6 tonnes per person in the world and 14 tonnes per person in the developed world. The sheer size of our emissions per person exposes the moral bankruptcy of the argument that Third World countries should curb their much lower, but growing, emissions before we move.

Agriculture accounts for 49.4 per cent of our emissions (and is growing at 1 per cent a year) while transport contributes 18.6 per cent, energy 16.3 per cent and industrial processes 5.3 per cent.

So what solutions are on the table?

A pared-down carbon tax, which may apply narrowly to energy generation, is on the cards.

In the energy area, expect measures to encourage renewables, and discourage thermal generation.

Something must be done about the country’s vehicle fleet. It is continuing to age, thanks to used Japanese imports, and is now well over seven years old on average. Meanwhile, fuel efficiency gains are being eroded by a trend toward larger engine sizes.

Research into mitigating agricultural emissions is a “sub- optimal” — more accurately “pathetic” — $3.6 million a year, drawn from the levy imposed in lieu of the so-called Fart Tax.

In a classic case of privatising the profits and socialising the losses, foresters are arguing they should retain the economic value of their plantings, or carbon sinks, while farmers argue the general taxpayer should bear the cost of their livestock emissions.

In the meantime, there is, in departmental-speak, “no current price for greenhouse gas emissions”, so farmers have no incentive to cut emissions unless there are other benefits, such as increased productivity. Against that background, the Greens’ proposals, a cap on current levels of agricultural emissions with an offset for any increases, and carbon storage payments for new forest plantings, are apparently being given serious consideration.

Large-scale forest plantings will not meet the first commitment period target because young trees absorb carbon slowly relative to older, bigger trees.

But there is a need to ensure policies send appropriate signals on the costs and benefits of different land uses. Otherwise, the trend to convert forests into dairy farms will add to the county’s emissions problems at the expense of all taxpayers, who will have to fund the purchase of carbon credits on the world market.

That may ultimately be the strongest incentive of all.

Sending large mounds of cash to China or Russia because it is cheaper than reducing emissions at home, is no way to win friends — or votes.