Wednesday, December 21, 2005



Fiddling while the planet burns

The government has decided to axe the carbon tax. So, with a little over two years to go until the beginning of the Kyoto Protocol's first commitment period, we now have no coherent policy to reduce emissions or comply with our obligations. Talk about fiddling while the planet burns...

At the same time, the Minister is mouthing platitudes about how "New Zealand is committed to meeting our international obligations under Kyoto and achieving our domestic goal of lowering emissions" and how the government "takes seriously the threat that human-induced climate change poses to our environment, economy, and way of life". Of course they do. That's why they're refusing to do anything about it.

The core idea behind the carbon tax was that people should pay the cost of their pollution. Greenhouse gas emissions impose costs on others (in the form of long-term climate change), but are "free" to the emitter. They are a clear example of what economists call a negative externality. But markets don't work properly when there are externalities; resources are misallocated, resulting in activities which are privately profitable but socially destructive. A carbon tax (or its equivalent, an emissions trading regime) would have internalised this externality, ensuring that carbon emitters paid the full social cost of their activities, and thus made socially destructive activities unprofitable. It would also have helped shift the market towards a lower regime, by providing a direct incentive (in the form of saved taxes) for adopting lower-emissions technology. Now, that's less likely to happen, and we look set to continue along the same dirty, high emissions path we were before.

The decision doesn't even seem to make economic sense. According to the government, the cabon tax "would not cut emissions enough to justify its introduction". But according to the figures in the Greens press release, it would have cost the economy an estimated 0.2% of GDP in 2012 - or about $300 million. The tax would have saved an estimated 13 million tons of CO2-equivalent, or about a third of our total emissions overflow. The cost of buying credits to cover that now is around $150 million, and it is expected to increase substantially. A mere doubling in carbon prices is at the lower end of the range. The cost of carbon in Europe is already around 20 Euros, or NZ$30 - and at that price the carbon tax more than pays for itself. By canning it, the government has just committed us to a large and uncertain risk on international carbon markets. All of those worried that we will be paying a billion dollars to the Russians, congratulations; the government has just more or less guaranteed that we will.

(I'll have more analysis and some proper number crunching once I've had time to read the full report. Hopefully one will be arriving in the mail by the end of the week...)

I am disgusted by the government's utter gutlessness on this. Ten years of policy development and the long term interests of New Zealanders and the planet pissed away because Labour didn't want to face criticism from the self-interested business sector. If we'd wanted the country to be run by Business NZ, we would have voted for National. Unfortunately, that's what we seem to have gotten anyway.

13 comments:

The word "gutless" was my first gut reaction to this news when I read it the Herald earlier.

http://www.nzherald.co.nz/category/story.cfm?c_id=280&objectid=10360930

From that article: "Government support parties New Zealand First and United Future oppose the tax."

I've been fuming all day about how we ended up with such a fucking rightwing "leftwing" government.

Shame on you Helen for selling out the Greens and the environmentally friendly image of NZ you promote us for in your tourism PR campaigns!

Posted by zANavAShi : 12/21/2005 05:17:00 PM

What is ammusing (in a sad sort of a way) is labours atempt to justify not having the tax saying they just realised it would have no effect.

I think (as much as I think kyoto is the wrong approach, although admittedly an understandable first try) in principle the kyoto protocol costs should be passed on in a clear (and reasonably fair) manner rather like this.

Posted by Genius : 12/21/2005 06:05:00 PM

You fail as always to understand the failure of the Kyoto process or the economic costs of the carbon tax.If you read the effects of the various scenarios at the climatechange office they are up to 1%of gdp.

The limitations of kyoto have been present and the life expectancy of its beureaucratic prescriptions have been pronounced terminal eversince the 6 country agreement the ,G8 announcement and the House of lords economic committes report.

For all the hype in the MSM about the montreal agreement I suggest you read the reports more clearly.

The emphasis is now on CDM processes and technology and a complete review of the IPCC.

The emphasis in NZ should be on the unbundling of the grid and distribution and the abilit yof alternative technology to connect to the system.

Of course the Govt will lose a substantial amount of revenue from their enterprises as more efficient ie smaller companies and generation at lower cost onto the grid.

There is also the green lobby preventing the abundent hydro resource that is available being used or the constraints of the RMA that have meant the cost of power has doubled in 2 years!But of course that is not your objectice is it Ground ZERO would be a more adapt interpretation of your agenda.

Posted by maksimovich : 12/21/2005 06:58:00 PM

I'm sorry... but I think you guys are all wrong.

The Labour has done the write thing with this and I’m 100% behind it. If they're true to their word and instead directly tax big polluters this is a far better idea that a flat tax. Firstly, i think it will have a bigger effect in stopping pollution and secondly and most importantly a flat tax hits the poor harder. If you're being taxed per unit on a necessity then the poor get charged a higher percentage of their income because they spend a higher percentage of their income on necessity. Well done to Helen for removing a burden from poor working New Zealanders. Lets find a way to spread the burden is a fairer manner.

Posted by Lincoln : 12/21/2005 11:10:00 PM

Good stuff NRT - I look forward to your further analysis and number crunching. Do you expect the report you speak of to appear online somewhere?

Lincoln: you are right that flat taxes have a greater impact on the less well off, but if you combine a carbon tax with a more progressive tax system you can still discourage unnecessary carbon use at the same time of ensuring the less well off are not unjustly affected.

I don't think Helen was motivated by lessening the burden of the poor in this case - otherwise Labour would have gone into this years election with a different policy on the carbon tax. Far more likely they have been scared off by the farming lobby and the right wing protestations of Peters and Peter. Despite being responsible for 50% of NZ emissions, from the look of the Ministers press release the agriculture sector are likely to get a freer ride out of today's broken promise from Labour.

"Mr Parker said the agriculture sector, which accounts for approximately 50 per cent of New Zealand's emissions, would be protected from any broad-based price measure. It is anticipated that some of the money saved by the sector will be reinvested in research and development."

Posted by Joe Hendren : 12/22/2005 01:38:00 AM

Joe: The report is in PDF format here.

Posted by Idiot/Savant : 12/22/2005 03:07:00 AM

maksimovich,

Bollards.

Kyoto is a market-based mechanism for charging polluting countries. As such, it is explicitly designed to foster technological change - if you can improve technology to reduce your nation's carbon output, it makes you money.

The carbon tax likewise is an explicit use of market mechanisms to promote technological change.

To claim that the real issue is "unbundling the grid" seems to show a perverse ignorance of the NZ power situation. We have already unbundled power generation and supply, and have an electricity market.

Lincoln,

It doesn't work that way. If the biggest polluters turn out to be a power company providing the poor with power, the affect is the same. Indirect taxation is no better than direct taxation, and if you unflatten the pollution taxes you end up with loopholes, and industries polluting up to the precise limit of the law and then stopping. Look, for example, at SUVs: they came about largely because the US introduced fuel efficiency laws only for cars, not trucks, so the auto companies found it cheaper to produce and market SUVs that were technically trucks.

A simple carbon tax that pushes the market to where you want is much better than labyrinthine beaurocratic regulation that tries to tax some polluters but not others.

Posted by Icehawk : 12/22/2005 11:08:00 AM

Everyone is right to feel angry about this. My immediate reaction this morning was to inflict my rather terrible mood on the few remaining staff here at UoA. But terrible as it is, it was fore-signalled prior to the election and, if you were watching closely, effectively confirmed the moment this Govt took office. Also there is obvious historical precedent, the Nats developed this policy and abandoned it about the same time Kyoto was negotiated.

It is now worth looking at acting swiftly to organise ourselves (as citizens, members of environmental groups, voters...) to place as much pressure as possible on this govt to outline a new approach immediately. If you look closely at the review, and hypothesise as much as possible about the sections that are still classified under the Official Information Act, you will notice that there is already an approach favoured which does not amount to doing absolutely nothing.

Referring to pg. 418 of the review Option 1a: a low level broad-based tax, rising over time, which may at some stage involve agriculture (where and when problems with accurate accounting are resolved) could actually produce better results. But to do so it needs to be adopted soon.

Overcoming bureaucratic and political inertia on this issue will be difficult, so action by you and others is necessary now. Our main focus must be on increasing general awareness across society; otherwise parties like UF and NZF will be able to score cheap electoral votes off a confused, unelightened public.

If anyone wants more info my thesis concerning this issue will be published in Feb, and I can make any further historical info/ links to other useful published works available to those who want it.

Tan Copsey
tancopsey@gmail.com

Posted by Tan Copsey : 12/22/2005 11:23:00 AM

Icehawk without going into the failings of your insights of which I suggest there are many due to your lack of depth or expertise in the scientific/engineering spheres.

The constraints in the interconnectivity in the NZ local and national grids are indeed restrictive.If you use an airline analogy it would be akin to Air NZ writing the qualitative areas of jets to land at NZ airports.The restrictions to interconnctivity are controlled by the industries biggest players.

If we followed the UK specifications for interconnection it would allow connection of standby and alternative energy streams to add up to 30kw without having to meet AUS standards.The barriers are not technical they are political!

The economics of kyoto and its mechanisms of emission limitation by restriction have been found to be against most best practice methodology by both the House of Lords and the international statistics organisation.

I suggest you follow the submissions to the ongoing stern review in the UK

If you require a NZ model I suggest you research the Numerous papers available on renewables at the MOED.

We do not have unbundled distribuiton in NZ,The situation is the same as access to broadband with telecom.

Posted by maksimovich : 12/22/2005 12:02:00 PM

"I don't think Helen was motivated by lessening the burden of the poor in this case - otherwise Labour would have gone into this years election with a different policy on the carbon tax. Far more likely they have been scared off by the farming lobby and the right wing protestations of Peters and Peter. Despite being responsible for 50% of NZ emissions, from the look of the Ministers press release the agriculture sector are likely to get a freer ride out of today's broken promise from Labour."

Well, if she wasn't then we'll see that will the new policy. I think their is a better way to do it. I don't think the carbon tax was the best of ideas. Attack her new policy if you must, don't attack her scrapping a bad idea.

Posted by Lincoln : 12/22/2005 12:22:00 PM

Icehawk it now sees as the commerce commission agree also with the problematic issues that I stated.They have also put the distribution companies under watch.

The economic realities is we are paying 45% more for electricity then we need it.You and the other myopic dinosaurs are so distanced from reality of the science and engineering facts that it is embarressing.

The fundamental issues are if we are to see innovative solutions to our unfortunate kyoto committments the solutions will be from science and engineering and not from social busybodies,beureaucrats and lawyers.

The entire construct of Kyoto and
the emmission control portions were fundamentially flawed from the outset.The entire basis of reductio ad absurdum is a paradox of impossibility.The tenets produced constucts of measurement and perception that were designed to fit the theory, a basic error of science and against the Merton Norms of scientific acceptability.

Indeed in the Russia and the CIS the global warming phenomena of western science is akin to Lysenkoism.The result is that research is undertaken with open objectivity in regards to Planet science.They have been studying this and the biosphere for over 150 years well before Lovelocks grandparents were born.

Posted by maksimovich : 12/22/2005 07:04:00 PM

Gutless? From the reaction amongst many of Labour's supporters, I think it might be one of the boldest actions they've taken in a long while.

Posted by Duncan Bayne : 12/23/2005 11:01:00 AM

God when are you people going to see this is a hoax to get taxed from the UN? It's awful.

Posted by Anonymous : 3/14/2007 08:49:00 AM