Friday, March 31, 2006

The cost of Kyoto

Radio New Zealand this morning had a story about the expected cost of our participation in the Kyoto Protocol doubling to a billion dollars due to Treasury increasing the expected cost of buying carbon credits on the international market. All I can say is that this has been in the pipeline for a long time: Treasury valued carbon at around $8 a ton, when they were currently trading between $9 and $25 a ton. They've updated their cost estimate to a midrange figure of $16 a ton, but even this is probably too low: at the moment, carbon is traded at around 25 Euro a ton on the European emissions market - around twice Treasury's estimate. Which suggests we're going to be facing another revaluation in the future, and we should probably start buying at least some credits now to hedge our bets against future price rises.

This is causing the usual outpouring from the right about "having to pay a billion dollars to the Russians", and its worth pointing out three things: firstly, that this is around a seventh of a percent of GDP a year, meaning that the overall cost is hardly crippling (its a medium-sized spending programme, but not enormous). Secondly, that we don't necessarily have to give that money to the Russians - we could, for example, spend it on making emissions reductions here. And thirdly, if the price of carbon goes up as expected, that one billion dollars could become two - which makes it all the more important to pursue solid domestic emissions reduction, as a way of reducing our exposure to the international market. Unfortunately, the government and business sector just don't seem to get this - they think it is all just too hard and too costly (whether financially or politically), and are hence unwilling to support any significant domestic emissions reduction policy. And arguably, that is precisely why we are in this mess in the first place.


maybe we could try to claim credits for all the carbon sequestered on the backsides of various 'important persons'.

they're obviously planning on sitting on them for a fair old while, so...

Posted by che tibby : 3/31/2006 02:52:00 PM

It is valid to beat up labour for intentionally mis-representing the cost - that is anti democratic even if it is pro environment.
Also it is different to spent 1/7 % GDP on let's say a benefit or schools, and being taxed 1/7% of GDP per year with the money going overseas.
The former might well give enough return on investment and multiplier effects to cost almost nothing the latter is something that, if you kept on doing it in many policy areas, would inevitably destroy your economy.
That is not to say THIS will destroy the economy all by itself - but it will obviously hurt it.

Posted by Genius : 3/31/2006 07:17:00 PM

"A billion here, a billion there, pretty soon you're talking about real money..."

The cash should go on education and healthcare, at least then we'd be wasting it domestically.


Posted by Anonymous : 4/03/2006 01:15:00 PM