Climate change: The results of subsidised pollution

So, the same day National moves ahead with gutting the ETS, climate criminals Solid Energy and Ravensdown announce plans for a lignite to urea factory in Southland to support our rapacious dairy industry:

Energy producer, Solid Energy, and agricultural fertiliser supplier, Ravensdown, are jointly investigating the viability of building a US$1 billion plus coal-to-fertiliser plant in Eastern Southland, harnessing the region’s world-scale lignite resource and making New Zealand self sufficient in, and potentially an exporter of, urea fertiliser.

The study will consider the economics and possible location of a plant producing up to 1.2 million tonnes a year of urea – a nitrogen fertiliser used to enhance grass growth – from up to 2 million tonnes a year of lignite mined from Solid Energy’s extensive lignite resources. At last year’s urea prices – up to US$800/tonne – this plant would have generated the equivalent of about NZ$1.5 billion per annum in export equivalent revenue – through a combination of import replacement and direct exports.

How bad will this be? Urea is 47% Nitrogen. Most of that nitrogen will end up in our streams and waterways, but about 1% of it will turn into nitrous oxide, a powerful greenhouse gas. Doing the maths and applying the appropriate emissions factors, that 1.2 million tons of urea will turn into 8,800 tons of nitrous oxide, which is the equivalent of 2.73 million tons of CO₂. By way of comparison, that's about 20% of our 2007 nitrous oxide emissions, and 3.6% of our gross carbon-dioxide-equivalent emissions a year. As noted in the story, some of the urea (and hence some of the emissions) will be exported - but the rest will go straight onto our fields, and hence into the atmosphere. While distributed across South Island farms, it will be a noticeable hit.

Under the ETS, importers or manufacturers of nitrogen-based fertilisers are liable for the emissions they produce. Under the existing scheme, Solid Energy and Ravensdown would have been paying the full cost of this additional environmental impact from the day the plant went into operation. Under National's version, they will get a year's free pollution thanks to the delayed entry of agriculture, and then a production-based pollution subsidy for the next 80 years. In the first year this amounts to 90% of their pollution, which under National's cost assumptions ($50 per ton from 2013) works out to over $120 million a year, straight out of our pockets and into theirs. National argues that this is necessary to "protect jobs", but do the maths - they're paying just under $25,000 for each of the 500 jobs created. If they're willing to pay that much, then I suggest they can do so quite easily without destroying the environment in the process.

This is what subsidised pollution gets us: we pay, so they can destroy the environment. As I said, this is utter madness. And it will not last. If Solid Energy is planning this project on the basis that they will be insulated from paying the full price of their pollution forever, then they are simply fools, and deserve the resulting loss.