Today is a landmark day in New Zealand climate change policy. Today, we finally have a price on carbon for electricity, industrial, and transport emissions.
Its been a long time coming. The idea of a price on carbon was first floated way back in 1990. An ETS was first examined in 1996 by the Working Group on CO2 Policy. Policy then alternated between the two basic options of a carbon tax and an ETS for the next decade, with no less than four failed attempts to impose one or the other (carbon taxes in 1997 and 2002, emissions trading schemes in 1999 and 2008) before we finally got to the current scheme, which is a bastardized and gutted version of Labour's one (which was itself heavily compromised in favour of polluters).
As should be clear from the above, I think the scheme is a long way from perfect. It has no long-term reduction target. It gives out far too much in subsidies in polluters, to the tune of $105 billion to 2050 (so, about $2.5 billion a year - more than we spend on police, about the cost of the unemployment and domestic purposes benefits combined [PDF]). And it exempts our biggest source of pollution, farmers. But these things can be fixed, and the next government will have to, just to get its books in order.
Meanwhile, the fact that we have a scheme in place will begin shifting investment decisions. Now that carbon costs money, there's a direct financial incentive to reduce its use. Electricity companies deciding on the next power station, or manufacturers deciding on the next factory, or people deciding on their next car will all be pushed towards lower-emissions options. That's what its meant to do. Forget all this crap about people turning down their heaters - that's just pass through. It's supposed to make you buy insulation (or, on a larger scale, make electricity companies buy a wind-farm rather than a dirty, stinking coal plant). And even with the subsidies it will have that effect. Smart companies will not be planning on those subsidies lasting; any polluter who does and invests on that basis deserves to go out of business.
The ETS isn't the solution to our emissions problem. But its a (weak) start, and we can strengthen it. The challenge for those who want real action on climate change is to make that happen, and turn this mess into a real scheme.
