Wednesday, September 28, 2016



Climate change: Why are we subsidising polluters?

How much does climate change cost? According to a new study from the OECD, almost $50 per ton of carbon dioxide:

The price put on 90 percent of all all greenhouse gas emissions does not come close to paying for their real cost, according to a new study by the OECD.

Several countries put prices on greenhouse gas emissions via a carbon tax, or in New Zealand's case, an emissions trading scheme, to offset their climate change cost.

The OECD has conservatively set the cost of future climate disasters caused by emissions at €30 ($NZ47) a tonne of CO2 or other greenhouse gases with an equivalent impact.

But it says only 10 percent of all emissions from 41 mainly developed countries are at that price or above.

The OECD adds most carbon emissions incur no price at all and those which do incur a price get it very cheaply.


New Zealand is a perfect example of this. Almost half of our emissions - those from agricultural sources, usch as our polluting dairy industry - are completely free (and so they keep growing). And even in those sectors which are subject to a carbon price through the Emissions Trading Scheme, the price is statutorily capped at NZ$25 / ton - about half the price of the damage caused.

Polluters should pay the full cost of their emissions. If the market underprices them, then that suggests that the market is broken. Either we need to fix the market by radically cutting supply (thus forcing emissions to drop), or we need to replace it with a non-market mechanism such as a carbon tax.