Back in March, He Pou a Rangi laid down the gauntlet to the government, recommending ETS price and volume settings which would slash the amount of available carbon, in an effort to force polluters to burn their stockpiles. I had low expectations of the government, and expected them to repeat Labour's mistake of ignoring the Commission in order to ensure cheap carbon for their cronies. Fortunately, I've been disappointed: the government has (mostly) accepted the Commission's advice, and even strengthened it in some ways.
The good news is that they've accepted the recommendation to continue the two-tier, high-trigger point cost containment reserve - meaning that it should never trigger and that carbon should stay out of the system. Their annual auction volumes actually total 1.5 million tons less than the recommended amount - though of course National has backloaded this, with slightly higher volumes for the next two years, offset by deep cuts later ("cuts later" is basically their policy in a nutshell). But this is more than offset by higher industrial allocation volumes, signalling that they refuse to end the outrageous pollution subsidies which see NZ Steel given 50% more credits than it actually emits. Which isn't just a commitment to ongoing corporate welfare - its also a refusal to fix an existential threat to the system, kicking the can down the road for the next government to fix (I guess those polluter lobbyists earned their pay). And the upshot is that their total volumes are about half a million tons higher than that recommended by the Commission. Which means half a millions tons we will need to make up later, somehow.
The silver lining is that that extra half million tons might not be emitted. Pollution subsidies are production-based, so if the polluters shut down - due to high electricity prices, say - then they don't get an allocation. Winstone Pulp's announced shutdown will more than offset the extra volume. Of course, if they weren't being subsidised to pollute, we wouldn't have to cheer their destruction. But policy choices have consequences.
