Saturday, May 07, 2005

Incentivising the market

Thursday's Dominion-Post reported that the government's new carbon tax will boost the profitability of hydro, and result in windfall profits for (primarily government-owned) hydro-generators. But arguably, this is exactly what it is supposed to do: incentivise the market. The tax makes carbon-free energy sources that much more profitable than carbon-emitting ones, and will thus encourage the market to provide them. The likely outcome will be an explosion of interest in wind (which can be built cheaply and quickly enough to be generating by the time the tax comes into force in April 2007), and a consequent decline in gas and coal (which is a Good Thing anyway; in the former case because Maui is running dry, and in the latter because burning coal for electricity is like rolling in your own excrement).

OTOH, those opposed to the tax have at least one good point: why should industry and transport pay, when farmers - who are responsible for over half of New Zealand's carbon emissions - are exempt? It's a glaring inconsistency which undermines both the "polluter pays" principle and its effectiveness, and its something we will need to correct in the long-term if we are to continue to use market mechanisms to solve the problem.


> when farmers - who are responsible for over half of New Zealand's carbon emissions - are exempt?

Well i guess the farmers might argue they are also responsible for most of NZ's consumption of CO2 (ie plants) but in the end what really matters is what policy achieves the aims - if farmers have very little ability to change their produxction if GHG there is no point in taxing them.

Of course farmers probably get too easy a ride in NZ - displacing resources from more productive and future oriented activities into farming.

Posted by Anonymous : 5/07/2005 01:04:00 PM

Wasn't that what the fart tax was all about?

Posted by Hans Versluys : 5/07/2005 01:10:00 PM

indeed carrots often work better than sticks..
good idea.

Posted by Anonymous : 5/08/2005 11:38:00 AM

When talking about farms and carbon emissions, I'm talking about CO2-equivalent. Farms produce methane from animals and nitrous oxide from fertiliser and animal runoff; both are greenhouse gases covered by the protocol and far more potent than ordinary CO2. And as they make up more than 50% of our total emissions already, we can't seriously reduce emissions without doing something about this area.

This doesn't have to mean shooting cows, or discouraging dairy exports. Any fix is likely to be technological - for example by using nitrogen inhibitors in fertilisers or on animals. Under the "polluter pays" principle, farmers should be paying for this. Instead, they've managed to use their political muscle to get a free ride - which ultimately means dumping the costs of their activities on the rest of us (just as they do in so many other areas).

As for incentivising forest sinks, I don't have a problem with that. But they're only a short-term dodge; any long-term reduction has to come from technological improvement.

Posted by Idiot/Savant : 5/08/2005 03:09:00 PM

I don't see the point in a carbon credit/debit scheme on farmers for methane/Co2 produced by their animals - If you're going to decide that farm animals (_still_ part of the biosphere) are contributing to the greenhouse effect, then you've got to factor in all the wild animals - who pays for methane produced by native/feral ruminants, then? Its pretty pointless. Especially when you consider that the methane produced by the worlds farmed ruminants probably equals that produced by the vast herds of wild ruminants that we wiped out with the help of various varieties of pointed stick technology since the ice ages (Bison, anyone?) Gas produced by farm animals is probably approximately equal to gas produced by animals that previously occupied ecologies now displaced by farming.

Posted by Weekend_Viking : 5/08/2005 11:59:00 PM

Iarni: or humans. The US would look even worse if you included all those fat, flatulent Texans. But unfortunately, farm animals and land use were in the protocol, and we agreed to it - so we're pretty much stuck with it.

And OTOH, reducing farm emissions would be a good thing in itself. Carbon emitted as methane is energy that doesn't go into making milk or steaks; farm runoff (which causes nitrogen dioxide emissions) also pollutes waterways, while anything which acts to prevent its breakdown also increaes its effectiveness as a fertiliser. A technological fix for either of these problems (better gut bacteria; denitrification agents) will also boost farm productivity. Unfortunately, our freeloading farmers want that handed to them on a platter...

Posted by Idiot/Savant : 5/09/2005 01:49:00 AM

There weren't any ruminents in NZ before colonisation. Though possibly Moa were prone to flatulence - the Dodo was (according to an episode of The Goodies).

Posted by Rich : 5/10/2005 11:15:00 AM