Tuesday, May 16, 2006

The price of inaction

While browsing around on the Climate Change Office website for the previous post, I discovered that they had - with very little fanfare - issued a pre-budget release on the Kyoto liability, or how much we need to budget to pay for the cost of our excess emissions. This has been calculated by Treasury at 64 MTCO2-equivalent, or NZ$582 million.

There are two points to make here. Firstly, we should be very clear that this is the price of doing nothing - both in the past, and in the future. Looking back, while successive governments have made varying levels of noise about climate change, and even proposed quite reasonable policies to reduce our emissions, there has been very little concrete action. Instead, government seems to have consistently hedged its bets in the hope that Kyoto would collapse and the whole thing would go away. That projected $582 million is the price of this sustained inaction and dithering. Looking forward, we only have to pay that $582 million if our emissions grow as expected. If we reduce them - if for example we use the narrowing time window to emplace some policies to encourage forest plantings and reduce transport emissions - we hopfully won't have to pay that much. Except for my second point, which is that the estimate is almost certainly too low. Treasury's estimated price for carbon - US$6 (NZ$9) per ton - bears about as much resemblence to reality as its estimated price for oil. Carbon is already trading at 12 Euro (NZ$24) on the European market, and was in the range of 25 Euro a week ago, before the market learned that EU countries had systematically set their emissions caps too high. Which suggests two things: firstly, that we should be pursuing domestic emissions reductions to minimise our exposure to a volatile international market - and secondly, that if Treasury knows of a source of carbon credits for US$6/ton, it should start buying now, because the price is only going to go up.


Just curious, not that I know anything about this:

Do you know which countries will end up being net sellers of carbon credits??
Or do you have a handy link to any data that would tell us this?

I presume only a few countries will have met their targets...I was curious how much cash they would rake in

Posted by Anonymous : 5/17/2006 04:21:00 PM