Wednesday, March 07, 2007

Climate change: National's $1.25 billion giveaway

How would you feel if the government deducted $300 from your bank account to give to its mates? Because that's what National is planning to do with carbon credits. At a meeting in Christchurch yesterday, National Party leader John Key announced that a National government would deliver a carbon windfall to forest owners by hand out carbon credits for all forests planted since 1990. It's an idea which makes absolutely no sense from a policy perspective - the trees are already there, and so there is nothing to incentivise, and nothing to be gained. But its an idea that makes a lot of sense if you view climate change policy primarily as a way of delivering corporate welfare to business interests, as yet another way to funnel public money and assets into the private pockets of your rich mates.

Make no mistake - this is a massive asset grab. Forest sinks are expected to absorb 78.2 MTCO2-e over CP1. At the present value of $15.92 / ton, those credits are worth $1.25 billion - and that value is expected to rise. And National is planning to hand this over to its friends and donors in the biggest theft of public property since they hocked off the family silver at bargain basement rates in the 90's. I'd ask how much the forest owners donated to the party to receive this outcome - except it would probably be considered contempt of Parliament.

The argument that these credits "naturally" belong to forest owners is spurious. They are an accounting convention created by the Kyoto Protocol, and would not exist had our government not pushed for a net approach, and other governments reluctantly agreed to accept it. Under the Protocol, credits and liabilities are the responsibility of governments. They can pursue whatever policies they wish to reduce their emissions, including carbon devolution and trading, but at the end of the day they carry the can for all emissions in the eyes of the international community, and they end up having to purchase credits on the international market to make up any shortfall. Forest owners are not parties to the Protocol, and have no emissions limits or obligations under it - and therefore no credits.

If National becomes the government and implements its mad plan, we will pay for it. Ordinary taxpayers will have to fork out to purchase credits on the international market to replace those given away. That's money that could go on schools, hospitals, roads, or (if you're that way inclined) tax cuts. Instead it will be going directly into the pockets of forest owners. Coincidentally, this will massively increase the cost of compliance with the Protocol - but I'm sure National (who until last year were rabidly opposed to meeting our Kyoto obligations) wouldn't use that as an excuse to back out of any post-2012 agreement, would they?

In short, its a typical National Party policy: socialise the costs, privatise the benefits, and funnel money from the poor to the rich. We let them get away with this once in the 90's; we shouldn't let them do it to us again.


I've coincidentlaly had a large document dump from Jim Anderton of cabinet papers relating to the government's sustainable land management and climate change policies. I'll do a full post on them later today, when I've finished digesting it all, but there's some very interesting points in there around timing for carbon-credit devolution, and long-term forest liabilities which will come due between 2020 and 2030 when all those forests planted in the 90's come up for harvest. I wonder whether National has thought of this - or whether it is using the same short-term (and short-sighted) focus on next quarter (or at best, next financial year) favoured by the business sector?

Posted by Idiot/Savant : 3/07/2007 02:22:00 AM

Wich is the relationship beetween those who have come up qith the idea of the tax and the forest owners?

Posted by JAL : 3/07/2007 04:45:00 AM

another poorly thought out national policy.
I think the "we have a nearly infinite surplus" argument means the answer to any problem can be "flush some money down the toilet and see if that helps".


Posted by Anonymous : 3/07/2007 06:17:00 AM

"there is nothing to incentivise, and nothing to be gained"

How about keeping them?

That would be good, right?

You also seem to be wilfully misquoting the numbers - the media release on which base your piece says:

" “some credits will be given to post-1990 forests”. "

National does not appear to be handing over $1.25 billion, merely some of $1.25 billion.

The existence of post-1990 forests is valuable to NZ, and that value has been created by the the people who grew the forests. You want to charge people who remove those forests money, surely the corrolary is letting those who don't deforest at least share in the benefit?

Posted by Graeme Edgeler : 3/07/2007 07:57:00 AM

I would be all for this policy if there was a similar 'polluting post 1990' tax imposed on polluters.

Posted by Anonymous : 3/07/2007 10:41:00 AM

Not that it effects the merits of the arguments, but I do feel the urge to point out that - as far as I've noticed, recently - Matthew Hooten is back behind the PR wheels for the Kyoto Forestry Association. And now National are offering foresters what they want with interest. Or rather, some unspecified fraction of more than what they seemed to want.

I don't know if I'd read too much into it, but there's an appearance that goes one step beyond being in bed with big business into manufacturing complaints in order to offer a solution.

I assume the accelerating deforestation problem is real and perhaps even partly for the reason suggested, though.

Posted by Lyndon : 3/07/2007 11:05:00 AM

... so there's not "nothing" to incentivise, I think. The forests can be cut down, for the time being.

Posted by Lyndon : 3/07/2007 12:26:00 PM

"How would you feel if the government deducted $300 from your bank account to give to its mates" - come on rightwing loonies - this is an opportunity to launch an attack.


I'll give you a hand:

1.) Misconstrue the meaning of the sentence
2.) Make argument that that is what taxation achieves
3.) Make a stupid comment on how I/S should support lower taxation
4.) End with "Party vote National"

Posted by Anonymous : 3/07/2007 01:36:00 PM


The current policies in place from Labour are causing the greatest deforestation NZ has known in over a hundred years. National's policy will reverse that and see people converting from pasteuralism to forstry. This will of course be a massive plus for the environment. Its overall net effect will be miles better thn anything you or Labour have suggested in this area.

Posted by Anonymous : 3/07/2007 03:21:00 PM

You have a point about the policy problem, but you are missing the core of this issue: Our current activities are causing the planet´s average temperature to rise. We need to change our behaviour. Both greenhouse gas (GHG) sequestration and GHG emissions are ¨externatilities¨ that need to become part of a decision-maker´s cost:benefit structure in order to bring about the required changes in behaviour. Until now, forest creators have been providing a free service to the community by sequestering and storing carbon. By gradually (to minimise the costs of change) devolving both costs and benefits of GHG exchange to those who bring about the exchange, you can alter behaviour without waving a big regulatory stick, and the process will be fair. Both parties´ policies are ad hoc, inconsistent, and downright unfair on this issue. National´s policy is slightly better that Labour´s because it suggests a gradual devolution of credits to forest creators, thereby providing incentives to create and maintain forests. Look at their farm policies, though, in light of the fact that about half of our GHG emissions are methane from livestock: Increase research funding for farming! Excuse me? Reward the current emmitters of GHG? What is going on here? Why aren´t the polluters paying for the value of credits given to sequesterers? After all, that would eliminate any transactions involving all taxpayers. The answers lies in pork barrel politics in its most naked form. Both parties are afraid of losing rural voters.

Posted by Anonymous : 3/07/2007 06:05:00 PM

Oh dear what a bozo we have in you dear no right turn. As an example of your silliness you say " a way of delivering corporate welfare to business interests, as yet another way to funnel public money and assets into the private pockets of your rich mates".
Here is a fact for you to digest - the vast bulk of exotic forests planted in NZ through the 1990s were planted by private individuals (like me), in small packages - not by corporates. That is what we are told by MAF so who am I to quarrel ? Will you ?
Have you noticed recently that under the Labour government that forest plantings are now negative -more trees are being cut down than planted ? The connection is not coincidental - it is the policies of the Labour government that have caused this to happen. one of the major reasons is that the Laour government made the decision to retain the carbon credits - and the result is... no more trees. Instead of encouraging citizens to plant trees, Labour discourages them from cutting them down. What a bunch of bozos.
Nobody who has any connection with forestry is going to support the Labour government - thats a lot of lost votes Mr Right Turn !
So trusting people like me planted trees, and along comes Labour to confiscate part of their value, and so drives down the value of the land they grow on making the property virtually unsellable, clever eh ?
Have you noticed the news that the US owners of the huge forestry tracts in the NI are laughing themselves sick over this policy ? the value of the land under their trees has fallen so the amount of money they pay in rent to the government (and the Maori groups benefitting) has fallen making their investment more profitable - great planning there don't you think?
Labour has retained the carbon credits and what does it do with them ? why - gives them to its corporate mates who then flog them off to foreigners ! Bet you didn't know that eh ?

Posted by Anonymous : 3/07/2007 09:09:00 PM

...and yet taking $300 (and a lot, lot more) from my bank a/c to "give away to their mates" in the form of extending working for families into the middle classes is OK?

Posted by Anonymous : 3/08/2007 07:16:00 AM

RichGraham is telling only part of the story. Forest plantings have fallen mostly because market values of wood have dropped (in part due to NZ´s artificially high dollar - thanks Reserve Bank! - and partly because the cost of transport to foreign markets has risen as China makes more calls on shipping with its booming economy). To blame all this on Labour´s policies is a distortion of the facts. On the other hand, the proposal to tax people who make a decision to change from forest plantation to farm has accelerated deforestation, and on that point RichGraham could be justified in blaming bad public policy.

Lastly, there is one point on which no right turn is partly correct and RichGraham slings the word bozo instead of giving credit. If all the carbon credits are devolved to forest growers immediately without any taxes on carbon dioxide, nitrous oxide and methane emissions, taxpayers will have to pick up a 1.25 billion dollar bill.

The best answer I can think of is to gradually introduce both devolution of credits and taxes on emissions so that they balance each other out. This would aviod bankcruptcies in the farming sector by allowing time for change (they could plant small wood lots to become GHG neutral), provide incentives to change that fairly represent current externalities of emissions and sequestration, and avoid having taxpayers gift forest growers 1.25 billion.

Posted by Anonymous : 3/08/2007 07:24:00 AM

Euan says: "Forest plantings have fallen mostly because market values of wood have dropped (in part due to NZ´s artificially high dollar - thanks Reserve Bank! - and partly because the cost of transport to foreign markets has risen as China makes more calls on shipping with its booming economy)."

People who are prepared to make 30 year investment decisions don't get distracted by short-term drops in log prices. Also, log prices have increased dramatically in the last year yet the deforestation is getting worse. Blaming the spot market for a major shift in investor behaviour is like blaming the electricity spot market for investment decisions in electricity generation.

Posted by Anonymous : 3/08/2007 10:17:00 AM

Deforestation results from lower new planting rates and increasing conversion of forest land to other uses. Motivations for both are strongly influenced by perceptions of relative prices. The decline in wood price has been a phenomenon for the last several years. A short term blip (that we hope might be the start of trend) in the last year isn't going to change perceptions of that long term trend, as you point out.

A further motivation for forest land conversion is the suggestion of a tax on that activity. People are converting land now that might have been converted more gradually over a longer period, with, at least in one case, purchases of new land for forest elsewhere. Given the prospect of a tax, landowners are deforesting rapidly to get in before the tax is actualised, and their new forest land elsewhere may or may not eventuate.

Posted by Anonymous : 3/08/2007 11:50:00 AM

Idiot/Savant could be truncated to idiot with no loss of accuracy. Not because this blog is utter drivel but because he/she/it has not learned to keep quiet about subjects where knowledge is entirely lacking.
Lets put aside all political views about the public/private ownership of land and just look at the issue.
Under the Kyoto protocol there is a great public benefit in having as much land in NZ under Forest as possible. This was recognized very early in the development of Kyoto and was why govt. ministers (nat. party) were talking up the planting of Kyoto forest for most of the nineties and telling all that would listen that the carbon credits generated would be largely passed on to the producers , ie. the forest owners.
Almost all the talking going on now about Kyoto Forest is about Radiata forest but in fact far more non-radiata forest was under development than Radiata. This non-radiata forest was being put in place purely for the earning of carbon credits and for environmental benefits.
When the govt.(lab. party) announced that is was intending to steal the value of the forestry carbon credits for itself there was a massive feeling of betrayal and anger amongst foresters, particularly those whose new forests had no other monetary value other than as carbon sinks.
Five years after that announcement there are none of those non-radiata Kyoto forests left. If you count 'potential forests' as deforestation then the last five years has seen more deforestation in NZ than any other two decades in the last two hundred years.
The various governments are entirely to blame for this, they had plenty of advise that this would happen but chose to believe what they wanted to hear. That a lot of ordinary people could fuck them over so completely was not something their egos could cope with.
So now the NZ economy is looking at a nasty Kyoto shortfall. The government have encouraged new fossil fuel power generation and totally alienated the people that could sequester the carbon to offset this.
The govt. are now lying to cover their asses (no surprise there) a look at the raw figures suggests that the cost of buying carbon credits at 2012 will be much higher than the govt is spinning. Three reasons:
Policies for reduction of carbon emissions are failing.
Without a drastic policy change there will be net deforestation relative to 1990.
Carbon credits are likely to be a lot more expensive than govt. estimates.

The bottom line: NZ Kyoto balance in US$ with different policy options:

Govt steals carbon credits : 30000H net deforestation = -$4Billion, deficit

Foresters keep Carbon Credits: 250000H new forest = $5billion, credit

So Mr/s/i idiot your beloved governments have taken NZ$3600 from the pockets of every man woman and child in NZ. I think that giving $300 and getting over ten times as much back is a good deal, but I'm not a politician.

Posted by Anonymous : 3/08/2007 01:44:00 PM

Apart from other outright mistaken factoids, anonymous said,

¨The bottom line: NZ Kyoto balance in US$ with different policy options:

Govt steals carbon credits : 30000H net deforestation = -$4Billion, deficit

Foresters keep Carbon Credits: 250000H new forest = $5billion, credit

So Mr/s/i idiot your beloved governments have taken NZ$3600 from the pockets of every man woman and child in NZ. I think that giving $300 and getting over ten times as much back is a good deal, but I'm not a politician.¨

Anonymous obviously doesn´t understand how this works. If the government gives away carbon credits, they disappear from the country´s account. Private owners of them can sell them anywhere in the world. Taxpayers have to pay for them.

The only way this can work in a fair fashion is for both polluters (farmers and fossil fuel users) to pay and for sequesterers (only forest growers at present) to receive credits. If the government devolves carbon credits then it should also devolve liabilities, that way taxpayers wouldn´t have to wear the cost of the credits while enduring the on-going pollution generated by polluters who didn´t wear any penalties. Now ask yourself. What would happen if we did this on April 1st 2007? Why, we´d have wholesale bankruptcies in the farming sector, for a start. So while devolving credits and liabilities is an obviously fair objective, we have to move slowly towards it in order to allow people to adapt. Both main political parties are suggesting a gradual devolution of credits to plantation growers. Sadly neither is willing to wear the political risk of devolving liabilities to both farmers and fossil fuel users. The result of this inconsistency will be an increasing transfer of tax dollars to plantation forest growers, a foul smell of unfairness that grows with time, a slow adaptation to climate change realities and an legacy of regulatory and environmental problems for our children.

Posted by Anonymous : 3/08/2007 07:32:00 PM

"We´d have wholesale bankruptcies in the farming sector, for a start."

No we wouldn't. Most sheep farmers have had roughly static emissions. Those corporate dairy farms that have expanded rapidly since 1990 would be the main ones affected negatively and they are extremely profitable right now.

But, in any case, why should forest owners miss out on credits and have to subsidise dairy farmers? If the Govt wants to protect dairy farmers from the Kyoto impact of their activity, it should do so out of general taxation. Protecting dairy farmers by penalising a sequestering industry - forestry - is just dumb. That is why the Greens support the forestry campaign.

Posted by Anonymous : 3/09/2007 06:48:00 AM

This is how the first lot of Kyoto works right?
If we are in debit in 2012 then NZ govt has to pay some other country to buy their credits?
If we are in credit then someone else will give NZ money for our surplus?
So as long as we are in credit then the money given to tree growers comes from abroad?
If we pay nothing to the tree growers we get no trees, have a debit, and the taxpayer has to pay it in one way or another?
In the long term who cares? Nanotech will be sucking up billions of tons of CO2 within two decades and the greenys will all be worrying about poor plant growth due to low CO2 levels. Remember how the oil was going to run out by 2000?

Posted by Anonymous : 3/09/2007 04:29:00 PM

No right turn. Straight on to Zimbabwe!

You make an interesting if inaccurate point when you comment on NZ's hocked off assets in the 1990's. Labour as much as National were obliged to sell off State Assets, to address the dire financial situation following years of a command and control economy under Muldoon.

NZ's State Forests then Forest Corp, were sold lock stock and freehold barrel. You may remember (now NZ's Forestry Minister) Anderton on the hustings years ago saying he would buy the state forests back? He has hit on a much cheaper (fiscal) option! Use legislative power to expropriate them, at least to the extent that Government want to dictate what the owners can and can't do.

Forestry isn't a cause of climate change and to the extent that trees grow they are actually a benefit. Climate change is caused by emissions from fossil fuel use. So here's an idea. Leave forestry right out of the picture. Don't give foresters any carbon credits and don't tax them if they use their land in the same way everyone else in this country is allowed to.

Instead tax the polluter, being the core principle of resource management within the RMA! A doubling in the price of fossil fuel should get motorists out of their cars and onto public transport, as well as generating the funds to build that public transport. It might make people think twice about taking a long shower or catching a plane to go on holiday.

We could even adopt a bit of old fashioned socialism as Anderton wants to do to forestry, and have the State reintroduce carless days or seize cars from those households with two. At least it would be understandable to the extent that cars emit greenhouse gasses whereas trees don't.

Honouring our Kyoto commitments won't be easy. NZ already emits 30% (?) more greenhouse gas than it did in 1990, so some fossil fuel user somewhere needs to go without. That is what the Government's officials signed all New Zealanders up to; not just foresters!

Perhaps its the realisation that there isn't a big constituency for a cold shower that has caused the Government to look around for someone to blame. The foresters may be entirely innocent, but they don't command many votes as compared to urban Aucklanders driving gas guzzlers down clogged motorways.

If National has the intelligence to see Government's proposed climate change policy for the environmental that it is, good on them.

That they have the integrity to deal fairly with a sector that is not part of the environmental problem that is climate change, and arguable central to its long term resolution I say, its about time someone stepped up and sorted out a policy described accurately by the NZ Parliamentary Commissioner for the Environment as a "buggers muddle"!

Posted by Anonymous : 3/10/2007 08:08:00 AM

To answer question above, This is how Kyoto works in the the first Committment Period ?
If NZ is in debit at then end of 2012 (as it will be becase of our Govts numerous false starts in creating robust and fair policy) then the NZ govt (taxpayers) will EITHER have to pay some other country to buy their credits (if any are in Surplus), Use the Clean Development Mechanism (CDM) - which effectively means sending funds off shore, OR carry a 30% penalty into CP2 (2013 to 2017). We better get planting somr trees.
If we are in credit then someone else will give NZ money for our surplus?

Posted by Anonymous : 3/10/2007 08:13:00 AM

Here is an interesting snippet from the green forum:
"Anderton is pushing the impression that 'Kyoto deforestation' is clearfelling. This is not really the case. 'Kyoto forest' is a technical definition. Angry agroforesters are just changing the planting patterns so that post 1990 forests don't qualify.
As an example. Say the owner of a 1000 Hectare farm decided in 92 to put the worst 300 in Kyoto forest. This would probably be done over 10-15 years in the most efficient way, that is to have planting is which the distribution and density only just qualify. When planting stopped in 2000 the incomplete patchworks were easy to fragment so as not to qualify under the selected Kyoto definition.
The good news is that these fragments mean that even at this late stage NZ could still have a neutral balance if the treasury can get their greed under control this year."
Maybe all is not as lost as it looks? National's pussy half promise of "some credit" is not going do the job in my opinion.

Posted by Anonymous : 3/10/2007 02:02:00 PM

Mr Savant,
National is simply proposing to return to the forestry owners what Labour stole off them with no compensation.

Posted by Anonymous : 3/11/2007 01:23:00 AM

"Instead tax the polluter, being the core principle of resource management within the RMA! A doubling in the price of fossil fuel should get motorists out of their cars and onto public transport, as well as generating the funds to build that public transport. It might make people think twice about taking a long shower or catching a plane to go on holiday."

Logic suggests we should go for all road users paying the true costs of roads on a per kilometre basis. A sensible suggestion that policy was developed for in the 1996-99 term by National, but utterly rejected by Labour in favour of large scale taxpayer dollar transfers.

Yet the more fuel efficient rail sector has to pay its way after receiving a minimal one-off govt subsidy.

Posted by Anonymous : 3/11/2007 01:26:00 AM

It seems that the Greens now disagree with you and support the forest growers:

Use forest credits for long term benefit of forestry

Jeanette Fitzsimons MP, Green Party Climate Change Spokesperson

12th March 2007

The Government must act quickly to reassure the forestry sector that they will receive some financial benefit from the carbon their trees remove from the atmosphere, the Green Party says.

“Forest owners are in an uproar primarily because Government policies are not requiring the transport or farming sectors to take any responsibility for their emissions, but instead appear to be using forest credits to shield those parts of the economy,” Climate Change Spokesperson Jeanette Fitzsimons says.

“Whether the final decision is a carbon charge, an emissions trading scheme, or an alternative approach to putting a price on carbon, the Government must commit to using the forestry credits for the long term benefit of the forestry industry.

“And that commitment must be made now, before even more forests are felled for conversion to dairying, losing the carbon locked up in the trees and creating new emissions from animal methane.

“However, it is not as simple as Rodney Hide would suggest with his individualistic property rights approach. It is superficially easy to say, ‘give the Kyoto credits New Zealand will earn from the increase in our forest area since 1990 to the owners of those post-1990 forests’.

“But every hectare of pre-1990 forest that is felled and not replanted reduces the credits earned by the forests planted since 1990. Kyoto forests can’t be considered in isolation from the rest of the forest industry, and there must be incentives to reduce deforestation.”

The Greens believe there are equitable ways of treating the forest industry as a whole, and expect to have detailed policy available in a month or two.

“What matters most at this stage is for Government to tell the forest industry immediately that they will not be expected to subsidise farmers and those who burn fossil fuel. Then foresters will start to co-operate with the Government's policy making,” Ms Fitzsimons says.


Posted by Anonymous : 3/12/2007 07:53:00 PM

you seem to miss a simple FACT the credits the govt has swiped have to be paid back when the trees are harvested in the 2013 to 2023 period care to estimate the price per ton of CO2 then? the true cost of labours cockups will be nearer to 20billion and will be some one elses problem

Posted by Anonymous : 5/03/2007 08:44:00 PM