Thursday, March 05, 2009



Climate change: comparing allocations

Here we go: Climate Change Minister Nick Smith has appeared before the Climate Change Review Committee apparently arguing that the ETS needs to be weakened to align it with Australia's. But his primary argument seems to be a little shaky:

Dr Smith told the committee that New Zealand's model of allocating carbon credits needs to be better matched to Australia's.

He said the rolling back or abatement, of credits here for industry is currently around 8% per year, whereas in Australia it is around 1.3% per year.

Really? Let's look at some actual numbers.

Australia's net emissions in 2006 were 6.6% above 1990 levels - well within its 8% Kyoto target. The country has set itself a soft target of a 5 - 15% reduction from 1990 levels by 2020, depending on whether international negotiations are successful or not. As the ETS starts in 2010, that equates to a 2.16% reduction a year for the deeper cut. Looking beyond that, they're planning a 60% reduction from 1990 levels by 2050, which equates to 66.6% in 40 years, or a 1.7% reduction a year.

New Zealand's net emissions were 33% above 1990 levels in 2006 - the legacy of sitting on our hands for a decade. Our ETS includes no fixed targets, but it does legislate for future changes to the allocations to forestry, industry, and agriculture. In the case of forestry, it legislates for an increased allocation, from 21 million units for 2008 - 2012, to 34 million units from 2013 to 2021. With regards to industry and agriculture, initial allocations of 90% of 2005 emissions, plus a hefty "compensation" for higher power prices to industry, declines by 8.3% a year from 2019. So comparing apples with apples shows our ETS is much weaker than Australia's, and in fact increases allocation until 2020. Beyond that, the government has set itself a target of "50% by 2050". This equates to an 83% cut over 40 years, or about 2.075% a year if done linearly (except of course the free allocations to industry - which National howled for and wanted to make perpetual - mean that it will in fact need to be much steeper than that post 2030. But that's well beyond their one-week PR horizon...)

So, in terms of alignment to Australia, New Zealand's scheme doesn't reduce allocation at all to 2020, but will need to reduce it much more sharply after that date - but only because of early slacking. Smith is - as usual - pulling his numbers out of his arse.