Wednesday, November 25, 2009

Climate change: Not durable

One of the desiderata of climate change policy is that it be "durable", capable of surviving a change in government. Polluters need to know that pricing is not going to just go away at the next election. They also need some certainty about the costs they will face in order to make investment decisions. New Zealand's climate change policy pre-2005 was not durable: while Labour wanted to act, National was locked in Denier mode and promised to repeal any measure. Post-Brash, National softened its stance from outright denial, but still promised to gut the ETS, as we are seeing now.

Unfortunately for their backers, their giant polluter-welfare scheme is not durable either. Last night in the House, Labour made it clear they would replace the scheme next time they are in government:

If Parliament passes this Bill in anything like its current form, a priority for Labour will be its repeal and replacement with legislation providing for a robust ETS and a fit-for-purpose series of complementary measures.
A rough outline of what that replacement would entail was spelled out in his list of Labour's proposed amendments: a return to a shorter phase-out, no transitional period, earlier entry for agriculture, a cap on allocation, stronger complementary measures, and legislated short and medium-term targets.

Nothing lasts forever. In two, or five, or eight years time, Labour is going to be in government again. Possibly sooner, National may find itself beholden to the Greens. Either is going to mean substantial changes to the ETS. Polluters had better factor that into their equations. They may get a free ride for the next few years, but anyone who thinks that these subsidies will last is simply a fool.