Friday, January 29, 2010

Climate change: Secret deals cannot be trusted

The New Zealand Refining Company is one of New Zealand's biggest polluters. Its Marsden Point refinery was responsible for almost 900 thousand tons of CO2-equivalent emissions in 2007 - 1.2% of New Zealand's total. At current carbon prices, that means they should be paying about $18 million a year to cover their emissions - but they're not. Why? because back in December, the government quietly exempted them from any liability under the ETS.

The exemption is due to a Negotiated Greenhouse Agreement they signed with the government back in 2003, under which they agreed to pursue "world's best practice" in energy intensity. I was quite interested in this agreement, so I OIA'd it. Unfortunately, the result was not particularly useful. While I obtained a copy of the agreement and its schedules, all the key details had been deleted on the basis that it was "commercially sensitive", "confidential", or that releasing it might make it difficult for the government to negotiate with NZRC. So, for example:

  • The key metric by which NZRC's performance is measured is the Energy Intensity Index, or EII. We are not allowed to know NZRC's historical performance in this, its baseline, or its targets.
  • We are not allowed to know what constitutes "world's best practice" in EII, so we cannot tell if those targets actually meet that goal.
  • We are not allowed to know the dates on which NZRC's performance will be assessed.
  • We are not allowed to know what, exactly, NZRC is to be exempted from.
  • We are not allowed to know the definition of "competitiveness-at-risk", or the process by which the government assessed whether NZRC fell into that category. As a result, we cannot tell whether the NGA is justifiable, or just a sweetheart deal with a powerful polluter.

The deal will last until 2012, after which it may be renegotiated for a further 10 years. Using the government's estimates of carbon prices ($25 / ton before 2012, and $50 / ton after), that means the deal will potentially cost us half a billion dollars. With this much public money effectively being paid as a pollution subsidy to a private company, this deal deserves the highest level of scrutiny. Unfortunately, as seen above, we can't do that. We can't tell whether our politicians and public servants have served us well or poorly because the key details of what they have done are kept secret. As a result, we have no way of judging their performance, and no way of effectively holding them to account.

It's a fine example of why secrecy has no place in a democracy: because it inevitably undermines the people's ability to hold elected representatives to account. As for the solution, I'd start by deleting the confidentiality and commercial sensitivity clauses from the OIA. If companies want public money, they should face proper scrutiny, to see whether they actually need it or whether they're just engaging in special pleading for an easy handout. And if companies don't want to do that, then they can stand on their own two feet instead.