Thursday, June 13, 2013

Climate change: Fixing the ETS

The government's headline policy for combating climate change is the Emissions Trading Scheme (ETS). But the ETS is broken. An idea which in theory is supposed to make polluters pay for their emissions has been perverted in practice into one where we pay polluters to pollute more. This doesn't just make it ineffective - it also burdens future New Zealand governments with the enormous costs of subsidising polluting for decades to come.

If we actually want to do anything about this problem, then the ETS will have to be changed. The Greens have put a few markers in the ground with a members bill on the subject, the Climate Change Response (National Emissions Reduction) Amendment Bill. The bill would immediately end free allocation of credits, bring agriculture into the scheme, phase out the two-for-one deal over three years, repeal the $25/ton price cap and introduce a $30/ton price floor. In the longer term, it would establish a pathway to an 88% emissions reduction by 2050 with 5-yearly targets, and require the Prime Minister to report on progress in meeting them.

The bill is a bit rough. While seeking to end free allocations, it does not actually repeal the relevant sections. It is vague on what will need to be done to make the price floor an enforceable reality. And the independent Climate Change Commission seems to lack any real purpose, other than checking and reporting on corporate claims that price increases are due to carbon costs (something I don't think justifies the creation of a new Crown Entity). But its core provisions are the guts of any real solution to the problem. Its thus an important sign of the direction we can expect policy to take under any future Labour-Green government. Polluters beware - your free ride is going to end.