Friday, October 28, 2016

Climate change: The purpose of the ETS

Writing in the Herald, Brian Fallow looks at New Zealand's options for meeting our carbon budget. None of them look very credible. And part of the reason for this is that the government is just confused over the purpose of the Emissions Trading Scheme:

It is the Government's responsibility to ensure New Zealand meets its international obligation, at lowest cost.

But the purpose of the ETS is different. It is to set the economy on a decarbonising path. A path towards zero net emissions from these islands, hopefully within the lifetimes of most of the people who already inhabit them.


The object of the ETS is not to mitigate fiscal risk. It is to mitigate climate change.

The government's efforts to pervert a tool for reducing emissions into one for reducing costs is the main reason why New Zealand has failed spectacularly to lower its climate change footprint, and why future governments are facing a bill of $72 billion. As for how to fix it, the answer is simple: auction units rather than giving them away as pollution subsidies, and don't open the system up to international trade. But I guess that might cost National's donors and cronies too much money, and then they might not donate any more...