Tuesday, September 04, 2018

Climate change: Reinventing the wheel

The Productivity Commission has released its report on transitioning to a low-emissions economy, and its largely an exercise in telling us what we already know: emissions are too high, they need to be reduced, and to do that we need to plant trees, decarbonise transport, and have fewer cows. On the latter, they seem much more aggressive than the Parliamentary Commissioner for the Environment (who assumed that farmers were entitled to continue warming the planet exactly as much as they are now), to recommend "substantial" cuts in farm methane in order to allow a slightly higher budget for long-lived gases like carbon dioxide. And they recommend doing this by pricing methane within a tradeable system.

Where it goes off the rails is the policy mechanism for doing that. We already have a mechanism which would allow pricing and trading farm methane: just bring individual farms into the ETS, and let the market work out whether cars or cows are more valuable. But farmers might be the losers there, so instead the Productivity Commission reinvents the wheel and proposes a "Methane Quota System": a system of tradeable permits for farm and waste-produced methane, with free allocation based on historical pollution. In other words, a separate ETS, to give farmers a permanent budget and a permanent pollution subsidy.

Or, we could just use the ETS we've got, and start using a different GWP for biogenic methane, just as we would for biofuel-CO2. Simple, fast, and doesn't create immense transition problems from completely changing policy halfway through.

Having studied the history of New Zealand climate change policy, the Productivity Commission's recommendation for a separate ETS for farmers is just a recipe for delay. It sounds simple, but the details can be quibbled eternally. If you need an example, the Emissions Trading Scheme was originally recommended and designed by the Working Group on CO2 Policy in 1996. It took well over a decade for legislation to be passed, and over twenty years later the system is still full of "transitional" arrangements and not fully implemented. But in climate change policy, delay is the enemy. The planet is burning, and we simply do not have time to piss about designing and redesigning perfect policies. It is better to do something simple and imperfect but in the right direction, than wait for perfection. That way, the worst we'll do is over-achieve, cut too much, and save the planet by accident. Whereas if we wait another decade before farmers even have to start cutting their emissions, we are fucked. Which makes the Productivity Commission's arguments largely academic. Either we cut now and cut hard, or our kids all burn.