Wednesday, June 17, 2020

Climate Change: The final squeals of a dying industry

The Climate Change Response (Emissions Trading Reform) Amendment Bill, which finally make the ETS sortof function, over a decade after it was first established. Farmers are naturally unhappy, claiming that the law will see polluters buying farms to plant trees, effectively driving them off the land. To which the only response should be "good" - because we are already better off without those farms.

I did the maths on this last year, when farmers were squealing about rural communities being killed off by tree planting. Their example then was forestry conversions in Tararua, which would lead to the loss of 47,500 sheep, 20,500 cattle, and ~$1.7 million from the local economy. But at $25 / ton, the carbon cost of the avoided emissions from those animals was already catching up with that economic value. And carbon prices are now at $30/ton, making the value of avoided emissions $1.65 million. Last week, they were over $32, and forward units were over $35. So we're basicly in a situation now where the economic benefit of those farms is less than the climate damage they do. Farmers are protected from that reality because they are effectively subsidised by not being included in the ETS. But we are better off as a society if those farms on marginal land shut down. And that's without considering the value of any carbon stored in trees.

Obviously, some farms will be more efficient. But for those that aren't, the best thing that can happen is for the market to take its course. And the sooner it does, the better.