Tuesday, September 08, 2020

Climate Change: Reviewing overallocation

Back in February, Stuff revealed that the government was planning to review industrial allocations under the Emissions Trading Scheme, due to concerns it was over-subsidising pollution and causing windfall gains for polluters. Now, it looks like that work is finally going ahead. Late last month, the government issued calls for the provision of data for four subsidised industries: cement, cardboard, lime, and cucumbers. Basicly, every major producer in these industries will be required to tell the government how much money it made and how much it polluted for the 2016-19 period. The results will be used to calculate new, and hopefully lower, allocation factors under the ETS, or to reclassify these industries from high to moderately trade-exposed, or to remove their subsidies entirely. Though it doesn't affect a lot of firms - according to the latest ETS allocations, there's only one producer of cardboard, one of cement, two of lime, and about ten for cucumbers receiving subsidies.

(Reading the briefing note on this, Shaw had originally proposed looking at iron and steelmaking, which means sticking it to BlueScope. For some reason, he changed his mind and decided to look at "protein meal" producers (freezing works), before going for lime instead. Sadly, no reason is given for the change).

There's also a briefing on the review itself, which suggests there will be a full review of industrial allocation (good), starting with a review of the Electricity Allocation Factor, which massively overestimated the amount of carbon in our electricity. Unfortunately, there's no indication of when this will start.

Meanwhile, two of the major polluters highlighted in the original news report - Refining NZ and BlueScope Steel - look like they're going to be shutting down or moving to ticket-clipping import operations, which is good news from an emissions POV. And insofar as it causes emissions leakage - unlikely in the case of BlueScope as their facility is one of the dirtiest steelmakers in the world - we can always load the extra carbon cost onto their imports and make them pay that way. In fact, I'm surprised we don't do that already for imported refined petroleum, in order to ensure a level playing-field.