Getting rid of the hot air

The Emissions Trading Scheme – a rough start, but it starts to look more promising. The pitfall however lies in greenwashing practices due to the scheme. Governments should be reluctant to excessive business lobbies to ease the ETS settings. It’s time to get ambitious.

Rod Oram, journalist and adjunct professor in the business school at Unitec in Auckland wrote this article for the Sunday Star-Times.

The Emissions Trading Scheme is working, but some sectors drag chain.

Two years ago, 78% of businesses opposed the Emissions Trading Scheme and Environment Minister Nick Smith was getting 1000 letters a week on the issue. Today, 63% support it, and he gets one letter a week.

This is evidence the ETS is working and business is engaging constructively with it, Smith said when he released the government’s annual report on the scheme last week.

But what if the ETS was acceptable only because it was so weak? What if business and government were merely paying lip-service and ignoring the real opportunities it creates to advance technology and value creation?

If that were true, they would be flirting with greenwash, running the risk of deeply damaging the national brand. Worse, they’d be storing up economic, energy and environmental problems, which will only get harder and more expensive to solve the longer we leave them.

At first glance that seems too pessimistic a view. After all, we generated 79% of our electricity from renewable sources over the past year, a 12-year high. Abundant hydropower thanks to a wet winter was the main factor.

The electricity investment picture is promising too. Consents have been granted for 11 new plants totalling 1340MW – 59% wind, 26% geothermal, 13% hydro and 2% tidal.

Forestry also has a good story to tell. The torturous policy debates about a carbon tax or a trading scheme created so much uncertainty, forest owners virtually stopped planting. Some also rushed to convert to dairy farms before they would be hit by deforestation charges under the ETS. As a result, deforestation totalled 40,000 hectares between 2005-08.

But, once the ETS was enacted in 2008, the economic outlook for forestry brightened. Landowners became eligible for tree planting subsidies, they began selling carbon credits to New Zealand emitters who need them to meet their obligations in the ETS, and to the likes of the Norwegian government, and international log prices have boomed.

Reflecting these positive developments, the government says a net 4700ha were planted last year, and it is forecasting 5700ha this year, and 7700ha next.

In some other respects, the performance of the ETS is diverging markedly from the track the government had forecast at the outset. Notably, the transport sector has generated 17.5% more emissions than forecast. Dr Smith says this was simply a miscalculation by officials.

That’s a big surprise, since this is the easiest sector to predict. Maybe we should be worried instead that fuel use remains high, despite weak economic growth, and users still aren’t taking efficiency seriously enough, despite high prices.

Before the ETS began operating, business lobbyists forecast all sorts of dire consequences. The rhetoric was “wild”, Smith told the Seventh Australasian Climate Change and Business conference in Wellington last Monday. “I can’t find a single case of jobs being lost because of the ETS.”

Even though National has delivered the extra safeguards for business, on top of the ones Labour had built into the original legislation, business fought it all the way. Many were still lobbying a year ago to stop electricity and transport fuels being activated in the ETS last July.

So the latest survey shows sweetness and light have dawned across business? No. It was very clear from comments at the conference by senior executives of Fonterra, Rio Tinto, Chevron and other companies that they grudgingly accept the ETS.

No wonder they do. They are subject to a minimal price of carbon, thanks to the likes of the government’s current two-for-one price. Emitters surrender only one credit for every two tonnes of carbon. Moreover, some trade- exposed companies can reduce their emissions thanks to only small investments or improvements in their operations. This then gives them surplus free credits that they can sell at market price.

Thus, the real test of their attitude is their views on what should happen next with the ETS. It turns out that fully 60% of them in the government’s recent survey argued the ETS should be weakened.

The government could easily oblige. It will soon receive the first report measuring the impact of the ETS on competitiveness. Based on its findings, the government could decide to leave the ETS settings essentially unchanged, tighten them by, for example, ending the two-for-one rate, or ease it by back- pedaling on the phase-out timetable for free allocations, and delaying the 2015 entry of agricultural emissions into the ETS.

The betting in Wellington is on an easing, particularly with a delay to agriculture.

Andrew Ferrier, Fonterra’s chief executive, argued for that at the conference. He said Fonterra was already making substantial energy savings, and had set itself the target of reducing agricultural emissions per litre by 30% by 2030. Leave us alone to do the best we can, don’t put counter-productive penalties on us through the ETS, he argued.

But all the safeguards in the ETS would ensure agriculture would get all the free credits it needs to ensure it suffered no adverse financial effects. They would only be phased out in line with the sector’s ability to reduce emissions.

Being in would bring more focus to developing the science, technology and business disciplines farming needs to improve its efficiency, reduce its emissions and improve its profitability and brand value internationally.

By lobbying to be let off the hook, Fonterra and the rest of the agriculture sector want to perpetuate the free ride on the science money taxpayers are pouring in to helping them reduce emissions, and the subsidy other sectors and taxpayers are making to cover farming’s ETS liabilities.

It’s time for agriculture to enthusiastically take up its responsibilities in the ETS. If it does, it will find it will make faster progress on these energy and emissions’ issues, as those sectors already in the ETS are finding.

So, enough of the lip-service by reluctant sectors. It’s time they got ambitious.

Source: Sunday Star-Times, August 2011

Comments are closed.