Comments on: An elegant solution http://blog.greens.org.nz/2007/03/26/an-elegant-solution/ hopping along the corridors of power Wed, 07 Jan 2009 21:28:09 +0000 http://wordpress.org/?v=2.3.3 By: kahikatea http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25597 kahikatea Wed, 28 Mar 2007 06:36:43 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25597 there is no double whammy effect. The policy says: 1. Companies who first bring fossil fuel into the NZ economy, whether by mining it here or importing it, will be required to purchase and transfer to government enough Kyoto-compliant emissions units to cover the carbon that is released when that fuel is burned. ... 2. The exception to the above (3.a.1) would be for the fuel that is sold to electricity companies. This fuel would be exempt because Electricity companies will themselves be required to purchase Kyoto compliant emission units, and transfer these to government. so the electricity companies buy carbon credits for the fuel they burn, and the fuel sellers buy carbon credits for the fuel they sell, except what they sell to electricity companies. So all fuel is paid for once. But it does seem needlessly complicated. Why don't the fuel sellers pay for carbon credits for all the fuel, and the government not directly gharge the electricity companies at all. Is it to stop the electricity companies stockpiling fuel? there is no double whammy effect. The policy says:

1. Companies who first bring fossil fuel into the NZ economy, whether by mining it here or importing it, will be required to purchase and transfer to government enough Kyoto-compliant emissions units to cover the carbon that is released when that fuel is burned. …
2. The exception to the above (3.a.1) would be for the fuel that is sold to electricity companies. This fuel would be exempt because Electricity companies will themselves be required to purchase Kyoto compliant emission units, and transfer these to government.

so the electricity companies buy carbon credits for the fuel they burn, and the fuel sellers buy carbon credits for the fuel they sell, except what they sell to electricity companies. So all fuel is paid for once.

But it does seem needlessly complicated. Why don’t the fuel sellers pay for carbon credits for all the fuel, and the government not directly gharge the electricity companies at all. Is it to stop the electricity companies stockpiling fuel?

]]> By: dbuckley http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25596 dbuckley Wed, 28 Mar 2007 06:21:54 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25596 On the 'leckky front: the carbon cost will fall heavily on the likes of Genesis, but lightly on Meridian. Will this mean that Meridian's juice will be significantly cheaper? - I doubt it, the difference in generation costs will go to the shareholders. Remind me who that is...? On the ‘leckky front: the carbon cost will fall heavily on the likes of Genesis, but lightly on Meridian. Will this mean that Meridian’s juice will be significantly cheaper? - I doubt it, the difference in generation costs will go to the shareholders. Remind me who that is…?

]]> By: Russel http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25594 Russel Wed, 28 Mar 2007 05:36:43 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25594 i/s. regarding coal, Huntly get their coal from overseas I understand so it's not going to affect them. regarding gas, the electricity generator contracts are pretty long term i think so not so llikely to be affected by an increase in the price of the domestic gas - not to mention that the same firms are often both gas users for generation and domestic gas distributors. so don't think there's too much scope for a double whammy effect. cheers Russel i/s. regarding coal, Huntly get their coal from overseas I understand so it’s not going to affect them.

regarding gas, the electricity generator contracts are pretty long term i think so not so llikely to be affected by an increase in the price of the domestic gas - not to mention that the same firms are often both gas users for generation and domestic gas distributors.

so don’t think there’s too much scope for a double whammy effect.

cheers

Russel

]]> By: Russel http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25530 Russel Tue, 27 Mar 2007 08:14:03 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25530 i/s, I see what you're saying. will cogitate. thanks, Russel. i/s, I see what you’re saying. will cogitate. thanks, Russel.

]]> By: idiot/savant http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25525 idiot/savant Tue, 27 Mar 2007 05:35:21 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25525 Russel: No, I understood that part, and it was clear enough in the primary document. The problem is that the electricity sector is not the sole market for natural gas or coal. Natural gas and coal providers will therefore be required to purchase credits to cover their non-electricity sales (a big chunk of the market for gas, and an even bigger one for coal). And this will affect the price paid not just by the non-electricity sector, but by the electricity sector as well. If the aim is to advantage renewable generation, exactly the same effect is gained by dropping the exception and having a consistent point of obligation at the fuel supply. The price of fossil fuels for generation will rise (just as for transport), renewables will become more profitable, and generators will have an incentive to switch. So why try and be complicated about it? Russel: No, I understood that part, and it was clear enough in the primary document. The problem is that the electricity sector is not the sole market for natural gas or coal. Natural gas and coal providers will therefore be required to purchase credits to cover their non-electricity sales (a big chunk of the market for gas, and an even bigger one for coal). And this will affect the price paid not just by the non-electricity sector, but by the electricity sector as well.

If the aim is to advantage renewable generation, exactly the same effect is gained by dropping the exception and having a consistent point of obligation at the fuel supply. The price of fossil fuels for generation will rise (just as for transport), renewables will become more profitable, and generators will have an incentive to switch. So why try and be complicated about it?

]]> By: toad http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25520 toad Tue, 27 Mar 2007 03:33:36 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25520 Russel said: <i>This will have some intereting effects on the electricity market such as bigger profits for renewable generators because generally the marginal cost of electricity generation at any one point sets the price for the whole market.</i> Yep - Meridian will love this policy. Solid Energy will hate it. It definitely sends the right signals. Russel said: This will have some intereting effects on the electricity market such as bigger profits for renewable generators because generally the marginal cost of electricity generation at any one point sets the price for the whole market.

Yep - Meridian will love this policy. Solid Energy will hate it. It definitely sends the right signals.

]]> By: Russel http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25518 Russel Tue, 27 Mar 2007 03:18:35 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25518 Hi I/S Not sure you're right but maybe I haven't understood you properly. Under the policy, Mobil pays for the carbon credits on the oil they import. They then no doubt pass this on to consumers at the petrol pump (maybe 5c/L at $30 tonne CO2). And Contact pays for the carbon credits to cover the emissions from the gas they import to burn in their power station. And they will probably pass this one to electricity consumers (don't have the numbers in front of me). This will have some interesting effects on the electricity market such as bigger profits for renewable generators because generally the marginal cost of electricity generation at any one point sets the price for the whole market. Looking again at your post, I think the fault is mine because when I summarised the policy I didn't make it clear enough that the importers of the fuel for electricity generators won't have to buy the credits, the generators themselves will. Russel Hi I/S

Not sure you’re right but maybe I haven’t understood you properly.

Under the policy, Mobil pays for the carbon credits on the oil they import. They then no doubt pass this on to consumers at the petrol pump (maybe 5c/L at $30 tonne CO2).

And Contact pays for the carbon credits to cover the emissions from the gas they import to burn in their power station. And they will probably pass this one to electricity consumers (don’t have the numbers in front of me). This will have some interesting effects on the electricity market such as bigger profits for renewable generators because generally the marginal cost of electricity generation at any one point sets the price for the whole market.

Looking again at your post, I think the fault is mine because when I summarised the policy I didn’t make it clear enough that the importers of the fuel for electricity generators won’t have to buy the credits, the generators themselves will.

Russel

]]> By: idiot/savant http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25501 idiot/savant Mon, 26 Mar 2007 22:37:19 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25501 Luke: unfortunately, that is exactly what it will do. Once you establish a marginal price (for fossil fuel companies) of production / importation / whatever, it will be incorporated into the market price, even when they don't have to pay it. It's the same effect which saw electricity prices rise to include the cost of carbon in Europe, even though the generators were grandparented the permits. So, those fossil fuels they buy will already include the carbon cost - (which is BTW enough to get them to "consider the net effect of generation"; to the extent they don't attract a carbon price, renewables will be favoured and generators will shift their generation patterns). There are international trades - Chch City Council received Kyoto AAU for a landfill gas project, which they sold to the Dutch, while European companies buy Kyoto credits to feed into the ETS - but its all ad hoc at the moment. It's just not big enough or reliable enough to underpin our policy. And its unlikely to be, unless some other much larger countries run their own emissions trading scheme with devolved Kyoto credit. Luke: unfortunately, that is exactly what it will do. Once you establish a marginal price (for fossil fuel companies) of production / importation / whatever, it will be incorporated into the market price, even when they don’t have to pay it. It’s the same effect which saw electricity prices rise to include the cost of carbon in Europe, even though the generators were grandparented the permits. So, those fossil fuels they buy will already include the carbon cost - (which is BTW enough to get them to “consider the net effect of generation”; to the extent they don’t attract a carbon price, renewables will be favoured and generators will shift their generation patterns).

There are international trades - Chch City Council received Kyoto AAU for a landfill gas project, which they sold to the Dutch, while European companies buy Kyoto credits to feed into the ETS - but its all ad hoc at the moment. It’s just not big enough or reliable enough to underpin our policy. And its unlikely to be, unless some other much larger countries run their own emissions trading scheme with devolved Kyoto credit.

]]> By: bjchip http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25498 bjchip Mon, 26 Mar 2007 21:25:09 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25498 Stuey - I agree, I was looking at it on the internal forum earlier and I liked what I saw. I like it even better now. Think "big blue marble" which is one of the phrases that came out of the space program... but I have no idea why it isn't a green background. Not worrisome. I am also VERY happy to see this production. respectfully BJ Stuey - I agree, I was looking at it on the internal forum earlier and I liked what I saw. I like it even better now. Think “big blue marble” which is one of the phrases that came out of the space program… but I have no idea why it isn’t a green background. Not worrisome. I am also VERY happy to see this production.

respectfully
BJ

]]> By: Luke http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25491 Luke Mon, 26 Mar 2007 20:37:32 +0000 http://blog.greens.org.nz/2007/03/26/an-elegant-solution/#comment-25491 Um, I don't think the "kludge" does that. It is supposed to be there so the Generators don't pay twice, once when fuel enters and again for generation. My understanding of it is that this allows Generators to consider the net effect of generation thereby using non-GHG emitting generation to offset GHG emitting generation. I think this is equivalent to giving Generators Carbon credits for non-GHG emitting generation which they could sell to the oil/gas/coal importers. And I'm no expert on international market for carbon but I thought that there were already New Zealand projects which sold credits international? Um, I don’t think the “kludge” does that. It is supposed to be there so the Generators don’t pay twice, once when fuel enters and again for generation. My understanding of it is that this allows Generators to consider the net effect of generation thereby using non-GHG emitting generation to offset GHG emitting generation. I think this is equivalent to giving Generators Carbon credits for non-GHG emitting generation which they could sell to the oil/gas/coal importers.

And I’m no expert on international market for carbon but I thought that there were already New Zealand projects which sold credits international?

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