Jeanette Fitzsimons
ETS: Four minority reports = FAIL

The long awaited report of the special select committee to review the ETS – yes, that one with the terms of reference that didn’t even mention reviewing the ETS – you know, the one forced on the government by a coalition partner who then mostly didn’t even turn up to occupy their place on it – yes, THAT one – has finally reported.There is a main report – and four minority reports. That’s right, Labour, the Greens, the Maori Party and Act all disagreed sufficiently with the report that they wrote minority reports attached to it. Nothing could illustrate better that we do not have cross party consensus on climate change. The Government only managed to pass the report by majority because Act did them a favour and voted for it – despite a 12 page minority report dissociating themselves from almost everything in it. There are really only National and Peter Dunne supporting the report unconditionally. That’s a minority, both in the committee and in the House.

It would have been nice to try to reach agreement on more, and if we had really debated the issues we might possibly have done so. However, after many weeks of hearing submissions, most of them the same as the ones we heard last year when considering the legislation, we then didn’t sit for weeks until the government was ready to proceed, then crammed consideration into a few short meetings. The day we met to vote on the report we had still not discussed about half of its text.

This is not surprising. The special committee review was never about forming policy on the ETS. It was always a smokescreen to cover the gap while the government made up its mind what it wanted to do. It was allowed to conclude only when the government had done this, and then it had to conclude hurriedly without too much discussion. The problem for the Government is that it has not been able to keep either of its coalition partners with it.

At least the report sidelines the climate deniers and agrees the science is soundly based and there is a need for action. (Everyone except Act.) There is universal agreement that we must both mitigate and adapt to climate change, they are not alternatives. There is wide agreement on proceeding with an ETS (except Act and the Maori party, who prefer a carbon tax.).

The biggest sticking point is over who should bear the cost. Labour’s ETS, which is the current law, is overly generous in allocating the biggest polluters 90% of their 2005 pollution for free until 2019. This will be paid for by the rest of us. But National and Peter Dunne see this as too hard on heavy industry and propose the allocation of free credits on an output, or intensity, basis. That means no-one pays the full cost of carbon at the margin of their activities, and the more they grow and pollute, the more free credits they get at the expense of the rest of us. It also means NZ’s emissions continue to grow as fast as the economy grows. There is absolutely no transition to a low carbon economy. It is much, much worse than no ETS at all.

As if this wasn’t enough, the main report (which a majority voted for but only a minority supports) speaks very favourably of a price cap on carbon at least for a while. This would make it easier to align our ETS with the scheme the Australian government wants but can’t get the votes for in the senate, so it may never happen anyway. In order to align with a non-existent Australian ETS the NZ government (or some of it) wants to artificially reduce the price on carbon below the world price. This is a massive wealth transfer from households and small business and taxpayers to the big industrials and intensive farmers.

The winners would be the Rio Tinto Aluminium smelter, NZ Steel, Holcim cement, big MDF and other wood processing plants – all large corporates which are owned overseas. So that’s a large flow of funds out of the NZ economy. Nothing could illustrate so well what an economic colony we have become. The coal industry and intensive farmers would benefit too. Everyone contributing to accelerating climate change would get a subsidy, and everyone contributing to solving the climate change problem would pay more for the privilege.

Households would end up paying higher electricity and transport fuel prices to cover their own emissions, and higher taxes to cover the emissions of the big polluters.

42 thoughts on “ETS: Four minority reports = FAIL

  1. I was under the impression that the Green party would support a carbon tax. Has this changed?

    Trevor.

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  2. You say Rio Tinto would benefit. While the price of electricity would be lower if the electricity companies don’t have to pay for their CO2 emissions, I suspect you are refering to the smelters own CO2 output, which is significant. However the smelter oxidises (burns) carbon anodes, and I was under the impression that these were made on site from wood products rather than fossil fuels, so overall the smelter process is CO2 neutral if you include growing the wood. Is this incorrect?

    Trevor.

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  3. It was our preferred means of putting a price on carbon since 1993, but when the big parties scuttled it in 2005 and the ETS became the only game in town, we accepted that reality. We now have an ETS in current law and there is no serious proposal to do something different. The issue is whether the Nats can be persuaded not to completely gut it. The prognosis is not good.

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  4. I think the Green Party’s preference for two decades has been a carbon tax, but that was taken off the table by the two old grey parties. Why would it be up to us to re-litigate their (poor) decisions?

    An ETS is the game here at home and internationally. Talk of a carbon tax is now just a further delaying tactic, not a real option.

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  5. Carbon credits still have to be purchased for NZ emissions. With no emissions cap Rio Tinto benefits by being able to grow their emissions, knowing that the Kiwi taxpayer will purchase the carbon credits for them. It would be cheaper just to can the ETS and pay for the credits outright. It would also be more honest about what’s going on, which is why the Nats will keep up this charade.

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  6. “..but that was taken off the table by the two old grey parties..

    ..Why would it be up to us to re-litigate their (poor) decisions?..”

    excuse..me..!

    ..w.t.f.are you paid for..?

    ..if not to do that..?

    ..w.t.f. do you do all day..?

    the ets is a f*cken ponzi scheme..

    a cynical ‘scammers/sharp-dudes’ game..

    it is them who will be the only winners..

    start slapping carbon taxes on everything that pollutes..

    ..and reward the ‘good guys’..with tax breaks/w.h.y..

    do you see yr role to just lie there passively..?

    as ‘the two old grey parties’..

    have ‘their way’ with you..?

    i mean..i don’t want to be repetitive here..

    but..f.f.s..!

    ..eh..?

    phil(whoar.co.nz)

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  7. Gee phil. I hadn’t noticed us sitting on our arses down here. In fact, what I can see from my point of view is a party, led by Jeanette, working their arses off to prevent this thing from turning into a disaster, and to the limited extent within our power, succeeding.

    You have parroted our stated aims and policy as if we hadn’t thought of it and weren’t working towards it.

    If you see an opportunity for progressing the Green’s position on ecological taxes that we don’t, speak up. But going off half cocked about an opportunity that isn’t even on the table is a bit lame.

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  8. what ‘i’m ‘going on about’.;

    is yr history of passivity ..in yr dealings with first labour..

    (jeanette was the labour govt spokesperson on the environment..

    under her ‘watch’…all the stats went south/got worse..

    w.t.f. was with that..?..eh..?)

    ..(and now this..?..

    and why aren’t the green party co-leaders out there in the media..?

    ..gong..oi..!

    i am not the first/only one to note their aopparant absence from the dialogue on this..?

    on what is surely a pillar of green thought..?

    ..even ‘action’..?

    (and hey..!…a specia; ‘disengenuous-award’ for you..

    ..eh frog..?)

    phil(whoar.co.nz)

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  9. Valis – you appear to have missed my point. If Rio Tinto use NZ wood to make their anodes, then emissions from the anodes are cancelled by the CO2 used to grow the wood, providing the trees are replanted and grown to an equivalent size.

    Trevor.

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  10. I don’t know. It would seem if that were an “emissions neutral” activity then it could go on regardless of what the ETS looked like.

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  11. Jeanette was the spokesperson on energy efficiency during the last term only. There was definite progress in that area while she was there, but we constantly slagged Labour for their bad performance elsewhere. Jeanette did hours of media yesterday and got some coverage, but as usual, not what the issue deserves. This ain’t her fault and it ain’t over yet either. No one is lying about, ffs.

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  12. “..Jeanette was the spokesperson on energy efficiency during the last term only. There was definite progress in that area while she was there,.”

    care to give us a brief rundown on what that ‘definite progress in that area while she was there,.”..

    ..actually was..?

    (i must have missed it..)

    phil(whoar.co.nz)

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  13. My understanding is that it’s Rio Tinto’s electricity consumption that exposes them to the price of emissions. Invercargill uses more electricity than Wellington and Christchurch put together, and Rio Tinto is a huge part of the reason for that.

    Of course it’s actually carbon-neutral electricity from Manapouri, but there is an opportunity cost in emissions, due to that electricity being unavailable to replace electricity from thermal power stations in the North, so the market will assign some of the cost of carbon credits to it.

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  14. Why doesnt NZ build a bike and rail factory, and use NZ steel to begin creating a low carbon economy and greens collar jobs programme –

    better than a carbon trading scheme for carbon traders and big polluters.

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  15. ‘Feeding the bonfires’ as described by Helen Clark on the night of her toppling.

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  16. treesoftomorrow says:
    September 1, 2009 at 1:40 pm

    > Why doesnt NZ build a bike and rail factory, and use NZ steel to begin creating a low carbon economy and greens collar jobs programme

    Because National are in Government and they don’t want to follow the Green Party’s ‘Getting There’ proposal for reducing emissions. You could ask them why not.

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  17. Once you’ve closed the smelter Kahikatea how are you going to magic all that power up to the north island or are you actually Nikola Tesla and you plan to move the electricity without wires from one end of the country to the other.

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  18. Treesoftomorrow = Rob Muldoon.

    I mean if your business idea is so great Trees what is stopping you from starting a business to execute it.

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  19. Yes because its the government job to build bike and rail factory’s
    Where do I go to get my little red book again?

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  20. There’s this thing called wires. To get that volume of power further north, you would probably install large ones, often referred to as cables.

    Of course the fact that installing these cables costs money keeps the market value of that electricity lower than it would otherwise be, but it would still go up as a result of putting emissions charges on thermal-generated power.

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  21. Kahikatea

    We should not shut down the smelter. The production would be displaced to coal-fired plants in China and elsewhere, so we’d be increasing the global output of CO2. It is too easy for a casual Green to look at that power and say “shut-it-down so we can use it”. It is really quite wrong to do so.

    It is wrong to try to build extreme-high-voltage wires the length of a fault line and then expect the supply to be robust. In particular the conversions involved crossing the strait, and the distances involved mean large (I would guess 20%) losses by the time that electricity reached Auckland.

    The urge to shut down industry has to be resisted. We will need that aluminum if we want a bicycle factory, or even something in a small commuter vehicle plant. Building such things in the near neighborhood of the aluminum production makes sense. The energy is THERE, build the factories THERE. Build the wind farms near THERE.

    Yes, Invercargill will then be a more energy intensive place than Wellington. It is colder, it has more energy resources nearby, it makes sense to build the consuming industry THERE. This isn’t wrong or bad. It is the fundamental basis of any efficient industry.

    What does Auckland PRODUCE that requires energy? It is a shipping center or a shopping center, depending on your perspective. Wellington? The energy content of half-a55ed laws is pretty inconsequential.

    respectfully
    BJ

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  22. bjchip says:
    September 2, 2009 at 10:40 am

    “Kahikatea

    We should not shut down the smelter. The production would be displaced to coal-fired plants in China and elsewhere, so we’d be increasing the global output of CO2. It is too easy for a casual Green to look at that power and say “shut-it-down so we can use it”. It is really quite wrong to do so.”

    I actually never suggested we should – I was just referring to the fact that it could be shut down and the power diverted north because that fact is part of what sets the market value of the power it uses, and hence the way that an emissions trading scheme would affect its costs.

    I think the smelter should be able to afford to pay the market cost for its electricity. This market cost is lower per unit than what you or I pay because of transmission issues, timing of use and their ‘take-it-or-pay-anyway’ payment arrangement. All I was arguing was that Rio Tinto doesn’t deserve an exemption from the ETS.

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  23. bjchip says:
    September 2, 2009 at 10:40 am

    “Yes, Invercargill will then be a more energy intensive place than Wellington. It is colder, it has more energy resources nearby, it makes sense to build the consuming industry THERE. This isn’t wrong or bad. It is the fundamental basis of any efficient industry.”

    Yes, Invercargill does make sense as a location for energy-intensive industry. I only mentioned it because a big part of its energy consumption currently is the aluminium smelter, and I wanted to make a point about how much electricity the smelter uses. This was relevant to my explanation of why the smelter is affected by an ETS as much as it is.

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  24. kahikatea – Aluminium’s emissions profile in our country is based solely on the production process, because, as you pointed out, manapori power is ‘essentially’ carbon neutral, now that the CO2 from the dam is almost all spent.

    I’m afraid I would have to agree with bjchip that to close the smelter does nothing to improve the world’s emissions (and next to nothing to improve NZ’s) If they threaten to leave because of emissions trading, I say call their bluff. (Pun excused, please) They won’t do better elswhere.

    When it comes to building a low carbon economy, an aluminium smelter is more valuable than the steel plant. Aluminium will be in much greater demand when we try and lighten everything that moves. (again. we started that process in the ’70s, then lost our heads)

    I say we keep both plants, and cash in on the low carbon future by making value added products from both of them here in NZ, rather than exporting the raw goods like a colony.

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  25. frog says:
    September 2, 2009 at 11:01 am

    “I’m afraid I would have to agree with bjchip that to close the smelter does nothing to improve the world’s emissions”

    thanks. I hope you’ll see my post above in which I explain that I wasn’t actually arguing for it to be closed. I think the misunderstanding that I was saying that came from Turnip’s post.

    “Aluminium’s emissions profile in our country is based solely on the production process, because, as you pointed out, manapori power is ‘essentially’ carbon neutral, now that the CO2 from the dam is almost all spent.”

    That’s where my earlier point about opportunity cost of electricity consumption came in. They use electricity than could be used to take the place of thermal generation elsewhere (I didn’t say should – the cost comes from the fact that it would otherwise be used that way, irrespective of whether that would be a good idea). The only real consequence of this is that I think it justifies them being hit by power price rises due to the ETS, rather than getting out of this through special pleading.

    My conclusions may be wrong even there, because I’m not sure how to take into account the fact that they are competing with Chinese aluminium smelters which use fossil fuel but may continue not to be covered by emissions limits under the successor to the Kyoto protocol.

    I actually believe that the best way for New Zealand to respond to environmental damage due to aluminium smelting is to tax aluminium consumption in New Zealand, rather than production, to take account of the fact that our production is less polluting than the world average.

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  26. frog says:
    September 2, 2009 at 11:01 am

    > I say we keep both plants, and cash in on the low carbon future by making value added products from both of them here in NZ, rather than exporting the raw goods like a colony.

    How would you deal with the fact that aluminium is not all created equal? New Zealand aluminium is at the high-purity end, so for uses that don’t require high purity you would actually want to encourage NZ businesses to use imported aluminium, rather than encouraging them to use local aluminium by discusraging the export of raw aluminium?

    Or are you suggesting that we encourage NZ businesses specifically to get involved in the industries that require the highest purity of aluminium?

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  27. Kahikatea

    Sorry, Turnip was responding to an implication. I sort of read the same thing into what you were saying, so so so..

    My thoughts about the Aluminium …. I think the reason we concentrate on the high end because we can and it provides a point of differentiation that justifies our prices which on the global scale, have a hard time competing with the low cost coal-fired no-carbon-tariff varieties from china. (That is an “I think” at the front of that absurdly long sentence).

    That quality difference isn’t entirely necessary. It can be traded for volume. The smelter has some choices about how it charges its pots.

    The question is what happens as the price of power from carbon intense sources goes up… as it must. Our costs stay pretty constant. The price of Al from the coal plants goes up. The balance changes.

    If (on the other hand) they don’t do anything meaningful at Copenhagen and the price of the CO2 isn’t built into the system and traded or taxed, then we will need the Al for ourselves (and every bit of industrial ability we can stock up with) to maintain some sort of civilization during the ensuing collapse.

    Either way, we keep the plant.

    respectfully
    BJ

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  28. Points taken kakihatea. i, like I see bjchip did, misread your intentions. The opportunity cost issue is significant, and is why I would always call their bluff if they threatened to leave. We would, as you pointed out, have to build more transmission in order to take advantage of the extra 15% of generation, but in any case the cost of electricity would collapse in Southland first and then in the rest of the country should Tiwai close. Then the issue of relative short run marginal costs kicks in, (possibley reviving old fossil fuel stations), energy efficiency measures get tossed out as ridiculous because power is so cheap, and we just return to a different part of the price rise spiral as consumption rises to meet the ‘abundant’ source of energy.

    As for what kind of aluminium industries, I mean precisely those high end things that use the stuff made here and have a huge value added proposition for our economy. Making cheap crap from cheap aluminium would be a loser. There’s always someone else who could build it cheaper with cheaper labour. Give us the high end stuff! Aeronautics maybe?

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  29. bj and others-in-the-know..
    is the aluminium smelted at Tiwai used in the weapons industry? After all, it’s reputedly top grade stuff. Can’t see them using inferior grades, given that the industry is hardly strapped for cash.

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  30. probably greenfly – quite possible the very centrifuges that Sadam Hussein bought to use as ‘rocket casings’! I can’t say for sure what the exact grade of the aluminium is, but it is amongst the good stuff, made in quantity and probably used elsewhere for all manner of things we might consider objectionable.

    Same could be said about the output of many of our politicians…

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  31. The “good stuff” is needed wherever the alloy has to have predictable strength and fatigue characteristics. Airplane wings are a good example, beer cans are not. Once sold in raw form (because we don’t make anything useful with it ourselves – to our everlasting shame) the ability to be sure what it is being used for is minimal.

    It is a processed material, but not a finished good, and whoever makes those finished goods isn’t going to ask us whether it can be (or is) used in weapons.

    A good way to ensure it is NOT used in weapons manufacture is to make something else ( bicycle, car, boat, engine-block or airplane) with it first.

    BJ

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  32. Re: Solar Roadways
    My first thought, which I cannot see addressed anywhere on the relivant site, is keeping the surface clean so as to minimise drop off of power generation. I mean keeping the ice off the road is one thing but what about the mud, dust, and tyre marks?
    Additionally, it seems to me that instead of recharging points, if your going to totally revamp the network as suggested here, induction would be a far better option; kind of like a tram cable except built into the panels and not needing any actual contact. A Auckland university researcher was working on it rather successfully from memory.
    From what they suggest it would be economic but I cant see it sticking to that budget, even if it is almost $10,000 per panel, or even being implimented to anywhere near the extent cited. Maybe in airports?

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  33. BJ,

    Alcan had a full a,uminium process facility in South Auckland years ago (worked there for a while).

    Included melting furnace, casting bay for pencil (extrusion) and billets (plate, sheets, etc.).

    Two four high rolling mills to reduce billets to plate and sheet, 4 extrusion presses plus a fully set up aluminium foil mill.

    Included die making facilites, roll grinding machinery, etc. Even had its own fire brigade.

    All gone and to replicate this to enable local finishing of locally smalted aluminium would cost many many billions.

    Not likely to happen so we will be at the mercy of chinese, canadian and brazillian mills.

    Mind you we have a fully functioning steel mill using locally sourced raw materials (ironsand and coal). Yet I bet steel for new capital projects such as the electricity pylons will be sourced overseas.

    As I remarked in an earlier post, New Zealand has neglected manufacturing now for so long that we do not have the skills base any longer with people in order to fire it up again.

    Here is why New Zealand has a problem. We source a locally manufactured part to include with finished parts. Cost locally is $400 for one.

    Cost from China for the same quality part (and including some special tooling required to provide a maintenance service to the customers) is $12.00 landed in New Zealand.

    Yes we have to buy 100 at a time (about 12 months worth of stock) but look at the savings.

    And that is the problem getting New Zealand manufacturing back up to speed.

    No skilled staff, no manufacturing infastructure and uncompetitive pricing.

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  34. The aluminium smelter has another thing going for it – when we have a “dry year” and a threat of electricity shortages, its power consumption can be lowered. It therefore helps to support electricity prices thus encouraging more renewable electricity generation without the attendant risks of shortages when there is less renewable generation available.

    Trevor.

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  35. Gerrit

    No disagreement about NZ neglecting both manufacturing and retention of skills.

    Why did they build that plant in Auckland? There are people there to be sure, but the power to run the place would have to have been a problem.

    We’re in a bad place economically, and part of it has to do with not recognizing the place we are in. Our lack of any attempt to protect ANY basic industries is … a sort of death-spiral, as to get work and pay commensurate with their abilities our best and brightest migrate to other countries.

    There are NOT jobs here for most of them, and there is certainly not a proper pay packet associated with the jobs that are here… and when they look to buy houses the prices have all been bid into orbit by people and banks who are sucking on the public teat to pay the interest, and don’t much care about the price as a result.

    So they leave and the human resources available to build industrial production back to something appropriate to an isolated island our size are substantially diminished.

    We have the energy resources but we malinvest our Capital brutally and we punish our best and brightest twice… unless they elect to become landlords too. That’s just wrong on so many levels.

    So you won’t get much disagreement from me.

    respectfully
    BJ

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  36. The aluminium smelter releases CO2 formed from the reaction of the oxygen in the bauxite with the carbon anodes. My understanding is that these anodes are made from wood, so the smelter is actually neutral with respect to CO2 emissions assuming the wood is harvested from forests that are replanted and regrown.

    This raises an interesting possibility. The CO2 is not produced from oxygen from the air, so it isn’t necessarily contaminated with large amounts of nitrogen. Therefore it could be isolated reasonably easily, and if it can be sequested underground, then the entire aluminium smelting process may become a CO2 sink.

    See http://blog.greens.org.nz/2009/08/04/can-we-do-40-yes-we-can for links to more on CO2 sequestration.

    Trevor.

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