What’s wrong with the National-Maori Party ETS?

While we haven’t seen the bill yet, Monday’s announcement makes it clear that this is the sort of ETS you have when you think climate change is a hoax. It imposes a considerable bureaucracy and compliance burden on the economy with no benefit to the climate.

Basically, it’s less obligation for everyone, and more delay. Taxpayers pick up the cost. It seriously weakens the scheme we have now, and will do little to reduce emissions.

There are serious problems with entry dates, a price cap, free credits to big emitters for the rest of the century and a two for one deal that halves the price signal.

However the worst feature of the new proposal is none of these. It is the proposal that free credits be allocated on the basis of how much a firm produces. It’s called “intensity based” or “output based” allocation. It means there is no limit ever to NZ’s emissions; they never peak and start to trend downwards; and the incentive is to grow our most polluting industries. It works like this.

Suppose a cement plant (or steel, or aluminium) currently produces 100 tonnes of product and emits 500 tonnes of greenhouse gases. Under the existing law, let’s assume the same numbers were true of 2005. They would then get free allocations for 90% of this pollution, or 450 units, and have to purchase 50 units. If they managed to become more efficient and reduce their pollution they would have less to purchase. If they grew their production to 150 tonnes at the same energy intensity and therefore emitted 750 tonnes of carbon dioxide equivalent, they would still get only 450 free credits.

So when they did the financial analysis about whether to expand production, the cost of carbon credits they would have to purchase would be part of the calculation. There would be a strong incentive to find new technology that emitted less pollution per tonne of product, or to invest their capital in something with lower greenhouse gases per dollar of value created. This is how a country can transition to a low carbon economy. At the same time, cement, steel and aluminium become more expensive and new technology is developed to build strong buildings using less cement, and in some circumstances to substitute strengthened timber for steel or concrete.

But that was last year’s scheme, which is about to be cancelled. Under National’s new scheme, the plant gets a free allocation for every tonne of product they make. If the starting  point is 450 tonnes for 100 tonnes of production, when they expand to produce 150 tonnes of product they get 90% of 750 units, or 675 units. When considering whether to expand, the firm never faces the full price of carbon on the next unit of product. They only ever face 10% of it. This leads to an economy where our most carbon and energy intensive industries grow and there is little reason for new technology or low carbon production or switching from high to low intensity materials. It is an economy stuck in the past, unable to transition to the new, hi-tech, climate-friendly future.

There is also a provision that the allocation will be related to the industry average emissions for that level of production. This raises more problems than it solves. It is unclear at this stage whether the industry average is international or NZ, and how it is determined.

Of course, if the plant expands its production and raises its emissions, that becomes part of New Zealand’s obligation under Kyoto. As a country, we have to purchase units overseas to balance out that extra 250 tonnes. The difference between 450 free units under the old scheme, and 675 under National’s proposed scheme is picked up by taxpayers.

In short hand, the more you pollute the bigger the subsidy you get. It’s not polluter pays, it’s pay the polluters.

I’m going to Copenhagen in December. I’m thinking of a large sign round my neck: Ashamed to be a New Zealander.

41 Comments Posted

  1. Steven Joyce wants Kiwirail to be more profitable so the government doesn’t have to subsidise it:

    Meanwhile the government is subsidising Kiwirail’s trucking competition by not charging them for their CO2 emissions. Assuming the price of CO2 emissions to New Zealand will be around $25-$100/tonne, this is a subsidy equivalent to around 7.5-30 cents per litre of fuel. Kiwirail’s fuel costs are considerably lower, so this is penalising Kiwirail.


  2. This saturation issue is only an issue if you are using a simplistic model that was realised to be inadequate 50 years ago. Have a look at The Discovery of Global Warming

    (hat tip to BOSH).

    Essentially heat energy absorbed in the lower layers can be reradiated upward and absorbed again in the higher layers. Those higher layers are cold, so there is little water vapour, so added CO2 there has a significant effect.


  3. While we all share your concerns, I would like to know what we can do as an effective alternative, given that the world seems unable to accept even a strong trading system where real reductions might be made while still allowing for the market ticket clipping that would occur.

  4. AAArrrr!!!! Climate Justice Pirate Cap’n Trade Disrupts Danish Minister of Climate in NYC ahead of COP15

    Environmental activists, some dressed as “Trillionaires for Bad Math” today delivered a “climate bill” to Copenhagen, ahead of schedule. The mock “bill” was delivered at a 3 pm lecture at Columbia University’s School of International Public Affairs hosted by Danish Climate and Energy minister Connie Hedegaard.

    The centerpiece of the banner is an image of a bewildered Al Gore, who introduced the concept of tradable emissions allowances into the UN process in Kyoto in 1997.

    Leading Trillionaire, Cap’n Trade, dressed in pirate regalia, told the assembled crowd, “‘Tis a bloody shame for the climate that Congress has chosen me to clean up this mess for ‘em. But I don’t mind a bit,” he continued, “’cause rising seas and booty and plunder are just my thing and soon the land, air and water will be all mine.”


  5. “Got the inside running on a switch Wat? One that ‘hasn’t kicked-in quite yet’!”

    Yeah, he got the inside running by reading an opinion columnist’s interpretation of a speech by one scientist, a speech which the opinion columnist may not even have understood correctly.

  6. Got the inside running on a switch Wat? One that ‘hasn’t kicked-in quite yet’!


    Are you investing in extra thermals?

  7. As I understand it, there is evidence that we are on the cusp of a switch from warming to cooling. It hasn’t kicked-in quite yet.

  8. “The problem being the natural warming cycle does not mitigate the man-made warming impact, but exacerbates it.”

    Indeed. This cool phase is nearly as warm as 1998, which was a warm phase. If this is a cool phase, watch out for the next warm phase.

  9. The point is that, contrary to years and years of lies and propaganda, any anthropogenic CO2 influence is completely insignificant and absolutely dwarfed by all the natural agents. Moreover, because of the saturation issue, the effects of any increase in CO2 are diminishing rapidly to vanishing point.

  10. SPC,

    – “It is well known that we are currently in a (natural) cooling cycle”

    Well quite. A natural cooling period following a natural warming period.

    Natural climate change.

  11. It is well known that we are currently in a (natural) cooling cycle – a scientist expressing awareness of that, is not in any way his making a repudiation of man made “global warming” causing climate change (the cooling cycle will come to an end but global warming and resultant climate change will occur).

    Gratuitously, Iraneaus was wrong to apologise for lies, Augustine of Hippo was wrong to apologise for murder, and Gregory V11 was a German.

  12. “Imagine if Pope Benedict gave a speech saying the Catholic Church has had it wrong all these centuries; there is no reason priests shouldn’t marry. That might generate the odd headline, no?…When a leading proponent for one point of view suddenly starts batting for the other side, it’s usually newsworthy.

    So why was a speech last week by Prof. Mojib Latif of Germany’s Leibniz Institute not given more prominence?

    Latif is one of the leading climate modellers in the world. He is the recipient of several international climate-study prizes and a lead author for the United Nations Intergovernmental Panel on Climate Change (IPCC). He has contributed significantly to the IPCC’s last two five-year reports that have stated unequivocally that man-made greenhouse emissions are causing the planet to warm dangerously.

    Yet last week in Geneva, at the UN’s World Climate Conference–an annual gathering of the so-called “scientific consensus” on man-made climate change –Latif conceded the Earth has not warmed for nearly a decade and that we are likely entering “one or even two decades during which temperatures cool.”


    In other words, the climate is behaving in a way which flatly contradicts the AGW alarmism. Sounds like the gravy train is coming to an end. People won’t be happy as it becomes more and more obvious how the Greens have exaggerated and hyped-up the scare for their own selfish ends.

  13. What puzzles me most is just what were the Maori Party Thinking? Did they actually think that this amended ETS will have any effect on CO2 emissions? And were the supposed 2000 insulated homes worth the cost of $1.2+ Billion PER YEAR to the taxpayer? And what incentives/initiatives are there for farmers to reduce GGE? A 90% subsidy by the taxpayer to farmers for ever? What were they thinking???

  14. Fair enough. I live in the ‘H’ town and whilst the rest of the country saunters by, we have headlines of the ‘Moon Landing’ order here.
    And the issues of selling Votes for bully muscle has come up (how could it not?)
    And it has underlined the shortcomings of MMP (a system I support).
    Further, it makes the Maori Party look like an Apartheid Pusher….you may have missed ’81 in NZ BJ (I sure did) …. those were interesting times – no one seems to want to air films such as ‘Patu’ but I assure you, you’ll learn more about the ‘real NZ’ in an hour, than you could in Forty Years just shootin the breeze
    Regards Mark

  15. Many agree, and until now one would have thought National was amongst them, that reducing the tax burden on incomes is a good idea and that this can be done by spreading taxation onto more areas of the economy – such as carbon pollution and rental property capital gains.

    Yet instead the cost of our Kyoto committments is passed onto taxpayers and not the users of energy.

    After this fiasco, there is need for best practice farming by government regulation and an increase to .7GDP in foreign aid (delivered in assistance to develop clean energy), or otherwise our New Zealand pure campaign is going to get the “yeah right Tui thumbs down”.

  16. That’s an insightful piece Nandor. The disquiet that Metiria displayed over moves to align with the Maori party, or at least forge bonds with them, around the time of the election, are explained in part by your article.
    E Whaea Tariana! He aha tou raruraru!

  17. I am ignoring the ‘H’ thread. You guys make up your minds and put something in there or not, I don’t really care. I won’t spend time and effort on something as meaningless. Nobody should.

    That observation applies to both sides.


  18. (on the maori party u-turn..)

    they are only following the ‘political-wisdom’ of lyndon baines johnson..

    “..son..in politics you’ve got to learn that overnight..

    ..chicken shit can turn to chicken salad..”


  19. The Maori Party Has no sHame – tHats really all tHis is…..
    bj? Fly? How come you guys get all the juicy Trolls?
    I can’t get arrested on the ‘H’ thread!

  20. Shaunyboy – are you daft? You asked a question and BJ answered it comprehensively, yet you failed to take on the new information, just plugged-away with your original shallow thought.
    Are you able to absorb new ideas, shaunyboy?
    Did it occur to you that your original question was not addressed (by me anyway) because it was purile? (New idea? Struggle with it, master it and make it your own. You’ll be a better shaunyboy for it).

  21. Well maybe the Green representatives should boycott the conference in regards to the huge carbon footprint it will produce ?

    The way Mrs Fitzsimons carries on is in total contradiction to her policies of carbon emmissions….

    Unless she plans to sail to Copenhagen…. But that would be a Tui advertisment wouldn’t it?

  22. The science hasn’t contained a lot of recent attention to aerosols. Last year they were a more salient issue, now just another thing to worry about. If you could provide a specific concern? We aim to help where we can, and you do have credit to spend in terms of questions.

    Average temperature fiasco?


  23. Shaunyboy?

    Right… lets examine just what the Copenhagen Conference is…. and who called it.

    The meeting was called by the United Nations, not the Green Party of Aotearoa. It is a conference IN Copenhagen, not on the net. We have absolutely no say in the matter, and if we want to have any say at all, we have to go.

    Of the people going it might be more appropriate to omit the members of this government who are so completely ignoring their responsibilities, but that would be a POSITIVE move, and there is thus no chance that the government will actually decide to properly represent itself – as being absent on this issue.

    Why is the Mayor of Wellington going? Why does ANYONE not in government want to go to this conference. The short answer is because we have an interest in the outcome. We have an interest in knowing what is discussed. We have an interest in the meetings that are not part of the formal conference. We have an interest in the future of the planet as well as the future of New Zealand.

    Which is why this government might well serve NZ interests by simply absenting itself entirely. Its interest in the future of New Zealand BUSINESS is real enough, its interest in anything else appears to be strictly pro-forma. Informal representation by interested New Zealanders is a very apt description of its preferred approach to climate change.

    A very real reason to go is to gauge whether the conference has any chance of successfully changing the suicidal course human civilization seems to have set itself on. We have to consider what course to pursue if failure is likely.


    Some people try to shackle our party by claiming we should all remove ourselves from the equation by living according to rules that nobody else obeys. This of course ignores the fact that there are no rules in place. The same logic that demands that people advocating population reduction commit suicide. It warrants the same response. fnck off.

    (not feeling particularly polite or charitable today)

  24. OK Jeanette Fitzsimons ??

    Copenhagen eh ??? I hope you are going to be sailing a yacht there using currents and windpower ..

    Also why are you going ? Is it a Green conference? If you Green lot are so concerned about climate change and carbon footprints then…. WHY CAN YOU NOT HAVE AN INTERNET CONFERENCE and log in from your respective homelands?

    This is just grand hypocrisy … A total and utter JOKE. YUCK.

  25. You have to wonder if Key and Co. think that the climate change issue is just going to fizzle out in the next few years.
    I suppose that view has some traction given the average temperature fiasco.
    Personally I think the effect of upper atmosphere dust has been grossly underestimated and something nasty might happen if the dust reduces.
    It does look as though the Nats mentioning price control and NZ only carbon credits has screwed forestry planting again for the next year at least.

  26. That’s a serious screw-up and screw-over by the National party. I suppose the question now is; will they be able to jiggle it around enough so that the people at Copenhagen won’t see it for what it is, the same way that they’ve done for the people of New Zealand. Sleight of hand on the international stage – what a challege for the Mr Snake Oil and his motley crew.

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