Is Methanex poised to rort the taxpayer with National’s help?

The enormity of the National-Maori Party changes to the ETS become apparent when you consider the case of Methanex, the Canadian-owned company that turns natural gas into methanol at several plants round the world, including two in Taranaki.

They were a very large user of  NZ’s dirt-cheap Maui gas for many years, with peak annual production being 2.33 million tonnes.  By 2004 the field had largely run down and further gas was being negotiated at a much higher price so they rapidly wound down their plant and stopped production altogether at the end of 2005. With new gas contracts in 2006 they reopened the smaller, Waitara Valley plant and last year announced some production would resume at  their Motunui plant.

Last week, days before the Government announced their big ETS subsidies for carbon-intensive plants, they announced they will be moving to full production at both plants, even though they don’t have an assured gas supply.

This reminds me strongly of just how many fish fishing companies caught in the early eighties, which became the baseline year for allocating fishing quota.

Anyway, under last year’s ETS legislation, companies like Methanex, if they were competing with companies that didn’t face a carbon price on natural gas, would get 90% of their 2005 emissions for free, and have to pay full price for the rest, and for any future growth in emissions.

The curly bit for Methanex is that in 2005 they produced only 340,000 tonnes and this would form the baseline from which their free credits would be calculated. Assuming the same level of production and a carbon price of $25/tonne of emissions, the value of free credits to Methanex under the current ETS would be $12.7 million. However NZ Inc would have been liable for only a small part of this under our Kyoto obligations. If they grow their production, they would have to pay the full $25 for each extra tonne, as that is what the NZ government is liable for.

However under National’s new scheme, the more they expand their business the more free credits they get.

Assume the starting point is still 90% of 2005 levels for free, and then 90% of the emissions from each extra tonne of product; the price is still $25/tonne; and the plants are run at full production of 2.33 million tonnes. Methanex will get $87 million in free credits each year. Their increased production and emissions raises New Zealand’s total emissions and all of this increase has to be paid for by our government after 2012.

Under the Labour scheme Methanex would have paid for their growth. Under National’s scheme, taxpayers do.

However that’s only at the start. Under the existing ETS, the free credit subsidy phases out by 8% each year till in 2030 it is zero. Under National, it reduces only by 1.3% a year and by 2030 is still over $60 million!

Was it a coincidence that Methanex made that announcement days before the National-Maori Party announcement, or did they know what was coming? Just as business leaders whose press statements welcoming the deal appeared with unseemly haste appear to have done?

21 Comments Posted

  1. re:Solid Energy’s proposed Lignite – Urea plant in Southland

    Solid Energy seem to have caught on to an original proposal put to Southland Inc. to use Lignite. The sleeping dog in the SE/Rav proposal is that Urea when added to Lignite during combustion substantially reduces specific toxic emissions (PCDD/F)Benzene’s and Furans.

    Now I am not against the use of extracted resources, there is an acute double standard when we condemn a ton of coal while importing a barrel of oil, but when Solid Energy took a damn fine idea and then adapted it to suit its commercial interests (ie: stole) I take umbrage.

    Urea can be nitrogen stabilized substantially for addition to soils but the BEST approach from the environmental perspective is to do what was suggested and focus on humic acid routes that add bioavailable carbon to the soil matrix. (Concept first proposed by CQuestNZ)

    Regretably this choice is not favoured by ETS (as it is currently designed. The carbon credit should trickle through to incentivise the consumer choice VIA the farmer and not acrue to Solid Energy’s stockholder (govt).

    And there is the rort.

    ETS gets in the way of good ideas.

    Ask Treasury… they got it when after this fellow explained WHY Contraction and Convergence was the best practice transparent ‘rights based’ option when they said in their Christchurch ‘consultation’, it is the concience’ behind what they were trying to accomplish (with ETS).

    If we want a benchmark for New Zealand, we could do no better than chuck ETS and adopt C&C. It is not to late but the Nats and Lab’s are too stooopid. Hon N.SMIFF even stoopider. Why? because he said C&C is his favoured choice. And there is the biggest rort of all. Knowing what to do and to stoopid to do it.

  2. I don’t use it often. There are very very few who get that treatment from me. There ARE some who will. Here I would not be able to use it much. Here is “home-turf” which IMHO has to be vigorously defended lest the vandals take over.


  3. I think everyone does have something worthwhile to say. Unfortunately, some people prefer to use their voice to say things that are not worthwhile.

  4. Would be nice. I’d like to think that everyone has something to say that is worth listing to – but sadly there are exceptions 🙁

  5. Mark – I’ve been bottling it for years. Sold a crate of the golden elixir to the caterer for the 2009 National Party AGM . Went down a treat by all accounts.

  6. On other systems I was able to tag a user with an “ignore” label and then did not see any post at all, just an “ignored user” field where the post might have otherwise appeared.

  7. Greenfly; – leafing thru my New Universal Encyclopedia I was simply amazed by the following….

    “Greenfly; Aphis (Hermiptera)Soft Bodied, usually wingless, with prominant eyes and a suctorial beak which is kept thrust into the tissues of the plant. The surplus food is discharged as honeydew from the anus…..”

    Talk about all sweetness and light hey?
    Talents unheard of really – you ARE too modest!

    Regards Mark

  8. Does anyone actually have to reply to Wat? He’s a troll, and lives in a fairy-tale land of his own imagining. Whereas Greens live in the real world, and know that fairies, and trolls, aren’t real and can therefore be entirely ignored. If you ignore a fairy, or a troll, they shrivel up and disappear. I am pretty certain if Wat’s troll like presence was entirely ignored, he would eventually get fed up of posting, and would indeed disappear. Please, everyone, give it a go.

  9. Watt: “and some of them are a lot smarter and better organised than your lot.”

    And who exactly may they be?

    Plundering workers watt? I thought you championed capitalism and all of a sudden you have the workers best interests at heart.

  10. – “Under the Labour scheme Methanex would have paid for their growth. Under National’s scheme, taxpayers do.”

    For a start, let’s drop the pretence that you give a damn about the taxpayers, shall we? Your complaint it that it’s not you who gets to plunder them with your own pet schemes.

    Your entire political aim to to turn the state into a vehicle for delivering benefits to particular special-interest groups, at the expense of the workers. The problem is that by doing so you create a mechanism which causes all manner of other special interest-groups to come into being in order to gain control of your fascist state. And some of them are lot smarter and better-organised that your lot.

    So if this company is using your activist state as a vehicle to plunder the workers, blame yourself.

  11. Your analogy to Lange and nukes doesn’t work for me, because doing nothing was a viable alternative then, a most desirable one even, whereas this is not the case for us in the present situation. So while I 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.

  12. Sucking up is hardly a good summary of what is happening – NZ’s contribution to the overall GHG emissions is small, agreed, but we’ve been over all that before.

    If we don’t go to the ‘party’ we’ll be a pariah state & will suffer trade sanctions or worse (withdrawal of credit or very high interest rates from overseas loan sources). We must be seen to be making our contribution – however the outcome of Copenhagen is far from certain & may turn out a very different scenario (likely ).

    My bet is that there will be a fudge of massive proportions & business as usual in another guise. Capitalism will rule as usual & anyway it can’t stand a make-over let alone a material change for the better.

    We’ll see.

  13. This is a perfect demonstration of why an ETS is destined to severely damage New Zealand.

    Future generations will look back with hatred towards the current batch of politicians (including the Greens) who have sacrificed their tamariki and mokopuna upon the altar of capitalism by hitching us up to Kyoto and the ETS.

    We should have had the same courage shown by Lange with his anti nuclear stand.

    NZ is nothing more than an insignificant little speck and we should stand courageously alone in our decision making. We should put ourselves first, and protect those who come after us from the Traders and Manipulators to whom we have now sold our souls.

    The evil spirit of sir Michael Fay hovers over us once again – I wonder how long it will be before we see his ugly mug back on these shores with a gavel in his hand and a rapacious grin on his lips.

    Sucking up to international pressure over Kyoto has been shortsighted and ignorant.

  14. Of course the Nats + Maori Party are leading us all astray, however the concept of all Taxpayers sharing the cost of increased Carbon Levies doesn’t seem all that bad to me – trouble is as you say Jeanette, an overseas company profiting at our expense then remitting the profits overseas fits well with Nat’s philosophy, should we be surprised ? They seem to feel that this is good for our economy, & in terms of ‘old economic thinking’, it is.

    Nat’s ETS Policy is full of contradictions & wrong headedness as we would expect. Short-term thinking & economic blindness is symtomatic of them. Surprise that the Maori Party have been fooled into complicity with them though. Where’s the sting in the tail ?

  15. Jeanette,

    Thanks for explaining these Byzantine, or should that be labyrinthine, concepts to us. I trust you’ll be given time in the house to get some embarrassed answers from National about Methanex; actually that doesn’t seem likely, they don’t seem to be in the least embarrassed by any of their follies. There was a good article by Rod Oram in today’s Sunday Star Times about National’s bungling of the ETS – though of course the main principle that sustains National in regards to the environment is a self-serving and socially destructive cynicism, and, sad to say, one could now pin this label on the Maori party.

    Are you able to get some sort of article in the Dominion Post to explain this matter, it’s a wonderful example of how New Zealanders will be committing themselves for the next 22 years to subsidising an overseas corporation, when surely this money could be put to better use at home? Of course it pales into insignificance as compared with the money involved in Bell’s ownership of Telecom, and the excessive profits of Contact Energy, to name just two such rorts.

    Perhaps you could introduce a bill into the house which makes ministers liable for prosecution if they enact legislation that so badly effects our sovereignty or economic prospects, you could call it the “Economic Treason Bill” – I could suggest quite a few names for prosecution over the last twenty-five years.

  16. This ETS is a rip-off.

    It’s not climate change policy because there are no incentives to reduce carbon emissions. All the ETS does is subsidise big polluting industries.

    Why should the average taxpayer, that is struggling to get by as it is, pay money to big polluting industries?

    What a rip. What is the Maori party thinking?

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