Human beings and the natural world are on a collision course. Human activities inflict harsh and often irreversible damage on the environment and on critical resources. If not checked, many of our current practices put at serious risk the future that we wish for human society and the plant and animal kingdoms, and may so alter the living world that it will be unable to sustain life in the manner that we know. Fundamental changes are urgent if we are to avoid the collision our present course will bring about… No more than one or a few decades remain before the chance to avert the threats we now confront will be lost and the prospects for humanity immeasurably diminished.

Warning. We the undersigned, senior members of the world’s scientific community, hereby warn all humanity of what lies ahead. A great change in our stewardship of the Earth and the life on it is required, if vast human misery is to be avoided and our global home on this planet is not to be irretrievably mutilated…

The Earth is finite. Its ability to absorb wastes and destructive effluent is finite. Its ability to provide food and energy is finite. Its ability to provide for growing numbers of people is finite. And we are fast approaching many of Earth’s limits. Current economic practices which damage the environment, in both developed and developing nations, cannot be continued without the risk that vital global systems will be damaged beyond repair…

The developed nations are the largest polluters in the world today. They must greatly reduce their overconsumption, if we are to reduce pressures on resources and the global environment. The developed nations have the obligation to provide aid and support to developing nations, because only the developed nations have the financial resources and the technical skills for these tasks.

Acting on this recognition is not altruism, but enlightened self-interest: whether industrialized or not, we all have but one lifeboat. No nation can escape from injury when global biological systems are damaged. No nation can escape from conflicts over increasingly scarce resources. In addition, environmental and economic instabilities will cause mass migrations with incalculable consequences for developed and undeveloped nations alike.

Developing nations must realize that environmental damage is one of the gravest threats they face, and that attempts to blunt it will be overwhelmed if their populations go unchecked. The greatest peril is to become trapped in spirals of environmental decline, poverty, and unrest, leading to social, economic, and environmental collapse.

Success in this global endeavour will require a great reduction in violence and war. Resources now devoted to the preparation and conduct of war – amounting to over $1 trillion annually – will be badly needed in the new tasks and should be diverted to the new challenges.

A new ethic is required – a new attitude towards discharging our responsibility for caring for ourselves and for the Earth. We must recognize the Earth’s limited capacity to provide for us. We must recognize its fragility. We must no longer allow it to be ravaged. This ethic must motivate a great movement, convincing reluctant leaders and reluctant governments and reluctant peoples themselves to effect the needed changes.

The scientists issuing this warning hope that our message will reach and affect people everywhere. We need the help of many.

We require the help of the world community of scientists – natural, social, economic, political;
We require the help of the world’s business and industrial leaders;
We require the help of the world’s religious leaders; and
We require the help of the world’s peoples.
We call on all to join us in this task.

They followed this warning up with a Call to Action, in the lead up to the creation of the Kyoto Protocol. Despite its flaws, the Kyoto Protocol was the first serious global response to the threat of anthropogenic global warming. I wonder if it will require another such call to action to spur our reluctant politicians to create its successor in Copenhagen.

I had to ask three times what the practical effect would be of the statement in National’s confidence and supply agreement with Act, that the Government would pass “an amendment to the ETS delaying its implementation”.

First time he avoided the question and told us – again – about the select committee review.

The second time, he told us “no element” will be currently affected because the legislation will not begin until 2010 when energy comes in.

Only when I asked him directly about the effects on forestry, which came in almost a year ago and is expecting to claim credits in January for its 2008 carbon capture, did he say that the current rules about deforestation stay in place, pending the outcome of the select committee.

He didn’t actually say that foresters will retain their legal right to credits in January; however he can’t legally confiscate those without legislation, which he clearly isn’t planning before the those credits become due.

What was clear is that he had not thought at all about the effects of his statement on the forestry sector, who have been as puzzled as I have, and he confirmed that he has not talked to them.

So it seems we have established that foresters will be able to apply under the existing Act, which will not be “on hold” in any way at all, for credits to be transferred to their account in the NZ inventory, some time in January. But this is only step one.

There will be no market for those credits, at least for a year and maybe much longer, as he intends to amend the legislation before the end of 2009, and if obligations are removed the market for those credits will also be removed.

Let’s not be surprised if no-one plants anything more.

About a week after the election, reassured by pre-election statements that there would still be an ETS, though it might be different, a major forestry company was about 12 hours away from concluding a sale of forestry credits. They had achieved a price of NZ$30/tonne. The legislation passed last August provided that the ETS comes into effect for forestry on 1 January ’08, though not for energy till ’10 or transport till ’11. That is still the law.

From 1 January ’09 foresters can apply to have NZ units credited to their account in the registry, and can then sell them.

Then Key announced, part way through the coalition negotiations, that the ETS might be “repealed”. The buyer immediately shot through. Now we have Gerry Brownlee announcing that there will still be an ETS (despite setting up a committee to consider whether a carbon tax would be better) but business is gun-shy now and no-one is going to commit investment based on that.

The interesting question is, what does “put on hold” mean for forestry? If companies apply on 1 January to have units transferred to their account for carbon sequestered during 2008 by their post-1989 forests, as the law provides, will those units be forthcoming? That is dependent on whether MAF has completed the work needed to rollout the mapping tool that allows foresters to prove that their land is eligible. They were on track to have this done in time to meet the requirements of the law; have they been told not to proceed?

If so, under what authority? You can’t suspend the law just by announcing it. I was fully expecting an amendment bill to come to Parliament before Christmas, changing the date of coming into force for forestry. That hasn’t happened. Just as well, as that would also “put on hold” the deforestation penalties for those who clear and don’t replant, and lead to a frenzy of land conversion for dairying, with more damage to our emissions profile. That would be ironic, as Nick Smith grandstanded constantly in the last Parliament, attacking the Labour government for mismanaging the question of forestry credits and causing a landslide of dairy conversions in the year before the penalty came into force.

Of all people, a key player in the financial markets which rely on rumour and reading the tea leaves as they make their daily trades, should understand the damage loose talk can do to business confidence.

This version of the video is from eco-tube.com.

We all know now that a carbon tax would have been the simplest, least wasteful means of pricing the carbon externalities into the market. The only difficult part, particularly for politicians, would have been setting the price.

But the ideologues both here and abroad could not abide the thought of a market intervention as simple and elegant as a tax. No, we needed a much more expensive, intrusive, new market in our lives and the carbon tax was killed off.

Now the reality of an international carbon market is hitting home, while some players, including New Zealand, prevaricate, pointing to some of the waste and corruption in the market they insisted was created.

We have had 16 years of debate on this issue and almost no action. I am personally agnostic about which kind of market intervention is the best in the long run. What I care about is results, sooner rather than later. The massive paradigm shift required to avert the worst that anthropogenic global warming is threatening is going to create winners and losers regardless of how it is done. There will be spilled milk, and tears.

I was amused by Peter Dunne’s comments yesterday regarding the climate change select committee. It seems he got a somewhat different brief from John Key than Rodney Hide did. Let the fireworks begin!

… with the first year of the five-year commitment period under the Kyoto protocol almost over, square one is looking increasingly untenable. It has also become a rather expensive piece of real estate. New Zealand is the only country in the world to have fully elaborated both a carbon tax and an emissions trading scheme and implemented neither. That takes some doing.

He goes on to criticise Labour for failing to get a cross party consensus, and National for backing away from a cross party consensus when Labour moved towards their emissions trading policy. He also chides the Greens for discounting National in the lead up to the election.  The Greens offered before the election to sit down with National and work on fixing up the ETS, since a number of the objections in National’s minority report the Greens agreed with and were already trying to negotiate to fix. Alas, John Key refused to discuss the issue. I am pretty confident that the offer still stands, John.

Most striking in the article  is Upton’s criticism of ACT and the select committee.

What fresh insights can a select committee of New Zealand politicians add to a subject that has been exhaustively canvassed elsewhere? Anyone who has studied the issue in good faith knows that there are no certainties and that it is a risk management issue. Picking holes in computer models or climate data is a path to nowhere and would make New Zealand a laughing stock.

I couldn’t have said it better. Oh wait. I already have said it. Many times. So has Jeanette. Good on you Upton. Pull us all up on it and tell us all to pull finger. Sage advice. The risks of inaction are too great. Too great for the environment, for society and for the economy. Too great to risk becoming the laughing stock at Poznan, or Copenhagen for that matter.

Why would a “mainstream” party that campaigned on an ETS – but a different one – set up a select committee enquiry into maybe preferring a carbon tax?

What does Key mean when he says the ETS will be “put on hold” when most of it won’t be operational for more than a year anyway?

Why would a government that has set a target of reducing greenhouse emissions 50% below 1990 levels by 2050, oppose and dismantle every measure that could help achieve that, while at the same time reviewing whether there should even be a pricing signal?

Why would a government that wants to be taken seriously internationally, on the eve of the next climate change talks, set up a committee of politicians to review whether the scientists of the IPCC, the Royal Society and NASA, etc., know what they are talking about, or whether an alternative view is “right”?

Why would a government that aims primarily at economic growth and positions itself as business friendly create such policy uncertainty that international investors withdraw from New Zealand?

Most of these bizarre situations can be explained by the transition from opposition to minority government.

Key has set up a carefully balanced government where he can go as far to the right as he wants and justify it as “Act made me do it”. But he doesn’t have to go an inch further than he is comfortable with – “sorry Rodney, Maori Party won’t go there”.

It will be a true National government, able to do pretty much what it wants.

So Rodney’s posturing about scrapping the ETS was just a distraction and a nuisance during government formation. “You want to scrap the ETS Rodney? Let’s put that to the select committee. You want to review the science? Good idea. They can do that too. You think a carbon tax would be better? Fine – let them consider that.”

So Rodney calms down and the government is formed. The test will be when the chair of the committee arrives with a draft terms of reference, and Act has only one vote on the all-party committee. What that will really tell us is whether National is seriously committed to major delay. Considering a carbon tax and reviewing the science as well as considering National’s proposed amendments to the Act would be a huge job. It would take well beyond 2009. Meanwhile taxpayers are covering the cost of 100% of our emissions. Oh – but high income earners will be paying less tax.

Of course, Act doesn’t really want a carbon tax. Neither does the Business Round Table (BRT) which has been advocating it. But it gives them three advantages:

• more delay – so there is no price for as long as possible;
• if there is a carbon tax, it will be low, and cause a huge political fight whenever a government tries to raise it. The BRT is talking of $5-10/tonne, while the international carbon price for quality units is around $30-40.
• A carbon tax can be repealed as soon as there are the numbers in the House. An ETS creates property rights and cannot easily be done away with.

Under these conditions it’s not surprising that the Greens are not leaping at the chance to go there. Also, trying to apply it to agriculture and providing assistance for industries competing internationally with firms with no carbon price create the same problems as with an ETS.

I can’t believe that Key doesn’t understand that the only part of the ETS that is operational before 2010 is forestry, and that to “put the ETS on hold” either means nothing at all, or it means taking away the credits for planting over this last winter, which foresters are entitled to expect under the legislation, and taking away the deforestation penalty. This would lead to a huge deforestation this summer for conversion to dairying – exactly what Nick Smith endlessly criticised Labour for during 2007. To “put on hold” the ETS would require legislation before Christmas to amend the starting date for forestry – with all the international derision and challenge in Parliament. My pick is it was a figure of speech to keep Rodney happy.

Rumour has it that when Key complained about the air travel emissions tax in the UK, he was told to pull his head in and get his own house in order carbon-wise before he became a laughing stock internationally. He may be finding the hard way that sound bites that go down well with the uninformed on the campaign trail raise eyebrows in informed circles around the world and are not so simple to implement.

It must have been embarrassing when Nick Smith announced the cancelling of the green homes insulation fund (negotiated by the Green Party as part of the ETS agreement) and Key was announcing infrastructure spending to keep jobs and businesses afloat during an economic crisis, that Brian Easton was saying on radio that the home insulation fund was one of the best ways to keep jobs going because it could be done fast with little capital and only a very short training period. So should we expect an amendment to the ETS legislation, which has cemented the fund in law, to remove that clause? Will it be called the “ETS (keeping NZ homes cold and damp) Amendment Bill? Will it be introduced before Christmas? I look forward to the debate.

It must be embarrassing that investors ready to build biofuel plants making fuel from wastes and low value by-products are putting plans on hold because the Biofuel Act may be repealed.

It must be embarrassing that the EcoSecurities Group, one of the world’s largest, most reputable carbon trading companies has cancelled its plans to set up in NZ because there is uncertainty over whether the ETS will proceed.

It must be embarrassing for Gerry Brownlee to learn that the so-called ban on incandescent lights, which he campaigned to get rid of, is actually an efficiency standard for lighting just as we have for dozens of home appliances; that the appliance efficiency programme has saved households $148 million on their power bills over 7 years; and that some incandescents, as well as halogens and compact fluorescents will all meet the standard. It must be worse to find that without that standard, many of the best quality lights will not come into NZ because our market is too small if most people are still buying crap. Woops, market doesn’t always work after all.

He will learn similar embarrassing facts about what the showerhead issue was actually all about when he is responsible for cancelling a hot water efficiency standard for new homes.

So the interesting question, which I intend to ask in the House at some stage, is how does National intend to meet its target of 50% by 2050 with no investment in home insulation; no regulations for energy efficiency; no waste-to-biofuel projects; presumably no economy standards for vehicles coming into the country (announced in the Energy Efficiency and Conservation Strategy but not yet legislated); transport investment hugely favouring roads over public transport; and an investment strike in new green technology because of the uncertainty over whether there will be an adequate price on carbon?

Sounds like an interesting term ahead.

My presidency will mark a new chapter in America’s leadership on climate change that will strengthen our security and create millions of new jobs in the process. That will start with a federal cap-and-trade system. We’ll establish strong annual targets that set us on a course to reduce emissions to their 1990 levels by 2020, and reduce them an additional 80% by 2050. Further, we’ll invest $15 billion each year to catalyze private-sector efforts to build a clean-energy future.

Few challenges facing America and the world are more urgent than combatting climate change. The science is beyond dispute and the facts are clear.

Climate change and our dependence on foreign oil, if left unaddressed, will continue to weaken our economy and threaten our national security.

When a Green Party MP says these things, it’s just the loony left who don’t understand science and should shut up and wait to see what the Aussies and the US are going to do. Meanwhile, the New Zealand government reopens the talking shop to debate whether the sun revolves around the earth.

Specialist news service Carbon News this morning reports broker Nigel Brunel, of OMF Financial, as saying New Zealand is “a bit of a joke in Europe at the moment” following the National-Act agreement to suspend the emissions trading scheme.

“This was New Zealand’s opportunity to reinvent its financial markets by being the Asian centre of the carbon trade.”

But this week’s announcement that the incoming government will put the ETS on hold pending a review that will go as far as considering a carbon tax instead of an ETS and will re-examine the validity of the science behind climate change, has jeopardised everything, Brunel says.

“We have just fallen off the radar in Europe,” he said. “They are saying ‘all you do is talk. You’ve been talking since 1992. You are all talk and no action. You maintain that you are so clean and green and try to be leaders and all you do is nothing. You make a decision and then you change your minds. How can we do business with people like that? We can’t take you seriously’.”

Well, I confess that I have never taken Rodney Hide very seriously, particularly when it comes to his science.  Europe is into its fourth year of emissions trading. Claims of New Zealand leadership from National and Act during the campaign were fallacious.

All I can say is that I am looking forward to the blow torch of lobbyists coming onto National and Act, hard and fast. Oh, and the Maori party and UF too. They stood on the sidelines and threw stones while the rest of parliament got on with the challenging work of coming up with an ETS agreement that could get a majority in parliament. Even though it was our second choice, we Greens rolled up our sleeves and engaged with the real work.

Now John and Rodney have re-opened Pandora’s box and there will be hell to pay as the lobby groups from all sides pony up the big cash and the big guns. Meanwhile, the very allies and trading partners that National and Act say we should emulate are actively putting in place their own schemes. And we wonder why we look the fools on the international stage. Bad timing boys!

Also in the policy is an amendment to the Overseas Investment Act that would only allow residents or New Zealand citizens to purchase property here. There is already a tremendous amount of foreign owned property, which would be unaffected at least until it went to market.

Finally, the Greens would amend the baseline year for agricultural emissions in the Emissions Trading Scheme to be 1990, so that sheep and beef farmers get a fair deal. With the current set up, sheep and beef farmers end up paying for some of the dairy industry´s increase in emissions since 1990, when theirs has actually decreased.

Brazil’s Environment Ministry wanted to find out who were the biggest illegal loggers in their country, but unfortunately it found out the worst offender was the government itself. In fact, the six largest deforested areas of the Amazon belong to the National Institute for Colonisation and Agrarian Reform, which distributes land to the poor.

While I doubt that we have a significant illegal logging industry in New Zealand, we certainly have a significant illegal timber industry in NZ that the government turns a blind eye to, supporting illegal deforestation elsewhere in the world.

So who is it that causes the greatest deforestation in Godzone? I’m sure one of my readers will provide some hard numbers, but I suspect that the LandCorp’s own deforestation-to dairy programme will rank right up there at the top of the list.

A large portion of forestry companies are replanting for the next harvest, particularly now that the pre Emissions trading Scheme chainsaw massacre has abaited. The massacre was predictable, predicted and accounted for in the ETS forecasts, as was the sudden drop in chopping after January this year, so let’s not blame the forestry industry outright.

I suspect that for several environmental indicators, our government itself will be near the top of the list for destroying things like water quality, biodiverse habitat and deforestation. The irony is that in this country, not only are these things legal, they are encouraged by the government.

We certainly do need a change in government. And the change we need is Green.

‘ETS go-live has been a high priority project for the UNFCCC secretariat. We have worked closely with the European Commission and the EU member states in coordinating the extensive preparatory work that was necessary to achieve the full connectivity of the ETS registries to the ITL; we are now very pleased by its clear success,’ said UNFCCC Executive Secretary Yvo de Boer.

While I didn’t see New Zealand in the list, I’m sure we’ll be added there soon. So much for “leading the world on emissions trading”. It seems quite a few countries have got started without us. While our inclusion of agriculture is a world first, its delayed entry until 2013 (plus generous subsidies for years), ensures that we’ll be in line (or perhaps even late) compared with other’s plans to include agriculture in their scheme. Who was it that said we were rushing?

The ITL is now ready for starting real-time operation with the CITL and the national registries of Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, European Community, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.  Earlier, five national registries had already joined the ITL along with the CDM registry.

‘This event finalizes the infrastructure required for successful operation of all flexibility mechanisms under the Kyoto Protocol,’ the UN’s top climate change official said.’ 

The UNFCCC secretariat plans to link the registries of Iceland, Liechtenstein, Norway, and the Ukraine later in October–November this year.
At that time almost all industrialized countries with emission reduction targets under the Kyoto Protocol will have full access to the implementation of market-based mechanisms.

According to the Herald article, National wants to:

* Introduce a forestry offset scheme that is likely to mitigate concerns from forest owners that they cannot change land-use without paying big sums of money.

The very offset scheme that National wants to introduce is already in the legislation, just waiting to be activated should the Kyoto rules change. Duh! Has Nick not read the Bill?

* Put the fishing industry on the same level as other trade-exposed industries, and “grandparent” it for 90 per cent of 2005 emissions.

Read the Bill, Nick. It says that trade exposed industries will be compensated to the extent that they are trade exposed. No one gets 90% free credits automatically just because one of their widgets faces competition. The 90% of 2005 just sets a limit to the total amount that any sector’s pool of credits can reach. Having a fishing sector pool of 50% of 2005 is more than enough to give the trade exposed fishing companies protection from competition, to the extent that they are exposed. Don’t you think Winston would have held out for more if he really believed it was necessary?

* Have a more flexible plan for phasing out the allocation of units in the future, so New Zealand moves in line with its major trading partners.

What a novel idea, adjusting the phasing out of credits in line with our competitors! Again, it’s already in the Bill. Five yearly reviews are forced upon the Minister, who must review and adjust exactly this, among other things. There is also provision for the Minister to call a snap review at any time, in case there is some significant change in our trading situation. We’ve got it covered, Nick.

* Allow small and medium-sized businesses to get involved in the scheme. Lower, or potentially remove, the 50,000 tonne threshold an emitter must meet in order to be eligible.

Duh! There is no such threshold in the legislation, Nick. It was mentioned in the discussion document a year ago, but never made it into the legislation. You cannot remove what’s not there. This level of detail will be sorted out in the allocation plans, which have yet to be developed. Weren’t you there at the Select Committee when this was discussed?

* Write a 50 per cent reduction of 1990 emissions by 2050 into the legislation as an objective.

Now this is a credible request. We asked for the targets to be put into legislation in the same way that they are spelled out in the UK ETS legislation, with the Minister being responsible for delivering. The government obviously was shy about that, and you can bet that a National government would be terrified of making such a commitment. Instead, we compromised and the targets have been formally gazetted. I’d be willing to bet that your caucus wouldn’t even agree to that, Nick.

What we have here is a failure, once again, to differentiate. National has been exposed once again as having no policy whatsoever on the most important issue facing humankind today. Climate Change. That is a sad indictment. The only other alternative is that they have an agenda so secret that they cannot share it. That would be even more tragic, but I don’t give them that much credit. They are far to internally divided and disorganised to have a secret agenda.

Ask, and you shall receive. It seems that Kiwis do have something to say about the Emissions Trading Scheme, and one theme that is constant, from both supporters and opponents, is a big thank you for asking. It is also becoming apparent that the ordinary punters, who know very little about the details (and don’t want to), do realise that it is a fine balancing act and that compromises will be needed all around. What is also clear from both sides is that most agree that doing something about climate change and our emissions is urgent.

I’m taking heart from this great result. keep the feedback coming. If you haven’t said your peace, feel free to do so at ets@greens.org.nz

Then there is:

It’s time to have your say on the ETS.

For the Greens there are two key principles at stake with the ETS. They are fairness and urgency. The Bill as drafted, even before the government’s recent backtracking on timing, is deficient in both.  Half our emissions (agriculture) don’t enter the scheme till 2013. Big business is protected against trade competition, but not small and medium business. Because none of the allocation issues are even signalled in the legislation itself, business is both complaining of uncertainty and crying wolf about how it will send them broke, just to spook the Government. Just look at Rio Tinto – it’s no accident their smelter is located at a place called Bluff.

Problem is, with no guidance in the legislation to what allocation plans are supposed to achieve, the next government, regardless of who it is, is pretty much free to rig the system for their friends without any oversight from parliament.

This is grossly unfair to businesses and households, who genuinely do need certainty in order to plan investments. It also means there will be furious lobbying by vested interests and gaming and special pleading.

Remember why we’re doing this? It’s to get a price signal for carbon into the market so that businesses and individuals begin to change their behaviour in ways that mitigate climate change. We don’t even need to get a huge signal into the market all at once. But we do need to allocate the costs of carbon fairly amongst those who use and abuse it the most. This is why I continue to call for an earlier entrance for agriculture and transport so that our foresters have someone to trade with, and so that the effort is seen to be shared across the economy. Even if this means that they come in gradually. We don’t need to bring transport in at 100% in 2009. But they should pay for at least some fraction of their emissions from that year.

Back in the mid 1990’s, when Simon Upton asked whether we should have a carbon charge or an ETS, I argued for a carbon charge, because this at least gave business certainty of price, even if there was no certainty of environmental outcome. And I knew that businesses don’t invest in new technologies if prices are uncertain.

An ETS should in theory give certainty of emissions reductions, but not of price. However, because this ETS has no cap, with potentially unlimited credits from overseas, it offers neither certainty of price nor of reductions.

In conclusion, we need more sectors in the market, earlier, to get faster action and to allow trading to begin. Having all sectors in earlier, even at lower exposure rates, begins to send the price signals the market needs and ensures a fairer spread of the costs. It would also begin to meet the urgency test. After all, Pachauri says that if we haven’t taken action by 2012, it is too late. Please take a few minutes and listen to the radio interview linked above.

I have rarely blogged before, so it will be interesting to see how it helps me organise my thoughts.

There are so many important issues that it is difficult to know where to start. So I will blog about them in no particular order and see where the conversation leads. There are issues with allocation, with equity and with the basic trading unit called an NZU or New Zealand Unit. There are missing Kyoto emissions and there is also the complementary measure of a ten year moratorium on new thermal baseload generation. May as well start there, actually.

Frog blogged here that the National Business Review reported that the Nats had done a deal with Labour to scrap the moratorium in exchange for continued support for the Bill. While I was issuing a press release here, the Nats were vehemently denying any deal and calling for a retraction. All that drama aside, one would have to ask if the moratorium actually mattered at all as it is written.

I asked three submitters during the Select Committee hearings whether there was any kind of thermal power station at all that could not be built under the exhaustive list of exemptions within the Bill. None of the three could name a single instance of something that would actually be banned. Contact Energy even argued that was not the point – it was having to get the Minister’s permission under the exemption clauses that was onerous and time wasting!

Many are arguing that with a price on carbon, the market will take care of it (heard that one before?) and build renewables. Certainly Contact has told us geothermal is currently cheaper than building new gas fired generation, which is why they have switched their emphasis and plan to build a great deal of geothermal baseload generation.

But not Genesis. Re-packaging their proposed Rodney gas fired station (which would be the biggest in the country by a large margin) as a peaking station by changing just a few words in their resource application is incredibly cynical, but no-one, including their shareholders, is pulling them up on this.

They’ve figured out that if they build it as a peaking plant (not allowed to run more than say, 30% of the time) then whenever supply gets a little tight they can apply under the “emergency�? clause to run it all the time for “security of supply�?. Knowing there are 480 MW of gas station just sitting there waiting for an opportunity will discourage others from building renewables, so supply is guaranteed to get a little tight. However, if that doesn’t work there are other exemptions it can try.

Fact is, if we want to reach the 90% renewables target by 2025 we have to stop building thermal plant and start retiring it. But that won’t happen under this legislation. It’s that simple.

The price of the most-traded carbon contract, for forward delivery of EUAs in December 2008, closed at €23.82 on the European Climate Exchange on Monday April 7. This is up €3.15 from a low point on March 4 and continues a recovery after a downturn to below €19 early in the year driven by global financial market instability. EUA contracts further forward have risen around €2, Dec 09s closing at €24.48, Dec 10s at €25.15 and Dec 12s at €26.85

Forecasts for price levels in coming years of €30 to €35 have certainly contributed to bullish trade of late.

That forward Euro 23.82 price at current exchange rates is a whopping NZD 47.50 !! It seems that $50 per tonne carbon prices may come sooner than Treasury wants to admit. They still calculate on a $15 per tonne basis while most punters have been doing their analysis base on a $25 per tonne price. Fun times lie ahead for those willing to play in our budding carbon market! I suspect some bright sparks are about to make a packet of cash in the coming 18 months.

This will no doubt put pressure on the Select Committee hearing submissions to water down the bill. I reckon it would be a waste of time if the world’s marginal carbon price got legislated out of the NZ ETS Bill. Well, we called for a carbon tax to give business certainty, but they wouldn’t have a bar of it and insisted on a cap and trade. Now they are going to have to dig deep and pay the piper for their carbon loving ways. (This means we will have to dig deeper too.)