For most people, the Emissions Trading Scheme remains a confused concept that means nothing more than higher petrol and power prices.
The average household is expected to pay $165 more this year as a result of the ETS, rising to $330 by 2012. Not so large a sum as to prompt the well-heeled to switch off their heated towel rails or take the bus to work, but large enough to put unwanted stress on low-income families who probably scrimp on power and petrol already.
Ironically, the only people marching in the streets about the scheme’s impost have been farmers, the group most heavily inoculated against its effects. Although they, like householders, will face higher prices as electricity and oil companies pass on the cost of the emissions caused by their products, farmers won’t have to pay until at least 2015 for the greenhouse gases produced by their animals. Yet the agriculture sector produces roughly half of New Zealand’s climate-damaging emissions.
New Zealanders might not understand the technicalities of the scheme particularly well, but they probably have the judgment to sense that this is neither fair nor efficacious.
Environment Minister Nick Smith says although he doesn’t expect New Zealanders to love the ETS, he thinks they will learn to respect it. But neither love nor respect will be given easily to this bastard child of last year’s liaison of convenience between the National and Maori parties.
The deal was hatched after a shambolic select committee hearing on the defeated Labour Government’s scheme, and resulted in a greatly watered-down ETS that gives hefty protections to polluting industries. Petrol and power companies will simply whack the cost of their ETS obligations onto their customers’ bills, while industries that face international competition are entitled to a government handout of carbon credits to cover the bulk of their emissions. These subsidies will be phased out very slowly over coming decades.
Despite being treated with kid gloves, business wanted still more concessions, and agriculture wanted still greater delay. Federated Farmers president Don Nicholson has threatened the Government with a “winter of discontent”.
Farmers and others with vested interests bleat on about the hazards of putting a price on carbon while the rest of the world drags its feet. The collapse of the Copenhagen climate talks feeds their argument that there is no rush to address our rising emissions profile.
They should lift their sights beyond the farm gate and look at what’s happening around the world. The idea that New Zealand’s ETS puts us into uncharted water or that we are reckless pioneers in a nascent carbon economy is plain wrong. The European Union has had an ETS since 2005, and although it doesn’t cover the whole economy, its development is a substantive attempt to bring about the behavioural changes that are needed to reduce society’s reliance on fossil fuels.
Japan has had a voluntary ETS since 2005, Switzerland since 2008, and Norway introduced a cap-and-trade scheme between 2005 and 2007. Even China, demonised for its role at the Copenhagen talks and for its coal-hungry economy, is targeting a 40-45% reduction in carbon intensity as a proportion of GDP by 2020, and is pouring massive investment into clean energy. Ex-Australian Prime Minister Kevin Rudd postponed that country’s planned ETS, and look where that got him. His replacement, Julia Gillard, has promised to put carbon pricing back on Labor’s agenda.
Smart companies like Marlborough wine-maker Grove Mill, certified as carbon neutral since 2007, know there are big marketing advantages in reducing their emissions. If farmers aren’t smart enough to recognise the long-term gains to be had by adopting emission-reduction technologies like nitrification inhibitors and biodigesters, then there should be no further delay in giving them a pricing clue that helps them to figure it out.
No one ever suggested that de-carbonising the economy would be easy. But the problems of ozone-depleting chlorofluorocarbons and acid rain-causing sulphur-dioxide emissions once seemed insurmountable, too, and they were dealt with using political leadership, pricing signals and commercial nous. The same is possible with carbon.
Sadly, New Zealand’s ETS is not the product of broad political commitment, nor does it deliver rational pricing signals. The best that can be hoped is it will become a starting point for much-needed cross-party co-operation, and that it evolves into a scheme that works for the environment and for the economy.