Nick, nobody has an ETS like ours
Climate Conversation Group
by Richard Treadgold 28 April 2010
In the Parliament today, Chris Auchinvole asked Nick Smith (Minister for Climate Change): “Are claims correct that New Zealand is the first in the world to have an emissions trading scheme, and that it is just a tax for revenue purposes?”
And thus did Nick reply:
No, 38 countries have commitments under the Kyoto Protocol, and 29 of them, or three-quarters, already have an emissions trading scheme. Nor is the scheme a tax. Although consumers and businesses will pay $350 million in the first year of the scheme for their emissions, foresters will receive $1,100 million in carbon credits for post-1989 forests. Far from providing net revenue to the Government, the scheme is actually a cost to the Crown. There are 12,000 New Zealanders who, in good faith, planted trees on the assurances of both National and Labour Governments that they would receive carbon credits for those post-1989 forests. The emissions trading scheme honours that commitment.
But the facts are different from those presented by our Nick.
Far from Nick’s claim of 29 countries having an ETS, in actual fact no country except NZ has ever enacted one. However, the 27 countries of the European Union (plus Norway & Switzerland) have all signed up to (or been forced to join) a regional scheme. This gives the impression of a sizeable number of individual countries “having” an ETS.
What are the details of the EU scheme?
The EU ETS is said to affect 43% of industrial process emissions: i.e., “installations with a net heat excess of 20 MW”. But there are important differences between the European ETS and ours.
Coverage
The EU scheme is very far from having the all-gases all-sectors coverage of the NZ ETS. Take note:
- The EU ETS doesn’t apply to methane, nitrous oxide, fluorocarbons, ozone, etc. Carbon dioxide only — which the IPCC reckon represents just 52% of human-caused emissions. So 48% of EU greenhouse gases (i.e., all non-CO2) are left out. Perhaps it was too hard?
- It doesn’t apply to emissions from the transport sector (21% of emissions), households and small business (17%), agriculture (10%), construction, waste, etc. (9%). So 57% of EU emissions are omitted.
- It applies only to heavy industry and electricity generation — omitting all other economic sectors (e.g. Government, services, wholesale and retail trade, finance, etc.) which make up 96% of economic activity. So only 4% of economic output is covered.
- It operates at an international level — so over 80% of exports and imports by value are with countries under the same regime, facing the same costs and the same restrictions.
New Zealand is the world’s only country — the only national entity — that has legislated an ETS. Everyone we deal with won’t be facing the same costs and the same restrictions as our businesses.
Now, some argue that other EU sectors are affected through electricity (although not gas, or petrol or diesel or heating oil). This may be what they want you to believe, but in reality:
Electricity
Although electricity generators are nominally included as industrial process emitters, each country received allowances for 95% of their expected emissions in 2005, to be distributed under a National Allocation Plan (NAP). During the first trading period (2005–7), the total number of allowances successfully claimed was 104.4% of 2005 actuals, so unregulated power utilities made windfall profits and had no costs to pass on to consumers. This didn’t prevent them from over-recovering the costs of the oil spike in 2007 (at a time when the traded carbon price had reduced to zero), to provide even higher profits.
In the second trading period (2008-12) much the same thing has happened — aided by the financial crisis. The allocations have become complex and riddled with exceptions and special cases. The bottom line is that electricity industry regulators throughout Europe seem unanimous in saying that the ETS has not yet justified ANY pass-on to non-industrial consumers. For all practical purposes, the EU ETS has not built any carbon price into electricity during its first five years.
Irrelevant
That’s a lot to remember, but to capture the near-irrelevance of the EU ETS, just remember that it covers only 4% of EU economic output. It’s quite different from ours after all, isn’t it?
You paying attention, Nick?
