The Cost of Carbon

Taranaki Daily News

Last updated 05:00 26/09/2009
OPINION: Taranaki has been high on the agenda in Parliament this week.

But the honourable members of the House were not talking about the region's wonderful collection of must-see attractions or John Key's failure to mention the energy pulse of the nation on the Letterman show.

Taranaki was the point of attack, the fulcrum of debate over the efficacy of National's Emissions Trading Scheme and how much of the burden of meeting our obligations under the Kyoto Protocol will be passed on to the consumers and taxpayers.

If the example offered by Labour and the Greens of Taranaki's methanol plant is correct, or even anywhere near being correct, then it will be a hefty burden indeed.

On the face of it, the ETS is a complex but significant policy constructed to be part of this country's effort to reduce its carbon emissions. Some of the theory and language seems impenetrable, but the basic thrust is that the Government does not want to penalise the polluters too harshly, lest they take their business elsewhere, and has decided to subsidise their carbon emissions, with many industries not having to pay their full share for at least 40 years.

Some industries will even be allowed to increase their emissions under the plan.

One of those is our Taranaki-based methanol producer. Despite Methanex admitting that its plants in Chile and Trinidad emit less carbon, under the Government's ETS, Motunui and Waitara are deemed efficient enough to increase their emissions without penalty.

Figures show both plants emit 0.67 tonnes of CO2 for every tonne of methanol produced.

Based on the Government's calculations of $25 a tonne for carbon, Methanex's annual production of 900,000 tonnes of methanol would produce 600,000 tonnes of carbon and a possible financial penalty of $15 million. If and when the price for carbon trades higher, the penalty will rise accordingly.

Also, Methanex recently announced plans to dramatically increase production, up to 2.4 million tonnes of methanol a year. If the Government, and by extension the taxpayer, is to subsidise the cost of its carbon emissions, that could mean a bill upwards of $40 million each year and for many decades into the future.

Methanex counters that its Motunui emissions are higher because the plant is an old one. But two weeks ago it announced plans to spend $150 million upgrading facilities so it can work at full production.

Given the level at which we may be asked to 'subsidise' its production, here's hoping some of that money is spent on reducing its carbon footprint before it flattens all of us.