I’ve had a further read of the select committee report on the Emissions Trading Scheme, and found a huge problem – National, United Future, and ACT want to get rid of the cap on emissions.
The normal emissions trading scheme is called cap and trade. A cap on the total number of carbon credits is set and polluters either get a free allocation or buy credits in an auction (or a blend of both). Polluters who find it economic to do so reduce their emissions while others who find it economic to do so increase theirs buying the right to do so from polluters with surplus credits. The least-cost reductions to emissions get made and emissions are limited. Over time, the cap is lowered and the goal of this whole exercise is achieved – greenhouse emissions go down.
There’s another approach called ‘benchmark and trade’, which the Greenhouse Policy Coalition – the major greenhouse polluters’ lobby group – has been after all along, for the very sound reason that it’ll cost their employers less to pollute. Under benchmark and trade, polluters get an allocation based on how much they pollute as a ratio of output. If you increase your output, you get more credits, more right to pollute. So, a polluter can increase their pollution without having to buy more credits, as long as they don’t become more carbon-intense (ie more pollution per output) which is easy because carbon intensity tends to fall anyway with technological advances.
The EU has something like this and, while it’s not as good as cap and trade – it’s not so bad because they still have an overcall cap on emissions and that cap falls. The EU system is delivering on the important thing less greenhouse gases going into the atmosphere. But National, United Future, and ACT don’t want our system to have an overall cap.
Think about what that means: polluters get free rights to pollute, and they can get more rights to pollute simply by producing more. There will be no meaningful price on emissions because you can just get more credits for free and there will be heaps of surplus credits as businesses naturally become less carbon-intense, meaning even a company that wants to become dirtier will be able to buy more credits cheaply. No meaningful price on carbon = no incentive to reduce emissions.
The select committee report admits as much, citing these cons for the plan (p59):
I’m sorry, but any climate change policy that is a ‘Weak signal to reduce emissions’ and under which ’emissions may increase’ is no policy at all. It is a thieves’ charter, an unlimited licence to pollute.
As the situation stands today, the Emissions Trading Scheme (working on cap and trade) that Labour passed with the Greens last term is still in effect and more sectors will come into it over the next four years. John Key and Nick Smith have said they want to replace it with their gutless ersatz ETS and have threatend to repeal the ETS altogether if they don’t get their way, which shows where their hearts really lie. Labour, the Greens, and Maori Party have pledged not to vote for a gutting of the ETS. ACT will only back scrapping the ETS altogether.
So, the Government has the numbers to keep the ETS or to scrap it but not to gut it. Surely, they won’t go so far as to throw out the only policy we have that can start making a serious dent in our greenhouse gas pollution.
If they care at all about our future, they should just let the ETS we have stand. Anything less will do nothing to fight climate change.