Give the snip snap to the zip zap plastic fantastic? Yeah right!

Written By: - Date published: 9:15 am, November 12th, 2009 - 23 comments
Categories: economy - Tags: ,

Brian Fallow has a great post over at Granny Herald this morning. “Emitters on bludger’s end of deal” deals with the way that the NACT government has been loading costs onto future voters and taxpayers.

On superannuation:

By siphoning off and investing around another 1 per cent of GDP while the babyboomers are still in their peak earning and taxpaying years the intention of the fund was to reduce the burden on future taxpayers by around 1 per cent of GDP.

A 40 per cent increase from 5 to 7 per cent of GDP would be easier to handle than a 100 per cent increase from 4 to 8 per cent.

Moreover, the government is also avoiding making the decisions that go with that decision:

…it is clearly craven and irresponsible for the Government to refuse to even discuss a reduction in the entitlement parameters of the scheme, such as pushing back the age of eligibility. Instead it plans to just pass on the now much larger bill to future taxpayers.

Now I wouldn’t be in favour of changing the terms of the superannuation. But as Brian says doing one without the other is completely moronic in terms of the future viability of the accounts. What Key’s government is doing is putting the costs onto the plastic. The inevitable higher bills will be picked after the current cabinet is safely picking up their super.

Same thing on the Emissions Trading Scheme (ETS):

Conspicuously, and for the first time anyone can remember, the Treasury has refused to endorse a regulatory impact statement for the legislation.

The quality of the analysis, it says in the bill’s explanatory note,”is not commensurate with the significance of the proposals”.

The reason is made clear in a report from the Substainability Council which is doing something that the government has been unwilling to do. You’d have to ask why exactly the government has been avoiding doing a analysis of the effects of their changes to the ETS. Possibly because it shows Nick Smith as being a serial liar as we have discussed here and here (and several other posts). But more likely because they are pushing the costs onto the plastic and onto future generations of taxpayers.

What has to be understood is that the Kyoto bill gets paid one way or the other. The question the government has is who pays for it? The emitters of the gases that it is meant to constrain the growth of? Or the taxpayers. Clearly they have come down on the side of the taxpayers paying for it, and emitters being given little or no incentive to change their operations. Indeed and in the spirit of Robert Muldoon on SMP’s to sheep farmers (PDF) 30 years ago, the rationale is that this will encourage exports. Nick Smith explicitly states this in a article at the granny:

The Government makes no apologies for being pretty pragmatic about climate change and the ETS. We want to get the economy moving again and particularly to get growth in the trade sector.

What the hell? I can remember almost exactly the same words being used to justify the SMP’s. As a taxpayer I’ve been paying them off most of my life – the experiments didn’t work!.

This government seems to be giving an incentive to emitters to increase their emissions. They will get more cheap credits. However like SMP’s it is far more likely to encourage industry dependence and discourage adaption to a changing world economy.

The councils report states:

Proposed changes to the emissions trading scheme (ETS) would result in 84% or more of the nation’s multi-billion dollar Kyoto liability being put on to future taxpayers. Today’s polluters will pay nothing like today’s emissions bill.

Frankly this government seems to be in denial. Borrowing to cover the current recession is one thing. But they’re just popping the structural bills on to the plastic. They will still be having to be paid decades past the recession costs, and hoping no-one will notice because they’re claiming it has something to do with this current recession.

BTW: I wonder if anyone told Bill?

Update: Toad points out that I’m in agreement with Cactus Kate. She comes at it from a different angle but essentially argues against the distortion in the economy – which was what the SMP analogy was about.

23 comments on “Give the snip snap to the zip zap plastic fantastic? Yeah right! ”

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  1. toad 1
    12 November 2009 at 9:44 am

    Well, knock me down with a feather! Even Cactus Kate agrees with you Lynn – right down to the Muldoon analogy.

    There is something seriously amiss when Smith’s policy is being attacked from both left and right – and for at least some of the same reasons.

  2. So Bored 2
    12 November 2009 at 11:47 am

    Seems to me we have two constants running here which will mitigate against any effective response from either the government (NACT or otherwise) or the individual taking any responsibility for emissions and climate change.

    First (as you demonstrate fronm the history of farmers getting SMPs and now asking for special special exemption for paying the cost of their emissions) is the desire of all interest groups to push the costs onto somebody else somewhere in the future. In short nobody, industry or individual wants to pay.

    Second is that state of denial which says we can keep getting credit and pay for it tomorrow so long as the drinks at the party dont dry up. As individuals we try to keep doing what we do whilst trying to postpone the bill. You see this as we take the SUV (bought on credit) to the local shops, then deny that our behavoir is part of a universal problem.

    My take is that the only chance we have of avoiding the abyss is to change our own personal habits, lead by example, vote by example, spend by example. If we wait for our neighbours to change, politicians to change or interest groups to change, we will be too late, fecked, kaput. its a slim chance.

  3. prism 3
    12 November 2009 at 11:49 am

    “Instead it plans to just pass on the now much larger bill to future taxpayers.”
    This referring to future large superannuation peak.
    Interesting how the opposite approach is presented as essential for ACC. Nothing must be borne by future
    tax revenue, everything now and no allowance for the vagaries of investment values going up and down on the market. (Surely that is an effect that ACC finances are suffering from at present.)

  4. Tony Everitt 4
    12 November 2009 at 11:53 am

    But Brian Fellow’s opinion piece negligently ignores the proposal to have timber from plantations acknowledged as a valid carbon sink at Copenhagen. If successful that changes all the math in our favour – provided we get busy planting treres on the one million hectares of marginal land available for that in New Zealand. See also my blog http://www.greenbranz.org/?cat=23

    [lprent: Are you stupid, ignorant, or just a dumb advertising troll.

    Evidently you didn’t bother to read the article. Otherwise you’d have seen the extensive section on the forestry and why this isn’t applicable for future taxpayers – unless you don’t ever cut the forests…

    Brian Fallow said…

    The Government’s accounts, however, estimate New Zealand will be some 10 million tonnes in credit when the time comes to square accounts with other Kyoto countries, because of the carbon sequestered in “Kyoto” forests, those planted since 1990 on land not previously forested.

    But if those forest sink credits are used to cover the overshoot of gross emissions in the interim they will not be available to cover the liability which accrues when the trees are harvested in the 2020s and their carbon is deemed to be emitted. Fresh emission units will need to be bought then to coverthe liability when forests flip from being a net sink to a net source of emissions.

    As the council points out the accounts treat forest credits as if they were income out of which the Kyoto bill can be paid. But they are more like a loan. They buy time, but on tick.

    Using them to cover the liability current emitters give rise to merely pushes the cost on to future taxpayers.

    The Treasury, at least, has acknowledged in its advice to the Government that “in the long term forestry is essentially a zero sum game”.

    In other words – doesn’t make much of a difference under the current accounting rules for Kyoto. If (and that is a big if) the rules get changed to recognize the long term storage of some of the uses of the wood in buildings, then a small proportion will be of interest – that ‘stored’ in buildings. ]

    • So Bored 4.1
      12 November 2009 at 12:24 pm

      It is interesting to note that the price of gold is extremely high due to the absolute uncertainty that surrounds hard currency deposits. That is because gold is tangible. I have often wondered why the Crown does not create a bond market backed by regularly tangible valued native forest assetts on Crown land. It is the one institution that could take a long enough timeframe as the trees mature (over 100 years for native hardwood)?

      • burt 4.1.1
        12 November 2009 at 1:06 pm

        Unless they catch fire or catch some disease that kills them. Gold locked in vaults won’t do that.

        • So Bored 4.1.1.1
          12 November 2009 at 2:41 pm

          Hi Burt, try those marvellous little commercial contrivances to manage this…hmmm insurance, risk spreads etc.

    • prism 4.2
      12 November 2009 at 9:43 pm

      What happens to our credits from forests if a major part of them burns? Then we haven’t got that credit, and the smoke will have created a debit won’t it? There are naturally occurring fires, fires from controlled burn-offs that get out of hand, fires from unauthorised burnoffs or just badly organised ones, and then there are the crazy arsonists that can’t be reached with reason.

  5. prism 5
    12 November 2009 at 12:01 pm

    “This government seems to be giving an incentive to emitters to increase their emissions. They will get more cheap credits. However like SMP’s it is far more likely to encourage industry dependence and discourage adaption to a changing world economy.”
    Poor little NZ – we shrink away from innovation really, while burbling on about our No.8 wire cleverness. We can put up a fence, that’s physical work, but to think around the problem of climate change that requires an Ernest Rutherford and he’s dead (We haven’t much money so we have to think…harder). The Problem – What is the most effective and efficient way for our big polluters who are also our big profit centres, to immediately move in manageable but definite, practical steps to lessen significantly our pollution. Not years hence, next year and all to achieve significant drops.

  6. burt 6
    12 November 2009 at 1:09 pm

    As long as the policy pays me the same for planting a tree as it costs me to cut one down – then all is fine. Otherwise it is simply a tax grab and pretending it is to protect the environment is dishonest in the extreme.

  7. lprent 7
    12 November 2009 at 1:35 pm

    burt: What you’re getting the market to look at is the amount of carbon stored in the trees. So you’re thinking of it the wrong way around in time.

    Now when you cut them down there is a *lot* of carbon there. That wee tree you just planted has bugger all.

    If the carbon system followed reality, then you’d slowly gain credits during its growth which will hopefully cover the carbon cost at the time it gets cut down.

    Of course the real issue for tree farmers is going to be what the future cost of carbon is. It will probably be considerably higher than it is is now – markets do that for scarce resources. In which case you’ll wind up owing money when you knock the tree over.

    Exactly how the system works for trees in NZ I have no idea. I just looked at the underlying zero-sum game (apart from the anamoly of the wood in permanent structures).

  8. burt 8
    12 November 2009 at 2:30 pm

    lprent

    Yes sure a grown tree contains a lot more carbon than a seedling (or a seed) however the same argument surrounds a mature tree that has been cut down. Burn it and the carbon is released immediately, let it rot and the release takes years. Store it a dry place and the carbon is locked up “forever’. Arguably carbon credits should be dished out for making wood products that stop the wood rotting or being burned. (note: rotting and burning are natural cycles of carbon when trees are concerned)

    However I don’t think the “carbon market’ can be expected to follow the pattern you discuss for ‘scarce’ resources. The carbon market is possibly the most artificial (and inverted) market we have today. As the (chemical) availability of CO2 increases (IE: increased concentrations in the air) the market cost will go up to provide the correct incentives for restricting release. Were CO2 simply a product that is traded rather than a proxy for climate change (based on science that is neither settled or certain) then there would be a more direct market pattern to how we trade it. As a product its value will decrease as the air concentration increases, ETS schemes will however work inversely if they are to achieve their goal of reducing emissions.

    Extracting CO2 from the air is not the aim of the game (although some will see an opportunity here and doing so has benefits), restricting the volume being released must be the long term objective if we are to join in the great pretence of doing the right thing. Furthermore the models for trading carbon (or any other proxy de-jour eg methane, dioxin, ozone, H2O, heat) should be based on the first practical point of tradability. For example coal mining – The emission taxes should be applied at the point the coal is extracted from the ground otherwise the maket for selling the ‘polluting product’ will simple result in places where no taxes are placed on consumption being in a position to pay a better price for the product. From an export earnings perspective taxing coal at extraction is not flash for NZ however from a global environmental perspective selling coal to China where it is burnt without due fiscal consideration for the environment makes a mockery of the intent of any ETS.

    The real question is are these schemes in place to raise revenue or to protect the environment. The way we seem to be going about them seems to be taking a head in the sand approach to the impacts the schemes have on the environment and putting the focus on the revenue potential. Either that or we are just going through the paces of being fashionable based on fickly and piecemeal understandings of global climate science. While we stop building coal power generation facilities in NZ (where we have rigid emission standards for our chimney stacks) we effectively lower the commodity price for places like China where there is neither emission consumption taxes or emission standards comparable to our own. Therefore realistically, from a planet environment perspective, not building coal consuming plants in NZ creates an environmental negative outcome as the lower commodity cost encourages other places to consume more of the product we have ditched so we can pretend we care at a global level. Either that or we stop mining it all together but I can’t see any NZ govt actually walking that walk rather than just talking the talk about trading taxes.

  9. lprent 9
    12 November 2009 at 3:06 pm

    Just to clear up a few of your misconceptions… (I’m at work and don’t have much time).

    As you know, I consider that the science is settled and certain in terms of a ‘velocity’. That is to say that global climate change due to retention of heat from greenhouse gases is going to happen. As I’ve pointed out before, my first degree was in earth sciences, so I have a pretty good idea on the physical processes and that retained heat is going to do some seriously nasty climatic changes.

    The only real question is how soon, how big and exactly what. On those questions the science is still not particularly settled. But it is an excellent bet now that the worst scenarios of IPCC AP4 are going to be close to the best scenarios of IPCC AP5, because the data is now available to support that.

    Not working in the area and having no professional reputation to protect, I’ll stick my neck out for a sure bet. I consider that the worst scenario of IPCC AP5 is going to be as wildly optimistic compared to what comes out in AP6 or what happens in reality. Everything is going to happen faster and harder than expected. We just don’t have the verified evidence to support it yet.

    I’d point out that I’ve made the same sure bet (only type I’ll take) for every IPCC report to date. It is also what almost every person trained in the field says after you get them to loosen up (jugs of beer are pretty good).

    Fashion has bugger all to do with it – that is just the politics side. Has nothing much to do with earth sciences. So having got that part of it out of the way…

    The reason to do the Kyoto agreement was to start limiting the amount of greenhouse gases emitted worldwide. Since your average person in the US emits probably a hundred times the amount as someone in someone in Somalia. And we emit probably over 25 times those of China even now. And for that matter Aussie is close to double our emissions last time I looked. Some one should post the tables.

    Since the only path we know about how to move up the prosperity scales is to increase emissions, and this is clearly a world wide problem. The Kyoto agreement was that existing high emission countries would constrain their outputs, while developing countries didn’t.

    It also meant that those who’d dumped this crap into the worlds atmosphere and oceans paid for the R&D in figuring out how to stop dumping it there. ie You.

    Are you avoiding responsibility again?

    • So Bored 9.1
      12 November 2009 at 4:35 pm

      Thanks Iprent, for saying “Since the only path we know about how to move up the prosperity scales is to increase emissions, and this is clearly a world wide problem.” Yes, this is exactly why we are in the proverbial.

      Until we totally rethink on an individual and group basis what prosperity means in relation to other factors such as ecological sustainability etc we are completely stuffed because every model our current system throws up to deal to the issue is based upon the premise of continuation with growth based economics.

  10. burt 10
    12 November 2009 at 4:24 pm

    lprent

    Well that addressed my use of the word ‘fashionable’ but little else of what I said seems to have filtered through your outrage that I choose that word.

    Look if I have thousands of tress (which as a matter of fact I do) then leaving them to their own devices is not a good thing for the CO2 levels in the air. In their own time they grow, fall over and rot and are replaced by new trees. Arguably their impact is neutral over time as there is generally a stable level of ‘tree coverage’ that is naturally cycling over time. (excluding other events like trees being buried in land movements which turn into coal so we can sell it for precious export $$$ ignoring the reality that the end use is something we want to stop occurring).

    I think you need to separate the environmental issues and the emission trading issues, one is about science and you claim to be a 33% better man than most in that regard, the other is about politics.

    Do you disagree that burning coal in countries with strict air pollution standards is not as bad for the planet as burning it in countries where there are little or no air pollution controls? Can you see why I assert that generating a megawatt of electricity from coal in NZ is possibly not as bad for the environment as producing a megawatt of electricity from coal in China? Add in the transport miles for shipping coal to China and the picture gets worse. (Or better if you look at the export earnings and monetary spin offs from the physical act of exporting it trucks/rail to get it to ports, ship loading costs yada yada yada)

    Sure haul me on the use of the word fashionable if that irks you – but at least address the shortfalls I note which show the ETS is well thought out from a revenue perspective but has gaping holes from an environmental perspective.

  11. lprent 11
    12 November 2009 at 5:53 pm

    Nah – just short of time. I’ll have another look at it when I get home.

    Won’t be for a wee while. Looking out of the window, the traffic is crawling over the bridge into town. I was unfortunate enough to have to take a car to work today rather than the bus.

    Since I hate doing the bumper to bumper crawl, I’ll wait a while and carry on working.

  12. outofbed 12
    12 November 2009 at 5:56 pm

    Conspicuously, and for the first time anyone can remember, the Treasury has refused to endorse a regulatory impact statement for the legislation.

    The quality of the analysis, it says in the bill’s explanatory note,”is not commensurate with the significance of the proposals”.

    This at the end of the article says it all really

  13. Cactus Kate 13
    12 November 2009 at 7:53 pm

    Well not really…I argue that NZ shouldn’t sign up to Kyoto and the ETS is a crock of shit for even existing…..but that’s another post isn’t it? As I gasp for more air in one of the heaviest polluter countries in the world China, that is exempt as it is (cough, cough) “developing”.

    If we are to sign up for stupidity then the costs of that stupidity should be borne by those polluting.

    If they pass those costs to a consumer then so be it. The consumer is free to minimise the use of that product or go elsewhere to find a cheaper product or alternative.

    Nice though that the left are starting to talk about being against distortions in markets.

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