- Date published:
8:47 am, May 22nd, 2023 - 102 comments
Categories: chris hipkins, climate change, Environment, ETS, greens, james shaw, labour, science - Tags:
This is huge.
The Government has done a deal with the owners of New Zealand Steel that will see the company replace its coal fired furnace with a renewable energy supplied electric arc furnace.
From Radio New Zealand:
NZ Steel’s Glenbrook plant will install an electric arc furnace – halving its coal use – in what the government is calling the country’s largest ever emissions reduction project.
Half of the coal being used at the site will be replaced with electricity to recycle scrap steel.
Prime Minister Chris Hipkins has announced plans for the project at a media briefing at the site in south Auckland this afternoon.
NZ Steel – which employs 4000 people in its New Zealand and Pacific operations – is the country’s only producer of flat rolled steel products for the building, construction, manufacturing and agricultural industries. It produces about 670,000 tonnes of steel each year for products that include roofing and structural beams.
Under the announcement today, the company will receive up to $140 million from the Government Investment in Decarbonising Industry (GIDI) Fund and it will foot the bill for the rest of the cost, which has not been specified.
The agreement has three components:
- Base build funding support up to $110m
- An extra $10m commissioning funding incentive paid if NZ Steel can get the furnace running by January 2027
- A further $20m of performance funding paid if NZ Steel can achieve a further 800,000 tonnes of emissions reductions by 31 December 2030 above the base amount committed to in the agreement
The government says the project means 800,000 tonnes of pollution can be removed from the atmosphere each year – the equivalent of taking 300,000 cars off the road. It will also achieve over 5 percent of all New Zealand’s required emissions reductions between 2026-2030 and and 3.4 percent within the third emissions budget (2031-2035).
The deal is the sort envisaged by the Emissions Trading Scheme. Set a price for Carbon, collect money from the large emitters and then use the funds to reduce emissions.
Expressions have been and will be expressed about this being corporate welfare but the bottom line is that this is a significant portion of the country’s greenhouse gas emissions.
And we need the steel. As Ad pointed out wind farms need mines, and steel.
The last two years have seen reductions in the country’s greenhouse gas emmisions.
Christopher Luxon clearly thinks he could have done a better deal. From Rachel Sadler at Stuff he is quoted as saying this:
“I thought that announcement was outrageous, actually, because it just says to me that this is a Government that’s got its priorities all wrong. Just this week, this Budget couldn’t find money to actually help support Kiwis going through a tough cost of living crisis. But all of a sudden they can find $140 million as a subsidy paid for by Kiwi taxpayers and give it to a large foreign, multinational, profitable company.”
It was money from the ETS and paid by polluting kiwi taxpayers. The money is from a contestable fund that has made a number of grants already.
But National clearly thinks that lazy rhetoric is a viable political option.
What I would like to know is what would they do? After all they do promise to a country where industrial processing plants are powered by clean electricity, not coal.
And the clock is ticking and the need to reduce emissions has never been clearer or more urgent. They owe it to the country to say exactly what they would do and what they would change.
Congratulations to the Government. By this one deal it has taken a significant step to its goal of reducing emissions by 50% by 2030.
Appreciated this morning that the funding for this came from the emissions fund ie from polluters not taxpayers.
I would like to hear a more concrete commitment from BlueScope to staying in the country.
Also I would like to have heard a more fulsome commitment by the CEO of Contact to ensuring no electricity generated by coal. That would also put pressure on Genesis at Huntly to shift to gas rather than importing brown coal.
I guess this is just one of those industries that we have to keep subsidising if we are going to have local steelmaking in the country.
So congratulations to Prime Minister Hipkins, and to Ministers Woods and Shaw. A really good post-budget hit.
That is like stating we don't pay GST because businesses do. Businesses factor in the cost of Carbon credits in to their financial models and pass on much of the costs to the end consumer.
Not if NZSteel can't compete against imported steel, as they can't at the moment.
You are discussing a different thing then. What you are wanting is for NZ to have a Steel industry not that we will reduce our carbon emissions.
No, we (the Government) want a steel industry and reduce carbon emissions.
I've told you that this deal won't make a difference to our overall carbon budget. That is set by the ETS and all this does is free up carbon credits to be used by others in another area of the economy.
And I have already told you that you’re talking porkies. If you keep ignoring information provided by others who are silly enough to engage with you still then you classify as troll.
I have addressed the information provided by others. We have a carbon budget that is based on our international obligations agreed at Climate change conferences like Paris. We have set up the ETS as the mechanism to meet our obligations. The most the agreement with NZ Steel does it reduce the likelihood that someone has to purchase carbon credits on an international carbon market. This just means we are paying someone overseas to reduce carbon emissions rather than doing so in NZ but the net effect in the World is essentially the same.
800,000 tonnes less emissions into the atmosphere each year is real and a real 5% of all NZ’s required emissions reductions between 2026-2030 and 3.4 percent within the third emissions budget (2031-2035), as per OP.
You cannot deny this nor wish it away. What NZ Steel does with its NZUs doesn’t let other polluters off the hook until this nation as a whole has met its targets. FYI, I believe that on current trajectory NZ is going to miss its agreed international targets.
Stop blowing hot air!
It makes zero difference.
Until other countries are bought inline, this is for nothing.
[When you quote, you must provide a link. Or take a ban – Incognito]
We have a moral and legal obligation to reduce its greenhouse emissions, regardless of what other countries do, because we have signed up to international agreements that commit us, together with the signatories, to taking action on climate change and supporting global efforts to limit warming to 1.5°C above pre-industrial levels. New Zealand also has a high carbon footprint per capita. We cannot afford to be complacent or irresponsible about our contribution to climate change, which is already affecting our environment, economy, and society.
You sound like a binary absolutist denier of Climate Change and any efforts to combat it.
I believe targets based on Carbon footprints/capita are the wrong measurement because it is trivial to achieve if you simply revert to pre-Industrial zero carbon economies and the mass poverty that physics imposes on this.
The correct measurement is Carbon/Unit GDP which includes human development and welfare in the mix.
As for doing ‘our fair share’ you are in a strict moral sense correct. Yet the commenters above also have a valid point – the only thing that matters is total carbon emissions globally.
And while taking a moral stand is well and good, it counts for little if others treat it with contempt.
And before you attempt the absurd stretch of calling me a climate change denier – my view is firmly located in the measures necessary to solve the problem. As contrasted to ideologically nice virtue signals.
Thank you for sharing your beliefs (incl. your old red herrings). None of it changes the fact that NZ has a legal and moral obligation to meet its targets. I don’t believe it is compulsory for you to sign up to those targets as individual and commit to what Government, on our behalf, has decided as necessary. Your lack of enthusiasm has been noted.
Meanwhile, NZ does what’s in its power to reduce harmful emissions and continue to apply pressure on others when & where appropriate to do the same – it’s called Realpolitik. If you wish to call this ‘virtue signalling’ then so be it. Nobody with even an ounce of integrity will be swayed by lazy labels thrown at them.
Tangible action to mitigate disaster vs. whining about others not pulling their weight and running off in a huff to sulk in a corner is like mature adults vs. whining 5-year olds. Adults look upward and forward and take responsibility as they see fit; 5-year olds play in their sandpits with other 5-year olds – the contrast is obvious.
PS I prefer talking with adults
Exactly what are you referring to as a 'red herring'?
And are you arguing that somehow total global carbon does not matter? That somehow only the emissions from New Zealand are worth discussing?
I’m not interested in chasing red herrings
Well that leaves everyone floundering.
No, I answered the two (leading) questions (and refused to be pulled into a wild red herring chase).
I cannot help it if this doesn’t satisfy you or leaves you floundering.
Have a nice day.
Just why would acknowledging that total global carbon matters be so difficult for you?
Because in 2022 China built two new coal burning power plants per fucking week.
Have a nice day.
"Meanwhile, NZ does what’s in its power to reduce harmful emissions…"
Not to a degree that is even remotely significant in the context of climate change.
" and continue to apply pressure on others when & where appropriate to do the same"
Are you serious? NZ? Do you seriously believe that NZ engage in some kind of economic self flagellation will be even remotely interesting to China? To India? They laugh at us.
You managed to sneak this one in while I prepared & activated your 10-day ban.
To quickly answer your questions:
Yes No No
Thanks for the diversion of red herrings – I have seen quite a few red herrings and strawmen lately, so it must be the season.
The planned reduction in volumes for the NZU auctions are set out at
Are you arguing that unless that planned reduction in volume is incremented by a further 800,000 tonnes before the commissioning of the new furnace, that the 800,000 tonnes saved will just be picked up other emitters through the ETS?
"Appreciated this morning that the funding for this came from the emissions fund ie from polluters not taxpayers. "
This money is 100% public money, owned by all of us (including 'tax payers') that could have been used in any way in the public interest. Instead it is being handed to a private multinational that makes in excess of $1b per annum profit, while they emit vast pollution.
We should regulate (or price pollution properly) and where the polluter's won't cooperate, nationalise or shut them down and spend the money on alternative industries. The already-wealthy should not be getting such gifts from the public purse.
If by “private multinational” you mean Bluescope, you might want to get a strong drink before reading this:
They can expect another $140m of public charity thrown onto their loot pile now.
Uncooked S. – You give the impression that you would rather see the the Glenbrook Steel Mill's carbon emissions stay at max possible levels.
Or, would you really rather see the mill shut down? And how many do you think would join you in that aim?
Please explain how this will impact our overall carbon budget given that this is driven by the ETS and freeing up carbon usage in one area of the economy will just drive the price of carbon credits down and mean others can use more of it?
Why is there a question mark at the end of your brain fart?
That is why the price needs to keep increasing as targets change.
The targets have already been set. This deal does not change the targets.
Best of luck with your forecast of lower carbon credits.
There's a review of the system at the moment, and plenty of uncertainty already after the last fix.
This won't change that screw up. That will still need to be fixed.
It seems to me people don't understand how the ETS works including our current Minister for Climate Change. That is disturbing. Unless these actions are accompanied by a reduction in the overall Carbon allowance that we have already agreed to this won't really impact our emissions profile at all.
It is cutting 5% of emissions. It is being paid for by ETS contributions. If industries continue to want to pollute they will need to buy credits. And the price of credits will go up over time.
It doesn't alter our overall carbon budget. It just frees up 5% of the carbon usage to be used by other activities.
What ‘other activities’?
Whatever the ETS decides. That could be a coal burning thermal power plant if people buy enough carbon credits.
That’s an evasive answer and you’re making up things as you go.
You are asking me what someone buying carbon credits on NZ's ETS will choose to do with them. I don't know. How am I meant to work that out? Do you have an idea of what all the carbon credits are used for in NZ?
Finally, some honesty! So, then why are you making these unsupported assertions if you don’t know what is going to happen on the ETS market?
But they get more and more expensive. There is only a set amount of credits. They become more expensive as time goes by if industry does not significantly reduce CO2 output.
Yes and the Government has just provided a subsidy to free up 5% of the total to be used by another player or players in the economy rather than NZ Steel. Ultimately the owners of NZ Steel benefits twice because it gets 140 – 160 million (depending on any targets it meets) from the Government plus it doesn't need to purchase as many Carbon credits to carry out activities.
I think we just have to suck it up.
That's about as policy as it gets.
I don't think anyone understands the impact on the carbon price.
Minister Shaw says Treasury inputted all the way, together with I think it was KPMG; the business case will make for interesting reading.
There was more in the RNZ interview this morning between Guyon Espiner and Minister Shaw.
James Shaw avoided answering the question when it was put to him (TWICE!) by Guyon Espiner whether Treasury thought this was a wise use of Taxpayers money. That suggests they were not impressed with the business case. As for KPMG's involvement, they will produce a report that will tell you what you want to hear if you pay them enough.
I'm happy to wait for the advice to be released.
Meanwhile, you’re flapping your wings in a dark echo chamber listening to your own shrieks believing they come from above.
Look, I appreciate the “rah rah” factor, and the projected real world effects as Micky describes re emissions and steel production, but this is still Corporate Welfare laid bare. The boss class will not do anything much of their own volition unless there is a benefit to shareholders, or, they are forced to.
NZ Steel has had much taxpayer support prior as well, they also have a high level of unionisation–up around 95% for non managerial staff which is pretty damn good. I noticed Mike Fuge Contact Energy, in some of the interview cycle, he was ex CEO at Marsden Pt. Refinery who left when NZ Refining were unwilling to develop a green energy division on site.
If this Govt. were not so keen on the ailing “Partnership model” they would eject Rio Tinto forthwith and put the infrastructure in place to redirect that power to other users.
And…time to restore power generation and supply to full public ownership. The retailers are having the country on.
It's not too hard to argue that we need corporate welfare in the country because we are a small, narrow, remote, vulnerable, path-dependent economy and we can't do without some key local manufacturers.
Even with the corporate welfare we still need to protect them from Chinese steel dumping.
The rich Tesla owners need to hold out for a bettter corporate welfare deal. They only get a 10% subsidy. Looks like 50% is the new corporate welfare rate.
People who don't own Teslas are getting more government subsidy per person than we've seen in the last thirty years. Did you not read the budget?
Luke Malpass over at Stuff:
He also provides a good balance:
In fact, his whole (long-ish) piece is worth a read.
They don’t care about climate change so nothing they say about it has coherency.
As well the looming $24 billion bill that could hit us if we do little seems a mite more than 100 million.
But apparently National are good at this kind of thing…
When National pays a subsidy it is called "investment".
When Labour pays a subsidy it is called "corporate welfare".
A welcome step in the right direction and well done to everyone who got this over the line.
Now we just have to convince the rest of the world to follow suit; because carbon atoms do not have a little label on them saying "Made in New Zealand".
This makes little to no difference to NZ's carbon budget. This just allows other users of carbon to get access to use it at a cheaper rate.
I think this is a worthwhile point, if accurate. Have you got any more insight into this Gos?
It's like those little aerolon things on the end of plane wings. They don't reduce pollution; they just increase fuel efficiency, causing cheaper and hence more flights.
Yup. That's an example of Jevon's Paradox.
While any engineer is going to chase improved efficiency, there in any given system there is a limit to how much this can be improved. Basic thermodynamics enforces this. We will always consume energy, and at some fundamental level our ability to control our environment, to generate human development, requires that we consume energy. No amount of magical thinking can avoid this.
Or as MS says in the OP – we need steel. Or any of the myriad other materials and processes that make modernity possible.
We will continue to use energy, and when you account for the energy requirement of the developing world, we need a LOT more of it, no matter how efficient we become. The only option that works is to decarbonise that energy supply.
So does that mean, as Gosman is implying, that the coal-use saved, will just be used somewhere else? Since we have that budget, we'll just use it up?
If so, then reduction is a red herring, it should be total cessation, right?
More or less yes.
But total cessation of what?
Of coal use.
I guess that even if it doesn't actually change emissions, it is proof of concept for when coal use is ceased.
Yes. The entire climate change debate hinges around whether the developing world chooses coal or nuclear to power it's future. That is pretty much all that matters – everything else is a nice to have.
The ETS sets the limit that NZ has for carbon usage. The Government sets that limit based on the international agreements it signs up to and has committed to achieving. That is unaffected by this agreement.
It is a big step towards meeting the targets in the agreements.
The ETS is set up to meet the targets in those agreements. If the targets are not met for the country then the government (or other parties) have to purchase more carbon credits from international sources.
So, we as a consuming & producing country must meet the targets. If/when NZ Steel meets its target of becoming carbon neutral it can auction off its surplus NZUs. We, incl. NZ Steel, are a long way of meeting our targets.
Are you a Climate Change denier, by any chance? You sure act like one.
I am extolling the virtues of the ETS so how does that make me a Climate change denier?
I cannot fathom your stubborn denial of a real reduction, yearly, of 800,000 tonnes of emissions into the atmosphere. It does sound like CC denier lunacy. However, if you have another/better explanation for your wilful pig-headed ignorance then be my guest.
You seem to have little grasp of the ETS.
How do you work this?
The price of NZUs is based on supply and demand (https://www.climatecommission.govt.nz/get-involved/new-content-page/what-is-the-nz-ets/). The supply of NZUs is limited and will drop over time in line with NZ’s emissions reduction targets. The demand for NZUs depends on the level of emissions from different sectors.
It doesn’t necessarily mean that NZ Steel will sell their NZUs to other emitters, as they may choose to hold onto them for future use instead of trading them on the domestic market (https://www.canopy.govt.nz/market-forest/carbon-credit-market/).
The deal with NZ Steel will also increase the demand for electricity, which may increase the emissions from the electricity sector if it is not generated from renewable sources. This in turn may increase the demand for NZUs from the electricity sector to offset their emissions.
The overall impact of all industry sectors on the NZ ETS market will depend on how much they reduce emissions, how much they increase electricity demand, and how they manage their NZUs.
Instead of asking your inane questions and making unsupported assertions, why don’t you bring something constructive and tangible to the discussion?
Asserting the deal has no effect when clearly it will reduce greenhouse gas emissions by 5% makes absolutely no sense.
I think Gossie is conflating NZU price with how much crap is blown into the atmosphere. The former is an artificial construct to reduce the latter and only the latter matters (but not to Gossie, for whom only the former seems to matter or matter most).
It won't reduce NET GHG emissions in NZ at all. It frees up 5% of our allocation to be used elsewhere. If you want to reduce our NET emissions (the actual figure that matters after all) then the target for the ETS needs to be reduced.
OMG! You’re exasperating!
5% of the yearly reduction of emissions (i.e. the target) means we have to achieve another 95%, every year. In effect, you’re arguing not to reduce emissions because it will get us closer to the target! Let’s not pay off the mortgage because if we reduce the principal to zero we have no mortgage to pay off anymore! Woe is me!
The target is not moving. All that is moving is one of the major emitters won't need to buy carbon credits to enable it to carry out their activity. Those carbon credits are still available though.
Correct, it is set (for now). The NZ Steel deal means we move closer to the target.
NZ Steel may be moving closer to its target or continue paying for NZUs. This is their decision based on their reasons/reasoning. It has been suggested that without this deal they could have (would have?) ceased their NZ-based activities.
To whom? NZ Steel can use them as they see fit. As a nation, we may have to buy fewer credits on the international market.
Has it occurred to you that NZ is not really a trailblazer?
Rod Oram over at Newsroom:
Agreed. Direct hydrogen conversion is the path forward for steel. A lot of work is going on in Australia to produce enough clean hydrogen to support this.
CSIRO was doing a lot of that research in Queensland, didn't they come up golden on production and other supply chain issues?
What would National do?
That's what National does best.
This is a really interesting signal to Rio Tinto.
If Labour can do this for NZSteel which is about 1% of our entire economy's GDP, can it also generate the same kind of deal for Rio Tinto's Tiwai Soutland plant to get something like $140 million to accelerate their conversion to hydrogen to power a smelter furnace?
Maybe it's because Rio Tinto have turned themselves into a pariah by screwing us for so long, playing us for many years that they will leave when they then don't, and leaving their poisonous crap everywhere.
I would not put it past Parker to hold the line against Rio Tinto Southland while Woods did the deal with NZSteel, just to make the FUCK YOU point nice and obvious.
Couldn't happen to a more deserving lot, here's hoping.
Is NZSteel's output all used in NZ or do they export?
How much of Rio Tinto's output is used in NZ?
Why does it matter?
Most of Rio Tinto's is exported. Somewhat less of NZSteel is exported.
Do we really have enough hydro power for NZSteel? If not, coal at NZSteel will be substantially less carbon emitting than coal at Huntly to create the required electricity.
I expect domestic electricity consumers will pay the price yet again.
As for conversion to hydrogen, heavens forfend! https://www.sierraclub.org/articles/2022/01/hydrogen-future-clean-energy-or-false-solution#:~:text=Hydrogen%20is%20an%20inefficient%20use%20of%20clean%20electricity&text=Using%20renewables%20to%20produce%20hydrogen,when%20direct%20use%20is%20feasible.
Been scanning all of Gosman's contributions and couldn't decide which one to hook my response to, so decided to add it at the bottom.
I'm neither a physicist, a chemist, nor and accountant, so my knowledge of the carbon credit system is limited. I don't know whether there are smoke and mirrors here, or not.
But, I like to try to find simplified comparisons to help me understand complex things. I'm comparing this one-off, massive deal to the EV subsidy that the government is giving on electrified vehicles. Seems to me to work the same way and (Gosman) the EV subsidy seems to be open to the same kind of criticism you're making about NZ Steel – just grossly smaller.
So, what will help me sleep at night is the fact that, while not every country has an NZ Steel, many are doing EV subsidies. So, I'm assuming the concept must be ok and I think maybe some of us are being overwhelmed by the big numbers.
You are correct this is similar to the EV subsidy which is itself a waste of time and money and does not reduce our NET GHG emissions one iota..
800,000 tonnes only exist in an Excel spreadsheet, they are not real. NZ Steel is not real. Nothing is real. Nothing we do is real. Where is my blue pill?
"""The government says the project means 800,000 tonnes of pollution can be removed from the atmosphere each year –
Surely this is worded wrong.
Not releasing 800,000 tonnes is different from removing 800,000 tonnes??
I just a bit vague on it, can you(any one) confirm that the GIDI fund is holey funded by a tax on carbon? And is that fund completely separate from the ets?
It is a good thing, that NZ steel will be able to compete with overseas producers with a lower carbon footprint BUT…
In practice it means that we are recycling steel here instead of sending it overseas for recycling. It reduces NZ emissions, but not worldwide emissions.
Some farmers who don't won't to be forced to pay for some (or all or any) of the greenhouse gas emissions from agriculture must be getting very angry with right wing politicians who don't won't businesses to be helped by government. They are currently getting help from government to avoid paying their share of NZ's emissions…
Where does "Corporate welfare" start and end? Some farms make a lot of money. Maybe not as much as NZ Steel but still…
My goodness Mickey, did you have to put a pix of scomo up? You almost made me melt my pc monitor with the rage that erupted from my mouth. Took me a while to calm down.
That Tory train wreak, has stuffed up more lives than any other PM in Australian history – a Litany of suicides. The extension of drug cartels across the pacific with his 501 laws. And as you so keenly point out, a public disaster on environmental issues with a massive expansion in oil and coal exploration.
The man is the personification of Mammon in the 21st century.
Most definitely if the person is a amoral greedy a-hole who pretends to be Christian.
Well, that might be so in the eye of the beholder.
Confused by your response, are you defending Morrison?
Climate Change Commissioner Rod Carr is obviously not smoking the right stuff.
https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018887709/climate-commissioner-current-pathway-will-not-get-us-there [3 weeks before Budget-2023]
Tom Pullar-Strecker over @ Stuff has a say on the deal with NZ Steel.
I think it is a fair and balanced piece.
If I get the energy I'll do a piece on some of the ways government directly alters and forms deals with private business.
This scale of state 'intervention' isn't something we see very often, but of necessity it happens to many leading NZ corporates.
That would be great.
I have a Post 95% finished on Tax cuts vs. universal social welfare but a long power cut on Saturday threw a spanner in the works. It can wait a little longer.