The government released its first Report on the New Zealand Emissions Trading Scheme, tracking progress in the ETS, today. Their conclusion is that the scheme is working well, and I’d agree. Forestry emissions – the most direct and immediate way we can control our emissions profile – are down, forest owners having stopped cutting down trees the moment it started costing them money. Energy sector emissions are also down (mostly due to good weather, but in part due to generators prioritising plants which wouldn’t cost them money), and investment has been steered towards renewables and away from dirty generation. At the same time, it also highlights the biggest flaw of National’s modifications to the ETS: the massive pollution subsidy scheme, which sees emitters rewarded for destroying the environment. National’s ETS means subsidies for everyone, from cement-works to capsicum growers. But the biggest beneficiaries are two of our biggest companies: New Zealand Aluminium Smelters and Methanex. Unfortunately, the report doesn’t say how much these companies received, and obfuscates its numbers to make it difficult to work out. But it does highlight the scale of subsidies: NZAS gets 4.36 tons of carbon credits for each ton of Aluminium produced, to offset its already generously low electricity costs. And Methanex gets 0.35 tons of carbon for each ton of Methanol. Despite the low latter figure, the company received 9% of all credits allocated to industry – or about 160,000 tons (and that will double after next year).
But its gets worse. The report also notes that
One company, Methanex New Zealand, also chooses to participate in the ETS on a voluntary basis. It does this because it earns NZUs for production of methanol. The greenhouse gases stored in methanol are assumed to be permanently embedded, and therefore removed from the atmosphere.
That’s a very interesting assumption. Methanol in its native state is highly biodegradeable – which means the carbon contained in it is released to the atmosphere. But it is normally used as a fuel (in which case it is burned and the carbon released to the atmosphere) or a chemical feedstock (which means it gets turned into something else, which is then burned or biodegrades, resulting in the carbon being released to the atmosphere). And what it means is that MethanexNZ is effectively in the carbon laundering business, turning natural gas into carbon credits by pretending that its products are never used.
To point out the obvious, we don’t allow this for wood – the carbon stored in a forest is considered to be emitted immediately when the trees are cut down. So why the hell do we allow it for industrial products?