Counting ETS costs

Now that legislation which will impose an Emissions Trading Scheme on us has been passed the papers are starting to count the cost.

The ODT says the scheme will hit consumers and exporters:

It seems consumers will bear the cost of the emissions trading scheme while farmers and horticulturists fear their businesses and New Zealand’s key export industries could pay the ultimate cost and be forced out of business.

But Agriculture Minister Jim Anderton has moved to ease the sector’s concerns, saying through a spokeswoman, that if there was no greenhouse gas emission mitigating technology, the sector would get additional time to adjust.

Would you buy a used reassurance from this man?

A BP spokeswoman said yesterday’s international price of carbon credits was $44 a tonne, which would increase the price of petrol 12c a litre.

A Meridian Energy spokes-woman said the company believed the ETS was the best way to change consumer behaviour, and she said the company accepted Government predictions of its impact on energy prices.

Those were: retail electricity price to rise 1c to 2c per kWh, gas 0.9c to 1.7c per gJ and a 20kg bag coal of 90c to $1.50.

Fonterra said the higher production costs would filter through to higher consumer prices.

Meat and Wool New Zealand chairman Mike Petersen warned the $5 billion sheep and beef industry could disappear.

Other than reducing productivity or the number of animals carried, little mitigation technology was available.

Horticulture New Zealand president Andrew Fenton feared his members could also go out of business.

The $2.6 billion export earner would lose its competitiveness and consumers become reliant on food imports from Chile, South Africa and China which had higher greenhouse gas emissions, he said.

“As our growers slowly go out of business under the weight of ETS costs, New Zealand consumers are going to end up eating imported product grown in countries with much higher carbon output than ours is now.”

Lincoln University farm management lecturer Guy Trafford, has calculated the cost of ETS in 2013 for a 4000-stock unit sheep and beef farm at $36,088 a year and for a 350-cow dairy farm $40,804.

“The problem for agriculture is that it’s essentially a tax and there is still a huge anomaly, as we seem to be bringing it in for agriculture when most of the world is ignoring agriculture.”

What will be the impact on consumers?

It depends on the international price of carbon dioxide at the time the sector is included, but the general consensus is the cost of everyday items will rise.

BP says if the ETS applied to it yesterday, petrol would rise 12c a litre at the pump.

The Government says retail electricity will increase 1c-2c/kwh, gas 0.9c-1.7c/GJ, coal 90c to $1.50 a 20kg bag.

HortNew Zealand say it will cost the sector an extra $40 million a year and Lincoln University says in 2013 it will cost a sheep and beef farmer $36,000 and a dairy farmer $41,000 a year.

The Southland Times  says the ETS could cost 1000 jobs.

Southland’s economy would be hardest hit by controversial emissions trading legislation, an economic study has found.


Economic consultancy the New Zealand Institute of Economic Research found Southland would be hit hardest because of the importance of the dairy industry and the aluminium smelter to the local economy.

In contrast, Auckland and Wellington would be least affected because of the high concentration of service industries and public sector employment.

The Emissions Trading and Renewable Preference Bill passed into law by 63 votes to 57 on Wednesday.

The study, done before select committee hearings on the legislation, found agriculture, in particular, would suffer because costs of the scheme would fall heavily on export industries.

Metals manufacturing would also be hit hard, with capital falls of 6.5 percent and a 3.4 percent reduction in employment, it says.

The impact of the scheme on agriculture and related services and processing in Southland could result in employment reductions of about 1000 jobs, the report says.

And what will the impact on global emissions of carbon be? That too is up in the air but given New Zealand produces just .2% of the world’s emissions and most of that is from animals and the technology to reduce them is not yet available the answer is little if anything.

And, if carbon efficient businesses move from New Zealand to countries without an ETS and with lwoer environmental standards emissions may increase.

7 Responses to Counting ETS costs

  1. hp: The “we’re small” exceptional logic can be used by any group of 4 million people until no one does anything. It’s EXACTLY the sort of thinking that has lead to the global rape of the commons. The forest you (whoever) fell doesn’t really matter becasue there are so many forests……or there are still hundreds of forest…..or there are still dozens……and finally “Why can’t I cut MINE?! I own it!”.

    The various newspapers (essentially Fairfax and APN – both owned by foreign billionaires and / or banks) have made no effort in their coverage to look at the cost of doing nothing. Yet the ETS is being driven by the FEAR of the cost of doing nothing.

    This series of articles is an overt effort to undercut one of the primary policy difference between National and Labour and Greens. The trigger may well have been the poll last week showing the greens rising to 8%.

    Be under no illusions. This series on the cost of the ETS while not addressing the cost of doing nothing is blatant electioneering by our two foreign-owned newspaper monopolies. Nowhere do they compete head to head in any meaningful way.


  2. homepaddock says:

    TS – what I’m objecting to is doing something which will have a high economic and social cost with little or no environmental benefit and a very real risk that it will actually increase global emissions.

    To use your analogy we’re going to stop felling our forest sustainably and clear fell someone else’s.

    Doing something isn’t enough we have to do something that works.

    The ODT from which I quoted is NZ owned.


  3. Spam says:

    Those were: retail electricity price to rise 1c to 2c per kWh, gas 0.9c to 1.7c per gJ and a 20kg bag coal of 90c to $1.50.

    Gas is mainly methane (assuming its completely methane is OK for a simplification).

    1 kg of methane, when combusted, produces 2.75 kg of CO2, and 55.7 MJ of energy. Ie – the CO2 intensity is 49.4 kgCO2 / GJ. At a carbon price of $30 / tonne CO2, this means the price is more like $1.48 / GJ. ie – they have got their price wrong by a factor of 100.

    Now: The retail gas price is something $15 – $20 / GJ if I recall correctly, so this puts the price up by about 10%. Which means that electricity prices will rise by about 10%.


  4. Mr Dennis says:

    Homepaddock, considering you generally support National’s ideas, do you support National’s proposed modifications to the ETS? These modifications basically make it slightly less expensive, so it does even less for the environment, and is still completely pointless just slightly different.

    Or, like the Family Party, would you prefer it were scrapped completely and future policy was based on an actual scientific and economic assessment of what New Zealand specifically should be doing?


  5. homepaddock says:

    Mr Dennis – I accept that politics requires an ETS because if we don’t have one we’ll face non-tariff trade barriers. But I’m concerned that the political solution increases econommic and social costs with little or no environmental benefit.


  6. Mr Dennis says:

    Politics (trade with Europe) requires at present that we are doing something, but that doesn’t need to be an ETS. Europe at least recognises that is not appropriate for all situations, which is why they have kept agriculture (a small sector of their emissions) out of it. As agriculture produces half of our emissions we would be fully justified in not having an ETS at all, and pursuing alternative strategies, or at least keeping agriculture out of the ETS.

    We don’t need an all-sectors-inclusive ETS to keep Europe happy. The only point of this is to get Helen Clark a UN job.

    The political ramifications need to be considered carefully in the Enquiry we are proposing. However don’t be fooled that we need this ETS to keep Europe happy, they would certainly settle for something quite different. It is crazy though that we must design our policies to keep Europe happy rather than doing what is best for the environment.


  7. Spam says:

    Interesting that Europe is mentioned.

    When Kyoto was singed (in 1996?) is was Europe that pushed for the emissions benchmark date to be 1990 – because they had already reduced emissions significantly in the early 90s, as a result of moving from coal fired to gas fired electricity stations. They wanted to make it easier for themselves to comply, so they set a date when their emissions where (relatively) high.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: