The subsidy myth

Business New Zealand has released a paper analysing claims that farms and other businesses will be subsidised by households under the proposed emissions trading scheme.

Chief Executive Phil O’Reilly says :

The subsidy myth is based on the mistaken belief that ‘households are good and business is bad’ and that business should be punished for any emissions.

“The truth is not so one-sided. In reality, we are all in this together. Businesses are consumer-driven, and consumers need to see a price signal on carbon in order for carbon emissions to be reduced.

“By making an early start on emissions trading we will be putting NZ export companies in a vulnerable position – they will have to compete against companies overseas that won’t be paying any carbon charges. Allocating carbon credits is simply a way of reducing that vulnerability in the short term, and is in the interest of all New Zealanders.

“Once other countries also adopt emissions trading that vulnerability will cease, reducing the need for carbon credit allocations. So, alarmist publications about ‘decades of subsidies’ are wrong in fact as well as assumption.

“Emotive statements about ‘bludging business’ have the effect of undermining confidence in emissions trading. They reflect an anti-business attitude that could harm our future prosperity.

“We have an altogether more positive view on how businesses and consumers can adapt to carbon pricing,” Mr O’Reilly said.

The Subsidy Myth paper is here.

One of the questions about the ETS no-one seems able to answer easily, is where will the money go? Paul Henry tried to get an answer from carbon credit expert Seeby Woodhouse on Breakfast this morning, but he wasn’t entirely successful.

If no-one can say where they money’s going how can anyone know if it will do any good?

Especially when, as Matthew Hooton pointed out in Friday’s NBR (print edition not online) that any government which seriously proposes paying a liability will be kissing re-election goodbye.

17 Responses to The subsidy myth

  1. Uncle Helen could be getting the money.
    The UN wants it for environmental projects and since Uncle heads the UNDP, it could be her baby!


  2. Rimu says:

    Being the first to cut subsidies and bring down trade barriers didn’t bother big business in the 80’s and 90’s… I wonder what’s different now?


  3. JC says:

    Politics 172.. or something.

    Invent a non problem
    Create a villain to fit the problem
    Blame villain for problem
    Sorrowfully tell the public it must pay because the victim can’t or won’t.



  4. Rimu says:

    Oh look!

    Subsidising farmers will cost an extra $110 billion, or ~$27,500 for every man woman and child in the country.

    I can’t see the public putting up with that for long.


  5. PaulL says:

    Over what period Rimu? That is a meaningless number.

    Where the money goes should be quite easy. There are three potential places:

    1. Some of it goes to the government. A number of the permits are auctioned, the govt keeps the proceeds.

    2. Some of it is captured in profits by companies that received “free” permits, or otherwise successfully procure credits that they can sell at a profit.

    3. Some of it goes offshore to buy foreign credits. A lot of that will end up in Asia or former Eastern Bloc countries, as they have the cheapest credits. To some extent that is the whole point of the scheme – that money is transferred to places that can most inexpensively reduce emissions. The problem is, once you work out where those countries are, you’d have to have some doubts about whether the reductions are actually happening, or whether it will all be fraud behind the scenes. This is why most schemes put a limit on how many foreign credits can be used.


  6. Andrei says:

    Subsidising farmers will cost an extra $110 billion, or ~$27,500 for every man woman and child in the country

    We are not subsidizing farmers – no we are subsidizing the patrons of big government who will be the ultimate recipients of the money extracted by absurd scheme.

    For goodness sake wake up and smell the coffee this is a scam no different than any other confidence trick and just as immoral maybe even more so.

    How the spin masters have managed to convince the population that CO2 and CH4 are pollutants is a demonstration of the power of “newspeak” and the scientific illiteracy of the majority.


  7. Rimu says:

    Yeah and somehow the ‘spin masters’ have convinced every major scientific body in the entire world of that fact too.

    Come on Andrei, that’s just not credible.


  8. Red Rosa says:

    Never mind, Nick Smith will explain all…..maybe…

    These are staggering numbers, which make the 1980’s SMPs look like chicken feed.

    Hooton has it right. The ordinary taxpayer will cotton on sooner or later.

    Even worse, the EU protectionists will jump at the chance to beat us over the head with it.


  9. PaulL says:

    I see ACT are returning to their position of the past:

    “ACT believes that, if it must do anything, the Government should introduce a low-level carbon tax rather than an Emission Trading Scheme – which will be difficult and expensive to administer. Looking to the future: if the theory that human action causes climate change is disproved, then an ETS will be even more difficult to reverse. ”

    Very good. Carbon tax, all the way.


  10. Andrei says:

    Come on Andrei, that’s just not credible.

    Maybe not but the people making these dire predictions have even less credibility


    World has only ten years to control global warming, warns Met Office

    And yet their predictions in April for the English summer, that has just finisihed were totally off the mark

    The Big Question: Why did the Met Office get it so wrong?


  11. murrayg1 says:

    Is this ome kind of sad joke folks?
    Lets get some facts under our belts.
    1. There is not the ‘sink’ in the world, to sink the current output of carbon.
    2. we needed to stop at 350 ppm to stop warming at 2deg. We’re way past that.
    3. Ironical, but of no help, is the fact that fossil fuels supplies will have ‘peaked’ well before 2050 (anyone thinking otherwise, please study ‘current rates of consumption’ vs exponentially increased usage, and overlay the Hubbert Peak).
    4. The subsequently diminishing depletion rate will not assist the carbon problem, see 3 above (exponential increase).
    5. Fiscal systems based on growth won’t go that distance, or anything like it. State-owned banks supplying money at 0% might work, but no other scenario. Lincoln, Kennedy and John A Lee tried it, lotta pressure to desist. Guess who from?
    6. It is disingenuous of ALL commentators above, to quote anything about 2050 as if real. John Key’s “50% by 2050” is tounge-in-cheek nonsense. The Labour numbers (whether ex-Treasury or not) are an unsubstantiable nonsense also. The only real difference – and Labours was the better because of it – was the ‘Cap’ part. At least with that, when (if) leadership with gumption came along, they could have lowered the ‘lid’.

    Those who continue to tout ‘economic growth’, ‘jobs’, indeed anything suggesting that Business-as-Usual is a ‘goer’, are either delusional, disingenuous, or a bit slow.

    The above is yet another deckchair argument, anyone notice the sloping deck?

    Come on folks, we’re out of time. We it the iceberg a year ago.


  12. J.R.M. says:

    A big con.The reasons for NZ participation -Trade-What about the facts as Wishart and others see it? let us be in the last 10 cabs off the rank .The so called experts are too socialist leaning.4m people wont make any difference NZ relies on agricultural exports cant you wankers see that how are your saleries going to get paid ? J.R.M.


  13. murrayg1 says:

    One person makes one person’s difference.
    Time you shouldered you responsibility, perhaps?

    Strutting self-important people who grasp at any straw which justifies their continued way of life, have never had my respect, and I find it interesting to watch how, when the going might get tough, the hithertofore tough are suddenly missing in action.
    Less invective and a little more self-education would be a good way to go. Denial is essentially blameshift – an immature reaction.
    Time somebody grew up.


  14. PaulL says:

    Murrayg1: have you tried

    I thought the numbers stacked up reasonably well. And it missed some energy options that I think are real – for example, he entirely ignored space based solar.


  15. murrayg1 says:

    I’ll have a look. One of the problems is the lead-time left to jump to any alternative, whilst the existing gets used up.
    I get a tad frustrated at times- if we all used energy like I do, we could probably run electric cars for everyone with the existing grid, and without Huntly.
    My house had 49deg in the conservatory and 33 in the house yesterday, and came through the night (sou’west blowing) at 21deg. Sorry, 20.1deg. No artificial energy used.
    As I said, we’re running out of time to create the infrastructure. Only 10% or so of the existing housing stock can be replaced, so it’s retrofitting needed, etc.
    The problem is that we have to acknowledge the problem, before we address the problem, and I think the deniers will take us well into injury-time.
    There’s an interesting precis of Peak Oil on, by ‘Gail the Actuary’. Good reading for those not up with it – and some good graphs.
    I’ll check out that site, cheers.


  16. Andrei says:

    No artificial energy used.

    There is no such thing as artificial energy – that’s elementary physics my friend.

    As entropy increases we can tap into the energy flows along the way to perform useful work for us along the way – that is all.

    And despite what you think there is plenty of oil – there are known reserves to last thousands of years, given the current state of technology and the availability of more easily accessible reserves these reserves are not economic to exploit at this current time.

    That will change – after all when I was at school peak oil was supposed to come in the nineteen eighties. It didn’t of course – we just found ways of making new reserves economic. And so it will be again provided fundamentalist green religionists don’t produce obstacles to prevent it.

    Of course if they do – your descendants will be living in mud huts while the more dynamic societies (ie the ones not infected with ludditism) will progress to even greater heights.


  17. murrayg1 says:

    Your information and mine, re oil reserves, are on a different planet.
    All energy here is solar in origin – I get it direct and therefore not from a finite store.
    Nobody, but nobody, is talking thousands of years, and you can’t even introduce such a silly statement without quantifying ‘at what rate of usage’.
    If you were taught 1980’s for Peak Oil, you were taught short. Hubbert – in the original stab at it – said 2000. And just because you haven’t died yet, doesn’t mean I can’t predict – with 100% accuracy – that you will.
    Get to learn about ERoEI. Energy Return on Energy invested. If it takes a barrel of oil equivalent, to raise process and offer a barrel of oil, it ain’t worth doing – at any price.
    Currently 30% of existing fields are left in the ground – not because of $, but because of the energy required. Ghawar, for instance, water-cuts more than 8 million barrels a day (of seawater) to produce 4-5 million of oil. Then they have to separare the water at the well-head. Deeper offshore plays just get worse….
    We didn’t ‘find ways to make new reserves economic’ most ofthe technology was pre-1960 in origin, as were the discoveries of the fields.
    You’ll fing a very clear graph of global discoveries on that oildrum site I mentioned.
    My vested interest is no more than saving enough of the global paddock to hand on to my kids – what’s yours? $$$$$?
    Get it straight – folk like me don’t want to do the mud hut thing – we’re pointing out that it’s a consequence of our current actions. Your last comment was copybook blameshift – see above.
    Good luck – tell me how your $ went in 2-5 years time…


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