Federated Farmers is continuing its campaign against the ETS and I think that’s a mistake.The interview on Checkpoint (at 18:09) with Federated Farmers President Don Nicolson did their cause little good.
He’s correct that only the biological component of agriculture are exempt, at least for now. But any other cost increases in the likes of power and fuel will fall on everyone, not just farmers.
Until recently I might have agreed with continuing to campaign against the ETS but for some time I’ve been thinking it’s time to stop fighting it and make it work for us.
This was confirmed at the National Party’s Mainland conference at the weekend.
The ETS has been the hot – no pun intended – issue at regional conferences. In acknowledgement of that Minister for Climate Change Issues Nick Smith changed his speech from water issues to deliver a speech entitled Our national interests and the ETS.
He started by acknowledging the debate over the science, econmics and international politics of who should do what, when. Then explained why New Zealand was going to introduce transport, electricity and industrial sectors into the modified ETS.
He started with the science:
We don’t claim a consensus or a perfect scientific understanding of the earth’s climate system. But we are satisfied that enough is known to be of concern and that action is justified to curb our growth in emissions. This is about sound risk management. New Zealanders expect governments to prudently manage risk of phenomena like earthquakes. We all pay EQC levies even though we may not need the billions that have been collected. We see managing the risk of climate change in a similar context.
Then came the politics:
The international politics of this issue is as hard as the science. Two stark facts dominate the global debate. 80% of the increase to date has been caused by developed countries that make up only 20% of the population. This is why there is such a rigid position from developing countries that we must move first to curb our emissions.
They say: “You caused the problem, you’re wealthier, you need to take the lead”. It’s on this basis that Kyoto was stitched together.
But there is an equally compelling statistic on the future. More than 80% of the increase in emissions this century will come from developing countries. That’s why countries such as China, India and Brazil are pivotal to the post-Kyoto framework.
And then there’s domestic politics:
Labour’s scheme would have doubled costs, required the early entry of agriculture and given less support for industry.
We have Labour and the Greens arguing our ETS is too soft, too slow, and too generous to business. . .
ACT has championed the cause of the Kyoto forest owners. They argue that carbon credits are a “property right”, “belonging to those who planted them” and must not be “confiscated”. That’s fair enough, but paying these out is set to cost about $1.6 billion over the Kyoto period until 2013. It’s odd then for ACT to argue the carbon debits that rest with emitters under Kyoto through to 2013 don’t belong to them and must be paid for entirely by the taxpayer. This is the ‘socialise your losses, capitalise your gains’ ETS. It is a recipe for a Greek-style fiscal tragedy.
Why is starting soon in our interests?
The sooner we start, the easier the transition will be; it will protect our green brand and market access and encourage afforestation and renewable energy.
While Labour was in power 56% of new energy generation built was thermal, only 44% was renewable. Since National came to power 80% of consent applications have been for renewable energy.
The price signals the ETS sends are crucial for foresters.
New Zealand lost 30,000 hectares of trees in Labour’s last four years in office, more than in any period since records began in the 1930s. Their confusing and shifting policies on the ETS contributed to this. Again, like electricity these are long-term investments that need certainty. In 2009, the deforestation stopped and there was a small gain in forest area of 500 hectares. Forester’s intentions indicate increased plantings of 4700 hectares this year, 5700 hectares next year, and still more of 7700 hectares in 2012. This confidence will be lost if we blink on the ETS, yet these plantings are crucial to New Zealand’s long-term climate change targets.
National campaigned amending the ETS in 2009 and introducing it this year.
We’ve halved the cost to businesses and consumers. We’ve slowed the pace, deferring sector entry dates. We’ve removed the disincentives for businesses to grow and ensured that small and medium businesses are not discriminated against in the allocations to trade exposed businesses. We’ve put regular reviews in the law in 2011 and regularly thereafter so we can reassess our approach relative to international progress and the latest science.
National promised foresters would receive credits for trees planted since 1989 and the country signed and ratified the Kyoto protocol. Without an ETS we’d miss our reduction target by 11 million tonnes.
There are alternative measures to meet our commitments:
You could regulate and tell citizens what sort of light bulbs they must use, how much water they can have in their shower, what sort of cars they can buy and tell business what sort of power plants they must build. An ETS encourages emissions reductions without reverting to a Nanny State.
All advice New Zealand has received says that the Australian approach would cost more and achieve less.
The crucial point here is that countries face a Kyoto cost either as taxpayers or as emitters, and all of the economic advice is that it is more efficient and cost effective to put the cost on those who can do something about how much they emit.
New Zealand is not leading the world. In the EU emission s are 10 tonne per capita and here they’re 18 tonnes. The EU’s emissions have dropped 9% since 1999, ours have increased by 24%. (I accept that a good deal of our increase is from agriculture, most of the production of which is exported). The EU scheme started five years ago and covers 43% of emissions, ours which is due to start in July covers only 23%.
The claim of New Zealand leading the world would be true if we were insisting on implementing an all gases, all sectors scheme on 1 July. We’re not. The scheme only provides for a half-obligation. Our plans to move to a full obligation in 2013 and to include additional sectors are conditional on progress being made internationally. We’ve got reviews of the ETS in our legislation scheduled for 2011 and regularly thereafter. A key test will be in ensuring New Zealand does not carry an unfair burden of the cost of constraining emissions and that our approach takes the least cost way of meeting our international obligations.
National has halved the costs Labour’s scheme would have imposed:
The cost to an average dairy farm of the fuel, power and processing impacts of the ETS is 0.5% of returns. The ETS will impose less cost on the average farmer than a 0.1% increase in interest rates.
And there are opportunities for farmers to make savings.
The obvious way a farmer could offset the cost of the ETS for the average farm is to plant on unproductive areas of the farm in forest. An area of only 6 hectares would offset the 1 July 2010 electricity and power costs of the ETS.
There are many new technologies available to reduce on farm energy costs. For example, the installation of heat pump technology in the dairy shed can deliver more than $2000 a year in savings in electricity. Studies of irrigation also show thousands of dollars of savings from modest efficiency improvements in systems.
Households could also become more energy efficient and make savings from that:
For instance just correcting the tyre pressure on the average car can save $130 per year. Changing driving habits for the average motorist can save $300 a year. The Government is helping to offset the ETS cost for a household by providing an $1800 home insulation grant and a $1000 grant for solar hot water systems. These would each save an average household $400 a year in energy costs, greatly exceeding the ETS costs of a $165 per home.
One reason our emissions have increased in the past two decades is mixed messages and an inconsistent approach.
Businesses and the economy need a steady and consistent approach, and that’s what your Government is delivering.
We Kiwis value our clean green brand and want to be part of the solution, and not the problem, on climate change. We don’t want to lead the world in emissions growth anymore than leading the world in emissions cuts. We know we need to be planting more trees. We know we should be building more renewable power stations. And we know we should be investing more in energy efficiency. Doing nothing is not an option. Our very moderate ETS is the sensible way for a National government to make progress.
A PDF of the power point slides is here. The ODT and Oamaru Mail reported on the speech and Stephen Franks posted on a similar speech delivered to the Central North Island conference and gives his views.
The whole speech follows the break.
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