Speech by Hon Rodney Hide, ACT Leader, to the Waikato Federated Farmers AGM, at Hamilton Airport Conference Centre, Hamilton, Thursday May 6, 2010
Should New Zealand lead the world?
Of course, you say. We've done it before.
First country to give women the vote. First country to sign a free trade agreement with China. First up Everest.
Yes, we know what it is to be first. To be the one others want to follow.
But do we know what it is to be out on a limb? To jump the starting gun and be running alone? Well, we are soon about to find out.
New Zealand will be the only country in the world to enact a national all sectors, all gases ETS. Just us.
The US won't be, nor Japan, India, or China. And Australia has just pulled out as well.
You have been told by our climate change Minister that 29 European countries already have an emissions trading scheme. So don't worry, we are not alone.
Not so. The Europeans are well known for their diplomatic skills. As somebody once said, a diplomat is one who can cut his neighbour's throat without having his neighbour notice it.
The EU scheme is very far from an all-gases all-sectors ETS.
It doesn't apply to methane, nitrous oxide, fluorocarbons, ozone, etc. It covers carbon dioxide only. It doesn't apply to emissions from the transport sector, households and small business. It doesn't apply to agriculture, construction, waste, etc.
So almost 60 per cent of EU emissions are omitted. It applies only to heavy industry and electricity generation - all other economic sectors are out.
And in the electricity sector the allocations have become so complex, so riddled with exceptions and special cases that, for all practical purposes, the EU ETS has not built any carbon price into electricity during its first five years. So overall, the European ETS covers only 4 per cent of economic output.
Within the European trading and ETS area, over 80 per cent of exports and imports by value are with the other countries under the same minimalist ETS regime. So those businesses are competing largely with other businesses facing the same costs and the same restrictions.
But not us.
Our government is imposing these NZ ETS costs on you. No other government is imposing such costs on their farming sectors. Your competitors get off scot free.
Meat and Wool NZ has calculated that the cost for the average dairy farmer will be $10,200 per annum. Less than a quarter of this is animal methane and nitrous oxide - which comes into the ETS in 2015. The overwhelming majority is electricity, petrol and the processing costs of dairy factories. This starts on July 1 this year.
Meat and Wool NZ also confirms that the cost of the ETS to dairy farmers is 7.5 cents per kg of milk solids - the MAF estimate of 2.5 cents is just a fraction of the full true cost.
On 1 July, the tentacles of New Zealand's Emissions Trading Scheme will reach across every sector of our economy. And into everybody's pocket.
The New Zealand government is about to go where no other government has gone, and where it is very likely that none will ever go. The ETS will make energy - both electricity and petrol - more expensive. Treasury forecasts its immediate impact to be a five per cent increase in the price of electricity and a four cents per litre increase in the price of petrol. And the plan is to double it again in 2013.
New Zealand is to be the first and only country in the world to impose a comprehensive and costly ETS on its productive sectors. All our trading partners and all the major world economies are backing away.
Most economies are in big trouble, and there is no way governments are going to further damage the prospects for jobs and growth with a comprehensive ETS. They realise it makes no sense to damage their economies, export jobs and lower the income of their citizens by going it alone.
An ETS, or preferably some form of carbon tax and subsidy scheme, makes sense if two conditions are met.
First, the science must be solid. Second, all or most countries must participate.
Well, we know that we don't have international participation - there is just one small country at the bottom of the South Pacific going down this path.
Let me expand on that second point a little before coming back to the science.
The urge to participate in an international agreement has led us into a truly dreadful position.
Why an ETS?.
Because that is what, for a time, it appeared the international cooperation was going to be based on. Economists have long tended to prefer a carbon tax to an ETS, because of the high compliance and administration costs, lack of transparency, massive lobbying for special treatment, corporate welfare, and market manipulation that an ETS encourages.
Politicians, of course, are attracted to an ETS because it does not look or sound like a tax, although it is. And, for a politician, handing out the associated credits has an obvious appeal.
All the theoretical problems with an ETS are here in spades. We already have the large and growing bureaucracy which will be needed to manage the ETS. Already the process of establishing the ETS is shot through with lobbying, unprincipled deal-making and divergent treatment of different economic activities.
The deal with the Maori Party to pass the legislation was a last minute one. We know they got agreement to include a Treaty of Waitangi clause, to look again at past Treaty settlements, and to allocate carbon credits to iwi fishing interests.
The longer this ETS continues, the more likely it is that the costs and subsidies will get reflected in asset prices, the wealth transfers will become locked in, and over time become more difficult to change.
Already the government is using this as an excuse, in respect of foresters, for not suspending the ETS. The Minister for Climate Change has argued that foresters have planted trees on the promise of securing carbon credits and it would therefore be unfair to change the rules.
This is nonsense. Most of our forests were planted long before an ETS was considered. The number of hectares planted in the years since the ETS was first considered is not large. And much of this planting was motivated by government afforestation programmes, not the prospective ETS.
A temporary suspension would have limited consequences for most foresters since forests are planted on a 30-year plus rotation.
The ACT Party strongly supports the principle of compensation, but claims that the Crown would incur large compensation costs are grossly overblown. To be consistent, the government should also apply the principle to the case of pre-1990 forest owners who are retrospectively penalised if they convert their forests to other land uses.
The delayed entry and a gradual transition for various sectors does little to reduce the damage the ETS will cause. It is the direction of policy that is the crucial signal to investors. As far as jobs and investment are concerned, it is the destination that is the problem.
As farmers you know that there are huge costs not that far down the line for you. And you know your international competitors will not face those costs. The signal to business is loud and clear. Invest elsewhere. That is why the ETS will export jobs.
For a country producing only 0.2 per cent of global emissions to try to lead the world is absurd. We will damage our economy, our jobs, our incomes. This will have no detectable influence on the global climate, whether warmer or colder.
To summarise, we have chosen a costly, bureaucratic mechanism to change the price of emissions in our economy. We are the only country to even contemplate an all-sectors, all-gases ETS, let alone actually implement it.
We have inflicted upon ourselves the third most ambitious emissions reduction targets for 2020; and unlike most countries, we appear to be taking our targets seriously.
So there we were, late last year, the deal done with the Maori Party, the legislation passed. We were off to Copenhagen, first up, best dressed, ready to go.
Our Ministers turned up to the Copenhagen conference tarted up in the best, most comprehensive ETS they could imagine. But the conference was an abject, humiliating failure.
A deep global recession and major scientific scandals surrounding the science of climate change have shifted the landscape. No legal treaty after 2012 is in sight.
Kyoto obligations won't be enforced, because this would deter countries from making future commitments. And there are no effective sanctions for non-compliance.
The argument that if we do nothing the taxpayer will have to pay is bogus. And in any case there is no liability, on current projections New Zealand will meet its Kyoto obligations in the first commitment period.
So, there is no good reason to be involved in all of this by virtue of doing our bit internationally. Nobody else is doing theirs.
What then about the science?
This is the other necessary condition for us staying fully involved in the Kyoto process.
Is the science unassailable, is the matter settled?
Well no, it never was. I am not suggesting that there is not a respectable body of science suggesting we should be concerned about the potential for global warming from the activities of mankind. Because there is.
But there is also a respectable body of science suggesting that the risks have been greatly exaggerated, that our level of understanding of global climate is weak. What we have known for some time is that the institution of the IPCC has become driven by political agendas, rather than by science.
We know of the notorious hockey stick graph, of data manipulation to eliminate the Medieval warm period and produce a sudden dramatic spike in temperatures in the past century.
We have heard of the numerous projections of imminent disaster that had no basis in established science. In short, the credibility of IPCC process has been destroyed by the political agendas that have infiltrated it.
Now Climategate has left the science looking even more suspect than it already was - and it was by no means secure before Climategate. The hacked emails, documents and computer codes from the University of East Anglia Climate Research Unit (CRU) are now in the public domain.
They reveal a systematic attempt to manipulate the historical time series data, together with arbitrary adjustments to the computer codes which produce the averaged and smoothed temperature data.
CRU officials, from the top down, have conspired to block official information requests, influence and control the peer review process, and avoid accountability. They claim to have lost the original, unadjusted data, which means it cannot be cross-checked in the usual mode of scientific peer review.
And independent reviews of their methods confirm that the CRU was disorganised and lacking in competence in statistical methods. Given that most of what they do is database management and statistical analysis, this is an astonishing revelation.
Their data is the crucial input to the computer models on which projections of rising global temperatures are based. Those projections have led the global community to consider introducing globally binding ETS systems to reduce emissions.
You know the old saying about computer models: garbage in, garbage out.
These global emission targets, if met, will have a substantial negative impact on world economic growth and incomes, and thus on global poverty. These are issues, therefore, of the utmost importance.
Climategate has massively damaged confidence in the methods, processes, and basic data on which all the analysis is based.
Well, you might say, at least it couldn't happen here. Well here's a curious thing.
New Zealand' National Institute of Water and Atmospheric Research (NIWA) is responsible for maintaining our climate records, having taken over from the NZ Meteorological Service in 1992 when NIWA was established.
In the early to mid 2000s NIWA produced a graph showing New Zealand was warming even faster than global averages.
Around that time the government started exploring options for reducing emissions - carbon taxes and ETS arrangements. Helen Clark, then PM, later announced her Party's intention that New Zealand should lead the world in fighting climate change.
The NIWA graph was most helpful.
This new official NZ temperature series - which was based on only seven measuring sites - showed a warming trend of 0.9 degrees centigrade per century. The Climate Conversation Group (CCG) and the NZ Climate Science Coalition (CSC) combined to investigate the New Zealand temperature record.
They started with the official graph and the raw temperature readings, both published on NIWA's web site. There are big differences between them. The raw data shows basically no trend since the 1850s, whereas the adjusted series shows the 0.9 degree rising trend per century.
But there was no explanation for the differences on the web site.
Most of us know there are many good reasons to adjust a series of temperature readings: there may be gaps in the series, the site for the temperature readings may change, the environment around the site may change (eg trees or roads or parking lots), or what was once a rural area becomes urban over time.
These can all be valid reasons for making adjustments. The technical term for the documentation of these adjustments to raw data is a Schedule of Adjustments (SOA). It's quite normal to have an SOA.
In fact it is essential - that's how you keep track of the reasoning behind the adjustments, and this is what allows other scientists to cross-check the quality of the work. Replication of results is an essential part of good science.
And here is where it gets interesting.
NIWA started to get evasive when asked for the SOA. In answer to requests they talked about the standard reasons for making adjustments, and they referred to numerous papers which describe different methodologies for doing so. They said the information could be found in obscure papers from 20 and 30 years ago.
The one thing they did not do was simply hand over a schedule of adjustments. It wasn't a state secret. The climate science coalition duly followed up the references. But there was no SOA in any of them.
In frustration they contacted me, and we started asking questions of the Climate Change Minister, and then the Minister for Research, Science and Technology.
We tried oral questions in Parliament. We got evasive answers. So we peppered them with written questions. Again, evasion.
We got the usual references to academic papers scattered around the internet, and one on restricted access at a university library. We managed to get that one on interloan, electronic access only, but were only allowed access for a limited time.
It was like trying to get information out of the Kremlin, but not as cooperative. Coming after the scandalous behaviour and sloppy processes revealed in the United Kingdom at the climate research unit, we started to think the unthinkable.
Are they trying to hide something?
Maybe we have our own CRU scandal?
All we wanted was a schedule of adjustments for the official climate series, so that scientists - not politicians, not political parties - could check the analysis.
All we wanted was some basic science. As scientists, NIWA should have been welcoming scrutiny of their data and methods. Instead they were blocking us at every step.
It eventually became clear that NIWA simply did not have a well-organised database, with an accessible or up-to-date, or defensible schedule of adjustments.
One of the reasons for the embarrassment and defensiveness apart from hiding sloppy and inadequate scientific procedures is probably that NIWA along the way realised that it actually has a statutory duty under the Public Records Act to maintain full and accurate records.
They are in breach of their statutory obligations.
The Seven Station Series seems to have been introduced into NIWA's records, without formality, on some date in the early 2000's when James Salinger was Principal Scientist of the Climate Group. There does not seem to be any supporting documentation, it appears not to have been checked or assessed or peer-reviewed.
Was it approved by the Chief Scientist, and on what basis? If so, show us the documentation.
What we know is that the raw data show no rising or falling temperature trend. The rising trend in the official Seven Station Series is a result entirely of adjustments to the data.
You might say the warming was man-made. Analysis of the data shows that 90 per cent of the adjustments favoured a rising temperature trend.
A sceptic would naturally be getting suspicious at this point.
Conceivably these adjustments might be entirely reasonable. But we won't know, and can't know, until NIWA is able to publish an authoritative schedule of adjustments, and until independent scientists are able to check that work.
As the pressure was building from the Climate Science Coalition (CSC) on the Seven Station Series (SSS), NIWA released in December last year a new Eleven Station Series (ESS) which showed a similar rising temperature trend to the Seven Station Series.
The CSC analysed this data, and visited a number of the measurement sites. There have been site re-locations for these instruments; some have multiple and lengthy gaps in the data; some are "class 4" stations which have an error potential as high as 2 degrees. The CSC has grave doubts over the consistency of the series, as new stations are added from quite disparate locations.
When the 7 and 11 series data are overlaid, the differences are more pronounced than the similarities. Warming periods do not coincide.
There is a happy ending, or at least the prospect of one. After all the blocking, the defensiveness, the evasion, NIWA has - to its credit at last now announced that it will have a fresh start.
Essentially NIWA has conceded it does not have a schedule of adjustments. It is conducting a full review of the temperature series, and has committed to publishing a complete set of data and documented adjustments - in short, a schedule of adjustments.
Why does all this matter?
Well, it doesn't much matter what New Zealand's temperature trend is in respect of whether or not global temperatures are rising or falling. Our data doesn't strengthen or weaken the case for emissions control policies.
But the science does matter in respect of the politics of global warming. The science is used to motivate political agendas, to scare people into accepting changes that they would otherwise resist.
And how come our climate scientists didn't notice any of the problems with the IPCC reports? Were they asleep at the wheel or did they just decide to keep quiet about it?
All of this matters greatly for the integrity of science in New Zealand. It matters whether or not our taxpayer funded scientific institutions behave with some integrity, as well as doing good scientific work.
It matters when they consider themselves some sort of secret society, not open, not accountable.
And it matters if they disregard their statutory obligations to maintain adequate records.
There are heads that should roll in NIWA.
They have misled Ministers.
They have performed with reckless disregard for basic scientific standards and for their statutory obligations.
They have blocked perfectly reasonable requests for information.
And they have covered up the inadequacies of their own performance.
In conclusion, let me say this.
ACT has neither an alarmist nor a denier position on climate change. But we are certainly sceptics.
Nor is ACT opposed to New Zealand adopting responsible climate change policies. Our minority report to the ETS review committee concluded that New Zealand should be seen to be willing to play a part in any fully international agreement - but there is no such agreement.
What ACT does oppose is premature action to proceed with the next phase of the ETS on the basis of flimsy arguments about liabilities to taxpayers and unfairness to foresters.
We think it is foolish to rush ahead of our trading partners at a time when the economy is weak, many households are struggling, GST and electricity prices may increase, and Australia has deferred any action.
A decision to suspend the ETS temporarily - say until Australia adopts a similar scheme - would not prejudice New Zealand's diplomatic relations or its commercial interests.
New Zealand should continue to participate as a responsible international citizen in climate change discussions. And we should promote our initiative on agricultural research.
But we should not put our economy at a competitive disadvantage with Australia and the rest of the world at a time when the government's top priority objective is to boost productivity and catch up to Australian income levels.
We should suspend the ETS forthwith.
John Boscawen MP speech to ETS Public Meeting; Beach Street Hall, Beach Street, New Plymouth; Tuesday May 4, 2010.
Good evening ladies and gentlemen. Thank you very much for taking the opportunity to come this evening.
This is the seventh and final speech in my two day tour through the Waikato and Taranaki regions. Once again we have another outstanding turnout.
Over the last two days, I have addressed meetings in Morrinsville, Matamata, Tamahere on the outskirts of Hamilton, Te Awamutu, Otorohanga, Te Kuiti and finally this evening in New Plymouth.
I have been stunned by the turnout to these meetings and the reaction I have received from shopkeepers and pedestrians on the streets in these towns. There is widespread concern amongst rural New Zealand that is matched in cities such as New Plymouth. I have also detected major concerns by rank and file National Party members, some of whom have told me that they have already resigned from the National Party over this issue and many more who have told me that they intend to do so if the ETS is implemented on July 1.
The New Zealand Emissions Trading Scheme comes into effect on July 1. Since it was passed into law in November last year much has changed. In light of these changes it is time to take a step back and to take stock of the scheme. It is time to remind ourselves why the legislation was passed in the first place and to ask whether it still makes sense to proceed with it.
The ETS will have a profound impact on our economy, raising prices across the board and costing jobs. Climate Change Issues Minister Nick Smith himself has said "this legislation is probably the most significant change and reform, of a financial nature, since the introduction of GST' - and just to be clear, he meant GST per se, not the 2.5 percentage point increase that may be implemented later this year.
The ETS is designed to increase the price of energy. Treasury forecast that the scheme will result in a five percent rise in the price of electricity and a four cents per litre rise in the cost of petrol from July 1, double again in 2013. In addition the ETS will also tax emissions from certain industrial processes and from agriculture. These increases will flow through every segment of our economy and affect every New Zealander.
Meat and Wool New Zealand has calculated that the ETS tax cost for the average dairy farmer will be just over $10,000 per annum. Now you may have heard Prime Minister John Key say that agriculture doesn't come into the ETS until 2015. That is correct, but only technically. Farmers don't have to account and pay for the methane given off by their animals when they burp or the nitrous oxide from fertiliser until that time. However, for the average dairy farmer these costs represent less than a quarter of their total ETS bill. By far the largest costs faced by a dairy farmer are the higher costs of the petrol and electricity consumed on the farm, and of the costs incurred by the dairy factory - these costs start on July 1 this year.
In fact Meat and Wool New Zealand calculate that the total cost of the ETS by 2015 will be 7 cents per kg of milk solids. Just a short while ago Federated Farmers was predicting an average profit per dairy farmer this year of 25 cents per kg of milk solids. While this has increased with the recent announcement by Fonterra of an increase in the payout, it still represents over ten percent of the average dairy farmer's profit. Nick Smith says "that the cost is not excessive for business.' Can you imagine the Government asking the teacher unions to take a ten percent pay cut?
For struggling beef farmers, who receive less today for their animals than they did twenty years ago, it is even worse.
If you are a farmer, and if you only take one thing from tonight's meeting, please understand that you will be affected by the ETS from July 1 this year. Do not be fooled by any amount of National Party spin that farmers will not have to pay until 2015.
However, it is not just farmers who will be feeling the pinch. Still struggling to recover from the recession, businesses across the board will be hit hard as they are saddled with higher production and transport costs. Domestically business will try to pass costs onto consumers as much as they can. That means prices will rise for many of the daily staples that are produced here and not imported. Not only will we be paying more for electricity and petrol, but also for bread, butter and milk.
Internationally, however, our businesses cannot pass on their costs. In a competitive world market, exporters receive the world price for their product. Foreign consumers do not care if Fonterra's production costs have increased, they will simply buy from someone else. The world price for milk is the world price; farmers get what is left over after processing costs. Some firms will be able to absorb these costs, others will not. They will either close down or shift production overseas. I have spoken to several firms for whom this is the reality they face. The Government recognises as much. In a Ministry for the Environment report published in December last year, to which Nick Smith wrote the foreword, the following statement appears:
Many New Zealand-based firms operate in markets in which prices are set internationally. This includes both firms that are exporting and those that produce goods that compete against imports. For these 'trade-exposed' firms, an increase in the costs of production in New Zealand as a result of the NZ ETS will make them less competitive relative to firms in other countries that are not facing an increase in their production costs.
The same report also warns that:
If these other countries do not place controls on emissions, this may cause emissions leakage: New Zealand emissions fall, but there is no reduction in global emissions since production has simply shifted abroad. The lost business activity may not return to New Zealand in future, even when emissions pricing is more widespread internationally.
Sadly, that means for some New Zealanders, not only will they be facing higher electricity, petrol, bread, butter and milk prices, but they will also be out of a job.
The ETS will impose real costs on the economy; it will affect real people.
Why then, implement this scheme? Well, the ETS is one of the Government's responses to the hypothesis that human activity contributes to 'climate change' or 'global warming'. It is, to quote Nick Smith about "ensuring that New Zealand does its fair share to combat climate change.'
The idea was that by imposing a cost on greenhouse gasses, we would emit less of them, either by reducing consumption generally or by investing in new technology and carbon sinks such as forests. With countries working together emissions would drop sufficiently world wide to avoid potentially harmful climate change. The costs would be justified by the benefit to the environment.
That at least was the idea.
For better or worse, the international political environment has changed greatly since then.
Australia, the country on whose draft scheme ours was modelled has just scraped any plans to introduce an ETS until at least 2013. Prime Minister Kevin Rudd buried it last week.
If John Key had any last remaining doubts that he had made a mistake by implementing this legislation it must surely have disappeared last Tuesday with this announcement.
The United States is nowhere near passing a scheme. Politicians there have more pressing things to deal with. And in any event, President Obama spent whatever political capital he had pushing through his recent healthcare reforms.
The Copenhagen Climate talks broke down without deciding on a successor agreement to the Kyoto Protocol. Most commentators no longer expect any agreement that might give rise to an ongoing financial obligation by New Zealand beyond 2012.
President Sarkozy of France had to scrap a planned petrol tax rise recently because of fierce regional opposition.
There are signs that German Chancellor Angela Merkel is wavering in her commitment to lead world climate change efforts.
And, 'climategate' and other UN IPCC irregularities have increased public scepticism of the human induced global warming theory.
It is ACT's contention, that in light of these changes it is imperative to re-evaluate the New Zealand scheme.
It is time to ask whether it makes sense to continue with the ETS.
The answer, quite simply, is "no'. Even assuming John Key and Nick Smith have got the science right, the New Zealand ETS has no chance of achieving its raison d'être. The scheme was meant to represent our contribution to global climate change mitigation efforts. There is no global effort to be part of; and, by going it alone we will not make an iota of difference to the world climate.
Whether we like it or not, we are too small to affect world climate on our own. We produce only 0.2 percent of total greenhouse gas emissions. Even if we shot every cow and sheep in the country and stopped using cars and heating our houses we would still not affect world climate.
In the words of the Prime Minister's Chief Science Advisor Professor Sir Peter Gluckman: "anything we do as a nation will in itself have little impact on the climate - our impact will be symbolic, moral and political.'
If we go ahead with the scheme, in ten, twenty or thirty years the climate will not be any better off. However, we will be poorer.
Unfortunately, it seems John Key and Nick Smith are not prepared to re-evaluate the situation, let alone to delay if not scrap the ETS. Instead of stepping back to take a cool, rational stocktake of the situation, Nick Smith is, day after day, issuing misleading, contradictory and inconsistent justifications for continuing full steam ahead. These statements do nothing to inform public debate; they only serve to confuse.
In a press release last week Nick Smith said "It is also not correct that the ETS is a tax. This completely ignores the carbon credits flowing to forest owners.' Fact: for all practical purposes the ETS is a tax on our economy. The fact foresters get a subsidy is irrelevant. Any other argument is semantic.
Nick Smith said his ETS is less severe than Labour's: "National's changes have more than halved the costs to businesses and households.' Fact: while this may be correct, comparisons with what Labour would have done are totally irrelevant. Nick Smith could scrap or delay the ETS. He is choosing not to do so. No comparison with Labour will change this. What matters is what Nick Smith and the Government choose to do, not what Labour would have done.
Nick Smith says "Claims that New Zealand is the first in the world to have an ETS is incorrect. Three quarters of countries facing Kyoto commitments, 29 out of 38, already have an ETS.' Fact: all of those 29 countries operate under the European Union ETS. This is an ETS for a whole trading block rather than for an individual country. It is not even remotely comparable to ours. It does not impose the same costs on European producers as ours does on New Zealand businesses and farmers. In addition, over 80 percent of European trade is internal and less than 20 percent is exported outside the European Union. In New Zealand's case none of our major trading partners have an ETS.
Nick Smith says the Government has "provided generous allocations for trade-exposed industries.' Fact: he is imposing a cost on businesses and consumers that would not exist otherwise. There is absolutely nothing generous about that.
Nick Smith says the ETS "provides a clear financial incentive to plant trees and not deforest'. Fact: he fails to mention that it was the Kyoto/ETS debacle that triggered the mass-deforestation in the first place. If the Government moves to delay the implementation of our ETS there is nothing to stop it leaving the disincentive for deforesting pre-1990 forests in place until the end of first Kyoto Commitment Period on December 31, 2012. We can then review that if we enter into binding commitments beyond January 1, 2013, which at the moment looks extremely unlikely.
Nick Smith says we need to implement the ETS on July 1 to give businesses the certainty and necessary "incentives to invest in forestry, renewable energy and more efficient technology'. Fact: the type of investment he is talking about requires long term certainty. There is no such certainty. He has already signalled that it is likely he will not proceed with the ETS in its current form after his review next year: "We have scheduled a review in 2011 and will not be proceeding with full obligations and additional sectors unless progress is made by New Zealand's trading partners."
Nick Smith says in the first year of the scheme "forest owners are budgeted to receive $1100 million in credits as compared to the $350 million in costs to businesses and households for emissions.' Fact: this statement is misleading on several fronts. First, it implies the yearly cost is $1.1 billion versus income of only $350 million. Fact: the $1.1 billion does not represent the carbon liability incurred by the Government in 2010. Rather, it is a composite figure that includes a proportion of the liabilities attributable to 2008, 2009 and 2010. In addition Nick Smith's own advisors told me last Thursday that approximately $420 million of this $1.1 billion related to pre-1990 forests (ie: 16.9 million tons out of a total of 44.3 million tons of carbon). In short, contrasting the $1.1 billion with the yearly revenue figure of $350 million is pointless. I am happy to discuss further nuances of the $1.1 billion figure with anyone who is interested afterwards.
Second, the sentence implies the Government will only generate $350 million from the scheme. Fact: Nick Smith's own officials have confirmed to me in that same meeting that this figure ignores the windfall profits the Government will make from state owned electricity generators.
Because of the way the New Zealand electricity market works the wholesale price is the same for all the generators and is set by the cost of the most expensive one. Currently, 80 percent of the time the most expensive generator is Genesis' coal and gas fired Huntly power station. From July 1, Genesis will have to pay for its emissions of carbon dioxide from that coal and gas. So for example, if Genesis was able to offer electricity at ten cents per unit before the ETS, it will now have to factor in the cost of carbon credits, say an extra cent per unit. This higher price of eleven cents now becomes the market, or equilibrium, price that all generators will receive.
State owned companies such as Meridian that generate electricity from renewable sources such as hydro and wind will have the benefit of the higher price, while they incur no extra costs for carbon emissions. They will be making hundreds of millions in extra profits - all of which will either flow to the Government as dividends or be retained within those companies for future investment thus increasing the value of the company to the Government.
Finally, Nick Smith was careful only to quote the revenue figure for stage one of the ETS. Once stage two kicks off in 2013 and the carbon price doubles from $12.50 per unit to $25 per unit we can expect the revenue figure to double. It will increase further still when gasses such as methane and nitrous oxide are added to the scheme down the track.
Nick Smith said "I have been contacted by a number of businesses who are making substantial investments or have entered into significant contracts that would be severely disadvantaged by change.' Fact: this is not surprising; of course those with a vested interest in the scheme are keen to see it continue. I would expect Contact Energy and Trust Power, who will be huge beneficiaries of the ETS, to be lobbying Nick Smith and the Government to proceed with the scheme. Equally, owners of post-1990 forests who stand to make massive windfall gains from this will be doing the same.
Also, Nick Smith fails to mention all those businesses that will be harmed by the ETS.
Moreover, he is confusing a potential argument for compensation with a justification for continuing with the ETS. If businesses have invested in reliance on the scheme, then it may be justified to talk about compensating them. But, that in any event is a sunk cost. It has been incurred and we cannot change it. It in no way forms a justification for imposing new costs on businesses and consumers. That will just do more harm to our economy.
Nick Smith claims it is too late to scrap the ETS now. Fact: with ACT's support National can put the House into urgency and delay the scheme. Indeed, National and the Maori party used urgency to pass the ETS in the first place.
When passing the ETS into law last year, Nick Smith said of Labour's old scheme that it "was a branding statement by a dying Government wanting to make gestures about saving the plant, with little regard to whether they would work or impact on consumers, on jobs, and on investment.' It seems things have come full circle. While the National Government certainly is not a dying government at the moment, the description of blind advocacy for the ETS is certainly apt and National needs to be very careful it does not cost them the next election.
Nick Smith was correct when he said "this legislation is probably the most significant change and reform, of a financial nature, since the introduction of GST." Unfortunately, unlike GST, the ETS will be a change for the worst. Given the changes in the international political climate over the last few months, National owes it to New Zealanders to stop issuing misleading statements about the ETS, to step back and take stock of whether it makes sense to proceed with the scheme.
Finally, if you are not prepared to sit back and see National take its core supporters for granted, I urge you to write to John Key, Nick Smith and the whole National cabinet calling for the Government to match Australia by delaying our ETS until at least 2013. The Government is under growing pressure on this issue. Every voice counts.
ACT New Zealand Climate Change Spokesman John Boscawen today poured scorn upon Agriculture Minister David Carter’s claim at Mystery Creek that the Government needs to proceed with the Emissions Trading Scheme (ETS) to avoid a potential trade backlash from Europe.
“If National proceeds as scheduled then, on July 1 2010, we will become the first and only country in the world to have such a comprehensive ETS. It is simply not credible to argue that we’ll be penalised if we don’t lead the world on having an ETS,” Mr Boscawen said.
“Further, Mr Carter referred to National’s pre-election considerations but neglected the fact that the climate change situation has changed dramatically since then – only last week Australia announced that it was delaying its plans until at least 2013. The US does not have an ETS, and nor do any of our major trading partners. National needs to wake up to the reality of this changed situation.
“The Government also continually confuses the New Zealand ETS – a single country scheme – with that administered by the European Union trading bloc. The two are completely different: our ETS will directly penalise all exporters, whereas the European ETS imposes costs on the European trading bloc and 80 percent of European exports are internal.
“Mr Carter also perpetuated the National Party myth that agriculture will not come under the ETS until 2015. Meat and Wool NZ has calculated that the cost for the average dairy farmer is $10,200 per annum. Less than a quarter of this is animal methane and nitrous oxide – which comes into the ETS in 2015 – but the overwhelming majority is electricity, petrol and the processing costs of dairy factories. This starts on July 1 this year.
“Meat and Wool NZ also confirms that the cost of the ETS to dairy farmers is 7.5 cents per kg of milk solids – the MAF estimate of 2.5 cent, which Mr Carter quotes is just a fraction of the full true cost.
“It’s time for National to start playing it straight and being honest with farmers. If this Government intends to continue with the ETS, it must tell farmers what costs they’ll be facing from July 1,” Mr Boscawen said.
ACT New Zealand Climate Change Spokesman John Boscawen was today pleased to announce the success of day one of his two-day ETS public meetings tour throughout the Waikato and Taranaki regions.
"I have been overwhelmed by the great public attendance at my public meetings yesterday in Morrinsville and Matamata, and again last night in Tamihere on the outskirts of Hamilton," Mr Boscawen said.
"People across New Zealand - be it in the rural heartland or urban centres - are increasingly worried about the Government’s refusal to delay its ETS in light of changes in the international political climate.
"However, from the response I received at my public meetings, and walking the streets and talking to residents and shopkeepers, in Morrisville and Matamata it is very clear that rural people in particular are very concerned for their future.
"It makes no sense for New Zealand to proceed with an ETS if the world’s major emitters and our major trading partners don’t do so also. If we go it alone, as we are set to do, the climate won’t be better off - but we’ll be poorer. That is ridiculous. New Zealanders are aware of this and are calling for the ETS to be delayed, if not scrapped. It is time John Key and Nick Smith heeded their calls.
"I look forward to meeting with more people at the four public meetings I am holding today," Mr Boscawen said.
Public meetings are being held today in:
* Te Awamutu - Te Awamutu Rugby Sports and Recreation Club Inc., 420 Albert Park Drive Te Awamutu, 9.30 am;
* Otorohanga - Otorohanga District Library Meeting Room, 27 Turongo Street, 11.30 am;
* Te Kuiti - St Johns Hall, 2 Jennings Street, Te Kuiti, 2.00 pm; and
* New Plymouth - Beach Street Hall, 40 Beach St, New Plymouth, 7.30 pm.
ACT New Zealand Climate Change Spokesman John Boscawen will continue his campaign to defer the Government’s implementation of the Emissions Trading Scheme, and will hold a number of public meetings in the Waikato and Taranaki regions.
“These meetings are an opportunity for members of the public to learn just how much the ETS will cost them and their families – as well as the cost to our farmers, businesses and exporters,” Mr Boscawen said.
Morrinsville: 11am, Morrinsville Community House, Canada Street.
Matamata: 2:30pm, St Andrews Presbyterian Church, Meura Street.
Hamilton: 7:30pm, Mellow Manor, Hamilton/Cambridge Highway, Tamahere.
Te Awamutu: 9:30am, Te Awamutu Rugby Sports & Recreation Club, Albert Park Dr, Te Awamutu.
Otorohanga: 11:30am, Otorohanga District Library Meeting Room, Turongo Street.
Te Kuiti: 2pm, St Johns Hall, Jennings Street, Te Kuiti.
New Plymouth: 7:30pm, Beach Street Hall, Beach St, New Plymouth.
Auckland: 7:30pm, Royal Akarana Yacht Club, Tamaki Drive, Orakei, Auckland.
Christchurch: 7:30pm, Heaton Normal Intermediate School, Heaton Street, Merivale.
Further meetings are planned for May 7 (Timaru & Ashburton), May 31 (Takapuna), and June 28 (Katikati, Te Puke, Tauranga). Details will be released soon.
ACT New Zealand Climate Change Spokesman John Boscawen today demanded Climate Change Issues Minister Dr Nick Smith stop his misleading, contradictory and inconsistent justifications for the New Zealand ETS and be honest to New Zealanders about the financial burden he insists on imposing on the country.
"It is impossible to have any confidence in Dr Smith as Minister - he's in denial about the futility of the ETS; scrambling to justify a scheme that, while making no difference to the world climate, will come at a huge cost to our economy," Mr Boscawen said.
"Minister Smith has regularly played politics and made misleading statements. For example: Nick Smith said the ETS isn't a tax because foresters receive credits. Fact: for practical purposes the ETS is a tax on our economy, subsidies to foresters notwithstanding.
"Nick Smith said he's 'been contacted by a number of businesses who are making substantial investments or have entered into significant contracts that would be severely disadvantaged by change'. Fact: he failed to mention the businesses that will be harmed.
"Nick Smith said his ETS is less severe than Labour's. Fact: he's the one choosing to inflict an ETS on New Zealand. No comparison with Labour will change this. What matters is what Nick Smith chooses to do, not what Labour would have done.
"Nick Smith said 29 countries have an ETS. Fact: the EU ETS isn't an all-sectors, all-gases scheme, and any comparison misses the point that our farmers and exporters will be at a competitive disadvantage.
"Nick Smith said the Government has 'provided generous allocations for trade-exposed industries'. Fact: he's still imposing a net cost on our businesses.
"Nick Smith said the ETS 'provides a clear financial incentive to plant trees and not deforest'. Fact: the Kyoto/ETS debacle triggered the mass-deforestation in the first place.
"Nick Smith said we must implement the ETS on July 1 to give the certainty necessary to incentivise forestry, renewable energy and efficient technology investment. Fact: there's no certainty when he's signalled he won't proceed with the ETS in this form post-2011.
"Nick Smith said the point of the ETS is to combat 'global warming'. Fact: no matter what we do it won't have an effect - we're simply too small to change the climate on our own.
"How can we have confidence in such a Minister? New Zealand's response to climate change is a serious issue with huge economic implications and the public deserves a Minister prepared to look at the facts - not one as confused and misleading as Dr Nick Smith," Mr Boscawen said.
Environment Minister Dr Nick Smith’s claim that 29 individual countries have implemented an ETS is flawed at best – Dr Smith is confusing an ETS across an entire trading bloc with one that affects an individual country, ACT New Zealand Emissions Trading Scheme (ETS) Spokesman John Boscawen said today.
“The European Union ETS increases costs across an entire bloc of countries – putting them all at an equal disadvantage. New Zealand, however, will be disadvantaged by having an ETS when none of our major trading partners have similar schemes,” Mr Boscawen said.
“Another important difference is that the European ETS excludes petrol – and when France tried to include petrol with a carbon tax earlier this year, Present Sarkozy abandoned the move after suffering huge losses at regional elections.
“It must also be remembered that the EU ETS has been structured in such a way that there have been massive exemptions and allowances so it doesn’t apply to large parts of the European economy.
“Dr Smith repeatedly – and proudly – told the New Zealand public and Parliament last year that we would be the first country in the world to have an all-sectors, all-gasses tax. Now, six months on – with Australia deferring its ETS until at least 2013, no progress in the US, and Angela Merkel having second thoughts on European world leadership – Dr Smith now seems to want to forget his stand on world leadership.
“The fact is that the New Zealand ETS will impose a significant cost burden across all Kiwi families, businesses and exporters. Our three major trading partners – Australia, China and the US – do not have an ETS.
“Proceeding on July 1 will catapult us into world leadership – putting businesses and consumers at risk at a time when we’re still coming out of recession and have high unemployment,” Mr Boscawen said.
Reports that Australia has decided to postpone the implementation of its Emissions Trading Scheme (ETS) until 2013 is just the sort of news that Prime Minister John Key was waiting for and he can now delay the start of New Zealand's ETS, ACT New Zealand Emissions Trading Scheme (ETS) Spokesman John Boscawen said today.
"This news plays right into the hands of the man who, in October 2008, said that National would balance New Zealand's environmental responsibilities with our economic opportunities," Mr Boscawen said.
"This comment was reported on Mr Key's campaign blog on October 23 2008. He also said:
‘...while we must play our part in the fight against climate change, we shouldn't be the world leader, because that will come at the expense of our economy ... I see no sense in New Zealand exporting emissions - and jobs - to another part of the world.'
"The Prime Minister clearly sees that implementing the ETS is madness: it will cause the cost of electricity to increase five percent from July 1 2010, and push the price of petrol up to four cents per litre - and double it in 2013.
"I call on Mr Key to follow Australia's sensible lead and postpone the ETS. Implementing it now the ETS will impose a significant, if not crippling, burden of cost on to all New Zealanders - especially farmers and exporters - which is exactly what he said he didn't want to do," Mr Boscawen said.
The Government’s Emissions Trading Scheme is set to increase price levels by 0.4 percent after it comes into force on July 1, which is the same amount as today’s quarterly inflation result. The impact of this single piece of legislation will be equal to that of all other inflationary forces over the last quarter combined, said ACT Climate Change Spokesman John Boscawen.
"The price impact of the ETS is largely made up of a five percent increase in the price of electricity and a four cents per litre rise in the price of petrol. These are significant increases that will hurt ordinary New Zealanders, especially those already struggling to make ends meet," Mr Boscawen said.
"Worst of all, the Government is imposing this cost on Kiwis for no apparent benefit. New Zealand is too small to influence the climate on our own. That means, even if Nick Smith and John Key have got the science right, their scheme won’t make an iota of difference to the world climate unless the world’s major emitters act also.
"The reality is that none of the world’s major emitters and none of our major trading partners is proposing anything nearly as radical as the New Zealand ETS, nor are they likely to do so. We’re going it alone. Unfortunately, while we’re too small to change the climate, the ETS is big enough to hurt our economy.
"I call on Prime Minister John Key and Dr Nick Smith to delay, if not scrap, the ETS until the world’s largest emitters and our major trading partners follow suit," Mr Boscawen said.