Bob Edlin: The climate change challenge - leading the charge has cost-of-living implications

Climate change zealots who press for New Zealand to lead the charge globally in reaching a zero carbon target appear to be not too bothered by the cuts in living standards New Zealanders would have to absorb.

According to the most optimistic technology scenario used by the NZIER, there would be a $6.7bn reduction in annual GDP – and if lower levels of innovation are achieved, in areas such as forestry planting, methane vaccines for livestock and mass electricification of transport and industry, the annual loss rises to $26.6bn.

And what if the sacrifices made by NZ – that is, the reduction made in domestic emissions – are counteracted by a rise in emissions elsewhere as domestic product is replaced by imports?

Analysis to date has relied on substantial and unsupported assumptions on what can be achieved.

What should be foremost for the government is to build a prosperous low-emissions economy, not to destroy prosperity in a crusade for low emissions.

Proponents of drastic action to cut NZ’s emissions underline how half of NZ’s greenhouse gas emissions are from methane. They call for abolition of “industrial dairying”.

But what if the government acts on those calls, only to see NZ’s dairy exports replaced by higher production in the US, Australia, the UK and China?

Animal-sourced foods are the major source of food-system greenhouse gases and their relative importance is likely to increase in the future. Meat production is the single most important source of methane from agriculture. Meat exports earned NZ $6.7bn (and dairy $14Bn) in the latest year.

Dr Jim Salinger, deputy editor of Climate Change, in an article in the NZ Herald says the immediate challenge for the proposed new Climate Change Commission is to provide solutions for agriculture.

True, particularly if NZ could pioneer a vaccine against methane. But the hard fact is there are many more beef animals in Texas or cows in India than in NZ and those countries don’t seem too worried about methane emissions.

Wouldn’t it be more sensible to be pursuing genetic changes to breed more productive animals or higher-yield grasses?

Virtue-signalling by governments may be great for the reputation of posturing politicians but they always come at a cost to the population.

The government’s decision to ban new permits for oil and gas exploration is but one example.

Only this week Genesis Energy (a company owned 51% by the state) underlined the value of its oil and gas production from the Kupe field offshore in Taranaki.

While Kupe’s field production in the June quarter was 94% of maximum capacity, down 2 percentage points, and Genesis’ share of gas sales was down 5% to 3 PJ due to contract rebalancing, LPG production was up 21% on pcp to 13.5 kt with LPG yield at 4.43 t/TJ of gas produced, up 23% on pcp.

Oil production was down 11% to 130 kbbl, due to natural decline in yield, and 70 kbbl of oil sales were recorded, up 20% on pcp.

The rise in LPG production underlines the value to the country of having this source of fuel rather than having to import it.

The good news for the shareholders of Genesis (which owns 46% of Kupe) is that it may be possible to drain the Kupe gas field without drilling further wells.

Earlier this month, Beach Energy, one of the Kupe partners, reported the nine-year-old field has more than a decade of production remaining.

The venture is considering installing onshore compression, which Beach describes as a “low-risk, high-value” project to extend Kupe’s production plateau and field life.  A final investment decision on the compression project is expected in the second half of 2019, it said.

Kupe, owned by Beach, Genesis and New Zealand Oil & Gas, delivered 25 PJ of gas last year, 1.2 million barrels of light oil and 94,700 tonnes of LPG from the project’s three original wells. It is expected to continue producing out to 2034 if a second phase of development is undertaken.

In late 2016, when NZOG sold a 15% interest to Genesis, the scale of that phase-2 capex was estimated at up to $250m, including adding compression and the drilling of at least one additional well.

If some of the wilder elements in the Green lobby had their way, not only would drilling more wells in current permits be banned, but production in existing fields would be curtailed, if not shut down.

But the stuff would still be imported, almost certainly at higher cost – another penalty for the ordinary Kiwi.

The report this week from the Intergovernmental Panel on Climate Change was interpreted by some commentators as a “dire, final warning to humanity: everyone must change their habits, now”.

But China produces 26% of global GHG emissions, nearly twice as much as the next-highest producer, the US.

NZ contributes 0.17%.

The average New Zealander won’t be easily persuaded to become a world leader in the emission-reducing crusadendeavour.

Bob Edlin is a veteran journalist and editor for the Point of Order blog HERE.