Friday, May 20, 2022

Roger Partridge: Blowing the budget

Yesterday’s budget was not the only budget in town. It followed hot on the heels of Climate Change Minister James Shaw’s announcement on Monday of the Government’s $2.9 billion Emissions Reduction Plan. The plan sets out the steps the Government will take to meet the first of three national emissions budgets.

Like yesterday’s budget from the Minister of Finance, Shaw’s announcement showed an alarming air of unreality.

The Finance Minister’s error was failing to respond to the change in the country’s economic predicament. Shaw’s error was failing to realise the Government has already implemented a policy to achieve the very objectives proposed for his costly Emissions Reduction Plan – at least for non-agricultural emissions.

New Zealand’s Emissions Trading Scheme uses carbon pricing to lower net emissions. Those responsible for emissions must use tradeable carbon credits to offset them. The Government issues carbon credits using free allocations (to some industries) and auctions. It also issues credits for activities taking carbon out of the atmosphere like forestry.

Over time, the government reduces the number of units supplied by free allocation or auction. This limits or “caps” the quantity of New Zealand’s net emissions. Restricting supply increases the price of carbon credits (currently about $75 a tonne). This makes carbon emissions increasingly uneconomic. The scheme is designed to ensure New Zealand’s follow a pathway to net zero by 2050.

Aside from agricultural research and development, Shaw’s Emissions Reduction Plan has no chance of altering New Zealand’s net emissions. Subsidising electric vehicles may reduce gross emissions from private cars. But that will just free up carbon credits for use elsewhere in the economy. This will allow emissions which would otherwise have been avoided if credits had not been made available. Economists call this the “waterbed effect.” Push down on one side and the other side goes up.

The beauty of the ETS is it puts a price on carbon. This allows market participants to work out where carbon emissions can be most economically avoided.

The Minister knows private car use is not the most efficient place to save emissions. In an answer to a question in Parliament last week, Shaw said the price of carbon would have to reach nearly $600 a tonne to achieve the same result as the EV subsidies proposed in his Emissions Reduction Plan.

But at nearly ten times the cost of a carbon credit, that means this part of Shaw’s plan is grossly uneconomic. But more than that, the plan is futile. The ETS already has the country on a course to net zero by 2050.

Blowing a $2.9 billion budget on a futile plan is some feat.

Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was first published HERE


DeeM said...

This confirms what many of us knew all along. Shaw's adoption of the CCC's recommendations, which have no affect on carbon dioxide emissions but come at a huge cost, is all about showing off to the international woke elites at the UN and the WEF.

The Greens, Labour ...and National actually, don't care how much of our money they waste, as long as they look good in front of their mates at the next COP meeting.

Only ACT has opposed this plan from the outset and they are the only party which takes a sensible approach to the runaway train that is climate change, whether you believe it or not.

Ray S said...

Shaws plan to save the planet, or at least New Zealand, is nonsense. Even if C02 targets are met around the world and climate change is stopped in its tracks, we would still have the conditions as they are right now.
We are told that things are a disaster climate wise now, so why not live with it and get on with life.

Terry Morrissey said...

Well here we go again. The labour cult has pretty much done covid to death and squeezed from it about all the fear and control possible. Now we revert back to the old favourite Climate change. Another that the UN uses to instil fear and control and can be used to to bleed countries, with gullible politicians,of billions of dollars of the hard earned taxpayers money to line the pockets of corrupt politicians and scientists.
Take away the money and watch the problem disappear.
Take away the bloated salaries of MPs and watch them disappear.

Doug Longmire said...

Some simple scientific facts,
From the IPCC’s own data:-
New Zealand’s CO2 emissions are only 0.17% of total human CO2 emissions.
Compare to China – 30% of total human CO2, which is about 200 times NZ’s.
So NZ’s emissions are effectively ZERO. Nothing we do can have any effect upon total Global emissions, or any effect upon global climate. This is not "denial". It is a scientific fact.

The Climate Control Commission’s recommendations to reach zero NZ emissions by 2050 have been costed out by NZIER.
Full compliance has been costed out. The cost to NZ’s economy will be $86b per year.
That is 86 BILLION DOLLARS per year – EVERY year. $86,000,000,000 per year.
That works out to $17,000 per year per head of population.
This is fast track economic suicide.
Translated – a typical four person family will be paying 4 x $17,000 = $68,000 per year, EVERY year just to meet the dreamland CCC’s recommendations.