Robin Grieve: The ETS Flip

If you wanted to invent a policy that would increase poverty and inequality the Emission Trading Scheme (ETS) would be hard to beat.

The ETS is a scheme in which market forces and Government initiated scarcity are supposed to drive up the cost of everything that has fossil sourced energy in its supply line. The ETS is the Government’s main policy tool to reduce emissions and its goal is to reduce emissions by making fossil sourced energy less affordable so that people use less of it.  The money that people pay because of the ETS either goes to the Government when it releases carbon units for sale or to a forester who is given carbon credits by the Government to plant trees.

The scheme was inflicted upon New Zealand by the left, namely Labour, NZ First and the Greens. It was opposed at the time by the right, namely National and ACT. The Maori Party opposed it too.

The irony of it being that embracing market forces is not a left-wing trait yet they did. The Nats and ACT opposed the ETS because they just foresaw misery and hardship that would be brought about by the ETS pushing up the price of everything and the devastation this would cause low-income New Zealand families.

That was then and this is now. The support for the ETS has flipped with National and ACT now embracing it and singing its praises as the final solution to global warming. They advocate that there is no need for any other government action to save us from burning alive as the planet warms a little bit. The ETS will do it all and market forces will ensure it is all done in the most economical and efficient way they say.

Even the NZ Initiative embraces the ETS as the final solution, so it is well and truly entrenched on that side of politics.

The left is never going to dump the ETS unfortunately, but they now realise the limitations of the ETS and argue that the ETS can’t do enough on its own. They argue that we need more government action and interventions to steer us away from our evil fossil fuel burning ways. They argue that if it was just left to the ETS the price of carbon would have to be too high and there would be too much of the human misery and hardship that opponents of the ETS were originally worried about.

So the battle over global warming policy has flipped completely and changed from the original position of the left advocating that the ETS is the ultimate tool to save the planet and the right opposing it because it would cause more hardship than was warranted - to what we have now which is the right singing its praises and the left arguing it will cause more hardship than is warranted and it needs help in the form of other government interventions.

So, who is right? They both are but at different times. The ETS is a good scheme if you ignore the hardship putting up the price of everything has on people. Proponents of the ETS continually talk about the importance of making the polluter pay, but what they have never realized is that the polluter is not the producer of goods and services, it is the consumer of these products and services. It is the baby who needs milk formula to survive and the mother driving her child to the doctor who are the polluters, and they are the ones who pay under the ETS.

With carbon budgets in place now the ETS is an even better scheme for reducing emissions than it was initially because the Government can just reduce the supply of carbon gradually over the next 25 years in line with its emission reduction targets. This makes it easy in theory for New Zealand to meet its emission reduction targets because the price of carbon will just keep going up and up and the market dictates who gets the privilege of emitting the ever-reducing allowance of carbon.

Because it is price determined it will be the rich who get that right to emit, thus increasing inequality. The ETS effectively transfers the right to emit carbon from the poor to the rich.

If you told someone that this was a left-wing policy, they would not believe you, but it was.  

Now to be fair to all the ETS fans out there, the supporters of the ETS are aware of the financial hardship that comes from a scheme that makes everything more expensive, so they argue that the money collected in the ETS can be given back out to people. By focusing this support on low-income people, they argue it can reduce the inequality that the ETS causes to increase. The scheme will be able to increase inequality and reduce it at the same time. It will be able to make things less affordable to make consumers consume less and then give them extra money to make the goods more affordable again so they can consume more. Goods will be less affordable and more affordable at the same time and people will consume less and more at the same time, which leaves one wondering what has been achieved?

I would say nothing.

It must also be remembered that the Government does not get all the money people pay because of the ETS and so it can’t give it all back in any case. Forestry corporations get a lot of it and that creates another problem.

Forestry is the other problem with the ETS. The ETS was invented to not only cure us of fossil fuel burning but also, and mainly, to encourage tree planting. Of course, at the time everyone knew that planting trees was not the solution to anything and that it would cause the demise of rural communities, reduce export earnings and cause biodiversity and environmental damage for no real climate benefit but no one cared about that back then. Now people are starting to care but not enough to stop the devastation this policy will have on rural New Zealand and our economic prosperity in the future.

The politicians who voted for the ETS in 2008 knew that it would cause economic hardship to families, it effectively takes food out of the mouths of hungry children and gives it to forestry corporations. They also knew that planting trees achieves nothing, in fact it makes matters worse if reducing emissions is the goal. We don’t need to reduce emissions if we can just plant trees. This just kicks the can down the road a generation or two by making our children and grandchildren responsible for our emissions when the trees eventually have to come down. They knew all this, yet they voted for it in any case.

The ETS was never going to achieve anything and no matter how much the Government tinkers with it, it never will. This Labour Government, which regards stopping global warming as so important it is our nuclear free moment, has bottled when it comes to allowing the price of carbon to increase in line with what the Climate Change Commission says is needed to make us reduce emissions. It knows it can’t inflict that harm on struggling Kiwis and those who voted for this stupid policy should have known that too. The concept that pricing emissions will make us emit less has never been proven in any case. Transport emissions, which are priced in the ETS, have increased by about 100% since 1990 whereas methane emissions from livestock, which are not priced, have increased a mere 5%. In addition, there is a morality issue the supporters of the ETS ignore. If we had to ration water would we do it by putting the price up? Of course not, that would be immoral, yet we do it for energy.  

History will not be kind to those who support the ETS and the left will love the fact that National and ACT will be remembered as its biggest fans, and ultimately take the fall for it.

Robin Grieve, agricultural tutor, orchardist and retired farmer, is Chairman of FARM (Facts About Ruminant Methane) and Pastural Farming Climate Research Inc.