His said that the carbon price had fallen. Investors in carbon forestry faced huge losses.
National he claimed favoured fixing a carbon price to restore a valuable stream of Crown revenue from carbon auctions. New Zealand First was sympathetic to the plight of forestry investors.
ACT was holding out.
I do not know whether his reading of coalition politics is correct.
He is right that the carbon price has fallen.
The conversation revealed something more important.
A debate that will influence our future is taking place in Wellington almost entirely out of public view.
The Emissions Trading Scheme is New Zealand's carbon market. It affects the price we pay for petrol, electricity and countless other goods.
The scheme is the tool New Zealand adopted to reach carbon neutrality. Businesses that emit greenhouse gases must purchase carbon credits. Owners of permanent forests receive carbon credits because their trees absorb carbon from the atmosphere and can sell those credits to emitters.
To assist the transition to carbon neutrality the Government creates carbon credits and auctions them. The Government imposes a reserve price, currently around $71 a tonne, to encourage businesses and households to reduce emissions.
For years the scheme appeared to work. Carbon prices rose. Forests were planted.
Treasury anticipated substantial revenue from carbon auctions.
Then the market stopped cooperating.
Government auctions have repeatedly failed. Emitters can buy carbon credits more cheaply on the secondary market.
Everyone assumed the challenge would be carbon prices rising too high.
Instead, the market is telling us they may already be too high.
That should prompt an obvious question.
What if the Emissions Trading Scheme is working exactly as intended?
Markets send signals. The signal today is that enough carbon credits exist to meet demand.
For some people, that is a disaster.
Investors poured money into permanent carbon forests on the assumption that carbon prices would continue rising. Productive farmland was converted into pine plantations.
If carbon prices remain low many forestry investors face losses.
The temptation is obvious.
If the market delivers the wrong answer, change the market.
Fix the price.
Guarantee the return.
Transform an emissions trading scheme into something much closer to a subsidy scheme for carbon forestry.
That should concern every taxpayer.
Markets involve risk. Investors keep the profits when they are right. They should bear the losses when they are wrong.
A possible explanation for the falling carbon price is that the coalition has abandoned the previous Government's proposal to bring agriculture, responsible for almost half our emissions, into the scheme.
Treasury now estimates New Zealand may need to spend billions purchasing overseas carbon credits to meet our Paris Agreement commitments.
But maybe it is not that simple.
Agricultural emissions are primarily methane.
Carbon dioxide accumulates in the atmosphere for centuries. Methane breaks down after about twelve years.
Professor Myles Allen of Oxford University argues that the accounting rules underpinning the Paris Agreement treat short-lived methane as if it behaves like long-lived carbon dioxide. He proposes an alternative measure, GWP*, under which rising methane emissions add to warming, while stable methane emissions add little further warming.
The science has evolved. The accounting rules have not.
What Professor Allen and his colleagues say has the ring of common sense.
The same number of cows producing the same amount of methane that breaks down in little more than a decade does not add to global warming in the same way as carbon dioxide from fossil fuels that lasts for centuries.
Methane is not harmless. If methane emissions increase, warming increases. Only if methane emissions remain stable is there little warming effect.
Importantly, if methane emissions fall, warming falls.
Many scientists believe improvements in breeding, methane inhibitors, vaccines and farm practices can achieve reductions in methane well beyond the Government's 24 per cent target.
Measured in the way Professor Allen suggests, New Zealand's farmers could do more than merely achieve neutrality.
Combined with continued reductions in carbon dioxide, New Zealand could make a net cooling contribution to global temperatures.
I do not know whether his reading of coalition politics is correct.
He is right that the carbon price has fallen.
The conversation revealed something more important.
A debate that will influence our future is taking place in Wellington almost entirely out of public view.
The Emissions Trading Scheme is New Zealand's carbon market. It affects the price we pay for petrol, electricity and countless other goods.
The scheme is the tool New Zealand adopted to reach carbon neutrality. Businesses that emit greenhouse gases must purchase carbon credits. Owners of permanent forests receive carbon credits because their trees absorb carbon from the atmosphere and can sell those credits to emitters.
To assist the transition to carbon neutrality the Government creates carbon credits and auctions them. The Government imposes a reserve price, currently around $71 a tonne, to encourage businesses and households to reduce emissions.
For years the scheme appeared to work. Carbon prices rose. Forests were planted.
Treasury anticipated substantial revenue from carbon auctions.
Then the market stopped cooperating.
Government auctions have repeatedly failed. Emitters can buy carbon credits more cheaply on the secondary market.
Everyone assumed the challenge would be carbon prices rising too high.
Instead, the market is telling us they may already be too high.
That should prompt an obvious question.
What if the Emissions Trading Scheme is working exactly as intended?
Markets send signals. The signal today is that enough carbon credits exist to meet demand.
For some people, that is a disaster.
Investors poured money into permanent carbon forests on the assumption that carbon prices would continue rising. Productive farmland was converted into pine plantations.
If carbon prices remain low many forestry investors face losses.
The temptation is obvious.
If the market delivers the wrong answer, change the market.
Fix the price.
Guarantee the return.
Transform an emissions trading scheme into something much closer to a subsidy scheme for carbon forestry.
That should concern every taxpayer.
Markets involve risk. Investors keep the profits when they are right. They should bear the losses when they are wrong.
A possible explanation for the falling carbon price is that the coalition has abandoned the previous Government's proposal to bring agriculture, responsible for almost half our emissions, into the scheme.
Treasury now estimates New Zealand may need to spend billions purchasing overseas carbon credits to meet our Paris Agreement commitments.
But maybe it is not that simple.
Agricultural emissions are primarily methane.
Carbon dioxide accumulates in the atmosphere for centuries. Methane breaks down after about twelve years.
Professor Myles Allen of Oxford University argues that the accounting rules underpinning the Paris Agreement treat short-lived methane as if it behaves like long-lived carbon dioxide. He proposes an alternative measure, GWP*, under which rising methane emissions add to warming, while stable methane emissions add little further warming.
The science has evolved. The accounting rules have not.
What Professor Allen and his colleagues say has the ring of common sense.
The same number of cows producing the same amount of methane that breaks down in little more than a decade does not add to global warming in the same way as carbon dioxide from fossil fuels that lasts for centuries.
Methane is not harmless. If methane emissions increase, warming increases. Only if methane emissions remain stable is there little warming effect.
Importantly, if methane emissions fall, warming falls.
Many scientists believe improvements in breeding, methane inhibitors, vaccines and farm practices can achieve reductions in methane well beyond the Government's 24 per cent target.
Measured in the way Professor Allen suggests, New Zealand's farmers could do more than merely achieve neutrality.
Combined with continued reductions in carbon dioxide, New Zealand could make a net cooling contribution to global temperatures.
We could become the first country to cool the planet.
Politics may take time to catch up, but eventually science wins.
Perhaps falling carbon prices are not evidence of policy failure.
Perhaps they are evidence of success.
The real question is not whether the market is working.
It is whether politicians are prepared to accept the answer the market, and the evolving science, are giving them.
If ministers intervene to guarantee prices and shield investors from losses, the Emissions Trading Scheme ceases to be a market.
It becomes another tax, another subsidy and another example of Wellington deciding who wins and who loses.
If the science has changed, the accounting should change too.
Why not use the market cool the planet?
Politics may take time to catch up, but eventually science wins.
Perhaps falling carbon prices are not evidence of policy failure.
Perhaps they are evidence of success.
The real question is not whether the market is working.
It is whether politicians are prepared to accept the answer the market, and the evolving science, are giving them.
If ministers intervene to guarantee prices and shield investors from losses, the Emissions Trading Scheme ceases to be a market.
It becomes another tax, another subsidy and another example of Wellington deciding who wins and who loses.
If the science has changed, the accounting should change too.
Why not use the market cool the planet?
The Honourable Richard Prebble CBE is a former member of the New Zealand Parliament. Initially a member of the Labour Party, he joined the newly formed ACT New Zealand party under Roger Douglas in 1996, becoming its leader from 1996 to 2004. This article was sourced HERE.
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