The $2 billion turnaround

In 2002 and 2003 Pete Hodgson told us all we would have a Kyoto surplus around 55 Mt which would be worth around $1 billion.  Pete said not to ratify Kyoto would be to set fire to a cheque coming our way.

This week we got our latest update on our billion dollar cheque.  Those who have been following will know it was reduced in 2004 to 33Mt surplus which would still be a nice $500 million for us.

But then in 2005, Treasury and MFE started officially calculating our “surplus” and it turned out not be be a surplus but that we would have a deficit of 36Mt.  And that this would be a liability to the taxpayer of $307 million.

And what has happened to that liability since then. The below graph is taken from the official Treasury data.

Wow that is some increase.  The billion dollar surplus has become a billion dollar liability.  And people may want to reflect as we send that cheque off to Russia, how much better off our hospitals could be if for example the billion dollars was spent on them, instead of Russia.

Anyway the logical question is, will the liability keep growing?  Well I’m not an expert in this area but I do note that the Treasury wallahs use a price of 11.13 Euros.  Now that may be the right price.  But I do note the European futures market in carbon credits has an average price for 2009 onwards of around 20 Euros.  Now if the price did end up that high we would be giving Russia $2 billion instead of 1 billion.  President Prime Minister Putin will thank us even more.