ETS Editorials

The NZ Herald laments the missed bipartisan opportunity:

A bipartisan policy on a subject so important for long-term investment decisions would be a rare and splendid thing, giving all sectors confidence that carbon emission costs would survive the next change of government. …

The economic good sense of ensuring emission costs are passed into prices will be obvious to those in industries that may be relieved by National’s transfer of their costs to the taxpayers.

Relief in those industries will be tempered by the knowledge that the next government is quite likely to reinstate economic sense. That likelihood already makes investment decisions difficult. Such is the folly of National’s failure to embrace a bipartisan approach.

My preference also was for a bipartisan deal, but I would not assume there would be changes made to the ETS by a future Government. National only had an opportunity to amend Labour’s ETS because it got passed just weeks before the election. I think, despite the rhetoric, Labour will be very wary of campaigning in 2011 on the platform of increasing prices.

In some respects the scheme National can now enact with Maori Party support is superior to the previous government’s. Permissible emissions will be based on an industry standard rather than an arbitrary base year so that firms that are efficient by their industry’s measure will be allocated free emission rights. The free allocations will be withdrawn much more slowly than Labour’s scheme allowed, sensibly aligning New Zealand’s scheme with Australia’s.

Labour might have agreed with all of these changes for the sake of a bipartisan consensus. It has found that leadership on climate change is not an election winner. The subject is too big for campaign slogans and some of the nominated solutions – dimmer light bulbs, dribbling shower heads – are annoyances that Labour now regrets.

The issue over allocation of permissible emissions being on an intensity basis, to reward efficiency, was one of the crucial aspects, and I suspect was the issue hardest for National and Labour to agree on. However it does seem that negotiations had not concluded with Labour, and it would have been desirable for them to be allowed to consider in private if they could back the changes the Maori Party agreed to.

The Dom-Post says:

Once the emissions trading scheme was about saving the world from global warming. Now it is about who pays and who gets to pass the cost of their emissions on to someone else.

Actually it was never ever about “saving the world”. Our reduction commitments at Kyoto and Copenhagen are about that, so to speak.  The ETS was always about who pays.

The deal cobbled together by National and the Maori Party is a triumph of political pragmatism. It is also an agreement that has ended, at least for the foreseeable future, the prospect of an enduring bipartisan approach by Labour and National. That turns New Zealand’s emissions policy into a political football.

The deal is a political solution that fails to solve an environmental and economic problem. It will not provide long-term certainty to business or to consumers.

The ETS was always a political solution. And as I said previously I would be surprised if in two years times Labour really wants to campaign on changes, as it will meet massive resistance from the losers from any changes.

Other changes will result in some businesses and agriculture being given more time to adjust, with a delay in bringing them into the scheme, while others are given less time.

That is good news for those who benefit, but it rather misses the point. The aim of the exercise is not to raise money to pay for New Zealand’s Kyoto obligations. It is a stick to encourage those responsible for emissions to cut them.

The Dom Post needs to read up on trade exposed industries and how imposing costs on NZ businesses and farmers that their overseas competitors do not have, may actually lead to an increase in global emissions.

Finally the ODT:

Having stitched up a deal with the Maori Party on its revised Emissions Trading Scheme – which has exercised environmentalists and received only lukewarm plaudits from two of the revised scheme’s more notable beneficiaries, industry and agriculture – the Government might venture to suggest that since no-one is entirely happy it must have the numbers about right.

Indeed.

The big question for the Government has been how to be seen – ahead of the Copenhagen climate meetings in December – to be making a meaningful contribution to mitigating the effects of emission-induced climate change as a good global citizen should, but to be so doing in a manner that does not place an undue burden on industry and agriculture, and thus circumscribe economic growth; nor, in the midst of a recession, place too much immediate cost on the individual consumer.

The proposed new scheme, which it will be able to pass into law with the support of Peter Dunne’s United Future vote, and that of the Maori Party, seeks to achieve this by, in the first instance, delaying entry of agriculture into the ETS from 2013 until 2015.

For the purists who decry the delay, it is worth noting this will be the first ETS in the world that includes agriculture, I believe.

In the face of climate change with its dire predicted consequences, all countries are having to grapple with striking a similar balance, nuanced according to the demands of their individual economies and political sensitivities.

This is new territory. There is an element of guesswork and gamble in reaching all such accords. National has, for better or for worse, both spurned Labour’s hand and taken a conservative approach. In the short term this is likely to pay handsome political dividends; in the longer term, it may prove to be less advantageous – electorally and environmentally.

Again, it would have been desirable to continue negotiations with Labour.