The Ministry for the Environment has outlined four options to redesign the Emissions Trading Scheme (ETS) to incentivise gross emissions reductions, rather than offsets from forestry.
Current settings are likely to result in as much as 600,000 hectares of pine forest being planted on lower-quality farmland by the end of the 2030s, without incentivizing much actual reduction of emissions.
The scheme was designed to discover the cheapest way to bring down New Zealand’s net carbon emissions, and it has found offsetting emissions with permanent pine forests to be the most cost-effective path to net zero.
However, huge carbon forests have been planted on land previously used for sheep and beef farming which has begun to destabilize rural communities and economies.
Meanwhile, the Climate Change Commission has become concerned that the carbon captured in these forests could be released by fires or infestations in the future.
And so, the Government has asked the Environment Ministry to draw up some possible ways to adjust the scheme’s settings to incentivise gross emissions, as well as offsets.
On Monday, the Ministry released a discussion document outlining four high-level policy options that could tackle the issue — ranging from status quo, to a whole new scheme.
The first option would be to simply reduce the supply of NZ units using existing policy settings such as auction volumes, price controls or industrial allocation.
This would likely boost the price per unit and therefore make emission reductions more economically viable. But it would also incentivise more (and more expensive) offsets which would ultimately limit the effectiveness of the policy.
Option two would be to allow the Government and overseas buyers to purchase units, either to support the carbon price or to meet voluntary emissions targets.
Since there is not much evidence of demand from overseas buyers and the Government already controls the number of units released into the market, this would only have a marginal impact on prices and incentives.
The next two options are more substantial changes.
Option three would create two, separate prices for direct emissions reductions and indirect offsets. One tonne of carbon offset, such as from pine forests, would be paid a lower price than a tonne of direct reductions.
This would effectively create an exchange rate between direct and indirect reductions. For example, one tonne of direct reductions might be worth three tonnes of offsets.
The Ministry for the Environment said this option, depending on specific settings, was likely to result in less carbon removal activities and better incentivise direct reductions.
Option four goes further and would create two separate markets, one for gross emission reductions and the other for carbon removal activities.
This would completely unlink the two prices, which would move independently. A decision would have to be made about who could buy and use the offset units.
Emitters may only be allowed to use direct units sold at auction or received through industrial allocation to meet their surrender obligations, and the Government may buy the offsets to meet its national net targets.
“In its current state, the price of carbon is not high enough to drive significant change. We know a higher carbon price leads to faster emissions reductions. We want to find out whether changes are needed to provide a stronger incentive for businesses to transition away from fossil fuels,” said
Climate Change Minister James Shaw said the current carbon price was not high enough to drive significant decarbonisation in the NZ economy.
“We know a higher carbon price leads to faster emissions reductions. We want to find out whether changes are needed to provide a stronger incentive for businesses to transition away from fossil fuels,” he said.
Forestry has been estimated to contribute up to 95 million tonnes of carbon dioxide removals between 2021 and 2030, with as much as 1.4 million hectares of additional afforestation needed to meet New Zealand’s climate change targets.
Native forests cost a lot more to plant and grow much more slowly, which ultimately encourages carbon farms to use cheap, fast-growing pine trees.
The Ministry for the Environment will consult on these options for the next eight weeks and any changes would have to be implemented by a new government after the October election.
38 Comments
WTF? - Offset carbon?!?
1. If the government can offset their emmisìons by "buying trees" why can't you!
2. If we can offset our emissions by buying trees then WHY do we need EVs, green power...
Surely if Shaw was serious about the environment and the economy he would not waste a cent on offsets !
Instead he would use the "offset bilions" on heavily subsidizing EVs, etc
Shaw is a clown who is just costing us billions for no net gain.
Kindly re-write your comment - it is indecipherable.
The problem is that energy underwrites money. 100%. So if there is no energy going into a system, your 100 bucks is worth exactly zero.
There is no energy resource anywhere near oil - and then next best two are coal and gas, all three being somewhat interchangeable but not wholly (Germany ran WW2 on coal-to-oil, and lost to the straight-oil crowd).
Reducing emissions means reducing energy-use, means doing less (after you've run the gamut of efficiency-gains). That means getting 'poorer'.
The stupidity, and Shaw is no more guilty than every other current politician - but he IS guilty - was/is a fierce adherence to attempting a financial solution to a physical problem. Of course it has run into trouble. It was always going to. The joke is that fossil energy is leaving us for depletion reasons - the job will be done for us. Time someone looked ahead properly.
Yup
attempting a financial solution to a physical problem.
Says it all. No credit really to Shaw however, it was never his idea - we can put that down to Al Gore and the UN.
In 2021, Al Gore said we had a subprime carbon bubble (of $22 trillion).
See this by the way; https://climatetrace.org/
Carbon tax appears to be a new tax with no net benefit to the problem it's trying to solve....
How about carbon taxes being used to subsidize solar or wind energy installations for homeowners to decentralise power supply distribution and lighten the impact of fossil fuels on the grid during peak times?
Power generated from homes support their local areas and possibly lighten the load of industry as well as it would generate power when people are at work and industry demand is high...
At least it would support something thats actually useful...
The carbon tax is spent in the decarbonisation fund, doing exactly as you have stated. https://www.eeca.govt.nz/co-funding/public-sector-decarbonisation/state… and https://www.eeca.govt.nz/co-funding/industry-decarbonisation/about-the-…
Interesting. Thanks for the link. There is a lot of woolly and counterproductive thinking in some of those projects that they are funding. For example the replacement of boilers. I will give you an example. Gas fired boilers are being removed and replaced with electric boilers. Gas fired boilers typically convert fossil fuel to heat with an efficiency of about 80%. Because we are not 100% renewable power extra power demand must be supplied by the marginal fossil fueled generation. All existing and new renewable generation is already dedicated to the existing load. If it is not then it is being wasted and we have far more fundamental problems. Electricity is produced and distributed from fossil fuel at an efficiency of 30-35%. So we must burn about 230% more fossil fuel to produce the same heating as burning it directly. It only makes sense when we are essentially 100% renewable electricity generation. The NZ Steel is a very similar situation.
This is not the only foolishness. But it is the most glaring example.
That is a GREAT comment.
But it points to the Boolean Algebra problem; we do indeed have to de-coal our boilers. The question is the same, regardless of which coal? You are absolutely correct in absolute terms - and en passant, you've touched on the reason hydrogen isn't a goer - but we still have to have the discussion.
Maybe we come to 'work' in warmer clothes. Maybe at that point, much boiler-heated 'work' isn't deemed a necessity by a society grappling with powerdown...
Heat pumps are fantastic for low temperature applications like space heating to 25 C. Their efficiency is inversely related to the temperature difference between the low temperature source from which you are obtaining the heat, and the temperature of what you are trying to heat up. As you head toward 100 C they start running out of puff. A lot of industrial processes require 150-200 heating and heat pumps to do this do not exist and if they did, basic thermodynamics mean that they would offer little if any advantage. ( That is unless you have a source of much higher than ambient temperature energy like superheated geothermal water. In a case like this a dedicated unique design would be required. It would be ground breaking and certainly not an off the shelf product)
You are correct. But I believe the new co2 units can heat to 60-100 degrees. efficiently. They won't take over every role steam does, but a lot of older plant uses steam to make hot water and ambient heating( schools and hospitals etc ), and these can be replaced or supplemented by heat pumps.
I think its important to take those 10 -30 % gains ,and not say we can't do 100% , so that tech is not worth it .
About b****y time the plant pines for carbon credits is radically changed to make it cheaper to reduce emissions rather than keeping on emitting and buying offsets.
The loss of productive food production land, the loss of employment opportunities in rural communities is just plain governance negligence.
The planting practices of carbon foresters impose a potential massive burden on rural volunteer fire brigades due to disregard to access to water resources and vehicle access within the forests for fire fighting.
Hopefully out of this review, coupled with local authority consenting regulations, we'll see a win win for both sequestration and maintenance of agricultural food production.
Sequestration is horsepoo. The amount of above-ground carbon was what it was, for all of human evolution. That goes for all other species currently present. What we're doing, is introducing carbon which has been locked underground longer than we've been around. You can't 'offset' - indeed we could plant half of NZ, merely to replace what we have cut down or burnt since we arrived here.
So offsetting was a boondoggle - couldn't be done. The scrum was screwed by the neoliberal nonsense that you just make a 'market' of something/anything, and people can 'make money'. That too, was a nonsense.
Agree with all that Powderdownkiwi. However we can't instantly reverse 900 years of human occupation in NZ. We, the population still need food and shelter. The economy needs export revenue to keep the lights on. So carefully considered pragmatism is what I'm looking for from our policy makers, rather than idealogical dream policy - like Rogernomics neoliberal idealogical that has, arguably, shaped the depth of schtuck we find ourselves in, in 2023.
What policy would you advocate for?
Great question.
I'd go for rationing of fossilised sunlight, at the front end. Far easier to count, far easier to administer, far easier to screw emissions down in a controlled manner. Ration as in old-school wartime style, or with TEQs, I'm open as to which.
But that would expose growth as an impossibility, and to propose something other than growth, to people who think they might be happier if.... is political suicide. So instead, we've attempted to jam a spud up the exhaust-pipe, while telling folk they can drive on. Wrong approach.
Yes.
Because the future is non-fossil, and those who spent THIS time building, adapting and triaging in anticipation of that, will be far better off than those who banked on the old paradigm. Just logic.
And rationing will force people to think their way around the change. Luckily, some of us went on ahead of the curve, and can report back. Might save some misdirected effort.
Careful, though, this is a compounding problem :)
So the rest of the fossil fuels are brought to the surface and burnt by other countries while we go medieval level poor. And then when world stocks get low enough one of those countries will "bring us freedom" and dig up all of our stocks too. Tell me I am wrong.
Edit: maybe I misread the level of rationing you propose. A gradual but increasing amount that gets people thinking about how they structure their lives is probably a good idea, but politically impossible.
We could start with spa pools and watch the howls of protest.
I've got one - but I turned it into a stand-alone solar-heated camp-shower, out in the orchard.
Means we don't need to burn firewood for hot water 6 months of the year...
But your comment misses the point: energy underwrites money. Here's the oldie:
https://www.financialsense.com/contributors/chris-martenson/the-trouble…
And it still makes sense a decade later. What it tells you, is that the financial system won't hang together long enough to extract NZ offshore fossil energy. It's shooting its last bolt now, someone else put up the link today on peak oil and where it's at. I think there will be a repeat of 2008, which cannot be plugged - after all, global debt is outpacing global GDP; how long does that fairy-tale fool the punters?
Currently removing CO2 from the air is a mechanical process that requires - energy - to operate (Fossil fuel energy perhaps) so until we generate more renewable electricity sequestration by growing pines is at least economic and practical. Until I see real progress on new non intermittent renewables Shaw and other will simply continue spewing the same unworkable schemes as a solution.
The carbon trading scheme is very poor economic attempt to solve an engineering problem.
It is little more than a fig leaf to make it appear that we are doing something and allow us to carry on with the status quo.
Can anybody tell me how it affects their pocket in any way that would alter their behaviour? For that matter can anybody tell me how it affects their pocket. In my view, even as an attempt as an economic signal it is a total fail.
The only thing that I see it achieving is swamping the country with bloody low value pine trees and all the problems that this is bringing.
We don’t have the time for all this useless f…..g around. We need decisive, prioritized and meaningful actions.
Exactly. From memory, the scheme adds somewhere in the region of 10-20c to a litre of petrol (may be less at current carbon prices) and perhaps doubles the price of generating electricity from coal. The price will need to be higher to really drive behaviour, and if successive governments don't screw it up this is exactly what will happen as the cap comes down and companies and consumers have to compete for an increasingly scarce resource.
Unfortunately, this seems to be a very big 'if'.
You would be one of the few that know that. About 6.5percent in March. More to the point does that change yours or any bodies behaviour. As you said, you barely remember the price.
It is very hard to find publication of these market signals that are supposed to be influencing our behaviour and choices. You would think that part of the process would involve wide publicity. As a comparison I tried to find the effect on electricity. Next to impossible, but the closest that I can get is in the order or 4-5 percent. A bit mystifying as it is hardly showing a preference to encourage EVs.
It doesn't change my behaviour, but I only drive a few times a year. As you say, the price of carbon is too low to effect driving behaviour - but it is high enough to kick the gentailers into building renewables as coal is so pricy to burn. None of them want to be left holding the thermal generation baby - Genesis and Contact want the government to buy and manage them.
The point in this mechanism is will automatically hit the low hanging fruit first. Big carbon generators with limit economic benefit. Private transport is a long way down the list but the government is (expensively) jumping the gun by subsidising EVs (but just cars and not bikes, for some reason).
Agree. The most important priority is to get rid of practically all fossil fuel power generation. Coal first, conventional oil next, conventional gas next, Cogen last and perhaps retained for absolute emergencies.
Totally agree re EVs. Having committed into the EV subsidy, to save face, I would convert it to a solar power installation subsidy so that the owner would generate their own power and avoid extra coal burning at Huntly for the increased marginal demand. In the meantime Hybrids are the best choice, so why in hell did they remove the subsidy from the best option.
Interesting watching Toyota absolute bafflement at the worlds head long rush to EVs in preference to hybrids, ignoring the fact that 80% of the worlds electricity is non renewable generation. And a total lack of the required Lithium production yet. But even they have to bow to the market , however stupid, or get left behind.
Yes, processed into laminated beams, up to a point. My understanding is that pruned log stock is required and processing capacity. The latter has been steadily declining over the last 30 or more years. And for the bulk of new pine plantings in Central and Southern Hawkes Bay, there's no intention to thin and prune.
There are LVL plants in Northland and Wairarapa. And numerous plywood ones that use un pruned logs.
ETS forests would not be used for timber anway , at least not at a rate of more than 5%.
But I agree the processing of wood should be invested in . Apart form export , there are large markets in NZ that are currently going to concrete or steel . Like railway sleepers , and power poles for example.
Study: Manmade CO2 'much too low to cause global warming.' Carbon-14 dating debunks the climate hoax. Soaring in Altmetric rating. Now ranked #315 out of ~24 million studies. So popular, no paywall. Make it #1. https://journals.lww.com/health-physics/Fulltext/2022/02000/World_Atmospheric_CO2,_Its_14C_Specific_Activity,.2.aspx Link
Publishing that study is probably the reason your quoted journal ranks somewhere outside the top 200 publications?
https://ooir.org/journals.php?field=Physics&metric=median&metric=jif
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.