I’ve been resisting the temptation to write a blog for Sign On about the emissions trading scheme (ETS).  In fact, as I write this, I can hear Kathy from Greenpeace’s office in Auckland going “nooooooo!.”  But there’s some things about yesterday’s announcement you really need to know because it’s a dog; a smelly decomposing one even.

To explain why, I’ll need to outline how emissions trading works.  Big firms (like NZ steel and Fonterra) will be allowed to pollute up to a certain amount.  Above that, they will either have to reduce their emissions, or pay someone who has reduced their emissions (or planted trees or some other climate friendly action).  There will be a kind of Trademe for firms where they can buy and sell carbon credits. This is what people call putting a price on carbon.

The bit about being allowed to pollute up to a certain amount, that’s done by giving firms free credits.  It’d be a bit like someone  putting cash on your credit card.  The more credits big polluters get for free, the less they have to either reduce their emissions or pay to someone else.  Giving free credits is like giving cash to businesses.

Because of the deal between National and the Maori Party, announced yesterday the Government intends to give away lot more free credits.  Remember that this is like cash to businesses so you could use the word ‘money’ instead of ‘credits’ and it will mean much the same.  For the first couple of years the design of the scheme does mean that petrol and
electricity prices won’t rise quite so much, but experience overseas shows it’s the price of carbon in the carbon market, or “Trademe” for polluters, that determines what we will pay for electricity and petrol.  Any free credits will actually be pocketed by the big polluters and not passed onto consumers.

So you’ll end up paying twice.  You’ll have to pay for your own greenhouse pollution, and then you’ll have to pay for the pollution caused by Fonterra and other big firms through your taxes.  The way you’ll pay through your taxes is that there’ll be less money to spend on medical services and schools; basically, someone in your family will go without something they need so that Fonterra’s shareholders get bigger profits.  If this makes you angry, you have every right to be. The more I think about it, the more disgusted I become.

The Government and Maori Party have changed the design of the scheme so that Fonterra won’t actually have to reduce emissions overall, ever.  Under the scheme Fonterra will be allowed to generate more greenhouse pollution as long as they increase the amount of dairying even faster than they increase their pollution.  But this will cause a problem because the rest of the world expects New Zealand’s emissions to go down, not up.  If New Zealand’s emissions don’t go down fast enough, they expect us to either plant an ever increasing amount of trees (until we run out of available land) or use our tax money to pay other countries to reduce their emissions.  As there’ll be some practical limits to forestry (not least of all because the land will be gobbled up for all these dairy farms that we’re helping subsidise), this means ever increasing amounts of our tax money will be needed to subsidise all these new dairy farms.

Developing countries are worried about this.  New Zealand is signalling that developing countries will need to take on binding targets in a few years time, but when this happens, we and other developed countries will have bought up all the cheap credits from developing countries and they’ll be left with all the hard work. South Africa got stuck into New Zealand at the climate change negotiations in Bonn over this very point, saying “we need to start being honest with each.”  This is a very diplomatic way of saying they think New Zealand’s being dishonest about its motives.  It’s not a good look.

So to sum up: The announcement yesterday means you’ll be paying twice: you’ll pay for your pollution, and you’ll pay for the pollution of New Zealand’s biggest firms.  And the Government will look to reduce the cost of this subsidy by plundering cheap reductions from developing countries before insisting that developing countries do the hard work in their own countries.  It stinks.

The real pity about all this is that we can do so much better as a nation and I’m sad that a place that could be a leading light has fallen so low.