The New Zealand emissions trading scheme (ETS) could be tuned to deliver meaningful emissions reductions, but that has not been the focus or effect to date.  It reduced gross emissions by less than 1% during its first five years to the end of 2012, and these are officially projected to keep rising out to at least 2050. The ETS has essentially maintained business and emissions as usual.

The ETS is highly discriminatory, with the net effect determined by varied sector start dates and precise targeting of rebates, compensation and gifts.  Small emitters pay much higher charges (proportionately) than major emitters that are heavily subsidised.  During the first five years, households paid roughly half the total charges resulting from the ETS, while being responsible for less than 20% of all emissions.  Agricultural emissions that make up nearly half of New Zealand’s total are entirely exempted despite evidence that pastoral farmers could significantly abate their emissions at low cost.

It is a tax that did not even pay for itself during this five-year period. The various slabs of corporate welfare and compensation ate out all the ETS income and more.  The end result was a huge deficit of 76 Mt to the end of 2012.

The original programme for progressively tightening the ETS was indefinitely shelved in 2012 when the scheme was effectively put into a coma through ‘transition measures’ being extended indefinitely and carbon prices collapsing to levels that provide no meaningful price incentive.

During the period from 2013 to 2050, the Treasury projects that net emissions will exceed the government’s emissions targets by over a billion tonnes of carbon.  At present, the government’s accounts offset excess fossil emissions by claiming credit for carbon sequestered in crop forests.  However, the owners of crop forests providing that sequestration generally intend to fell their trees in the 2020s.  When the forests are logged, the excess emissions that New Zealand ducked paying for come back as a liability for a 2020s government.  The ETS would need to be substantially rebuilt to curtail the ongoing major transfer of liability to a future generation.

Key documents:

The Carbon Budget Deficit (2012)

New Zealand’s Climate Response Officially Inadequate – UN (2011)

ETS: Bill to a Future Generation (2009)

A Convenient Untruth (2007)

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