Kiwis not so dumb? Scaling back ETS already

Slightly less mad?

Following on from yesterday’s post on the New Zealand ETS that, according to PM John Key, is “working”, The Australian today reports that our neighbour across the ditch is actually scaling back its ETS in the face of economic pressures. Julia didn’t mention that, did she?

AS Julia Gillard urged Australia to follow the “gutsy Kiwi” lead on carbon pricing, Prime Minister John Key has declared New Zealand will be slowing its expansion of emissions trading and doesn’t want to “lead the world”.

Mr Key refused to offer advice to Australian politicians embroiled in the carbon tax debate and signed an agreement with the Australian Prime Minister for a joint working party on trans-Tasman carbon emissions trading.

But he warned that New Zealand would be delaying the inclusion of agricultural emissions in its system for at least four years and was unlikely to double the carbon price from 2013, as previously planned, because of pressure on consumers.

Earlier, Mr Key said in an interview with The Australian his government was reviewing the ETS he inherited from the former Labour government and there would be changes to the “quite expensive system”.

Mr Key said the New Zealand system, which prices carbon at $NZ12.50 ($9.55) a tonne and includes all gases and emitters, was costing consumers about $NZ150 a year but the price was due to double to $NZ25 a tonne from 2013 and include agriculture, which accounts for 50 per cent of New Zealand’s emissions.

Mr Key told The Australian the review would mean “the government is likely to move a bit more slowly because of the global financial crisis and other countries are moving more slowly”. (source)

So NZ is actually taking notice of the fact that the other major emitters are doing nothing, and responding appropriately. How refreshing. Just as the Kiwis sensibly don’t want to “lead the world”, neither should Australia.


  1. It’s worth looking at the NZ ETS in detail. Industries get a two-for-one deal on their emissions. Agriculture provides something like 40% of all emissions, and, as noted in the article, is currently exempt (from direct effects, but as large users of liquid fuels, are already paying). The NZU is a new-zealand carbon permit. Most of the trade between the EU market and the NZ market is done as a aribitrage play on the currency markets. Because the co2 market is so illiquid it often gets out of whack against the Euro markets (priced in Euros) so traders and making up the difference. Current brokerage rates are between 2 and 5% – because this is an ‘over the counter’ trade rather than in an organised exchange. This is unlikely to get any better because the EU system is likely to be the only large scale system introduced anywhere. And after Kyoto expires, there’s a big question mark on how it is going to work.

    Unlike the USA ‘cap and trade’ the NZ system doesn’t actually involve any ‘cap’, so, to me at least, it’s unclear how this is going to actually reduce any emissions. The ‘market’ actually has a price cap of $25 (it is currently about $18) so it’s not a free market at all.

    And finally, the large hydropower electricity suppliers haven’t dropped their prices at all – they still sell at the market rate and pocket the difference. Yes, that’s how it is supposed to work – any ‘dirty’ generators are supposed to see this price signal and now move to hydro power. Only there aren’t any locations left where you’re allowed to build a hydro power station. So what you do have is a bunch of consumers paying more for everything, some traders making out big bucks on shuffling money around ,and no actual change in any industry or emissions.

    Does that sound like something we should be doing here? Or should we be laughing across the Tasman at the Kiwis realising they have shot themselves in the foot, and drastically trying to work out how to extract themselves?

    I like NZ but, like Tasmania, it is a tad overrun with dreamers and meddlers.

  2. Tim Maloney says:

    If price increases economy wide for zero enviromental benefit is what John Key by meant by ‘our ETS worked’ then i guess he is right.
    Also the figure he quotes of $150 a year is way too low as it only includes the direct cost of increased power and fuel prices. It does not include the flow-on inflationary impact of these increases.

  3. Mervyn Sullivan says:

    So… NZ is actually taking notice of the fact that the other major emitters are doing nothing, and responding appropriately.

    Actually, this is being too kind to NZ. NZ was actually utterly stupid when it went ahead with its ETS at a time that the ‘Kiwigate’ scandal was known… a scandal that revealed the fudged temperature data that gave NZ its imaginary global warming when in fact, the real unfudged temperature data revealed no global warming whatsoever. Yet these ‘sheep huggers’ still went ahead with their ETS stupidity! Bloody incredible!!

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