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John Blakeley: Carbon trading an indulgence we can’t afford

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Michael Kinsley, writing in Time magazine in an article entitled “Credit for bad behaviour” in July 2007, suggested that the purchase of carbon credits to offset greenhouse gas emissions could be compared with the Middle Ages practice of buying indulgences for the forgiveness of sins.

Martin Luther (1487-1546) was a leader of the Protestant Reformation in Germany. His first idea of revolt occurred when he saw indulgences being sold, a practice he openly condemned – leading to his eventually being excommunicated.

In a similar manner to indulgences, purchasing carbon credits to offset greenhouse gas emissions can be seen as an alternative to making the hard decision to reduce these emissions.

It is much easier for politicians to tell people they must pay a little extra for their electricity and petrol than to try and persuade them that they must cut back on their energy use. Some of us can still remember the oil shocks of the 1970s and carless days, which was not a happy experience.

Furthermore, from July 1 next year, we will all be expected to pay around 6 cents per litre extra for petrol and around 10 per cent more on our electricity bills, so that the supplier of the petrol or electricity can purchase carbon credits on our behalf.

The idea is that significant emissions reductions can be obtained at low or no cost if people can be persuaded to use energy more efficiently.

But increases of this magnitude are close to the range of normal price fluctuations and are unlikely to influence consumer behaviour. A widely held view now is that that the Emissions Trading Scheme (ETS) will have no effect on reducing New Zealand’s gross greenhouse gas emissions, but it will be a great source of revenue collection.

Even a much more effective scheme than the one currently proposed would on its own be unlikely to significantly reduce greenhouse gas emissions unless it was part of a co-ordinated set of policy measures to achieve that objective. There is no evidence as yet that this co-ordination is likely to happen in the near future.

So from July 1, 2010, we will be asked to pay more for our electricity and petrol for a scheme which is likely to have no effect on reducing our gross greenhouse gas emissions. And it is unlikely that the average consumer is going to be happy to pay this extra cost as “indulgence money”, especially at a time of considerable constraint on wage increases.

As taxpayers we are also likely to pay heavily in the future to buy more carbon credits to offset New Zealand’s dismal failure so far in controlling its greenhouse gas emissions at 1990 levels (at present 22 per cent above this level) in accordance with our agreement to do so under the Kyoto Protocol signed in 1997.

A recent estimate has been made that the total debt as a result of our failure to control these emissions could amount to $100 billion or more by the year 2050. Have we any right to impose such a massive debt on future generations?

Much of this debt is caused by major industrial emitters and the agricultural sector being given a “free ride” for many years into the future, because they are regarded as “trade-exposed sectors”.

This means that the majority of the burden will fall on individual taxpayers both in paying higher prices for their energy, and servicing the huge debt which is likely to build up.

The Government’s revised emissions trading scheme is due to be reported back to Parliament. The select committee considering the legislation became deadlocked and could make no recommendations.

Instead of this, members of each party on the committee have prepared their own separate report. Parliament will therefore have to debate the bill clause by clause in late-night sittings.

The sensible alternative would be to delay bringing the bill back to Parliament until some degree of consensus could be reached, bearing in mind that this legislation needs to remain in place for a long period of time without being changed every time the government changes.

But the present Government seems to be determined to press on with a flawed legislative process and ram the bill through Parliament under urgency before the climate change conference begins in Copenhagen next month.

This is irresponsible behaviour, especially since it is now clear that no binding international agreement is going to be reached in Copenhagen and it may take another two years to reach that agreement.

The bill is also noteworthy in that it is the first legislation that the Treasury has refused to sign off, which in itself is a telling indictment of the present proposed legislation.

The National-led Government will need support to pass the legislation to introduce its emissions scheme which will not come from the Act Party who regards emissions trading as a “dopey idea”. The only likely source of support is the Maori Party who is at present negotiating with National a special deal for some iwi involved in forestry projects to be given preferential treatment in exchange for Maori Party support for the legislation.

This illustrates the very worst aspect of the MMP electoral system. The Maori Party is also asking for more home insulation, and financial help for those who cannot afford extra energy costs resulting from the trading scheme.

I believe that it is now time to “go back to square one” and start again, to define the best, most cost-effective way for New Zealand to control future increases in greenhouse gas emissions. Purchasing indulgences by way of carbon credits is not the best way to go.

By John Blakeley

* John Blakeley is a programme director in the Department of Civil Engineering at Unitec in Auckland.

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