ECONOMIC AFFAIRS: by Patrick J. ByrneNews Weekly
Emissions-trading a "bureaucratic indulgence"
, July 5, 2008
The cost of New Zealand's emissions-trading scheme is a warning to Australia. Patrick J. Byrne reports.
With the Garnaut report on an Australian emissions trading scheme (ETS) due in July, estimates from New Zealand's ETS draft legislation show it could cost households NZ$19,000 annually by 2025.
New Zealand contributes just 0.2 per cent of global emissions. As half of this comes from agriculture, the rural sector is concerned at the costs the legislation will impose on the farmers and NZ exports.
In theory, an ETS will see emitters of greenhouse gases — carbon dioxide, methane, nitrous oxide and an array of industrial gases — required to have permits for any emissions above a certain threshold level. Then the threshold will be reduced in line with government targets to reduce emissions over a specified time.Farmers exposed to full cost
The NZ government aims to assign emissions units to the rural sector at a defined level of 90 per cent of 2005 emissions levels, to be linearly phased out by 2025. This will expose NZ's farmers to the full cost of carbon reductions.
In a submission to a government inquiry of the NZ bill, Deer Industry New Zealand (DINZ) said that the scheme will make no real difference to climate change, but will inflict serious damage on the NZ economy.
Writing in The New Zealand Farmers Weekly
(May 19, 2008), DINZ chief executive, Mark O'Connor described the scheme as a "bureaucratic indulgence" and said that if CO2 emissions are charged at NZ$50 per tonne, then the negative impacts will include:
• Electricity bills rising possibly by 20 per cent.
• Petrol prices increasing by 12.2 cents per litre.
• Average household spending shrinking possibly by NZ$3,000 per annum in 2025.
• Gross domestic product shrinking possibly by NZ$6 billion (NZ$1,400 per person) by 2025.
• Household costs potentially increasing by around NZ$19,000 per annum by 2025.
• Possible national employment losses of 20,000 to 50,000.
O'Connor said that if NZ wants to make a serious impact on emissions reductions it should instead invest heavily in significant research to bring down emissions of methane and nitrous oxide from farming.
In Australia, indications are that emissions permits (covering carbon dioxide and other greenhouse gases) could eventually cost $50 per tonne of CO2 equivalent. Some such gasses have greater greenhouse warming effects. Methane has 23 times, and nitrous oxide about 260 times, the potency of CO2. These gas emissions are converted to their CO2 equivalent.
While coal-fired power stations are responsible for 50 per cent of emissions, agriculture comes second with 16 per cent, transport has 14 per cent, and the rest comes from mining, industrial processes, land use and waste disposal.
According to Brian Clancy writing in the Weekly Times
(June 11, 2008), the Rudd Government faces a major conflict between including agriculture in an ETS, which will force up food prices, and at the same time maintain food production at a time when the UN estimates that, by 2030, the world will need to increase food production by about 30 per cent.
Clancy says that, unfortunately for agriculture, methane is belched by ruminant animals such as cattle, sheep and goats, while nitrous oxide is generated from manure and nitrogen fertilisers.
He writes: "CSIRO research, under controlled feeding conditions in the 1990s, found that the belching of methane by cattle was the equivalent of about 1.5 tonnes of carbon dioxide, while sheep were about 150kg."
This could lead to farmers paying an annual fee of $70 to graze a cow or $7 for a sheep. In fact, all areas of agriculture will be affected — feedlots and poultry, which have substantial manure production, as well as horticulture and cropping, which rely on nitrogen fertilisers.
Clancy reports that Mike Keogh, of the Australian Farm Institute, warns that farm input costs will rise. He estimates that higher prices for fuel, electricity and fertiliser could add 46 per cent more to cropping costs. Beef and sheep costs could rise 15 per cent and 23 per cent respectively.
Writing in the summer 2007/08 edition of the Council for the National Interest's National Observer,
former Secretary to the federal Treasury, John Stone, has warned that the Rudd Government's emissions-trading plans, which are likely to parallel NZ legislation, "will damage our economy seriously". Stone gives a scathing criticism of Professor Ross Garnaut's preliminary review of global warming issued late last year.
Stone concludes his critique citing Nigel Lawson's recent lecture to the NZ Business Roundtable: "The more one examines the current global warming orthodoxy, the more it resembles a Da Vinci Code of environmentalism. It is a great story, and a phenomenal best-seller. It contains a grain of truth — and a mountain of nonsense....
"We appear to have entered a new age of unreason.... It is from this, above all, that we really do need to save the planet."— Patrick J. Byrne