The Emissions Trading Scheme was always a neoliberal, market-based, get-out-of-jail-free plan. Time to lead the way with Tradable Energy Quotas instead
Opinion: The old saying about news – that it’s always bad or it wouldn’t be news – is distressingly true for the climate, both in terms of this summer’s weather and for what the future holds.
Consider Climate Change Minister James Shaw’s reported comment after the failure of the latest Emissions Trading Scheme (ETS) auction, that the current carbon price is “lower than the replacement cost of coal”.
That price of $65 had the negative effect of inspiring nothing but a lack of confidence in the market which caused a virtual boycott of the auction.
The current European Union’s price for carbon is $171.
Consider also that the Government had expected to reap up to $1 billion in revenue from that auction – funds that would have gone into the emissions reductions till.
READ MORE: * Why climate mitigation equals defeat * Climate change’s biggest myth
It seems to me our ETS was always a neoliberal, market-based, get-out-of-jail-free scheme, which has cost heaps and brought in next to nothing. It continues to allocate free credits to large companies deemed “Emissions Intensive, Trade Exposed” industries whose competitiveness would be at risk from countries with no equivalent climate policies.
The EU gives no free credits and deals with the “carbon leakage” the system was designed to prevent by taxing goods imported from such countries.
Carbon has to have a price because it equates to energy and it governs every aspect of our lives. So the price has to be fair, transparent and workable. It has to involve us all in whatever we do.
Other bad climate news includes Auckland Council’s proposed reductions in bus services of more than 100 trips daily along with an increase in fares of 6.5 percent.
Did Prime Minister Chris Hipkins know this was on the cards when he extended the fuel tax reprieve?
Hipkins missed another opportunity to reduce our emissions when he dropped the financial incentive to swap your old car for a more efficient vehicle. Or will the increase in EVs achieve a significant reduction?
Did the money saved with this measure make the Government feel better about the $20 million recently allocated to Fiji to support their climate change projects?
Our climate change policies are a mess. Granted, when the climate extremes scientists warned us to expect cause catastrophic flooding, survival takes precedence over prevention.
Our commitment to the 2015 Paris Agreement of reducing our emissions to 41 percent below our 2005 level by 2030 recedes tragically into the mid-century. And with it, our part in keeping global temperature rises to an average of less than 2C above pre-industrial temperatures. Paying other countries to enact their emissions reductions schemes is a shameful and expensive cop-out.
Local activist groups are undeterred. The Nelson Tasman Climate Forum is pushing ahead with activities to do their bit to prevent that 2C temperature rise. They’ve calculated the percentage by which each region in the country would have to reduce their emissions, every year. They reckon it’s a reduction of 10.5 percent and are working hard to show how it can be done.
But there is something we could do at a national level. A new government (even if it’s the same one after the election) could jettison the ETS and start again. Carbon has to have a price because it equates to energy and it governs every aspect of our lives. So the price has to be fair, transparent and workable. It has to involve us all in whatever we do.
A way to do this was devised but never implemented in the UK in the 1990s by the economist David Fleming. He called it Tradable Energy Quotas known as TEQs. At its base is the calculation of a national carbon budget that governs the total amount of energy required to achieve national objectives each year.
This budget determines the number of quota and the amount of carbon that each one represents.
In this system every adult receives a certain number of TEQs, free, each week. Businesses, organisations, government departments must buy the number of TEQs they need.
It’s electronic, like a credit card, and your TEQs are held in a personal account. When you buy petrol or pay your electricity bill, you submit your TEQ card which is debited with the amount of energy you have used.
Unused TEQs can be traded and bought by those who need more. Thus, the system is flexible to account for differences in energy consumption, at the same time rewarding those who manage to reduce their use.
Note: it includes renewable electricity because the installation of wind turbines, solar panels and hydro dams requires carbon.
No system is perfect. This one has been criticised for enabling the wealthier to sustain their energy-rich lifestyles by buying more quotas. However, as the starting point is the same for all – the poor have a free allocation equal to that of the rich –these discrepancies should not be allowed to discredit the system’s overall benefits.
The annual energy budget – which would be established here by the Climate Change Commission, independently of Government – is set to reduce each year and therefore also the number of TEQs to be distributed or bought. This amounts to a cap, similar to the way credits are limited in the ETS.
Thus our emissions would reduce and in a way that required the transparent participation of every citizen.
Fleming died in 2010 but his work is continued at the Fleming Policy Centre. In their 10 key points of the system they explain that:
TEQs have never been implemented. Is this because although the system involves trading, it is self-supporting, semi-economic and offers no, or minimal opportunity for personal gain?
“All fuels and electricity supplies carry a ‘carbon rating’ in units; one unit represents one kilogram of carbon dioxide – or the equivalent in other greenhouse gases – released in the fuel’s production and use. This determines how many units are needed to make a purchase (thus giving a competitive advantage to low-carbon energy).”
The effect on air travel isn’t mentioned. No system has yet been devised that prices the carbon used in aviation.
Calculating an energy budget for New Zealand would be a complicated and no doubt controversial exercise but its priorities could be unassailable: building back better after the cyclone damage, allocating substantial quota to public transport and to the enormous project of re-establishing inter-city rail.
Fleming’s work has been taken up in New Zealand by local economist Deidre Kent . Her list of the advantages of TEQs includes these points:
* Everyone is involved … and thus comes to understand the importance of reducing emissions.
* It ensures everyone has access to their fair share of energy. Unlike the ETS, TEQs … do not involve price increases for energy … It also means low energy users will not be priced out of their rights to their fair share.
* TEQs are easier for everyone to understand than the ETS.
* TEQs stimulate creative solutions all along the supply chain.
TEQs have never been implemented. Is this because although the system involves trading, it is self-supporting, semi-economic and offers no, or minimal opportunity for personal gain? It also offers a role for the Climate Commission whose advice, along with that of the minister of climate change, for example on the ETS price for carbon, our government ignored.
Abandoning the Emissions Trading Scheme in favour of Tradable Energy Quotas would set a world-wide precedent. We would be watched as our emissions reduced.
