Excessive government handouts mean that some polluters are making a profit instead of punishing with the intention of cutting carbon.
To mitigate the impact on heavy spending in the face of foreign competition, the government created a buffer in the Emissions Trading Scheme (ETS). But some industries are receiving rebates. Three times bigger Such as their pollution costs.
The government has now acknowledged that the buffer is too generous, and is undermining the scheme. It’s asking people now. How to solve these problems..
* Rising demand for pollution is blowing up the government’s first limit on carbon units.
* The government has given a long rein to the emission trading scheme in 2022.
* Secret auction designed to reduce pollution of our climate.
When the government introduced the ETS, which required companies to pay a ton of emissions, it feared that some polluters would move their work abroad, leading to dismissals and GDP will decline.
To reduce this risk, the government offered to provide a large number of units for free.
In industries facing foreign competition, moderate-emission businesses are required to receive 60% of carbon emissions without compensation, and those with higher emissions aim to receive 90%.
Free carbon units Presented to producers each year. In addition to steel, aluminum, chemicals, cement, fertilizer, glass and paper, many horticultural businesses grow peppers, cucumbers, tomatoes and roses.
Some farmers are jealous. Coal or natural gas To provide extra carbon dioxide to keep your greenhouses warm and increase plant growth.
Coal and gas businesses are subject to ETS, buying NZ units for their products. On Current prices, One ton of coal is subject to the price of carbon. More than 120. This makes coal more expensive for domestic farmers, who are often competing with overseas producers for access to cheap coal.
In 2019, the government handed over. About 50,000 units For tomato growers, even greenhouses that do not use fossil fuels can claim shares.
The goal was to encourage performance, said Catherine Lanning, a fat researcher.
He added, “If a firm is more effective than the benchmark, it can close the gap – and that’s a good thing, because it’s more motivating to perform.”
Coal mining companies have already paid for carbon, and delivered it to their customers. So tomato growers receive free credit. By selling them in the secondary market – which was paying about ڈالر 30 per ton in 2019 – horticulturists collectively would have earned about 1.5 1.5 1.5 million from their approximately 50,000 units.
But to calculate the number of free units using the old information, the government is now giving exemptions to some businesses that are more than the cost of pollution.
For example, cement production from limestone releases a lot of carbon dioxide, so producers are eligible for free units. When ETS started, there were two cement companies: Fletcher Concrete, which used a more efficient process, and Holchem, which was less efficient.
The waiver system used an average of both actions, which rewarded Fletcher and punished Holchem - Joe. Closed its Westport factory. In the year 2016.
Yet when Fletcher generates its number of emissions at the end of each year, it is able to use business-specific and up-to-date numbers.
So while the government intended to shoulder 90 percent of its carbon footprint, taxpayers are stepping in. 100% of the bill.According to the Ministry of Environmental Analysis.
The problem is worse than any other industry: Cucumber growers get it. 300% of their relative carbon expenditure. Under the system
The government has sought opinions on two key issues: how it decides which industries are eligible for free units and how many rewards it calculates.
To qualify, a company has to face two times: it must have some competition with foreign companies and it must be a moderate or high emitter. Today, it’s “a little easier,” Lening said.
I A report Written with Benjamin Rontard, Lening expands the standard. For example, the degree of competition, profit margins, ability to pass costs on to customers, and availability of green tech can all be part of the assessment.
If low-carbon technology is available, the government can raise money to replace the industry’s commitment.
“There are a handful of people who get literally a small number of units,” he added. “Wouldn’t that be a better result if you could help them avoid the cost of emissions?”
Another problem is that the government does not use New Zealand data to calculate its eligibility. For example, it uses Australian power numbers – although our power is more green. This is the legacy of trying to link our scheme to Australian initiatives (which were). Finally canned).
Government Overview This may cause some industries to be rated moderate rather than high emitters, or lose their annual supply of free units.
The change is also possible for companies that are eligible for free units.
Cucumber growers receive free units to compensate for the high cost of fossil fuels that burn directly in the greenhouse – as well as the high cost of electricity for lighting, as about 20% of all electricity is generated from coal and gas.
Fossil-fired power plants can make all electricity more expensive, because when an expensive coal unit is in operation, all wind farms and hydro dams in the market get paid equally.
Government modeling in 2013 estimated how many units would adequately discount higher electricity bills based on the formula. Which turned out to be unrealistically high.. It is trying now. Create a more appropriate multiplication..
It is also using outdated estimates of emissions from industrial activities, such as how much carbon dioxide is produced in a ton of cement.
Sometimes it tends to be dysfunctional companies that have left the market, such as Holchem’s cement factory.
But all the data was obtained between 2006 and 2009, although most industries are emerging. Constantly more efficient. As a result, companies do not always notice rising carbon prices.
“Even for emissions-related firms, there should have been a 10% increase that gives them the option to invest in mitigation,” Lenning said.
The government is reviewing whether. Updating the pollution baseline of each industry., With possible reviews every 10 years – although more regular updates are being released.
Lining said initial support rates of 90 and 60 percent could be reviewed, and possibly tailored to each industry. Under Reforms last yearNow it is possible.
In fact, these rates were going to be very low by now. The plan was that Eliminate these unit gauges before 2030.But the national-led government delayed it. This phase-out is starting again, albeit at a slower pace – meaning more emitters will still be getting free units beyond 2050.
In addition, the government has not limited the number of free units. It is unlikely for a large plant to double its production, but nothing can stop it from claiming double free units – although it could blow up the country’s carbon budget and pay taxpayers a carbon offset. Can force
Another downside to the current system is that customers are sheltered, Lining said. “Consumers are not seeing the cost of imports or domestic products being significantly higher, because everyone is trying to compete. It slows growth with de-carbonation.
Because of this, the government is also interested in public opinion about alternatives.
There is a carbon border adjustment method, where the value of carbon in exports and imports is removed or applied, respectively, when products cross the border. European Union Currently making a suggestion. Targeting imports, but Lening said there is still a lot of work to be done.
In addition, the Paris Agreement is now in force. For this, it is necessary that almost every country in the world should work for its expulsion purpose. Companies are also growing rapidly. Climate risk reporting. Lanning said conditions were less favorable for heavy polluters to close a factory in a country to avoid carbon prices than they did a decade ago.
“I think it’s about the coffee industry,” he added. “The idea here is to know where the risk is greatest and to target the right amount of aid there.”
Furthermore, in cases where “huge sums” are being offered to ensure that production remains in New Zealand when it cannot be threatened, Lanning suggests that the government should reduce the cost of this exchange. Should be reviewed.
The people have. Until September 17 to say..
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