Go-slow on ETS pricing overhaul
The Government has unveiled changes to the contentious emissions trading scheme (ETS), including temporarily keeping the price of carbon credits at a $25 a tonne.
The review follows New Zealand’s signing of the Paris climate change agreement, which replaces the Kyoto protocol.
Two major concerns about New Zealand’s scheme have been the exclusion of agriculture from the list of polluters, and access to cheaper foreign carbon credits, which at one stage pushed the cost of New Zealand credits to 14 cents.
Climate Change Minister Paula Bennett said the finer details of her package would be worked out over the next 12 to 18 months.
But in principle, the Government wanted to introduce auctioning of carbon credits, and limit the use of international credits when the scheme reopened to international markets.
It also wanted to eventually have a ‘‘different’’ price ceiling than the current fixed price of $25.
However, for the moment it was business as usual, with no change to the current price ceiling until either an auctioning system or links with international markets were established.
Credits would also continue to be freely allocated until at least the end of 2020, so that big emitters were not disadvantaged compared to their international rivals.
Further consultation would be allowed before the decisions were implemented
The Greens accused the Government of ‘‘tinkering’’ with the scheme, saying it had ‘‘no faith’’ the changes would have any effect on reducing greenhouse gases.
Party co-leader James Shaw said the changes woudl still subsidise major polluters and exclude agriculture from the scheme. Climate pollution was up 20 per cent since National had taken power.
He called for a progressively rising price cap on carbon and a minimum floor price, so foresters had certainty to invest more in planting.
Catherine Leining, a research fellow at economic thinktank Motu, said the proposals ‘‘have potential to shift New Zealand onto a low-emission pathway, but only if they are implemented well’’.
Motu recently put forward its own ETS model, which called for both a price floor on carbon, and a price ceiling bound by capped supply. It also wanted auctioning earlier than 2021 and independent advice on supply and price setting.
Leining said the changes pointed broadly in the same direction as Motu’s, but there was no mention of a price floor.
Until more was known, the uncertainty that had plagued the carbon credit system since 2012 would continue, she said.
Professor Euan Mason, of Canterbury University’s school of forestry, was more critical, saying it would be ‘‘the nail in the coffin of our ETS’’.
He said carbon credits with ‘‘no environmental credibility’’ would continue to be bought by polluters.
‘‘The carbon price will be suppressed and the notion of greenhouse gas neutrality will be undermined,’’ he said.
‘‘How could you recommend to anyone to participate in New Zealand’s emissions trading scheme when the supply of bogus credits is infinitely variable?’’
However, BusinessNZ chief executive Kirk Hope said the amendments to the ETS made sense in the international context.
‘‘The amendments announced today will help ensure the core building blocks of the New Zealand ETS are fit for purpose and able to take us towards our 2030 target and beyond.’’ OPINION: Anyone involved in an industry regularly accused of price-gouging would have found a lot to ponder at the Commerce Commission’s heavily attended Competition Matters conference in Wellington last week.
The final session involved two American law professors and an Australian competition regulator in a contest to see who could come up with the most entertaining advice on how companies should avoid getting into conversations that lead to price-fixing.
In the process, it became apparent just what a gulf exists between New Zealand and the United States when it comes to competition law or, as they call it, anti-trust enforcement.
Simply put: If you fix prices in the US, expect to go to jail. If you do it in Australia, you might go to jail. And if you do it in New Zealand, expect a slap on the wrist from a politician and some pretty hurtful headlines.
Jail time for price-fixing was on the cards here too. But after four years of dithering, the Government decided in December 2015 to remove those parts of the Commerce (Cartels and Other Matters) Amendment Bill 2011 that would criminalise cartels for fear it could prevent legitimate business collaboration.
Marcus Bezzi is the executive general manager for competition enforcement at the Australian Competition and Consumer Commission. Given the ribbing he got for Australia’s comparatively weak stance, it’s probably a good thing none of the Kiwis in the audience drew this foot-dragging to the attention of the visiting Americans.
But it does get you thinking about how comparatively unthreatening the sanctions are on price-fixing behaviour in a small economy like New Zealand,
If you fix prices in the US, expect to go to jail. If you do it in New Zealand, expect a slap on the wrist from a politician and some hurtful headlines.
where there’s a natural tendency for small numbers of players to emerge in sectors that benefit from economies of scale.
Think, for example, of the recent petrol pricing inquiry which, flawed as the initial report is, appears to have helped drop the pump prices in Wellington.
Or the clamour about New Zealand’s high food prices compared with other countries and the unanswered question as to whether the supermarket duopoly might be a factor.
Or the way that electricity companies broadly agree that power prices need to match the long-run marginal cost of the next unit of energy before a new power station gets built.
Or the barriers that global wallboard manufacturer Knauf discovered when it tried to break Fletcher Building’s grip on the New Zealand market a couple of years back.
There is no suggestion that in any of these sectors there’s collusion in the sense of meeting in a dark room and agreeing to pricefix. But it’s a fair bet that US antitrust regulators would take a far less tolerant attitude, backed by far tougher law, than New Zealand’s.
Last Friday’s session focused particularly on the role of industry lobby groups and was not without moments of levity, along with some practical do’s and don’ts.
Rule one for a meeting of industry competitors that’s going in the wrong direction is to ‘‘make a noisy exit’’, according to Professor Spencer Weber Waller, director at the Institute for Consumer Anti-Trust Studies at Chicago’s Loyola University School of Law.
‘‘Get up and say either: ‘My God, we can’t talk about this, I’m leaving,’ or literally knock over a water glass. Knock over the coffee. Knock over the mints.
‘‘[Then say:] ‘The rest of you can go to jail if you want. I am not going to be part of this.’ And make sure you’re not inadvertently winking or blinking.’’
While not strictly an anti-trust matter, Professor Harry First from New York University’s school of law suggested Donald Trump Jr’s meeting during the US presidential race with Russians offering dirt on Hillary Clinton represented a ‘‘teachable moment for anti-trust people, as to just what collusion looks like’’.
‘‘Donald Trump Jr gets a call – ‘Come talk to this lawyer who’s employed by this industry, who’s highly connected, and wants to talk, blah blah blah, about Russia.’ It’s about an 11 [on a scale of 10], wouldn’t you say?’’ First said. –BusinessDesk