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NZ farmers miss out on a $120 million a year windfall

New Zealand farmers miss out on a $120 million a year windfall, Canterbury expert says

July 23, 2014

New Zealand farmers would be paid to pollute if they participated in the country’s emissions trading scheme under current policy settings, University of Canterbury forestry expert Professor Euan Mason says.

If farmers had joined the scheme, they would have received about $120 million to pollute each year, he says. Professor Mason will give a paper at a seminar on campus tomorrow night (Thursday July 24, 7 pm, Forestry Building).

“This rather strange outcome is a direct consequence of Government policy that allows unrestricted imports of carbon credits, including hot air credits from former Soviet countries. Farmers do not participate in the scheme right now, but it was proposed that they would have been liable for only 10 percent of their greenhouse gas emissions, which are currently around 35 million tonnes of carbon dioxide equivalent a year.

“They would have been gifted New Zealand units, which are our domestic carbon credits, for the remaining 90 percent so that they could submit credits to account for all their greenhouse gas pollution each year. This practice of gifting is known as grandfathering and it is happening for all emission intensive and trade-exposed enterprises apart from farming right now.

“New Zealand emissions trading scheme is failing but could be fixed. However, the scheme allows imported credits to be submitted to account for pollution instead of New Zealand units. The vast majority of imported credits are hot air emission reduction unit credits imported from former Soviet countries.

“These credits represent no change in people's behaviour in response to climate change and they are so numerous that they are currently worth 11 cents each in New Zealand. New Zealand units on the other hand are worth $4. So polluters are effectively paid to pollute in our emissions trading scheme. They are grandfathered credits worth $4 and can submit instead credits worth 11 cents.

“If farmers had been in the scheme, we would have paid them the equivalent of 90 percent of their emissions multiplied by the difference between the price of grandfathered New Zealand units and imported emission reduction units. Between 2010 and 2012 we grandfathered credits to other trade exposed industries such as the Tiwai Point smelter enough credits to effectively pay them more than $36 million to pollute at today's credit prices.”

Professor Mason says that by changing a few key policy settings the emissions trading scheme could be made to work really well. These include stopping imports of hot air credits, ceasing grandfathering, requiring New Zealand unit surrenders each year only for target greenhouse gas reductions, and treating all productive sectors equally.

He says New Zealand has so far failed to respond adequately to climate change and its emissions are among the fastest rising in the world.


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