Transcript How Not to Design an Emissions Trading Scheme

How Not to Design an
Emissions Trading Scheme
Geoff Bertram
Institute of Policy Studies
13 November 2009
1
Outline
• Ten lectures in one slide
• Theory of emissions trading: the ideal-world
textbook story (but only if you have a good
textbook)
• Fitting NZ numbers to the textbook story
• Realpolitik sinks the textbook: the NZ ETS
• Outcomes for CP1
• Outlook beyond CP1: another time….
2
Ten lectures in one slide: how not to
design an ETS, and lessons from NZ
3
•
•
•
•
•
•
•
•
•
•
Start from a false dichotomy between carbon tax and cap-and-trade.
Make the scheme complicated, not simple.
Block the market mechanism from its function as a means of sniffing out,
rewarding and promoting technological innovation, emissions reduction
and energy efficiency.
Embrace the market mechanism as a means to transfer wealth from poor to
rich, from weak to powerful, from unorganised citizens in general to wellorganised polluters. Greenwash the process as necessary to save the
planet, or at least to “meet international obligations”.
Identify your biggest carbon-sinking sector (forestry) and expose it to as
much regulatory uncertainty and expropriation risk as possible.
Identify the sector where your headline opportunities for emission
reductions lie (pastoral agriculture) and exempt it from all obligations for a
decade or so.
Assert repeatedly that the outcome is fair and efficient. Ignore critics who
say it is neither.
Move fiscal consequences off balance sheet and out of public view
Hand out subsidies on a basis that leaves the economy vulnerable to
imposition of anti-dumping tariffs by trading partners.
Treat future taxpayers in the same way as you treat the environment – as a
temporarily defenceless target to be plundered for the benefit of the present
generation, or at least today’s political insiders.
LESSONS FROM NEW ZEALAND: Avoid the above.
4
Theory of emissions trading: the
ideal-world textbook story (but
only if you have a good textbook)
5
$ per tonne of CO2-e
The “carbon market”
O
Demand for emissions = Marginal Product
of Emissions = Marginal Abatement Cost
Emissions, Mt
6
$ per tonne of CO2-e
With emissions unpriced, the economy emits ON
Demand for emissions = Marginal Product
of Emissions = Marginal Abatement Cost
BAU emissions
O
Emissions, Mt
N
7
$ per tonne of CO2-e
If the price of emissions rises to Pe then the quantity falls to OM and the
emissions reduction (“abatement” or “mitigation”) is MN
Demand for emissions = Marginal Abatement Cost
Pe
O
BAU emissions
Emissions, Mt
M
N
8
$ per tonne of CO2-e
One way of doing it: a carbon tax of Pe would lead to MN of abatement
CARBON TAX
Pe
Revenue to Government
O
Emissions, Mt
M
N
9
$ per tonne of CO2-e
Or the Government could impose a cap at M, issue permits, allow
trading, and the carbon price would be bid up to Pe
CAP
Pe
Revenue to Government
if permits are auctioned;
windfalls to recipients
if permits are given away
O
Emissions, Mt
M
N
10
$ per tonne of CO2-e
In the real world, the MAC is uncertain and shifts about with technology
shocks, sectoral restructuring, and so on
MAC
So it is often said that in
this situation the
government can have
either
certainty about the quantity M
Cap
or certainty about the tax Pe
Pe
but not both
Tax
(an uncapped ETS gives neither)
0
M
N
Emissions
11
Open-economy emissions trading, however, is neither of
those two closed-economy stories
• The atmosphere is a global commons, not a national asset
• The climate-change problem is a global problem and there
exists, in principle, a global carbon price reflecting the real
value of atmospheric storage for GHG emission streams (flows
into a stock)
• Recognising this, the Kyoto Protocol allowed countries to buy
and sell carbon units from each other as a step towards
equalising marginal abatement cost across countries, in pursuit
of “first-best allocative efficiency”
• So there is a respectable case from mainstream
neoclassical economics for uncapped emissions trading,
so long as you believe either that the world market is
efficient enough to deliver an equilibrium carbon price
path that sustains the atmospheric commons, or that the
imperfect world market will do better than your national
government.
12
$ per tonne of CO2-e
Uncapped emissions trading in Kyoto instruments is
“like” a carbon tax – not like a cap-and-trade scheme
Pw
Done properly in the context of an
efficient world market, it equates the
economy’s Marginal Cost of
Abatement to the cost of cutting
emissions in other countries
WORLD PRICE
This amount is spent by emitters
to buy permits or credits offshore
The fluctuating world
price determines both P
and Q locally
Neither is certain.
The permits are surrendered
to the Government
The Government sells them
offshore and thus secures revenue
O
Emissions, Mt
K
N
13
• Choosing between uncapped emissions trading and the closedeconomy cap-and-trade/carbon tax options is partly a matter of
where the world price is.
• There are two cases: Pw>Pe, and Pw<Pe, where Pe is the
carbon-tax or permit price required to achieve the Kyoto or
other) target by domestic abatement effort, and Pw is the price
at which other countries’ abatement credits can be purchased
14
$ per tonne of CO2-e
Case 1: Pw > Pe. Cheaper to meet the target by closed-economy
policies; but optimal to abate to OK and export KM of carbon credits.
Kyoto
target
World supply/demand
of Kyoto credits
Pw
Pe
Exports
of units
O
Emissions, Mt
K
M
N
15
$ per tonne of CO2-e
Case 2: Pw < Pe Closed-economy policy is more expensive than
buying-in credits from offshore. Country abates to OK and imports MK
of carbon credits.
Kyoto
target
Carbon tax to hit target by
domestic abatement
Pe
Supply of Kyoto
credits
Pw
Imports
of credits
O
Emissions, Mt
M
K
N
16
$ per tonne of CO2-e
Fiscal/revenue implications of Case 2 under Kyoto rules: the Government receives OKTU of
surrendered credits, hands over MKTR to the UNFCCC to cover excess emissions, and has
OMRU of disposable revenue (saleable credits) in hand. Lobbyists and politicians smell a rentseeking opportunity….
Kyoto
target
Carbon tax to hit target by
domestic abatement
Pe
U
R
Pw
Disposable
O
Supply of Kyoto
credits
T
Pays for excess
Emissions, Mt
M
K
N
17
Why not simply hand all those disposable units back to
emitters to make them happier?
• Because
– The cost of those units represents the real cost of using
emissions as an input and the revenue is legitimate
Pigouvian tax revenue [NOT a “taking!]
– There are better things to do with the money - such as
promoting renewables and R&D, and compensating lowincome households for the costs of higher-priced electricity
etc
– In the long run the full price incentive for abatement has to
bite if the MAC is to be shifted over time. Rebating of
emission units blocks the market mechanism from doing its
long-run job
18
Fitting NZ numbers to the textbook
story
19
Put some numbers onto our diagram
• To do this we need to have some idea of the MAC curve
• There are quite a few estimates but none really solid
• Generally the estimates tend to be conservative because
– they lack induced technical progress
– they don’t allow for large-scale shifts in the structure of the economy
– they all embody pessimistic assumptions about agricultural emission
reductions, or leave them out altogether (McKibbin & Pearce)
• In particular, integrating “top-down” and “bottom-up”
estimates in a framework that includes backstop technologies
has not been fully undertaken to date for New Zealand
• The proposition implied by the bottom-up curves that
emissions become less price-responsive as the price rises
above $100 per tonne seems intuitively wrong - backstops
exist, but have not yet made it into the modelling
• Still, for better or worse, here we go….
20
$ per tonne CO2-e
Estimates of the New Zealand Marginal Abatement Cost Curve (excl forestry)
[Drawn here as a supply of abatement starting from BAU at zero]
560
540
520
500
480
460
440
420
400
380
360
340
320
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
-20
-40
-60
-80
-100
-120
GAINS appendix
GAINS online calculator gross no
trade
GAINS online calculator net no trade
GAINS online calculator gross with
trade
GAINS online calculator net with
trade
MfE 2009 energy and agriculture
McKibbin/Pearce 1997 at 2020
horizon
Infometrics 2007
0
5
10
15
Mt annual abatement
20
25
21
Draw these MAC curves the other way
around so that they become the emissions
demand curve, convert to 5-year total
abatements, and plot them onto our
diagram for CP1
Health warning: I am taking big liberties
by imposing long-run 2020-horizon
abatement estimates onto the short-run
CP1 situation. This is a scoping exercise
only
22
CP1 assigned
amount
650
600
550
500
Carbomn price $/tCO2-e
450
400
350
Would meeting the
Assigned Amount have
cost $100-200 per
tonne carbon charge?
300
250
200
150
100
50
0
-50
-100
-150
0
50
100
150
200
250
300
350
400
450
Emissions, Mt
GAINS appendix
GAINS online calculator gross no trade
GAINS online calculator net no trade
GAINS online calculator gross with trade
GAINS online calculator net with trade
MfE 2009 energy and agriculture
McKibbin/Pearce 1997 at 2020 horizon
Infometrics 2007
Assigned Amount for CP1
23
$ per tonne of CO2-e
There’s a nice clean simplicity about that Infometrics implied
MAC so I’ll use that for a stylised discussion
Assigned
Amount
Marginal
Abatement
Cost
BAU emissions
100
O
Emissions, Mt
300
400
24
Carbon tax path to hold NZ at 1990 gross
emissions, assuming Infometrics abatement cost
curve
120
80
60
40
20
2008
2006
2004
2002
2000
1998
1996
1994
1992
0
1990
NZ $/tCO2-e
100
25
Let’s suppose the world carbon price for CP1 is $30/tonne
$ per tonne of CO2-e
Assigned
Amount
net of
PREs
Assigned
Amount
Marginal
Abatement
Cost
100
Supply of Kyoto
credits
30
An ETS without NZUs or gifting would*
cut emissions to ≈370 Mt
and bring in $11.1 billion revenue
O
310
303
* assuming long-run response rate and the MAC as drawn
≈370
≈400
BAU
Emissions, Mt
26
Realpolitik sinks the textbook: the NZ
ETS
27
The NZU: the rent-seeker’s delight
• Instead of requiring emitters to buy and surrender Kyoto units,
Government prints its own carbon fiat currency, the NZU, and
announces it will accept NZUs as substitutes for Kyoto-derived
AAUs, CERs, ERUs, and RMUs.
• There is now an exchange rate issue: Government has to decide
whether to fix and defend the value of the local currency.
[Monetary policy – is there a carbon-currency Central Bank
somewhere?] Inconvertibility looms (check out proposed new
s.222G in Nick Smith’s Bill)
• Instead of auctioning all the NZUs, which would still provide
revenue to fund obligations to the UNFCCC and other activities,
Government gives away big tranches of NZUs for free to appease
politically-powerful business interests
• This effectively means the ETS’s disposable revenue is rebated as
corporate welfare - gifted (“allocated”) NZUs are wealth transfers.
• Scarce resources that could have been used, e.g., to reduce
emissions, are diverted to lobbying for political favours.
• .
28
Now take the simple scheme and make it complicated
• Instead of applying surrender obligations equally to all,
exempt more than half the economy’s emitters entirely for the
whole of CP1 (2008 scheme) or most of the next decade (2009
scheme)
• Start the scheme off in the middle of CP1 for most of the
sectors covered, with only forests in from the beginning
• Make it voluntary for Kyoto forests to join the scheme, then
give them confusing and often perverse incentives on whether
to do so. Leave ownership of the carbon in their trees an open
question but hint that it’s social, not private, property –
potentially subject to eventual appropriation by government
• The next slide shows what the first two of these do to the total
amount payable by emitters or users of emission-intensive
products. (The polluter-pays benchmark here is $11.6 billion
that a $30 carbon tax would collect on 386 Mt of currentlyprojected emissions including deforestation)
29
ETS on 386 Mt of CP1 emissions,
Amounts payable by various2008
sectors
2008 ETS
14,000
12,000
$11.6b
Coal, gas and oil producers
10,000
Agriculture and fishing
Large industry
6,000
$3.1b
4,000
$3.1b
$1.8b
2,000
Other industry, commerce,
transport and services
Households
Pre-Kyoto forest owners
$0.4b
Table 6.4: add
electricity costs
under 2008 ETS
Table 6.2: with
2008 ETS
exemptions
-2,000
$0.8b
Table 6.3: add
gifted NZUs under
2008 ETS
0
Table 6.1: full
polluter-pays
$ million
8,000
30
Then increase the complexity but cut the (already
negligible) impact on emissions and extend the
subsidies’ life: the 2009 amendments
• The amendments now before Parliament knock about twothirds off the amounts to be paid under the ETS
• They extend the gifting of NZUs to selected sectors out to the
year 2088 for industry and 2091 for agriculture, on a scale that
declines at 1.3% a year (effectively perpetual production
subsidies)
• They allocate NZUs to industry and agriculture on a goingforward intensity basis rather than in lump sum amounts based
on historic emissions, which means that emissions are likely to
rise rather than fall, whereas New Zealand’s assigned amount
must be expected to fall
31
Outcomes for CP1
32
Amounts payable by various
sectors
on 386 Mt of CP1 emissions,
2009 ETS
amendments
2009 proposed amended ETS
14,000
12,000
$11.6b
Coal, gas and oil producers
8,000
Agriculture and fishing
6,000
Large industry
4,000
$1.3b
2,000
$0.8b
$1.2b
Other industry, commerce,
transport and services
Households
$0.5b
$0.4b
Table 6.3: add
gifted NZUs
under 2009 ETS
Table 6.4: add
electricity costs
under 2009 ETS
0
Pre-Kyoto forest owners
Table 6.2: with
2009 ETS
exemptions
-2,000
Table 6.1: full
polluter-pays
$ million
10,000
33
2009 ETS amendments
2008 ETS
14,000
12,000
14,000
$11.6b
$11.6b
12,000
Coal,
gas and oil producers
10,000and fishing
Agriculture
Coal, gas and oil producers
8,000
Large8,000
industry
Agriculture and fishing
6,000
$ million
Other6,000
industry, commerce,
transport and services
$3.1b
$1.8b
2,000
4,000
Households
2,000forest owners
Pre-Kyoto
0
$1.3b
$0.8b
$1.2b
$0.5b
$0.4b
Table 6.4: add
electricity costs
under 2009 ETS
$3.1b
Large industry
Table 6.3: add
gifted NZUs
under 2009 ETS
4,000
Other industry, commerce,
transport and services
Households
0
$0.4b
Pre-Kyoto forest owners
Table 6.2: with
2009 ETS
exemptions
-2,000
Table 6.1: full
polluter-pays
Table 6.4: add
electricity costs
under 2008 ETS
Table 6.2: with
2008 ETS
exemptions
-2,000
Table 6.3: add
gifted NZUs under
2008 ETS
$0.8b
Table 6.1: full
polluter-pays
$ million
10,000
34
Exemptions and rebates: effect on net surrender of emission units
2008
ETS
2009
ETS
Projected CP1 emissions incl deforestation
Exempted from ETS coverage
Gross number of units required to be surrendered (mill)
NZUs issued as rebates (allocations) (mill)
NZUs for power price compensation (allocations) (mill)
NZUs for pre-1990 forests compensation (mill)
386
284
102
31
20
16
386
332
54
16
10
16
Net number of units required to be surrendered (mill)
35
12
These can come from
offshore or from NZUs earned
by Kyoto forest owners and
sold off rather than banked
35
Fiscal impact: how much of those billions of dollars of ETS
burdens actually comes to Government?
• With most of the liable CP1 emissions covered by gifted NZUs, Government
pulls in only a small amount of direct revenue that can be used to pay for the
country’s Kyoto obligations
• Under the 2008 scheme, I estimate that 35.4 million of the 102 million
emission units surrendered would be of value to the Government to fund
offshore Kyoto payments. Under the 2009 scheme that falls to 12.3 million.
• At $30 per tonne, the estimated effective direct revenue is $1.062 billion
under the 2008 scheme and $369 million under the 2009 scheme.
• Before amendment, thus, the ETS yield is just 10% of the $11.1 billion from
the hypothetical carbon tax for the whole of CP1 (slide 25 above). With the
amendments this will fall to 3%.
• Relative to the 76 Mt expected overshoot of gross emissions for CP1, the
2008 ETS would pay for 47%; the 2009 ETS would pay for 16%. 84% then
falls on taxpayers.
• My estimated revenue drop of $700 million is bigger than the $415 million
shown in the Explanatory note to Dr Smith’s Bill, reflecting some different
assumptions – mostly my use of a $30 carbon price rather than $25.
36
Fortunately for taxpayers there is a sort of silver lining
in electricity prices
• The Government owns a big share of electricity generation
capacity, including much of the renewable capacity.
• As the cost of fossil-fired generation rises, so will the
wholesale electricity price
• SOE renewable generators then get windfall profits and these
accrue to the owner (Government)
• Under the 2008 ETS total SOE electricity windfall profits
during CP1 would be about $1 billion at a $30 carbon price.
Under the 2009 ETS they fall to $0.4 billion. (Not all of this
comes in as cash dividends to the Crown accounts, of course.)
• Adding electricity profits and ETS revenue, the 2008 ETS
yields about $2 billion compared with the Kyoto excess
emission cost of $2.3 billion. The 2009 ETS yields less than
$0.8 billion, leaving $1.3 billion with taxpayers.
37
Emission Reductions? Forget them.
Sector
Projected
Emissions for
CP1 under
BAU without
ETS
Reduction due
to 2008 ETS
Reduction
due to
proposed
2009 ETS
(Mt)
(Mt)
(Mt)
Agriculture
184.0
0
72.1
0.2
Non-transport Liquid
Fuels
14.0
0.2
Electricity
36.2
3.3
Stationary Energy
from non-liquid fuels
37.2
1.1
Industrial Processes
21.4
0.6
Transport Fuels
0
0.1
0.1
1.5
0.5
0.3
Waste, Solvent and
Other
Fugitive emissions
9.0
0
0
10.7
0.3
0.13
Total
384.3
5.7
2.6
* BAU emissions have been estimated by marking-up MfE’s projected emissions, since these already incorporate the Ministry’s
estimate of ETS-induced abatement. Hence total emissions in this table are 5.8 Mt greater than the 378.7 of projected emissions
in the ministry’s most recent net position report.
ETS burden compared with emission responsibility by sector, 2008 ETS
55
50
Households
Share of 2008 ETS cost burden
45
40
35
30
25
20
Commerce & services
15
Other industry
10
Transport industries
5
Fugitive emissions
Fishing
0
0
Agriculture
Large industrials
Pre-Kyoto forests,
waste & solvents
5
10
15
20
25
30
35
Share of emissions
40
45
50
55
39
ETS burden compared with emission responsibility by sector, 2009 ETS
55
Households
50
Share of 2009 ETS cost burden
45
40
35
30
25
20
Commerce & services
Other industry
15
10
Transport industries
5
Fugitive emissions
Fishing
Pre-Kyoto forests,
waste & solvents
0
0
5
10
Agriculture
Large industrials
15
20
25
30
35
Share of emissions
40
45
50
55
40
Effect of exemptions, rebates and electricity pricing on selected sectors
60
Households 2008 ETS
Households 2009 ETS
Share of total cost burden
50
Other sectors 2008 ETS
40
Other sectors 2009 ETS
30
Agriculture and fishing 2008
ETS
Agriculture and fishing
2009 ETS
20
Large industry 2008 ETS
10
Large industry 2009 ETS
0
Table 6.1: full
polluter-pays
Table 6.2:
with ETS
start dates
Table 6.3: add Table 6.4: add
gifted NZUs
renewable
electricity
price rise
Pre-Kyoto forest owners
2008 ETS
Pre-Kyoto forest owners
2009 ETS
41
Short-run and long-run views of the subsidies
to “trade exposed” (= “too big to refuse”)
sectors
1. During CP1
Households
(including private transport)
Large industry
Sector's
share of
excess
Share of
Kyoto bill
Net cost
proposed
2009 ETS
(Mt)
($ mill)
($ mill)
Excess
payment
relative to
fair share
($ mill)
Payment
relative to
fair share
(%)
104
14.4
434
452
18
11.4
343
-145
-488
-42
Other industry
2.9
86
96
10
111
Transport
3.3
98
102
5
105
Commerce and services
2.0
64
65
1
102
37.5
1,123
17
-1,106
2
Fishing
0.5
14
-4
-17
-25
Waste and solvents
1.8
54
0
-54
-
Coal, gas and oil producers
Totals
(excluding deforestation)
2.1
62
66
4
106
75.9
2,277
649
-1,628
Agriculture
42 -
2. Value of Subsidies to Large Industry and Agriculture – 2010 to 2092
(undiscounted figures, but no intensity change assumed)
2008
ETS
2009
ETS
($ bill)
Proposed
($ bill)
Carbon Price and Sector Subsidy
Assuming emission unit price 2013-2091 is $50
Large Industry non-electricity allocations
Electricity price compensation to industry
Agriculture late entry and NZU allocations
Total value of subsidies
6.5
4.8
26.8
38.1
17.3
12.7
69.0
99.0
Assuming emission unit price 2013-2091 is $100
Large Industry non-electricity allocations
13.0
Electricity price compensation to industry
9.7
Agriculture late entry and NZU allocations
53.6
Total value of subsidies
76.3
34.2
25.0
134.2
193.4
43
Time out….
44
Do we need the NZU in order to be able to reward forest
owners for not deforesting, and for sinking carbon?
• The NZU enables the New Zealand Government to pay forest owners
for the valuable services they provide, at no cost to the taxpayer.
• The Government hands out newly-printed NZUs and leaves the forest
owners to find a private buyer if they wish
• Forest owners can convert their NZUs to cash if they sell them – or
they can “bank” them against future harvesting
• Because it’s not the Government that pays out the cash, this transfer to
forest owners is at no direct cost to the taxpayer.
• In effect, the job of collecting the taxes to fund payments to foresters
has been privatised – this is “tax farming”
45
Flow Chart of Projected Payments Under the 2008 ETS
$969m from 32.3m gifted NZUs (after covering 12.7m of process emissions)
$13.5m from sale of 0.45m NZUs
Large industry
ETS net cost
$114m
$145m
Small/medium industry
ETS net cost $412m
$4m
Fishing
ETS costs $15m
$532m
$15m
Households
ETS costs $1,500m
$776m
$68m
Commerce & services
ETS costs $535m
$344m
$192m
Transport industries
ETS costs $220m
$21m
Agriculture
ETS costs $115m
$7m
$123m
$191m
$1m
$74m
$164m
$62m
Non-renewable electricity generation
collects $583m passed-on emissions charges
Pre-Kyoto forest owners
Profit from ETS $411m
$30m
$1,877m to
purchase
62.6 m units
$583 m to purchase 19.4 million units
$69m to purchase 2.3 million units
$480m from sale of 16m distributed NZUs
Emission units market: total net demand 85.3 million units
$207m
$461m
$22m
$458m
Suppliers of oil, gas, and coal fuels used for energy
purposes collect $1,687m emission charges and pay
$190m for their fugitive emissions
Renewable electricity generation windfall profits $1,628
million
$6m from sale of 0.19m gifted NZUs
Sales of 48.9m
gifted units
35.4m units
from Kyoto
forest owners
and offshore
purchases of
Kyoto units
Flow Chart of Projected Payments Under the Proposed 2009 Amended ETS
$365m from 14.6m gifted NZUs (after covering 5.3m of process emissions)
Large industry
ETS net cost
$14m
$70m to cover 2.8 Mt
Small/medium industry
ETS net cost $167m
$1m
Fishing
ETS net profit $8m
$185m
$8m to cover 0.3 Mt
Households
ETS costs $638m
$386m to cover 15.4 Mt
Commerce & services
ETS costs $187m
$120m
$25m to cover 1 Mt
Transport industries
ETS costs $109m
$7m
to cover
$3m
$43m
Agriculture
ETS costs $41m
$66m
$0.02m
$26m
$57m
$22m
$99m to
cover 4 Mt
Non-renewable electricity generation from
collects $202m passed-on cost of 8.1 m units
Pre-Kyoto forest owners
Profit from ETS $343m
$11m to cover
0.5 Mt
$830m
to
purchase
33.2 m
units
$202 m to purchase 8.1 million units
$57m to purchase 2.3 million units
$400m from sale of 16m distributed NZUs
Emission units market: total net demand 43.6 million units
$72m
$164m to cover 6.5 Mt
$8m
$159m
Suppliers of oil, gas, and coal fuels used for energy
purposes collect $764m emission charges to cover 41
Mt and pay $66m for 2.6 Mt of fugitive emissions
Renewable electricity generation windfall profits $566m
million
$18m from sale of 0.7m gifted NZUs
Sales of 31.3 m
gifted units
12.3 units
from Kyoto
forest owners
and offshore
purchases of
Kyoto units
Free Units Allocated under Current ETS Legislation
70
Total New Zealand Units
60
Million Units
50
40
30
20
Surplus units generate $21 billion
revenue to 2030
Free Allocation to
Agriculture and Industry
10
0
2010
2015
2020
2025
2030
2035
2040
2045
2050
Year
Source: Christina Hood submission on Nick Smith’s Bill
48
Free Units Allocated under Proposed ETS Legislation
70
Total New Zealand Units
60
Million Units
50
40
30
Proposed free allocation to agriculture and
industry
20
10
0
2010
2015
2020
2025
2030
2035
2040
2045
2050
Year
Source: Christina Hood submission on Nick Smith’s Bill
49
Value of Subsidy - Current and Proposed
70
60
Million Units
50
40
30
Proposed:
An extra $105 billion to 2050
Current:
$25 Billion
20
10
0
2010
2015
2020
2025
2030
2035
2040
2045
2050
Year
Source: Christina Hood submission on Nick Smith’s Bill
50
Total free NZU allocations assuming no intensity effects
60
40
Total under 2007 ETS
Total under 2008 ETS
30
Total under 2009 ETS
20
10
2055
2060
2065
2070
2075
2080
2085
2090
0
2010
2015
2020
2025
2030
2035
2040
2045
2050
Million NZUs
50
51
$ per tonne of CO2-e
Emissions
demand curve
steepens with
exemptions and
shifts left with
recession
Assigned
Amount
net of
PREs
Projected
emissions incl
deforestation
100
30
O
ETS pulls
in $1,1b
from
35 Mt
Supply of Kyoto
credits
Exempted or rebated 351Mt worth $10.5b
310
303
Emissions, Mt
400
379 386
BAU
ETS Charges for CP1
Proposed
2009 ETS
2008 ETS
Share of
total CP1
emissions
%
Costs of
ETS
Share of
total costs
Costs of
ETS
Share of
total costs
$ mill
%
$ mill
%
Households
18.7
1,498
48
637
52
Large industry
14.8
114
4
14
1
Other industry
3.7
412
13
167
14
Transport
4.2
220
7
109
9
Commerce and services
2.8
530
17
185
15
48.5
111
4
39
3
Fishing
0.4
25
0.8
0
0
Waste and solvents
2.3
0
0
0
0
Coal, gas & oil producers
2.7
190
6
66
5
Total
(excluding deforestation)
98.1
3,101
100
1,218
100.0
Pre-Kyoto forest owners
1.9
0
0
0
0
Total
100
3,101
100
1,218
100
Agriculture
53