A shiny example of how ETS should not be done
New Zealand has started its emission trading scheme (ETS) from 1 July (yesterday). The country is one of the handful countries that have such scheme in place. Once again, New Zealand has become an experiential ground of a new concept for the world to observe.
New Zealand’s has experienced serious changes even before it is implemented. As the centre-right wing national government gets elected in 2009, the scheme has undergone a hasty review, and several changes were resulted.
One of the major issues that will eventually topple this ETS is the removal of caps on total amount of emissions allowed nationally, and by sector. Government is responsible to supply unlimited amount of emission units at a fixed price of $25 per unit until 2012.
Now this is a very weird thing to do by a government which proclaims itself as “pro-market”. The reason for a cap isn’t just limiting the country’s total emission, but providing a market mechanism that provides financial incentive for cleaner sectors to emerge. By removing such cap the scheme becomes no more than a new type of tax, since there is no limit on the amount of emissions, businesses can go on as usual, and the cost of this new “tax” is conveniently transferred to end users – i.e. every day consumers.
And this appears just like what has happened.
The effects of ETS are further reduced by not having agriculture sector included in the scheme until 2015. As the country’s largest polluter, agriculture accounts for nearly half of the total greenhouse gas emissions. This isn’t a sign that such issue is being treated seriously in New Zealand.
No wonder this ETS receives very little support – consumers absolutely hate it, even politicians don’t agree. From the very right wing Act Party, which highly doubts the existence of global warming, to the very left environmentalist Green Party, all voted down for such scheme.
But such scheme does provide a good example to rest of the world though – how it should not be done. I highly doubt the ETS will last as its current shape for long - a major overhaul might just be an election away.
