May 13, 2008

They Are Laughing At Us On Wall Street

Just what we don't want at a time when foreign funds are more difficult to access, an Editorial in the Wall Street Journal pointing to enormous country risk! Well it happened to New Zealand today. We received a tip off early today but as of now we have yet to find an electronic versions. All we have is a faxed copy and we are operating remotely so have no scanner handy. So we will re-type.

But before we do lets remember that one of the reasons we were planning to introduce such a comprehensive emissions trading system was to set a great global role model right? Well as one submitter to the Select Committee pointed out this comes with risk as well as opportunity. If the New Zealand scheme turns out to impose heavy cost on industry and the economy it runs the risk of turning the rest of the world away from a climate change policy response of the type we are trying. That would be negative for New Zealand and set back the global process designed to control the level of global emissions. As a country only responsible for 0.2% of global emissions it would be a crime if we were responsible for torpedoing the global policy response.

This is today's Editorial in The Wall Street Journal

Kiwi Climatology

Global-warming alarmists tend to understate the true costs of cutting greenhouse gas emissions. So give credit to New Zealanders, who seem poised to give the rest of us a real-life illustration of those costs.
This month Wellington is debating a cap-and-trade scheme to meet its Kyoto Protocol targets. Because New Zealand is already a low carbon dioxide emitter, the bulk of its emissions come from agricultural sources, such as, well, sheep. So the Government is proposing to implement caps not only on carbon dioxide from industry but also methane and nitrous oxide from farms. If passed, the Kiwi plan would be the broadest cap-and-trade programme to date.
As in smaller schemes in the U.S. and EU, the government would cap the country's emissions at a level allowable under Kyoto, and then distribute tradeable credits to businesses and farmers. Low emitters could sell excess credits, while high emitters could buy credits to cover their "extra" emissions. Under Kyoto, New Zealand committed to reduce its emissions to 1990 levels, in effect a 30% reduction from expected emissions in 2012.
Meeting those targets will be hard. New Zealand already uses a wide range of hydropower and renewable energy to cut carbon dioxide use. For the agricultural gases, new kinds of fertilizers might help, but only to a point. For the rest of the cuts, farmers will have to persuade cows and sheep to emit less - or have fewer cows and sheep.
The cost for farmers and industry alike, is likely to be prohibitive. The New Zealand Institute of Economic Research, and independent consulting firm, recently estimated that the government's plan would result in 22,000 job losses by 2012, or 1% of total employment. That translates into NZ$4.6 billion annually in lost GDP, or a NZ$3,000 cut in each household's annual spending.
This analysis assumes that as greenhouse gas fees make Kiwi industry less competitive globally, business and jobs will move overseas. The government disputes this conclusion, mainly because its own analyses assume [do they???] New Zealanders will be willing to take lower wages. That's debatable to say the least.
That aside, give the Kiwis credit for honesty. Having signed up to Kyoto they're actually talking about shouldering the costs of meeting their commitments. Whether or not they end up regretting it, other countries will now have a chance to see what the anticarbon crusade does to an economy.