New documents confirm the ETS has been a net loser for the taxpayer and that the government faces a big deficit in its carbon accounts, contrary to the Climate Change Minister’s denial.
Documents also show that Tim Groser and two other ministers are so keen to play down this inconvenient truth that they requested officials to consider whether the ETS accounts could be changed so that such losses would not form part of the government’s financial statements in future.
Parliament’s Finance and Expenditure Committee sought updated figures on the ETS as part of its consideration of a Bill that would all but gut the scheme. These updated estimates were requested following a Sustainability Council submission that urged the committee to obtain them.
Documents presented to the committee estimate the ETS will be 76 million tonnes of carbon dioxide equivalent in deficit by the end of this year – the total for the first five years of its operation.
These documents also show a credit of 22 million tonnes for the same period resulting from obligations under the Kyoto Protocol. After allowing for this credit, officials report that there is an overall deficit on the government’s carbon accounts of 54 million tonnes for the period from 2008 to 2012.
That is essentially the same figure the Sustainability Council first exposed on September 13 and which the Climate Change Minister then denied on Morning Report. Rather than it being the Sustainability Council that has “got it completely wrong” as he claimed, it is Tim Groser who has some explaining to do.
He has also to explain what the basis is for ministers asking officials to report on “whether ETS units should still be valued in the Crown’s financial statements”. Translated, that means ministers are asking whether local carbon credits given away by the government as corporate welfare and compensation need to be shown as a cost to the taxpayer.
The government has systematically suppressed detail on the ETS accounts so that this very complex scheme is harder still to monitor. It is breathtaking that ministers would ask officials to consider not valuing something that when given away means the recipient no longer needs to pay tax. Such gifts must be recorded as costs to the taxpayer, in line with generally agreed accounting practice.
The government’s current debt of 54 million tonnes of carbon is worth $325 million at the price of $6/tonne that officials used to value it in the estimates presented to Parliament. The debt is $1.3 billion at the $25/tonne price the government uses to consider policy options under the ETS. As this deficit will be paid off at future prices, it is analytically more appropriate to use a forecast future price when assessing its value, and this could be much higher than $25/t.
Carbon budgeting is the route to serious emission reductions. This is the approach the UK is following and it still involves pricing emissions but the emphasis is on working out practical options for cutting carbon and then setting limits on the total volume of emissions for the country over a particular period. It truly caps emissions and maximises the opportunities for funds to be spent in New Zealand.
For references see the full statement.
