New Zealand (Image by: niko)

Article by Guest Contributor: David Hall

On July 1^st this year, New Zealand’s Emissions Trading Scheme (ETS) began to turn the screw on its greenhouse gas emissions. With forestry liable since 2008, the energy and industrial sectors finally entered the carbon era.

Fuel and power companies immediately displaced the cost of greenhouse gas emissions onto consumers, raising petrol prices by roughly 3 cents a litre and the price of electricity by over 3%. Government estimates put the average annual cost at $165 per household, rising to $330 by 2012. Not much, perhaps, but enough to cause some grumbling, especially given that electricity prices had already risen 72% in the last eight years.

Unfortunately for the New Zealand public, this is only the beginning. Analysts have warned that in the first five years of the ETS, 52% of its costs will be carried by households, despite their accounting for only 19% of total emissions. Including road users and small to medium businesses, this group is expected to shoulder 90% of emissions costs while producing only 30% of emissions.

Where do these additional costs come from?

To begin with, agriculture is exempt from any costs until 2015, even though the sector accounts for 49% of the country’s greenhouse gas emissions. Until then, the Government will pick up the tab—on behalf of present and future taxpayers.

Next, the ETS employs an intensity-based allocation of emissions units (known as NZUs) which means that NZUs are allocated to companies as long as their greenhouse gas emissions do not exceed the industry average, measured in tonnes of greenhouse gases per million dollars of sales. These NZUs are eventually surrendered to Government, along with any additional credits needed to cover an excess of emissions.

As such, there is no cap on individual emissions, nor any fixed volume that total emissions cannot exceed. If the nation’s total emissions exceed its Kyoto target by 2012—presently they are 24% above 1990 levels and rising—then the Government will have to buy credits on the international carbon market. How much this will cost taxpayers will depend on market price, but Treasury has put its net Kyoto liability at $1.1 billion, with warnings that it could be as high as $5.7 billion.

Finally, the ETS provides a transition phase for export industries exposed to international competitors. Thus, until the end of 2012, each NZU is capped at $25 a tonne. Not only does this mean that any shortfall on the international carbon credit market must be met by the Government, it also dampens the price signal of emissions, removing another incentive to adopt cleaner technologies. Furthermore, during the transition phase, polluters are only required to surrender one NZU for every two tonnes of carbon. Only in 2013 will this revert to a ratio of one-for-one, yet even then industries will be gifted NZUs equivalent to 90% of 2005 emission levels, phased out at only -1.3% per annum.

Little wonder that public attitude toward the ETS is decidedly ambivalent, a combination of confusion, resignation and discontent. Politically, this is a major problem, because it fosters public hostility toward an area of policy that desperately needs its support. Widespread resentment toward an unjust distribution of emissions costs could easily mutate into (or be interpreted as) a popular unwillingness to do anything at all.

Furthermore, the over-protection of industry and agriculture from emissions costs removes any strong incentive to evolve. And that, ostensibly, is what the ETS is for. When government protections are removed, these sectors may find themselves in a world that has moved on without them—their international competitors cleaner, and their key markets less tolerant of carbon-intensive products.

This is especially frustrating in agriculture where technological solutions are both available and affordable. With half of all greenhouse gas emissions produced by agriculture, mostly from dairying, any reduction will have a significant impact on New Zealand’s overall emissions. As it stands, however, the will to adapt must come from farmers themselves, many of whom seem instinctively hostile to change. Federated Farmers’ stubborn resistance to past policy proposals is evidence of that.

In the meantime, the ETS is only expected to cut emissions by 2% at best. The policy is a demanding test of the wisdom that anything is better than nothing.

Article by Guest Contributor: Adalberto Maluf

The fourth meeting of the BASIC country ministers (Brazil, South Africa, India and China) on climate change took place in Rio de Janeiro on the 25th and 26th of July 2010 to further discuss their common positions regarding the Copenhagen Accord.

The BASIC countries were part of the final agreement reached in Copenhagen, although, officially, they left the conference “frustrated” with the final results. The joint statement after these two days of meeting in Rio “reiterated the importance of the two pronged approach – Working Group on Long-Term Cooperative Action and the Ad Hoc Working Group on Further Commitments by Annex I Parties” as crucial for an “equitable and balanced outcome in Cancun”.

The joint statement also shares concerns about those sensitive issues for the developing countries regarding differential (historical) responsibility between developing and developed countries, which is related to “equitable burden sharing” of past emissions within an context of sustainable development and also “demands the implementation of ambitious financing, technological support and capacity building.”

Despite the fact that the official joint statement didn’t differ much from what these countries have formally agreed in Copenhagen, there were some advances in Rio which can’t be underestimated. Overcoming Brazilian initial opposition, they all agree to develop a common methodology to assess their total emissions. The group, led by China’s chief climate negotiator, also agreed to have a “panel of experts” which would be responsible to establish a common baseline that could be equally measurable, reportable and verifiable (MRV methodology). Brazil opposed it but didn’t block the initiative.

It could be the starting point for the development of a common methodology to assess and measure the real implications of their pledges for the economic and social development of these key countries. It’s a direct response of the Chinese government to the agreement made in the last hours of the Copenhagen conference between President Obama and Prime Minister Wen Jiabao, with the intermediation of India’s Prime Minister Manmohan Singh and Brazilian President Lula da Silva.

There is a common feeling inside the BASIC countries that the Kyoto protocol won’t prevail in the near future, which could mean that they would have to change their positions for future negotiations. India insisted that it is rather clear that the Kyoto protocol is no longer a feasible route. With that in mind, they should all work together towards a single, inclusive climate change agreement.

The BASIC countries are still awaiting further developments around the world before moving forward with their pledges, however, there was a common understanding that developing countries with advanced economies, like Brazil and China, would have to abandon their rhetorical demand and start discussing ways to push concrete proposals in the table. The decision on a common methodology for MRV could be the beginning of that change.

The UK Government has claimed to become the ‘Greenest Ever Government’ since the previous Labour and Conservative leadership.

Following the announcement of the Energy Security and Green Economy Bill during the Queen’s Speech on 25 May 2010, David Cameron (Prime Minister) promised the country that he would lead the UK to become a low carbon economy through enhanced energy efficiency and low-carbon energy production, both of which remains to be seen.

The previous labour government had committed a total of £405 million towards promoting a green economy, of which the Sustainable Development Commission (SDC) was a large arm of this delivery.  The SDC has made £70m savings every year through implementing a number of Green Initiatives.  The SDC also claims that additional savings of £350m per year through improvements in energy, water, waste, recycling and transport will also be met, regardless of funding, over the next five years.

However, recent announcements of funding cuts have led to the SDC to be axed.  The Secretary of State for the Department of Environment, Food and Rural Affairs (DEFRA) Caroline Spelman has led the cuts, whilst at the same time calling for the Government to ‘step up’ its green ambitions and drive further energy savings.  This contradictory view was not shared by the Chair of the SDC, who is simply disappointed at the announcement.

Many more cuts are on the way.  The budget led by George Osborne on 22 June had created a sense of hope and expectation that concrete energy policies were on the way, but these hopes were simply not met.  Instead, Osborne made slight references to climate change policies, but the lack of detail on policies, financial plans and commitments were heavily noted.

The government’s commitment to renewables has also come under question, with the Micropower Council saying that it is stalling on the introduction of the Renewable Heat incentive (RHI), which would pay householders for generating low carbon heat.

Price Waterhouse Coopers (PWC) issued a report yesterday suggesting that a commitment of £10 billion is needed, for investments in pre-construction off-shore wind farm technology if the UK is to meet its renewables electricity target of 30% by 2020. Capital funding for projects is critical to ensure that the UK invests in renewable projects.  The budget announcement was Osborne’s golden opportunity to make the Energy savings the government has promised to deliver.

To add to the frustration, the delay of implementing existing energy policies are being felt in most areas of the UK, particularly in terms of cost and uncertainty for business.

The six month delays to the October introduction date for the Part L changes, which are designed to make homes 25% more energy efficient, are causing losses in both carbon and heating bill savings.  It has emerged that the programme is still subject to approval by the government.

Perhaps more pressing are the delays to the most radical policy which involves defining a replacement for the electricity component of the Climate Change Levy (CCL) by adding a ‘top up carbon tax’ on power generators. This would be a way to establish a carbon ‘floor price’ which is needed to support carbon trading in the EU ETS scheme, which is a major part of the Energy Security and Green Economy Bill commitment.

MP Caroline Lucas has published a statement today arguing that ‘now is the time to invest’, but lack of government financial commitment and delays to current programmes is painting a gloomy outlook at the moment.  Is the UK really committed to becoming the ‘greenest ever government’ as promised at the start of the Coalition?

France, Germany, and the United Kingdom have simultaneously launched a call for the European Union (EU) to commit to a larger reduction of greenhouse gas emissions by 2020. In recent months, the EU has weathered economic troubles. But the current plan for increased energy cuts is being billed as a bid to help economic recovery and to shore up energy security.

Currently, the agreed EU target is to reduce energy use by 20% from 1990 levels by 2020. In scientific terms, the current 20% reduction target is not likely to restrict global temperature rise to the 2°C – the key climate danger threshold identified by the IPCC.

The main line of argument being repeated across the three major EU powers is that Europe’s current focus on recovery from recession must not distract from the type of economy that is appropriate in the medium and long-term. Thus, Jean-Louis Borloo, France’s Energy and Climate Change Secretary, states that “without a path to a sustainable low-carbon future, we will face continued uncertainty and significant costs from energy price volatility and a destabilizing climate.” His counterparts, in the UK and Germany respectively, Chris Huhne and Norbert Roettegen, agree. “We’re determined to make the economic case for the EU to cut its emissions by 30% by 2020 as quickly as possible,” Huhne said.

The current argument is that the recession itself has cut emissions in the EU’s traded sector by 11% from pre-crisis levels. Thus, the current carbon price is too low to stimulate significant investment in “green jobs” and “green technology.” Thus, Borloo, Huhne and Roettegen contest that if the EU sticks to 20% reduction targets, Europe is likely to lose the race to compete in the low-carbon world to countries such as China or the USA—which, following from the Copenhagen COP, they are looking to create attractive environments for low-carbon investments.

Though, reduced emissions during the recession has brought projected annual costs in 2020 of meeting the existing 20% target down a projected third from €70bn ($89bn, £59bn) to €48bn. A move up to 30% is now estimated to cost only €11bn more than the original cost of achieving a 20% reduction. To put this into perspective, according to the International Energy Agency, every year of delayed investment on low-carbon energy sources costs €300bn to €400bn at the global level into the future.

But it remains to be seen what the tangible motivation will be for increasing thresholds on carbon reductions to 30%. In the past, feed-in tariffs have been successful; but with a declared reduction target, perhaps even written into law formally, there will be issue with anxiety related to the current recession. Also, competition is key to motivate changes and the USA Congress just dropped the proposed comprehensive climate change package.

The Environment Ministers in the UK, Germany, and France have addressed general public in their call for increased reduction targets. In recent months there has been a surge in popular press discussion of extreme temperatures. The first six months of 2010 brought a string of warmest-ever global temperatures. Connecting these extreme weather months to long-term climate change patterns remains difficult, according to experts. “When we are looking at the scale of a season or a few months, we can’t talk about trends related to climate change,” Herve Le Treut, head of France’s Laboratory of Dynamical Meteorology. But, for the general public these extreme temperatures reflect the concept of climate change.

Between the extreme temperatures recently and potential business-case outlines, 30% reduction targets seem to have some potential. But only time and changing circumstances will tell…

As of July 22^nd , the second effort to enact a Climate Change bill in this congress failed. Democratic Senate Majority leader Harry Reid announced that the ‘We know that we don’t have the votes’ for a comprehensive reform. Instead, the focus will be on a slimmer package focusing on household efficiency and the gulf oil spill.

Continue reading…

On 21 July, Ministry of Economy, Trade and Industry (METI) announced a summary of Japanese Feed in Tariffs (FITs), in which electric power companies are required to buy the electricity generated by all types of renewable sources of energy by households and businesses. FITs seek to promote the adoption of renewable energy sources by offering long-term contracts for the ‘green’ electricity produced by them at fixed purchase prices.

Purchase prices are to be 48 yen/kWh for solar power, which will be gradually decreased, and 15 to 20 yen/kWh for the other types of the ‘green’ electricity. The contract periods are to be 10 years for solar power and 15 to 20 years for the others. In FITs, electricity users  have to bear costs of purchasing the ‘green’ electricity and, according to the summary, the maximum monthly burdens for standard households and for large-scale factories in ten years after Japanese Feed in Tariff (FIT) is to be introduced will be approximately 150 to 200 yen and 1.2 million to 1.63 million yen, respectively.

METI expects that FITs would contribute to CO2 emission reduction by 2% (approximately 24 million to 29 million tons) in ten years after its introduction because FITs would accelerate technological development and promotion of renewable energy. Masayuki Naoshima, Minister for Economy, Trade and Industry, emphasized ‘total national benefits from FITs will be greater than total national burdens’ because they would expand the environment-related market. METI sought to start FIT in 2012 after working out its details within this year.

METI’s summary for FITs is unpopular not only for businesses but citizens. Regarding businesses, as mentioned above, as FITs would increase the electricity prices, they are basically against FITs. For instance, the Japan Iron and Steal Federation suggested in a hearing held by METI that FITs would put Japanese iron and steal industries in a disadvantageous position in a global competition with China.

Finally and most seriously, citizens are seemingly not for FITs suggested by METI. For an article on this news released by Jiji Tsushin, 84 visitors (Yahoo!Japan News) left 113 comments. Then, among the top 100 comments sorted by the number of  ’agrees’,  there were only 3 comments that clearly supported FITs though the most agreed comment among them was ranked 38th.  According to a brief discourse analysis of mine, citizens (or the visitors) are against FITs mainly because (1) FITs would worsen the income difference between the rich and the poor, (2) households would have to suffer more burdens while businesses would be able to reduce their burdens, and (3) METI’s FIT plan had flaws. Further, many of them did not support FITs because they were unsatisfied with climate change policies of Democratic Party of Japan (DPJ), a ruling party, especially on the ’25%’ target and a large amount of money spent to buy credits from China, one of the world largest emitters.

The summary of Japanese FITs proposed by METI might be a great first step for Japanese renewable policies. However, it is not sufficiently supported by businesses, environmental groups and citizens. Thus, though it might be difficult to create FITs in which everybody agrees, it is necessary to improve the current ‘everybody is unhappy’ situation.  Especially, it is very much problematic that FITs lacks citizens’ support as they have been recently frustrated with climate change policies of DPJ and DPJ itself. Details of FITs should be carefully examined so that renewable energy can be widely promoted, contributing to the energy security and CO2 emission reduction in Japan. However, successes of FITs or renewable energy policies and climate change policies in Japan depend more on whether public support for them can be increased.

In anticipation to the 16th Conference of the Parties of the UNFCCC, the Mexican Presidency anticipates to demonstrate the potential for innovative policies to address climate change. The Mexican Government has already presented an ambitious plan to mitigate carbon emissions (50 million tonnes by 2012); recent legislation suggests an adaptation framework.

Mexico is highly vulnerable to hurricanes and floods—both of which are expected to intensify under climate change scenarios, making adaptation to climate extremes a priority for the country. Further, economic analyses suggest that the costs of inaction will be very high—lowering economic output by an average of 6% annually over the next few years.

The Government has recently presented the General Law on Climate Change which aims to restructure the political system that deals with climate change in Mexico, suggesting the creation of a Commission on Climate Change to be accompanied by a Council on Climate Change. The former organisation will be an implementing agency while the latter will be a monitoring and evaluation institution. As such, their roles will be mutually enforcing.

Additionally, the recent legislation emphasises the importance of two key issues: the need for adaptation and financing.

On the adaptation front, the strategies emphasise the need for robust climate analysis that highlight the shocks on livelihoods as well as the need to protect the most vulnerable communities. To this end, the initial stages of the adaptation strategy will be technical, mapping out the main risks associated with climate change in Mexico, whereas the later stages will involve concrete strategies to target vulnerable populations through microinsurance and safety nets.

In regards to financing, the Mexican Government is very keen on advancing the dialogue during the COP process. The Green Fund is proposed as the main mechanism to channel and centralise financial resources to fund climate change policy as the Kyoto Protocol phases out. The Adaptation Fund is also a focal institution to finance large-scale projects to reduce the adverse impacts of climate change on vulnerable livelihoods. Important progress is expected on this respect.

The Mexican Presidency is very hopeful for important advancements during the 16th Conference of the Parties.

As the Coalition Government attempts to reform the UK’s finances, fatal spending cuts have continued to penetrate the environmental sector. Despite boasting plentiful resources in marine, offshore wind, solar and other forms of renewable energy, significant cuts announced by the Government this week risk the UK loosing out to countries with poorer natural resources, but an increased willingness to invest in renewable energy.

Plans to cut the energy R&D budget by £34m, announced last week, delivered a massive blow to the low carbon technologies sector, particularly for technologies including offshore wind, geothermal energy, wood fuels and building insulation. Ironically, the announcement came just days before the Government’s independent Committee on Climate Change publically stressed the continued need for public support to develop emerging renewable energy technologies – suggesting a minimum of £50m of public money each year.

Chris Goodall highlights that these cuts to the R&D budget represent a reduction of total public expenditure on low carbon technologies by almost 20%. He adds that “this figure is on top of the cancellation of the £80m loan to Sheffield Forgemasters that would have paid for much of the installation of a new press to make the huge parts necessary for new nuclear power stations.”

Goodall suggests that the Government’s plans will diminish Britain’s ability to compete in the global energy race. The cuts also bring the UK’s spending on emerging technologies to an internationally low 0.01% of GDP – 3 times less than the US and 9 times less than Japan (as a %age of GDP).

Furthermore, there is increased speculation about plans to axe the Government’s independent sustainability watchdog, the Sustainable Development Commission. Whilst no official decision has been made, an announcement is expected to be made – ironically – on the day the agency plans to unveil its annual report detailing green improvements to government operations, which would deliver savings of tens of millions of pounds.

Whitehall has announced some significant spending cuts over the last few weeks, and the cuts to low carbon and renewable technologies are likey to have particularly riled environmental stakeholders. Prime Minister David Cameron is going to have a big task on his hand if he wants to prove to UK taxpayers that his Government will be the “greenest government ever.”