Our world-leading ETS actually hikes hydroRichard Treadgold | May 2, 2012
The Bluff aluminium smelter has won an award from a xenophobe group for milking the ETS (Emissions Trading Scheme). That’s interesting by itself, however the award draws our attention for the unexpected proof it provides of a little-known, hidden effect of the ETS: instead of penalising carbon dioxide “polluters” at source while making wind and solar seem cheaper, it actually increases the cost of all generators by creating windfall profits for them.
It’s a testament to years of calculated deception of the electorate and a recipe for ruin.
The ETS was intended to apply a “carbon price” to thermal power generation (using coal, oil or gas) for what are thought to be its dangerous, polluting emissions of carbon dioxide. The ETS, or carbon tax, is also applied to geothermal generation because of the carbon dioxide it releases — despite the fact that most people consider geothermal just as renewable as wind or solar power (but not so the guardians of our national carbon footprint).
The stated intention of the ETS was to provide a financial incentive for operators of these “polluting” power plants to “save” the planet. But that was a smoke-screen, a mere gaseous concealment. The real purpose was fund-raising and along the way some of the worst examples of pork-barrel politics since the Wild West.
The Roger Award For The Worst Transnational Corporation operating in New Zealand has run annually since 1997. It is organised by CAFCA and GATT Watchdog, both Christchurch-based groups.
So says the web site of CAFCA (Campaign Against Foreign Control of Aotearoa), whom I’ve never heard of and who seem overly concerned, even obsessed, with being told what to do by people they don’t know. Perhaps if I read some of their material I’d form a different view, but who knows?
New Zealand Aluminium Smelters Ltd/Rio Tinto Alcan NZ Ltd (NZAS) (previously Comalco) had been nominated for this strange “Roger Award” for lobbying two governments over several years to secure excessive allocations of free emissions units under the NZ Emissions Trading Scheme (ETS).
“Between July 1 and December 31, 2010, NZAS was allocated 210,421 free emissions units yet only had to surrender 156,147. This adds up to a new gain of 24,274 free emissions units worth $759,836. [The arithmetic here is faulty and the gain is actually 54,274 units; I don't know if this affects the value – RT] In this regard it appears that NZAS has already been secretly compensated for any electricity price increases associated with the emissions trading scheme. Since this was written, the nominator, at the request of the judges, used the Official Information Act, and has advised that NZAS were provisionally allocated 423,047 New Zealand Units for 2011.”
The judges report also said:
“New Zealand Aluminium Smelters Ltd (NZAS) has effectively undermined the purposes of the carbon emissions trading scheme… the New Zealand taxpayer is subsidising a transnational corporate rort of the emissions trading scheme. NZAS has, effectively, abrogated any responsibility to mitigate the incidence of anthropogenic global warming… a major transnational player within New Zealand materially benefits from its non-compliance with a strategy to reduce global climate change…”
But Rio Tinto draws all its electricity from hydro sources, mainly Manapouri. Why, then, did MfE expect the smelter to need compensation against “electricity price increases associated with the ETS” – when the ETS (everybody assumes) only taxes fuels which emit carbon dioxide?
Because, by the way the ETS distorts the spot-price auction system, Because the spot-price auction system lets the highest bid (usually from thermal generation) set the price of electricity. The ETS lifts expectations for all generators because they know it penalises carbon, so the prices of all forms of generation, including wind and hydro, increase. And all the power companies earn “windfall profits.”
[There's a good explanation of spot prices in this NZ government Climate Change document (pdf).]
Our world-leading ETS pushes up the price even of clean, “ethical” energy like wind and hydro, and thus average Kiwis provide generous compensation through their power bills to generators and their major corporate customers like Rio Tinto for saving the Earth.