Now we get the newest fad from the “Not So Fast on Climate Action” crowd; complaining about electric vehicles (EVs), the most conspicuous ones being flashy and expensive Teslas, driven by people from “leafy suburbs” – code for rich people.
The principle gripe seems to be that EV drivers don’t pay road user charges, like drivers of petrol and diesel cars and trucks do. This and the Clean Car discount are, in essence, subsidies that other drivers don’t get. And all that money in subsidies won’t make much difference in the country’s overall greenhouse gas emissions – the money would be better spent elsewhere in reducing emissions.
Let’s step back a moment and look at why these subsidies exist. The burning of fossil fuels creates greenhouse gas which is warming our planet and contributing to damaging weather. The world, including New Zealand, needs to stop burning fossil fuels. No one seems to argue with this anymore. So, how do we get to a fossil free world?
Unlike for air and sea transport, the technology to eliminate fossil fuels in land transport already exists. All it takes is a transition to electric vehicles. The problem is, technology and production capacity have not matured sufficiently to allow the manufacture of EVs at comparable price to petrol vehicles. For the same size vehicle, EVs are still significantly more expensive.
And, not everyone wants to deal with the inconveniences of driving an EV: Limited driving range, limited charging sites, long waits and sometimes queues at charging sites. Driving an EV takes a bit of patience, planning and adaptation that aren’t needed when driving a petrol vehicle. Given the existing price difference, even with the subsidies, no one buys an EV because it is the cheaper and more convenient option.
So, it makes sense that the government would “tip the scales”, at least temporarily, to get more people into EVs. If we are going to reach “net zero” greenhouse gas emissions by 2050, expanding the number of electric vehicles in the nation’s passenger fleet is a necessary step. It may not give the best “bang for buck” in eliminating emissions, but it is one of many steps needed to reduce the nation’s emissions.
So, for the Tesla-bashers out there, consider these thoughts next time you want an EV to give way to you at an intersection:
In our last episode, Sheriff Cabinet Ministers, in the wild west town of Aeotearoa, turned away from using his trusty ETS sidearm to confront the destructive Climate Breakdown Gang. Things have changed since then. There is a new mayor in town and the Breakdown Gang has wreaked havoc on the Hawkes Bay grocery, the Auckland livery and the Northland Ranch. They’ve slashed up Tairāwhiti. Will he confront them this time? We’ll see in this next, exciting episode.
Camera zoom into the sheriff’s office on Main Street…
Sheriff Ministers is having his toast and tea when Deputy Greenie Shaw bursts in.
Greenie: “Sheriff, it’s a mess out there. The grocery and the livery are all bashed up and now I’ve got Commissioner Carr asking why we didn’t use the ETS on the Breakdown Gang.”
The sheriff leans back and takes a bite of toast, “Just tell Carr that it’s complicated, we gots lotsa irons in the fire”.
Greenie: “That’s what I told him before, but he wants more spe-cifics. Should I tell him about the…”
Sheriff: “No, don’t mention nothin’ ‘bout the ‘lection. He’ll just think we’re a pack of coyotes who think ‘bout nothin’ more than holding on to our day jobs and sounding ‘portant.”
“Besides, that ETS don’t seem to work anyway. I took it out to the Unit Auction for a test fire and it didn’t work. Didn’t get a single bid. I think it was maybe a problem with the reserve price…”
Shaw looks incredulous, “Didn’t work? What are we going to use against the Breakdown Gang?
Shaw takes his hat off and sits down, pressing his temples.
“How about the Biofuels Mandate?”
The sheriff sips his tea, “Nah, Mayor Hipkins nixed that.”
“The Cash for Clunkers deal to get the high emissions vehicles off the street?”
Sheriff: “Gone too.”
Greenie: “Expansion of public transport?”
Greenie: “Maybe the light rail for Auckland?”
Greenie: “Surely, we could at least put back the petrol tax. You know, cheaper petrol is playing right into the Breakdown Gang’s hands.”
Sheriff: “Not gonna to happen. Hipkins has made some changes round here.”
Greenie: “So, what we gonna do? The situation’s getting dire out there! People are hurtin’!”
Sheriff: “Well, the mayor has sent around some bread and butter. Maybe that will help. It’s awful good. Here, try some… If he keeps giving these out, maybe he’ll win that ‘lection.”
The sheriff hands Deputy Shaw a slice of toast. Shaw looks on in stunned silence.
Camera fade to credits.
So, dear reader, the situation in Aotearoa is looking grim. As you will recall, cabinet decided in December to ignore the Climate Commission’s advice and kept the Emissions Trading Scheme (ETS) price settings low for this year. As a result, the price of emissions credits fell so low that last quarter’s unit auction actually failed. None of the bids achieved the minimum price set by the Ministry. No emissions credits were sold.
Compare this to last year, when a quarterly auction hit the cost containment reserve price triggering the release of extra credits and emissions unit prices were at an all-time high. The price of emissions units has been steadily rising in the last few years, as intended.
A failure of the auction is a little bit of good and a lot of bad. Good because it means industry will need to buy the credits they need to surrender for their emissions from the secondary market, soaking up some of the surplus units that Climate Commission has been worried about, but bad because the government didn’t raise any revenue for the Climate Emergency Response Fund like it expected.
It’s also bad because the price for a tonne of CO2 emissions has fallen from a high of around $85 late last year to a low of $60 now. Releasing greenhouse gas into our atmosphere has just gotten a whole lot cheaper.
And, there’s a whole lot more uncertainty in the ETS market right now. Companies planning to upgrade coal boilers to electricity or wood chip will now look at their balance sheets and wonder if it is still a good idea. It’s maybe going to be cheaper just to pay for more credits, if the price stays low. Yet another delay in the transition to a low emissions future.
So, the Climate Breakdown Gang appears to have won this round in Aotearoa, and will have plenty of rein to continue its havoc. I suppose we can all thank the new mayor for our bit of bread and butter, at least until the Climate Breakdown Gang comes back. And, you can rest assured, they will be back.
Lake Onslow BluesRead Now
Now we hear from MPI that the Lake Onslow pumped hydro scheme – meant to store enough hydropower for the nation’s electricity shortfall in the event of a “dry year” – is projected to cost 4 times more than initially anticipated – a new price tag of $15.7 billion dollars! In its 16 March newsletter, MPI says it is investigating alternatives.
This setback to the Lake Onslow project isn’t bad news to the many critics of the scheme. It would be a massive engineering undertaking, with a fair risk of becoming an expensive drain on the nation’s resources. There is no estimate yet on how much it would cost, year to year, to keep it topped up to offset losses from evaporation and leakage.
The intent of the scheme is noble; to reduce the need to burn fossil fuels for electrical generation during a dry year. But, it’s overall premise seems to violate common sense; why build a massive hydroelectric scheme to address a problem caused by a lack of water? Mother always taught us not to put all our eggs in one basket. Would it not be more logical to focus on other forms of electrical generation that don’t depend upon a scarce, vital resource like water? Maybe a Lake Onslow scheme would get the country through a dry year, but what about two? Or, a dry decade? Global warming isn’t done surprising us.
So, what are the alternatives MPI is looking at? Some are seem reasonable, like building a smaller pumped hydro-storage scheme in the central North Island or burning charcoal pellets instead of coal at the Huntly Power Station.
It is clear they haven’t thought very hard about the other alternatives. Hydrogen, presumably generated by electrolysis of water and stored underground or as ammonia, still comes up, even though it has dismal efficiency compared to pumped hydro.
MPI also mentions something called “flexible geothermal energy” which, to someone who spent a career in the geothermal industry, sounds like an oxymoron (like “open secret”). Due to the thermodynamics of hot water and steam, the operation of geothermal power plants is highly inflexible, otherwise it risks accelerated damage to its most valuable asset – the geothermal wells.
What they don’t consider is accelerated development of renewable power sources, such as wind, solar and tidal power. An abundance of these affordable, renewable power sources, along with charcoal at Huntly and a few pumped hydro-storage projects around the country, would fit well with an “eggs in different baskets” strategy.
MPI fears that overbuilding wind and solar would lead to higher market prices for electricity. How too much electricity leads to higher prices isn’t clear.
Perhaps the problem is actually the power market itself. I ask you, which would give better bang for buck: $16 billion for a pumped hydro project at Lake Onslow or reforming the New Zealand electricity market to promote an abundance of wind, solar and tidal generation?
The present generation spot market is dominated by a quasi-monopoly of four big, highly profitable companies. The market incentivises shortages by setting higher prices when electricity supplies are short, which has resulted in retail electricity prices rising faster than inflation. The 1998 Bradford reforms, which were supposed to deliver cheaper electricity to consumers, has resulted in ever increasing energy bills for residential customers and ever fluctuating power prices for industrial customers. It has clearly failed to deliver on its promise of cheaper power. Reform is well overdue.
How about, instead of looking to build giant infrastructure projects like the Lake Onslow scheme, the government focus on reforming the electricity system so that it provides the generation needed to get us through a dry year (or decade). That reform might also look to provide reasonable and stable power prices to consumers and industry, instead of the escalating prices we are seeing now.
The Interim Climate Change Commission has pointed out that lower retail electricity prices will also act to reduce greenhouse gas emissions, by further incentivising industry to replace fossil fuel in process heat and transport with electricity. Reportedly, that uncertainty in the future price in electricity is holding many companies back from making the transition. So, low and stable electricity prices will help abate carbon emissions too.
And for Kiwis struggling to make ends meet, a lower, more certain electricity bill would be a welcome sight.
Tom Powell and Tim Jones – Coal Action Network Aotearoa
This is how technology advisor Michael Liebreich recently described hydrogen in Threadreader.
In some renewable energy circles, green hydrogen is all the rage. It can be made from ordinary water and electricity. It can be burned like fossil gas but without the greenhouse gas emissions. And, it can be used in fuel cells to make electricity again. What is there not to like? Quite a lot, it turns out.
The usual argument against using green hydrogen for energy is the abysmally poor efficiency of turning electricity into hydrogen and then turning it back into useful energy. Presently, a hydrogen fuel cell vehicle gets back only about 30% of the electrical energy used to make the green hydrogen in powering the vehicle. A typical battery electric vehicle gets back around 80% of the electrical energy used to charge its batteries.
The Parliamentary Commissioner for the Environment, in a December letter to Megan Woods, criticised proposals to use wind power to make green hydrogen at Taranaki, store it underground until needed then burn it to make electricity again, due to the lifecycle efficiency of only 20%. By comparison, pumped hydro storage has a lifecycle efficiency of about 75%. There are better ways to store energy than converting electricity to green hydrogen.
Like the petroleum fuels we have grown to know and love, hydrogen’s best attribute is that it is a flammable fuel that can be moved around and stored. But, what about the other properties of this weird and wonderful new fuel?
Let’s first talk about “escapey”. Hydrogen is a very small molecule and being small, it can squeeze through most materials. It leaks through ordinary carbon steel, which is what most fossil gas pipelines are made of. Along the way, it can cause “hydrogen embrittlement” which further weakens the steel. So, here we have a flammable gas that needs careful containment in special materials.
Now, let’s talk about “explodey”. Hydrogen is flammable in air with a wide range of concentration, 4% to 74% by volume. By comparison, fossil gas is flammable in air with a concentration range of 4.4% to 17%. Hydrogen burns with a flame invisible in daylight – when it is burning, you can’t see it.
It also has a very low ignition energy – a spark of static electricity is reportedly enough to set it off. And, it is known to ignite for unknown reasons when suddenly decompressed, as with the rupture of a high pressure fuel tank.
Add to this the fact that when it leaks, you won’t be able to smell it, like you can fossil gas. Hydrogen has to be very pure in order to work in automobile fuel cells, so perfume can’t be added. Sophisticated sensors are needed to detect leaking hydrogen.
There have been a number of recent accidents due to hydrogen explosions: one in South Korea in 2019 and one in Norway, also in 2019.
And, what’s this about “expanded polystyrene”? Hydrogen is much lighter than air, which is why it was used to lift early dirigible air ships, at least until the 1937 Hindenburg disaster. Being so light, it is still pretty light when compressed or liquefied. Hydrogen compressed to the NZ standard storage pressure of 350 bar (5,000 psi –14 times the pressure in an LPG tank and 2 times the pressure in a SCUBA tank) has a density of only 23 kg per cubic metre – about the same as expanded polystyrene used for home insulation. So, although it holds about 3 times more energy per kilogram than gasoline, the same amount of energy requires roughly 12 times the volume. Fuel tanks for trucks or aeroplanes would need to be many times larger, and many times stronger, than petrol tanks, in order to drive or fly the same distance.
The upshot of all this is that hydrogen is not an easy or efficient fuel to work with. We will need special materials to store and transport it – materials that keep it from leaking out, as well as hold it at very high pressure. We’ll also need lots of sensors to make sure it doesn’t leak and explode.
Green hydrogen is not all bad, however. It has a role in reducing emissions in the manufacture of steel and fertiliser, for instance, but that is very different than using it as a transport fuel.
When you add to this the poor round trip efficiency of turning electricity to green hydrogen and back to useful energy again, requiring abundant renewable electricity that Aotearoa New Zealand doesn’t have at the moment, we can only hope that somebody comes up with a better renewable fuel than hydrogen. Otherwise, I am afraid we are in for an “escapey, explodey, expanded polystyrene” future.
Reflections on the War in IraqRead Now
Twenty years ago, on 20 March 2003, the US and its few allies brought “shock and awe” to Baghdad, starting the Iraq war. At the time, I was an under-employed consultant / house husband in Windsor, California, taking the kids to school and back, cooking dinners, and volunteering in the regional parks and with the local search and rescue team. So safe and so secure, the war was still to change my life.
Having narrowly avoided the military draft during the Viet Nam war, learning of its horrors through correspondence with my older brother who was drafted and served two tours, and living with the sad carnage of the war’s aftermath, I was against the Iraq war, and the invasion of Afghanistan before it. I joined thousands of others demonstrating against these wars in their build-up, in Santa Rosa and in San Francisco, but to no avail.
Americans were still angry about the 9/11 attacks in 2001 and wanted retribution. Comprehending the history, politics and lies that the Iraq war was based upon seemed to be the least of their concern. Even seemingly rational newspaper columnists echoed the ridiculously unrealistic talking points of Bush-Chaney-Rumsfield neo-conservatives. America could build a liberal democracy in the heart of the Middle East – what were they smoking?
Now, at this anniversary, we get to relive that sad, disgusting and ultimately pointless episode of history. Weapons of mass destruction, Abu Ghraib, IEDs, Guantanamo Bay, drone warfare, Islamic State.
I recall opening the local newspaper in the mornings, to be confronted by the photos of the young military men and women who’d died in Iraq the week before, smiling proudly in their dress uniforms. Thankfully, we were spared pictures and home towns of the untold hundreds and thousands of dead Iraqis – the collateral damage – but we knew they were there. And it was all just heart breaking.
I would meet my neighbour in the street in the mornings, collecting the mail or putting out the rubbish and we would work ourselves into a near frenzy of anger at our government, its lies, its disregard for international law, its abdication of its own founding principles. How could they do this, so soon after the great folly and atrocity of the Viet Nam war?
When a consulting job in New Zealand came up, I jumped at it. Here was a quiet country, not at war with anyone, least of all with itself, like America was. The news was about traffic accidents and maybe the occasional murder, often just a coroner’s report from a crime committed years ago. A progressive country, seemingly interested only in bettering itself and the lives of its people.
When that consulting work turned into a job offer, I jumped at it again, leaving my adult sons at home and moving Hamilton. My wife moved back after 6 months of home sickness and I began a new life alone. That was 20 years ago. Since then I’ve shifted towns, found new loves and become a citizen.
I still follow American politics, but mostly for its entertainment value. No one, it seems, can out-do Americans when it comes to “man bites dog” stories or its mad roller coaster of electoral politics. Happily, I don’t feel that same anger anymore.
But I do still feel a tinge of sadness for the betrayal of national ideals that America’s recent wars represent, and how they appear to have changed the discourse of its democracy. There are still prisoners at Guantanamo bay. Drones are still conducting extrajudicial executions. If anything, the number of outlandish lies rattling around in the highest halls of government seems to be increasing.
Can it ever recover its dignity enough to be trusted again?
I’m sad to say that 20 years ago I gave up on trusting my home country and decided to join a new one. It’s been a good decision. But with this decision, comes a sense of vigilance – we cannot let the same thing happen here. Without fear or favour, we must always hold our political leaders to account. We need to trust that they will tell us the truth.
A Train of ThoughtRead Now
The future of New Zealand’s domestic transport needs should be trains.
Robert McLachlan and Paul Callister, in a 13 February article in the Conversation, make a good case for restoring long distance passenger rail in New Zealand as a way to decrease the emissions of passenger travel and reduce our energy use.
Decreasing greenhouse gas emissions is a given; rail yields only a small fraction of the emissions per passenger kilometre compared to personal automobile or air travel. Electrified, rail would do even better.
The case for decreasing our energy use is just as important.
One of the cold, hard facts of our times is that humanity is losing the ability to use its most abundant, readily available and convenient form of energy – petroleum. Losing it, by giving it up to prevent run-away climate disruption, or losing it simply by running out of it. Either way, finding an energy source that will replace it will be difficult and cost us more - cost us more in terms of the energy investment required to produce it in the first place.
Scientists call this Energy Return on Investment or EROI; the ratio of the energy you get out of a fuel or energy collecting device, divided by the energy it takes to find it or build it. For modern oil production, this ratio is about 20:1. In other words, it takes the energy equivalent of one barrel of oil to get another 20 barrels of oil.
Since it requires much less oil to produce new oil, we have been living in in times of surplus energy.
Think of what it would be like if it took one barrel of oil’s worth of energy to find two barrels of oil, or an EROI of 2:1. We’d be spending half our energy just getting more energy, and that’s not including the energy needed to transport and refine that oil into fuel, nor the energy needed to build the machinery to use that fuel. There certainly wouldn’t be much energy left to do other things.
Since the discovery of oil, we’ve grown used to having a large surplus of energy. And, our modern society has put that surplus energy to good use – producing our food, heating our homes and travelling the world – all the good things about modern life. It is estimated that today’s society requires an overall EROI of at least 14:1; anything less and we start lose things we’ve come to expect.
This all matters because the EROI of new renewable energy is generally less than what we’ve become accustomed to. Wind power is the best of the bunch, coming in between 10:1 and 30:1, but it is intermittent and needs backup power or some type of energy storage, such as batteries. This adds cost and energy, bringing the EROI of wind down. The EROI of solar is less, between 4:1 and 7:1 and again needs backup or storage because the sun doesn’t shine all the time.
What about renewable fuels? Bio-methane has an EROI of about 3.5:1 and ethanol from corn is 1.6:1; it takes almost as much energy to make ethanol as you get back. The EROI of green hydrogen is less than 1:1, which means it takes more energy, in the form of electricity, to make it than you get back when you use it. These low EROIs might be worth it, if the fuel has high energy density and is easily transportable, but they leave very little surplus energy for the rest of society.
The reality is that we will struggle to replace petroleum with energy that has even half the EROI of oil.
You can see where we’re headed. As we replace fossil fuels with renewable energy, we’ll need to expend much more of our energy budget just to get that energy. There will be less energy around for other things. Barring some miracle technology, such as cheap nuclear fusion power (remember the old saying: just 20 years away and always will be), we are headed for a world where energy availability will be much like it was when our grandparents were children. We need to start planning for that low energy future now.
This is where electric trains come in. They are the most energy-efficient, low emissions way to move goods and people over land.
Steel wheels rolling on steel rails are far more efficient than rubber tyres on asphalt roads. Trains can be electrified without the need for batteries and charging stations, replacing long distance trucking, which is presently struggling to find a low emissions replacement for petroleum fuel.
So, thinking long term, our best investment for domestic transport will be in upgrading, expanding and electrifying our existing rail system.
High Noon in AotearoaRead Now
It was high noon in the wild west town of Aotearoa.
Sheriff Cabinet Ministers was busy at his desk, sorting through citizens submissions, when Deputy “Greenie” Shaw bursts into the room. “Sheriff, it’s the Climate Breakdown Gang again. They’re back and causing trouble. If we don’t do something, somebody’s going to get hurt!”
Sheriff Ministers knew what had to be done. It was all laid out clear in the Zero Carbon Act. He rose from his chair and reached for his trusty sidearm, hanging on the peg by the door. Those troublesome Emissions Boys would be no match for the Revamped ETS, its shiny emissions-killing metal gleaming from the holster. He strapped on the weapon and reached for the door.
But then he thought, “Wait. What about inflation? What about the election? What about my corporate buddies at the Parliament Saloon? Nobody understands the ETS anyway. What the hell.”
The sheriff turned back and sat back down at his desk and went back to the submissions.
Greenie, wide-eyed and exasperated, piped up, “But sheriff, we’ve got to do something! Mayor Ardern has promised the townspeople that we’d be net zero of those emissions by 2050!”
“That’s another 27 years away, Greenie“, grumbled the sheriff. “Plenty of time to deal with those emissions. Now go away, I’ve got paperwork to do.”
“But, what will we tell the townspeople? They are expecting us to get out and fight those Emissions Boys with the ETS!”
“I’ll just hit them with another request for submissions. That’ll shut them up!”
What? Wait a minute! That isn’t how the story is supposed to go! The sheriff is supposed to go out into the streets and fight the bad guys, not hide in his office doing paperwork!
But faced with the choice of either strengthening the ETS, (i.e., NZ Emissions Trading Scheme) by letting emissions prices rise, as the Climate Commission has recommended, or holding emissions prices down for another year, our cabinet ministers blinked and voted in December to keep the prices low. So, we are in for yet another blowout of the cost containment reserve, releasing more emissions credits into the market than planned, making it incrementally harder to reach our ‘net zero by 2050’ emissions goal. So much for using the ETS to cap our emissions.
This little episode, the latest in a long list of disappointing episodes involving the NZ ETS, points up its fundamental weakness – it is a beast that is easily defanged.
Which is perhaps why The New Zealand Initiative, a conservative think tank advising the National Party, likes it so much. They argue that government incentives and regulations to control emissions, such as banning the import of petrol engines by 2035, as recommended by the Climate Commission, are not needed because the ETS is all that is needed to do the job.
But, we all remember what happened to the ETS under the last National government. The emissions price went from $21 per tonne CO2 in 2011 to just $2 per tonne by 2013, recovering to $19 per tonne by 2017, when Labour returned to power. In essence, the last National government was quite successful in defanging the ETS, stopping nearly all progress in reducing New Zealand’s emissions along the way. Good for business but bad for the planet.
So, considering this latest example of how easily the ETS can be softened, and even by a government that has declared a climate emergency, it is clear that we should NOT put all our climate mitigation “eggs” into one basket, like the ETS.
Government incentives and regulations, on the other hand, are harder to “defang” because, once handed down, industry starts to take action. The government ban on coal-fired boilers after 2037, for example, would be difficult to change because industry has already started to invest in the change to other fuels. A new government relaxing the 2037 ban would be met with howls of anger from industry, asking why they want everyone to change horses in mid-stream. Businesses do better in a stable regulatory environment, so regulations made well in advance give them time to plan and make the necessary changes with minimal disruption.
So, don’t despair, Deputy Shaw. There are other guns we can use to fight off the Climate Breakdown Gang. Sheriff Ministers just needs to be pushed into having the courage to use them.
Our Broken Electricity MarketRead Now
If there were any doubt that our country’s electricity generation market is badly broken, the recent report by the New Zealand Council of Trade Unions, Aotearoa 350 and New Zealand First Union should put it to rest. The report points out that since 2014, the three majority government-owned electrical power generators – Mercury, Genesis and Meridian – have paid out more in dividends to shareholders than they made in after tax profit. Really?
First of all, as any businessman will tell you, paying out more in dividends than you make in income can only be sustained by borrowing or selling assets. So, why are they doing this?
Second, and perhaps more importantly, these companies need to be ploughing their revenue back into new renewable generation projects to feed New Zealand’s growing electricity needs, not paying it out to shareholders. These companies are owned mostly by our government. Didn’t they get the memo that the country needs for more renewable energy?
The Climate Commission has said that national electricity generation needs to increase by 20% over 2018 levels by 2035 in order to meet the anticipated needs of industry and transport. Yet, according to MBIE data, wind and geothermal generation – two important renewables - have remained relatively flat in the 6 years between 2015 and 2021, growing by an anaemic 12% and 3%, respectively. Meanwhile, coal generation grew by a whopping 72%, making up 7.0% of the country’s electrical power in 2021.
This slowing of new renewable generation is hard to believe, considering wind generation grew by a phenomenal 280% in the decade before 2015 and geothermal generation grew by 140%. So, why the slowdown in investment in new power after 2015?
The Climate Commission has suggested that the hesitance of the generators to add new power is due to the uncertain future of the Manapouri power, if the Tiwai Point aluminium smelter closes down. Manapouri represents 13% of the country’s electrical generation and if diverted into the national grid would certainly depress wholesale electricity prices. They think generators are worried that if electricity prices fall they might not be able to recover their investments in any new generation. So, they are sitting on their hands.
The reason for the high dividends may be more subtle. When the three 51% government owned generators entered the share market, a significant portion of CEO and executive team pay was given as what are called “long term incentives”. This is basically the ability to purchase company shares at a discounted price if certain performance targets are met. This is a program that didn’t exist before 2013 because there were no shares to sell or give away prior to the public share sales.
Experience with this type of management pay in the US shows that it can have a perverse effect on company strategy, narrowing the focus of otherwise diverse company objectives to a single goal – to bring stock price up. And, one obvious way to do this is to pay large dividends to shareholders.
So, we’ve ended up with a near monopoly of three government-owned and highly profitable power generation companies with an obsession to pay large shareholder dividends and an apparent indifference toward investment in new renewable generation that the country desperately needs. Add to this a power market structure that incentivises electricity scarcity to raise prices, which has caused residential electricity prices to rise 20% faster than inflation over the last 14 years!
With a power generation system this dysfunctional, it is little wonder that Meridian Energy is promoting a project to send excess Manapouri Hydro Scheme power overseas as green hydrogen, while Transpower, the government-owned electricity system operator, warned us of power shortages last winter. Our electrical power system is clearly not acting in the best interests of the country.
Solutions are readily in hand. In 2014, the Labour party, while in opposition, presented a power plan that would create a government company to be the single buyer of power generation that would then on-sell this power to retailers. This company would negotiate fair prices for existing and new power generation and make sure Aotearoa New Zealand has enough renewable power to decarbonise its energy needs.
Earlier this year, the deregulated power market in Australia, which is similar to ours, was taken over by the government market operator, in a manner similar to what Labour proposed, in order to prevent a system crisis. Our government could easily do the same thing and get the country’s electrical power system back on track.
When is this government going to recognise the problems with our electrical generation system and do the right thing for the people, the economy and the country’s low carbon future?
I walk our dog in the Taylor River Reserve each morning I’m in town, treading the stretch between Monro Street and Wither Road. It is a quiet time, when I contemplate my world.
My favourite place is the river bed, where, in summer, I see the river play hide and seek in the gravels, popping up here only to dive back underground there. In the wide open river channel south of the Burleigh Bridge, I navigate over gravels sculpted by a violent dance between physics and chaos we call the winter floods; a small patch of land still shaped by nature’s hand.
It is this immortal hand, with its timeless power and beauty, which gives me pause and a sense of awe.
I also see the debris of my species, infused in the gravels and discarded along the paths. Plastic bags, polystyrene foam, synthetic rubber, polyester clothing and discarded electronics, all making their way to the great rubbish dump that has become the ocean. What will be the result?
My mind flashes to Greek tragedy, where the hero is brought down by his or her arrogant confidence in their own strength or beauty, their hubris. Does humanity, in its new-found power over nature suffer the same tragic flaw? Is this unnatural rubbish I see in the river bed the seeds to this downfall, poisoning our land and seas, as bacteria turn this new food source into toxic waste?
My mind skips to the rocks in the river and to the newly designated geologic epoch – the Anthropocene; when the works of man dominate the world’s geology. The bricks, broken tile and glass are there in the river bed for some future geologist to mark our time in the sedimentary record. I was born in a different epoch – the Holocene, a time of warm and stable climate after the last great global glaciation. Now in the Anthropocene, I see change all around me.
Newly powerful and erratic weather is upsetting life’s delicate cycles. Humans and their livestock overwhelm the land. Disease, pests and weeds invade what remains of the natural planet. Every corner of the planet explored for mineral wealth and petroleum.
I’m reminded that the Anthropocene is also the time of the earth’s sixth great extinction. Will humanity succumb to this extinction as well?
All these things to wonder as the morning melts away.
The anger in the animal farming community about the proposed agricultural emissions levy is understandable. No business is happy about a new fee that they will have to pay, at least not on this planet. Add to this weather disasters, new freshwater regulations, high fuel prices; there is a lot on their shoulders at the moment.
So, was the process to develop the levy something the government did right?
Let’s step back and look at how this all happened.
The 2019 Climate Change Response (Zero Carbon) Amendment Act specifies a 10% reduction in biologic methane emissions by 2030, in order to meet the nation’s 2015 commitment to the Paris Agreement. The Act passed Parliament unanimously, so it would appear that all major political parties agreed to it. National signed the 2015 Paris commitment and Labour put forward the Zero Carbon Act.
So, like gravity, agricultural emissions reduction is not just a good idea, it’s actually the law.
Much to the climate activist community’s dismay, rather than add biologic methane to the Emissions Trading Scheme (ETS), the government agreed to form an industry-Māori-government partnership, He Waka Eke Noa, to hash out a program to achieve this emissions reduction, starting in 2025. He Waka Eke Noa includes 11 major farming industry groups, including Federated Farmers, Beef & Lamb, Dairy NZ and Horticulture New Zealand.
In that democratic governments derive their authority from the consent of the governed (that’s us), this was something the government did right. Agriculture needed to be part of the plan.
After 3 years of work, the partnership’s recommendations were published in May of this year and the government’s plan, based upon those recommendations, was put out for consultation in October.
So, what were the partnership’s recommendations?
The partnership recommended a farm-level, split-gas levy. In other words, a levy on individual farm businesses rather than on farm product processor businesses (such as Fonterra) and that farm businesses pay different levies for methane and the long-lived, farm-derived greenhouse gases, such as nitrous oxide and carbon dioxide from fertiliser. The levies would be calculated and paid annually.
Farm businesses would receive incentive payments for the uptake of approved methods to reduce emissions and receive payment or credit for on-farm carbon dioxide sequestration, such as through riparian planting, which are not presently eligible for ETS emissions credits.
Levy revenue would be invested in research, development and extension services (i.e., technical advice & information) and to a fund dedicated to help Māori landowners. Industry and Māori oversight boards would be formed to provide recommendations on levy rates & prices and the use of revenue.
So, which of these recommendations made it through to the plan in the government’s consultation document?
Just about all of them.
The principal point of difference appears to be that the oversight boards would provide advice on the use of plan revenue, but not on levy rates & prices. The fox doesn’t get to guard the hen house.
While farmer anger is understandable and regrettable, the need to reduce these emissions appears unavoidable. In most economies, including ours, polluting industries pay some sort of fee or tax for their pollution, in order to encourage a reduction in that pollution. Business sectors of New Zealand’s economy heavily dependent on fossil fuel use, such as process heat and trucking, already pay for their pollution through the ETS. The farming of ungulate animals (cattle, sheep & deer) produces about half of our country’s greenhouse gas pollution, so it is too large to be ignored.
While the agricultural emissions levy may be a hard pill for the animal farming industry to swallow, it does have an upside. As countries in the developed world take steps to limit their greenhouse gas emissions, they recognise that their domestic animal farming industries are at a disadvantage in competing with imports from countries that do not limit emissions. There has long been talk of “carbon tariffs”, or a special tax on imports to address this. In the European Union, it is called the Carbon Border Adjustment Mechanism, which if adopted, would take effect in 2026.
New Zealand’s dairy, meat and wool exports will be ahead of the game when these tariffs arrive. This also would be something done right.
These are a collection of opinion articles principally written by CKM member Tom Powell for the Marlborough Express. Tom is a retired geologist who came to New Zealand in 2004 to work in the geothermal industry on the North Island, is a New Zealand citizen and now lives in Blenheim. Some articles have been written by other CKM members, and their names appear with those articles.