The NZ government has announced a delay in implementing the proposed Emissions Trading Scheme. The 5 year pushback for the transport sector comes at a time when fuel prices are going through the roof and the government is concerned about the impact of further price rises on consumers.

Forgive me for wondering if that isn’t the whole point. First up it was the carbon charge which was dumped back in December 2005 and now the brand spanking new ETS which looked full of holes and now is barely recognisable as a piece of effective policy.

The main concern cited by “critics” is that higher costs may be passed onto consumers. Well the goal of the carbon charge and the ETS is to raise prices in order to lower demand. However, fuel prices are generally regarded as inelastic i.e. demand does not fall as prices rise, which consigns a price approach to the bin. Of course, there is some level of price at which demand will certainly fall. According the research it is when the price increase exceeds income rises i.e. the is the affordability as opposed to higher prices.

Or to put it more succinctly as long as money is available fuel will be purchased regardless fo the absolute price. So the supply of money is a major player in this equation. Now with the credit crunch bedding down money has become less available and so the impact of higher fuel prices is starting to kick in.

So given fuel prices have nearly doubled in the last 3 years, one would expect to have seen a huge fall off in fuel consumption. This has not been the case.

One can conclude that price measures will not reduce emissions and therefore any policy based on this approach is doomed to fail.

Why, you may ask, is no one clamouring for quotas to be implemented? The answer to that is very simple. It’s too hard.

So let’s keep pouring millions of $ into schemes that won’t do the job and keep the veneer of pretending to do something about climate change. They’d be better off spending the money on something important like child poverty and education.

A week of food riots has seen the Haitian Prime Minister fired by the Senate. Food is right up there on the National Security watch list along with climate change, peak oil and water. This has been simmering for a while now but is starting to loom as a serious global problem.

It’s not a problem that can be considered in isolation. Speculation in land (financial asset bubble), population growth, the bio-fuel issue and climate change have all contributed to a serious problem with the food chain.

Rising oil prices have just been the icing on this unpalatable cake. Is this likely to be contained to developing or poorer nations? Not so say some. In developed nations just-in-time delivery and stocking systems work on very tight margins. Food banks are under serious strain with a whole new layer of users appearing in recent times.

There’s no simple solution to this situation but governments need to take it very seriously.

Global leaders are shaping up for talks on a binding reduction in global greenhouse gas emissions. The EU Environment Commissioner is the in US for talks on this very subject. The US say they are ready to move forward on this thorny issue but want all countries to make similar reductions. This is not music to the ears of the Chinese who will continue to trumpet the issue of per capita emissions as opposed to total emissions.

No doubt they will all keep knocking this ball around until someone caves in. But why bother? It’s simply the wrong approach. At the moment we have a free energy market (actually its dysfunctional but that’s another story) where people can choose to buy what is offered. If we want to reduce greenhouse gas emissions we simply need to reduce the amount of fossil fuels available to create them.

Then just leave the market to operate as normal. Simple.

I know I’m restating my position on this but the longer this goes on the more clear it becomes

Finally some research has been done on the effects of bio-fuel crops on the ecosystem. As widely expected the research has shown that bio-fuels can be highly destructive on the environment as well as actually adding carbon into the atmosphere.

So much for being the replacement to fossil fuels.

This a prime example of doing something because it looks like the right or a good thing to be doing. Those people with prescriptive views on how we should live our lives rarely take the trouble to do the sums and that’s where the problem arises.

Until we start to price up environmental externalities and let them flow through the price mechanism we will not get to see the true cost. So we will keep doing things because they feel good to us or they remove some embedded guilt about the way we use the environment.

The market is working in an inefficient manner and the environment continues to suffer because of it. Many environmentalists have a big grudge against the market perceiving it to be a monstrous creation of the capitalist machine. They are sadly mistaken. The market is how we show the real value of the environment to everyone not just those who think humans are a stain upon it.

Now I don’t want to tar all bio-fuels with the same brush. Bio-diesel from algae for example is using a waste stream and an easily grown input. Large swathes of forest don’t need to be cut down for this process.

But until we see the costs flow through the system we just don’t know.

So finally the US capitulates and agrees to be part of talks in 2 years time that will look to make deep cuts in global emissions. Yet the reality, as reported here, is that not much has changed. The US still won’t budge on developing nations (read China and India) and still won’t provide any meaningful targets. It’s interesting that without Australia alongside they are looking very much alone on this issue.

Arguing over who is responsible and who must cut what is really a waste of time. It’s not an argument that can be won by either side. The simple question to be asked is whether global emission levels need to be reduced. If so then they need to be reduced through a global mechanism such as I have proposed in Climate Control where emissions will be reduced by virtue of a quota agreed at the point of extraction not use.

Otherwise we might as well stop wasting our time and focus on adapting and developing cheaper supplies of energy.

Martin Wolf writes an insightful piece here in the FT. If you can’t access it just register as its free.

He points to ingrained problems which are holding back progress:

- The free rider problem.

- Richer countries are responsible yet want poor countries to stop developing.

- The reality that the poorer countries will be worst hit by any further warming.

On top of that we still have disagreements of whether warming is taking place to the degree alluded to in the forecasting models. Scrutiny of forecasting processes and data management is throwing up some issues. Who can we trust? We know politicians always have their own agenda and a huge amount of political capital has been invested in the whole process.

Richer countries may feel that their best course of action is to simply adapt via new environmental technologies, building and planning. Developing countries (China and India) may feel that they didn’t cause this and so can carry on growing at a furious pace.

Poor countries simply have to bear it.

As Wolf notes we may need a real wake up call to make anything actually happen. He muses on the potential of a 2o degree increase as having the desired effect. We saw this scenario play out in the “The Day After Tomorrow” where the world gets a big wake up call but pulls through in the end.

For now though it seems like we will just stumble along from one conference to the next increasing emissions but having little real impact.