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 couple of weeks ago I attended a PM forum in Christchurch. It was a chance to hear Helen Clark and her Ministers talk about the new Emissions Trading Scheme that they had just put out. I’ve tried to wean myself off climate change conferences because in the end they are all pretty boring and generally say the same thing: the world may end in a flood of seawater and we need to get cracking by x% right now.

What always surprises me is that no matter how many calls for action there are very little has been done to really restrain emissions. Why is this? Well quite simply this is a very tricky issue. Economic growth is not going to be sacrificed on the altar of environmentalism or, more to the point, an outcome where there is uncertainty. So it drags on. China continues to expand its economy at a fierce pace and shows little interest in reining in its emissions insisting that it’s full steam ahead.

So in come emissions trading schemes: carry on as normal but buy your way to heaven via a piece of paper saying “1 tonne of carbon”. If it sounds like a papal remission that’s because it’s pretty close.  It’s a piece of paper you get for money which blesses your wins away.

The problem is quantifying and packaging a tonne of carbon or equivalent. How can we be sure that people will get what they pay for. This is where certification comes in. We need an agreed international standard and a single market. After all there’s only one type of carbon just like there is one type of gold. Its not like crude oil where there are different prices for different types.

Another issue is the changing science. For example, if forests are used as credit generators because of their ability to sequestrate carbon, there is a possibility that the amount the sequestrate may change over time either due to ecological reasons or a change in the understanding of how and how much they actually lock up and over what time period.

As a business having to purchase carbon credits on paper I would be crossing my fingers and hoping it all works out otherwise i might be out of business.

There is also a concern about the over issuance of paper credits. As readers will know they fractional reserve money system we have started life in a similar fashion: an underlying quantity of a commodity on which paper bills were issued. We know the outcome of that, a money system with no control.

From what i have seen this issues haven’t been covered in enough detail. I can still envisage a scenario where the carbon credit market takes off but overall emissions are not reduced. The goal of all this is to reduce emissions not create a huge market in carbon. But for now its the easy way out and politically more acceptable. Trees can take the slack for now and maybe technology can takeover at a later date.