The ETS: Another good Brian Fallow article

I have to admit that I enjoy reading Brian Fallow’s economics articles in the Herald.  His clear and concise writing about economic issues provides a public service to New Zealand.

His recent article describes what the Emissions trading scheme will do to the economy. The money quote for me is:

By ratifying the Kyoto Protocol in 2002, New Zealand took responsibility for its share of global greenhouse gas emissions. What the ETS does is devolve that responsibility from taxpayers to the firms and individuals whose decisions ultimately determine how large those emissions are.

Exactly!  It is not the ETS that creates the costs we are going to face – it is the ratification of the Kyoto protocol.

Other posts that mention the article (Frog Blog – although I would ignore their Rod Oram style discussion on the “opportunities” 🙂 )

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  • Stephen

    You’re a ‘if there was an opportunity out there, it would already have been taken’ kind of guy?

  • “You’re a ‘if there was an opportunity out there, it would already have been taken’ kind of guy?”

    Not necessarily – but presuming that there are a whole bunch of opportunities seems like a more reckless way of determining what is good policy.

  • Michael Kluge

    I just don’t see how the ETS is actually going to improve the environment. I also think it goes back to ratifying the Kyoto as the first step – but if the goal of the Kyoto Protocol is to reduce emissions, I’m still having trouble connecting the dots to see how the ETS is going to achieve this. And then on the radio this morning I hear that Labour plan to offset the increase in electricity costs by giving power rebates etc. It all seems like one incredibly wasteful money-go-round to me.

  • “I just don’t see how the ETS is actually going to improve the environment”

    This isn’t the goal of the ETS though – the goal of the ETS is to pay for our carbon liability which we took on when we ratified Kyoto. If we didn’t pay through it through an ETS we would have to have higher income taxes to pay for it – most economists (outside of NZIER) agree that the ETS is the least cost way of paying off our liability, which is why we do it.

  • StephenR

    “Not necessarily – but presuming that there are a whole bunch of opportunities seems like a more reckless way of determining what is good policy.”

    I can’t see Oram admitting that he is “presuming”. He seems a little more adamant than that!

  • “I can’t see Oram admitting that he is “presuming”. He seems a little more adamant than that!”

    Being adamant about something doesn’t make it true 😛

    Surely if we gave businesses information surrounding the costs and benefits of different investment they would make the best choices themselves. Rod Oram seems to believe that businesses don’t take up opportunities, and only will when the government pushes them too.

    Now I agree that the investment firms are making may not be socially optimal – which is why a carbon price makes sense. But he (and frog) takes it a step further and says that businesses will be “better off” when they are pushed to adopt different technology. I just can’t see how increasing someones costs of doing something makes them better off :). These are the “opportunities” that Frog and Rod Oram believe exist – I am skeptical to say the least.

  • Stephen

    I meant by ‘adamant’ that he surely must have good reason to be so, but I get you. Cheers.