Don Nicolson: ETS crusade barking up the wrong tree

Federated Farmers says the emissions trading scheme wipes out 12 per cent of the profit from an 18kg lamb. Photo / Greg Bowker

New Zealand has now embarked on the latest phase of an audacious branding exercise.

The Emissions Trading Scheme (ETS) corrupts market principles before super-charging them with the power of righteousness to drive what is, to all intents and purposes, a moral crusade.

Nations will be powerless to resist New Zealand's underlying logic with our goods sailing (but not, of course, flying) out the door to buyers willing to pay more for carbon neutrality.

Or, just maybe, New Zealand has embarked on a badly timed odyssey that will cost us all dearly.

It's no wonder our Government receives congratulatory emails from overseas - because if you were a Californian dairy farmer, wouldn't you send one?

Unlike the Prime Minister's chief science adviser, Sir Peter Gluckman, I'm not going to blame the "popular" media for confusing the public. The media, like most ordinary Kiwis, don't understand the ETS or its point.

Therein lies the danger for the National-led Government. The ETS is a sleeper policy packing a mighty electoral sting.

If we farmers come across as grumpy, it's because a lot of expectations are being loaded against our ever-decreasing profit. Last year's Situation and Outlook for New Zealand Agriculture showed that farmers collectively retain just 6.2 cents from every dollar we generate.

For a sheep farmer, the trading scheme actually obliterates 12 per cent of the profit from an 18kg lamb - to achieve what, exactly?

The ETS becomes another tax on our productivity but it's also a tax on young families. It's a tax on retirees. It's a tax on students huddling around a single-bar heater in a Dunedin flat.

It's a tax on everybody from a newborn infant to the funeral home. The ETS literally becomes a tax from the cradle to the grave.

Yet all of this sacrifice is for an imperfect protocol which lapses in 2012. Meanwhile the rest of the world, including the new Gillard Government in Australia, have their plans in electoral stasis.

Global eyes have turned towards Kyoto's successor. So why is our Government so fixated with 1990?

The newly released Hartwell Paper presents a glimpse of a post-Kyoto world. It was released in May by the London School of Economics and the University of East Anglia, a university at the epicentre of "Climategate" controversy too.

Its Professor Mike Hulme delivers a damning indictment on the policy trajectory New Zealand is on.

"It is not possible to have a 'climate policy' that has emissions reduction as the all-encompassing and driving goal," the report says.

Its executive summary provides a useful yardstick to compare our ETS with: "The key for completing the job is for policy makers to focus on the first steps and not on outcome targets or timetables.

"Current policies fail because they are back to front, politically and technologically. They also misinterpret the core message that scientific research on climate issues gives to policy-makers."

And what has been Federated Farmers policy since 1985? It's that voluntary market mechanisms work towards efficiency rather than state-led intervention.

State-led efficiency didn't work in the Soviet Union and it won't work in New Zealand or with the climate.

It is also refreshing to see climate variation experts jumping off the emissions trading bandwagon.

The Hartwell Paper looks to a flat carbon charge.

Yes, we've been there before, but if we are to do something, a low-level carbon charge is simpler, cleaner and less fiscally convoluted than the ETS.

The central thrust of the Hartwell Paper is funding research to develop commercially viable mass energy sources. This is about developing cheap energy sources able to compete directly with fossil fuels, unsupported by subsidy, tax breaks or incentives.

It's not about changing behaviours but replacing what we use.

It's about genuine breakthroughs.

If we wish to transform the New Zealand economy, this research may unlock a Kiwi Nokia, Apple or even, an ExxonMobil.

The Hartwell Paper focuses on raising global living standards through economic development. Its authors talk of resilience, so the policies of Government should be about building resilience into our communities to adapt to a changing world.

Resilience is a word we farmers readily embrace. Yet what impresses me is that its authors realise the clock cannot be turned back. 1990 was one year out of the billions that preceded it of this planet's existence.

Now this is complete heresy in the current New Zealand environment and that's my concern. The policy response has taken on a rigid air of orthodoxy.

Any questioning is treated as heretical followed by the predictable slur of "denier".

The promised but highly sketchy 2011 review provides the Government with an "exit" strategy over the ETS, given we currently have a projected Kyoto surplus.

This is why Federated Farmers won't go away on this. We cannot afford to because philosophically and practically the ETS is absolutely the wrong policy.

This is evidenced by the four-year $45 million commitment to global emissions research being dwarfed by the $1.06 billion for the ETS tax. Our priorities seem somewhat upside down. The ETS tax treats the symptom, whereas research is surely about solving the problem.

That's why the time has come to switch off the ETS but switch on to global solutions that embrace global progress. The 2011 review is the last chance to break free from the ETS' dogmatism.

So whether you are a sceptic or a fervent believer, no ETS tax will save the planet. But I believe research will. Switch off.

* Don Nicolson is president of NZ Federated Farmers.