Govt pays $140m of $300m cost of new NZ Steel electric arc furnace, cutting emissions by 800k tonnes at $16.20/tonne; Luxon says it's corporate welfare; I argue it's money well spent
IMO NZ Steel should have to pay for more of it themselves - but indirectly, by means of being subject to increased/new general corporate/land/capital/windfall profit taxes. It is nevertheless a good policy, the perfect can't be the enemy of the good when dealing with the climate catastrophe.
Lynn's pics are fantastic. That Chris Hipkin's smile! Better than a caricature.
Will NZ burn any additional coal to provide the electricity to run this furnace?
It is, of course, still corporate welfare. Unfortunately though because they are exempt from the ETS, their emissions problem is NZ Inc.’s emissions problem and Bluescope have little commercial incentive to fund it on their own or via other market mechanisms. NZ Inc. is over a barrel and the NZ government is up for the emissions liability in the future so may as well deal with it now rather than later. It’s not would you like to eat the dead rat but how would you like to eat it.
The purchase of (other) emissions reductions (offsets) locally could be encouraged by assisting the development of voluntary carbon markets using the global accreditors (Verra, Gold Standard, etc.). Emissions reduction projects (like NZ Steel’s) that aren’t tree-planting or vegetation-related are a bit more black & white when it comes to measurement & certification of actual emissions reductions. Maybe a future government should spend some effort on these policies.
ETS is now the problem. Precedent has been set. Do nothing and wait for the handout. Otherwise the government will have to pay even more for overseas credits.
When you talk to Luzon re ETS, and in relation to this comment from your report “Luxon looks captured by the NZ Initiative’s purist approach on this, which is to argue that the ETS should be the only policy designed to reduce emissions and all emitters should be included and the price should be allowed to equilibriate to achieve emissions reductions.”, if the ETS is the way then where should the money be spent?
With some of our large corporations being allowed a free pass on the ETS does anyone check the legitimacy of their claims regarding competitors? Especially as many other countries also move to reduce emissions.
Excellent article Bernard.
Of corse this is corporate welfare. And excellent to put NZ Steal in the same bag as Air NZ and Rio Tinto and other robbers. The so-called national airline has a long history of privatising profits and socialising losses. It should have been nationalised years ago as Luxon and the PM both know. Rio Tinto has been the arch-corporate bludger in Aotearoa for over 50 years. Tax payers could have retired all their employees on $1m a year each for the welfare the string of governments have paid out to Rio Tinto in electricity subsidies. They have monopolised all of Manapouri production, polluting Southland to add insult to injury. And yes, let’s put Fonterra in the bag with the corporate polluters. Dairy producers provide few jobs, relatively little of GDP and much of our environmental degradation. The problem is systemic. We need to address the farce of ETS, not hide behind the bullshit that it’s cleaning up after the corporate polluters.
Bernard I am a big fan but disagree with a few things here, you say - "given NZ Steel has no need to reduce its emissions, which is exempt from the Emissions Trading Scheme". NZ Steel is not exempt from the ETS. They are mandated to buy units and in addition receive around a $100 million in free credits from the govt. This article also implies the same thing which NZ Steel CEO said, "There is no business case/ financial incentive for us to make these reductions". This isn't true as they ignored the fact they are paying for their emissions in the ETS which is a significant motivator to cut emissions, and if they had to pay their for their full emissions liability, the extra $100 million I am sure they would very quickly make this investment themselves! I agree $16.2 is fantastic cost for abatement, but that suggests that this reduction would not have happened anyway, which I argue it would have if govt decrease NZ steel free unit acclamation. I am glad we are using the cost per tonne as a measure though finally, clean car rebate was $400+ per tonne !