WELLINGTON, Aug. 16 (Xinhua) -- New Zealand's much-criticized emissions trading scheme (ETS) is under fire again with an independent think-tank claiming some of the country's biggest companies have profited from buying fraudulent carbon credits.
Lawmakers and economists on Tuesday called on the government to end the climate change "cheating" and to reform the ETS so that New Zealand could be seen to be credibly meeting its obligations on curbing greenhouse gas emissions.
The Morgan Foundation released a report Monday listing the "dirty dozen" - the 12 biggest New Zealand users of fraudulent emissions reduction units (ERUs) from foreign countries in 2013 and 2014.
The list comprised oil companies, including the local arms of BP and Chevron, electricity generators, commercial forest holdings and dairy giant Fonterra.
The Morgan Foundation said in its report that the government - the regulator of the ETS - had argued the companies were responsible for buying the bad credits.
"This is despite New Zealand being the only emissions trading scheme in the world that allowed the use of these units from 2013 to 2015," it said.
DUBIOUS ORIGIN
However, the failure to reduce domestic emissions had put New Zealand in a difficult position, it said.
It called on the government to "stop exploiting the legacy of the dodgy credits by 2020 at the very latest."
"The international community is unlikely to look favourably on us continuing to hold over emission credits stored up from the past given their dubious origin and the fact that the Paris Agreement was intended to be a fresh start over the Kyoto Protocol," it said.
An analysis by the independent Motu Economic and Public Policy Research Trust said the problem stemmed from the New Zealand government's delinking from the second period of commitment to the Kyoto Protocol.
From June 2011, Kyoto carbon credit prices began to fall and New Zealand ETS participants started buying international units so New Zealand unit (NZU) prices were roughly equivalent to Kyoto prices.
In November 2012, when the government announced that it would not proceed with the Kyoto Protocol, the value of NZUs rose against Kyoto units, but overseas Kyoto units remained acceptable for surrender in the New Zealand ETS until May 2015.
CREDIT LIABILITY
"You could think of it as extra unintentional free allocation for industry and foresters," Motu senior fellow Dr Suzi Kerr said in a statement Tuesday.
"The long period of price divergence has led to a large privately held bank that is a liability to the New Zealand government in the post-Paris world. It also reduces the government's ability to raise revenue by auctioning NZUs," said Kerr.
If New Zealand had stopped allowing cheap international units to be used in place of NZUs when it was announced it was leaving the Kyoto Protocol, the government would probably have started auctioning NZUs and raising revenue already.
"We've given away our cake so now we can't eat it," said Kerr.
The NZUs in "the bank" equated to nearly twice the country's projected 2015 net emissions of 67.9 million tonnes of greenhouse gases.
"The private NZU bank is implicitly a liability on the government's balance sheet. The units represent future emissions whose cost will be borne by the government rather than emitters."
HORRIBLY NAIVE
Dr Ivan Diaz-Rainey, senior lecturer in the Department of Accountancy and Finance at the University of Otago, said the saga of New Zealand's ETS was "a sorry tale."
The ETS had a fundamental design mistake which was to have allowed unlimited importation in the first place, Diaz-Rainey said in a statement Tuesday.
"This looks horribly naive given that no other system in the world allows importation of more than 20 percent," he said.
"What is interesting right now is that prices have risen a good deal despite this overhang of banked allowances," he said.
"Prices are getting close to a level where afforestation of marginal land may be encouraged, so it is not all doom and gloom.
"Currently, the price of carbon in New Zealand is double of that in Europe. That said, prices here and in the EU are far from where economists think they need to be, to seriously tackle climate change."
The opposition Green Party on Tuesday called on the government to trade good carbon credits for bad ones, to ensure the integrity of New Zealand's global commitment to cut climate pollution.
New Zealand was the biggest user by far of fraudulent foreign carbon credits in proportion to our emissions, Green Party co-leader James Shaw said in a statement.
"The government can also take this opportunity to reassess its approach to climate change and start investing in reducing pollution at home, rather than relying on overseas carbon credits."
