As we progress through week two of the COP21 climate change talks in Paris, fossil fuel subsidies and financing the developing world to lower its carbon emissions have been major talking points.
Both involve billions of dollars, pools of investment that appear increasingly at odds with each other as the parties in Paris pursue a deal to combat dangerous climate change.
Last week saw Prime Minister John Key use his three minutes of allocated speaking time at COP21 to call for an end to fossil fuel subsidies.
“Countries subsidised fossil fuels to the tune of US$500 billion in 2014,” he said.
“These subsidies have the perverse effect of encouraging businesses and consumers to burn more fossil fuel and create more emissions.”
He pledged up to $200 million over the next four years for climate-related support mainly for Pacific nations.
He also said New Zealand would commit a further $20 million towards the Global Research Alliance on Agricultural Greenhouse Gases, the Palmerston North-based New Zealand arm of which is led by the scientist Dr Harry Clark and is hard at working looking for ways to reduce methane emissions from livestock.
It sounded good on the face of it, but Key’s critics were quick to point out that New Zealand’s emissions reduction target is weak by international standards and that New Zealand is heavily engaged in subsidising fossil fuel industries itself, effectively undoing much of the spending it is committing to Pacific Islands facing sea level rise and more extreme storms.
Oil, gas and tax breaks
The WWF has undertaken a detailed report into that subsidisation, which points out the gulf between the rhetoric of Key and Tim Groser on the world stage and the reality at home, where the Government has sought to develop petroleum resources.
…the government has made clear its strong support for further exploitation of New Zealand’s potential fossil fuel resources and is prepared to provide financial incentives to facilitate oil exploration.
The overall subsidies picture, as far as the WWF can tell, looks a bit like this:
Much of the subsidisation comes in the form of tax relief – the “motor spirits excise duty refund” and tax deductions for petroleum mining.
But the government also lends support in the form of research and development and acquisition of exploration data, which amounted to over $6 million in subsidies in 2012 – 13.
It is unclear as to whether that subsidisation is in addition to the money funnelled into New Zealand’s Energy and Mineral Research Fund. In September the Ministry of Business, Innovation and Employment announced $12 million in funding over four years for the following projects:
GNS Science – Understanding petroleum source rocks, fluids, and plumbing systems in New Zealand basins: a critical basis for future oil and gas discoveries. $9.6 million
University of Waikato – Cretaceous tectonic transition from convergence to extension in New Zealand: Implications for basin development, paleogeography and hydrocarbon plays. $2.4 million
In its explanation of the research, GNS Science explains that it will collaborate with several other research institute on the project:
“The research team is highly specialised and multi-disciplinary, and includes collaborators within several New Zealand universities (Auckland, Canterbury, Otago and Victoria), the Institute of Environmental Science and Research (ESR) and overseas institutions (UK, Germany, Ireland and Norway).”
Both GNS and Waikato point out that the research results will be made publicly available and be submitted to journals for peer review.
All of that sounds very worthy – its better to know about the ocean basins that surround New Zealand than not and everyone will benefit from this knowledge. But the fact remains that the only reason the research grants exist is because the government wants to promote oil and gas exploration in New Zealand and is willing to subsidise the R&D costs of the industry developing its business here.
Every country is in this bind – they all want economic growth and need to seek to exploit their natural resources to pursue it. But at what point does a government, a nation, call time on the subsidies or undertake to wind them down, in the name of tackling climate change?
Key certainly hasn’t articulated how or when New Zealand is going to pursue this. As a relatively small player on the international stage (and in the fossil fuel subsidy game) he seems content to throw the cat among the pigeons, with his finger pointed firmly at the big fossil fuel players who spend billions on subsidies, including hundreds of millions each year on subsidising the oil and gas industry’s R&D costs.
Fossil fuel R&D efforts targeted
The research community has taken these fossil fuel-related contracts and carried on with business in a low-key manner. But activists are increasingly putting their efforts in the spotlight. Last month a group of Greenpeace protestors boarded the NIWA research vessel Tangaroa in Wellington harbour, scaling the ship’s superstructure while the police waited below for them to come down. A Greenpeace film crew recorded proceedings from a boat.
They were protesting the ship being chartered wby United States oil company Chevron to do survey work off the East Coast.
On December 13, Oil Free Wellington plans to organise a flotilla on Wellington Harbour to “challenge the PM’s hypocrisy about fossil fuel subsidies”. Oil Free Wellington spokesperson Michelle Ducat said in a press release:
“John Key’s hypocrisy shows why it is more important than ever for people to stand up and resist the exploration of our waters by oil giants like Chevron and Statoil.”
NIWA may well become a target of protest activity though Tangaroa will be at sea, surveying for Chevron.
I’ve spoken to scientists who work in CRIs and universities that undertake research contracts for the oil and gas industry. They are sensitive to the issue, but point out that government sets the policy and that this is a rare area of growth in research funding that provides spin-offs for the public.
That may be the case, but it still leaves our position contradictory, all the more so as New Zealand appears to be all talk and no action on the issue.
A price on carbon crucial
But if subsidising the fossil fuel industry only hinders our efforts to limit dangerous climate change, what about the subsidisation of the R&D into renewable energy efforts? Obviously, that’s a preferable way to spend public money, but economists from the International Monetary Fund argue that the best way to spur innovation in renewables is to put a price on carbon so that investment by the industry shifts to these newer, cleaner technologies.
“Direct subsidies to R&D have been adopted by some governments but are a poor substitute for a carbon price: they do only part of the job, leaving in place market incentives to over-use fossil fuels and thereby add to the stock of atmospheric greenhouse gases without regard to the collateral costs.
“Politically, low oil prices may provide an opportune moment to eliminate subsidies and introduce carbon prices that could gradually rise over time toward efficient levels. However, it is probably unrealistic to aim for the full optimal price in one go.”