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Would you please explain how the New Zealand Emissions Trading Scheme (ETS) works in simple terms? Who pays and where does the money go?
Every tonne of emissions causes damages and a cost to society. In traditional market transactions, these costs are ignored. Putting a price on emissions forces us to face at least some of the cost of the emissions associated with what we produce and consume, and it influences us to choose lower-emission options.
An emissions trading scheme (ETS) is a tool that puts a quantity limit and a price on emissions. Its “currency” is emission units issued by the government. Each unit is like a voucher that allows the holder to emit one tonne of greenhouse gases.
The New Zealand Emissions Trading Scheme (NZ ETS) is the government’s main tool to meet our target under the Paris Agreement. In a typical ETS, the government caps the number of units in line with its emissions target and the trading market sets the corresponding emission price.
In New Zealand, the price for a tonne of greenhouse gases is currently slightly below NZ$25, which is not in line with our target. We are still waiting for the government to set a cap on the NZ ETS, which is (hopefully) coming.
In the past, we had no limit on the number of emission units in the system, which is why emission prices stayed low, our domestic emissions continued to rise, and the system accumulated a substantial number of banked units.
How an ETS works and who pays
The government decides which entities (typically companies) in each sector (e.g. fossil fuel producers and importers, industrial producers, foresters, and landfill operators) will be liable for their emissions. In some cases (e.g. fossil fuel producers and importers), liable entities are not the actual emitters but they are responsible for the emissions generated when others use their products.
There is a trading market where entities can buy units to cover their emissions liability and sell units they don’t need. The trading price depends on market expectations for supply versus demand. Steeper targets mean lower supply and higher emissions mean higher demand; both mean higher emission prices and more behaviour change.
Each liable entity is required to report emissions and surrender to the government enough units to cover the amount of greenhouse gases they release. The companies that have to surrender units pass on the associated cost to their customers, like any other production cost. In this way, the emission price signal flows across the economy embedded in the cost of goods and services, influencing everyone to make more climate-friendly choices.
There are several ways for entities to get units.
First, some get free allocation from the government. Currently, these free allocations are granted to trade-exposed industrial producers (for products such as steel, aluminium, methanol, cement and fertiliser) as a way of preventing the production and associated emissions from shifting to other countries without reducing global emissions. Producers who emit beyond their free allocation need to buy more units, whereas those who improve their processes and emit less can sell or bank their excess units.
Second, entities can earn units by establishing new forests or through industrial activities that remove emissions. By stripping emissions from the atmosphere, such removal activities make it possible to add units to the cap without increasing net emissions. The government publishes information on ETS emissions and removals every year.
Third, entities can buy units from the government through auctioning. In this case, market demand still sets the price. The NZ ETS does not yet have auctioning, but again this is (hopefully) coming. The government currently does allow emitters to buy uncapped fixed-price units at NZ$25.
In the past, entities had a fourth option – buying offshore units – but this stopped in mid-2015. This option is not currently available under the Paris Agreement. If that changes in the future, quantity and quality limits will be needed on offshore units.
Where the money goes
The entities that surrender units to the government directly face the price of emissions – either because they had to buy units from other entities or the government, or because they lost the opportunity to sell freely allocated units.
When the government sells units – through auctioning or the fixed-price mechanism – it earns revenue. In 2018, the New Zealand government sold 16.82 million fixed-price units and received NZ$420 million in revenue. When selling fixed-price units that allow the market to emit more, the government has to compensate through more action to reduce domestic emissions (like reducing fossil fuel use or planting more trees) or purchasing emission reductions from other countries – and these actions have a cost.
When ETS auctioning is introduced (potentially in late 2020), the government will receive more significant revenue. It has signalled that any revenue from pricing agricultural emissions (methane and nitrous oxide) will be returned to the sector to help with a transition to lower emissions.
What will happen with NZ ETS auction revenue from other sectors is an open policy question. So are the questions of how large the NZ ETS cap, and how high the emission price, should be. This will be determined under the Zero Carbon Bill and future amendments and regulations to the ETS.
This article was prepared in collaboration with Bronwyn Bruce-Brand and Ceridwyn Roberts at Motu Economic and Public Policy Research.
The fishermen have stopped fishing and turned to tourism, feeding whale sharks tiny amounts of krill to draw them closer to shore so tourists can snorkel or dive with them.
Oslob is the most reliable place in the world to swim with the massive fish. In calm waters, they come within 200m of the shore, and hundreds of thousands of tourists flock to see them. Former fishermen have gone from earning just a US$1.40 a day on average, to US$62 a day.
Our research involved investigating what effect the whale shark tourism has had on livelihoods and destructive fishing in the area. We found that Oslob is one of the world’s most surprising and successful alternative livelihood and conservation projects.
Illegal and destructive fishing, involving dynamite, cyanide, fish traps and drift gill nets, threatens endangered species and coral reefs throughout the Philippines.
Much of the rapidly growing population depend on fish as a key source of protein, and selling fish is an important part of many people’s income. As well as boats fishing illegally close to shore at night, fishermen use compressors and spears to dive for stingray, parrotfish and octopus. Even the smallest fish and crabs are taken. Catch is sold to tourist restaurants.
Despite legislation to protect whale sharks, they are still poached and finned alive, and caught as bycatch in trawl fisheries. “We have laws to protect whale sharks but they are still killed and slaughtered,” said the mayor of Oslob.
“Finning” is a particularly cruel practice: sharks’ fins are cut off and the shark is thrown back into the ocean, often alive, to die of suffocation. Fins are sold illegally to Taiwan for distribution in Southeast Asia. Big fins are highly prized for display outside shops and restaurants that sell shark fin products.
To protect the whale sharks on which people’s new tourism-based livelihoods depend, Oslob pays for sea patrols by volunteer sea wardens Bantay Dagat. Funding is also provided to manage five marine reserves and enforce fishery laws to stop destructive fishing along the 42km coastline. Villagers patrol the shore. “The enforcement of laws is very strict now,” said fisherman Bobong Lagaiho.
Destructive fishing has declined. Fish stocks and catch have increased and species such as mackerel are being caught for the first time in Tan-awan, the marine reserve where the whale sharks congregate.
The decline in destructive fishing, which in the Philippines can involve dynamite and cyanide, has also meant there are more non-endangered fish species for other fishers to catch.
Strong profits means strong conservation
The project in Oslob was designed by fishermen to provide an alternative to fishing at a time when they couldn’t catch enough to feed their families three meals a day, educate their children, or build houses strong enough to withstand typhoons.
“Now, our daughters go to school and we have concrete houses, so if there’s a typhoon we are no longer afraid. We are happy. We can treat our children to good food, unlike before,” said Carissa Jumaud, a fisherman’s wife.
Creating new forms of income is an essential part of reducing destructive fishing and overfishing in less developed countries. Conservation donors have invested hundreds of millions of dollars in various projects, however research has found they rarely work once funding and technical expertise are withdrawn and can even have negative effects. In one example, micro-loans to fishermen in Indonesia, designed to finance new businesses, were used instead to buy more fishing equipment.
In contrast, Oslob earned US$18.4 million from ticket sales between 2012 and 2016, with 751,046 visitors. Fishermen went from earning around US$512 a year to, on average, US$22,699 each.
Now, they only fish in their spare time. These incredible results are the driving force behind protecting whale sharks and coral reefs. “Once you protect our whale sharks, it follows that we an have obligation to protect our coral reefs because whale sharks are dependant on them,” said the mayor.
Feeding whale sharks is controversial, and some western environmentalists have lobbied to shut Oslob down. However, a recent review of various studies on Oslob found there is little robust evidence that feeding small amount of krill harms the whale sharks or significantly changes their behaviour.
Oslob is that rare thing that conservation donors strive to achieve – a sustainable livelihoods project that actually changes the behaviour of fishermen. Their work now protects whale sharks, reduces reliance on fishing for income, reduces destructive fishing, and increases fish stocks – all while lifting fishermen and their families out of poverty. Oslob is a win-win for fishermen, whale sharks and coral reefs.
Increasingly acidic oceans are putting algae at risk, threatening the foundation of the entire marine food web.
Our research into the effects of CO₂-induced changes to microscopic ocean algae – called phytoplankton – was published today in Nature Climate Change. It has uncovered a previously unrecognised threat from ocean acidification.
In our study we discovered increased seawater acidity reduced Antarctic phytoplanktons’ ability to build strong cell walls, making them smaller and less effective at storing carbon. At current rates of seawater acidification, we could see this effect before the end of the century.
What is ocean acidification?
Carbon dioxide emissions are not just altering our atmosphere. More than 40% of CO₂ emitted by people is absorbed by our oceans.
While reducing the CO₂ in our atmosphere is generally a good thing, the ugly consequence is this process makes seawater more acidic. Just as placing a tooth in a jar of cola will (eventually) dissolve it, increasingly acidic seawater has a devastating effect on organisms that build their bodies out of calcium, like corals and shellfish.
Many studies to date have therefore taken the perfectly logical step of studying the effects of seawater acidification on these “calcifying” creatures. However, we wanted to know if other, non-calcifying, species are at risk.
Diatoms in our oceans
Phytoplankton use photosynthesis to turn carbon in the atmosphere into carbon in their bodies. We looked at diatoms, a key group of phytoplankton responsible for 40% of this process in the ocean. Not only do they remove huge amounts of carbon, they also fuel entire marine food webs.
Diatoms use dissolved silica to build the walls of their cells. These dense, glass-like structures mean diatoms sink more quickly than other phytoplankton and therefore increase the transfer of carbon to the sea floor where it may be stored for millennia.
This makes diatoms major players in the global carbon cycle. That’s why our team decided to look at how climate-change-driven ocean acidification might affect this process.
We exposed a natural Antarctic phytoplankton community to increasing levels of acidity. We then measured the rate at which the whole community used dissolved silica to build their cells, as well as the rates of individual species within the community.
More acid means less silicone
The more acidic the seawater, the more the diatom communities were made up of smaller species, reducing the total amount of silica they produced. Less silica means the diatoms aren’t heavy enough to sink quickly, reducing the rate at which they float down to the sea bed, safely storing carbon away from the atmosphere.
On examining individual cells, we found many of the species were highly sensitive to increased acidity, reducing their individual silicification rates by 35-80%. These results revealed not only are communities changing, but species that remain in the community are building less-dense cell walls.
Most alarming, many of the species were affected at ocean pH levels predicted for the end of this century, adding to a growing body of evidence showing significant ecological implications of climate change will take effect much sooner than previously anticipated.
Marine diversity is in decline
These losses in silica production could have far reaching consequences for the biology and chemistry of our oceans.
Many species affected are also an important component of the diet of the Antarctic krill, which is central to the Antarctic marine food web.
Fewer diatoms sinking to the ocean floor mean significant changes in silicon cycling and carbon burial. In a time when carbon drawn down by our ocean is crucial to helping sustain our atmospheric systems, any loss from this process will exacerbate CO₂ pollution.
Our new research adds yet another group of organisms to the list of climate change casualties. It emphasises the urgent need to reduce our dependency on fossil fuels.
The only course of action to prevent catastrophic climate change is to stop emitting CO₂. We need to cut our emissions soon, if we hope to keep our oceans from becoming too acidic to sustain healthy marine ecosystems.
In the wake of a damning royal commission and an ABC Four Corners investigation, the federal government has created an Inspector General for the Murray-Darling Basin, to combat water theft, ensure water recovery and efficiency projects are delivered properly, and essentially make sure everyone is acting as they should.
While this is a laudable aim, the Inspector General – currently former Australian Federal Police Commissioner Mike Keelty – cannot hope to do this job without knowing how much water is being used in the Basin, by whom it is used, and where.
We urgently need a comprehensive audit to track the water in the Murray Darling Basin, so Inspector General Keelty can effectively investigate what he has already described as a “river ripe for corruption”.
Up the creek
Back in 2004 all governments in Australia agreed to track and provide information on water in terms of planning, monitoring, trading, environmental management, and on-farm management.
But water accounts still lack many essential features including double-entry accounting. When applied to water, double-entry accounts means that when one person consumes more water, someone else must consume less.
The technology to track this already exists: satellites that can quantify surface water are successfully being used used in the United States.
If we had monthly water consumption measurements, we could see how much water is being used, by whom, when and where. This would help decision makers see problems before they emerge, such as the mass fish deaths in the Darling River, and respond in real time.
As a recent report from the Natural Resources Commission shows, without proper accounting, too much water is taken upstream – seriously harming downstream communities.
Wide support for an audit
An independent Basin-wide water audit is supported by communities and some irrigators.
In July NSW farmers voted in support of a federal royal commission into “the failings of the Murray Darling Basin Plan”. In our view, this vote shows many farmers support much greater transparency about how much water is being consumed, and by whom.
Double-entry water consumption accounts would help identify whether the billions of dollars planned in subsidies to increase irrigation efficiency will actually deliver value for money. But irrigation improvements only generate public benefits when more water is left or returns to flow in streams and rivers. Such flows are essential to healthy rivers and sustainable Basin communities.
Irrigators’ crops benefit from increased efficiency, so subsidies help farmers greatly – but it is very unclear whether they do anything for the public good. In fact, they seem to reduce the amount of water that finds its way back into the rivers. Research also shows infrastructure subsidies to improve irrigation efficiency typically increases water consumption at the Basin level.
Our research, published earlier this year in the Australasian Journal of Water Resources shows federal irrigation infrastructure subsidies may have reduced net stream and river levels. This is even after accounting for the water entitlements irrigators provided to the government in exchange for these subsidies.
Just like financial accounts, water accounts must be independently audited.
For the average taxpayer, who has to justify every dollar they get from the government, it’s hard to imagine how some corporations can be given millions of dollars in subsidies without actual measurements (before and after) of the claimed water savings.
If Newstart recipients need to report and manage their income and have a job plan, as part of a system of appropriate checks and balances, shouldn’t the Australian government also be checking whether billions spent on subsidies for irrigators actually saves water?
A water audit would cost less than 1% of the money already spent on water infrastructure subsidies in the Basin. Unlike irrigation infrastructure subsidies, a water audit is value for money.
Importantly, independent water consumption accounts would allow the Inspector General for the Murray-Darling Basin to effectively manage our most critical nature resource, water.
Quentin Grafton, Director of the Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, Australian National University and John Williams, Adjunct Professor Environment and Natural Resources, Crawford School of Public Policy, Australian National University
Jaco Le Roux, Macquarie University; Florencia Yanelli, Stellenbosch University; Heidi Hirsch, Stellenbosch University; José María Iriondo Alegría, Universidad Rey Juan Carlos; Marcel Rejmánek, University of California, Davis, and Maria Loreto Castillo, Stellenbosch University
Earth is seeing an unprecedented loss of species, which some ecologists are calling a sixth mass extinction. In May, a United Nations report warned that 1 million species are threatened by extinction. More recently, 571 plant species were declared extinct.
But extinctions have occurred for as long as life has existed on Earth. The important question is, has the rate of extinction increased? Our research, published today in Current Biology, found some plants have been going extinct up to 350 times faster than the historical average – with devastating consequences for unique species.
Measuring the rate of extinction
“How many species are going extinct” is not an easy question to answer. To start, accurate data on contemporary extinctions are lacking from most parts of the world. And species are not evenly distributed – for example, Madagascar is home to around 12,000 plant species, of which 80% are endemic (found nowhere else). England, meanwhile, is home to only 1,859 species, of which 75 (just 4%) are endemic.
Areas like Madagascar, which have exceptional rates of biodiversity at severe risk from human destruction, are called “hotspots”. Based purely on numbers, biodiversity hotspots are expected to lose more species to extinction than coldspots such as England.
But that doesn’t mean coldspots aren’t worth conserving – they tend to contain completely unique plants.
We are part of an international team that recently examined 291 modern plant extinctions between biodiversity hot- and coldspots. We looked at the underlying causes of extinction, when they happened, and how unique the species were. Armed with this information, we asked how extinctions differ between biodiversity hot- and coldspots.
Unsurprisingly, we found hotspots to lose more species, faster, than coldspots. Agriculture and urbanisation were important drivers of plant extinctions in both hot- and coldspots, confirming the general belief that habitat destruction is the primary cause of most extinctions. Overall, herbaceous perennials such as grasses are particularly vulnerable to extinction.
However, coldspots stand to lose more uniqueness than hotspots. For example, seven coldspot extinctions led to the disappearance of seven genera, and in one instance, even a whole plant family. So clearly, coldspots also represent important reservoirs of unique biodiversity that need conservation.
We also show that recent extinction rates, at their peak, were 350 times higher than historical background extinction rates. Scientists have previously speculated that modern plant extinctions will surpass background rates by several thousand times over the next 80 years.
So why are our estimates of plant extinction so low?
First, a lack of comprehensive data restricts inferences that can be made about modern extinctions. Second, plants are unique in – some of them live for an extraordinarily long time, and many can persist in low densities due to unique adaptations, such as being able to reproduce in the absence of partners.
Let’s consider a hypothetical situation where we only have five living individuals of Grandidier’s baobab (Adansonia grandidieri) left in the wild. These iconic trees of Madagascar are one of only nine living species of their genus and can live for hundreds of years. Therefore, a few individual trees may be able to “hang in there” (a situation commonly referred to as “extinction debt”) but will inevitably become extinct in the future.
Finally, declaring a plant extinct is challenging, simply because they’re often very difficult to spot, and we can’t be sure we’ve found the last living individuals. Indeed, a recent report found 431 plant species previously thought to be extinct have been rediscovered. So, real plant extinction rates and future extinctions are likely to far exceed current estimates.
There is no doubt that biodiversity loss, together with climate change, are some of the biggest challenges faced by humanity. Along with human-driven habitat destruction, the effects of climate change are expected to be particularly severe on plant biodiversity. Current estimates of plant extinctions are, without a doubt, gross underestimates.
However, the signs are crystal clear. If we were to condense the Earth’s 4.5-billion-year-old history into one calendar year, then life evolved somewhere in June, dinosaurs appeared somewhere around Christmas, and the Anthropocene starts within the last millisecond of New Year’s Eve. Modern plant extinction rates that exceed historical rates by hundreds of times over such a brief period will spell disaster for our planet’s future.
Jaco Le Roux, Associate Professor, Macquarie University; Florencia Yanelli, Researcher, Stellenbosch University; Heidi Hirsch, Postdoctoral research fellow, Stellenbosch University; José María Iriondo Alegría, Catedrático de universidad en el área de Botánica, Universidad Rey Juan Carlos; Marcel Rejmánek, Emeritus professor, University of California, Davis, and Maria Loreto Castillo, PhD Candidate, Stellenbosch University