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  • rmacculloch

A world-leading Professor of Environment Economics tells me the Herald is terribly wrong on NZ Steel

I did some work checking on the Herald's claim that not supporting the NZ Steel subsidy was an "insidious form of climate denialism" on behalf of the National Party leader by consulting with a world-leading environment economics professor. These are his comments:

First, since the Kiwi public are putting $140 million into NZ Steel (owned by Bluescope in Australia) for capital investment by the company, why didn't the government take an equity holding in the company and receive dividends for its investment?

Second, the claims made by the Herald that this subsidy would reduce emissions are probably bogus. Why? If NZ Steel was buying carbon credits as part of the Emissions Trading Scheme then it no longer needs to. That drop in demand would lower the market price for credits making it cheaper for others to pollute & not change total emissions.

Third, he alerted me to the fact that it appears NZ Steel has actually not been buying credits but has been given free credits by the Kiwi government, under the guise of making its exports more competitive. Stuff reports that Tasman Steel (the holding company owning NZ Steel) received "free carbon credits worth $117million from the Government" last year. Combined with the recent announcement of the $140 million subsidy, that amounts to total subsidies of one quarter of a billion dollars this past year and a half!

Fourth, since the free carbon credits NZ Steel received will now probably be ended, the Government will likely sell them back into the market and thereby increase supply, so the mechanism by which the carbon price falls will be more due to this increase in supply of credits than lower demand from NZ Steel. Either way, total emissions won't change.

So who is the Kiwi Tax Payer subsidizing? Well, NZ Steel's share-holders and folks in overseas countries who buy Kiwi "environmentally friendly" steel at a discounted price, courtesy of your money. The moral of the story is that before the Herald goes and insults the Leader of the Opposition for taking an "insidious" position on how to reduce emissions, maybe the newspaper could please work out what is actually going on.



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