New Zealand's 'Dirty Dozen' climate cheats named

BP in Ponsonby, Auckland (Dan Satherley)
BP in Ponsonby, Auckland (Dan Satherley)

Mobil has been singled out for unlikely praise in the Morgan Foundation's latest report on the use of fraudulent carbon credits.

The petrochemical company didn't buy "hot air" credits from Russia and the Ukraine, while its competitors - including Z Energy and BP - snapped them up.

Those two companies have been named among the 12 biggest traders in worthless carbon credits in a new report from the Morgan Foundation.

It comes after the foundation's Climate Cheats report, released in April, which revealed how New Zealand companies bought cheap Ukrainian and Russian credits through the Emissions Trading Scheme, crashing the price here and allegedly put $200 million "into the hands of foreign criminals".

None of the companies named in the new report, Climate Cheats II: The Dirty Dozen Businesses, have denied buying the credits, described by the co-author of both reports - economist Geoff Simmons - as "hot air".

The 12 companies, in order of how much they benefitted, are: BP, NZ Forest Leasing, Z Energy, Wairakei Pastoral, NZ Steel, Matariki Forests, Contact Energy, Chevron NZ, Genesis Energy, Fonterra, Ngai Tahu Forest Estates and China Forestry Group NZ Company.

The list is based on publicly available data, but is considered to be indicative only - much of the trading is considered commercially sensitive and kept private.

"We offer our sincere apologies to any companies that missed out on this honour due to the insufficient data," the report states.

Mr Simmons praises Mobil for choosing not to buy any carbon credits, also known as emission reduction units (ERUs), to cover their obligations.

"This was a conscious choice, and one that would have hurt their bottom line given that ERUs were the slightly cheaper unit to buy," the report says. "Who ever thought that we'd be giving environmental kudos to Mobil?"

BP argued it "exists to meet the energy needs of its customers", "does not set domestic climate change policy in New Zealand" and operates within the rules the Government sets down.

Power companies Contact and Genesis are accused in the report of not passing on savings they made by purchasing the cheap credits - and collapsing the price of carbon - onto consumers.

"If this is the case then these companies have profited from the use of cheap fraudulent foreign credits, at the expense of ordinary New Zealanders," the report says.

Contact claims it has reduced its own emissions by 47 percent by "investing in new renewable geothermal and more flexible thermal power stations" and closing gas-fired plants. It says it met its emissions obligations using only more credible New Zealand ERUs.

Z Energy said it does both what it can to keep the price of petrol down and please its shareholders, and had to buy the cheapest credits possible to keep up with its competitors.

"We acknowledge that the system and the rules under which we were operating had flaws," the company said. "We're committed to doing what we can to try and ensure the rules and frameworks around emissions trading are as good as they can be."

The Government denied it was at fault, saying it didn't buy the credits - the companies did. Mr Simmons says it is ultimately responsible, however, as it sets the rules.

"New Zealand's Emissions Trading Scheme has been the only one to allow the unlimited importation of international credits, and from mid-2013 we were the only country still freely accepting Russia and Ukraine's fraudulent ERUs."

Ruining our reputation?

Professor Ralph Sims, director of the Centre for Energy Research at Massey University, says the ongoing use of the units is ruining New Zealand's international reputation.

"We are now a country seen by many as one that is seeking any means possible to avoid actually physically reducing our domestic greenhouse gas emissions."

Associate Professor Euan Mason of the University of Canterbury's School of Forestry says while legal, the companies' actions certainly weren't moral.

"There are many examples of companies refusing to profit from child labour, repression of workers, slavery, and environmental degradation even when such practices were legal," he says.

"I can only express my admiration for Mobil's example, refusing to purchase fraudulent credits, and I know of no shareholders of that company who lodged complaints as a consequence."

He says he told the Government in 2012 the credits were fraudulent, but it let them be bought anyway.

"Our government knew that imported credits were fraudulent. They knew that the domestic credit price had collapsed and exactly why it had collapsed. They knew that their policies allowed companies to act immorally and that many companies were acting immorally. Yet they failed to act."

The credits are banned from the European Union's trading scheme.

Dr Ivan Diaz-Rainey, a senior lecturer in the Department of Accountancy and Finance at the University of Otago says the report's suggestion the Russian and Ukrainian ERUs be dropped from ours from 2020 is sensible.

But he argues that without them, the international carbon market wouldn't exist at all.

"Yes, most ERUs had little direct environmental benefit but they were the consequence of political expediency to get Kyoto ratified - basically to get Russia to ratify so that the Kyoto came into force. So this is what is called 'hot air'. Without Russia and the ERUs, Kyoto would not have come into force."