The Government has over-allocated carbon credits worth a minimum of $5 million to Fletcher Building over the past three years, Marc Daalder reports
A 2020 report into the Government's free allocation of carbon credits to trade-exposed industrial emitters found that Fletcher Building's cement operation was among the companies benefitting from an over-allocation of units as a result of outdated data.
While many of the specifics in the report have been redacted over commercial confidentiality concerns, a Newsroom analysis of the figures indicate Fletcher Building has received at least 144,000 carbon credits above what it was intended to get for its cement production between the 2016/17 and 2018/19 financial years.
At a $35 per tonne carbon price, which is commonly used in Government analyses, that would be worth more than $5 million. At the current market price of $48, it would be worth nearly $7 million.
In a briefing on the report to Climate Change Minister James Shaw, Ministry for the Environment officials cautioned "it is important to note that the over-allocations discovered by this exercise are consistent with legislation. There is no suggestion or evidence these over-allocations result from an incorrect application of policy or poor-quality historical data."
Newsroom reported last week that the Government is consulting on options to address the policy gaps that led to this over-allocation. The key issue is that firms are awarded free credits based on the historic emissions intensity of their activity, dating back to 2006. Even if they manage to reduce that emissions intensity in the meantime, they'll still be awarded the same number of credits, therefore covering a greater percentage of their emissions.
In three of the four activities studied, free allocations now represented more than 100 percent of emissions. Firms are only meant to receive allocations of up to 60 percent of their emissions (for moderately emissions-intensive activities) or 90 percent (for highly emissions-intensive ones). None of this represents dishonesty or an error on the part of the firms, but merely the Government's continuing allocation on out-of-date baselines.
The Government's main proposal for addressing this was to update the baselines to average emissions between 2016 and 2019.
A Fletcher Building spokesperson didn't say whether the company would like to receive an allocation closer to 90 percent of its present-day emissions.
"As the only local producer of cement in Aotearoa, Fletcher Building has and will continue to invest significant amounts into upgrading our Golden Bay Cement operations to reduce its emissions, increase efficiency and ensure supply of this important building material. For example, we recently invested $25 million into a new tyre disposal platform reducing fossil fuel usage and solving a key New Zealand waste problem, while reducing our CO2 emissions by 13,000 tonnes per year," the spokesperson said.
"This type of innovation creates a long-term carbon reduction solution for us and New Zealand while ensuring ongoing competitiveness of local manufacturing. We are aware the Government is currently consulting on revising industry allocations and we will participate in this discussion as we believe we all need to work collaboratively on this important issue."
The spokesperson also highlighted Fletcher's pledge to reduce emissions by 30 percent by 2030.
The other industries detailed in the paper were cartonboard - represented solely by the Whakatane Paper Mill - burnt lime production and fresh cucumbers. Newsroom's analysis found the fresh cucumber industry received an over-allocation of 50,000 carbon credits over the previous three financial years, worth between $1.8 and $2.4 million.
The paper mill received at least 34,000 credits more than it was meant to over the same period and just under 40,000 too many credits were awarded to burnt lime producers. The financial value of each of these over-allocations is at least $1 million.
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