In 2008 Andrew Shelley conducted two studies for the Ministry for the Environment concerning the effect of the (then proposed) emissions trading scheme (ETS) on the competitiveness of two of New Zealand's large trade-exposed emissions-intensive industries: Pacific Steel, a large steel recycling plant; and Golden Bay Cement.
Mr Shelley's studies were cited by Fletcher Building in their Submissions on the Review of the New Zealand Emissions Trading Scheme, submitted to the Emissions Trading Scheme Review Panel.
The first study was the Impact of the NZ ETS on Cement Manufacturing, prepared by CRA International for the Ministry for the Environment, 2008. This study analysed the potential impact of the ETS on Golden Bay Bay Cement. The analysis indicated that the ETS would create significant incentives to switch to the import of lower-cost clinker1, particularly with high exchange rates. Importing clinker could result in emissions leakage, i.e. an increase in global emissions.
The second study was the Impact of the NZ ETS on Pacific Steel, prepared by CRA International for the Ministry for the Environment, 2008. This analysis indicated that under some plausible scenarios the NZ ETS could provide the incentive for Pacific Steel to cease production. If that occurred, then Pacific Steel's production of rebar and steel wire would switch to more emissions-intensive plants, and further emissions would be generated as scrap steel (e.g. old car bodies) were shipped offshore rather than recycled locally.
Summaries of both reports are provided in the annex to Fletcher Building's submission.
Note:
1. Clinker is a key intermediate product in the manufacture of Portland cement. It is produced in a high temperature kiln from the raw materials (limestone plus additives). Clinker is easily stored and transported, and is traded internationally.