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29
September 2007
Corrupting
Free Markets
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 Socialism
has become much more sophisticated in recent times. Socialist
power no longer comes from the barrel of the gun, but from
using populism to “corrupt” free market principles. There
are no better examples than the present introduction of carbon
trading to change the dynamics of the energy industry and the
government’s intrusion into telecommunications. Both rely on
“convincing” an uninformed public that a problem exists
that can only be solved through government regulation.
Global Warming
In his movie “An Inconvenient Truth”, Al Gore asserts that
global warming is having such a disastrous affect on the
earth’s climate that the entire Greenland and Antarctic ice
sheets could melt and cause sea levels to rise by 20 feet.
Such scaremongering is causing huge anxiety across the globe.
What’s worse is that such exaggerations are driving
government policy.
The latest five-yearly report from the
United Nations Intergovernmental Panel on Climate Change
explains that human influence on climate has been grossly
overstated. They say global
temperatures are actually falling, not rising, and that the
rate of sea level rise remains steady at around 2 millimetres
per year (To read a summary of the IPCC Report by Viscount
Christopher Monckton click
here >>> )
In
spite of facts showing the Kyoto Protocol will have a
miniscule effect on climate change – the National
Centre for Atmospheric Research has calculated that Kyoto
implemented on a constant basis by all industrial countries
would avert only 0.07°C of global warming by 2050 – governments
continue to race ahead trying to reduce greenhouse gas
emissions. What is even more alarming is that schools around
the world are now using Al Gore’s highly political and
questionable film as a teaching aid - please contact me if you
know of a local school that is using the movie as a teaching
aid by clicking here
>>>
In
light of the government’s plan to impose a new carbon tax on
the public through an emissions trading scheme, I asked energy
consultant Bryan Leyland for his opinion. He says, “Underpinning
the government's carbon trading regime is an assumption that
greenhouse gases can - and will - be traded on an open market
like any other tradeable commodity. But there is a world of
difference. Trading in greenhouse gases is trading
in something that you cannot see, touch, use or measure
accuratly. Because emissions are closely related to
energy, it is useful to compare carbon trading with trading on
the electricity market. Electricity trading is a
closely regulated business where the electricity bought and
sold is measured to the accuracy of 0.2% every 30 minutes.
This high accuracy is needed because the value of electricity
traded every year is close to $3 billion, so a 0.1% metering
error represents a gain or a loss of $3 million”.
With
the government’s new emissions trading scheme likely to be
worth in excess of $1 billion per year it is disturbing to see
that expected measurement errors will be a whopping 10%. This
is due to the variations in the quality of fuel and the
characteristics of different combustion processes. Worse, when
it comes to the measurement of the greenhouse effect of
forests, the scientific debate over whether they are net
emitters of greenhouse gases or net absorbers has yet to be
established.
Bryan
warns, “In emissions trading the item of ‘value’ is a
piece paper signed by an auditor that states that you have
purchased - or sold - the right to emit a greenhouse gas.
If the buyer - or the seller - can persuade the auditor
to inflate the amount of greenhouse gases on the certificate,
both parties benefit. That means that carbon trading is an
open invitation to fraud”.
Even
so-called ‘gold standard’ carbon credits, of the sort
offered by Meridian Energy recently on Trade Me, which priced
carbon up to $150 a ton, have been the subject of controversy
with claims being made that some emission reduction programmes
in developing countries are up to 50 times more expensive than
the costs the projects should warrant. (See $6 billion Kyoto
Loophole >>>)
The
government has told the public that once emissions-trading is
in place, the increase in the cost of power to the
average householder will be in the region of $7 a month.
However, the Electricity Commission has estimated that a
carbon price of $45 a tonne is needed if the government is to
achieve its goal of making renewable energy sources economic
against conventional generators. That would mean power prices
for the average household would increase to $400 a year. While
this would add enormously to our cost of living, the increase
in the profits of electricity generators would deliver massive
windfall profits to the government estimated to be in the
region of $600 million a year.
Even
though
climate science shows that the world has been cooling since
1998, not warming, Labour is forcing onto us a highly
political carbon trading scheme that will cost the economy an
estimated $2 billion dollars a year. The lion’s share of
that cost will fall on the general public through increased
power costs, and the rising prices caused by the new 4 cents a
litre tax on petrol.
But
while these changes to the energy sector have been well
publicised, the government’s intrusion into the
telecommunications industry have been taking place largely
under the radar.
Telecommunications
Bronwyn
Howell, a Research Associate for the NZ Institute for the
Study of Competition and Regulation at Victoria University, is
the NZCPR Guest Commentator this week. In her excellent paper
“Defiling the Rank: How Useful are the OECD League Tables”
Bronwyn exposes the government’s strategy of using New
Zealand’s poor showing in OECD rankings as a technique to
justify massive regulation:
“New
Zealand is no stranger to the promulgation of
popularly-acclaimed policies in the pursuit of OECD league
table success. The
Labour-led government swept into office in 1999 promising to
return New Zealand’s income (GDP per capita) to the top half
of the OECD with its policies recently re-branded as
‘economic transformation’. The Ministry of Economic
Development-led 2006 ‘Stocktake’ of the telecommunications
industry that resulted in the unbundling of Telecom’s local
loop and operational separation of the company was predicated
largely upon the pursuit of a top quartile OECD ranking in
broadband connections per capita. Unbundling was deemed the
appropriate policy to adopt because most other OECD countries
had already adopted it, and it was presumed to lead to a more
competitive telecommunications environment”.
She
explains that the OECD uses broadband connections per capita
to measure which countries are ‘winning’ in the
‘information economy’ stakes. As far as the OECD is
concerned ‘Broadband Nirvana’ would be if every household
and every business had a broadband connection. But as she
points out, trying to regulate to increase the uptake of
broadband connections in New Zealand to improve our ratings in
the OECD tables is a serious policy error due to the special
way New Zealanders use the Internet:
“Ironically,
New Zealand’s mid-ranking position of 16th in
‘Broadband Nirvana’ is so high principally because of our
comparatively small average business size.
Yet, most of New Zealand’s 300,000-plus significant
businesses are ‘micro-businesses’, run from home and
(likely) sharing the residential broadband connection, leading
to substantially overestimating achievable maximum diffusion
levels. Thus, even
Broadband Nirvana rankings provide a poor benchmark for policy
development – to reach this level of diffusion, it would be
necessary for New Zealand to adopt policies preventing
business and residential broadband connection sharing”.
Bronwyn
concludes her article by saying that using OECD rankings is
irresponsible and dangerous if it is being used as
justification for increased regulatory intervention. (To read
the article click here
>>>)
Imagine
if the government in its “wisdom” decided to set the goal
of taking us to the top of the OECD rankings in broadband
connections (just like they have announced we should lead the
world in “sustainability”). While such a policy would
sound progressive and responsible, in reality it would mean
introducing regulations to stop us using a single broadband
connection in our homes for business and residential purposes,
by forcing us to purchase separate connections.
With
the government’s announcement last week that it was going
ahead with the splitting up of Telecom into three distinct
business units, I asked Bronwyn if she could provide an
analysis on what is going on for NZCPR readers. Her paper
“Unbundling and Separating New Zealand’s
Telecommunications Market Challenges” makes sobering
reading. It essentially explains how the government’s
regulation of that market will lead to a greater investment in
the old local copper loop technology rather than fibre-optics.
This means that over time New Zealand will get left behind as
it is fibre that is at the forefront of leading edge
telecommunications developments:
“Ironically,
New Zealanders may stand to lose out twice.
Not only are delays in building new networks likely to
deprive broadband users of timely introduction of super-fast
broadband, but a substantial amount of the investment in the
ADSL bolt-ons… is likely to be underwritten by the taxpayer.
To date, the only company reported to be openly
committed to investing in every Telecom exchange to be
unbundled is Orcon/Kordia, the 100% state-owned company that
stands to be one of the principal beneficiaries of
government-imposed local loop unbundling and compulsory
separation of Telecom”. (To read her article click here
>>>)
With
all of this looking suspiciously like the government is poised
to re-nationalise the local loop and regulate household
Internet connections, New Zealanders stand to be held back
once again by a government that fundamentally opposes free
market principles.
No-one
should underestimate the resolve of modern day socialists.
They are well educated, well researched and well connected –
and their success relies on the indifference and apathy of the
public at large.
Thank
you to all of you who offered your support to the NZCPR over
the last week – I am extremely grateful. And for those of
you who found that your link to the support page did not work,
please try it again by clicking here
>>>
This week’s poll asks:
Do
you believe
the government should be interfering with the pricing
mechanism of free markets? Go
to Poll >>>
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