Kiwi’s Counting Cost of Kyoto

New Zealand has signed up to a contingent liability of $9 billion to $14 billion at present values through its commitment to the Kyoto protocol, according to what has become know as the Castalia Report. While the report was published last September it is still being quoted, and is still being emailed about.

The Executive Summary concludes:

The Government’s financial statements are required to comply with generally accepted accounting practice, including disclosure of contingent liabilities. It follows that the Government’s accounts should disclose its commitment to the Kyoto Protocol as a contingent liability. It is a possible obligation that arises from ratifying the Protocol, and it becomes a liability if and when the Protocol comes into force. Accounting standards require the disclosure of each class of contingent liability at the balance date, with a brief description
of its nature and an estimate of its financial effect.

We have estimated the financial effect. This involves two steps: estimate of excess emissions and forecast of the prices of emission units. Clearly, there is considerable uncertainty about
the likely outcomes. We therefore consider a range of possibilities. In general, we err on the conservative side, that is on the side of least cost to the Crown.

Depending on the assumptions, a conservatively estimated present value of the contingent liability for the first four Commitment Periods ranges from $9 billion to $14 billion. This is the amount that needs to be disclosed in the Crown accounts. We have not attempted to forecast beyond 2027, since by then new technologies may emerge. On current technologies, with the addition of each subsequent period, the liability would increase further. Hence again, we have deliberately erred on the conservative side.

Still in NZ, but on the subject of British PM Tony Blair trying to get President George Bush to move forward on cutting C02 emissions, the following is from a piece in yesterday’s New Zealand Herald.

WWF’s (Jennifer) Morgan said there was still a chance to get a strong deal to cut carbon dioxide emissions but that if it didn’t materialise then Blair and the rest of the G8 should go ahead without the US – the world’s biggest greenhouse gas polluter.

“If you can’t get something with Bush in it, then you shouldn’t reduce it to the lowest common denominator. You should move forward in other ways,” she said.

“There is a very heated debate going on right now about leaving Bush out in the cold.”

I am not sure about the choice of words from the WWF campaigner – so the earth is going to heat up because the US won’t cooperate, but their President is going to be left out in the cold?