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5.1 Towards a downwards carbon path?
In 2002, the Government adopted a strategic climate change goal for New Zealand as follows:
“To enable New Zealand to make significant greenhouse gas reductions on business-as-usual and be set towards a permanent downward path for total gross emissions by 2012.”
Cabinet was advised that the Government would be seeking the following outcomes for New Zealand by 2012 if the goal was to be met:
- New Zealand will be on a path to reshaping its energy use
- there will be an increased rate of technology uptake on renewables, energy efficiency, and lower emissions production
- all sectors will be addressing emissions and positioning themselves greenhouse-wise on world markets
- research findings will have been transferred to agricultural practice
- new buildings, dwellings, plant, vehicles and machinery will be at the optimal edge of efficiency
- there will be a population knowledgeable about greenhouse gases and taking responsibility for them.
It is arguable whether all of these outcomes are likely to be achievable by 2012 on current policy settings. Some of them are subjective (a and b), although others involve commitments that are less ambiguous (c and e). More importantly, projected greenhouse emissions trends indicate a continuous “upwards” rather than a “downwards” path by 2012 (see Figure 42 below).
Figure 42 - Projected Emissions for 2010, Total Emissions Reported in the National Inventory from 1990-2003 and a Linear Extrapolation of Previous Emissions
Source: Ministry for the Environment
The review has identified a limited number of further greenhouse mitigation options that the Government can consider. These include specific sectoral measures (eg, in transport) and the application of price-based measures (carbon taxes and emissions trading). However, in the absence of imposing a carbon price at a level that will have stringent growth and welfare trade-offs, the available additional measures to 2012 would only allow New Zealand to change the trajectory of the “upwards carbon path”. They would not credibly position New Zealand to move towards a “downward carbon path”. Of course, whether or not New Zealand is, at any point in time, “set towards” a downward carbon path will always be open to debate. As it is a subjective goal, it will always be possible for the Government to maintain that satisfactory progress is being made in its achievement. However, the more important question is whether the goal is credible, and useful as a guide to policy choice.
5.2 Choosing strategic climate change objectives
The Government may wish to consider whether it wishes to replace the current strategic goal with multiple objectives that it can use to guide its choice of climate change policies.
The timeframes that are attached to any new objectives may be important. At this time, it is arguably unproductive (for the reasons outlined above) to establish a revised climate change goal that incorporates either a quantitative, or even a qualitative, “downwards emissions path” or “target”. The review has provided the Government with broad alternative options to meet New Zealand’s Kyoto obligations in the period 2008 to 2012. These options include some further domestic mitigation action and utilising the Kyoto flexible mechanisms to acquire Kyoto units. Meeting New Zealand’s current Kyoto commitments is a manageable task for New Zealand. Importantly, the Government still has choices about how it meets these commitments. However, the point remains that none of the short-term options that the review presents will position New Zealand towards a downwards carbon path by 2012.
While a quantitative goal may not be helpful in guiding policy choice in the next five to seven years, that may not hold in the period beyond the next 15 to 20 years. Over a longer time period, technological change – eg, in agriculture – may allow New Zealand to pursue polices that do deliver an emissions profile that does take the country towards a “downward carbon path”.
5.3 Considerations in developing a goal
5.3.1 Key considerations
The following considerations are pertinent to consideration of an appropriate goal that might provide guidance for the development of climate change policy:
- New Zealand is dependent on effective global action if it is to manage the risks of climate change. New Zealand’s emissions amount to only about 0.24% of global greenhouse gas emissions, reflecting our small population base. This means that any actions taken by New Zealand to reduce its own greenhouse gas emissions will not significantly influence the amount of global climate change [This situation is shared with a number of other industrialised countries that also have commitments under the Kyoto Protocol. Examples include Austria (0.23%), Finland, Denmark and Ireland (0.20%), Sweden (0.19%), and Switzerland and Norway (0.15%).]
- it is desirable that New Zealand engages internationally to seek to secure effective global action. To be credible in this process, New Zealand, as a developed country, needs to itself take action that seeks to contribute to reducing global emission levels, either through domestic mitigation or assisting the reduction in emissions in other countries through using the Kyoto flexible mechanisms and international emissions trading. Judgement of what constitutes an appropriate level of New Zealand commitment needs to take account of the fact that, in practice, New Zealand has limited ability to influence other countries. There is little that New Zealand can do to persuade major emitters like the United States, Australia, China and India to agree to limit or significantly reduce their emissions where they have formed a judgement that this is not in their national interest
- it is desirable that New Zealand positions itself to promote its national interests in the design of international agreements to address climate change. An important precondition for such successful positioning is that New Zealand maintains its credibility by demonstrating its intention to deliver on commitments it has adopted
- there is no international agreement on how to deal with climate change post-2012. The positions of key players are far apart and it is likely there will continue to be a period of uncertainty until the international community gets closer to some agreement on future action. The European Union continues to promote a policy target that would not allow the global temperature to increase more than 2ºC above pre-industrial levels. As a consequence, the European Union is promoting 15% to 30% emissions-reduction targets for Annex I countries by 2020 relative to 1990 baselines.
Clearly, if New Zealand agreed to adopt the emissions-reduction obligations to 2020 that are being promoted by the European Union, this would have major implications for the policies that New Zealand needs to consider now, and the type of strategic climate change goal that should be adopted. Section 6 provides detailed analysis of New Zealand’s international engagement on climate change and a strategy for our participation in the Conference of the Parties (COP11) in Montreal in December 2005.
5.3.2 Considerations for New Zealand in post-2012 emissions targets
It is important that New Zealand’s domestic policies align with whatever future international targets we agree to (if any). New Zealand’s emissions-mitigation task for the 2008 to 2012 period remains manageable. The future decision for New Zealand, with higher domestic economic stakes, is what “carbon path” we may wish to adopt post-2012. If that path is ambitious, that would mean that early, more ambitious, mitigation action would be desirable. The problem facing the Government in that scenario - “move early to position for post-2012 targets” – is that the review has not identified any policies that would allow New Zealand to achieve the types of 2012 to 2020 emissions-reduction targets that are being advanced by the European Union. Such targets would be achievable by New Zealand only if one or more of the following conditions applied, and were acceptable to the Government:
- significant reductions in economic growth are acceptable, at least in the medium term while the economy undergoes structural change away from a large number of energy-intensive industries; or
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- New Zealand is able to meet ambitious emissions-reduction targets, largely by paying for emissions reductions in other (probably developing countries) on a large scale :
- a 20% to 30% reduction in emissions from 1990 levels in 2012 to 2020 would require reductions in gross emissions from an annual projected level of around 80Mt CO2e to around 50Mt (this is based on the 2010 business-as-usual projections, so is very conservative)
- if New Zealand were to “pay” for all of these reductions through facilitating emissions reductions in developing countries, at current carbon prices and exchange rates, the cost would be in the order of $250 million annually (or in the order of $2 billion over the period from the end of CP1 in 2012 to 2020).
5.3.3 Technology standards and production efficiencies
New Zealand is an importer of many technologies in the industrial, residential and commercial sectors, but also exports a range of products and expertise overseas. New Zealand products and services will therefore have to meet relevant international standards and expectations to be competitive, and to make efficient use of imported technology in domestic applications.
This need for alignment with international trends means that some international greenhouse gas and air pollutant emission, energy-efficiency and technology standards may become de facto standards in New Zealand.
The discussion above highlights just some of the possible international constraints on New Zealand’s choices on greenhouse gas emissions paths over the next few decades.
None of these considerations is sufficient in itself to dictate any emissions pathway that New Zealand must follow. However, it will be important for the Government to avoid raising expectations internationally – through participation in negotiations – that it is willing to adopt carbon paths that are not consistent with the types of domestic policies that it finds acceptable. An alternative climate change goal could be established based around the principles of ‘international engagement’ and ‘policy sustainability
An alternative climate change goal could be established based around the principles of “international engagement” and “policy sustainability”.
If the current climate change strategic goal is unsustainable, the question is: What should replace it? The answer depends in part on how the Government makes choices across different dimensions of this review. These include:
- how New Zealand wishes to position itself in international negotiations on climate change policy over the medium term
- the time horizon that it considers important in evaluating policy options:
- is it important for New Zealand to adopt policies that will be sustainable over the next 15 years? or
- are we simply concerned about meeting our current Kyoto commitments, and therefore are content to adopt a “wait and see” approach to future international commitments and the choice of policies?
A climate change goal should be a tool to help the Government choose between different domestic policies and international negotiation strategies. It is also important that there are realistic expectations of how long a climate change goal may remain relevant before it needs to be modified. Following this reasoning, the Government may wish to adopt a goal that guides New Zealand’s actions only over the next few years. If it does emerge that an international consensus is reached on future action, and New Zealand has clear obligations in the period beyond 2012, the goal could be updated appropriately.
With such a strategy in mind, this could lead New Zealand to adopt a strategic Climate Change Goal with the following elements:
- New Zealand will engage with the international community on responses to climate change in an attempt to secure broad and balanced participation and action, in particular by all the world's major emitters, including developed and developing countries, to effectively manage the risks from human-induced climate change
- New Zealand will adopt policy measures to address greenhouse emissions that meet the following criteria:
- policy settings allow us to meet the international commitments we take on – eg, through a combination of achieving domestic abatement and international emissions trading
- policy settings are sustainable, efficient and flexible
- policy settings are compatible withNew Zealandobjectives in relation to economic growth and social cohesion
- New Zealand manages the risks, opportunities and impacts arising from the effects of climate change and ensures adaptation as smoothly as possible.