Catherine Leining says even against the backdrop of the COVID-19 pandemic, we cannot afford to press 'pause' on climate action

Catherine Leining says even against the backdrop of the COVID-19 pandemic, we cannot afford to press 'pause' on climate action
The current prolonged drought in New Zealand reminds us that even with a pandemic, we cannot afford to press “pause” on climate action.

By Catherine Leining*

On 4 May 2020, as Parliament was emerging from lock down, so too did the Environment Committee’s report on the Climate Change Response (Emissions Trading Reform) Amendment Bill. This Bill deserves close attention, as the New Zealand Emissions Trading Scheme (ETS) has a critical role to play in post-pandemic recovery. 

The most crucial features of the Bill remain the same: to add a cap to our cap-and-trade system; to guard against extreme emission prices; to improve incentives for new forests; and to prepare the way for pricing agricultural emissions. 

In December 2019, the Interim Climate Change Committee (ICCC) identified six desirable outcomes for the Bill which were endorsed in the subsequent submission by the Climate Change Commission.  So will the revised Bill help New Zealand reach its climate change and economic goals?

1.            Coherence with the Zero Carbon Act

The purpose of the NZ ETS now relates to meeting our targets under the Paris Agreement and Zero Carbon Act, not just reducing emissions below business as usual. Decision-making processes are better integrated across the ETS Reform and Zero Carbon amendments. However, more information would be welcome on how the Government will manage achieving a split-gas 2050 target (treating biogenic methane separately from other GHGs) within all-gas emissions budgets and an all-gas ETS.  

2.            Predictable and coordinated processes for adjusting ETS settings             

Coordinated decisions on unit supply and price management will incorporate advice from the Commission and be made five years in advance, with a rolling year 6 update. There remains scope for adjusting the phase-down of industrial free allocation. Under the Bill’s default pathway, highly emissions-intensive and trade-exposed producers would still receive 30% free allocation in 2050, at which point New Zealand aims to be at net zero emissions. But this will be subject to advice from the Commission, and the Government has signaled a review of other aspects of industrial allocation policy.

3.            Sufficient predictability of future unit supply volumes and prices to build confidence and drive low-emissions investment in line with targets

This is enabled but will depend on regulations. While caps and price controls get set for five years in advance, the government can adjust years 2 through 5 (subject to some restrictions) when it makes each year 6 update. The necessary flexibility to accommodate changing circumstances affects predictability. In its submission on proposed ETS settings, the Commission identified ways to provide more transparency about volume adjustments, to strike a better balance between flexibility and predictability.    

 4.           An effective framework and process to enable future pricing of biogenic agricultural emissions 

This a major step forward while enabling further innovation. The default outcome – pricing fertiliser emissions at the processor level and livestock emissions at the farm level in the ETS from 2025 – is consistent with the ICCC’s advice (although it also suggested a faster start at the processor level for both sources). The sector has pledged leadership to prepare farmers for pricing and progress will be reviewed by the Commission in 2022, with an insufficient outcome triggering earlier pricing at the processor level. Also in 2022, Ministers will report back on an alternative emissions pricing mechanism for agriculture. 

5.            Strong safeguards for market integrity 

The Bill usefully provides for an independent auction monitor and makes more data publicly available about emissions and removals by individual ETS participants. The non-compliance provisions are better tailored for different types of infringements. Officials are undertaking further work on market oversight.

6.            Cross-party support for the core architecture and decision-making processes.

Here the Bill falls short. In its minority view, the National Party has proposed postponing passage of the Bill for 12 months to enable “more certainty around the economic position New Zealand will be in post-COVID-19.” Their argument is that a delay would provide an opportunity for more analysis of the climate change policy tools the Bill seeks to implement.

Despite the unprecedented shock of the pandemic, the following facts remain. This Bill is primarily about architecture; it equips the ETS with essential features for any Government to accomplish its climate change goals. The actual ambition of emissions pricing will be set through regulations that can be adapted to changing circumstances.

Businesses need policy certainty to invest wisely – and prolonged policy uncertainty on emissions pricing will hinder, not help, investment in economic recovery. Governments and businesses understand the importance of managing risk and climate change is a fundamental risk that is not going away. The economic impacts of the NZ ETS can be managed strategically through sectoral measures, free allocation, redistributing ETS revenue, and social and economic development policies. 

In a letter to the Minister for Climate Change in April 2020, the Commission identified six principles to help deliver an economic recovery that keeps New Zealand on track to achieve our climate goals. The fifth principle emphasised maintaining the integrity and continuity of market, regulatory and policy measures aligned with long-term climate change goals to guide investment and innovation.

The current prolonged drought in New Zealand reminds us that even with a pandemic, we cannot afford to press “pause” on climate action. As we launch substantial investment in economic recovery, effective emissions pricing will future-proof our investment, helping us avoid stranded assets, meet our climate targets and pass a better legacy to future generations.


*Catherine Leining is a Policy Fellow at Motu Economic and Public Policy Research and a New Zealand Climate Change Commissioner.

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31 Comments

Good piece.

The question for Carr and Co - who have my utmost admiration at the moment; attempting an impossible task amidst a cognitively-dissonant society - is how much energy we can bring to the table under the cap?

Therein lies the rub.

Google: Cognitive dissonance occurs when a person holds two or more contradictory beliefs, ideas, or values, or participates in an action that goes against one of these three, and experiences psychological stress because of that
I just don't perceive too much stress in our society. There is PDK and myself and extinction rebellion but we are not a majority of society. I reckon apathetic, uninterested, and 'couldn't care less' are more appropriate adjectives.

Did you miss the reaction to Greta Thunberg?

While I have no issues with policies that seek to reduce the impact we have on our environment, I do have a significant issue with any "emissions trading scheme" which frankly is rank BS.

Emissions trading is a false premise based on a flawed theory. The theory espouses that scarce resources will drive prices up and thus reduce consumption. And many theorists expect that to mean that by putting the price up on the consequences of human activity then you can change that activity. For one this just doesn't happen, peoples behaviour doesn't change when prices creep up incrementally. And prices will only ever creep up incrementally because the big players, the ones who profit the most from those activities will lobby the Government to prevent them from destroying their business. In the meantime an ETS will allow them to avoid responsibility and accountability for their environmental damage.

If greenies and anyone else wants the Government to stop sticking carbon and other GHGs into the atmosphere then get them to legislate a limit, not fiddle on the edges.

What "climate change" has become a giant global rort and bureaucratic power grab by those who think they know best and should therefore be in charge; setting the rules and telling the uneducated masses what they can and cannot do? Surely, not? Er....

Not.

No er about it.

:)

Flawed theory, agreed. But worse, NZ's ETS is a subsidy for business and a tax on end users (citizens), given there are exemptions for farming and outright subsidies for our 10 largest industrial emitters;

https://www.stuff.co.nz/environment/climate-news/116695150/free-carbon-c...

The economic mess we'll be in for the next ten years or so means all fancy climate change schemes that will drastically increase costs to everyone must be put on hold, if they were ever worth it in the first place. A scheme already exists of which I'm not fully aware of the negatives, is buying up land, claimed to be not productive for anything else but planting trees. I'm hoping the Greens don't get any say after the next election.

The irony is that COVID's done more to reduce emissions than any scheme. As long as tourism's on hold our transport emissions will be way down, even without counting the air emissions.

Nigelh - why is it that so many put 'economc' and ' the economy' at the top?

Your 'economy' is nothing more than the extraction, processing, consumption and excretion, of parts our very finite planet. How many times has it got to be said? That regime got bigger and bigger, exponentially - as per the original Lorax, if you need to read shallowly. As per the Limits to Growth, a bit more in-depthly.

And the forward betting on it getting ever-bigger, was always doomed to lose the last roll of the dice. Yet you - and most of society - still think the promary thing is to start the betting and the extracting above everything - including the ability of our species to actually exist.

Here's the problem - come back when you've watched it all. https://un-denial.com/2019/08/08/by-nate-hagens-reality-101-short-courses/

But let's have none of this ' we need to fix the economy first, OK? the ' Economy' is the problem.

This assumes a pre COVID19 BAU global economy.

I think the author is whistling in the wind. People who are suddenly thrust onto the dole and seeing their livelihoods ruined left, right and centre won't give a fig for the nation paying huge amounts of taxpayers' money to offset NZ's tiny contribution to global emissions. They will vote for anything that keeps their jobs intact, including coal and gold mining. As Bertolt Brecht put it: "Bread first; then morals."
After that, they'll want the quick revival of the gas-guzzling aviation industry to whisk them off on overseas holidays.

Yep.

Despite urging society to change, that's exactly how I see it too. If we were were smart enough to change, we would have already.

So we collapse. It's the only other scenario. Then someone has to pick up the - very local and very quickly - pieces.

How selfish do you have to be to fixate on climate issues right now? Economies around the world have collapsed. How about we press pause on preening for a little while.

Exactly the attitude I pointed out was the problem. Did you put it up tongue-in-cheek?

If you're serious, may I ask if you've got offspring? Carr's certainly influenced him.....

we have been borrowing from the future PDK, that's why we got in so much trouble. Now we watch economies slow down while we sort out this mess, thats a longer slower less consumptive world for probably a couple of decades.
China is the big emitter accounting for up to %60 of the increase in co2, they may not change for a while, anything we do will just destroy incomes and make others feel insecure. Politics matters.

That's our emissions from China, me o'le china.

We buy the crap from the big box stores, they make it, it's our pollution. Both kinds.

And sorry, but 'while we sort out this mess' isn't right. It's this mess got us into this mess. We have to do something other than what we were doing, not more of the same. Logic 101. I understand folk are hurting, but they all bet on something that wasn't there. Perhaps they should sue those who repressed the discussion?

Its not the climate, it always changes...its the dumbass farming practices our 'glorious' primary sector uses. How is everyones pasture renewal programme looking so far hmm? The old spray and pray technique working out well for you? Hows all that bare pasture and grass seed gone to waste when it rains in a weeks time and its too cold for the seed to germinate? $$$$$$$$ Should have kept that sward intact and under sowed instead huh? Don't ask for any tax payer support either, you caused the problem, live with the results.

Does your farming experience begin and end in Cuba Street by any chance?

Pay for my next latte and I'll tell you everything you need to know about farming.

Tempting, however I would want real milk in mine and you would probably want soy milk (direct from ex Amazon rain forest)

Whereas your milk is via PKE from an ex-rainforset where?

Possibly. And I would fully support an immediate ban on PKE imports! But at least our milk is produced here and a great many farmers don't use PKE.

How is a drought evidence of climate change?

Well, once upon a time it rained. Then it didn't for a while. Climate. Changed.

Astonishes me how people get suckered into this political control agenda.

The lack of drought in eastern NZ, would be some indication that CC is not an issue. But when people get assumptions locked-into their personas, it's near impossible to deprogramme them.....

As for 'political control'- be much much more worried about faceless global corporate control, via TPPA seppuku. But that looks to have high-water-marked; something folk don't realise if they're still holding all the current (growth, GDP, wealth, investment) assumptions.

I'm sure you'd be the first to bring in a political control agenda if someone started digging up and dumping their rubbish on your front lawn. Why is it any different for the commons?

Hasn't the lock down clearly shown (pictures of the Himalayas for the first time in ages etc) that the issue is cars, trucks and factories, especially in Northern Hemisphere. The numbers of cows and farms have not changes radically in that time. Accordingly this areas should be the focus., and yes China cola plants and factories are probably the worst offender.

The writer thinks we should impose more cost on local producers and require that we import more from overseas by airfreight which shall not be covered according to the terms of our ETS. Our ETS is complete climate killing dog, because whilst an Airbus can be flown completely non-taxed all the way from Europe all local industry will get taxed hard. Our ETS is effectively designed to increase climate change by giving tax breaks to airlines and international travelers, but preventing local industry.