Simon Terry says if NZ's to meet commitments signed up to in the 1997 Kyoto Protocol we may face a huge financial liability

By Simon Terry*

After many years focused on creative accounting, New Zealand is facing pressure to deliver emission reduction results.

Things are different partly because the two biggest carbon polluters, the US and China, recently pledged to do something meaningful – though not that much.

Mainly things are different because New Zealand’s options for more pretence are running out as old games come back to bite it.

Tackling the actual problem requires a big change in thinking. It begins by facing up to the size of the multi-billion dollar carbon hole New Zealand has been digging itself into.

Official figures acknowledge that government policy directed at climate change has reduced gross emissions by less than 1% to date, and the projected reduction in 2030 is just half a per cent. In other words, these emissions would be essentially the same if the government had taken no action at all.

So fossil fuel and agricultural emissions have been steadily rising, rather than falling to meet targets New Zealand has pledged to. On current plans, those international commitments are instead to be met using various forms of creative accounting.

For the first period under the Kyoto Protocol from 2008 to 2012, gross emissions were 20% over the target. But New Zealand plans to settle up using credits issued for the carbon absorbed by pre-existing crop forests.  

The catch is that those forests are due to be cut down in the 2020s and the bulk of the carbon will then be released again. So counting these crop forests largely just delays the time when the overshoot needs to be reconciled.  Result: the bill goes on the Visa card.

During the second commitment period from 2013 to 2020, New Zealand is projected to be 33% over target. Again, the country is planning to use credits based on carbon absorbed by its crop forests and that roughly halves the overshoot (to 15%).  

For the other half, New Zealand is signalling that it wants to make a tricky swap that would effectively allow it to use foreign credits minted for the first period to square up for the second period.

And not just any credits: while UN certified, they are mostly of dubious environmental integrity - sourced out of the Ukraine and Russia at a price of less than 50 cents a tonne. 

If New Zealand can get consent for such a swap, then the result is: half the bill goes on the Visa card, and the other half is met with foreign credits the government obtained through the ETS that cost emitters a few tens of millions.

It is the third period from 2021 to 2030 that is the critical one. This is the period world leaders are focusing on for global climate action to make a genuine showing and commitments for it are to be set next year. 

It is also the decade during which the trees New Zealand relied on to claim forestry credits are scheduled to be cut down.

Including payback for forest credits, New Zealand’s emissions for the third period are officially projected to be 55% above even the current target level – an overshoot of 350 million tonnes of carbon dioxide equivalent. 

The Treasury warns that carbon prices will be considerably higher during this period, and expects them to be between $10 and $165 a tonne. At the midpoint of that range, even a 350 million tonne excess would represent a $30 billion cost if settled with carbon credits.  Result: Visa card payment comes due with major penalty interest - and underlying emissions growth on top of it.

But that’s just the picture if New Zealand continues to deliver nothing locally.

Whatever size commitment is adopted, the clear path for a country that relies on food exports and tourism for a living is to create a branding win out of necessity - while keeping green jobs at home.

In particular, there is a sizable block of low cost emission reduction options in agriculture and a large potential for biodiverse permanent forestry. 

But getting serious results requires something well beyond erratic ETS settings. It requires a carbon budgeting process that involves options analysis, sector coordination – and lead times starting yesterday.

It also means an end to the shallow spin that has been used to put off meaningful action, and instead embracing a New Zealand that steps up to its responsibilities and starts to truly look like the country it claims to be.

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Simon Terry is Executive Director of the Sustainability Council, and co-author with Geoff Bertram of The Carbon Challenge. 

(Updated with video link above of a Parliamentary Question Time exchange on December 9 between Green Co Leader Russel Norman and Finance Minister Bill English over the Treasury's estimated cost of the 350 million tonne gap.)