Friday, 25 July 2014

Survey suggests that the NZ ETS is not meeting its objectives

Post by Judd Ormsby

Jessika Luth Richter and Lizzie Chambers’ recent article “Reflections and Outlook for the New Zealand ETS: must uncertain times mean uncertain measures?” provides an overview of the stated purposes of the ETS, descriptive analysis of trends in recent years, and new results from a survey the authors conducted.

The section on the purpose of the ETS is unusually detailed and well referenced – worth a look for researchers new to this area. The authors remind us that one of the legislative aims of the NZ ETS is “reducing New Zealand’s net emissions of those gases [GHGs] to below business-as-usual level” (see section 3 of the Climate Change Response Act 2002). Obviously this is vague. How much below business as usual (BAU) counts as success? And of course we need to remember that targeting emissions below BAU isn’t the same as a goal of reducing emissions, since BAU scenarios have emissions rising over time. Unfortunately (as I’ll explain in a moment) the survey results don’t suggest that even the weak goal of reducing emissions below BAU is met.

The survey is not scientifically administered – it was advertised “through numerous channels, including the Carbon Match website” so one should be careful about what sort of population the views expressed in the survey represent. Nevertheless the survey (conducted in April 2013) had 169 respondents, most of whom identified as foresters, emitters or traders, so the results are interesting and better than pure anecdotal evidence.

57% of people disagreed that “the NZ ETS helps New Zealand reduce its overall emissions” and “of the 85 foresters surveyed not one believed the ETS currently drives any new planting”. These pessimistic views don’t seem to be due to a perception that an ETS per se can’t reduce New Zealand’s emissions, since “most [foresters] said that the ETS had incentivised new planting in the past.” And “of those who could reduce emissions, the majority indicated that they would seek to do so if the price stayed above $20 (24%) or $25 (28%).”

These results are consistent with earlier work done by Karpas and Kerr. That work suggested that planting would increase given the then current prices but that uncertainty about future prices was a key barrier.

Luth-Richter and Chambers’ survey also see regulatory uncertainty as a problem with the NZ ETS:
In response to the statement ‘the Government has provided sufficient regulatory certainty about the NZ ETS’, over 80% of the total respondents either disagreed (31.4%) or strongly disagreed (50.3%). There is great uncertainty about whether the ETS will continue past 2020, with just under half (48%) of the respondents confident that this would be the case.
Motu will be doing research on mitigation under uncertainty as part of the Shaping New Zealand’s low-emission future project – so it will be interesting to see what comes out of this.

With a low price we should expect little reduction of emissions relative to BAU and the author’s survey findings supports this. The message to take away from their article is simple and not new, but it is important: to achieve significant domestic emission reductions below BAU – a goal enshrined in legislation (albeit vaguely) – we need a higher price. The options for doing this are many and varied, each with different pros and cons some of which we have discussed in previous blog posts.

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