John McDermott is the Executive Director at Motu Economic and Public Policy Research in Wellington, and Catherine Leining is a Policy Fellow at Motu. This is the oral submission to the Environment Select Committee they made on the Zero Carbon Bill in their individual capacities.
To build a successful low-emission economy, we need continuity of sound, evidence-based policy across elections. Today we will highlight three technical areas for improving this bill in line with New Zealand’s commitments under the Paris Agreement, and conclude with comments about target ambition.
Structure of the 2050 target and emissions budgets
I have four points.
- The split-gas 2050 target is a valuable innovation, and it should be accompanied by split-gas – not all-gas – emissions budgets. With all-gas emissions budgets, any breakthrough on biogenic methane could undermine progress on long-lived gases.
- The bill should enable restrictions to forest offsetting under advice from the Climate Change Commission. Forestry removals need to be part of our global contribution without derailing reductions in gross emissions of long-lived gases.
- When defining emissions budgets, overseas mitigation should be used to remedy noncompliance at the margin and should be limited. The government can decide separately about using additional offshore mitigation to help meet our international obligations.
- The Bill should signal reductions in cumulative emissions, international transport emissions, and consumption emissions. Options include adding monitoring and reporting, a deadline peak year, a 2030 sub-target for all GHGs, and/or a requirement for no backsliding.
Compatibility with the NZ ETS
The Zero Carbon Bill and NZ ETS amendment legislation need to work together seamlessly like tango partners, and right now we are shadow dancing.
A critical decision will be design of the ETS cost containment reserve. If this operates outside of emissions budgets, it could push domestic emissions and offshore mitigation beyond budgeted levels if ETS prices get too high. That design could be acceptable but the implications need to be clearly understood and managed.
Banking will be necessary across emissions budgets to accommodate the ETS. Beyond this, banking should not be allowed to dilute the ambition of future budgets. Borrowing across emissions budgets could threaten the delivery of New Zealand’s international commitments and have fiscal implications. If retained, borrowing should be limited.
Climate Change Commission
The Climate Change Commission must be empowered and adequately resourced to maintain the independence, credibility, and weight of its advice. It should be able to undertake additional work beyond government-defined terms of reference, and would benefit from multiple-year budget appropriations to improve funding certainty. The Commission should also be delegated responsibility to: (a) conduct public education on climate change, and (b) assess and improve New Zealand’s capability to model the economic impacts of climate change policies.
As documented in an independent review by our Motu colleague Niven Winchester, the economic modelling in the Regulatory Impact Statement is inadequate. As an urgent priority, New Zealand needs to boost its data collection and economic modelling capability.
The bill should delegate clear responsibilities to the Commission in regard to the NZ ETS. In addition to policy advice, the Commission could be tasked with making technical implementation decisions once key political decisions are in place.
The Zero Carbon Bill should align New Zealand’s effort with the Paris Agreement. All sectors need to reduce long-lived greenhouse gases, especially carbon dioxide, to net zero and beyond. We cannot evade this responsibility.
Globally, livestock production contributes about 23% of current warming (based on 2010 data). The warming caused by New Zealand’s past biogenic methane emissions is not an internationally recognised entitlement that we can take to the bank. An assessment from the industry-led Biological Emissions Reference Group found that a 10% reduction by 2030 could be achieved with widespread adoption of currently available options. Emissions would fall if today’s top performers were to become the new normal. This is reinforced by Motu’s research on the broad efficiency distribution of dairy production and the availability of no-cost measures to improve productivity and reduce emissions from livestock production. With good policy, the biogenic methane target can be a bridge, not a wall, for our innovative agriculture sector so it can thrive in a future where the social license for high-emission food has expired.
The targets in the Bill are directional signals. If we find we can do more and faster, then we should. The Bill should leave the door open to net-negative-emission pathways and reductions in biogenic methane beyond 47% if these become feasible and necessary.
Hard social conversations on our low-emission transition will continue to evolve over time. New Zealand needs an enduring policy framework to create the space, the systematic processes, and the evidence base for having those conversations. New Zealand needs the Zero Carbon Bill.