ETS Review Submission from Adrian Macey

Guest Post by Adrian Macey, Senior Associate, Institute for Governance and Policy Studies, Adjunct Professor, New Zealand Climate Change Research Centre, Victoria University of Wellington, Vice Chair then Chair, UN Kyoto Protocol negotiations 2010-2011, New Zealand Climate Change Ambassador 2006-2010, Chief Trade Negotiator 2000-2002.

This is a direct transcript of Adrian Macey's submission to the ETS Review. You can also check out Motu's submission and that of Z Energy.

General points

The discussion paper is a good overview and addresses some important longer term issues. The minister’s introduction correctly identifies the purpose of the ETS as the gradual transition to a low emissions economy.  

The Paris Agreement shifts the focus to domestic measures more than international compliance, and this needs to be reflected in the fundamental orientations of the ETS.

NZ ETS and manageable costs

by Suzi Kerr, Senior Fellow at Motu Economic and Public Policy Research Trust

In my last post I examined what we need to consider in setting an NZ ETS price consistent with an efficient long-term transition (at least in expectation). Given that price, are there any reasons to protect some sectors from the full price?

If we have chosen an NZ ETS price (or price corridor) we expect will lead to the most efficient adjustment path for the New Zealand economy, what arguments could there be to treat some sectors more leniently by, for example, extending a partial unit surrender obligation?

What ‘should’ the ETS price be?

by Suzi Kerr, Senior Fellow at Motu Economic and Public Policy Research Trust

The government is seeking input on whether all sectors in the New Zealand Emissions Trading System (NZ ETS) should move to full surrender obligations (i.e. all sectors must surrender one unit for each tonne of emissions) and how to manage the costs of moving to full surrender obligations. To address these questions, we need to consider what current NZ ETS price would be consistent with an efficient long term transition (at least in expectation) to a low-emission economy, and what is likely to happen to the NZ ETS price if full surrender is implemented.   

This blog follows on from Catherine Leining’s, which set the wider context for these decisions.

What ‘should’ the ETS price be?

The fundamental purpose of an ETS is to constrain emissions and hence set an emissions price path that facilitates a gradual, cost-effective transition to a low emissions economy. This is a long-term objective and the investments and behavioural changes that will drive the transition are long term, so the system has to be thought of over a long period – not just in terms of current issues.

The Five A’s of an Effective NZ ETS Review

by Catherine Leining, Motu Economic and Public Policy Research Trust

Public consultation is underway on the government’s 2015/2016 review of the New Zealand Emissions Trading Scheme. The first stage of submissions (due 19 February) focuses on whether non-forestry sectors should face the full unit obligation per tonne (compared to 50% under current rules) and invites comments on the scope of the review. The second (due 30 April) focuses on how the government should manage unit supply, emission prices and exposure to emission costs and invites comments on other issues.

Ministry for the Environment officials have been blunt about the system’s impact to date: “Research for this evaluation, and evidence from the interviews, found no sector other than forestry made emissions reductions over the Kyoto Protocol Commitment Period One (2008-12) (CP1) that were directly caused by NZ ETS obligations.” On the basis of participants' purchases of Kyoto units and some improvement in net forestry emissions, officials concluded that the system has delivered on its two-fold purpose to assist New Zealand in meeting its international climate change obligations and reducing net emissions below business-as-usual levels.

In this case, we are hitting the target but missing the point. Limiting temperature rises below 2 degrees C requires a transition to net zero global emissions by the end of the century, with peaking of global emissions in the near term. So far under the NZ ETS, the short-term emission price has been too low and the long-term emission price too uncertain to support the strategic decarbonisation of New Zealand’s economy.  Both gross and net emissions are projected to rise significantly through 2030 under current settings.

The government’s review would benefit from inviting stakeholder input on five “A’s” essential to reforming the NZ ETS: Ambition, Architecture, Alignment, Acceptance and Agriculture.

Family and the Fossil Carbon Safety Margin

by Dr. Susan P. Krumdieck, Professor in Mechanical Engineering, University of Canterbury

In my previous blog, I translated the current language of the 2^oC climate change target into an engineering concept of a global warming “failure limit” associated with carbon fuel production.  For this part of the analysis, I will use the units more commonly used by the media – GtCO2 – which means the cumulative emissions failure limit to maintain temperature rises below 2^oC is around 3000 GtCO2 with a probability greater than 66%.

Suffice it to say that a 2^oC temperature rise would pose an unacceptable risk to our civilization and most of the world ecosystems. That seems quite a dramatic claim, but there is pretty good certainty that the heat input involved in that 2^oC temperature change would be sufficient to melt global ice, raise the sea level and cause uncertainty enough to risk, alter, damage, or destroy 80-90% of the investment in real estate, infrastructure, agriculture and organization that humanity has made to date. It will also mean a mass extinction of species and climate chaos. By “climate chaos” I mean the occurrence of storms, droughts, high temperatures, low temperatures, rainfall, hail stone size, and tornado size that are “unprecedented” and can’t be managed by historical hazard mitigation measures.

I wanted to make this personal by considering the history of CO2 emissions against the human scale of seven generations of my family. As an engineer, I don’t think of safety limits as “targets.” Failure to reduce fossil fuel production to nearly zero in my lifetime will mean unacceptable hardship for people I know. So how did we get to this point?

Fossil Carbon Safety Margin

by Dr. Susan P. Krumdieck, Professor in Mechanical Engineering, University of Canterbury

To me, as an engineer and a person with a family, the language of climate change action – for example setting “targets” for emissions – seems to be dangerously at odds with the science.

It seems obvious that the engineers of the world have a lot of work to do in changing everything that uses fossil fuel to use much less to no fossil fuel. However, this discussion is not really taking place. 

The science is clear, so I wanted to look at how we might use the language of engineering to understand the way forward. The latest IPCC Fifth Assessment Report gives conclusive modelling and science observation that profoundly affects every person on the planet. However, the general population doesn’t seem to understand the message.