What’s driving business to understand and act on climate change issues now, and what will going forward?

by Catherine Leining, Public Policy Fellow Motu Research
This has been adapted from a keynote address for the 2019 Climate Change & Business Conference

Motu is an independent non-profit research organization. The businesses I work with are the early movers, and they are very well informed and engaged. My impression is that the early movers see climate change as a significant opportunity, a significant threat, or a corporate social responsibility obligation.  I suspect that for many businesses in the middle, decarbonisation is a future problem or someone else’s problem.     

I see three key drivers that will change how businesses will respond to climate change in the future.

The first driver is emission pricing. The current prices in the NZ ETS have to rise significantly to support New Zealand’s Paris target and long-term decarbonisation. Modelling for the Productivity Commission suggested prices ranging from $30-80 by 2030 and $75-250 by 2050. We are still in a policy vacuum about what the emission price pathway will look like and what additional regulations will apply. In the meantime, businesses need to future-proof their investments by factoring in a high and rising shadow emission price or risk stranding their assets. Frankly, that applies to central and local government too.

The second driver is that the social license to emit is rapidly expiring. We are seeing unprecedented demonstrations now; fast forward a decade when we have hit 1.5oC and are competing for entitlements to an exhausted global carbon budget. Pressure from investors and consumers may be more influential in the near term than government targets. To maintain their social license, businesses are going to need to show genuine commitment, transparency and accountability for action to reduce emissions.

The third driver is that climate change creates enormous business opportunities. In our beautiful welcome, we heard about the winds of change. We can harness those winds – or be blown away by them. We need to create the kind of business targets that will unlock innovation and harness the winds. Right now, a lot of business targets involve drawing a boundary, reducing internal emissions by a percentage, and planting trees. We need a mindset shift for targets from constraint to transformer, cost to investment, and self to system. We need targets for collectively changing whole supply chains and financing models, building new partnerships, educating consumers, creating new markets, and replacing technology and infrastructure with unprecedented speed. The biggest business opportunities lie in being not just carbon neutral, but carbon transformational.

My final comment is that policy uncertainty is lethal to long-term low-emission investment.  Reaching strong political consensus on the way ahead would empower the producers, investors, and consumers who will make change happen.

For emissions targets to work, they need to be a catalyst for action

by Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research.
This article was first published in The Spinoff's Covering Climate Now series on 16 September 2019.

Since 1992, multiple rounds of greenhouse gas emission targets have failed to reduce absolute emissions globally or in Aotearoa in line with preventing dangerous climate change. One definition of insanity is repeating the same action and expecting different results. Whether it is insanity or courage, we are trying again.

New Zealand’s economy is emissions intensive and vulnerable to climate change impacts. When it is so clear that we have a serious problem, why are emission targets so hard? Here are a few reasons:

• They impose near-term costs on us while the benefits will accrue globally and across generations.
• They create win/lose competition for economic growth rights within a shrinking cap on emissions.
• They are interdependent with other environmental, economic and social targets.
• They are hard to allocate equitably across sectors and translate into practical actions.
• They raise risks our production and emissions will be displaced offshore.
• They incentivise manipulative behaviour, as we saw with buying low-quality offshore emission units in the first Kyoto commitment period.

Zero Carbon Bill - oral submission from Catherine Leining and John McDermott

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. 

How emissions trading schemes work and they can help us shift to a zero carbon future

by Catherine Leining, Policy Fellow, Motu Economic and Public Policy Research

Would you please explain how the New Zealand Emissions Trading Scheme (ETS) works in simple terms? Who pays and where does the money go?

Every tonne of emissions causes damages and a cost to society. In traditional market transactions, these costs are ignored. Putting a price on emissions forces us to face at least some of the cost of the emissions associated with what we produce and consume, and it influences us to choose lower-emission options.

An emissions trading scheme (ETS) is a tool that puts a quantity limit and a price on emissions. Its “currency” is emission units issued by the government. Each unit is like a voucher that allows the holder to emit one tonne of greenhouse gases.

The New Zealand Emissions Trading Scheme (NZ ETS) is the government’s main tool to meet our target under the Paris Agreement. In a typical ETS, the government caps the number of units in line with its emissions target and the trading market sets the corresponding emission price.

Integrating climate with economy needs to extend beyond government

A reaction to the Wellbeing Budget of May 2019 by Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research

On 30 May 2019, the New Zealand government released its first “Wellbeing Budget.” Under this framework, new funding for climate change mitigation has been integrated with economic development. Adaptation gets only a brief nod. Is this budget allocation adequate to meet the climate change challenge before us? No – but could it ever be?

One key theme is research for a low-emission future. Examples are a National New-Energy Development Centre in Taranaki ($27m), an Advanced Energy Technology Platform ($20m), a Bioresource Processing Alliance and Product Accelerator ($18m), and an Agricultural Climate Change Research Platform ($3.2m). MBIE will advance policy on the future of work and “just transition” issues.

Commentary on Tranche Two Decisions on the New Zealand Emissions Trading Scheme

by Catherine Leining, Policy Fellow, Motu Economic and Public Policy Research. 

Reforming New Zealand’s climate change legislation is a complex tango. Where the Zero Carbon Amendment Bill leads, NZ ETS amendments must follow. The government’s latest NZ ETS policy decisions will help ensure future emission prices rise in step with our targets. Check out our “Top Ten” list of alterations to watch for as we outfit the NZ ETS for the important job ahead or read on for comments on yesterday's announcements.

Commentary on introduction of the Zero Carbon Amendment Bill

by Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research

The Government is heeding the stark warning in the IPCC’s Special Report on 1.5oC and putting New Zealand on an ambitious pathway toward net zero emissions of long-lived GHGs and substantial reductions in methane from agriculture and waste by 2050. The Zero Carbon Amendment Bill may finally light the fire under NZ mitigation action. It breaks important new ground in 6 ways.

PCE report on “Farms, forests and fossil fuels”: One lump or two?

by Catherine Leining, Policy Fellow, Motu Economic and Public Policy Research

On 26 March 2019, the Parliamentary Commissioner for the Environment (PCE) released a report on “Farms, forests and fossil fuels: The next great landscape transformation?” It looks at the challenges in decarbonising New Zealand’s economy and asks whether a fundamental restructure of the New Zealand Emissions Trading Scheme (NZ ETS) will be needed. 

The PCE usefully reinforces three important points: targets and policies should reflect differences across greenhouse gases (GHGs), fossil carbon dioxide (CO2) emissions need to reach zero during this century, and management of New Zealand’s land sector would be enhanced by a landscape approach that integrates climate change and other considerations.

Greenhouse gas recommendations from the Government’s Tax Working Group

by Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research

On 21 February 2019, the Government’s Tax Working Group (TWG) issued a report with advice on using environmental taxes to manage greenhouse gas emissions. It recommended retaining the New Zealand Emissions Trading Scheme (NZ ETS) with reforms to provide greater guidance on price, generate revenue through auctioning, and enable periodic review. It also recommended extending emission pricing to biological emissions from the agriculture sector, whether through the NZ ETS or a complementary system. It suggested those changes can help drive behaviour change to reduce emissions, generate revenue supporting the transition to a more sustainable economy, and, in the longer term, broaden the overall tax base.