Social Cost of Carbon: two further questions (with more help from New Zealand’s native wildlife)

Photo by Department of Conservation on Flickr cc by 2.0

by Bronwyn Bruce-Brand, Research Analyst at Motu Economic and Public Policy Research

This is post two in a series of three posts answering key questions about the Social Cost of Carbon (SCC). In the interests of getting you to the end of this article, I have included some bird breaks (hopefully these won't get too squawkward).

Zero Carbon Bill Submission

by Catherine Leining and Suzi Kerr.
The New Zealand government has recently consulted on its proposal for a Zero Carbon Bill. This would:

• set a new and more ambitious 2050 greenhouse gas emission reduction target
• establish interim five-year “emissions budgets” consistent with meeting those targets
• require the government to issue plans for achieving its emissions budgets
• require preparation of a national climate change risk assessment and national adaptation plan
• set up a new independent Climate Change Commission to advise the government and monitor its progress.

Our full submission on the Zero Caron Bill is available here. In this blog we highlight five key opportunities to improve the government’s proposal.

Vast majority of New Zealanders want action and leadership on climate change.

Guest post from Pure Advantage first posted here.

Following the US announcement that they would withdraw from the Paris Climate Change Agreement, we asked if New Zealand should follow suit. A whopping of 92 percent of Kiwis disagreed, not wanting our country to follow President Trump’s decision. New Zealanders are even more united in their commitment to the Paris Accord than Australians who show 87 percent support.

Last week, Pure Advantage released the results of their Climate Survey which talked to 1000 New Zealanders about their perspectives on New Zealand’s climate policy position. The results show that a vast proportion of New Zealanders have the appetite required to effect change and reduce our greenhouse gas emissions.

A new approach to emissions trading in a post-Paris climate

This article was prepared by Suzi Kerr, Catherine Leining and Ceridwyn Roberts at Motu Economic and Public Policy Research. It was first published on The Conversation.

Despite the US withdrawal from the 2015 Paris Agreement on climate change, other countries, including New Zealand, remain committed to cutting their greenhouse gas emissions.

In our report, we explore how New Zealand, a trailblazer for emissions trading, might drive a low-emission transformation, both at home and overseas.

Turning off the tap

Emitting greenhouse gases is a lot like overflowing a bathtub. Even a slow trickle will eventually flood the room.

The Paris Agreement gives all countries a common destination: net zero emissions during the second half of the century. It is also an acknowledgement that the world has only a short time to turn the tide on emissions and limit global temperature rise to below two degrees. The sooner we turn down the tap, the more time we have for developing solutions.

International transfers of mitigation to achieve the goals of the Paris Agreement

By Suzi Kerr (Motu Economic and Public Policy Research) and Mike Toman (World Bank)

More than a year has passed since the signing of the Paris Agreement under the United Nations Framework Convention on Climate Change, in which developed, emerging and developing countries across the world have pledged to limit or reduce their greenhouse gas emissions (GHGs) as a start toward limiting dangerous climate change. Under the Agreement, countries can work together to reduce emissions. 

Mike Toman, a Lead Economist in the World Bank’s Development Research Group, and Motu’s Suzi Kerr have come up with three basic guidelines for financing of emissions reductions in less economically advanced countries:
1. Do not conflate “international carbon markets” with “internationally transferred mitigation outcomes.”
2. Be cautious about the apparent gains from linking emissions trading markets.
3. Create contracts between developed and developing country governments for internationally transferred mitigation obligations.

New emissions reduction plan business as usual

By Ralph Sims. Reprinted with permission from Carbon News

The Government’s plan to cut the emissions intensity from industrial heat generation  by 1 per cent a year is just business as usual, and will do little to achieve New Zealand’s Paris Agreement commitment.

Ralph Sims is Professor of Massey University’s School of Engineering and Advanced Technology, an IPCC lead author and consultant to the International Energy Agency. He is an expert on renewable energy deployment and policies, distributed energy (including smart grids), biomass supply chains and bioenergy conversion, biofuels for transport andclimate change and renewable energy scenarios.

There is a major disconnect between New Zealand’s international commitments under the Paris Climate Agreement and the recently released draft for consultation of the NZ Energy Efficiency and Conservation Strategy for 2017 to 2022.

Creating Trust and Transparency in Fossil CO2 Emissions Reporting

by Jocelyn Turnbull, Senior Scientist, GNS Science

Marcus Trimble and Margaret Norris using the GNS Science high-tech grass sampling method near the Kapuni plant in Taranaki. A GPS, a plastic bag and a marker pen are all that is required. And perhaps a pair of gumboots! Photo credit: Jocelyn Turnbull, GNS Science.

Last year, I wrote about how we can use atmospheric measurements to determine whether nations and industries are meeting their fossil fuel CO₂ emission reduction goals. With the Paris Agreement, the stakes have gotten higher, with most nations agreeing to reduce their emissions, and a recognized need for “trust and transparency” amongst nations in emissions reporting.

This week, GNS Science published a new research paper taking the concepts I talked about in my previous post, and turning them into a specific method that evaluates emissions from individual power plants to better than 10% accuracy. This is key because power plants are the biggest emission sources (the huge Taichung coal-fired power plant in Taiwan produces more fossil fuel CO₂ than all of New Zealand!). This makes them an obvious target for regulating and reducing emissions. 

In the past there have been considerable barriers to measuring emissions rates from power plants. Radiocarbon measurements that need to be used in this process are time-consuming and expensive. Additionally, the atmospheric models used to translate fossil CO₂ concentration measurements to emission rates from the power plant are most accurate when averaged over long time periods.

To remove these barriers, the scientists at GNS came up with the idea of using living grass as sample collectors. There is no special field sampling equipment required, and grass effectively collects a radiocarbon sample averaged over the many days it grows. A single grass measurement tracks a week or so of emissions and is a perfect complement to the optimal model averaging period. These innovations allow us to measure the power plant emission rate to 10% accuracy. This is a marked improvement over the ~20% reported by individual power plants (based on their methods). That ~20% also doesn't take into account any bias in the plants' self-reporting. 

Grass growing in farmland near the Vector Kapuni plant in Taranaki makes an ideal sampler for fossil CO₂ emissions. Photo credit: Jocelyn Turnbull, GNS Science.

This simple and low-cost method was developed using the Kapuni processing plant in Taranaki as a test case and can be readily applied around the world. 

Can Engineers Change the World? Energy Transition Engineering

Dr Susan P Krumdieck is Professor in Mechanical Engineering and Director of the Advanced Energy and Material Systems Lab, University of Canterbury, New Zealand.

Can technology solve the climate problem? Dr Krumdieck outlines her work on a new interdisciplinary practice called transition engineering: changing course one innovative project at a time.

Business leaders recognise that the biggest risk to their business is energy transition. The most popular concept of this transition involves a substitution of renewables for fossil fuels and development of elusive tail-pipe technologies like carbon-capture and storage. This concept is comforting and simple. But it is also profoundly wrong. There is no way to achieve an energy transition without completely reworking every aspect of our infrastructure, industry and economy to vastly reduce energy demand. Changing the global economy to nearly eliminate the use of fossil fuels is a “wicked problem” – a problem with no known solution. This is why the new field of energy transition engineering is emerging. 

Can engineers change the world?

Finding the best cure for a "hot air" hangover

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

When it was introduced in 2008, the New Zealand Emissions Trading Scheme (NZ ETS) pioneered many design features. Among these was replacing the conventional ETS cap on emission units and constraint on offset credits with an unconstrained buy-and-sell linkage to the global cap set by the Kyoto Protocol. This gave participants the option to increase their own emissions while contributing to global mitigation by buying overseas Kyoto units if that was the most efficient outcome.  The history of why this policy choice was made and how it has impacted on the system’s outcomes alongside other design features and historical events is detailed in Motu’s new working paper entitled Lessons Learned from the New Zealand Emissions Trading Scheme.

Emissions Trading in Practice : A Handbook on Design and Implementation

As the world moves on from the climate agreement negotiated in Paris, attention is turning from the identification of emissions reduction trajectories—in the form of Nationally Determined Contributions — to crucial questions about how these emissions reductions are to be delivered and reported within the future international accounting framework. 

The experience to date shows that, if well designed, emissions trading systems (ETS) can be an effective, credible, and transparent tool for helping to achieve low-cost emissions reductions in ways that mobilize private sector actors, attract investment, and encourage international cooperation. However, to maximize effectiveness, any ETS needs to be designed in a way that is appropriate to its context. 

Time Travelling on the NZ ETS

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

Both the New Zealand Emissions Trading Scheme (NZ ETS) in operation today and the world in which it is operating are markedly different from those anticipated by policy makers when designing the system back in 2007-2008. As the New Zealand government reviews the NZ ETS, history can be a powerful teacher. What might we learn by looking back in time at how and why we arrived at today’s NZ ETS?

Motu Economic and Public Policy Research has compiled an interactive timeline for the development and implementation of the NZ ETS from 2005 to 2015. It is intended as an information resource for:

• policy makers, 
• NZ ETS participants, 
• researchers, and 
• ETS practitioners from other countries who wish to learn from New Zealand’s experience. 

The Paris Climate Change Agreement: text and contexts

by Adrian Macey, New Zealand’s former Climate Change Ambassador and a Senior Associate of the Institute for Governance and Policy Studies.

When French foreign minister Laurent Fabius brought down the gavel on the Paris Agreement on 12 December 2015, the international community reached a goal that had eluded it for six years: an updated and universal climate change agreement. It owed much to France’s diplomacy over the preceding 12 months, together with efficient, firm and innovative handling of the conference itself.

Fundamental to the success of the Conference of the Parties (COP21) was the commitment at all levels from President Hollande down to engage with the broadest range of parties and non-state actors. The fruits of France’s engagement were nowhere more apparent than in the small island states’ comment in the final plenary that this was the first time they felt they had been listened to at a COP.

On the road to climate progress, “We’ll always have Paris.”

by Catherine Leining, Motu Economic and Public Policy Research Trust

This week, 195 countries reached the Paris Agreement under the United Nations Framework Convention on Climate Change.  It breaks new ground by bringing developed and developing countries under a common legal framework for achieving “nationally determined contributions” (NDCs) toward reducing greenhouse gas emissions. Detailed rules will require further negotiation, but for New Zealand, the agreement ticks some critical boxes, notably:

• collective effort toward meeting the global temperature goal, 
• reporting provisions that support transparency, 
• the options to use forestry and carbon markets to deliver upon NDCs, and 
• acknowledgment of the need for food security.  

Achieving this outcome took years of preparation culminating in two weeks of highly intense negotiations.  In the spirit of dramatic but happy endings with a twist, this post highlights key features and policy implications of the new agreement – framed by classic quotes from “Casablanca.”

“Play it again, Sam.”
The Paris Agreement builds on many precedents, extending beyond the scope of the Kyoto Protocol and reflecting outcomes from key conferences in Copenhagen (2009), Cancun (2010), Durban (2011) and Doha (2012). Its 12 pages cover the traditional suite of core issues and are complemented by a series of decisions to help give effect to the agreement and initiate more detailed rule-making. Among these decisions, Parties acknowledge the efforts to address climate change by non-government actors and the value of providing emission-reduction incentives through domestic policies and carbon pricing.

Of course, "Play it again, Sam" is not what Ingrid Bergman actually says, but it is the quote everyone remembers. In 2030, how will people remember the Paris Agreement?

“The fundamental things apply, as time goes by.”
The Paris Agreement defines three important aims:

1. Limiting temperature increases to “well below” 2 degrees C above pre-industrial levels, and pursuing efforts to achieve a 1.5 degree C limit,
2. Increasing the ability to adapt to climate change and foster climate resilience and low-emissions development without threatening food production, and
3. Making financial flows consistent with a pathway toward low-emission and climate-resilient development. 

Attempts to strengthen the global temperature goal fell short of some Parties’ hopes. Significantly for New Zealand, no sectors have been excluded from mitigation targets and forest conservation and enhancement are encouraged.

“Will I see you tonight?”  “I never make plans that far ahead.” 
The Paris Agreement establishes processes for ratcheting up mitigation ambition over time. Parties will be required to put forward progressively more ambitious NDCs every five years. Developed countries must include economy-wide absolute emission reduction targets, whereas developing countries have the flexibility to transition toward that form of target over time. The agreement provides for a “global stocktake” of progress and goals every five years starting in 2023.

The agreement also encourages all Parties to develop “long-term low greenhouse gas emission development strategies” by 2020. New Zealand could take up this invitation, creating collaborative processes designed to harness expertise, exchange sectoral perspectives and build cross-party support for the outcome.  Over the past two years, Motu’s Low-Emission Future Dialogue has identified a range of potential transitional pathways and stakeholder processes that could be useful for this effort.

 “Last night we said a great many things.”
The aspirational goals of the agreement have not (yet) been matched by countries’ mitigation targets.  Collectively, countries’ intended NDCs tabled to date would align with a pathway to 2.7 degrees C.  In the supporting decisions, Parties identify a mitigation gap of 15 gigatonnes of GHG reductions needed by 2030 to stay on track for 2 degrees C.

While the Paris Agreement will be legally binding, countries’ NDCs themselves sit outside of the agreement and will be enforced through national legislation or policy. This was a requirement for ratification by some countries (notably the United States). The consequences for non-compliance with the Paris Agreement will be facilitative, not punitive. As a result, whether countries actually deliver on their NDCs will depend on domestic political will and international peer pressure. In New Zealand’s case, the NDC is not inscribed in legislation, and it will be interesting to see how the government reflects the obligation in the budget.

To help increase mitigation ambition pre-2020, Parties have encouraged voluntary cancellation of surplus Kyoto units by both Parties and non-Party stakeholders.  Five EU countries set an example by cancelling 635 million Kyoto units.  Other countries, including New Zealand, are relying heavily on surplus units from the first Kyoto commitment period to help meet their 2020 targets.

“Louis, I think this is the beginning of a beautiful friendship.”
Couched in language about "voluntary cooperation" through the use of "internationally transferred mitigation outcomes," Article 6 opens the door to using carbon markets with international emissions trading to help countries meet their NDCs.  The agreement also provides for development of a new mechanism to contribute to mitigation and sustainable development.  Reductions:

• must be independently verified, 
• cannot be double-counted across NDCs, 
• must be additional to what would happen otherwise, and 
• must deliver “an overall mitigation in global emissions.” 

A share of proceeds from transactions will cover administration and support vulnerable countries with adaptation.  Both public and private entities can participate. What this means in practice will depend on future rules.

Article 6 offers important opportunities for New Zealand to help achieve part of its NDC through overseas mitigation at lower cost through international linkages with the New Zealand Emissions Trading Scheme (NZ ETS) and participation in the new international market mechanism.  New Zealand led a Ministerial Declaration on Carbon Markets in which 17 additional countries pledged to support development of standards and guidelines to ensure the environmental integrity international market mechanisms used to support NDCs.  The government’s upcoming review of the NZ ETS will need to account for both the opportunities and uncertainties around the treatment of carbon markets in the Paris Agreement.

“If that plane leaves the ground and you’re not with him, you’ll regret it. Maybe not today. Maybe not tomorrow, but soon and for the rest of your life.”

An important new global agreement has taken flight, and whatever its shortcomings, 195 countries are on board.  Under current targets, the Paris Agreement will not deliver a safe climate.  However, its framework opens the door to that outcome – if people rise to the challenge. This will require mitigation actions by governments, businesses and households amounting to more than a “hill of beans in this crazy world.”  Future generations deserve no less.

“Here’s looking at you, kid.”

Assessing cost and creating pathways

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

As COP21 enters its final hours, I want to look at how New Zealand can progress our climate change ambitions by looking at assessing costs and creating a domestic pathway towards zero-net emissions.

This is the third and final part of my discussion about the sort of effort New Zealand should make in relation to climate change. The first was setting targets top-down versus bottom up, while the second looked at choosing the balance between domestic and global contributions and assessing fairness.

In its Fifth Assessment Report, the IPCC framed the global challenge very clearly. To limit temperature rises below two degrees Celsius, we need to achieve zero-net emissions by the end of the century AND get there fast enough to keep cumulative emissions below a ceiling which the world will exceed by 2035 under business as usual. This means that emissions that cannot be avoided are fully offset by removals through forest sinks, carbon capture and storage, or other means. Getting to net zero smarter and faster means a much, much better world for the rising generations. It is a powerful choice to make, and one that is still available to us.

Choosing a balance and assessing fairness

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



In Paris, the 21st session of the Conference of Parties to the UN Framework on Climate Change includes about 40,000 participants, including 25,000 official delegates, from nearly 200 countries. Two of the sticking points under discussion in the closing days of the conference relate to how much countries should be able to invest in mitigation overseas to help meet their own targets, and how to assess the fairness of countries' overall contributions to reducing global emissions and limiting temperature increases. Both of these issues are important to New Zealand.

This is the second part of my discussion of what this country needs to consider for a low-emission future. The first was about setting targets top-down versus bottom up and a look at assessing costs and creating a domestic pathway toward zero-net emissions will be coming soon.

How much effort should New Zealand make on climate change?

By Catherine Leining

From 30 November to 11 December 2015, governments will meet in Paris to resolve the framework for a new international climate change agreement to take effect from 2020.  New Zealand is bringing to the table an emission reduction pledge - or Intended Nationally Determined Contribution (INDC) - of 11% below 1990 emissions, or 30% below 2005 emissions, by 2030, conditional on rules for forestry accounting and use of carbon markets.

As New Zealand shapes its contribution to global mitigation, it needs to consider five factors: 

• setting targets top-down versus bottom up; 
• choosing the balance between domestic and global contributions; 
• assessing fairness; 
• assessing costs; and 
• creating a domestic pathway toward zero-net emissions. 

In this post I will examine the first factor.

Clearing the air on methane

by Zack Dorner

Agricultural emissions, caused in part by lots of cows and sheep burping, are responsible for around half of all of New Zealand’s greenhouse gas emissions. New Zealand faces “unusually high costs to cut greenhouse gas emissions” due to the large number of livestock in the country, or so the government is continuing to argue. With Suzi Kerr, I’ve just released a Motu Working Paper looking at methane emissions from NZ agriculture, which comprise 30% of NZ’s agricultural emissions (with 18% being from nitrous oxide), so it seems timely to look at some of the issues regarding methane, and hopefully clear the air on this confusing and complicated topic!

The virtue of sunlight

Guest Post by Adrian Macey, Senior Associate, Institutefor 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.

Among the many challenges climate change policy in New Zealand faces is knowing the costs and benefits of alternative pathways to a low carbon economy. The need to contribute a fair share of the international effort on climate mitigation adds a dimension that will be at the fore during the Paris climate conference in December (COP 21). 

Many factors can be taken into account in assessing transitions and contributions, but economic analysis and modelling (e.g. of mitigation potential, effects on households, on sectors, on GDP) are essential. 

The New Zealand Treasury advocates a simple burden-sharing principle for the international contribution: equal percentage GDP costs. In the government’s consultation preceding the announcement of the 2030 target and “INDC” (the international contribution) there were assertions about the relative cost of our contribution against those of the US and the EU. But neither these assertions nor the absolute cost figures were accompanied by any information with which to verify them. The full set of assumptions was not shown. Any benefits were excluded from the calculations. There was also a curious and unexplained decision to exclude forestry and agriculture from the figures (see below). 

Getting to the root of the problem with Kyoto Emission Reduction Units: Low mitigation ambition

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

In late August 2015, the Stockholm Environment Institute (SEI) released a study, accompanied by a letter in Nature Climate Change, reporting that 80% of the Kyoto Emission Reduction Units (ERUs) used by developed countries to help meet their climate change targets for 2008-2012 came from Joint Implementation (JI) projects with “questionable or low environmental integrity.” The authors concluded that JI may have contributed to increasing global emissions by 600 million tonnes of carbon dioxide equivalent compared to what would have happened otherwise. According to the Guardian, UN officials have confirmed the findings.

Some commentators have used these findings to call into question the use of international emission trading to help meet future emission reduction commitments, an issue that will be negotiated in Paris later this year. In this context, it’s important to recognise the fundamental role that weak national mitigation targets played in producing this outcome.

From Sea to Shining Sea: US Cap-and-trade Programs Showing Success on Both Coasts

By Katie Hsia-Kiung, High Meadows Research Fellow, US Climate and Energy Program, Environmental Defense Fund

When the preliminary plans for California’s cap-and-trade program were first introduced in 2010, it was quickly regarded as a groundbreaking policy due to its stringency, size, and scope. California was the ninth largest economy in the world – it has now jumped to eighth – and the Golden State’s program would soon implement the first economy-wide cap on greenhouse gas pollution in the country. But, it was not the first cap-and-trade program in the United States. In fact, ten states in the northeast had implemented the Regional Greenhouse Gas Initiative (RGGI) in 2008. Like California’s program, the RGGI system places a mandatory cap on greenhouse gas emissions and sets a corresponding price on carbon, but covering only the electricity sector. Despite the difference in scope and location of these two programs, they are both demonstrating that carbon pricing through cap-and-trade is an effective way to decrease harmful greenhouse gas pollution while allowing the economy to grow.