The Zero Carbon Bill is a critically important piece of legislation for New Zealand. Even though the importance of controlling global warming has become increasingly clear and more widely understood over the past 30 years, to date we have not set meaningful targets to significantly reduce emissions and we have not had any mechanisms in place that seem to have had any significant effect on driving reductions in emissions. Hence our net emissions have just continued to increase through most of this period.
It is really important that a workable form of this Bill, that will allow us to seriously address climate change, comes into law reasonably promptly.
Role of the Climate Change Commission
To be effective, the Commission will need to be open to new opportunities and to taking steps that may be considered fairly radical, including driving reasonably rapid reductions in emissions during the initial period that the legislation is in place. Hence commissioners need to not have vested interests that work against this.
Besides the items outlined in the Discussion Document, there are strong arguments for the Commission to also advise the government on the following:
What approaches should be used to allow targets to be met. (See later.)
How revenue from carbon charges can be re-distributed to the population in an appropriate and equitable manner. (See later.)
Because of the very wide range of information and knowledge required, it is recommended that the Commission be backed up by an advisory panel. This panel could then provide the Commission with more detailed information on developments in climate science, how fast change should be (rapid change in earlier years makes sense in reducing overall costs and damage), if, how and when targets need to be reviewed, figures for the cost of damage from emissions, estimates of emissions charges needed to meet targets, ways of achieving emissions reductions and how to re-distribute revenue from emissions charges.
The UK Commission has an adaptation subcommittee. However, there is an argument for this to be a separate group that works with the both the government and Climate Change Commission, as needed, advising on possible ways of adapting to change.
It would also work with local councils, other local bodies, businesses and the agricultural sector to assist in appropriate adaptation being made in a timely and, where possible, also in a cost-effective manner.
The Discussion Document is still quoting targets in which net emissions in future years are compared with gross emissions in base years (e.g. P 21). We need to immediately stop using this confusing and highly misleading way of presenting targets. (See for example, final report by previous Parliamentary Commissioner for the Environment, Dr J Wright, Stepping stones to Paris and beyond, 2017.)
When expressed in consistent net-net terms, the targets our government has recently set are appallingly feeble.
5% below 1990 levels by 2020 on a consistent net-net basis is 78% above 1990 levels by 2020.
30% below 2005 levels by 2030 on a consistent net-net basis is 7% above 2005 levels by 2030.
50% below 1990 levels by 2050 on a consistent net-net basis is 6% below 1990 levels by 2050.
The second target above is our target submitted under the Paris Agreement. Under this agreement we are not actually undertaking to make any reduction in our emissions between 2005 and 2030 when measured in a consistent net-net manner. We are actually undertaking to increase our net emissions by 7% over this period. The Commission needs to urgently review and drastically improve this target if the government has not already done so prior to the Commission becoming established.
It will provide greater clarity and send a strong signal on where we need to go, if the government specifically includes the zero net emissions by 2050 target within the proposed legislation. The Climate Change Commission can then later recommend that this be amended, if needed.
It is really important that we do not hide our fossil fuel emissions behind tree plantings and other steps that reduce emissions on a net basis. Hence the Commission may also need to track emission changes measured on a gross-gross basis. Fossil fuel emissions need to be rapidly reduced, regardless of how many trees are planted.
Approaches to meet targets
There are a range of different steps that could be taken to assist in reducing emissions and meeting targets. The Climate Commission should advise the government on which of these it considers should be used.
For example: Compared to the NZ ETS, a simple carbon charge would be less expensive to operate, easier to administer and comply with, and would make it simpler to re-distribute income received to the population.
If done correctly, following the German model and giving electricity generated from renewable resources priority access to the grid over electricity generated from fossil fuels, possibly also with a feed-in tariff arrangement, would very likely see New Zealand move to close to 100% renewable electricity within around 5 years, with stations like Huntly retired to backup status. This is far faster than the government’s current target of 100% renewable by 2035.
The ripple control system, which used to be able to reduce peak electricity demand by turning off almost all electric hot water systems in the country, has been allowed to run down since the reforms in the electricity market of the late 1990’s. Taking the necessary steps to reinstate it would help facilitate the move to 100% renewable electricity.
The move to 100% renewable electricity can also be assisted by providing incentives or introducing requirements related to installation of domestic solar water heaters and photovoltaic panels, and to building new dwellings in which passive solar will provide a significant part the heating requirements.
A date of say 2025 could be set for the complete phase-out of all use of coal for basic heating and steam generation. Coal users would then be required to move to other fuels prior to this date.
Controls over the ratio of numbers of various types of vehicles imported (standard fossil fuel powered, hybrid, fully electric), together with other incentives to make electric vehicles a more attractive option, could result in a quite rapid reduction in transport-related emissions. For example, in Norway around one third of new vehicles sold are now electric. This is very much higher than in New Zealand.
People in cities, e.g. Auckland, spend a lot of time and money commuting by car because public transport services are not adequate. This urgently needs to be addressed. For example, extending Auckland’s train system to serve the North Shore, Mangere and the airport, and the Pakuranga/ Botany/ Howick area would likely result in a major reduction in vehicle use and emissions generation.
Back in the past there were rules that required trains, rather than trucks, to be used for carrying freight over certain longer routes. This sort of approach could lead to significant reductions in emissions. Better train services between major centres would also provide people with an alternative to air travel.
Emissions directly related to domestic energy use can be reduced by providing incentives or introducing requirements to move away from the use of fossil fuels for heating and cooking.
Agricultural emissions can be reduced in a number of ways. For example, move to breeds of cattle that produce less methane, fence off streams/ wet areas and create hard stand areas for cattle to reduce nitrous oxide generation, move to more organic farming methods and plant steeper areas with tree crops or native bush. Significant reductions in agricultural emissions could be achieved quite rapidly by requiring farmers to take some of these steps within a given timeframe.
The large number of animals currently being raised in New Zealand’s agricultural sector, many as a source of meat, also makes a significant contribution to our country’s total emissions. We need to have a scientifically based debate regarding what is the most efficient and healthy way to produce protein for human consumption, and the negative health effects of the current high animal protein-based diet.
The current approach to controlling emissions centres on placing a charge on them. The whole field of how carbon charges are applied, and what these charges should be, requires a lot more attention. The Climate Change Commission needs to be able to advise the government on this.
Replacing the NZ ETS with a simple carbon tax would result in a system that was much less complicated, had lower compliance and administrative costs, was more transparent both to users and to the public, and made it simpler to re-distribute to the public revenue received from charges. (See later.)
The approach that is currently planned for controlling emissions under the NZ ETS, as inferred from the Discussion Document, is that a fixed number of emissions units will be made available over a given period. A more effective way of meeting targets is likely to be by placing a specific charge on emissions during a specific time period. Under this approach:
Businesses will not be able to buy emissions units when prices are low, “bank” them, and then use them when unit prices increase.
The charges that are estimated to be required to achieve targets can be specifically set. This gives more clarity to businesses compared to the current fluctuating prices for units available through carbon markets.
Charges can also be adjusted to reflect the cost of the damage emissions are creating, the so called social cost of carbon. Two recent papers have placed this at around NZ$300 a tonne of CO2-e (See, for example, F Moore and D Diaz, Nature Climate Change, 5, 127-131, 2015.). When emissions charges are lower than the damage figure, then emitters are being subsidised for the damage they are causing.
The problem is avoided of how to handle the situation where all units allocated for use in a specified time period are used up prior to the end of this time period.
The free emissions units currently made available to trade exposed businesses will need to be phased out. Some of these businesses currently receive enough of these units to cover a large part of their total emissions. This drastically reduces their incentive to take action on reducing them.
Reasonably rapid changes in emissions during the early period makes sense because these first reductions are the easiest to make, and overall costs are reduced. However, to achieve this, carbon charges are going to have to rise reasonably rapidly to significant levels – higher than is suggested by Vivid’s modelling of $76 to $100 per tonne CO2-e over the 2018 to 2050, as quoted on P28 of the Discussion Document.
For example, leading climate scientist, James Hansen, who previously held a leading role with NASA, has said that to avoid possible irreversible changes in the earth’s temperature, coal emissions need to be completely phased out in the developed world by 2025 and in the developing world by 2030. Our understanding is that to provide the financial incentive to achieve this, carbon charges will need to rise reasonably rapidly to at least $100 a tonne and the number of free emissions units currently made available to trade exposed businesses using coal will need to be rapidly reduced towards zero.
Carbon charges also need to be phased in for overseas freight and transport.
The Discussion Document mentions economic growth, as measured by GDP, several times. GDP is not a very good measure of where we want to go. We want a society in which climate change has been brought under control, and in which people live healthy, rewarding lives in a sustainable manner, where there are good education opportunities and fulfilling jobs available. This can be achieved without always having to aim for an increase in GDP.
Redistribution of revenue
Currently no mechanism is in place to redistribute revenue from carbon charges to the general population. The emissions charges needed to drive change at the rate required are going to need to be high enough to lead to significant increases in the costs of some goods and services. To make this workable there needs to be a method for returning funds to the population. Without this, the legislation is unlikely to be politically sustainable.
We recommend that the Climate Change Commission advises the government on this matter, with input also coming from the Advisory Panel.
One suggestion from overseas for recycling the revenue is to introduce a citizen’s dividend which is paid regularly to all adults, with a lesser amount to children over a specified age.
Recent literature has shown how income inequality is linked to mental health problems, drug use, physical health and obesity issues, low education levels and illiteracy, teenage births, violence and crime, gaol rates and other problem areas. (See, for example, Wilkinson and Pickett, The Spirit Level, 2009.) New Zealand’s income inequality has increased dramatically over the past 50 years and is now higher than in many other countries. This could be an excellent opportunity to change direction and move towards a fairer society.
Transparency and accountability
All reports from the Climate Change Commission, the Advisory Panel and the Adaptation Group must be fully accessible by the public.
International agreement was reached in Paris (December 2015) on “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels”. However, the 2 °C figure was not arrived at as a result of scientific study, and there is now increasing scientific evidence that this amount of warming would be extremely dangerous and perhaps catastrophic for mankind and many other living creatures.
It is therefore critically important that, despite possible strong political lobbying and opposition from some vested interests, the Commissioners recommend actions that will allow New Zealand to make an appropriate contribution, and ideally also play a lead role, “to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels”. Achieving this will require a quite rapid reduction in our emissions.
It is also critically important that our Members of Parliament have the courage to implement the required climate change policies to achieve this, despite short-term political risks. They have our support, and that of many, many New Zealanders.