Three big ideas for New Zealand’s climate change target

Gareth MorganEnvironment

In our last blog on climate change issues we argued that delaying action on carbon emissions is a short term strategy which portends awful long term consequences, – economic, social and environmental. Now we will take a look at the numbers. With the Paris conference on climate change coming up in December, all participating nations have been asked to submit greenhouse gas targets to succeed those set for 2020. What should our commitment look like?

What is our current target?

Remember in 2013 NZ decided to “refine” its 2020 target to include an unconditional promise to deliver net greenhouse gas emissions goal that are 5% lower than 1990 (gross) emissions levels were. We retained the target we’d set in 2009 of a 10-20% reduction, though that’s always had an ‘out’ clause – we made that undertaking conditional on other countries joining in the reduction campaign.

Wondering what ‘gross’ and ‘net’ means? Gross emissions include emissions from using fossil fuels and from the agriculture sector. Net emissions includes carbon emitted and absorbed from land-use change and forestry.

How are we going?

At the moment we are doing great. From 1990-2013 our gross emissions rose 21%. That may not sound good, but due to the tricky nature of carbon accounting, under Kyoto we subtract off the extra carbon stored in forests planted since 1990. Conveniently for the Government, it happens there was a bulge of forest plantings in the mid-1990s. This is how we met our first commitment of keeping net emissions down to 1990 levels over 2008-12, despite gross emissions running riot.


However, from now on the picture changes pretty rapidly. This graph was published in MfE’s 2014 Briefing to the Incoming Ministers and sets out our challenge nicely. The dark blue is our gross emissions, the light blue line is the emissions that count under Kyoto (our gross emissions minus carbon sequestered each year in the forests planted post-1990 as they grow). The red line is where we need to be – “CP1” was the old Kyoto agreement (which we scraped in on) and “Transition Period” is the Government’s target of a 5% reduction in net emissions by 2020.

Thanks to forestry, by 2012 we did fine. But as we start to harvest those forests post 2012, our net emissions go through the roof. By 2020 they are projected to be well above 1990 levels – so look sick compared to our target of 5% below 1990 levels. By 2027 our gross emissions will be around 36% above 1990 levels, and thanks to all our post 1990 forests being cut down our net emissions will be even higher.

In summary, the outlook looks crap. We are miles away from where we need to be. Are we fooling ourselves or what?

The Importance of forestry

One reason it’s so bad is that as soon as those pine forests are felled the current Kyoto approach counts them as emissions – as if we’d burnt the trees the next morning. If the forests are replanted then the carbon store slowly builds up again. This treatment of forestry under Kyoto was initially intended to keep carbon accounting simple, but it is something our Government should be questioning in Paris – after all it depends what we do with the timber – building and furniture sequesters the carbon (at least temporarily), and if we are exporting logs then it’s wrong to count these as emissions by New Zealand. It depends on what happens to the wood in Japan, Korea, China or wherever they end up – and even then it should be part of their emissions arithmetic not ours. After all, Saudi Arabia doesn’t have to pay for the emissions of the oil it exports.

And methane

Another issue that New Zealand should question anyway is the treatment of methane. Methane is a short-lived gas – making it fundamentally different from other greenhouse gases. It is very potent, but only for a “short” time – in climate terms at least. So while we need to get global methane emissions under control and reduce them, we don’t have to reduce them to zero like we do with carbon dioxide, each tonne of which when emitted adds to the total concentration in the atmosphere pretty much, forever. Methane only adds to atmospheric concentration of greenhouse gases temporarily.

But under the current approach, methane gets treated like it has a similar impact as carbon dioxide, lingering on in the atmosphere interminably – it doesn’t. The currently accepted methodology for measuring methane in terms of carbon dioxide “equivalents” puts the potency of methane at 25 times that of carbon dioxide, but there has been quite a bit of research done to suggest that grossly overstates the long term damage methane does, given its decay rate. Pressing this point home could be a major win for New Zealand, and take the heat off our farmers whose main way to reduce methane at the moment is to shoot their stock.

Given how far astray we are off getting anywhere near the required greenhouse gas reductions, we need our officials resorting to all the tricks in the book we can come up with to get the rules changed! Or of course we could just stop playing games, get the appropriate policy settings in place and take this stuff seriously. A bit of both is needed.

The global carbon budget

Back to the future – Minister Tim Groser has called for submissions on what target we submit to the Paris conference for the period beyond 2020. So that you get this in context, the latest IPCC report concluded that to prevent the global temperature rising more than 2 degrees, global emissions need to fall 40-70% by 2050. Why is 2 degrees the magic number? It isn’t, but global leaders have collectively agreed to stay under it to avoid serious harmful environmental damage. Many scientists say 2 degrees isn’t ‘safe’ – Pacific Islands will still go under water, we may lose the West Antarctic ice sheet, and more, which is why many vulnerable countries are calling for tightening the goal to 1.5 degrees. Under ‘business as usual’ the IPCC estimates warming of 2.6°C to 4.8°C by the end of the century – that could get nasty.

So the task is enormous. Government-set targets are hard enough to get political commitment to, let alone designing credible policies, conservation measures, and new technologies that will actually deliver on those ambitions. The latest IPCC report calculates the global carbon limit – the total amount of carbon dioxide we can release into the atmosphere – to be approximately 3 trillion tonnes of CO2 (or 1 trillion tonnes of carbon, depending on which units you measure it in). This limit is the roof beyond which you can probably kiss goodbye to 2 degrees. As the infographic below shows, since the start of the industrial revolution we have chewed through about two-thirds of that total.


From the MfE consultation document


Global emissions have been growing at 2.5% pa, and at our current rate we will exceed the “two degrees” limit by around 2035. The size of the challenge before us is enormous – to keep within the limit we really have to get global emissions under control by 2020 at the latest and reduce them about 5% per year from there.

Change is expensive – but delay is more expensive

The Government’s consultation document estimates the cost of different targets, and it makes for a gloomy picture. However, as noted in our previous blog these estimates don’t include the benefits of change, or even the costs of inaction. They also don’t include any possible change in the treatment of methane and forestry as we have discussed above. In fact the scenarios used in the consultation document are totally unrealistic – e.g. they exclude forestry as an option for reducing our carbon emissions – the reasoning being that the rules around it are too uncertain.

The costs of inaction are crucial – in fact the consultation report gives us some understanding of the costs of inaction so far. For example, if we aim for a 20% reduction in emissions between 1990-2030, by 2027 every household would be $1,400 pa worse off. However, $1,270 of this is the cost is the cost of maintaining our existing target of 5% reduction through to 2030 – the difference of a higher target is only $130 per year. If Government’s plan already was to truly meet their existing 5% target, we’d already be being hit up for the $1,270 pa. But because our government is failing badly here, the cost of catch-up is the bulk of what lies ahead.

The Government’s plan to achieve their 2020, 5% reduction target seems to rely on tricky carbon accounting. Over the last few years it appears that the Government has been hoovering up cheap and shonky international carbon credits. These credits were created as a way to improve funding to the Third World to reduce their emissions but the arrangement has been abused. In short, the developing world created a huge supply of these units (many were of questionable quality), while the commitments by developed countries to emissions reductions was so small that the price for these credits has collapsed. So for us – a country that can’t even meet the commitment it has made – we have had a windfall – we can just buy sufficient credits for nicks. For example, credits under the ‘Clean Development Mechanism’ have collapsed from €14/t in 2011 to less than €0.5/t since 2012. Only by countries committing to larger reductions will the price of a credit rise.

If and when the price of credits reflects the serious cost of emissions reduction being demanded by the world, then that growing gap between our target and our actual net emissions will become more and more expensive to bridge. For now, who cares?

This is what has driven our government’s to weaken the commitment to emission reductions.  Until the big economies demand it, one is truly being a martyr. Better to all go to hell in a handbasket is the idea.

So what should our target be?

We all know that sailing along in blissful ignorance of the reality of climate change is pretty dumbass. But the dilemma of being suckered into sacrifices when everyone else freeloads is very significant in the world of real politik.

And of course an economist looks at this and sees that at some stage we will have to get emissions down and possibly really, really fast. So aren’t we better – even with the gaming going on internationally – to start the process at least, rather having no policy apart from fortuitous forest credits and a windfall on the credits market to wing our way forward?

We would say yes, that a risk-minmising strategy would still seek to reduce the sudden sacrifice that becomes more and more likely the longer the world-at-large delays facing up to the carbon concentration issue. It still makes sense to look beyond the end of our noses and prepare for the inevitable – ie; invest in a least-cost scenario of carbon mitigation.

The question then becomes – what is that strategy?

Here are three big ideas for New Zealand’s target:

  • NZ should exclude methane emissions from our target, or at least establish a different target for that gas.
  • New Zealand should argue for sound scientific rules around the treatment of forestry to ensure we are suitably rewarded for the carbon in the wood we export.
  • If these changes were accepted by the international community, that would free us to focus our target on getting serious about reducing carbon dioxide emissions. The question is by how much? It all depends on cost, and the consultation document costings are no help to us here. A target of a 40% reduction in net carbon dioxide emissions by 2030 (from a 1990 baseline) would be in line with the EU target. This would also put us on our way to a target of zero net carbon dioxide emissions by 2050, which is consistent with what developed countries need to deliver in the IPCC scenario for 2 degrees. This wouldn’t mean weaning ourselves off fossil fuels entirely, however it would mean that any fossil fuels we burn would have to be offset (e.g. by forestry).

Like any proposal, the costs of this approach – either in toto or in part need a thorough evaluation. This is why it would be good to have more time to debate our target. However, the costs of this proposal should be far lower than the costs in the consultation document, assuming the international community accepts the other changes we have suggested to methane and forestry.

The final blog in this series will look at what this target would imply for our domestic policies. How could we achieve a goal of zero carbon emissions by 2050?

You can take part in the Ministry for the Environment’s consultation here.

If you are pushed for time, our friends at Generation Zero have prepared this handy little online submission form.
Three big ideas for New Zealand’s climate change target was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.