News » Overhauling NZ’s Emissions Trading Scheme
Overhauling NZ’s Emissions Trading Scheme
Oct 28, 2015
The recent report from the Ministry for the Environment has lead the Green Party’s co-leader, James Shaw to call for an overhaul of NZ’s Emissions Trading Scheme (ETS) and to include agriculture.
“In NZ, 48% of non-CO2 greenhouse gas emissions are from agriculture: methane (30%) and nitrous oxide (18%). This is a very high proportion compared with the rest of the developed world and has implications for the design of our ETS,” said Suzi Kerr, Senior Fellow at Motu Economic and Public Policy Research, a not-for-profit, non-partisan research institute.
Motu has undertaken considerable work over the last year on how the ETS was created and our experience to date – the good thinking and the mistakes and oversights. Motu researchers and an international team are writing a handbook on what countries can learn from existing ETS experience worldwide.
“Examining the history of the ETS and international successes and failures in this area will provide a sound basis for informed discussions on changes to New Zealand’s ETS,” said Dr Kerr.
“We need ETS settings that will work regardless of international agreements and carbon markets. We need higher emissions prices and ways for companies to make investments with more confidence. This will happen only with more policy stability.”
Dr Kerr mentions the Afforestation Grant Scheme as an example of an instrument that protects investments from policy uncertainty. This scheme is a programme by the Ministry of Primary Industries to help establish about 15,000 hectares of new forest plantations between 2015 and 2020.
The role of agriculture is one aspect of the ETS that needs to be revisited.
“Recent dairy prices illustrate that farmers face volatile international commodity prices – these prices do affect New Zealand as a whole but farmers bear the brunt. Similarly our modelling shows that farmers may see much larger gains or losses from international agricultural greenhouse gas policy than the country as a whole,” said Dr Kerr. “Like other businesses, farmers cannot invest effectively in mitigation if they face an unstable policy environment.”
“Motu is proposing a dialogue to discuss the options and contribute to a well-informed ETS review process,” said Dr Kerr. “We believe it would be valuable to bring together farmers, other businesses, researchers, and policy-makers to ensure New Zealand has a practical, stable, working ETS that is a model for other countries.”