Yesterday, I joined a panel at the Climate Change & Business Conference to talk about New Zealand’s Nationally Determined Contribution – our NDC. Under the Paris Agreement, countries must produce targets for emission reductions, set policies consistent with their targets, and report on their progress. Those targets, chosen by each country, are their Nationally Determined Contribution toward reducing global warming.
The report’s title seemed like a good starting point.
New Zealand’s latest NDC took a lot of criticism for setting a relatively small tightening on its prior NDC. Target emissions in 2035, by the latest NDC, are now meant to be 51-55% below 2005 gross emissions.
Climate change conferences usually call on everyone to be more ambitious. And everyone at these sorts of conferences agrees. And everyone applauds. And everyone goes home.
But what is the point of setting a far more ambitious target for a country that was not really on track to meet its prior one?
Projections from New Zealand’s first Biennial Transparency Report show emissions are not on track for 2030’s Paris targets. 2035’s targets aren’t yet assessed but likely won’t be on track either.
Those projections do not include a few recent policy changes, including a new ‘and boy, we mean it this time’ commitment to start pricing agricultural methane by no later than 2030. But there will still be a substantial gap.
But NZ is hardly alone here.
G20 members overall will likely miss their NDC targets for 2030; those projected to meet their 2030 targets tended not to strengthen their targets much. At least according to the UN’s “No More Hot Air” report.
G20 NDCs are “far from” what’s needed even for 2 degrees. And those are just the targets.
Promising something even more unlikely to be achieved would just be more hot air. And surely hot air is part of the problem we’re trying to solve.
So rather than damning the targets for being insufficiently ambitious, perhaps it’s better to focus on policies that could get us closer to where we need to be – and to be a bit more realistic about those targets.
On current trajectories, we will hit 2030 with much of the G20 having failed to meet their targets and the 1.5-degree interpretation of Paris being completely blown out. Everyone will apologise and promise to try harder for the next period.
It’s worth remembering what countries signed up to in the Paris agreement. Signatories are required to prepare, communicate, and maintain successive NDCs – the plans for the emission reductions they aim to achieve over coming years. They are required to pursue domestic mitigation measures aimed at achieving those targets, and to report transparently on progress.
Meeting the actual targets is not a legal obligation under Paris.
And it’s hard to see how they could be. Countries are meant to present their “highest possible ambition” as their Nationally Determined Contribution. Making it legally binding would be like asking an employee to set out their most ambitious project plan that assumes everything goes right, then firing them if they don’t meet that deadline. If targets are to be legally binding, countries would set out NDCs that are more realistically achievable, rather than those representing their highest possible ambition.
The International Court of Justice recently set an advisory judgment that poorer countries harmed by rising sea levels and climate change may have standing to sue developed countries that have not done enough to mitigate climate change.
But the opinion is advisory and does not create jurisdiction. Big non-consenting states aren’t justiciable – they have to agree to be sued. And there’s no enforcement arm.
Where does that leave us for New Zealand’s NDC?
I think Dave Frame got things basically right back in January. We should have separated long-lived from short-lived gasses not only because they’re different things, but also so our NDC could be more aligned with the policy instruments we have in place.
New Zealand has an excellent Emissions Trading Scheme covering emissions outside of agriculture. It can be used to drive covered-sector net emissions down – though with a caution that how the ETS measures net emissions is not the same as how Paris measures net emissions.
But we may not even have methane pricing in before 2030. And if other larger agricultural producers do not price methane, New Zealand’s doing so on its own will be difficult and not particularly effective in reducing global emissions.
We should have aimed for targets that can more plausibly be reached than ones that nobody would bet on even at odds. And we ought to have set a conditional tier linked to comparable effort elsewhere on methane.
But we still can, and should, set a more credible policy path.
The panel’s moderator asked me what success looks like.
Success is building and maintaining political support, both in NZ and internationally, for continued reductions in net GHG emissions to avoid potentially catastrophic climate outcomes. Maintaining that support requires not causing catastrophic economic outcomes.
Maintaining support is hard enough in good times when medium-term consequences of climate change can be front-of-mind. The prospect of Russia invading Europe doesn’t make climate change any less important but can make it less of a political priority.
Some problems are small enough that a bit of inefficiency in dealing with them can wash out. This problem is bigger than that. If reducing emissions in one sector costs $60/tonne but $600/tonne in another sector, spending resource on the latter means doing far less good than we need to, per dollar spent. And if we make the entire effort more costly than it needs to be, we risk breaking political support for necessary continued efforts – and then we wind up with both bad economic outcomes and bad climate outcomes.
This gives us one measure of success. The cost of avoiding the next tonne of net emissions should not vary considerably across the world, or across sectors; carbon prices are a good signal. High domestic carbon prices aren’t a measure of success if the same amount of effort could have brought greater net emission reductions elsewhere.
Domestically, success means strengthening the ETS so that it can do its job properly, and so people do not second-guess its durability. It’s how we can drive net emissions down most cost-effectively. That should involve:
New Zealand’s latest NDC took a lot of criticism for setting a relatively small tightening on its prior NDC. Target emissions in 2035, by the latest NDC, are now meant to be 51-55% below 2005 gross emissions.
Climate change conferences usually call on everyone to be more ambitious. And everyone at these sorts of conferences agrees. And everyone applauds. And everyone goes home.
But what is the point of setting a far more ambitious target for a country that was not really on track to meet its prior one?
Projections from New Zealand’s first Biennial Transparency Report show emissions are not on track for 2030’s Paris targets. 2035’s targets aren’t yet assessed but likely won’t be on track either.
Those projections do not include a few recent policy changes, including a new ‘and boy, we mean it this time’ commitment to start pricing agricultural methane by no later than 2030. But there will still be a substantial gap.
But NZ is hardly alone here.
G20 members overall will likely miss their NDC targets for 2030; those projected to meet their 2030 targets tended not to strengthen their targets much. At least according to the UN’s “No More Hot Air” report.
G20 NDCs are “far from” what’s needed even for 2 degrees. And those are just the targets.
Promising something even more unlikely to be achieved would just be more hot air. And surely hot air is part of the problem we’re trying to solve.
So rather than damning the targets for being insufficiently ambitious, perhaps it’s better to focus on policies that could get us closer to where we need to be – and to be a bit more realistic about those targets.
On current trajectories, we will hit 2030 with much of the G20 having failed to meet their targets and the 1.5-degree interpretation of Paris being completely blown out. Everyone will apologise and promise to try harder for the next period.
It’s worth remembering what countries signed up to in the Paris agreement. Signatories are required to prepare, communicate, and maintain successive NDCs – the plans for the emission reductions they aim to achieve over coming years. They are required to pursue domestic mitigation measures aimed at achieving those targets, and to report transparently on progress.
Meeting the actual targets is not a legal obligation under Paris.
And it’s hard to see how they could be. Countries are meant to present their “highest possible ambition” as their Nationally Determined Contribution. Making it legally binding would be like asking an employee to set out their most ambitious project plan that assumes everything goes right, then firing them if they don’t meet that deadline. If targets are to be legally binding, countries would set out NDCs that are more realistically achievable, rather than those representing their highest possible ambition.
The International Court of Justice recently set an advisory judgment that poorer countries harmed by rising sea levels and climate change may have standing to sue developed countries that have not done enough to mitigate climate change.
But the opinion is advisory and does not create jurisdiction. Big non-consenting states aren’t justiciable – they have to agree to be sued. And there’s no enforcement arm.
Where does that leave us for New Zealand’s NDC?
I think Dave Frame got things basically right back in January. We should have separated long-lived from short-lived gasses not only because they’re different things, but also so our NDC could be more aligned with the policy instruments we have in place.
New Zealand has an excellent Emissions Trading Scheme covering emissions outside of agriculture. It can be used to drive covered-sector net emissions down – though with a caution that how the ETS measures net emissions is not the same as how Paris measures net emissions.
But we may not even have methane pricing in before 2030. And if other larger agricultural producers do not price methane, New Zealand’s doing so on its own will be difficult and not particularly effective in reducing global emissions.
We should have aimed for targets that can more plausibly be reached than ones that nobody would bet on even at odds. And we ought to have set a conditional tier linked to comparable effort elsewhere on methane.
But we still can, and should, set a more credible policy path.
The panel’s moderator asked me what success looks like.
Success is building and maintaining political support, both in NZ and internationally, for continued reductions in net GHG emissions to avoid potentially catastrophic climate outcomes. Maintaining that support requires not causing catastrophic economic outcomes.
Maintaining support is hard enough in good times when medium-term consequences of climate change can be front-of-mind. The prospect of Russia invading Europe doesn’t make climate change any less important but can make it less of a political priority.
Some problems are small enough that a bit of inefficiency in dealing with them can wash out. This problem is bigger than that. If reducing emissions in one sector costs $60/tonne but $600/tonne in another sector, spending resource on the latter means doing far less good than we need to, per dollar spent. And if we make the entire effort more costly than it needs to be, we risk breaking political support for necessary continued efforts – and then we wind up with both bad economic outcomes and bad climate outcomes.
This gives us one measure of success. The cost of avoiding the next tonne of net emissions should not vary considerably across the world, or across sectors; carbon prices are a good signal. High domestic carbon prices aren’t a measure of success if the same amount of effort could have brought greater net emission reductions elsewhere.
Domestically, success means strengthening the ETS so that it can do its job properly, and so people do not second-guess its durability. It’s how we can drive net emissions down most cost-effectively. That should involve:
1. Capping the number of unbacked units that the government will issue or allocate between now and 2050;
1. Being willing to back additional new NZU with credible foreign-government ETS credits if NZU prices are higher than prices abroad – you get more emission reduction per dollar spent that way, while avoiding bad economic outcomes from outpacing international carbon prices. Article 6 provides some options;
1. Reforming industrial allocations to peg to product-specific emissions intensity, so those allocations drop if foreign companies become more efficient – and considering Carbon Border Adjustment Mechanisms;
1. Setting a strong principle that proven, durable sequestration will be awarded NZU – so investors in new sequestration-tech are only betting on the tech, not on policy. Getting this right could help in going net-negative, to offset prior emissions.
Success means being responsive as new opportunities and challenges emerge with rising carbon prices and new tech development.
A decade ago, it seemed impossible that solar panels could be a more profitable use of a paddock than a dairy or sheep farm. But technology moves so quickly. Solar evangelist Casey Handmer says that every doubling in solar production drives solar costs down by about 40%, and solar production is doubling every two to two and a half years. That creates a self-reinforcing cycle in which greater production of solar panels brings down panel prices by enough to fuel demand for more solar panels, which drives cost down further.
Even without methane charges, drops in the cost of solar generation combined with higher cost of coal-generation provides high-powered incentives to shift paddocks from producing meat, dairy, wool and methane to producing energy. Unfortunately, New Zealand too often makes it hard to put solar panels on paddocks, with consents continuing to be tied up. We can’t throw sand in these gears. It's too important.
It also means actually following through with methane charges – ideally at a low level, with higher levels conditional on other countries also pricing biogenic agricultural methane. If global methane emissions reduced to lower stable levels, temperatures would reduce as well.
And maintaining political support along the way also requires keeping carbon policy focused on the lowest-cost ways of avoiding the next tonne of net emissions. If it is, or is perceived as being, about driving other agendas, that support will falter.
Finally, it also means preparing adaptation measures – not instead of continued action in reducing net emissions, but in recognition that the world is likely to miss 1.5 degrees regardless of what NZ does.
Getting this right requires less hot air about our targets, and a bit more focus on the policy settings.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was sourced HERE
Success means being responsive as new opportunities and challenges emerge with rising carbon prices and new tech development.
A decade ago, it seemed impossible that solar panels could be a more profitable use of a paddock than a dairy or sheep farm. But technology moves so quickly. Solar evangelist Casey Handmer says that every doubling in solar production drives solar costs down by about 40%, and solar production is doubling every two to two and a half years. That creates a self-reinforcing cycle in which greater production of solar panels brings down panel prices by enough to fuel demand for more solar panels, which drives cost down further.
Even without methane charges, drops in the cost of solar generation combined with higher cost of coal-generation provides high-powered incentives to shift paddocks from producing meat, dairy, wool and methane to producing energy. Unfortunately, New Zealand too often makes it hard to put solar panels on paddocks, with consents continuing to be tied up. We can’t throw sand in these gears. It's too important.
It also means actually following through with methane charges – ideally at a low level, with higher levels conditional on other countries also pricing biogenic agricultural methane. If global methane emissions reduced to lower stable levels, temperatures would reduce as well.
And maintaining political support along the way also requires keeping carbon policy focused on the lowest-cost ways of avoiding the next tonne of net emissions. If it is, or is perceived as being, about driving other agendas, that support will falter.
Finally, it also means preparing adaptation measures – not instead of continued action in reducing net emissions, but in recognition that the world is likely to miss 1.5 degrees regardless of what NZ does.
Getting this right requires less hot air about our targets, and a bit more focus on the policy settings.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was sourced HERE
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