Author: nzcpe

New Zealand’s productivity commission charts course to low-emission future

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According to a recent report, New Zealand will need to increase renewable electricity generation, plant more trees and continue switching to electric transport more rapidly to achieve its zero carbon goal by 2050.

New Zealand has set itself a target of becoming carbon-neutral by 2050.

A recent report issued by the New Zealand Productivity Commission has found that this is an achievable goal, even under modest forecasts of technological progress and increases in carbon price. 

Rising emissions

New Zealand already had a goal of reducing greenhouse gas emissions to 50% below 1990 levels by 2050. That target had been in place since 2002, but emissions continued to rise through the 2000s.

An emissions trading scheme, which began operating in 2008, failed to stop the increase. A flood of imported cars increased New Zealand’s vehicle fleet and its emissions by 20% in just the past four years. A “wall of timber”, expected after 2020 as existing plantations are harvested, would further greatly increase net emissions under current carbon accounting rules.

Agriculture is responsible for an unusually large proportion — just under 50% — of New Zealand’s emissions. These emissions were rising too, especially long-lived nitrous oxides released by effluent and synthetic fertilisers.

A key part of New Zealand’s plan to meet global obligations had always been international carbon trading. However, in the Ukraine hot air scandal, low-integrity carbon credits were imported at rock-bottom prices. International trading was therefore suspended in 2015.

Aiming for zero

The Paris climate agreement made New Zealand’s “50 by 50” target — which the country wasn’t on track to meet — look distinctly weak. It has now become clear that only zero net emissions can stabilise temperatures, at any level, in the long run.

It was in this context that New Zealand’s previous government asked the Productivity Commission to examine the “opportunities and challenges of a transition to a lower net emissions economy”. A few months into their work, the government changed and the new climate change minister, the Greens’ James Shaw, reinforced the urgency of the inquiry by asking the commission to consider the possibility of a net zero target for 2050.

The resulting 500-page report, now available in draft form, is a huge and comprehensive piece of work. From the very beginning, the commission knew what they were up against, writing that:

…the shift from the old economy to a new, low-emissions, economy will be profound and widespread, transforming land use, the energy system, production methods and technology, regulatory frameworks and institutions, and business and political culture.

The impact of widespread consultation, evidence and research is clear throughout. Although it is only advice, the report is a valuable resource for all future work on emissions reduction. It joins a chorus of similar (but much less detailed) studies issued recently.

Cost of carbon

The report finds that the carbon price required to get to zero net emissions in 2050 is fairly modest. In one model, it rises from its present price of NZ$21/tonne to NZ$55 in 2030 and NZ$157 in 2050 — within the NZ$100-250 range of global estimates consistent with the goal of keeping global temperature rise below 2℃. In other words, New Zealand does not have an unusually difficult decarbonisation challenge.

Although the report covers all main aspects of society and economy, there are three big changes that stand out:

  • Transport must be electrified rapidly (in some models, nearly all light vehicles entering the fleet must be zero-emission by the early 2030s)
  • Huge numbers of trees – up to an extra 2.8 million hectares, tripling the current plantation estate – must be planted to absorb carbon dioxide. These trees have to go somewhere, probably on sheep and beef farms
  • A lot of new renewable electricity generation will be needed, nearly doubling the present capacity, which is already 85% renewable.

Emissions trading can work

The meat of the report is the policies and institutions required to support and drive the transition. Key among them is a revised emissions trading scheme. So far the scheme has failed to reduce domestic emissions because the price of carbon was too low. This was driven mainly by low international prices, sector exemptions (including agriculture), and policy uncertainty which left businesses and investors unclear about future rules and prices.

The commission’s key recommended fixes include the adoption of a falling cap on emissions (to drive up prices and guarantee emissions reductions); a rising price cap (to prevent shocks to the economy and political resistance from emitters); and a rising price floor (to provide confidence to investors in low-emission technologies). Indeed, California’s system includes all of these elements and is currently on track to reduce emissions to 40% below 1990 levels by 2030.

Besides the emissions trading scheme, the report argues that every sector needs its own strategy. For example, on transport, it recommends an emissions standard – something most other developed countries except Australia currently have. Without this, New Zealand risks becoming a dumping ground for high-emission vehicles that manufacturers cannot sell elsewhere. They also recommend a “feebate” scheme, in which vehicles entering the fleet either incur a fee (if they have above-average emissions) or receive a rebate.

Risks and opportunities

I see a few key risks. First, trade-exposed industries, such as agriculture and food and metal processing, need to get discounts on carbon prices to remain competitive. A future in which each global industry decarbonises in a coordinated way does not seem likely, but each industry in each country still needs an incentive to clean up. This aspect remains difficult to deal with. For example, the recommendation that agriculture should be fully phased into the ETS is far outside the political mainstream in New Zealand at the moment.

The falling cap on emissions is an absolutely vital component, but it remains a decision that could be subject to lobbying in the aftermath of some domestic or international crisis.

In none of the report’s scenarios do gross emissions fall by more than 43% by 2050. This is certainly achievable, and it is in line with what some countries are doing right now, but it means New Zealand is relying heavily on tree planting to get to net zero. This is not a long-term solution – eventually you run out of space to plant more trees.

In New Zealand, the idea for a Zero Carbon Act originated with a youth group, Generation Zero. Their campaign has led fairly directly to this detailed road map for a zero carbon future. The next step, a public consultation about the Zero Carbon Act itself, kicks off this month.

Robert McLachlan, Professor in Applied Mathematics, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article. First published on 4 June 2018.

A fresh start for climate change mitigation in New Zealand

Robert McLachlan, Massey University

The election of the sixth Labour-led government heralds a new direction for climate change policy in New Zealand.

As part of the new government’s 100-day priority plan, it pledged to set a target of carbon neutrality by 2050 and to establish the mechanisms to phase out fossil fuels. In doing so, New Zealand will join a small group of countries that have established this goal since last year: France, Germany, Sweden (by 2045) and Norway (by 2030).

From commitment to action

The government plans to set up an independent climate commission, likely based on the one established in the UK with nearly unanimous parliamentary support in 2008. UK emissions are down not just to 1990 levels, but to 1900 levels.

The climate commission’s tasks will include providing advice on effective pricing mechanisms for climate pollution, on the transition to 100% renewable electricity by 2035, and on bringing agriculture into the NZ Emissions Trading Scheme.

All parties to the Paris Agreement have already agreed to become carbon-neutral in the second half of this century. The snag is turning that commitment into action.

A story of good intentions

It is now 20 years since New Zealand first signed the Kyoto Protocol – two decades of fine words and twists and turns in policy while emissions continued to rise. Surprisingly, while Australia has followed a twisty path of its own, perhaps with not so many fine words, the effect has been the same: gross greenhouse gas emissions have risen 24% in New Zealand since 1990, compared to a rise of 27% in Australia.

New Zealanders built a lot of gas-fuelled power stations in the 1990s and bought a lot of cars in the 2000s. Astoundingly, we now have more cars per capita than Australia.

The frustrating story is told in the documentary Hot Air. New Zealand spent ten years getting a strategy in place, ending up with an emissions trading scheme (ETS). Another decade of tinkering later, the scheme involves a complex system of discounts, free allocations, exemptions and, crucially, unlimited access to international emissions units.

After 2012, New Zealand companies used this access to buy large numbers of low-integrity units from the Ukraine, enough to officially cover a quarter of all our emissions. The price of carbon, currently NZ$19, adds about 4c per litre to the price of petrol, and about 1c per kilowatt-hour to gas-powered electricity. So far, New Zealand’s ETS – like others worldwide – has not delivered.

New Zealand’s state-owned mining company, Solid Energy, was pushed into some risky deals and ultimately into managed bankruptcy. The remaining assets have been sold to Bathurst Resources. Chief executive Richard Tacon said recently:

… there is no viable alternative to coal. I mean we realise it’s a transition fuel, but there’s a lot of business, dairy … that rely on coal to be a reliable, storable source of energy.

Has even an Australian coal baron ever called coal a “transition fuel”? But then again perhaps Tacon has a point: the dairy company Fonterra burns more than half of all New Zealand’s coal, and the dairy industry as a whole emits 2.2 million tonnes of carbon dioxide per year burning coal to dry milk.

Civil society perseveres

Against this background, climate activists have had a hard row to hoe. Law student Sarah Thomson took the government to court in July 2017 over its inaction on climate change. In a victory for both sides, the judge ruled that the government should have reviewed its 2050 target, but declined to order a judicial review because the government had since changed.

The youth climate group Generation Zero campaigned for a Zero Carbon Act. The former parliamentary commissioner for the environment, Jan Wright, called for a UK-style Climate Change Act. Thirty-nine mayors pressed the government to take stronger action.

Data from a 20-year longitudinal study of social attitudes in New Zealand show increasing agreement with climate change.

A third review of the ETS removed a 50% discount, with further strengthening scheduled. The Environment Ministry was asked to advise specifically on domestic emissions reductions. The Productivity Commission, a government think tank, was asked to report on a low-emission economy.

However, during the election campaign, climate change was not a major issue, and official projections showed a continued rise in emissions. Under current policy settings, net emissions will rise a further 58% by 2030.

Aiming for carbon neutrality

That brings the story to New Zealand First’s decision to choose a Labour-led government, with the Green Party in a confidence and supply arrangement. The Greens now have five ministers, including co-leader James Shaw as minister for climate change. Labour, having first introduced the ETS in 2008, will now amend it to try to make it work.

Already, since the election, Fonterra has announced a commitment to cut processing emissions (mostly due to coal, but also natural gas and transport) by 30% by 2030, matching the national target, and 100% by 2050.

Carbon neutrality calls for, among other things, a complete stop to burning fossil fuels and to buying products that burn them, such as petrol cars. The year 2050 is not that far away.

In truth, by 2050 anything might happen: organic solar cells might become as cheap as newsprint, unleashing economic growth and making “sunlight-to-liquid fuels” economic – or not. Positive carbon feedbacks from the oceans, forests and Arctic methane might overwhelm our mitigation efforts. Climate sensitivity might surprise us on the high or low side.

We can’t say what parts of the natural world will survive climate change and the attempted sustainability transition. But New Zealand is taking a step in the right direction.

Robert McLachlan, Professor in Applied Mathematics, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article. It first appeared on 29 November 2017.

Let’s talk about cars

2018 should be a big year for climate mitigation in New Zealand as three factors converge: the potential for a Zero Carbon Act, continuously rising emissions and a growing sentiment for action from the public.

To cut emissions we need to stop investing in fossil fuel infrastructure and invest instead in renewable energy infrastructure. While all countries struggle with this, Australia and the US, for example, are closing coal plants and investing in solar and wind. This builds clean energy industries and creates expertise which can be a base for further progress in the future. In New Zealand there are no large commercial solar farms, no large wind farms are planned (the last moderately-sized wind farm to be constructed was Meridian’s 60MW Mill Creek, in Wellington in 2014), while Contact and Nova are renovating and building gas power stations. Indeed, in the present policy environment, unless demand grows, why would an existing generator build a wind farm? Adding a wind farm would lower the wholesale price of electricity and potentially leave all generators worse off.

But let’s talk about cars. The car importing business represents a huge, ongoing malinvestment in fossil fuel infrastructure which we must face head on. The 325,000 petrol and diesel cars imported to New Zealand last year will be emitting greenhouse gases for many years to come. Worse, the total number of cars is increasing rapidly – a development that took many people by surprise, after an apparent plateau during the GFC (there were even articles at that time about how young people preferred to buy a smartphone than a car). The climate only cares about cumulative emissions, but at the moment it is not clear how we can compensate for our cumulative transport emissions, since 2000, say. In the past three years we’ve been adding 183,000 vehicles (almost all of them cars and small commercials) to the fleet per year. Aucklanders can guess where most of them have ended up.


Number of vehicles in New Zealand, 2000-2017. Source: NZTA. Credit: Environmental Health Indicators New Zealand. This represents one of the highest ownership rates in the world (compare our 4.22m vehicles to our 3.7m adults).

CO2 is invisible; the damage in extracting, processing, and burning oil is often far away and invisible. But cars are not invisible. They are very much in your face, every day for most of us, especially in our cities that are now completely choked with cars. You can’t turn on the TV for five minutes without seeing an ad for an SUV or sports car. For most of us the car is our single greatest source of personal greenhouse gas emissions.

Many believe that electric vehicle technology (EV, including both full electrics and plug-in hybrids) is superior to the internal combustion engine vehicle (ICEV). It cuts local emissions significantly — by 90 percent today, and by more tomorrow as we move to 100 percent renewable electricity. Techno-optimists can point to Tesla, to the trickle of EV models becoming a flood, to massive investments by old and new car manufacturers. They see EVs becoming cheaper, with longer range and complete charging networks. At this point EVs will be winning on all points and the revolution assured. There may be a rapid ‘S-curve’ adoption like that of the smartphone.

I am not so sure.

First, progress around the world has been extremely variable to date.

Here are the market shares of EV sales, as a percentage of total sales, in three leading markets, Norway, Iceland, and Sweden, all three doubling every two years or less:

                    2013           2014           2015           2016           2017

Norway      6%              14%            23%           27%            34%

Iceland       0.9%           2.7%           2.9%          5.7%           13%

Sweden      0.7%           1.7%           2.6%          3.2%           4.7%

Market share of electric vehicle sales, as a percentage of total sales.

Now for three very large markets that have been trying hard, the UK and Germany (doubling every two years) and the  US (doubling every 5 years).

                   2013           2014           2015           2016           2017

UK              0.2%           0.6%           1.1%          1.5%           1.9%

Germany   0.2%           0.4%           0.8%          0.8%           1.6%

US              0.6%           0.7%           0.7%          0.9%           1.2%

Optimists foresee a worldwide doubling of market share every two years, reaching 60 percent by 2030; after that, bans on the sale of ICEVs are more prevalent, and the transition could largely be complete by 2040. Heavy transport follows close behind and 60 percent of oil consumption could be  gone by 2050.

But consider one very sad story, Denmark, a country of 6m people and a renewable energy leader in Europe, which has experienced mixed results with their EV policies:

                   2013           2014           2015           2016           2017

Denmark    0.3%           0.9%           2.3%          0.6%           0.4%

                   

Tax on new vehicles, previously 180 percent, had been waived for EVs. From 2016 the tax was reduced to 150 percent for ICEVs, while the EV tax was raised to 20 percent in 2016 and is being phased in to 150 percent by 2022. Despite the high tax, Denmark still has some the highest per-capita car sales in Europe.

Another perplexing example is the Netherlands, which also has sizeable (but fluctuating) incentives, as well as the most extensive charging network in the world, but no clear signal of accelerating adoption:

                   2013           2014           2015           2016           2017

Netherlands    5.6%          3.9%           9.6%          6.0%           2.2%

Second, the EV transition may need more help to become a reality.

The first six countries above all have complex and widespread incentive systems in place. Norway provides an effective discount of about 1/3 of the up-front cost, with other extensive ongoing incentives. The US provides a discount of up to US$10,000 and a gas guzzler tax (in place since 1978) of up to US$7700. The UK has a petrol excise tax of 58p/l (compare New Zealand’s 60c/l, the same in real terms as 50 years ago), an EV rebate of up to £8000, and no road tax for EVs—but up to £1120 + £515/year for gas guzzlers. Controversially, the UK road tax system was changed in April 2017, so far without ill effect on EV sales.

Third, getting the transition underway may require a change in attitudes.

Robert Llewellyn, host of the popular web series ‘Fully Charged’, remarked in his testimony to a parliamentary committee on EVs that he does not see the famous ‘S-curve’ transition as being in the bag by any means. People have a complex emotional relationship to their cars. They may stick to their favourite kind of car (or an emerging new one, like the huge SUV) beyond any obvious reason. I find it striking that in the EV world, most people want to talk up the amazing advantages of EVs; yet few want to dwell on the evil of ICEVs. I like to imagine public health information posted at petrol stations such as these:[1] 

This vehicle emits poisonous gases and you may be killing your neighbours by its  operation.

This vehicle emits gases known to be damaging to the long term stability of the climate and estimated to cause trillions of dollars in damages.

The exhaust gases of this fuel remain in the air and oceans for thousands of years, raising sea levels and acidifying the oceans.

The product you are dispensing is directly responsi[2] ble for major wars and terrorist attacks.

It may seem far fetched, but the public seems to  accept  analogous warnings on cigarettes. Why not on fossil fuel burning cars?

Some activists, such as Naomi Klein, would say that driving a petrol car is wrong. Arnold Schwarzenegger, who is suing oil companies for first-degree murder, would say that the manufacturers, importers, and sellers of cars, the producers and refiners and sellers and burners of oil, are in fact a public nuisance. And clearly, the Volkswagen emissions scandal ‘Dieselgate’, the ExxonMobil climate change denial controversy ‘ExxonKnew’,[3]  and some mining operations are wrong. But most of us are both actors and victims, caught in a difficult situation. Some car companies are clearly stalling, others are deliberating restricting the supply of ‘compliance vehicles’, but all of them need the income from selling ICEVs to fund the development of EVs, and they’re the ones with money and expertise. Just to pick one local example from many, Toyota NZ—a leader in the Sustainable Business Council and in greening their own operations—feels compelled to fill their ‘Sustainability’ page with subtle digs at all-electric vehicles, because Toyota doesn’t have one.

It’s a tautology that ceasing investment in ICEVs means not actually buying them anymore. Incentives, charges, advertising campaigns, are just mechanisms. Are people really ready for that to happen? In general terms, New Zealanders say they want the government to act on climate change but have we made the connection to our  own behaviour and the current freedom to pollute? We’re talking about changes coming that will make the extra 10c/l in the pipeline for Auckland look like spare change.

Fourth, time is running out, both for the planet and for our goals.

A Zero Carbon 2050 Act is coming this year. That’s 32 years. Planting trees will buy us some time, but let’s regard them as offsetting agricultural emissions. CO2 should see steeper reductions than methane, and many industries will need ongoing protection while acceptable  reduction plans are set in place globally. (There’s no point closing one of the world’s cleanest smelters, Tiwai Point, when China is building coal-fired smelters flat out.) Some sectors, such as aviation, have no low-emission options yet. What’s left? Private cars! The alternative exists already; the emissions savings are large; there is no local car industry to protect or cajole; while cars have some productive value, they are by and large consumer items; the NZ$8.4b a year we spend importing vehicles is a valuable existing source of finance that can fund the low-emission transition; the NZ$5b a year we spend importing fuel is a pointless ongoing drain on the current account. As the transition gets underway, the fuel savings will grow rapidly.

The actions required for the scale and speed of the transition could be  large. One proposal currently gaining attention is a feebate, developed in depth by Barry Barton and Peter Schūtte in a November 2015 report. A feebate is charged on every newly imported vehicle that is directly related to its emissions. In the simplest model, the feebate varies in direct proportion to emissions and adjusted so that the entire scheme is revenue neutral. Let’s consider an example. (The actual dollar amounts can be scaled up or down depending on what is needed.) Buyers of a gas guzzler like the biggest 240g/km Toyota Hilux or Mercedes might pay an extra NZ$4000 up front. Buyers of smaller cars like the 140g/km Honda Civic  or the 110g/km Toyota Yaris might get rebates of NZ$2000-3500, while 17g/km EVs get a rebate of NZ$9,000. The amounts would change over time as the fleet gets cleaner. The difficult question, not answered here, is the overall scale of the scheme. With these numbers — broadly similar to what other countries are already doing — NZ$300m is changing hands per year. Not a small sum, but not as big as the NZ$13b spent last year on vehicles and fuel. At some point, the scale of the scheme has to be pegged to the market response.

The Barton-Schūtte proposal achieves emissions reductions in one area — cars. That goes against decades of official thinking in New Zealand, which is that a single price for carbon may decarbonize the economy at least cost. This kind of thinking has to go. Not only is it not necessarily true, it flies in the face of the reality that (a) our emissions are rising, not falling, and (b) we don’t have a fixed price for carbon anyway; there are all sorts of exemptions and allowances in place. Andy Reisinger, of the NZ Agricultural Greenhouse Gas Research Centre, wrote in submission to the Productivity Commission that:

“I disagree … that direct regulation doesn’t achieve emission reductions at overall least cost to the economy. That statement would only be true if there were no market failures, no information limitations or asymmetries, and no preferences in specific interest groups that go beyond economics… It is also important to consider whether least-cost is the dominant criterion for policy choices, or whether risk, equity, social inclusion etc. are not equally or more important”.

Even the Australian government, so far no EV hero, is now considering direct regulations that would cut emissions of new cars 45 percent by 2025.

So 2018 really is shaping up to be a big year. As the groundwork takes place for the Zero Carbon Act and the Climate Commission, there will be plenty of opportunities to talk about cars.

This article first appeared on 9 April 2018 at pureadvantage.org. 
Postscript: We now know that New Zealand did not get a Zero Carbon Act in 2018. Maybe in 2019?