Emission pricing

On 2 November 2014, the Intergovernmental Panel on Climate Change released its Synthesis Report 2014 with the headline “Climate change threatens irreversible and dangerous impacts, but options exist to limit its effects.” The report is a sobering reminder that limiting temperature increases below 2° Celsius relative to pre-industrial levels could entail reducing emissions by 40-70 percent of 2010 levels by 2050, and bringing net emissions near or below zero by 2100.  It emphasises the clear benefits of near-term action given the inertia of economic and climate systems.

A White House report issued in July 2014 also highlights the costs of delaying action to reduce emissions.  Two key findings were:

• Based on a leading aggregate damage estimate in the climate economics literature, a delay that results in warming of 3° Celsius above preindustrial levels, instead of 2°, could increase economic damages by approximately 0.9 percent of global output… The incremental cost of an additional degree of warming beyond 3° Celsius would be even greater. Moreover, these costs are not one-time, but are rather incurred year after year because of the permanent damage caused by increased climate change resulting from the delay.
• An analysis of research on the cost of delay for hitting a specified climate target (typically, a given concentration of greenhouse gases) suggests that net mitigation costs increase, on average, by approximately 40 percent for each decade of delay. These costs are higher for more aggressive climate goals: each year of delay means more CO₂ emissions, so it becomes increasingly difficult, or even infeasible, to hit a climate target that is likely to yield only moderate temperature increases.

The global case for near-term action is clear.  What about the case for near-term action in New Zealand?

This issue has proven challenging for New Zealand so far.  In addition to economic and climate inertia, New Zealand has faced a third important dimension: political inertia.  This was the subject of Alister Barry’s 2014 documentary “Hot Air”.  Using archival footage and retrospective interviews, the film traces New Zealand’s successive attempts to price and reduce greenhouse gas emissions since 1988.  Across policy cycles from the government’s initial consideration of emission pricing to the choice of voluntary greenhouse agreements, consideration and abandonment of a carbon tax and agricultural emissions research levy, the monumental passage of legislation for the New Zealand Emissions Trading Scheme (NZ ETS) and the subsequent decisions that reduced its impact, a similar story was repeated.

Attempts to shift New Zealand toward a lower-emission development pathway were resisted effectively by those with powerful interests in maintaining business as usual.  

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“Hot Air”: Searching for the winds of climate policy changeRead More »