How much effort should New Zealand make on climate change?

Wellington Climate March 2015

From 30 November to 11 December 2015, governments will meet in Paris to resolve the framework for a new international climate change agreement to take effect from 2020.  New Zealand is bringing to the table an emission reduction pledge – or Intended Nationally Determined Contribution (INDC) – of 11% below 1990 emissions, or 30% below 2005 emissions, by 2030, conditional on rules for forestry accounting and use of carbon markets. 

How much effort should New Zealand make on climate change?  In September 2015, the Green Party organised a Parliamentary conference entitled “Feasible Ambition: Climate Goals for New Zealand in 2030.”  Below is an adaptation of some comments I provided as an independent panelist responding to a research paper presented by Dr Kennedy Graham, MP.

As New Zealand shapes its contribution to global mitigation, it needs to consider five factors: setting targets top-down versus bottom up; choosing the balance between domestic and global contributions; assessing fairness; assessing costs; and creating a domestic pathway toward zero-net emissions.

1. Top-down versus bottom-up targets

Countries face a gap between what the science is telling us we need to do, and what we feel we are capable of doing within current technological, economic and social constraints. We don’t yet know how we will bridge that gap and yet countries are being asked to commit to doing it. Both top-down and bottom-up approaches for bridging that gap are useful as reference points but in my view both have limitations for delivering on the outcome we are looking for.

The top-down approach helps us understand the size of the challenge and systematically analyse distributional implications using different criteria. Where things get tricky is translating the concept of fair ambition into a formula and assumptions that everyone can agree upon. Here are some of the shortcomings of this approach:

  • Surrendering to a formula is perceived as a threat to national sovereignty.
  • The lack of transparency in a complex model means that some people are skeptical of the results.
  • The underlying principle involves dividing up the global emission budget into entitlements using criteria such as population, historical responsibility, emissions profile and capacity to pay, and the selection and weighting of criteria are subjective. This means the outcome inevitably doesn’t feel fair to somebody.
  • The model doesn’t guarantee that national welfare will be protected. Suggesting that NZ should shift from per capita gross emissions of roughly 17 tonnes of carbon dioxide equivalent per person in 2012 to something like 3.5 tonnes per person in 2030 feels like we are being asked to commit to a starvation diet. Hopefully this will not be the case; as new technologies become available then that per capita target may actually reflect fantastic lifestyles with abundant low-emission energy and food. But it feels hard to bet on that today.
  • The outcome doesn’t necessarily resonate with the individuals and businesses who will be taking the actions and bearing the costs. “Those weren’t MY historical emissions, it’s not MY wealth that has accumulated and MY emission needs are different from others’ needs.”

An alternative is the bottom-up approach. This is very useful in identifying specific mitigation opportunities and assessing their costs and benefits. However, the bottom-up approach is constrained by what countries feel they can and are willing to do today while safeguarding national welfare and this locks us into incremental change that does not take us collectively where we need to go.

Countries and researchers have struggled for decades to create formulas for fair and effective burden sharing of emission reduction budgets and this hasn’t delivered a politically acceptable outcome. It is useful to do the exercise but we should not rely on it to resolve the political impasse.

Personally, I would like to explore ways to change the focus from negotiation of fair emission budgets to negotiation of collaborative pathways to decarbonisation that support human development. This would look more like opportunity sharing rather than burden sharing. We could move from win/lose competition for national development rights and compensation for past wrongs toward practical collaboration and resource sharing to develop and deploy technology breakthroughs that will improve welfare globally.

Perhaps we can apply three complementary dynamics to shift us toward zero-net emissions:  pushing mitigation action from the bottom and pulling it from the top while being drawn forward by emerging technologies and opportunities.

2. Balancing domestic and global contributions

In its Fifth Assessment Report, the IPCC framed the global challenge very clearly. To limit temperature rises below two degrees Celsius, we need to achieve zero-net emissions by the end of the century AND get there fast enough to keep cumulative emissions below a ceiling which the world will exceed by 2035 under business as usual. This means that emissions that cannot be avoided are fully offset by removals through forest sinks, carbon capture and storage, or other means. Getting to net zero smarter and faster means a much, much better world for the rising generations. That is the powerful choice in our hands right now.

The atmosphere doesn’t care where emissions or emission reductions come from. New Zealand can make a legitimate contribution to global mitigation whether this is through domestic investment, overseas investment, or a combination of both. To date, New Zealand’s climate policy has been designed to allow us to increase our own emissions while outsourcing our emission reductions to other countries as long as our producers were making economically efficient decisions that took the global cost of carbon into account.

That may have been a reasonable starting point, but the global price has collapsed and strategic domestic mitigation isn’t happening.  The reality is that New Zealand actually does need to decarbonise its own economy while helping other countries to make this transition, with benefits to all.

There is no ideal line between domestic and international mitigation effort, and I don’t see any merit in fixing the position of that line now. That line may need to shift back and forth over time as new technologies emerge and countries’ circumstances change. We can no longer rely on our old Kyoto strategy of deferring domestic action and expecting developing countries to sell us their so-called low-hanging fruit via cheap carbon credits.  At the same time, new market and financing models for supporting developing country mitigation are emerging, so we also will not need to rely solely on high-cost domestic action in order to make an effective global contribution. Our domestic mitigation potential need not limit our global contribution and it’s important to think strategically about how we can contribute on both fronts.

3. Assessing fairness

There are many dimensions to fairness. All countries need to transition toward zero-net emissions; the element of fairness is in how quickly countries make the transition and how much they contribute to the global cost of the transition. Ultimately I think that fairness will not be dictated by a formulaic calculation of atmospheric entitlement or mitigation cost per capita or as a percentage of GDP. Instead, it will come more from the heart, driven by some combination of our capacity to reduce emissions, our willingness to take responsibility for contributing to the problem, our natural human desire to help others and prevent harm, and – very significantly – the benefits we stand to gain nationally and globally from accelerating our effort and encouraging others to act.

Perhaps we can be guided by a fresh take on the Golden Rule: “Emit unto others as we would have them emit unto us.”

4. Assessing costs

There is widespread economic consensus that the costs of inaction far outweigh the costs of action. Every tonne of carbon dioxide that is emitted today – including every tonne from New Zealand – creates climate damages whose social cost today ranges from US$37 (NZ$56) as a central estimate to US$109 (NZ$166) under a high-impact scenario. That cost roughly doubles by 2050 (central estimate of US$71/NZ$108). A global study by the Obama Administration found that every decade of delay in mitigation raises the net cost of achieving a given target by 40% because a sharper adjustment comes at higher cost with greater stranded assets.

We make major investment decisions involving large costs all the time. Can we reframe the costs of mitigation as a strategic investment in our inevitable transition to a zero-net-emission economy? The challenging part is managing the distribution of those costs and accounting for the returns on those investments which accrue across the private and public sectors, across countries and across generations. The methods we rely on now for cost/benefit analysis for mitigation and for sharing mitigation investment risks are not producing the action that will support national and global welfare in the long term. We need new approaches here.

5. Creating a domestic pathway toward zero-net emissions

New Zealand will need to join the global transition toward zero-net emissions. Our challenge – and our opportunity – is to make the transition strategically so we thrive as a country and capitalise on our advantages. And we do have significant advantages. Our natural resource base, our economy and our institutions place a zero-net-emission future within our grasp. But we face some significant choices that will have long-term implications for our progress as a country.

I want to borrow from the words of Thomas Merton. Without a sound strategy for our transition, we face a very real risk that we could spend the next two decades working very hard to climb the ladder of success, only to find when we reach the top that the ladder is leaning against the wrong wall.

This transition will not be a linear process or a predictable process. We can guess at some of the likely characteristics of our pathway but much remains uncertain. So how can we get started? Motu’s cross-sector Low-Emission Future Dialogue, which I’ve been involved in leading, has been exploring possibilities.  One option would be to take an adaptive approach designed to encourage experimentation, leave desirable outcomes open, re-prioritise investment, remove barriers to innovation and avoid locking ourselves into emissions-intensive technologies, infrastructure and practices.

Transitioning toward a zero-net-emission economy will require both new and better processes for cross-party agreement and collaborative decision making, problem solving and action by governments and businesses. Such processes could be used to enable greater policy certainty across election cycles, align policy with action and investment across the public and private sectors, safeguard the needs of communities who are most vulnerable during the transition, and respond to rapid change with greater agility and coordination.

We shouldn’t be afraid to strive for ambitious mitigation, and we shouldn’t be afraid to fall short.  If we must fear something, let it be inertia, apathy and free riding.  I am hopeful about the opportunities that lie ahead for New Zealand if we commit to strategic transformation.

I want to send best wishes to all participants for a safe and constructive conference in Paris that ultimately supports the global transition to a low-emission future.

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