16 June 2005

Climate change challenge increases for New Zealand

The latest government forecast of net greenhouse gas emissions for 2008-12 shows New Zealand will miss its Kyoto target by 36.2Mt CO2e unless further action is taken.

"Climate change poses a direct threat to New Zealand's environment, way of life and economy. Unless there is a concerted global effort to limit emissions and the extent of climate change, New Zealand, and its agricultural base, will be hit hard," says Convenor of the Ministerial Group on Climate Change Pete Hodgson.

"No responsible government can afford to ignore this threat. The results released today demonstrate that much more needs to be done to combat climate change."

Two factors account for the majority of the change from last year's forecast, which predicted New Zealand would meet its target with 32.6 Mt CO2e units to spare.

The first is the way in which emissions, particularly from transport, have grown as a result of New Zealand having one of the highest performing economies in the world. They are up 38 Mt CO2e. Officials have advised that due to ongoing revisions to the energy modeling, these results should be treated as provisional.

The second is due to the way forest sinks are assessed. Changes to the way scrub is accounted for and the qualification of forests planted on land that was scrub in 1990, have lead to a reduction of 19.8 Mt CO2e of allowable sink offset.

"We know that we must do more to reduce emissions and to prepare our economy for a world which already puts a price on them. The science debate is over, as reinforced last week by the release of a communiqué by the science academies of the G8 nations plus those of India, China and Brazil. Progress also continues to be made in increasing participation of countries in taking meaningful steps to tackle climate change.

"The good news for New Zealand is that significant savings are available from the adaptation of readily available emissions reductions technologies and practices. We know what we need to do to make our economy less emissions intensive, more energy efficient and more competitive. Being one of 150 nations to have ratified Kyoto means we have many options to meet our targets at least cost."

There will be no changes to the carbon tax as a result of this announcement.

Net position – questions and answers

What are New Zealand’s Kyoto obligations? The 2008-2012 target for New Zealand is to return emissions to 1990 levels, or take responsibility for any excess by offsetting with forestry sink credits or by purchasing or earning extra emissions units internationally.

How will New Zealand meet these obligations? The Kyoto Protocol allows each country to choose the least-cost way of meeting its obligations. Options are to a). Take further action to reduce emissions in New Zealand, such as accelerating energy efficiency efforts, to ensure that the goal of a 20% improvement in energy efficiency by 2012 is met improving the efficiency of our vehicle fleet introducing biofuels b) Earn credit for emissions-reducing projects in developing countries, such as clean energy projects in Pacific Island states or China (the Kyoto Protocol’s Clean Development Mechanism) c) Purchase additional emissions units internationally

When will further decisions be taken? Officials will report by the end of October on further emissions reduction measures, use of the Clean Development Mechanism, and trading options to meet New Zealand’s obligations at least cost over the long term.

What assumptions have been made in these projections? Officials have, appropriately, been conservative in their assumptions. For example, energy demand is assumed to grow steadily, rather than slowing in line with the Government’s energy efficiency targets. Relatively low oil prices, and low levels of new natural gas discoveries feature. Officials also assume no gains arise from the agricultural research programme.

How are New Zealand’s GDP and emissions related? Greenhouse gas emissions in 2010 are forecast to be 30 per cent higher than in 1990, while GDP is expected to have grown by 80 per cent. Even though emissions are growing at less than half the rate of GDP, our strong recent economic performance means that the increase is significant nonetheless. What is clear is that New Zealand, like the rest of the world, faces a significant challenge in further de-linking economic growth from that in greenhouse gas emissions.

Will the carbon tax be increased, or will carbon tax revenue be used to pay for additional units ? No. The carbon tax policy will not be changed. As announced in May, the carbon tax will be set at $15 per tonne of carbon dioxide or equivalent, and rate will apply until 2012 unless the international price diverges substantially from this on a sustained basis. The government is absolutely clear that carbon tax revenue will be used for tax changes elsewhere, which were announced in the 2005 Budget.

Have forestry planting rates been revised, and what impact has this had? Yes. The most-likely scenario uses a rate of 10,000 ha/yr, compared to last year’s 20,000 ha/yr. Current planting rates are around 10,000-15,000 ha/yr. The historical average rate is 40,000 ha/yr, meaning that the current assumption is conservative. This change has made only a small difference to the projections – it is part of a 2.5MT change in total projected carbon sequestration.

Should the Government have been giving out emissions units to projects such as windfarms, given that there now are not enough? The PRE programme is run with a surplus – that is, these projects generate more units for New Zealand than are allocated to them. New Zealand’s position is improved, not diminished, by this allocation.

Was the government intending to use our forestry sinks to free ride until 2012? No. Our forest sinks provide a temporary buffer that make New Zealand’s task easier than most other Western countries, but it would be a big mistake to try and use them as an excuse to do nothing.

The responsible approach is to use this buffer period to undertake the necessary economic shifts, so that the New Zealand economy will be positioned well to take advantage of a low-emissions future, rather than struggling to catch up.

What will happen after 2012? In international negotiations, New Zealand will be seeking broader international participation in binding commitments after 2012. It is also likely that deeper cuts in emissions from all parties will be needed. New Zealand may move to an emissions trading regime once international markets are sufficiently robust.

Implementing a carbon tax from 2008-2012 will set the New Zealand economy up better for deeper commitments and emissions trading than if we were to do nothing in the interim.

ENDS

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