The virtue of sunlight

Guest Post by Adrian Macey, Senior Associate, Institutefor Governance and Policy Studies, Adjunct Professor, New Zealand Climate Change Research Centre, Victoria University of Wellington, Vice Chair then Chair, UN Kyoto Protocol negotiations 2010-2011, New Zealand Climate Change Ambassador 2006-2010, Chief Trade Negotiator 2000-2002.

Among the many challenges climate change policy in New Zealand faces is knowing the costs and benefits of alternative pathways to a low carbon economy. The need to contribute a fair share of the international effort on climate mitigation adds a dimension that will be at the fore during the Paris climate conference in December (COP 21). 

Many factors can be taken into account in assessing transitions and contributions, but economic analysis and modelling (e.g. of mitigation potential, effects on households, on sectors, on GDP) are essential. 

The New Zealand Treasury advocates a simple burden-sharing principle for the international contribution: equal percentage GDP costs. In the government’s consultation preceding the announcement of the 2030 target and “INDC” (the international contribution) there were assertions about the relative cost of our contribution against those of the US and the EU. But neither these assertions nor the absolute cost figures were accompanied by any information with which to verify them. The full set of assumptions was not shown. Any benefits were excluded from the calculations. There was also a curious and unexplained decision to exclude forestry and agriculture from the figures (see below). 

Calculating the size of the bank

By Judd Ormsby and Suzi Kerr

From the 1st of June this year NZ ETS participants have been able to surrender only NZUs or NZ AAUs. NZ AAUs are units designed for NZ to meet Kyoto commitments. Prior to June participants could also surrender international Kyoto units (such as CERs and ERUs). Since November 2012 participants have surrendered almost exclusively cheap international units but many have received free allocation of NZUs which they have saved for future use. A natural question to ask is ‘how many NZ AAUs and NZUs are there in private holdings?’ We refer to this as the NZ ETS bank, or the bank for short. The size of the bank affects prices in the NZ ETS (we have previously blogged about our own simple modelling – here and here).  It will also affect how many NZUs the government may want to auction for use in the ETS in coming years, and hence how much revenue the NZ ETS could generate.

From the NZ EUR registry, we can see details about allocations and surrender over time, up until December 2014. While the website doesn’t explicitly list the size of the bank, we can get a good estimate of what it was at the end of last year by calculating the number of units that have entered private holdings and then subtracting the number of units that have since left private holdings.

Getting to the root of the problem with Kyoto Emission Reduction Units: Low mitigation ambition

By Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research

In late August 2015, the Stockholm Environment Institute (SEI) released a study, accompanied by a letter in Nature Climate Change, reporting that 80% of the Kyoto Emission Reduction Units (ERUs) used by developed countries to help meet their climate change targets for 2008-2012 came from Joint Implementation (JI) projects with “questionable or low environmental integrity.” The authors concluded that JI may have contributed to increasing global emissions by 600 million tonnes of carbon dioxide equivalent compared to what would have happened otherwise. According to the Guardian, UN officials have confirmed the findings.

Some commentators have used these findings to call into question the use of international emission trading to help meet future emission reduction commitments, an issue that will be negotiated in Paris later this year. In this context, it’s important to recognise the fundamental role that weak national mitigation targets played in producing this outcome.