The New Zealand Institute recommends NZ adopt a fast follower approach to reducing its emissions
24 Oct 2007
The report recommends that New Zealand adopt a ‘fast follower’ approach to emissions reduction, and aim to reduce its national emissions in line with the actions that are taken by other countries with whom New Zealand is competing.
The government has recently announced the design of its proposed emissions trading scheme. New Zealand Institute chief executive Dr David Skilling notes that “The government’s proposed scheme looks well-designed but there is a lack of strategic clarity. What is the scheme designed to achieve in terms of reducing emissions? How ambitious should New Zealand be and how quickly should New Zealand move to reduce its emissions?”
In order both to assess the government’s proposed scheme, and the National Party’s ‘50 by 50’ proposal, and to provide a clear view on the best way forward, there is a need to answer some key strategic questions. “Should New Zealand aim to be a world leader with respect to reducing emissions, to move with the pack, or to do as little as possible?”
This report aims to provide greater strategic clarity in terms of New Zealand’s exposures, interests, and objectives with respect to global climate change. New Zealand’s primary exposure to climate change is economic in nature and the nature and size of this exposure depends on actions taken by global consumers, firms, and governments.
The report argues that, to date, there has been more talk than real action on climate change among these groups, but that there is a reasonable likelihood that this will change in the future. Such change may require New Zealand to take more action to reduce emissions than perhaps it would choose to given the highly emissions-intensive nature of the New Zealand economy.
Given the potential need for New Zealand to reduce its emissions significantly in the future, the report argues that New Zealand should begin to prepare now by reducing its emissions. The cost of adjustment is likely to be lower if emissions are reduced in a measured way rather than in an abrupt manner. The key judgement to make is what sort of ‘insurance premium’ New Zealand should pay, in terms of incurring costs now to reduce emissions.
In response, the report recommends that New Zealand adopt a ‘fast follower’ approach with respect to emissions reduction, and move no faster than comparable countries. We also recommend that an indicative long-term emissions aspiration be specified, with an indicative pathway of emissions reduction over time to achieve this aspiration. Importantly, this target should be specified in a contingent manner such that the pace of emissions reduction can be altered depending on international developments.
Specifically, we recommend that New Zealand delay meeting its emissions reduction targets under the Kyoto Protocol to 2020 rather than 2012. After 2020, we propose an indicative pathway for emissions reduction of 1% a year. This pathway would be reviewed every 5 years to evaluate whether the pace of emissions reduction should be altered.
David Skilling notes that “The Institute’s proposed approach differs from the government’s scheme in three key ways. First, the recommended emissions reduction pathway is likely to be less demanding. Second, it has a much greater degree of strategic clarity about both the target and the pathway to reduce emissions. And third, the nature of the proposed target is contingent on developments in technology, markets, and government action, rather than being fixed”.
Although some New Zealand firms may choose to develop a world-leading position in terms of their emissions intensity in response to changing consumer preferences in the markets they serve, a fast follower approach is appropriate from a national policy perspective.
The Institute’s next report, scheduled to be released early next year, will focus on the specific actions that New Zealand ought to take to position itself. In particular, this report will argue that New Zealand’s climate change policy should be seen more broadly than simply those policies that are directly aimed at reducing emissions. For example, policies aimed at encouraging the development of strength in low emissions types of economic activity should also be central to the government’s climate change response.
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For information please contact:
Dr David Skilling, Chief Executive, The New Zealand Institute, Ph: (09) 309 6230, Email: , Web site: http://www.nzinstitute.org
Notes to editors:
This report builds on an essay and presentation released in June that described the nature of New Zealand’s exposure to climate change and outlined the strategic choices that New Zealand could make. These presentations are available on the Institute’s website at http://www.nzinstitute.org