Submission on the second emissions reduction plan discussion document

^{Pine forestry in Queenstown. Michael Heng, Unsplash.}

The Commissioner has made a submission on New Zealand’s second emissions reduction plan (ERP2) discussion document outlining how the plan’s ‘least cost approach’ risks passing on undue costs to future generations.

He describes ERP2 as a mixed bag of policies designed to deliver the minimum reductions required, and possibly not even achieving that.

“There is a very real risk that New Zealand won’t even meet the first or second budget with the policy mix that is proposed. The projected reduction only just adds up and margins are thin, with no allowance being made for uncertainties surrounding policy measures.”

If the budgets are not met, then future generations will carry the burden of meeting those targets. 

Of greatest concern is the plan’s reliance on the New Zealand Emissions Trading Scheme (NZ ETS), which in its current form suppresses carbon prices, discourages gross emissions reductions and incentivises the planting of large areas of land in pine forests.

When the NZ ETS was established, forestry offsets were intended as an interim measure to buy New Zealand time to develop new, low emissions technologies. However, in the decades since, these technologies have not eventuated and instead forestry offsets have effectively become a cheaper option for fossil fuel producers to deal with their emissions.

The Commissioner is concerned that ERP2 does not sufficiently consider the long-term risks of allowing unlimited forestry offsets. These include:

• the loss of productive land and the impact of afforestation on rural communities
• large areas of land used for forestry offsets will be locked up in perpetuity, removing the option of alternative future land uses
• the future costs of maintaining a permanent, much larger forestry estate in a warming world
• the Crown carrying an implicit liability if those forests, which need to be permanent, are deforested or damaged by pests, diseases or natural events
• uncertainty generated by forests registered in the NZ ETS under stock change accounting affecting supply and price in the NZ ETS
• the impact of unlimited offsets on NZ ETS auction revenue and prices, including suppressing the carbon price below that needed to drive gross emissions reductions and uptake of new technologies.

The Commissioner has made a series of recommended changes to the plan. These include:

• decoupling forestry from the NZ ETS and using alternative incentives to drive afforestation
• building a much greater margin of error into emissions budgets
• preparing an energy strategy to address long-term issues facing the energy sector
• encouraging the uptake of existing and affordable emissions reduction technologies for transport, energy and agriculture through complementary policies
• imposing a departure levy from New Zealand to fund solutions for aviation emissions.