New Zealand Begins Emissions Trading Scheme

“At present we appear to be bogged down in emission reduction schemes and targets. This thinking is short-term as the high emissions industries in the long run are doomed.  We have the low-carbon technology – which include many forms of renewable energy such as solar electric, solar thermal, wind, wave, tidal, geothermal and bio-energy.  All we need to do is scale these technologies up rapidly and harvest the economies of scale.”

“The first is to include a carbon price cap or safety valve in the early years of the system. This would provide more certainty while the economy comes to grips with the system and while international carbon markets develop. The second issue of potential concern is the currently very high levels of free allocation, which are costly to tax payers. Many of the outstanding issues where economics is important will be addressed in the regulations rather than the legislation – the practical problem of putting the legislation into effect. The challenges here go beyond the ETS alone. It is difficult to combine research with policy making, especially when the research is very much in the early phases. It is also difficult to get genuine constructive discussion between the private and public sectors. The agencies are trying hard at this and doing better than they have previously, but there is still room for improvement. ”

“The passing of the ETS amendments sends positive signals about New Zealand’s desire to address global climate change, providing greater certainty to business and the population about the path New Zealand will follow.  Given that most of the debate so far has been around the risks New Zealand faces with adopting the ETS, now perhaps the debate can switch to where potential opportunities may lie. The inclusion of agriculture, despite its omission in other national schemes, is also an important step for New Zealand’s management of greenhouse gas emissions and may just provide some of these opportunities.”

The most salient points with respect to the trading scheme were made back in 2008, and her words ring as true today as they did 2 years back. The following is from Dr Suzi Kerr, Senior Fellow at Motu Economic and Public Policy Research and the only New Zealander commissioned by the government to peer review the proposed ETS framework. Dr Kerr talks about the bridge between intersection between the economics, the regulations, and the practicalities:

“Economic analysis was reasonably well incorporated in the ETS. However, the government had a limited body of empirical research to guide their decision-making. This is partly because these are new issues globally and partly due to New Zealand’s relatively limited capacity for economic analysis. Existing economic analyses point towards two possible issues which may justify further attention as the policy evolves.

TVNZ