The New Zealand government is the only government that has made their emissions reduction pledge fully conditional on carbon trading. In the past, they have used the purchased of overseas ‘credits’ as a way to fulfil New Zealand’s Kyoto Protocol commitments without reducing emissions at home. These credits were sourced from East European avoided emissions (resulting from the collapse of their polluting industries), or poorly-governed Clean Development Mechanism projects, many of which we found to have been fraudulent. These credits did virtually nothing to reduce emissions abroad. The net result was a carbon price close to zero for NZ business and few reductions in emissions. Together with other loopholes on forests and climate finance, this meant the New Zealand government got away with cheating on our commitments.
Such loopholes destroy trust between countries in climate talks. It is crucial that there is integrity in the mechanisms under new Paris Agreement. The draft text gives little confidence that the lessons of the past have been accepted by all governments, and will not be repeated in future.
For the new agreement, the New Zealand government is again planning to rely heavily on buying credits rather than reducing its domestic emissions. The government’s pledge, already low and judged as inadequate by climate experts, does not incorporate major new policies for reducing emissions, and instead relies on credits. So the government is trying to ensure that the Paris Agreement allows more carbon trading in future. In an attempt to paint it in a more favourable light, they now talk about “transfer of mitigation outcome” under a “Mechanism to support sustainable development”.
The challenge of regulating a system of carbon markets will be far more difficult in future than under the Kyoto Protocol. After 2020, developing countries will be reponsible for their own reductions in emissions (either in terms of intensity or absolute levels). They undertake some commitments themselves and some that will need to be supplemented by climate finance. That finance comes from contributions by developed countries (including New Zealand) and some richer developing countries. A fund of $100 billion per year by 2020 (likely to be scaled up thereafter) has been promised to finance these emissions and to support adaptation. New Zealand’s commitment of $200 million is below our fair share, so we are funding a low level of emissions cuts (mainly for renewable energy projects in the Pacific).
In addition to the emissions reductions partly paid for by climate finance, the New Zealand government is seeking a mechanism that would allow polluters to buy credits from other countries (developed and developing countries) rather than reducing their emissions at home. That leaves New Zealand in the position of having to buy more and more emissions credits each year, instead of putting the economy on a lower emissions path through domestic investment that can help create jobs, modernise our economy, strengthen our position in clean technology sectors, reduce pollution and provide co-benefits for health, quality of life and the environment.
So if a New Zealand polluter is ‘buying’ a credit from another country, and it is planned as part of that country’s target, the emissions reduction will be transferred to count towards NZ’s target, rather than the developing country’s target. That means the overall targets for emissions reductions (Intended Nationally Determined Contributions — INDCs) will be lower than currently submitted. It also means that the projection for global warming will be even higher than the 2.7–3.5 degrees C estimated.
This would represent a major problem. We are already heading for dangerous climate change affecting millions of vulnerable people, including our Pacific neighbours. The only way that credits could have integrity is if they are additional to the other countries’ INDCs, as well as being properly regulated. However, regulating ‘additionality’ has proven impossible in the past and is likely to allow pervasive loopholes in future.
We therefore need to question the rationale for allowing these credits. It is up to the proponents of carbon trading to provide far more persuasive arguments than they have so far. The best outcome for New Zealand is if polluters reduce their greenhouse gas emissions as part of a transition to a low emissions society. It is not in our interests, or those of other countries, to allow a complex financial trading system to drive a truck through the Paris Agreement, provide loopholes and undermine trust. This issue must not be allowed to put the Paris Agreement at risk.
Barry Coates is next into Parliament for the Green Party, a campaigner on trade and climate change, and former CEO of Oxfam New Zealand.