Brian Fallow on the economy
Brian Fallow is the Herald's Economics Editor

Brian Fallow: NZ faces big calls over climate pledge

We are entering a period of transition between two phases in the global response to climate change. File photo / Supplied
We are entering a period of transition between two phases in the global response to climate change. File photo / Supplied

The Government has two big and difficult decisions to make regarding New Zealand's international commitments on climate change.

The first is to set a firm target for emission levels in 2020.

So far all it has put on the table is a spongy offer, with a range of numbers and a list of conditions attached.

The other key decision is whether to undertake that commitment under the second commitment period of the Kyoto Protocol, as the Europeans have, or under the overarching agreement, the UN Framework Convention on Climate Change, like most of the rest of the world.

New Zealand's offer with respect to a 2020 target has not changed since before the ill-fated Copenhagen conference in 2009.

It is to cut gross emissions to between 10 and 20 per cent below 1990 levels, subject to a string of conditions.

Gross emissions right now are around 25 per cent over 1990 levels so a target of, say, 15 per cent below that benchmark would still represent a cut of nearly a third within eight years - a tall order.

To be remotely feasible it would require, at a minimum, New Zealand to continue to be able to cover any overshoot with credits for the carbon sequestered in "Kyoto" forests (those planted since 1990 on land not previously forested) or bought on the international carbon market.

Other conditions are that other developed countries make efforts "comparable" to New Zealand's and that developing countries which are major emitters "take action fully commensurate with their respective capabilities".

At this stage, the Government says, despite the progress made at last December's Durban conference it is still too soon to say if, or to what extent, its conditions are met.

It has also reserved its position, as have the Australians, on whether any commitment it does make for the period after Kyoto's first commitment period finishes (at the end of this year) will be part of a second commitment period under the Kyoto treaty or under the broader and looser "LCA" track. That bit of jargon stands for long-term co-operative action under the framework convention on climate change.

It may look like an arcane question, but it reflects something important - that we are entering a period of transition between two approaches to, or phases in, the global response to climate change.

The Durban conference's key outcome was a mandate to negotiate by 2015 a comprehensive global agreement "with legal force" to commence, if ratified, in 2020.

The current, woefully inadequate situation is that Kyoto only covers a dwindling minority of global emissions.

It enshrines an outdated binary distinction, that the world can be divided into developed and developing countries and only the former should have obligations to curb emissions.

Kyoto has been stifled from the start by the fact that the United States has never ratified it, leaving a big hole in the demand side of the carbon market it set up, and by the fact that its year zero is 1990, just before the collapse of the Soviet empire let an awful lot of chimneys in Eastern Europe go cold, creating an excess of credits on the supply side (the so-called "hot air").

Of the major non-European countries in the Kyoto system, Japan and Russia want no part of a second commitment period.

Canada has gone further and is reneging, with evident impunity, on its obligations under the first commitment period.

That has undermined what has been seen as Kyoto's saving grace, that it is is a legally binding treaty requiring the countries with obligations under it to square accounts with each other after a commitment period ends.

Environmental NGOs like the World Wildlife Fund worry about trust. If a country like Canada can't be trusted to honour formal treaty obligations, would a chain of merely political pledges, even if it covered most the the world's emissions, be worth the paper it was written on?

Immediately after Durban, Prime Minister John Key said he thought New Zealand would undertake commitments under Kyoto's second commitment period, now that it's confirmed there will be one.

But that was an instant, off-the-cuff response. Both Climate Change Issues Minister Nick Smith and Climate Change Negotiations Minister Tim Groser are much more guarded on the question.

If anything, they are signalling a preference for not joining the Europeans in Kyoto this time round.

Groser stresses, however, that would not mean "pulling out of Kyoto' in the sense of reneging on existing undertakings for the 2008 to 2012 period, as the Canadians have.

Nor would it mean that New Zealand would not make international commitments to curb emissions over the next few years.

And of course it does not mean an end to the domestic policy of an emissions trading scheme and the costs it imposes - light as they may be under current settings - on New Zealand energy users.

Groser questions how real in practice the distinction is between a "legally binding" Kyoto commitment and "merely political" pledges under the LCA track.

"Once a New Zealand Government has made a decision to commit to something of a high-profile nature like this, not to do it would cause a future Government enormous embarrassment," he said.

"If we decided not to join the Europeans but to join the whole of the rest of the world for the period 2013 to 2020, what will happen is we politically commit ourselves to that and to a reporting procedure that I paid some large part in facilitating.

"I'm sure any future New Zealand Government would treat that as seriously as if it were legally binding."

Smith said: "Given that the United States, Canada, Japan, in fact all the countries outside of Europe have said they won't be part of Kyoto, it's a big stretch for New Zealand, whose trading interests are very much Asia-Pacific, to sign up to Kyoto. The Government has not ruled it out, but it is a big ask".

Australia was in the same position, Smith said, and there was a close dialogue between the two Governments on the question.

Harmonising policy with Australia is difficult, however, since climate change policy is major area of disagreement between the ruling Labor Party and the Greens on the one hand and the Opposition Coalition on the other.

The other big factor in New Zealand going the Kyoto route again is whether not doing so would inhibit our access to the international carbon markets it has engendered.

New Zealand has long argued that it's more costly to reduce emissions here than in other developed countries because electricity generation is predominantly from renewables already, and half the country's emissions arise from the bodily functions of livestock rather than the combustion of fossil fuels.

For that reason it is crucial to have the option of paying, via the carbon market, for UN-approved emissions-reducing projects elsewhere in the world when that is cheaper.

Groser believes there will be an agreement for countries going the LCA route to have access to that market.

"But it is not determined. It's a very important question in Canberra right now and it is very important for us."

- NZ Herald

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