Hallelujah! Chris Hipkins has drunk the climate Kool-Aid and come to the very public realisation that “you can’t offset your way out of the climate crisis”.
It’s about time.
The upshot of successive government policies is that New Zealand will face a bill of possibly up to $10 billion to buy sufficient tonnes of overseas carbon offsets during this decade. That’s if we can’t make good on a pledge to cut this country’s emissions by 147 million tonnes over the 2020s via the Nationally Determined Contribution (NDC) under the Paris Agreement.
Given the economic and moral imperatives — and this is a rocky financial period for New Zealand — this country has only one choice: fundamentally, reduce emissions.
For some who were indoctrinated in the Roman Catholic faith, the notion of buying your way out of making emissions reductions by instead investing in carbon offset projects in foreign lands has seemed seductively attractive. Too familiar, in fact.
After all, making confessions, saying prayers and buying papal indulgences to offset major sin was long part of a religious tradition which reached its apotheosis in the early 16th century, when Pope Leo X offered indulgences for those stumping up to rebuild St Peter’s Basilica in Rome.
These aggressive marketing practices prompted Martin Luther to condemn what he saw as the “purchase and sale of salvation”.
But the parallel is there, and made more egregious when some studies of various overseas certifiers have disclosed that many offset projects simply involved “phantom credits”. In effect, fraud.
We were spared religious cant in Hipkins’ address to a Chapter Zero business audience mustered by the Institute of Directors this week.
Clearly, Hipkins has experienced a conversion in his own thinking.
I won’t reprise his speech here — it can be found on the Beehive website. But the thrust is that the consequences of climate change are significant.
If New Zealand does not stay ahead of the curve — or simply occupies the position of a fast follower — the consequences are that people will stop buying New Zealand products. Particularly our major export earner, food — where major Fonterra customers, such as Nestle, now want to see absolute emissions cuts on farms that form part of their supply chains.
That thrust is reinforced in the subtext of the recent European-New Zealand free trade agreement, which Hipkins witnessed when it was signed in Brussels recently. The deal still has to be approved by the European Parliament.
But under the agreement, the EU and New Zealand commit to effectively implementing the United Nations Framework Convention on Climate Change and the Paris Agreement. The commitment to respect the Paris Climate Agreement is subject to trade sanctions in case of material breaches.
This was reinforced by a high-profile European Parliament member at last week’s Europe Business Summit.
The politicians can talk all they want about how climate change is the “greatest existential threat facing humanity”, with possible significant economic consequences. But unless the politicians lead meaningful change, they are leading us towards failure.
National is also in the frame here.
British environmentalist Sir Jonathon Porritt recently slagged off the “two Christophers” for failing at climate leadership just when this country needs it most.
That criticism would have stung one of those Christophers — National’s Christopher Luxon — who brought Porritt in to head a sustainability advisory panel at Air New Zealand when Luxon was the airline’s chief executive.
National does support the recognition of on-farm sequestration, allowing landowners to earn Emissions Trading Scheme credits through other forms of carbon capture besides tree planting, such as restoring wetlands. It also plans to remove the ban on gene technologies which will help give farmers the tools they need to reduce methane emissions through gene-edited crops, feed and livestock.
There’s more besides. Both major parties plan to invest more in renewable energy projects. Green hydrogen will be one area for future co-investment with the government.
The Labour Government has also resorted to industrial policies by incentivising Fonterra to cut coal use at six dairy factories, thus halving its manufacturing emissions by 2030.
It will co-fund up to $90m from the Government Investment in Decarbonising Industry (GIDI) fund, which is paid for through the Emissions Trading Scheme. The rationale is that this will deliver 2.69 per cent of all New Zealand’s required emissions reductions between 2026 and 2030 and “is equivalent to taking 120,000 cars off the road”.
Except the latter part is a false equivalence.
To stay true to the Hipkins’ mantra that you “can’t offset your way out of reducing emissions”, the cuts to transport emissions also have to be absolute through removing fossil-fuelled cars and trucks from our roads.
The Fonterra agreement follows an earlier one made with NZ Steel, which will deliver 1.17 million tonnes of CO2 equivalent cuts, 2.69 per cent of the total emissions reductions required in New Zealand’s second emissions budget between 2026 and 2030.
These co-investments with big private sector companies will make a small reduction in the target.
But even with the Government’s Emissions Reduction Plan, New Zealand is still very short indeed of achieving the promise it made to cut emissions by 147 million tonnes in the 2020s.
The answer is for both Labour and National to put aside allegations of “corporate welfare” and “crony capitalism” and invest large to achieve the targets. Particularly in transport and agribusiness.
Other countries, notably China with its major investments in EVs and solar power, are achieving major reductions.
The United States passed the Inflation Reduction Act last year — the most significant climate legislation in US history — to offer funding, programmes and incentives to accelerate the transition to a clean energy economy.
There are significant opportunities in the transtasman arena.
Hipkins has foreshadowed further changes to the Emissions Trading Scheme, to take account of the Climate Change Commission’s advice to ensure the scheme is priced appropriately and incentivises effective climate action.
“We can’t simply plant the whole country in exotic forests and pretend that we have done our bit to tackle the challenge.”
The existential crisis which the Prime Minister alluded to this week is such that we now need to invest in major change to reduce emissions here, protect our major export earner agriculture, explore gene-editing and grow new greentech industries for the future.
Free-riding by buying phantom offshore credits is not the answer for New Zealand.
It never was.