Investing in a low-emission future now could save New Zealand big in the future, a new Government-commissioned report has found.
The report, by Dr David Hall and Sam Lindsay of economic research collective Mohio, investigated opportunities for New Zealand in climate finance - or the billions of dollars in global capital being channelled into areas focused around climate change.
Specifically, climate finance was investment and spending between companies, countries and people that contributed to either combating climate change or adapting to it.
The bulk of the world's climate finance, estimated to be in the hundreds of billions of dollars, was tied up in the private sector and most of the cash was being poured into mitigation efforts.
Signs that it was becoming established included the growth of a global green bond market that had surged in issuances to NZ $126b in 2016 - a 120 per cent increase on the previous year.The figure was expected to balloon again, driven by issuances out of China and a renewed international commitment from the Paris Agreement.
Analysts say that, although a transition to a low-emission world will require new investment, climate-aligned spending offered in return new opportunities to create jobs and industries, to spur growth in different parts of the economy, and to pull in new capital from a range of sources.
Yet there was still a gap between the level of current global climate investment and the level of expenditure required to stop global warming.
It was estimated current global climate finance flows were around NZ $530b to $968b each year - but annual investments of NZ $1.2 trillion would be needed over the next 15 years to meet the Paris Agreement's goal of limiting further global temperature increase to within 2C.
The Paris Agreement also committed its parties, New Zealand among them, to "making finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development".
Hall and Lindsay's report found that fostering climate finance flows wouldn't just help New Zealand meet its international obligations, but position it favourably within the global economy as the transition to lower emissions activities gathered pace.
Meeting its 2030 Paris target of slashing emissions by 30 per cent below 2005 levels and 11 per cent below 1990 levels was estimated to cost the country between NZ $1.4b and NZ $3.6b throughout the next decade, largely through buying emissions reductions from overseas carbon markets.
Not meeting the 2030 target would mean those costs continued.
Other big risks of falling short on climate action included missing out on the economic and social benefits of climate projects, losing the advantage of adopting low-emission technologies early, and suffering the lost value of "stranded assets" tied up in industries such as fossil fuels.
And then there was physical cost of climate change - paying for damage from sea level rise and higher numbers of flooding, wildfires and drought.
The report recommended New Zealand support actions and efforts, such as setting up a pipeline of investable projects, exploring the potential of a Green Investment Fund, determining a "consistent" carbon price for policy planning and boosting reporting.
"Pursuing these policy strategies creates opportunities to avoid a variety of long-term costs, lost value, and opportunity costs that follow from not meeting the 2030 target," the report authors said.
Climate Change Minister James Shaw, who launched the report in Auckland this morning, said the Government was already working on some of the recommendations.
Those included developing the Green Investment Fund and improving the Emissions Trading Scheme to provide effective carbon pricing.
Shaw had also asked officials to look at options for disclosure and reporting of climate-related financial risks.
"New Zealand has committed to making sure finance flows go towards low emissions and climate resilient development as part of the Paris Agreement," he said.
"Many businesses and investors can see that climate action and green activities are not only good for business – but are a crucial part of New Zealand achieving a low emissions, climate resilient future, while also reducing risks to the financial sector.
"Financing the clean economy is crucial to ensuring a just transition that creates jobs in new industries.
"Roughly two thirds of all climate finance globally comes from the private sector, so there is heavy reliance on them to take action.
"Climate finance activities are underway, progress is being made, but this is just the start of a long journey and we need to do more."
The report was launched the same week that new figures showed New Zealand's greenhouse gas emissions had climbed by nearly 20 per cent from 1990 levels, and that Prime Minister Jacinda Ardern announced an end to new offshore oil and gas exploration.