Petrol and diesel-fuelled cars could become more expensive to import if New Zealand adopted a recommendation made by the Productivity Commission in a new draft report.

The commission suggested the Government could look at a price "feebate" scheme, under which a vehicle would be assessed for its greenhouse gas emissions potential.

Essentially, high-emission vehicles would incur a fee, while low-emission vehicles like electric vehicles would receive a rebate, making them a more attractive option.

The "feebate" could be a one-off transaction at the point of importing a vehicle, a component of a vehicle's annual registration fee, or a combination of the two, the commission said in its new low emissions economy report.


There were also warnings that power prices could become more expensive if electricity generation didn't shift completely away from gas and coal energy sources.

The commission's modelling showed the New Zealand carbon unit under the Emissions Trading Scheme (ETS) currently costs $22 per tonne - and this could rise to $30 per tonne by 2030 and possibly $75 per tonne by 2050 if the country made the transition to a low carbon economy.

But Climate Change Minister James Shaw told RNZ that if no changes were made the cost could rise to $250 per tonne.

Shaw said the Government was considering the "feebate" scheme and other recommendations made in its new 500-page report.

The Government was also reviewing whether to incorporate into the ETS agriculture, which accounts for half of the country's gross greenhouse emissions, largely in the form of methane and nitrous oxide.

The sector has long resisted the move, and Federated Farmers strongly opposes livestock emissions being included until mitigation options become cheaper and overseas competitors face similar costs.

The lobby group has argued ongoing improvements would bring down agricultural emissions in the meantime.

But the commission's draft report recommended an ETS phase-in should happen, amid changes to make a "broad-based and effective" pricing scheme.


Other calls included mandatory financial disclosures about climate risk and a cross-party commitment to transition to a low-emissions economy.

The strategy it outlines generally involves replacing fossil fuels with clean electricity, and a major change to land use favouring large-scale new forestry plantation and significant growth in horticulture.

In the longer term, the commission says new technologies that emerge in response to higher emissions costs would offer more options.

The Productivity Commission has called for big-emitting agriculture to be pulled into the emissions trading scheme (ETS), among other suggested bold recommendations. Photo / File
The Productivity Commission has called for big-emitting agriculture to be pulled into the emissions trading scheme (ETS), among other suggested bold recommendations. Photo / File

Climate change policies already in place have not been effective in slashing our domestic emissions, which the latest figures show have climbed by 20 per cent from 1990 levels.

"Our report shows that major changes will be needed," commission chair Murray Sherwin said.

"Our inquiry shows that, if credible and stable climate policy can be established now, businesses, households and consumers will be better able to plan for change and manage the risks of moving to a low-emissions economy.


"While the challenges of achieving a low-emissions economy are large, the scale of change involved in the transition is comparable to transitions that have occurred before in New Zealand, and within the scale of transitions faced in other developed countries.

"New Zealand can reach its low emissions targets if it has the right institutions and policy settings in place, and the journey is embarked upon without delay."

Shaw said some of the recommendations were already part of the Government's work programme.

Those included its proposed Zero Carbon Act, which aimed to reach a net zero emissions goal by 2050; setting up a new Climate Change Commission, and looking at options disclosure of climate-related financial risks.

"As the Productivity Commission points out, this transition to a low-emissions economy will require major changes but New Zealand can achieve those changes and reap the rewards."

Massey University sustainable energy lecturer Professor Ralph Sims said the challenge for the Government would be remaining bold on the issue, at a time many industries and businesses had yet to come to terms with what a low-emissions future meant.


"The recent furore over the Government's statement that no more permits for offshore oil and gas exploration will be issued is but one example," Sims said.

"Yet we have no choice but to transition away from all fossil fuels starting from now. We will have to reduce not just carbon dioxide but all greenhouse gas emissions.

"We will not be alone but will be working alongside the vast majority of countries in aiming to reach near net zero emissions in around just 30 years time in order to keep the climate of our planet from becoming untenable."

Professor Shaun Hendy, an innovation commentator and director of University of Auckland-based Te Punaha Matatini, said New Zealand would need to be a fast adopter of green technologies if our high-emissions economy was to remain competitive - and it otherwise risked missing out.

"Sitting on the sidelines is not an option."

The draft report is open for feedback until June 8, when the Government is due to consult on its zero carbon legislation.


On the table: Five major recommendations

• A "strong signal" from the Government about its long-term commitment to transitioning to a low-emissions economy.
• A new framework that supports policies for transition.
• Mandatory financial disclosures about climate risk.
• A broad-based and effective emissions pricing scheme that includes phasing in agriculture.
• More resources for research and development, especially for agriculture.