James Shaw welcomed the recommendations of the Productivity Commission's report on a low emissions economy. Photo: Lynn Grieveson
SEPTEMBER 5, 2018 Updated September 10, 2018
Thomas Coughlan
Thomas Coughlan is a Newsroom reporter based in Wellington who writes on policy and economics.
Farm vs town in climate debate
Farmers look set to be given a reprieve, as the second of two reports shoots down the call for New Zealand to reduce its methane emissions to zero.
A report from the Productivity Commission released on Tuesday recommends placing methane within a dual cap emissions trading scheme or an alternative methane quota system to "incentivise reductions of biogenic methane" in recognition of its nature as a short-lived greenhouse gas.
It comes hot on the heels of last week's report from the Parliamentary Commissioner for the Environment which said methane emissions would need to be cut by around 10 to 22 percent by 2050 to halt global warming.
That reduction would come from cutting stock numbers as well as initiatives to reduce the emissions of individual animals.
The Productivity Commission also recommended New Zealand take urgent action to reduce the emissions of its light-vehicle fleet, possibly by introducing a "feebate" scheme, which would subsidise the purchase of green vehicles by levying a charge on dirty vehicles.
Both reports come as a rebuke to campaigners including Greenpeace and Forest & Bird, who argue methane emissions must be reduced to net zero.
But it may come as welcome news to the Government as it decides whether to treat methane differently to other greenhouse gases in the Zero Carbon Bill, which will be unveiled next month. National has promised to work with the Government on the bill.
The Government will want to avoid a repeat of farmers' protests against the previous Labour government's Emissions Trading Scheme (ETS), when National MP Shane Ardern memorably drove a tractor up the steps of Parliament alongside Bill English.
But treating short-lived gases differently could pit farmers against other emitters, like families with cars who are being asked to transition to a majority electric fleet by 2050.
New Zealand's emissions profile
Greenhouse gases can be separated into short-lived and long-lived varieties. Short-lived gases such as methane exist in the atmosphere for less time, during which they cause a large amount of damage.
Long-lived gases like carbon dioxide are less harmful, but persist in the atmosphere for much longer, effectively "locking-in" the warming they create.
New Zealand is in a unique position because the size of our agriculture industry means short-lived gases make up a much larger proportion of our emissions profile.
The Commission recommends taking aggressive action to reduce the long-lived gases, because once they are in the atmosphere their effect on the climate is effectively "locked-in".
The big question for New Zealand is how to prioritise reducing both gases, while balancing economic and social risks.
The Commission notes that while reducing long-term gases should be a priority, reducing emissions from short-term gases to "create "room" for a (slightly) greater budget for long-lived gas emissions, to reduce short- and medium-term warming".
But reducing short-lived gases to give long-life gases greater "room" may be politically risky for the Government.
A figure from the Productivity Commission's report showing the different effects of long and short-life gases on warming.
If not farmers, then who?
Climate Change Minister James Shaw strongly implied the reports would mean short and long-lived gases would be treated differently under the Zero Carbon Bill, the landmark legislation that will direct New Zealand toward meeting its Paris commitments to reduce greenhouse gas emissions.
"I do think that we will arrive at a target that satisfies a range of concerns including the scientific reality that this report is acknowledging and other reports like the Parliamentary Commissioner for the Environment's report last week, that a reduced but ongoing flow of methane doesn't produce any ongoing warming for the climate and also meets the Paris agreement requirements," Shaw said.
Shaw expects the interim Climate Change Committee, which is tasked with setting out a roadmap for how New Zealand will achieve its emissions targets, will take on board today's report.
National's climate change spokesperson Todd Muller welcomed the Commission's report, in particular the recommendations around methane.
"A key recommendation from the report is that agricultural methane should not be included in an all-sectors all-gases Emissions Trading Scheme," he said.
Federated Farmers also welcomed the Commission's recommendations for treating short-lived gases separately.
Prime Minister Jacinda Ardern said both before and after the election that she would look to implement an "all-gases all sectors Emissions Trading Scheme".
Greenpeace and Forest & Bird have both said the Government has a scientific and moral obligation to include agriculture in the Zero Carbon Bill.
"The Government must begin by stopping the problem from getting worse by banning all new dairy conversions and ending further increases in livestock numbers," Greenpeace campaigner Gen Toop said.
"The dairy industry is the country's single biggest climate polluter and has long been the worst industry for avoiding responsibility for their climate emissions."
Forest & Bird's Adelia Hallett said the Government needed to reduce all greenhouse gases to net zero by 2040 — 10 years earlier than the most ambitious Government target.
Carbon pricing still a problem
The report also made recommendations for our Emissions Trading Scheme, which is currently under review.
The scheme is widely considered to have suffered a catastrophic failure in 2013, when the market was flooded with junk credits, which crashed the carbon price.
The Commission recommends establishing a minimum price for carbon credits to prevent a similar crash, but the latest consultation document from the Government's review of the ETS makes this seem unlikely. It said price floor options are "interventionist, administratively complex, with potentially significant negative fiscal impacts".
Shaw said today he was still open to minimum prices, but said it was less necessary in the post-Paris agreement market, where there was a large swell of collective action by governments against climate change. He said he would be reluctant to reopen the ETS to international credits, which had helped bring about the 2013 crash in the scheme.
But Catherine Leining, Policy Fellow at Motu, said an economic shock or a significant industrial carbon producer exiting the market could reduce demand and collapse the price of carbon - discouraging tree planting while also making it cheaper for emitters to continue polluting.
"The price floor usefully guards against price collapse when the market does not go to plan," she said.