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On 07 July 2015, New Zealand submitted its provisional Intended Nationally Determined Contribution (INDC). We rate New Zealand’s INDC 2030 target — nominally  a 30% reduction from 2005 levels, equivalent to 11% below 1990 levels of greenhouse gas (GHG) emissions excluding land-use, land-use change and forestry (LULUCF) by the year 2030 to be “inadequate.” The “inadequate” rating indicates that New Zealand’s commitment is not in line with any interpretations of a “fair” approach to reach a 2°C pathway: if most other countries followed the New Zealand approach, global warming would exceed 3–4°C.
New Zealand’s INDC target to reduce GHG emissions excl. LULUCF by 11% below 1990 by 2030 is likely to result in an increase in GHG emissions excl. LULUCF of up to 11% above 1990 levels by 2030, given the approaches New Zealand is proposing to use to account for Kyoto surplus emission allowances and forestry credits.
New Zealand's proposed 2030 INDC target is not on a direct path towards its 2050 goal, which is, in itself, inadequate.
Using preferred accounting rules for Kyoto surplus emission units and the package of forestry crediting measures, New Zealand’s nominal 5% reduction below 1990 levels by 2020 pledge also translates into a large allowed increase in GHG emissions excl. LULUCF of 74–94% above 1990 levels by 2020. Under current policies, New Zealand’s overall agriculture, energy, waste and industrial processes GHG emissions could increase without constraint to 32% above 1990 levels by 2020. As the amount of emission allowances lies far above the emissions resulting from current policies, a substantial further surplus of emission allowances is likely for the post-2020 period. New Zealand would like to use these towards its 2030 INDC target. Whether all this is possible is, however, subject to some uncertainty about whether New Zealand could legally apply the rules it intends to rely upon.
An unusual aspect of New Zealand’s INDC is that it is provisional pending “full and final agreement on the accounting rules/guidelines to apply” to the accounting rules for the land sector and access to carbon markets, or “confirmation in Paris that accounting rules agreed post-Paris will not be applied retroactively.”
New Zealand declined to take on a legally binding target for the Kyoto Protocol’s second commitment period (2013–2020). Nevertheless, New Zealand has announced its intention to continue to use certain Kyoto accounting rules that apply to Parties (to the Protocol) with commitments. However, given that New Zealand’s lack of a legally binding commitment, the legal basis upon which New Zealand is seeking to rely upon these accounting rules is unclear.
Kyoto Protocol first commitment period
New Zealand's Kyoto Protocol target for the first commitment period (CP1) (2008–2012) was to return its GHG emissions excl. LULUCF to 1990 levels (QELRO of 100% of 1990 emissions).
Under the Kyoto Protocol accounting rules applicable to New Zealand in the first commitment period, certain land-use change and forestry activities provided credits which were added to allowed GHG emissions excl. LULUCF during the commitment period. In CP1, these activities resulted in extra emission allowances of, on average, 14 MtCO2e per year for New Zealand (equivalent to about 23% of base year emissions in 1990).
Overall, New Zealand ended CP1 with GHG emissions excl. LULUCF at about 19% above 1990 levels, but will likely remain in compliance with its Kyoto Protocol QELRO due to the operation of Kyoto accounting rules and New Zealand’s access to the Protocol’s flexible mechanisms. As a consequence of its large volume of LULUCF credits, New Zealand had a substantial surplus of unused emission units at the end of CP1.
As explained below, New Zealand proposes to use these surplus emission allowances from the Kyoto Protocol’s first commitment period, which are derived, in part from Kyoto LULUCF credits and acquired emission units from other countries, to meet its 2020 reduction target under the Convention.
2020 Pledge and Kyoto Second Commitment Period
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New Zealand put forward an unconditional pledge in 2013 to reduce GHG emissions excl. LULUCF by 5% below 1990 levels by 2020 under the Convention. New Zealand’s unconditional pledge is complemented by an earlier conditional pledge from August 2009 to reduce emissions by 10–20% below 1990 levels by 2020 (Government of New Zealand, 2013). The conditional pledge range is linked to a set of conditions, including: adoption of a global agreement that sets the world on a pathway to limit temperature rise to not more than 2°C; developed countries make efforts comparable to those of New Zealand; advanced and major-emitting developing countries take action fully commensurate with their capabilities; there is an effective set of LULUCF rules; and there is recourse to a broad and efficient international carbon market (Government of New Zealand, 2013).
While New Zealand remains a Party to the Kyoto Protocol, it announced in 2012 that it would not participate in the second commitment period (CP2) (2013–2020). In subsequently announcing in 2013 its unconditional 5% by 2020 reduction target, New Zealand provided further details, including that it plans to apply Kyoto Protocol accounting rules governing the second commitment period and that its 5% reduction target will be expressed as a QELRO of 96.8%.
While New Zealand’s clarification of the modalities for the accounting it proposes to apply to achieve the 5% by 2020 target is welcome, and the intended application of clear emission reporting rules commendable, there are a number of important issues raised by New Zealand’s 2013 communication.
New Zealand’s unusual decision to adhere to the Kyoto Protocol rules without signing up to the second commitment period raises a number of legal issues, as the Protocol provides certain benefits only to Parties that have emission reduction commitments for the second commitment period.The Kyoto rules New Zealand seeks to apply, despite its lack of a legally-binding commitment under the Protocol for the second commitment period, broadly relate to:
(i) The carry over of surplus emission units and allowances from the first commitment period;
(ii) The ability to generate LULUCF credits during the second commitment period (2013–2020);
(iii) The ability to purchase, acquire or sell Kyoto emission units from other Kyoto Parties during the second commitment period; and finally
(iv) Provisions relating to the carryover of any surplus from earlier commitment periods to the post-2020 period.
The CAT has estimated likely quantities of the two major sources of “Kyoto” emissions units that New Zealand wishes to use in the period to 2020 (for details on LULUCF accounting rules, please refer section “Opening the land-use and forestry and surplus credits black box”here):
When we put together all these units (credits from LULUCF, CERs, RMUs and ERUs), if New Zealand were able to apply its preferred accounting rules, and use these units to offset its fossil fuel and industrial emissions, we calculate that its nominal 5% reduction by 2020 from 1990 levels pledge could in reality enable an increase in GHG emissions excl. LULUCF of 74–94% above 1990 levels by 2020. As this exceeds—by a large margin—New Zealand’s projected GHG emissions based on its current policies—a projected increase of about 32% above 1990 levels by 2020—New Zealand would not need to adopt further policy action to meet its stated 5% reduction goal and it would be left with a further substantial surplus of emission units that it could again seek to carry over to the post-2020 period. However, it should be noted that while this CAT assessment considers the implications of applying Kyoto Protocol second commitment period accounting rules to New Zealand, it is by no means clear that New Zealand’s preferences will be permitted in the post-2020 agreement. The figure below graphically shows the results.
Figure 1: The effect of Kyoto CP1 surplus and CP2 LULUCF accounting credits on allowed emissions on the period to 2020, compared to the 2020 pledge, current policies and the 2030 INDC. The Kyoto CP1 surplus gives sufficient emission allowances to increase emissions to 45% above 1990 levels by 2020 (grey), well above current policies. KP CP2 LULUCF credits further increase these allowances (green). Note: here the 5% reduction by 2020 pledge is effectively 3% reduction to base year emission inventory differences with initial data set used to set this pledge.
Post-2020 INDC target
On 7 July 2015, New Zealand announced a 30% nominal reduction by 2030 from 2005 levels of greenhouse gas emissions excl. LULUCF (UNFCCC, 2015). This is stated as equivalent to an 11% reduction by 2030 from 1990 levels, the base year used for New Zealand's 2020 target and commitment. However, as with the 2020 target, the effective reductions may be very different from the nominal reductions, as the following analysis shows.
A recent publication from the Government of New Zealand’s contribution to the new international climate change agreement (Government of New Zealand, 2015) makes clear that New Zealand intends to continue applying its preferred pre-2020 accounting rules in the post-2020 period. The government argues that given the significance of the land sector to New Zealand, these rules are particularly important as they can considerably affect the cost of achieving targets. The structure of New Zealand’s preferred rules, if permitted for its 2020 pledge, have implications for the effectiveness and real level of emissions related to any INDC target put forward by the New Zealand Government. This section outlines some of the implications and consequences of the accounting system New Zealand proposes to use.
The submitted INDC does not provide full clarity on what accounting rules are to be applied. However, it states that it assumes that any rules agreed between parties will allow for accounting for LULUCF and for the use of international market mechanisms. In fact, New Zealand indicates in its INDC that it will finalise the INDC only “following full and final agreement on the accounting rules/guidelines to apply in those areas, or confirmation in Paris that accounting rules agreed post-Paris will not be applied retroactively.”
New Zealand has indicated its intent to use international emission market mechanisms.
For this analysis, we have assumed that New Zealand would seek to continue to apply a Kyoto-type accounting system and also seek to carry over surplus units from the first Kyoto commitment period to the second commitment period, and then from the second commitment period of the Kyoto Protocol to the post-2020 agreement, even though their ability to do so in the new agreement has not been verified.
Under these accounting assumptions we assume that New Zealand “starts” its post-2020 commitment at its 2020 target of reducing emissions to 5% below 1990 levels (excl. credits and debits from LULUCF). Under a Kyoto type accounting system, this would lead to an allocation of “allowed emissions” corresponding to a budget over the 10-year period of its INDC that meets it 11% reduction below 1990 by 2030 target.
If the estimated 2013–2020 “surplus” emission units generated by New Zealand’s proposed application of the Kyoto Protocol LULUCF rules were allowed to be carried over to the post-2020 period, then the 11% below 1990 GHG emissions excl. LULUCF reduction target in 2030 could actually become a 11% increase above 1990 GHG emissions levels excl. LULUCF (the lower end of that range would be a reduction of 5% below 1990). This would significantly decrease any action required from New Zealand in the period in its energy and industrial sectors (Figure 2).
However, this is likely to be compensated by projected LULUCF debits. Based on old estimates published by the Government (Government of New Zealand 2009b), the CAT estimates that the debits to be generated in the period 2020–2030 can be as high as 150 MtCO2e (roughly 2 years of national emissions). However, caution is needed when interpreting these numbers, given their old date and very high uncertainty associated with such estimates.
Figure 2: Effects of surplus carryover from Kyoto CP2 on effective INDC target for 2030. The total volume of surplus units is not sufficient to permit current policy emissions to continue. However it would still result in allowed emissions being up to 11% above 1990 levels.
Long-term emissions reduction target
In 2011, the New Zealand Government announced its long-term target: a 50% reduction in GHG emissions from 1990 levels by 2050. The Government has stated that “[t]he 2050 target is based on New Zealand’s net GHG emissions and will take into account any removals or emissions arising from afforestation or deforestation since 1990 consistent with the Kyoto Protocol under the United Nations Convention Framework rules on climate change.” The INDC text reiterates New Zealand’s intent to meet this target.
This target is insufficient. To hold warming below 2°C, the IPCC AR5 found that global GHG emissions need to be reduced to 40–70% below 2010 levels by 2050, which corresponds to 35–55% below 1990 levels. Industrialised countries would need to make substantially larger reductions by 2050 than the global average, otherwise unfair burdens would be placed upon developing countries.
New Zealand's proposed 2030 INDC target is not on a direct path towards its 2050 goal. The direct pathway between a 5% reduction from 1990 levels in 2020 and a 50% reduction in 2050 would require in 2030 about a 20% reduction from 1990 levels, or about 37% from 2005 emission levels. However it also needs to be noted that the 50% reduction by 2050 is in itself inadequate for a developed country, and moving towards “medium” consistent with for example the United States 80% reduction by 2050 goal would mean a 30% reduction from 1990 levels by 2030 (about a 45% reduction from 2005 levels).
We rate New Zealand’s 2030 INDC target— an 11% reduction from 1990 levels of GHG emissions excl. LULUCF by the year 2020—to be “inadequate.” This means the emissions levels resulting from the 2020 target exceeds the acceptable emissions level for New Zealand in all effort-sharing proposals evaluated by the CAT. For New Zealand, effort-sharing proposals based on capability require less reduction in emissions levels than proposals that focus on equal cumulative/equal per capita emissions. The nominal 2020 5% reduction target would be rated “medium” if no LULUCF credits were used (black dot in main graph). However, with the package of forestry crediting measures that New Zealand has indicated it intends to use in accounting for its emissions, the 5% target can lead to the country’s actual overall emissions significantly increasing, meaning that its actual emissions (green range in Figure 1) fall within the “inadequate” category.
For some countries, studies provide "cost as percentage of GDP,” which we include as one of the categories of effort sharing, called "capability/costs.” It usually determines the top end of the range for developed countries. For New Zealand, no data from this category is available in existing studies. Some literature suggests, that abatement costs may be comparably higher in New Zealand than in other developed countries. As a result, the missing category could give New Zealand a higher fair share of emissions and the border between “inadequate” and “medium” could move to the upper end of the range of “capability”. However, this is not possible to confirm without more data.
For details on New Zealand’s per capita emissions trends, please refer to the full analysis.
With current policies in place in New Zealand, total national GHG emissions excl. LULUCF are projected to rise to 80 MtCO2e by 2020 and 86 MtCO2e by 2030. This represents an increase in emissions from 1990 levels of 32% in 2020 and 42% in 2030. In 2009, the Government projected forestry to change from producing net removals of emissions to becoming a source of emissions by around 2025, as relatively large areas of production forests planted in the 1990s are harvested. A challenge for New Zealand to meet its reduction targets is the growth in GDP, up 67% from 1990 to 2012. During this period, emissions in the energy sector have increased by 25%, mainly due to transport sector growth (58% growth between 1990 and 2012) and fossil fuel electricity generation, while emissions from the agricultural sector grew by 15% (CRF, 2014).
Climate policy developments in New Zealand since 2008 have tended to weaken rather than strengthen policy signals. New Zealand’s main instrument to reduce greenhouse gas emissions is an Emissions Trading Scheme (ETS) (Ministry for the Environment, 2014; Government of New Zealand, 2011b). The ETS entered into force in 2008 and has been progressively weakened. At present there is no cap on total emissions within New Zealand under the ETS, and it therefore does not regulate total emissions within a given period of time. This implies that there is no restriction on the supply of emissions units and hence there is no price signal constraining the overall level of emissions. The ETS is due to be reviewed later this year.
Forestry was the first sector to enter the ETS (in 2008), followed by liquid fossil fuels, stationary energy and industrial processes in 2010, and waste and synthetic greenhouse gas sectors in 2013. The agriculture sector (with a large share of methane emissions), responsible for around 50% of New Zealand’s emissions, has been exempted from the ETS. A recent publication by the Government on New Zealand’s contribution to the new climate agreement being negotiated under the Convention (Government of New Zealand, 2015) indicates that there are currently no plans to bring agricultural emissions under the ETS. The Government has stated that it is unlikely that the agricultural sector will be specifically targeted for delivering emission reductions in New Zealand’s INDC. The Government’s INDC consultation document argues that as no other country has yet put a direct carbon price on farmers, putting a price on agricultural emissions could potentially displace agricultural production in New Zealand with less efficient farming in other countries.
Targets for 2020, 2030 and 2050 were calculated from the most recent national inventory submissions (CRF, 2014).
We note that our projection methods do not take into consideration the effects of forest maturation on LULUCF emissions, and therefore we currently consider our estimate to be an upper bound. New Zealand supports proposals to remove emissions from natural disturbances and to count removals from harvested wood products, which have not been accounted for here. This could lead to higher credits (or lower debits).
We calculated New Zealand's LULUCF accounting quantities in 2020 for afforestation, reforestation and deforestation using the current Kyoto rules and for forest management using a net-net approach with a projected reference level for 2013–2020 (Government of New Zealand, 2009a). If calculations are performed using New Zealand’s own projections for Afforestation/Reforestation and Forest Management activities (Government of New Zealand 2009b) the country would gain 10 MtCO2e LULUCF debits per year. However, the government projections date from 2009 and are not consistent with subsequently reported historical emissions for 2008–2012. We therefore also perform calculations based on our own projections (using historical averages) which result in 17 MtCO2e credits a year. Because our estimates are more consistent with historical data, we consider that our estimates—and hence the 17 MtCO2e credits a year—may be more likely estimates. We note that our projection methods do not take into consideration the effects of forest maturation on LULUCF emissions, and therefore currently consider our estimate to be an upper bound. New Zealand has included a level of natural disturbance in their forest management reference level. For further details on LULUCF accounting rules, please refer section “Opening the land-use and forestry and surplus credits black box” here. For the 2030 target, we have estimated credits and debits of LULUCF using only the Government’s projections and applying a Kyoto type accounting system. This would lead to large debits in the LULUCF sectors. These estimates are however associated with very high uncertainty.
The current trend projections are based on growth rates from New Zealand’s Sixth National Communication (Ministry for the Environment, 2014) applied to the GHG inventory data (CRF, 2014).
IPCC AR4 Global Warming Potentials (GWPs)
Until this year, Annex I emissions inventory reporting has used the global warming potentials (GWPs) of the IPCC’s second assessment report (SAR). Most INDCs, including New Zealand’s, are based on the more up to date GWPs of the fourth assessment report (AR4). Estimates of the GWPs of methane, nitrous oxide, and many fluorinated gases changed significantly between the two reports that affect the absolute values in accounting and target calculations. Due to the large contribution of emissions from the agriculture sector, a high proportion of New Zealand’s emissions are in the form of methane and nitrous oxide. Under AR4 GWPs, CH4 and N2O contributed 43% and 13% respectively of New Zealand’s total Annex A GHG emissions in 2005.
If New Zealand's INDC 2030 reduction target is calculated against their 2005 emissions using the more up to date (AR4) GWPs it is 58.6 MtCO2e, 3.7 MtCO2e higher than a target calculated using second assessment report GWPs. In all our calculations here we use second assessment report GWPs to ensure comparability with all countries and with earlier assessments. In addition the effort-sharing calculations are based on the older, second assessment report GWPs. The change in GWP’s does not affect the percent reduction targets.
CRF (2014). UNFCCC AWG-KP Submissions 2013. Common Reporting Format.
Grosser, T (2013) New Zealand commits to 2020 climate change target, Media Release
Government of New Zealand (2013). Submission to the UNFCCC on Quantified Economy-wide emission targets for 2020
Government of New Zealand (2011b). NZ ETS Review.
Government of New Zealand (2009b). A Submission to the Ad-Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) Land Use, Land Use Change and Forestry (LULUCF).
Government of New Zealand (2010). New Zealand's pledge to the Copenhagen Accord Compiled in: Compilation of economy-wide emission reduction targets to be implemented by Parties included in Annex I to the Convention, UNFCCC (2011).
Ministry for the Environment (2014). New Zealand’s Sixth National Communication under the United Nations Framework Convention on Climate Change and the Kyoto Protocol, Wellington: Ministry for the Environment.
UNFCCC (2015): INDCs as communicated by Parties
 The term "nominal" is used to describe the stated target for fossil fuel and industrial GHG emissions, and the term “effective” is used to describe the emissions levels that would result after surplus emission units and credits/debits from the forestry sector are accounted for. Where forestry credits (debits) are accounted for, the effective target will be higher (lower) than the nominal target.
 Whilst New Zealand remains a Party to the Kyoto Protocol, but did not sign up for the second commitment period 2013–2020 and has also not put forward legally-binding QELRO for that period. See http://unfccc.int/files/documentation/submissions_from_parties/application/pdf/13-1620.pdf
 The CAT assessment findings outlined above are, in line with New Zealand's stated intentions, premised upon it being able to apply in the period to 2020 accounting rules that govern Parties with commitments under the second commitment period of the Kyoto Protocol. Specifically, it is understood that New Zealand is seeking to rely upon accounting rules that relate to the carry over of surplus emissions units from the first commitment period to the second commitment period, the ability to generate LULUCF credits and to purchase, acquire, transfer or use Kyoto emission units from other Kyoto Parties during the second commitment period.
 The QELRO, expressed as a percentage in relation to a base year, denotes the average level of emissions that an Annex B Party could emit on an annual basis during a given commitment period.
 Final Kyoto Protocol first commitment period reports have not been reviewed.
 We assume that New Zealand sets an emissions target for a specific year (e.g. 2025), and then applies a budget approach from a specific starting point (for example the unconditional emissions target in 2020), as this is what is has proposed for the period 2013–2020. The emissions budget is the average of the starting point (target or emissions level) and the endpoint (target) multiplied by the number of years covered by the target. For a 2025 INDC, this would be five years, and for a 2030 INDC, this would be 10 years.
 This is on a direct line between -5% in 2020 and 50% in 2050, but is nonetheless inadequate.
 https://www.climatechange.govt.nz/reducing-our-emissions/targets.html. It needs to be noted that there is no necessary linkage between the accounting rules under the Kyoto protocol and those of the UNFCCC itself, including in relation to the definitions of afforestation and deforestation.
 The data used to calculate the current-policy-based trends are taken from the policy scenario from New Zealand’s Sixth National Communication (Ministry of Environment, 2014).
 See http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/climate-change-consultation-document.pdf, Page 10: “New Zealand is a relatively efficient agricultural producer compared to other countries. As no other country has yet put a direct carbon price on farmers, such a price could potentially displace agricultural production in New Zealand with less efficient farming in other countries.“