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New Zealand’s climate policies are set to undergo an overhaul after the 2017 election of a new Government, which has declared climate action as one of its priorities. An independent Productivity Commission, tasked to look at how New Zealand can maximise the opportunities and minimise the costs and risks of transitioning to a lower net emissions economy, has issued a draft report that sets out a range of options across the economy, in transport, agriculture and recommends a reformed ETS and increased carbon pricing. It confirms that until now, there have been few policies to reduce emissions. It will deliver its final report in August 2018. However, it is too early to quantify the potential impact of the suggested policies on emissions projections. The Government is in the process of drawing up a “Zero Carbon” bill to be introduced in late 2018 that will set up an independent Climate Change Commission and set the framework for action on climate change. The government has also recently announced the banning of new offshore oil and gas drilling.
According to the most recent national emissions projections, New Zealand’s total national GHG emissions excluding LULUCF are projected to stabilise around current levels, reaching 75 MtCO2e in 2020 and decreasing to 72 MtCO2e in 2030. This represents an increase in emissions from 1990 levels of 25% in 2020 and 21% in 2030, which is equivalent to an emissions reduction of around 6% compared to the ‘without measures’ or “Business as Usual” national scenario (excluding LULUCF).
Emissions from the industry and transport sectors are projected to continue growing until 2030. This growth will be compensated by emissions reductions in the energy and agriculture sectors, resulting in a net 4% reduction of emissions excluding LULUCF by 2030 compared to 2015 levels. Additionally, the LULUCF sector, which historically has represented a big carbon sink, will see a progressive reduction from -24 MtCO2e in 2015 to approximately -16 MtCO2e in 2020 and -4 MtCO2e in 2030.
Expected emissions levels are far from the government’s emissions targets for both 2020 and 2030. However, the New Zealand government intends to make use of its “creative accounting” rules for the forestry sector to achieve its targets. New Zealand is planning to use the “gross-net” approach to account for LULUCF emissions in its base and target years and carry over surplus units from previous commitment periods to achieve the targets, which raises questions on the environmental integrity of its targets. However, the accounting rules that will be used under the Paris Agreement have not yet been defined, and therefore the legal basis upon which New Zealand is seeking to rely upon such accounting rules is unclear..
We rate New Zealand’s Nationally Determined Contribution (NDC) target of a 30% reduction from 2005 levels by 2030 as “Insufficient,” meaning that it is not consistent with holding warming to below 2°C, let alone limiting it to 1.5°C as required under the Paris Agreement, and is instead consistent with warming between 2°C and 3°C.
New Zealand needs to significantly strengthen its current policies and implement new mitigation measures to reach its 2020 and 2030 emissions reduction targets, therefore expectations for new climate policies are set high for the new government. To be on track for its long-term target of reducing emissions 50% below 1990 levels, New Zealand’s emissions would need to peak and start declining at much higher rates of reduction post-2030. Reforms to the current NZ-ETS—in particular including the agricultural sector, auctioning units to align with the emissions reductions target and removing the price ceiling—would be a positive first step towards providing incentives to achieve emissions reductions. All of these areas have been covered by the draft Productivity Commission report, with the final report expected in August.