Brian Fallow: Shaw's bid to combat climate change

Columnist·NZ Herald·

1 Feb, 2018 04:00 PM6 mins to read

Current emissions trading rules have distorted decisions on land use. Picture / NZME File

James Shaw has his work cut out for him.

As Climate Change Minister, he aims to have a Zero Carbon Act passed and a Climate Commission established by the middle of next year.

Separate from but in parallel with that is the process of coaxing agriculture into the emissions trading scheme.

Meanwhile, as co-leader of the Green Party he has to lead a transition in its mindset from high-minded but impotent opposition to the compromising realities of coalition government — from finger wagging to consensus building.

As he put it in a state of the planet speech last week, it is about beating swords into ploughshares, making friends of enemies, calling everyone in rather than calling them out.

Enlarging the clearing of common ground within the forest of partisan division is, in fact, a challenge for the political class as a whole.

"If we succumb to tribalism over inclusion we will continue down the same path we're currently on, creating different groups of winners and losers until our social fabric decays under the wear and tear of partisanship," he said. "Some of our oldest and closest friends internationally are illustrating just how badly that ends."

Shaw sees the Zero Carbon Act as foundational legislation, a cornerstone of a new economic paradigm, socially just and environmentally sustainable, to replace the neo-liberal model that is now in its decadent terminal phase.

Something, in short, similar in status to the Reserve Bank Act and the Public Finance Act enacted 30 years ago.

The planned act is to set a new emission reduction target for 2050 in law, and a more ambitious one than the current 50 per cent reduction (from 1990 levels) which can be changed at a stroke of the Cabinet's pen.

It would also establish an independent Climate Commission, on the British model, to advise on translating the long-term goal into a series of intermediate carbon budgets, monitor progress towards those targets and advise on policies to achieve them.

So it is important to get it right, and crucially important to secure widespread public buy-in and ensure its durability.

James Shaw sees the Zero Carbon Act as the foundation of a new economic approach. Picture / Nick Reed

The process agreed by the Cabinet just before Christmas envisages releasing a public discussion document mid-year, by which time the Productivity Commission will have completed its inquiry into the transition to a low-emissions economy and the Biological Emissions Reference Group, which includes the major agricultural industry bodies, will have reported as well.

Following public consultation, the aim is to introduce a bill by October, with a view to passage by the middle of next year.

Meanwhile, an interim climate change committee, which should emerge within the next few weeks, will be engaging public consultation on sector-specific policies including the perennially vexed one, agriculture.

The coalition agreement between Labour and New Zealand First provides that "if the Climate Commission determines that agriculture is to be included in the ETS, then upon entry, the free allocation to agriculture will be 95 per cent but with all revenues from this source recycled back into agriculture in order to encourage agricultural innovation, mitigation and additional planting of forestry."

New Zealand has been able to rely on carbon sequestered in commercial forests to cover ... growth in emissions ... That game is up

That implies that a decision on including the agricultural gases in the ETS will not be made until the Climate Commission is in place — in other words, not before the middle of next year.

A free allocation of 95 per cent, which means farmers would be charged for only 5 per cent of their ruminant livestock's emissions, is similar to the level of exposure to a carbon price that was faced by other emissions-intensive, trade-exposed industries until it was increased to 10 per cent last year.

Methane and nitrous oxide account for nearly half of national emissions and largely explain why, even with a high proportion of renewable electricity, New Zealand's per capita emissions are the fifth highest in the OECD. It was always intended that the ETS, as designed by David Parker, would eventually include all sectors and all gases.

And the logic of the situation has not changed.

If those who profit from the emission of the agricultural gases entirely escape the cost, the rest of us bear it all. That is a subsidy, of the kind that gets capitalised into land prices.

If the socialisation of that cost is expected to continue, it is rational to pay more, all else being equal, for land. The beneficiary of the status quo is the vendor of the land, who gets a larger tax-free capital gain, while the buyer just gets a larger mortgage.

It is a question of intergenerational as well as horizontal equity; Federated Farmers should be honest about whose interests they are defending.

The inclusion of forestry in the ETS but not agriculture has also distorted land use decisions in a counterproductive direction from the climate's point of view.

So far, New Zealand has been able to rely on carbon sequestered in commercial forests to cover effectively untrammelled growth in emissions and allow us to meet international commitments. That game is up. It will no longer be the case in the 2020s, the period covered by the Paris Agreement.

The Cabinet paper Shaw presented to his colleagues on December 18 spells out the consequences. New Zealand's emissions over the 2020s are expected to exceed our commitment under the Paris accord by nearly 200 million tonnes. Even with the proposed Billion Trees Planting Programme, forestry is only expected to offset between 15 and 25 per cent of that emissions overshoot.

Reducing the rest of the gap will be assisted by policy changes across a broad front, including energy and transport.

But there will still be a need to import carbon credits from someone, somewhere in the rest of the world.

That is dead money. But it is the price we have to pay for the legacy of two decades of lip service and inaction by successive governments.

The Zero Carbon Act will reflect the indisputable fact that transition to a low-carbon economy will have to span changes of government.

Globe NZ, the cross-party grouping of MPs progressive on climate change, which was shepherded by Kennedy Graham, is evidence that this is an issue which can transcend partisan divisions. It must.