The answer is to closely follow the approach of the new Australian system, the Emissions Reduction Fund.
Under the Australian system, the largest emitters in the economy have to reduce their emissions by 4.9 per cent per year. If they don’t reduce their emissions by this amount, they have to buy carbon credits.
New Zealand should do the same, but set our reductions at 7 per cent, in line with our Paris Agreement commitments.
New Zealand is unique in that we have a carbon credit market where the carbon credits can’t be used to balance out a business’s emissions.
Strangely, while the Government claims the carbon from these credits for New Zealand’s global climate change contributions, a business that buys a credit cannot.
All the Australian carbon credits meet voluntary carbon credit guidelines - so a business can use them, and so should New Zealand’s.
The common criticism of carbon crediting or offsetting is that carbon credits are an excuse for emitters to buy their way out of actually cutting emissions.
However, the solution is simple. The single biggest thing that motivates emissions cuts is when a business is mandated to pay for its emissions.
As soon as cutting emissions becomes cheaper than paying for emissions, a company will cut its emissions. We need to set a price high enough for credits that businesses will make the cuts before buying credits.
I have never heard anyone say: “We should stop cleaning up the great Pacific garbage patch because it is an excuse to keep polluting plastic.”
That’s because everyone knows we need to both stop polluting and clean it up. The same applies to carbon credits.
Some have suggested that instead of making a business buy carbon credits (taking removals out of the ETS), we should just put on a carbon tax and use the tax revenue to fund carbon removal.
However, in this case, we end up generating funds for future government carbon removal, rather than as a reward for restoration that has already happened.
It will be much more efficient to pay for the outcome (carbon removal) and let the market decide how best to achieve that carbon removal, rather than the Government funding carbon removal.
We are better off with the emitters paying to remove carbon via carbon credits than the taxpayer.
One of the key changes we need to make to the ETS is to exclude permanent exotics (pines), which, as many have written, is ecologically fraudulent and devastating in the long run for both our people and land.
Planting pines for carbon is a classic case of putting profit above planet.
The Australian system recognises diverse forms of carbon removal that support biodiversity and communities. We need to include new forms of scientifically robust carbon removals like wetlands, blue carbon, soil carbon and biochar.
Of course, I have oversimplified the Australian system. Australia has long not taken climate change seriously enough.
One of the key drawbacks of the Australian system has been the level of paperwork required for their carbon removal projects.
For example, the Australian blue carbon (ocean carbon sequestration) method has had virtually no uptake because the costs of administration have been so high.
We must ensure we have a pragmatic way to recognise carbon removal in the ETS. We need funds going to work on the ground, not auditing, consulting and verification.
Kiwis like to forge our own path, but we often benefit from following the Aussies’ lead.
The ETS has been a failure and we don’t have time to slow down for a couple of years to fix it.
Let’s take the best parts of the Aussie system and get on with it to cut emissions and restore our wild places.
So much is at stake for the future of our forests and our planet.
Finn Ross is a PhD candidate at the Blue Carbon Lab, founder of Carbonz, co-chair of Future Farmers New Zealand and part of the Lake Hāwea Station team.
