UABS KNOWLEDGE

ENERGY

New Zealand feels the heat on climate change

16 Feb 2016

Major policy changes are needed if we are to meet our environmental goals, argues Barry Coates. One obvious target – the "disastrous" Emissions Trading Scheme.

There is no doubting the significance of the Paris Agreement. In December 2015, the largest ever gathering of world leaders signalled its commitment to global action on climate change, with 196 nations collectively agreeing to drastically reduce gas emissions over the coming decades and to limit the rise of global temperatures to 1.5-2oC by 2100. Importantly, the agreement covers both developed and developing countries, including those reliant on income from oil and gas. But with the focus now shifting to action at the national level there is a danger that New Zealand will lag behind, says Barry Coates, who was at the Paris summit.

"The Ministry for the Environment has projected that New Zealand's net greenhouse gas emissions will be 96% above 1990 levels (the baseline year) by 2030, if we continue with business as usual," says Coates, who heads the Business School's Sustainability Programme.

"Major policy changes are needed, even to meet the government’s pledge to reduce emissions by 11% from 1990 levels by 2030 – a target deemed ‘unacceptable’ in a comparative analysis of pledges."

He says that continued inaction on climate change will risk damaging New Zealand's reputation, and will mean that suppliers are unable to meet supply chain standards and that innovators will miss out on growth opportunities in some of the fastest growing sectors internationally.

The Paris Agreement is yet to be ratified, but attention is already shifting to the policies and programmes needed to drive emissions reductions in individual countries. Given the historic reluctance of governments to commit to a transition away from fossil fuels, the response of business will be crucial, especially in view of the market shakeup already underway, says Coates.

"The prices of coal and oil have plummeted and major energy companies are facing bankruptcy. It is now clear that most proven fossil fuel reserves will stay in the ground, meaning that the assets of many energy companies are over-valued. And fossil fuel divestment is accelerating, driven by investment losses as well as a strong global campaign," he says.

Coates says that the Paris Agreement was hampered by the need to accommodate political constraints, with neither of the two major emitters, China and the United States, willing to accept a binding agreement to reduce emissions. Instead, the agreement relies on a voluntary pledge and review process.

"The initial pledges are clearly inadequate to avoid dangerous climate change, but there is a mechanism to ratchet up the emissions reductions every five years, which is essential in a world of rapid change and disruptive technologies." 

Coates says that a confluence of other factors is driving business action on climate change. Increasing public awareness and changing social norms around socially acceptable behaviour are altering patterns of consumer demand. And some of the world's largest companies, including Apple, Unilever, and HSBC, are positioning themselves as responsible corporate citizens by reducing their carbon footprints and calling for broader action on climate change. The rapidly falling cost of solar power generation, improved battery storage and new low-emission technologies are creating new markets and disrupting sectors such as energy, transport and housing.

However, he says that governments also have a key role in setting a long term framework for change, including pricing signals, regulation, infrastructure investment, and education. Some governments are beginning to view action on climate change as an opportunity, rather than an economic cost. Several progressive European nations have been at the forefront of policy change, including facilitating the growth of electric vehicles, solar power and public transport. Meanwhile, to overcome massive health problems in its cities, China has put a freeze on new coal power generation and is aggressively investing in renewable energy, while India, which faces equally crippling pollution, is planning massive investments in solar power.

A stable and rising long-term price on emissions would enable business to plan future investment, says Coates. He suggests, for example, that the New New Zealand government could change the setting of the Emissions Trading Scheme in its forthcoming review, by setting a minimum price.

"The previous policy of allowing trading in international offsets has been disastrous. More than $100 million has been used to buy largely fraudulent credits that have done nothing to reduce emissions. The ETS price has fallen to as low as a few cents, rather than maintaining a realistic and predictable price that could provide incentives and drive business investment."

One of the most serious failings of the Paris Agreement, says Coates, is that it opens the door for carbon trading in future, and offers a loophole for countries to avoid taking action.

He says government action needs to complement price signals with best practice in a range of policy areas, including investment in cycling and public transport, fuel efficiency standards, sustainable urban development, afforestation and agriculture.

"The good news is that many New Zealand businesses and local authorities are taking action, supported by organisations such as Pure Advantage, Sustainable Business Council, Sustainable Business Network and a range of non-governmental organisations."

Barry Coates

Barry Coates developed a sustainability programme at the University of Auckland Business School in 2015-16. He is now a member of Parliament.

b.coates@auckland.ac.nz

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