New Zealand to review carbon pricing amid pollution concerns
NEW Zealand is reviewing the way it puts a price on carbon emissions amid concerns the current system is failing to adequately reduce pollution.
The Emissions Trading Scheme (ETS) may not be incentivizing companies to cut emissions because it is currently cheaper for most of them to just buy offsetting units instead, Climate Change Minister James Shaw said on Monday (Jun 19) in Wellington. The government has published four options in a consultation document released today.
New Zealand has committed to achieving net zero emissions by 2050, and has set up structures including the ETS to push towards that target. Government policy is helping to replace coal-fired boilers and generation and encouraging the switch to electric vehicles, but many large-scale polluters have relied on carbon credits generated from increased forestry to meet their obligations.
“In its current state, the price of carbon is not high enough to drive significant change,” said Shaw. “We know a higher carbon price leads to faster emissions reductions. We want to find out whether changes are needed to provide a stronger incentive for businesses to transition away from fossil fuels.”
All sectors of New Zealand’s economy, apart from agriculture, pay for their emissions through the ETS, which requires polluters to surrender units to offset their emissions. Units are issued to activities that remove emissions, such as forestry, and can then be bought by polluters. The government also auctions units.
The design of the ETS means it has become lucrative to plant forests. Large swathes of New Zealand farmland have been bought by local and foreign investors and planted with trees, either for eventual harvest or as permanent forests that attract carbon credits.
The government is considering ways to push up the carbon price. It may reduce the number of units it offers through auction or it could increase demand by allowing overseas buyers to purchase them, according to the consultation documents.
Another option is to create separate incentives for gross emission reductions and removals through a new market, which would include removing forestry from the ETS.
The government today also opened a consultation on whether permanent non-native forests should be allowed in the ETS.
“Encouraging afforestation should not replace or delay gross emissions reductions,” Forestry Minister Peeni Henare said. “We need to consider how the ETS can provide the necessary price for both gross emissions reductions while continuing to incentivize the planting of trees.”
Under existing policy, as much as 1.4 million hectares of new forests are needed to meet New Zealand’s 2050 target, Henare said.
The consultation will assess whether to only allow permanent native forests to be in the ETS, or to allow non-native planting in limited circumstances, such as using only long-lived species or only those located on Maori-owned land. BLOOMBERG
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