Submission: Transitioning to a low-emissions and climate-resilient future

24 November, 2021

Our submission is the Emissions Reduction Plan cannot reduce emissionsunder a binding ETS.

The government should have written this paper years ago. It is about to make unprecedented policy commitments under its Emissions Reduction Plan without any basis to believe its plan will reduce emissions.

The framework and analysis in this paper is only preliminary, but our findings are clear. The waterbed effect is a sufficiently general phenomenon that nearly all of the governments current and proposed complementary policies will be caught by it. We can see no credible pathway for complementary policies under the Emissions Reduction Plan to further reduce emissions given the government has already capped emissions via the ETS:

  • Emissions will come down in line with the ETS cap (including the stockpile) with or without complementary policies.

  • Complementary policies can only reduce emissions if the ETS becomes politically constrained before 2050. Even then

    • complementary policies can only make any material difference to emissions if they are more scalable (i.e. more politically efficient per tonne abated) than the ETS, which seems implausible

    • complementary policies are probably less politically efficient than the ETS, in which case complementary policies could raise emissions.
  • We see no plausible way for the ETS to become politically constrained before 2050 except as the result of governments choosing to limit access to removals technologies (not just trees) and access to offshore mitigation.

In short, we see no credible or sufficiently general combination of events in which complementary policies lower emissions under a binding ETS cap.  Complementary policies require an exceptionally unlikely combination of events to reduce emissions. Even then, the same reduction in emissions could be achieved for a fraction of the cost and virtually zero risk via removals or offshore mitigation. Over the medium term, a carbon dividend supports a tighter ETS cap.

In all, complementary policies look like a bad bet, at least if the primary goal of the Emissions Reduction Plan is to reduce emissions.

The New Zealand Initiative calls on Climate Change Minister James Shaw to urgently explain how complementary policies will lower emissions under a binding emissions cap.

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