Case Study for an Effective Climate Contribution: 2nd post-Paris blog

Dr Kennedy Graham, MP (NZ)

The 2015 Paris outcome is going to require higher standards of behaviour from all 196 Parties to the Framework Convention.  

• The Paris Agreement aims to ‘strengthen the global response to the threat of climate change’; Article 4 provides that “developed country Parties should continue taking the lead by undertaking economy-wide reduction targets”.

• In the accompanying COP-21 decision, the Conference notes with concern that “much greater emission reduction efforts will be required than those associated with the intended 2°C above pre-industrial levels” (i.e. the Paris INDCs); and resolves “to ensure the highest possible mitigation efforts in the pre-2020 period …. to ensure the highest possible mitigation efforts under the Convention by all Parties” (FCCC/2015/L9, paras 17, 106).  

New Zealand’s INDC for 2030 (11% off 1990) submitted to COP-21 is regarded by independent observers as ‘inadequate’ and ‘poor’.  So, to meet our legal obligations from Paris, New Zealand will be obliged to increase this before its ratification of the Paris Agreement, probably in mid-’17.  We are also obliged to ensure ‘the highest possible mitigation effort) in the pre-2020 period, i.e. above our current 5% target.

The onus is therefore on the NZ Government to review its two targets, not at its leisure, but starting in early 2016.

To kick-start this process, we might begin by scrutinising the reasoning that underpinned the NZ Cabinet’s decision of June ‘15 to submit an 11% INDC, because a ‘much greater mitigation reduction effort’ will require fundamentally different reasoning, and it is best to recognise now what has been incorrect in the current Government’s thinking.

The Cabinet paper on the subject consists of 81 paragraphs of which 23 contain redaction, of which 9 are completely redacted. The public version therefore contains what the Government wishes the public to know about its reasoning, rather than what its reasoning actually is.  

The redacted segments, of course, contain the considerations that are the most sensitive.  The two most frequent reasons cited for redaction (under the Official Information Act 1982) are:

• Prejudice to the security or defence of NZ or the international relations of the NZ Government (art. 6(a); and

• Maintain the effective conduct of public affairs through the free and frank expression of opinions by, or between, or to, Ministers of the Crown, or members of an organisation, or officers and employees of any department, or organisation in the course of their duty (Art 9(2.g.i); and

• Enable a Minister of the Crown or any department or organisation holding the information to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations) (2.j).

So, the critical aspects of the reasoning that underpins an effective NZ mitigation target for climate stability is withheld from the public, lest there be prejudice to our security or international relations or inhibition on the relationship between the Crown and commercial and industrial negotiators. Let us persevere, without any further comment.

The first point to know is that the Cabinet paper was submitted in mid’15 by the Minister for Climate Change to the Cabinet Economic Growth and Infrastructure Committee.  The Committee’s terms of reference are “to consider policy issues relating to economic growth, trade, infrastructure, natural resources, local government, Auckland issues, and Canterbury earthquake recovery issues”.  So, the judgement of the percentage emissions reduction to help ensure a safe climate for the future of Earth is taken, in New Zealand, in the context of the country’s sub-national economic growth considerations.

Three months earlier (30 March), Cabinet’s Strategy Committee had given ‘initial direction’.  That committee’s terms of reference are to set the ‘overall strategic direction and policy priorities’ of the government.  Its initial direction took the form of noting the need to balance a number of considerations, including:

• NZ international credibility;
• Costs to the economy;
• Implications for the agriculture sector;
• Nature of signals that would be set to different sectors of the economy.    

At least, that is the first half.  The second half is redacted.  

Nonetheless, it is clear that, in addition to the costs and signals of the INDC to every economic sector, agriculture gets specific attention, presumably at the political level.

The cabinet paper provides a brief background overview.  Tackling climate change, it says, is “crucial to avoid economic costs and harm to people and the environment” – in that order. Securing an effective global response to ensure 2°C, it says, ‘is in New Zealand’s interest’, and New Zealand will ‘be expected to play its part’.

Split Target

The Minister considers a split option in the target with different treatment for agriculture but, while it has some appeal from a domestic perspective, he does not recommend it.  Agricultural reductions will be needed in the long-term and, with little confidence in how technology will progress, it is better to maintain an economy-wide target.    

International Comparisons

The paper devotes attention to some other countries.  It notes their reductions off 1990: EU (-40%), US (-15%), Japan (-18%) and Canada (+2%).  Australia had not yet submitted.  An appendix acknowledges Norway (40%), Switzerland (50%) and Russia (25-30%), among others.  In the Minister’s view, New Zealand ‘faces challenges’ in reducing emissions:

• “Our emissions have increased more than those of most other developed countries” and
• “We lack significant, low-cost opportunities to reduce emissions”.      

Factoring in these challenges means NZ ‘could justify’ making relatively smaller emissions reductions than other developed countries.

Criteria for target

This is followed by a one-sentence acknowledgement of ‘other factors alongside cost’ which ‘international and domestic commentators’ will look at.  These include historical emissions responsibility, and per capita emissions. These considerations ‘suggest’ a more ambitious target in the range of 10% to 20%.

Costs

The Minister focuses his mind, however, in the section on Costs.  Three leading consultancies have provided General Equilibrium modelling of the estimated impacts on business sectors and households.  Critically, “these estimates … do not factor in any avoided damages from successfully mitigating climate change.”  In other words, in asking experts what the cost of an INDC might be, the Government has consciously required them not to consider the counter-factual – what the costs of climate policy inaction might be.   

The answer comes back: Real Gross National Domestic Income in 2030 would be reduced by 1.18% for a 5% target, 1.23% for a 10% target, 1.32% for a 15% target, 1.37%, for a 20% target, and 1.66% for a 40% target.

Public, Iwi*, Stakeholders

The Minister recalls the public hui (whose opinion was overwhelmingly for a target of 40%), discussion with Iwi (which urged political leadership from the Government) and business stakeholders.

ETS Review

The Minister states his intention to initiate a review of the NZ Emissions Trading Scheme (ETS) ‘as a first step on work towards delivering the target’.  This has, in fact, now commenced (late ’15 / early ’16). But this ETS Review has nothing to do with the level of ambition of the target itself.

Recommendation

The Minister recommends a target of 10% below 1990, which would be expressed as 29% off 2005.  Using 2005 as the base-year would make it ‘more clearly comparable’ with others (the US and Canada). He invites the Cabinet Committee to note that this target “appropriately manages New Zealand’s domestic and international interests”.

Cabinet Decision

In the event, Cabinet decides to up the target a fraction from the Minister’s recommendation, from 29% below 2005 level to 30% (resulting in 11% off 1990, not the recommended 10%).  There is no public record of the cabinet discussion, but it is clear that Canada’s 30% had much to do with it.

Comment

The cabinet paper displays how the Government’s thinking has trended in making what is perhaps the most critical decision in New Zealand’s history.  The issue is not described as such; in fact the Government does not believe this to be the case, although it acknowledged then, and acknowledges more publicly post-Paris, that climate policy is an ‘important global issue’.  

It is of significance that the Minister posits ‘New Zealand’s reputation’ as a major consideration.  He rejects a split target (agriculture and other sectors separated) on the grounds that it could cause irreversible damage to our international reputation.  “The value of this reputation”, he muses, is ‘a political judgement call’.  

The cabinet paper reveals that government departments differ about this matter.  The Ministry for Primary Industries supports the target.  Treasury opposes, on the grounds that “further work is needed to test the key assumptions about impacts on NZ negotiating influence and broader international interests”. The Foreign Ministry strongly supports the target, believing it to be “critical we have influence at this juncture of the negotiations”.  

Perhaps the most revealing comment in this belongs to the Minister (para 67):

“My recommended target represents progression but balances this against the need to manage costs on the NZ economy. I consider it sensible to preserve our international reputation and negotiating influence at this critical stage in negotiations.”

Clearly the Minister sets considerable store by NZ’s reputation but what is extraordinary, and hard to fathom, is that he appears to believe that it is still sound.  While there may be a degree of respect for him, and also to his official team, as negotiators per se, they seem unable or unwilling to acknowledge that our public repute rests on the integrity of our mitigation target and climate financing, not our negotiating skills.

The overall conclusion, with regard to Governmental thinking on climate policy, is four-fold:

• It is dominated by two considerations: domestic economic concern and international negotiating influence to meet that concern;
• It looks to those concerns in the context of assumed stable global economic growth, with no counter-factual pertaining to a global dynamic towards a low-carbon society, with a global carbon price to that end;
• It sees New Zealand as being, somehow, unique among other countries, largely because of its agricultural profile;
• It therefore insists on international trading in carbon credits and offsets, with a view to minimising the obligation to engage in gross emission reductions.   

Each of these four fundamental assumptions and presumptions is inaccurate and short-sighted.

Above all, let us consider what the cabinet paper does not address:

1. It does not explore the global mitigation required between 2015 and ‘30 for the 2°C global goal, even though the paper states that the goal ‘is in New Zealand’s interests’, and quotes, without further concern, the Prime Minister’s scientific adviser that sustained reductions of global emissions “of the order of 40% to 70% by 2050 compared to 2010”.  
2. It touches, in passing (Appendix 2), on ‘ways of comparing targets’, identifying four (‘equal cost’; equal per capita emissions by 2050; historical responsibility; equal reductions from business-as-usual.  It does not explore any of these, and fails to acknowledge the most sophisticated model for equity in ‘fair shares’ (the Equity Reference Project).  

An Alternative Cabinet Paper

What is required is a Cabinet paper no later than mid-‘16 that does the following:

1. Acknowledges the integrity, and applicability, of the principle of equity in the ’92 Framework Convention, and the results which some of the research institutes have reached regarding the responsibility of each State party for its national emissions within the Global Carbon Budget, including for the specific year 2030, noting in particular New Zealand’s NRL;
2. Explores the maximum domestic abatement potential for New Zealand by 2030, and acknowledges a responsibility to make up, through climate financing, any shortfall between this and its NRL;
3. Explores the most effective set of climate policies (carbon pricing and/or taxing) and regulatory measures designed to reach the maximum domestic abatement potential (the National Climate Action Plan);
4. Ensures that the National Climate Action Plan reflects optimal equity among all relevant inter-sectoral and societal interests, to the extent possible.

The Minister, Hon Tim Groser, has just resigned his cabinet and parliamentary positions, and is expected to become NZ ambassador to Washington.  His successor, Hon Paula Bennet, faces a major challenge, along with the Prime Minister and all other cabinet colleagues, in getting NZ climate policy right – in 2016, not during the ‘facilitative dialogue’ in 2018 or the peer-review in 2023.  

01/09/2016 – 19:28