28 Feb 2023

$12.8b to cut NZ emissions overseas - with no funding plan yet

From Morning Report, 8:43 am on 28 February 2023
08 July 2022, Mecklenburg-Western Pomerania, Rostock: The coal-fired power plant in the Rostock seaport is visible from afar with its cooling tower over 141m high. The power plant has been in operation since 1994 and can produce 553 MW of electricity. Up to now, the power plant has obtained a large part of its hard coal from Russia, but alternatives are now being sought. Photo: Jens Büttner/dpa (Photo by JENS BUTTNER / DPA / dpa Picture-Alliance via AFP)

Photo: AFP

Billions of dollars will have to be paid to other countries to slash emissions on New Zealand's behalf, if the country is to meet its carbon slashing target.

The government raised New Zealand's 2030 Paris Agreement carbon-slashing target October 2021, and Climate Change Minister James Shaw said two-thirds would have to come from paying other countries.

Treasury estimated that could cost $12.8b by the end of the decade, but the government still hasn't made its mind up on how to fund it.

The lack of plans on how to finance that concerned experts like Climate Venture Capital Fund partner Dr Jez Weston.

"We don't know how much it's going to cost, we don't know who we're giving this money to, we don't have international agreements on how that trade will work. That seems like a very big financial risk," Weston said.

That is a sentiment echoed by University of Canterbury Professor David Frame, who previously contributed to the Intergovernmental Panel on Climate Change.

He said New Zealand has put its target too high, without figuring out how to get there.

"Having the ambition first and then saying we will do this here and there, leaves us with this gap that we are planning to meet through carbon farming elsewhere, and it is not clear if taxpayers think that is a good use of New Zealanders' money," Frame said.

There is also no international carbon market yet to facilitate those payments.

The government is looking to deal directly with developing countries in the Asia-Pacific region.

Oxfam climate justice lead Nick Henry said many of those countries have their own climate challenges, and they do not need New Zealand to dump its problems on them too.

"When we think about communities that live off the land, wherever they are farming or indigenous communities, they do not need New Zealand paying their government to take more land.

"We can only go off what has happened before in the previous trading under the Kyoto Protocol, and there was a lot of dodgy dealing."

He is referring to the 'hot-air' credits scandal from a decade ago, involving the purchase of carbon credits from Ukraine and Russia.

That system - criticised by both Labour and the Greens - was abandoned.

Weston said even if this government has learnt from those mistakes, there is just not enough land in the world to suck up all our carbon.

"When every rich nation is trying to make it somebody else's problem, there simply is not enough land in less developed countries.

"It is cheaper now, but if the market was operating correctly, then the price would go up very rapidly. The bigger issue is the market does not exist yet, and it is very hard to see how it may be made to work properly."

The answer, Frame said, must be to reduce our emissions in the first place.

"This idea that we are just going to plant our way out of it is kind of unconvincing because there just are not enough nature-based solutions."

'Great reluctance' to go offshore - Climate Change Minister

Climate Change Minister said work is underway to ensure as much of the emissions cuts can be met in NZ as possible.

"That is our top priority, to do that at home to the maximum extent that we can, and it is only with great reluctance that we will go offshore if we absolutely have to."

Shaw said the target required New Zealand to remove 150 million tonnes of projected emissions over the course of the next few years, and domestically the country could get somewhere between 50 and 75 million tonnes.

That left a shortfall between 75 and 100 million tonnes.

Shaw said there was currently no international market for emissions trading and New Zealand was "badly burned" by the last system, but the plan was to do one-to-one arrangements with different countries, the price of which will vary country to country.

He said reducing emissions domestically remained incredibly important.

"Cabinet has decided, and I absolutely endorse this, that the top priority has to be domestic investment in terms of transitioning our economy.

"There's no point in continuing to put pollution into the atmosphere here and then paying somebody else to reduce emissions overseas. That's just daft."

Shaw said decisions about offshore funding would be made prior to the election.