19 Sep 2022

Climate Change Commission chair Dr Rod Carr calls for reform of emissions trading scheme

7:05 pm on 19 September 2022
Climate Change Commission chair Rod Carr.

Dr Rod Carr Photo: RNZ / Dom Thomas

The emissions trading scheme allows companies to "plant and pollute" and needs reform, Climate Change Commission chairperson Dr Rod Carr says.

Carr spoke to more than 500 business and policy leaders at the business and climate conference in Auckland today.

He was one of a number of speakers who said the country's plans to reduce emissions rely too heavily on planting trees to absorb carbon dioxide planting, instead of actually cutting the amount of damaging climate gases being released.

They said the practice was not in keeping with international efforts to keep warming below catastrophic levels.

The government is currently reviewing the emission trading scheme.

Carr said other countries were becoming increasingly sceptical about the use of offsets at all.

Businesses here needed to get with the new paradigm or lose international customers to those who could make more sustainable products elsewhere, he said.

"Those are the biggest threat to a business, it's not some regulator coming along and putting a price on emissions.

"It's the banks not willing to lend you the money, the investor is not willing to provide the equity, the customer is not willing to buy your products because basically your competitors got the equity, got the funding, got your customers - that's what will put you out of business."

Prime Minister Jacinda Ardern said businesses that did not start cutting emissions faced being left behind in the global marketplace.

Aotearoa businesses should aim to be the best in the world and make the greenest products, she said.

Climate change become 'weaponised' in global protection racket'

A New Zealand business leader warned exporters that other countries were itching to slap tariffs on products, with the excuse that producers were not doing enough to cut their emissions.

Malcolm Johns heads the Christchurch Airport and chairs APEC climate business leaders group.

"Globally, climate change is becoming weaponised as a trade protection racket," he said.

"Carbon across borders is being used as the mechanism to protect that trade."

There was no international avenue for working though these issues right now, Johns said

That highlighted how making actual cuts to emissions was crucial if exporters wanted to thrive, he said.

International business expert Stephen Jacobi told RNZ the risk of a trade war over climate issues was very real.

While it was not a reality yet, pressure was mounting, he said.

"When economies start to put in place policies to meet Paris targets that really impact on [their] own business sectors, they will come under pressure from those business sectors to adopt protectionist devices that will keep out others."

Talks on the issue were already underway internationally and New Zealand needed a seat at that table, Jacobi said.

Reserve Bank - climate change action is necessary

The Reserve Bank nailed its colours to the mast of climate change action, saying it is an important part of its remit to safeguard the country's financial system.

Reserve Bank (RBNZ) governor Adrian Orr told the conference the central bank was increasing its contacts with other central banks, financial groups, and companies to improve the strength of the financial system against climate change risks.

The bank integrated climate considerations into its core operations, he said.

14596413 - smoking industrial chimneys against a blue sky

Photo: 123RF

"We are the kaitiaki (guardians) of the financial system, tasked to maintain and enhance financial stability."

Assessing the real risks to banks and insurers and the financial system was its core business, he said.

"Financial stability is best maintained when all relevant risks are identified, priced, and allocated to those best able to manage them.

"To meet our financial stability objective, it's important for us to take account of the current and future impacts of climate change."

Orr said climate change was here in the form of extreme weather, record high temperatures and droughts, but could still be tackled.

"Climate risks are evolving, and the market is working to come up to speed on those risks. But, historically, that engine hasn't fully addressed potential risks from climate change."

"With appropriate identification, pricing, allocation, and management of risk, we can reduce the impacts of climate change on Aotearoa's financial system. Disclosure provides a vital impetus for this approach."

The RBNZ was required by the government to have regard to climate change under the financial policy remit, he said.

And the central bank was already taking climate change into account in its "stress testing" of financial entities, consulting with other regulators (the Financial Markets Authority and the External Reporting Board) on how climate change was incorporated into reporting standards and disclosures.

The central bank's move to include climate change in its policies had been criticised by some former officials and commentators who said it was outside the bank's core job to control inflation and maintain financial stability by regulating banks.

Some telling (and large) numbers

Auckland's mayor Phil Goff told the conference a huge amount of the region's coastline was subject to sea level rise, which could eventually risk $1.5 billion of assets.

More than 40 percent of Auckland's emissions came from transport, and to meet IPCC goals it had to cut transport emissions by 64 percent in eight years, he said.

Auckland Mayor Phil Goff says it is important that the council consults with both mana whenua and urban Māori about the creation of Māori seats.

Auckland mayor Phil Goff. Photo: Ricky Wilson / Stuff

Meanwhile, Treasury's chief executive Dr Caralee Mcliesh said financing the transition to a net-zero economy was a mammoth task - with $34b of additional investment needed by 2050.

"On top of those domestic costs Treasury estimates that meeting the international commitments under the Paris agreements could require up to $12.8b in overseas mitigation [paying others to make cuts NZ is unable to] by 2030."

Taking action early would save money in the long run, she said.

NZ needs do more to help other countries - NZ's UN climate ambassador

New Zealand's UN climate ambassador Kay Harrison said Aotearoa had a moral duty to give money to help poorer countries adapt to the warming globe, on top of our programme of climate reform.

As the damaging effects of climate change gets worse it would get harder to prioritise what to spend money on - and the world needed to develop a global sense of responsibility, she said.

Aotearoa should deliver on its own reduction plans, but must also provide additional resources to other countries on top of that, Harrison said.

It could also be cheaper to pay to make emissions cuts offshore, she said.

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