2020 saw the passing of the Zero Carbon Act, a groundbreaking piece of legislation that will be a key tool in curbing New Zealand’s carbon emissions. NZ was widely lauded in international media, and rightly so – this radical piece of work puts us on the forefront of global climate change policy.
But, flying under the radar, was another important piece of climate change legislation passed in June of this year – the Emissions Trading Reform Amendment Bill. Despite this mouthful of legislation not receiving much press (not nearly as catchy a title, perhaps), it will be a crucial part of NZ’s climate change mitigation policy. Hats off to James Shaw – this would’ve been a difficult bill to pass, winning only 63 votes to 57 in the final reading, particularly with pastoral lobbying groups out in full force.
The Emissions Trading Scheme 2008 is NZ’s tool for regulating greenhouse gas emissions. It is a ‘cap and trade’ system where the government creates ‘carbon permits’ that parties can buy and trade to ensure only a certain amount of gasses are released.
A forestry company, for example, will sell credits that they’ve been given (as their land is sequestering carbon, meaning they’re in surplus) to a steel plant (as carbon creation is inherent in the manufacturing of steel). In essence, we’ve created a trade-able market for CO2.
In theory, this works by both setting a limit of total emissions and incentivizing low-carbon activities while disincentivizing high-carbon ones.
Yet, it has been plagued with issues, from not setting a cap on the number of credits available (surely a key feature in a ‘cap and trade’ system), to allowing the purchase of dodgy international credits. Both have resulted in a woefully low price of carbon, and in terms of curbing emissions, the ETS hasn’t done much.
The revised bill aims to fix this, and on the most part, it has succeeded. A floor and ceiling price on carbon has been introduced, as well as a limit on the total amount of credits available. That agriculture has received a 95% free allocation until 2025 is a bit of a sticking point, but, as we know the pastoral sector is a formidable foe when it comes to creating climate policy.
Fixing our ETS is a milestone in our fight for a stable climate, and in combination with the Zero Carbon Act better equips us for a zero-carbon future. We love your work James Shaw, take a bow!
Sophie Elstone-Sara is studying towards a Master of Climate Change Science and Policy at Victoria University, Wellington.