Climate change symposium: the afternoon I

Last Friday I attended the one-day Climate Change: the Policy Challenges Symposium in Wellington. Where the morning session focused mainly on the international context, the afternoon dealt specifically with domestic policy:

Dr Bert Metz (IPCC / Netherlands Environmental Agency) spoke on "How to avoid more than two degrees of warming?" The EU has adopted a target (based on the UNFCCC's objective of avoiding "dangerous" anthropogenic climate change) of limiting climate change to a 2 degree increase in average global temperature. Unfortunately its difficult to tell how much CO₂ this allows us to emit; the best guess is that to have an even chance of staying within the target, the global concentration of greenhouse gases needs to be limited to around 450 ppm CO₂-equivalent (or 400 ppm of CO₂). But the CO₂ concentration is at 380 ppm now, so this will be a very challenging target. Achieving it will require around a 50% reduction in emissions by 2050, and 70% or more by 2100 (figures relative to today; the cuts are deeper compared with the "business as usual" baseline). That looks insurmountable, but there are plenty of reduction options available, and a fair amount of choice in how we achieve it. However, the core of any lower-emissions pathway is likely to involve massive changes in the global energy system, with vastly reduced use of oil and coal and corresponding increases in biofuels and nuclear or renewable energy (note that all of these options exist now, so its not as if we can't do anything about it). There's also the interesting possibility of linking carbon capture and sequestration technology (if developed and commercialised) to biofuel generation to effectively suck CO₂ out of the atmosphere and start reversing the damage we have caused; this has the potential to significantly lower both the cost of abatement and the risk of dangerous temperature rise.

The next section, on "Policy Issues and Options", consisted of four short talks by people involved in one way or another with the policy community.

Phil Gurnsey (Ministry for the Environment) is the man currently responsible for climate change policy. His talk on "The Policy Landscape" covered the enormous shift we have seen in international opinion in the last few year, the growing global consensus that we actually have to do something about the problem, and the driving forces behind New Zealand policy. As a public servant, he couldn't really say much, but he did highlight some of the upcoming policy announcements and suggested in a roundabout way that the government was looking at a gradual introduction of emissions trading.

Murray Ward, Gurnsey's predecessor between 1996 and 2002 (and thus the man responsible for both the 1999 emissions trading scheme and the now-discarded carbon tax) talked about "An Integrated Approach". He pointed out that from the 1st of January 2008 - a little over a year away - New Zealand would be fully exposed to the international cost of carbon, and that every ton of CO₂-equivalent emitted that could otherwise have been avoided will cost the taxpayer between $20 - 40. He argued strongly that this cost needs to be reflected in the domestic cost of energy, and that an effective response to climate change was impossible unless this occurred (mostly because we would repeat the same mistake we made between 1997 and today: allowing major new capital investments to occur in the energy sector which will burden us with costs for years to come - e.g. Marsden B). However, he also noted that this raised some equity considerations, which suggested a need for both a separate track for "competitiveness at risk" firms which could not pass on their costs, and "smart revenue recycling" to compensate and assist groups that are disproportionately affected. Having established the general bases, he proposed... a quick and dirty energy-sector emissions trading system, using Kyoto Assigned Amount Units so that it was fully interfaced with the international market. The government would auction an appropriate amount of AAU, while requiring the energy sector to provide it with AAU to cover their emissions, and the market would handle the rest. The revenue from the auction - estimated at $1.5 billion over 5 years - would be recycled into research, further emissions reduction (planting trees), providing information, training and capital to assist with energy efficiency, and helping those significantly disadvantaged (primarily by aiming to lower their energy bills through e.g. installing insulation), as well as a "carbon fund" to help pay for future impacts of climate change (floods and droughts). The emissions trading regime would be supplemented by a projects mechanism similar to the existing one, in order to spread the opportunity cost of emissions across the economy.

This is a good policy, particularly with the emphasis on revenue recycling. One of the failures of the carbon tax was that it was able to be presented as a tax grab by the opposition - with some justification as the money went into the consolidated fund rather than being tagged for any purpose (Treasury hates tagged revenue). And while the government proposed some recycling, it was never made explicit and in any case was not into the right areas (better depreciation rates to encourage capital upgrades rather than explicitly seeking environmental double dividends). Making it clear that any revenue will go straight back into helping solve the problem - and into helping those specifically disadvantaged by it - would do a lot to build public support and reduce opposition.

Peter Neilson (Business Council for Sustainable Development) spoke on "Price-Based Mechanisms". He made the by-now standard argument that we need a price on emissions to shift investment patterns away from carbon-intensive technologies and towards lower-carbon ones. The carbon tax was one attempt at this, but it failed because "the case for doing something about climate change was not widely appreciated" (whereas it is now), it exempted agriculture (our biggest emitter), and was seen as a revenue grab (see above). Unfortunately, it is unlikely to be revived, as too many parties are now on record as opposing it. Instead, we are now likely to see an emissions trading scheme. Neilson's contribution to this was to suggest grandparenting for "competitiveness at risk" firms, and using that promise to demand firms start monitoring their emissions now in the hope that it might get them to notice their activities. He was also strongly in favour of linking any system directly to the international market, on the basis that Kyoto (and whatever succeeds it) isn't just about lowering New Zealand's emissions, but also about New Zealand doing its share to lower global emissions.

Dr Charlotte Severne (NIWA) spoke on "The M?ori Economy". This is based heavily on primary production - farming, fishing, and forestry - and so will be heavily affected by climate change. At the same time, Maori organisations have a lower ability to plan for and respond to climate change, both because of less access to capital, and lack of capacity. But despite facing a higher burden, Maori have not generally been included in the process of formulating climate change policy. As she pointed out, those attending the symposium were overwhelmingly Pakeha.

That's the crunchy bit; I'll do the rest of the afternoon in another post. In the meantime, the presentations from the symposium are now online here, and they're well worth checking out.