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Paying for Mitigation: How New Zealand Can Contribute to Others’ Efforts

Author

Listed:
  • Suzi Kerr

    (Motu Economic and Public Policy Research)

  • Catherine Leining

    (Motu Economic and Public Policy Research)

Abstract

Purchasing international emission reductions (IERs) can help New Zealand make a more ambitious and cost-effective contribution toward global climate change mitigation and support developing countries in accelerating their low-emission transition. However, New Zealand must avoid past mistakes by ensuring international purchasing does not derail its own decarbonisation pathway. Furthermore, the Paris Agreement has fundamentally changed how countries will trade IERs over the 2021–30 period. This working paper, which evolved under Motu’s ETS Dialogue process from 2016 to 2018, focuses on how we can balance our international and domestic mitigation efforts. It explores how many IERs we may want, how we should integrate international mitigation support with participants’ obligations under the New Zealand Emissions Trading Scheme (NZ ETS), and what mechanisms we can use to fund international mitigation effectively. Fundamentally, the New Zealand government will need to ensure that all IERs counted toward its targets and accepted in the NZ ETS have environmental integrity and are both approved and not double counted by seller and buyer governments. This paper presents a working model for New Zealand’s purchase of IERs, in which the quantity is controlled by government, purchasing is managed by government for the foreseeable future (with potential participation by private entities), and the quantity is factored into decisions on the NZ ETS cap and price management mechanisms. If NZ ETS participants are able to purchase IERs in the future, then a quantity limit should apply as a percentage of the surrender obligation and the volume should offset other supply under the cap. The paper also highlights an innovative “climate team” mechanism for international climate change cooperation that could facilitate purchasing by the New Zealand government. Two companion working papers address interactions between decisions on international purchasing and the choice of NZ ETS cap and price management mechanisms. The three working papers elaborate on an integrated proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al. (2017).

Suggested Citation

  • Suzi Kerr & Catherine Leining, 2019. "Paying for Mitigation: How New Zealand Can Contribute to Others’ Efforts," Working Papers 19_09, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:19_09
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    File URL: https://motu-www.motu.org.nz/wpapers/19_09.pdf
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    References listed on IDEAS

    as
    1. Matthew Ranson & Robert N. Stavins, 2016. "Linkage of greenhouse gas emissions trading systems: learning from experience," Climate Policy, Taylor & Francis Journals, vol. 16(3), pages 284-300, April.
    2. Catherine Leining & Judd Ormsby & Suzi Kerr, 2017. "Evolution of the New Zealand Emissions Trading Scheme: Linking," Working Papers 17_06, Motu Economic and Public Policy Research.
    3. Suzi C. Kerr, 2013. "The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 47-66, January.
    4. Gavard, Claire & Winchester, Niven & Paltsev, Sergey, 2016. "Limited trading of emissions permits as a climate cooperation mechanism? US–China and EU–China examples," Energy Economics, Elsevier, vol. 58(C), pages 95-104.
    5. Suzi Kerr & Catherine Leining, 2019. "Uncertainty, Risk and Investment and the NZ ETS," Working Papers 19_08, Motu Economic and Public Policy Research.
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    Cited by:

    1. Catherine Leining & Suzi Kerr, 2019. "Managing Scarcity and Ambition in the NZ ETS," Working Papers 19_07, Motu Economic and Public Policy Research.
    2. Suzi Kerr & Catherine Leining, 2019. "Uncertainty, Risk and Investment and the NZ ETS," Working Papers 19_08, Motu Economic and Public Policy Research.

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    More about this item

    Keywords

    Emissions trading; New Zealand Emissions Trading Scheme; greenhouse gas; climate change mitigation; linking;
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