Looking back at the history of New Zealand’s climate change policy, it’s somewhat depressing to see how we’ve gone in circles debating the relative merits of an emissions trading scheme (ETS) versus a carbon tax. The announcement by the Greens in 2014 that their policy is to scrap the ETS and replace it with a revenue-neutral carbon tax has to be seen in the context of this decades-long debate and oscillation between these ultimately quite similar policies.
What’s important to keep in mind I think, and various commentators have pointed out this out, is that the differences between a good ETS and a good carbon tax aren’t really that huge. Each policy can be made to work, and I think the fundamental point is that the political commitment to the policy and the avoidance of compromising to industry lobbying are what really matter. In other words, a government could make either an ETS or a carbon tax work if they wanted to – the important factor is the degree to which they are serious about tackling climate change.
Anyway, you can draw your own conclusions from this time line below:
Note: I’ve italicised the contextual stuff
1988: The New Zealand Government starts working on climate change issues, the same year as the Intergovernmental Panel on Climate Change (IPCC) is formed.
1989: The Royal Society releases a government-commissioned report ‘New Zealand Climate Report 1990’
1994: the Fourth National Government announced a number of policies, including targets to reduce net emissions to 1990 volumes by the year 2020, and a target of slowing growth of gross emissions by 20%, as well as a number of complementary measures in forestry, the energy sector (including renewable energy). Establishes an energy efficiency strategy and the Energy Efficiency and Conservation Authority (EECA). Begins talk of voluntary agreements with industry to keep emissions down.
Most importantly, the government said that if emissions were not stabilised at 1990 levels by the year 2000, a low-level carbon charge would be introduced in December 1997.
1996: The National Government changed the emissions target to either no increase in 2000 net emissions of carbon dioxide from 1990 volumes or a 20% reduction if it was cost-effective and had no impact on trade.
Around this time, National puts the carbon charge on hold pending international negotiations.
1997: The Kyoto Protocol was signed.
1999: National loses the election to Labour.
2002: Labour passes the Climate Change Response Act, which is designed to address New Zealand’s obligations under the Kyoto Protocol, and introduces mechanisms by which emissions are recorded. New Zealand ratifies the Kyoto Protocol, pledging that by 2020, our emissions will be no higher than they were in 1990.
The policy of Labour is to implement a carbon tax in 2007 which would apply to the whole economy except for agriculture. The price would initially be set at $15 per tonne of carbon dioxide or equivalent, and eventually capped at $25 per tonne. The carbon tax policy was intended to be precursor to emissions trading when it became internationally established.
2005 : Labour abandons plans for a carbon tax after support parties United Future and New Zealand First oppose the policy.
September 2008: Labour creates the New Zealand Emissions Trading Scheme by passing the Climate Change Response (Emissions Trading) Amendment Act 2008 with the support of the Greens and New Zealand First.
November 2008: Labour loses the General Election to National.
December 2008: Emissions Trading Scheme Review Committee to review the NZ ETS. The committee releases it’s report in August 2009.
November 2009: National passes legislation which amends the ETS, introducing a transition period and a 2-for-1 emissions unit surrender arrangement (ie, businesses are only liable for half their emissions). The start date at which agriculture is brought into the scheme is pushed out. Industry to receive “intensity-based” allocation of units, such that overall emissions can continue to increase under the scheme.
2011: Another review into the ETS is conducted, which eventually recommends a number of changes: phasing out the two-for-one arrangement over three years, so that only in 2015 will businesses have to surrender one emissions unit for each tonne of emissions,a $5 per year increase in the price cap from 2013 (instead of no price cap), that the agricultural sector should still enter in 2015, but should initially be granted a two-for-one allowance, and changes to the domestic ETS forestry accounting rules
2012: National passes legislation which amends and weakens the ETS in a number of ways: extends the two-for-one transitional measures beyond 2012, removes the start date for agriculture, introduces an offsetting option for pre-1990 forests, introduces a power whereby the government can sell NZUs at auction within an overall cap, and changes the treatment of the synthetic greenhouse gas sector under the scheme.
August 2013: National pledges a -5% cut by 2020 relative to 1990 levels, but says it could still go to -10 to -20% if other countries enact sufficiently ambitious targets.
May 2014: As part of Budget 2014, and without prior warning, National introduces changes which stop forestry owners from surrendering foreign credits to meet their obligations.
June 2014: Greens announce their ‘carbon tax cut’ policy which would scrap the ETS and replace it with a revenue-neutral carbon tax, thereby restarting the debate about carbon tax versus ETS.
July 2014: Alister Barry and Abi King-Jones’ film Hot Air premiers at New Zealand International Film Festival in Wellington. It catalogues the endless and successful delaying tactics of big business trying to stop any serious action on climate change in New Zealand.
September 2014: John Key and the Fifth National Government win a third term at the election. In the run up to the campaign, the Climate Voter initiative attempted to make climate change an election issue.
September 2015: Kiribati man Ioane Teitiota and his family are deported after the Government rejects their claim that they are climate change refugees. RNZ reports that 11 people have claimed asylum in New Zealand in the last four years because of climate change.
2015(?): New Zealand will lose access to international carbon trading markets because the National government has chosen not to participate in the second stage of the Kyoto Protocol from 2013–2020 and instead pledge through the UNFCCC process.
December 2015: The Government kicks off consultation for the ETS 2015/16 review. Submissions on priority issues closed on 19 February 2016. Submissions on other review matters close on 30 April 2016.
March 2016: Climate Change Minister Paula Bennett announces that the 2-for-1 subsidy is to be removed. The 2-for-1 deal was introduced by National during the Global Financial Crisis to mitigate the impact of the ETS on businesses and consumers. Bennett said the ETS wasn’t working well, and that: “It is abundantly clear that if the ETS is going to work, carbon must cost more than it does right now.”
May 2016: Legislation to phase out the 2-for-1 subsidy passes as part of the budget. According to Minister Bennett:
The current 50 per cent unit cost will increase to 67 per cent from 1 January, then 83 per cent from 1 January 2018, with all sectors in the ETS paying the full market price from 1 January 2019. The current price ceiling which caps units at $25 will remain.
That said, there are still some pretty big subsidies left in the scheme:
Businesses exposed to international trade competition, and whose emissions are a big part of their costs, will continue to receive an allocation of emissions units to protect their competitiveness.
October 2016: New Zealand ratifies the Paris Climate Agreement, formally submitting an emissions reduction target of 30 percent below 2005 levels by 2030. New Zealand also commits to joining an international aviation climate agreement.
September 2017: the General Election is held. The Labour Party forms a government in coalition with the New Zealand First Party and also involving the Green Party. The Government will pursue the creation of a Climate Change Commission to set climate change mitigation targets.
May 2019: The Coalition Government introduces the Zero Carbon Bill. Under the Bill, Governments will be mandated to reduce emissions to “net zero” by 2050 to limit global warming increases to 1.5C. However, biological methane will be treated differently, and reduced by at least 10 per cent by 2030 and between 24 and 47 per cent by 2050.
November 2019: The Zero Carbon Bill passes and receives Royal Assent.
June 2020: The Government announces changes to strengthen the Emissions Trading Scheme. For the first time, the ETS will have a ‘cap’ on emissions.
September 2020: The Government announces many financial market participants (e.g. banks, investment schemes, insurers) will be required to assess and disclose climate-related risks. If approved by Parliament, the regime will kick in around 2023.
- The New Zealand Emissions Trade Scheme (excellent and very in-depth Wikipedia page)
- Climate change in New Zealand (Wikipedia)
Last updated October 2020