Opinion: Missing climate change targets will come at a cost

OPINION

With climate change impacts ever more visible around the world, we didn’t expect to have to defend the idea that New Zealand should follow through on its 2030 emissions targets. However, we are seeing
a worrying trend toward downplaying these near-term targets, with the suggestion that far-off 2050 goals are more important. In case there is any doubt, action now matters.

As management consultants will tell you, a well-defined goal is S.M.A.R.T. – specific, measurable, achievable, relevant and time-bound. New Zealand has S.M.A.R.T. goals for climate action. One of the most important is our Paris Agreement target, known as our Nationally Determined Contribution (NDC).

It is specific, measurable and time-bound. Our NDC is for New Zealand to hold net emissions to 571 million tonnes over 10 years from 2021 to 2030. This entails a 50 per cent reduction of net emissions below gross 2005 levels by 2030.

It is relevant because there are costs in not achieving it. Our economy would face repercussions, potentially including for market access, as explained below. More fundamentally, if countries do not collectively fulfil their promises, then climate impacts will grow in severity, saddling us with ever-steeper losses and damages.

But is our NDC achievable? It is challenging, but achievable through a combination of accelerated domestic action and reductions offshore. Domestic action must be prioritised as it has positive spill-overs and locks in our long-term reduction path. International cooperation, if done with high integrity, can enable the remaining gap to be closed.

New Zealand has even nearer-term targets under the Zero Carbon Act, which Parliament passed near-unanimously in 2019. The Act requires successive domestic emissions budgets to be set and met, with emissions shrinking at each step. The first budget ends in 2025, and two further budgets run to 2030 and 2035.

Given the significant challenge of meeting the NDC, some suggest weakening it. This is not an option under the Paris Agreement, where “no backsliding” is a bottom line. And even our near-term domestic budgets are quietly being downplayed in favour of a focus on 2050.

To fixate on our long-term targets, however, is to leap into the trap that near-term targets were supposed to save us from. A 2050 target is far beyond the political cycle. It permits politicians to make promises they won’t be accountable to, perhaps not even alive to answer to. This is what former Bank of England governor Mark Carney called “the tragedy of the horizons”.

By contrast, the NDC and first two domestic budgets end in 88 months, well within the political time horizon. Almost all emissions reductions for these need to occur in the next two parliamentary terms. The legal frameworks of successive short-term targets – both in the Zero Carbon Act and the Paris Agreement – are designed to be uncomfortable for governments because they demand action now, rather than only plans for later.

While challenging, we should embrace our S.M.A.R.T goals because commitments can foster innovation and ambition. For example, the UK government set a target in 2000 for a 10 per cent renewable electricity supply by 2010, with an aspiration to double to 20 per cent by 2020. Many regarded this as too ambitious. Yet it forced policy innovation, especially in onshore and offshore wind. Recently, renewable generation contributed 35 to 40 per cent of total UK electricity supply, far beyond expectations.

New Zealand too has bent the curve. When our intended NDC was announced in 2015, around 200 million tonnes of offshore reductions were expected to be needed, a cost in today’s dollars of $18 billion to $48b. The National Government of the day judged this the “sweet spot” in balancing ambition and cost. As Prime Minister John Key said in Paris: “While New Zealand’s emissions are small on a global scale, we are determined to make a strong contribution to the international effort. That’s why we have set ourselves a target of reducing greenhouse gas emissions to 30 per cent below 2005 levels, by 2030.”

Since then, the expected need for offshore reductions has halved to 100 million tonnes, even though the current Labour government strengthened the NDC in 2021. This is real progress. Switzerland has been purchasing NDC-compliant offshore units for under $40 a tonne: at that price, our cost would be around $4b. That is a very substantial sum, but a major reduction on what was expected in 2015 when the NDC was first announced.

Giving up has costs too. Businesses are increasingly expected to have net-zero strategies and ambitious 2030 targets. Buyers of New Zealand exports expect action in their supply chains. Nestlé, for instance, has signalled that emissions from its ingredients suppliers must be reduced. But businesses cannot plausibly decarbonise, especially at the pace required, if the Government doesn’t have the right settings in place. The Sustainable Business Council and Climate Leaders Coalition have highlighted the importance of maintaining and upholding the Zero Carbon Act framework.

There are also pressures emerging through international agreements. The NZ-European Union free trade agreement adds Paris Agreement provisions to the general dispute settlement mechanism. In other words, if New Zealand doesn’t make a concerted effort to achieve its NDC, access to the European market could be restricted.

So let’s not delay any longer. Targets are commitment devices like Ulysses preemptively tying himself to the mast to avoid the temptations of the sirens. Indeed, the sirens are calling, above all to our politicians. But action now is the surest pathway to security and prosperity.

Dr Christina Hood is head of climate policy consultancy Compass Climate, and Dr Sebastian Gehricke is co-director of the Climate and Energy Finance Group at the University of Otago.