New Zealand’s mistake

As countries around the world work to fulfill their obligations under the new Paris agreement, they will turn to various regulatory systems to limit greenhouse gas emissions. From direct regulation, to carbon taxation, to cap-and-trade, many countries have multiple already existing national policies to expand upon in the coming years.

Unfortunately, New Zealand only has the Emissions Trading Scheme. The scheme allows businesses and industries to trade in carbon credits. Each credit acts as an allowance for two tonnes of carbon equivalent emissions. The ETS is the only national carbon emission regulatory policy that has been adopted here, and it doesn’t work.

In light of the current review of the ETS it is important to know exactly what the scheme’s flaws are.

Weaknesses of the ETS

1. Only partial industry coverage
The ETS does not cover pastoral agriculture, despite the fact that it is responsible for over 48% of greenhouse gas emissions in New Zealand. While the industry is required to report emissions, it is not required to purchase carbon credits.

2. No cap
While most carbon trading systems worldwide are at least cap-and-trade systems, New Zealand’s ETS has no emissions cap. Compare this to the European Union’s system: businesses and industries must pay fines in addition to buying carbon credits, once they go over a specified limit (cap). Under a cap-and-trade system, the caps continually decrease, thus pressuring industries to decrease their overall emissions over time.

3. No price signal
Carbon credits have no set price in New Zealand, so they are completely dependent on market fluctuations. As a result, the price for one credit has decreased dramatically from $20 per unit to a current price of less than $10, dipping as low as $2 in the past. In comparison, the US Environmental Protection Agency has suggested a minimum of US $60 per unit to promote emissions reductions.

4. Internationally traded
Companies can simply outsource their credits – for example, by paying a poor country to use land to grow trees. These trees then count as “carbon sinks” and therefore carbon credits, despite the fact that the measurements used to determine how much carbon they actually absorb – and for how long – are extremely variable. These carbon credits also cost very little, which drives the price down.

Outsourced emissions are the other problem. Instead of emitting in New Zealand, a company may simply outsource all carbon-intensive production to another country. The same amount of carbon is put into the air, but the New Zealand company doesn’t have credits deducted for it.

5. Crude measurements for externalities
Under our current economic system, an “externality” is any cost (e.g. environmental degradation) that cannot be properly measured and assessed. Instead of trying to approximate the cost, externalities are generally ignored.

The ETS attempts to put a cost on a specific externality – but in a very crude way. By only measuring CO2 equivalents, other impacts on community health, ecosystems, and workers’ rights can be ignored. A hydraulic fracturing project, for example, would look good to somebody who is only concerned with decreasing their carbon emissions – despite fracking’s detrimental effects on surrounding groundwater, air, and worker safety.

Paying to pollute

Essentially, the ETS allows businesses and industries to pollute as long as they pay for it. And of course they will – as long as it is economically feasible. When a company can pollute and buy credits in other countries for low cost, there is no economic incentive to stop polluting. In fact, many European countries have shifted their production overseas for this very reason, causing Europe’s emissions to decrease and the emissions of developing nations to skyrocket. This is known as “emissions leakage,” and it will continue until countries start properly regulating their industries.

Real solutions
We need strong regulations, both nation-wide and locally. Direct regulation penalises corporations for emissions without allowing them to outsource their pollution. Even further, prioritising a low-carbon economy keeps fossil fuels from ever leaving the ground. This includes subsidising renewable energy technologies and taking subsidies away from fossil fuels – but also actively supporting local projects that seek alternatives to a fossil fuel economy.

From pedestrian- and bicycle-friendly infrastructure, to local walk-to-work initiatives, to Transition Towns and urban agriculture; all of these projects become more commonplace and viable when government initiatives support and promote them. If we want good national climate change policy, it needs to be diverse, and it needs to be accompanied by equally strong local policies.

So what can you do?
At the foundation of every strong government initiative that supports human well-being, is a powerful group of grassroots activists who do not give up. Pressure from below is the only way that we can turn our growth-obsessed society into one of nurturing and resilience. At the heart of any big legislative decision is social action. So join campaigns that you feel will make the biggest impact. Direct action; submissions; civil disobedience; talking one-on-one with politicians – all of this can have an impact if it is part of a larger, strategic campaign!