If the major political parties were taking climate change seriously, they would rely on the Emissions Trading Scheme (ETS) not add wasteful targets, says The New Zealand Initiative chief economist Dr Eric Crampton.

Today, the Labour party unveiled its promise to mandate zero-emission buses by 2025 and to ban some new coal-fired boilers. A few weeks ago, the National party also promoted electric vehicles.

Crampton says neither policy will have any effect on New Zealand’s net emissions which are already capped by the ETS, for those sectors covered by the ETS.

He says New Zealand’s scheme includes transport and has a binding cap which determines how many ETS credits are available. For instance, whenever a vehicle uses fuel, a fuel company has purchased an ETS credit to cover its emissions.

“If the fuel company does not purchase those ETS credits, they are available for someone else to purchase and use instead. And the same holds true for industrial heating processes also targeted in today’s announcement,” Crampton says.

New Zealand’s ETS cap stands at 32 million units in 2021, reducing to 30 million units in 2025.

“Net emissions won’t be curbed by spending $50 million on electric busses, as Labour promises, or $93m on electric vehicle subsidies, as National promises. It simply changes where emissions come from,” he says.

Crampton explains that New Zealand’s ETS provides two ways to reduce New Zealand’s net emissions:

• Policy can target sectors not covered by the ETS (like agriculture), ideally by wrapping them into the ETS; or
• It can work to reduce the total quantity of allowed emissions.

He says at the current ETS price of $35, Labour could have prevented well over a million tonnes of emissions simply using its pledged $50m to buy ETS emission credits, and to leave them unused and unavailable to anyone else.

“All climate change policies should be evaluated against this benchmark: what is the cost-per-tonne of cutting emissions by using the policy, and how does it compare to the cost of relying on the ETS instead?” he says.

“If all parties take climate change seriously, they should be committed to ensuring that every dollar allocated to reducing emissions does the most good possible,” Crampton says.

A new report, Roadmap for Recovery: Briefing to the Incoming Government, urges the next Government to strengthen the Emissions Trading Scheme as the primary way to reduce emissions.

The Initiative’s prior reports, Switched On! Achieving a green, affordable and reliable energy future and Real action, not empty words: How to make the Zero Carbon Bill about cutting emissions, discussed the 100% renewable electricity target and the Zero Carbon Bill.

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