One success of the latest global climate summit (COP26) held in Glasgow was the completion of a rulebook for international carbon markets. This rulebook can help Aotearoa New Zealand and other countries meet climate emissions reduction commitments – if applied well. Researchers (including some from New Zealand economic research institute Motu Research) have developed Climate Action Teams (CATs), an innovative way for countries to use the rulebook that ensures environmental integrity and high emissions reduction ambition. This new policy brief shows how CATs could work for Aotearoa.

At COP26, the aim of cutting global climate emissions by 2030 to limit future global warming to below 1.5°C survived, in theory. But in practice, countries’ national plans to reduce climate emissions, known as nationally determined contributions (NDCs), are not enough to limit temperature rises to below 1.5°C.

“Countries need to take more action, above their NDCs, to avert catastrophic climate change”, says Ana Pueyo, a research fellow at Motu Research.

The New Zealand Government increased the ambition of its NDC on the eve of COP26, committing to net greenhouse emissions reductions of 50% below gross 2005 levels by 2030. Current Government policies go some way to meet this target — but not the whole way. Aotearoa will have a gap of 149 million tonnes of climate emissions left over to deal with over 2021-2030. International carbon markets can help Aotearoa meet its climate commitments.

“Aotearoa’s emissions reduction target will be met with a combination of domestic and international emissions reductions. The Glasgow carbon markets rulebook is a significant development for Aotearoa. The rulebook enables initiatives like CAT, which will lead to cheaper, deeper emissions reductions globally, while letting countries decide how cooperation takes place,” says Ana Pueyo.

A CAT is an innovative way to make international climate cooperation work, speeding up ambitious climate emissions reductions while ensuring environmental integrity. Within a CAT, a small, high-trust group of countries cooperate to increase their climate emissions reductions, beyond their NDC commitments. The resulting reductions are transferred as carbon credits from seller to buyer countries.

Carbon markets allow resources for climate change mitigation to be allocated more efficiently. The United Nations reported global cooperation to reduce emissions using market mechanisms could reduce the costs of meeting 2030 NDCs by 40-60%. However, there have been concerns carbon markets could reduce the ambition of buyer countries, if they can buy cheap credits from countries with low emission reduction commitments.

“Climate Action Teams avoid the problems of the Kyoto Protocol era, when Aotearoa’s use of cheap, low-integrity carbon credits from other countries discouraged climate action at home and produced few climate emission reductions offshore. CATs will only reward emissions reductions beyond already ambitious national commitments. The CAT approach emphasises cooperation to ensure mitigation investment benefits both the host country and the climate,” said Ana Pueyo.

Researchers have done preliminary analysis on several host (seller) countries. A hypothetical CAT (with Chile as host and Aotearoa and Switzerland as partners (buyers)) shows Chile could provide enough emissions mitigation to support Aotearoa and Switzerland to meet their NDC commitments — at a lower cost than Aotearoa’s and Switzerland’s domestic action alone.

Background information

Motu Research has been working with the Environmental Defence Fund (EDF), Universidad Católica de Chile and Perspectives in Switzerland to design and test CATs.

This policy brief describes the CAT approach and introduces modelling results, using Chile as a hypothetical host country case study for international climate cooperation.

The CAT concept has similarities to South Africa’s Just Energy Transition Partnership. The deal, hailed as one of the most impressive outcomes of COP26, sees a small group of developed countries fund South Africa’s transition away from coal. Whereas the partnership helps South Africa meet its NDC through climate finance, a CAT would increase climate emissions mitigation beyond the host’s NDC, with mitigation being transferred from the host to the partners.

Motu Economic and Public Policy Research is an independent economic research institute which never advocates an expressed ideology or political position.

A charitable trust, Motu is founded on the belief that sound public policy depends on sound research accompanied by well-informed and reasoned debate.

Motu is the top-ranked economics organisation in New Zealand. It is in the top ten global economic think tanks, according to the Research Papers in Economics (RePEc) website,

which ranks all economists and economic research organisations in the world based on the quantity and quality of their research publications.

It also ranks in the top ten climate think tanks in the world according to the International Center for Climate Governance.

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