Productivity Commission – low emissions economy

James Shaw (@jamespeshaw):

Getting to net zero emissions by 2050 is achievable & starting now is our best option to seize the opportunities and make a just transition says the Productivity Commission. I thank them for their work on a pathway to NZ becoming a low emissions economy

New Zealand Productivity Commission – Low-emissions economy

Final report August 2018


New Zealand is part of the international response to address the impacts of climate change and to limit the
rise in global temperature, requiring a transition of the global economy to one consistent with a low carbon
and climate resilient development pathway.

New Zealand has recently formalised its first Nationally Determined Contribution under the Paris Agreement
to reduce its emissions by 30 percent below 2005 levels by 2030. The Paris Agreement envisages all
countries taking progressively ambitious emissions reduction targets beyond 2030. Countries are invited to
formulate and communicate long-term low emission development strategies before 2020. The Government
has previously notified a target for a 50 per cent reduction in New Zealand greenhouse gas emissions from
1990 levels by 2050.

New Zealand’s domestic response to climate change is, and will be in the future, fundamentally shaped by
its position as a small, globally connected and trade-dependent country. New Zealand’s response also
needs to reflect such features as its high level of emissions from agriculture, its abundant forestry resources,
and its largely decarbonised electricity sector, as well as any future demographic changes (including

Scope and aims

The purpose of this inquiry is identify options for how New Zealand could reduce its domestic greenhouse
gas emissions through a transition towards a lower emissions future, while at the same time continuing to
grow incomes and wellbeing.

Two broad questions should guide the inquiry.

What opportunities exist for the New Zealand economy to maximise the benefits and minimise the cost that
a transition to a lower net-emissions economy offers, while continuing to grow incomes and wellbeing?

How could New Zealand’s regulatory, technological, financial and institutional systems, processes and
practices help realise the benefits and minimise the costs and risks of a transition to a lower net emissions


This inquiry should not focus on the suitability of New Zealand’s current, or any future emissions reduction
target. In addition, the inquiry should not focus on the veracity of anthropogenic climate change, and should
only consider the implications of a changing climate to inform consideration of different economic pathways
along which the New Zealand economy could grow and develop.

17.3 Immediate priorities

Achieving New Zealand’s emissions reduction targets requires concerted effort and widespread change.
Among the numerous policies recommended in this report, three areas hold particular priority in
establishing the conditions needed for a successful transition. Change in these areas should be
implemented within the next two years to set the strategy on the right trajectory and avoid New Zealand
incurring unnecessary costs later in the transition.

Reform the New Zealand Emissions Trading Scheme and introduce biogenic methane into an
emissions pricing system

Ensuring that emissions are appropriately priced is an essential component in New Zealand’s mitigation
strategy. Emissions pricing provides a strong incentive to reduce emissions at least cost. It decentralises
decisions to invest, innovate and consume across the economy to people who have the best information
about opportunities to lower their emissions. An emissions price is also pervasive through the whole
economy – shaping resource and investment decisions across all emitting sectors and sources.

However, the current NZ ETS has a number of weaknesses. The reforms to the NZ ETS set out in Chapter 5
should be a high priority so that the scheme begins to drive behavioural change and changes in land use –
particularly greater rates of afforestation. The emissions price in the NZ ETS will need to rise significantly, so
the sooner this process begins, the more gradual the price increase can be. Also, a higher emissions price in
the NZ ETS will help to identify those emissions sources where complementary policies are required to drive
emissions reductions.

Further, while the NZ ETS should be the primary mechanism to drive reductions in long-lived gas emissions
(such as from carbon dioxide and N2O), a pricing system should also be established for biogenic CH4. This
system, either a dual-cap NZ ETS or an alternative methane quota system, will separately incentivise
emissions reductions of biogenic CH4 in recognition of its nature as a short-lived GHG.

Clear and stable climate-change policies

New Zealand lacks clear and stable climate-change policies. This lack of clarity and political agreement
about longer-term goals has weakened incentives for change and undermined confidence in existing
policies. The Government is currently developing a Zero Carbon Bill that will set a 2050 emissions target and
aims to establish the foundations and institutions needed to meet that target. The Bill should establish:

  • legislated and quantified long-term GHG emissions reduction targets;
  • a system of successive “emissions budgets” that, separately for short- and long-lived gases, translate
    long-term targets into short- to medium-term reduction goals; and
  • an independent Climate Change Commission to act as the custodian of New Zealand’s climate policy
    and long-term, climate-change objectives. The Climate Change Commission should provide objective
    analysis and advice to the Government on the scale of emissions reductions required over the short to
    medium term; progress towards meeting agreed budgets and targets; and barriers, opportunities and
    priorities, to reduce emissions.

Substantial investment in the innovation system

New Zealand’s strategy for its transition to a low-emissions economy should have a strong focus on
innovation. Government should devote significantly more resources to low-emissions innovation than the
modest and inadequate current allocation (Chapter 6). Yet, extra resources are unlikely to yield significant
discoveries to assist in reducing emissions immediately. Rather, the investment will pay off more gradually
throughout the transition. But given the long timeframes involved in bringing innovative ideas to fruition, it is
important that the significant additional resources and infrastructure needed to boost New Zealand’s
innovation system are established quickly.

17.4 Meeting the challenge

New Zealand can achieve a successful low-emissions economy, but there will be challenges. Stronger action
in the immediate future is required, as delayed action will compound the transition challenge and risks
New Zealand being left behind in technology and economic opportunities. Sixteen years ago, the
Government enacted New Zealand’s current climate-change law. Yet, New Zealand has since made virtually
no progress in reducing its emissions, in part due to the absence of political consensus around the
fundamental need for action across the entire economy.

Shifting to a low-emissions trajectory will critically depend on political leadership and fortitude. Inertia and
resistance to change can be expected. The challenge will be one of communication and conveying the
advantages and opportunities of transformational change to the population at large. But, meeting this
challenge will likely be futile without broad agreement across the political spectrum on both the need and
means to make the transition.

This report sets out the policy architecture for New Zealand to transition to a low-emissions economy, while
continuing to grow incomes and wellbeing. Implementing the recommendations in this report will set
New Zealand on the path to meeting its emissions-reduction targets. Inevitably, the journey will be long and
punctuated by change and uncertainty. Technological change, climate-change policy in other countries, and
unintended consequences stemming from mitigation policies could each conspire to slow or derail progress.
While challenging, the transition is achievable given concerted commitment and effort across government,
business, households and communities – up to and beyond 2050.

It is a lengthy report with many findings and recommendations.

Final report August 2018


Leave a comment


  1. robertguyton

     /  September 5, 2018

    I/S makes the point that farmers will still be off the hook:
    “Where it goes off the rails is the policy mechanism for doing that. We already have a mechanism which would allow pricing and trading farm methane: just bring individual farms into the ETS, and let the market work out whether cars or cows are more valuable. But farmers might be the losers there, so instead the Productivity Commission reinvents the wheel and proposes a “Methane Quota System”: a system of tradeable permits for farm and waste-produced methane, with free allocation based on historical pollution . In other words, a separate ETS, to give farmers a permanent budget and a permanent pollution subsidy. ”
    Grandparenting, in case you missed it.

  2. Pink David

     /  September 5, 2018

    “Shifting to a low-emissions trajectory will critically depend on political leadership and fortitude.”

    Translation, the government is going to make you poorer weather you like it or not.

    • Alan Wilkinson

       /  September 5, 2018

      Gezza already has poor weather. He’ll be livid if it gets worse.

      • Kitty Catkin

         /  September 5, 2018

        I blame the parents, of course.

      • Gezza

         /  September 5, 2018

        Damn straigh,t Al. This is not what I bargain for when I pay my bloody taxes.

        • Gezza

           /  September 5, 2018

          Neither was that comma going there what I bargained for when I quickly whacked it in and hit Post Comment

    • robertguyton

       /  September 5, 2018

      Translation, the government is going to guide you down the path toward responsible behaviour, whether you like it or not.

  3. Alan Wilkinson

     /  September 5, 2018

    Rich people plant trees. Poor people cut them down. If the answer is more forests then the solution is to make people richer not poorer.

    • Kitty Catkin

       /  September 5, 2018

      Some rich people also kill trees, even protected ones, because they want to build where the trees are or the trees spoil their view of the beach. They can afford the fines.

      • robertguyton

         /  September 5, 2018


        • Kitty Catkin

           /  September 5, 2018

          Murderers. I always hope that the tree will fall on the tree killer when I see someone pointlessly cutting one down. It’s necessary sometimes, I know. People made harsh comments about the people who cut down a gorgeous tree near where we lived…unti they saw that it had rotted inside. Our lovely silk tree split and had to be cut down. But killing a healthy tree for no real reason is an abomination.

    • Alan Wilkinson

       /  September 5, 2018

      A wealthy suburb from the air looks like a forest. A poor one looks like a desert. On average of course – there are exceptions both ways.

      • Griff

         /  September 6, 2018

        Look along the coast Alan and you will find ducks who boy a property for the tree lined coastel veiws and cut down the tress that are a part of the veiw for every one else

  4. Gezza

     /  September 5, 2018

    “Low emissions economy” sounds like a euphemism for “efficient farting”.

  1. Productivity Commission – low emissions economy — Your NZ – NZ Conservative Coalition

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