Paying for Mitigation: How New Zealand Can Contribute to Others’ Efforts

Suzi Kerr and Catherine Leining

No 19_09, Working Papers from Motu Economic and Public Policy Research

Abstract: Purchasing international emission reductions (IERs) can help New Zealand make a more ambitious and cost-effective contribution toward global climate change mitigation and support developing countries in accelerating their low-emission transition. However, New Zealand must avoid past mistakes by ensuring international purchasing does not derail its own decarbonisation pathway. Furthermore, the Paris Agreement has fundamentally changed how countries will trade IERs over the 2021–30 period. This working paper, which evolved under Motu’s ETS Dialogue process from 2016 to 2018, focuses on how we can balance our international and domestic mitigation efforts. It explores how many IERs we may want, how we should integrate international mitigation support with participants’ obligations under the New Zealand Emissions Trading Scheme (NZ ETS), and what mechanisms we can use to fund international mitigation effectively. Fundamentally, the New Zealand government will need to ensure that all IERs counted toward its targets and accepted in the NZ ETS have environmental integrity and are both approved and not double counted by seller and buyer governments. This paper presents a working model for New Zealand’s purchase of IERs, in which the quantity is controlled by government, purchasing is managed by government for the foreseeable future (with potential participation by private entities), and the quantity is factored into decisions on the NZ ETS cap and price management mechanisms. If NZ ETS participants are able to purchase IERs in the future, then a quantity limit should apply as a percentage of the surrender obligation and the volume should offset other supply under the cap. The paper also highlights an innovative “climate team” mechanism for international climate change cooperation that could facilitate purchasing by the New Zealand government. Two companion working papers address interactions between decisions on international purchasing and the choice of NZ ETS cap and price management mechanisms. The three working papers elaborate on an integrated proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al. (2017).

Keywords: Emissions trading; New Zealand Emissions Trading Scheme; greenhouse gas; climate change mitigation; linking (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-05
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://motu-www.motu.org.nz/wpapers/19_09.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mtu:wpaper:19_09

Access Statistics for this paper

More papers in Working Papers from Motu Economic and Public Policy Research Contact information at EDIRC.
Bibliographic data for series maintained by Maxine Watene ().