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Coal-Fired Power Station along water, Huntly, Waikato, North Island, New Zealand
Coal-Fired Power Station along water, Huntly, Waikato, North Island, New Zealand

ScienceAugust 17, 2017

The ETS is ready to reduce New Zealand’s emissions

Guest writer
Coal-Fired Power Station along water, Huntly, Waikato, North Island, New Zealand
Coal-Fired Power Station along water, Huntly, Waikato, North Island, New Zealand

So far our Emissions Trading Scheme has been deemed largely ineffectual, thanks to low-integrity overseas credits and low emission prices. Motu’s Catherine Leining believes recent global and local changes mean the ETS can do its job – if we are ready to get serious about reducing New Zealand’s own emissions.

Ninety-two percent of New Zealanders are behind the Paris Agreement on Climate Change, which says we will join the global transition to net zero greenhouse gas emissions. New Zealand can follow any number of pathways to get there. It’s a ‘choose your own adventure’ style process. There’s no map, no chapter index, just decisions that will have long-lasting impact on our planet. Our Emissions Trading Scheme (ETS) can have an important role in guiding our emissions reductions, if it’s retooled for the future.

Part of the challenge in reducing emissions is that leaving it to an uncontrolled market creates signals pointing us in the wrong direction: the people who profit from emissions-producing businesses don’t face the global environmental costs of their actions, whereas those paying to reduce emissions don’t profit from the global environmental benefits.

An ETS is designed to change the behaviours causing climate change – rewarding those who reduce or sequester emissions. New Zealand introduced its ETS in 2008 so that our economy would have better price incentives to reduce emissions and increase the amount of forest planted or retained. The system was ground-breaking in its broad coverage (including transport, waste and forestry as well as stationary energy and industry), and a functional market was achieved; but New Zealand’s emissions have continued to rise.

There is an obvious reason for this: participants were given a cheap short-term option and no long-term price signals. From 2008 to mid-2015, participants could choose between reducing their emissions in New Zealand or buying Kyoto units representing emission reductions overseas. A global oversupply of units (caused by the economic downturn in Eastern Europe, followed by the US exit from the Kyoto Protocol and the Global Financial Crisis) and imperfect crediting rules meant many of our ETS participants bought up bulk, cheap, low-integrity Kyoto units to meet their obligations.

One of the key criticisms of the ETS is the way participants were allowed to use these ‘questionable’ overseas units to meet the country’s goals while they kept pumping out greenhouse gases at home. Now many Kiwis mistrust the ETS, especially foresters who invested under expectations of higher emission prices. Another issue has been the exclusion of biological emissions from agriculture, nearly half of our gross emissions.

Does this mean we need to ditch the ETS? Absolutely not. It still has an important role to play if it is adapted wisely for a post-Paris world. Recent changes, some announced by the government last month and some resulting from the Paris Agreement itself, are an important step in the right direction but leave us only part-way through the story.

What many people don’t know, is that the Paris Agreement has fundamentally changed the future of international carbon markets. The old Kyoto framework with Joint Implementation and the Clean Development Mechanism will no longer apply. Instead, “internationally transferred mitigation outcomes” can be exchanged between governments (without double-counting under targets), and a new UN market mechanism will be developed over time.

This means that for now, only the government – not ETS participants – can purchase international emission reductions for New Zealand. How this might change will depend on future international or bilateral negotiations.

Based on past experience, the government has promised to limit how many international units can be used by ETS participants once they are able to engage in international trading. This limit should keep more emission reduction investment at home, but we don’t yet know what this limit will be.

Many Kiwis mistrust the ETS, especially foresters who invested under expectations of higher emission prices.

Another issue for the ETS is that it has failed to deliver long-term emission price signals, mostly because there is no agreement between political parties about what should happen to domestic emissions. Without long-term policy and price signals it is very difficult to convince businesses about how much low-emission investment is really necessary, and how soon.

The High-Level Commission on Carbon Prices suggests that global emission prices consistent with the Paris temperature goal should reach US$40–80 per tonne CO2 by 2020 and US$50–100 by 2030. Our ETS price is sitting at NZ$17-18 per tonne CO2eq. We are not yet preparing our economy for serious emission reductions.

Last month, the government announced that by 2021 it will begin auctioning domestic units to emitters under an overall limit. Our cap-and-trade system will finally have its own cap to reduce domestic emissions. Auctioning will generate government revenue which can be returned strategically to the economy. The rationale for industrial free allocation is fading as more trade competitors take mitigation action. Phasing it out will increase auction revenue at a benefit to taxpayers.

In addition, future emission prices will be able to rise higher than our current price ceiling of NZ$25 per tonne, allowing the ETS to contribute more toward meeting our targets. Introducing a price floor at auction would also be useful; as explained in our recent paper on ETS reform, it would ensure a rising minimum emission price that encourages low-emission investment. Helpfully, the government is proposing to coordinate future decisions on unit supply and price issues, which will improve everyone’s ability to make sound investment decisions.

To meet our Paris target over 2021-2030, New Zealand will have to reduce emissions by 22 million tonnes per year on average. This reduction is roughly equivalent to eliminating our 2015 emissions from public electricity and heat production, transport, and fugitive sources combined. That may seem like a lot of reductions, but it’s only the start of our journey to net zero.

Right now we don’t know how government will distribute the responsibilities and costs for achieving this reduction. The government’s provisional carbon budget for 2021-2030 suggests the target gap will be met through some combination of ETS emission reductions, forest sinks and purchases of international emission reductions. It does not point to further mitigation in the agriculture sector – our largest emitter.

More Reading
Paris is burning: Will New Zealand abandon its climate change targets? We're unlikely to meet our target by buying carbon credits or reducing our emissions. So will we just leave the Paris Agreement?
Carbon credits, fish poo and the push to discover the secrets of the sea floor As the ocean is transformed by global heating, pollution and trawling, could blue carbon be a reason to protect more of it?

Given uncertainties about the future supply of forest sinks and international emission reductions, the ETS has an important role to play. If the proposed changes to the ETS are implemented with ambition, leadership and foresight, they will mark the end of the era of ‘dodgy credits’ and rising domestic emissions. This could direct us onto a more adventurous pathway toward a thriving low-emission economy where businesses and consumers are convinced to make emissions reductions, an essential contribution to New Zealand’s commitments under the Paris Agreement.

Climate Change Week at The Spinoff is brought to you by An Inconvenient Sequel – in cinemas August 24.

A decade after Al Gore’s film, An Inconvenient Truth, brought climate change into the heart of popular culture comes An Inconvenient Sequel – highlighting the perils of unmitigated climate change and the need for more action. See it in cinemas from Thursday August 24.

Keep going!
Black iron sands, mainly Titano-magnetite (over 50% iron), on the South Taranaki coast. (Photo by Education Images/UIG via Getty Images)
Black iron sands, mainly Titano-magnetite (over 50% iron), on the South Taranaki coast. (Photo by Education Images/UIG via Getty Images)

ScienceAugust 13, 2017

Allowing seabed mining in New Zealand is a decision you need to be a part of

Guest writer
Black iron sands, mainly Titano-magnetite (over 50% iron), on the South Taranaki coast. (Photo by Education Images/UIG via Getty Images)
Black iron sands, mainly Titano-magnetite (over 50% iron), on the South Taranaki coast. (Photo by Education Images/UIG via Getty Images)

This week massive seabed mining was approved off the Taranaki coast. Former environmental lawyer Dale Scott believes the potentially flawed application of the law will have significant consequences for all of New Zealand.

At every level, environmental issues raise the most pressing questions of who gets the benefit and who carries the cost. In every environmental issue you will find competing interests and competing values, whether those interests and values are explicit or not and whether they can be quantified in a generally accepted way or not. They are intensely inherently political – David Lange.

Regardless of where you sit on the political spectrum, most of us would be hard pressed to disagree with Lange’s appraisal of how intensely difficult it is to decide which commercial uses of the environment we should allow.

When the Environmental Protection Authority (EPA) approved Trans Tasman Resources Limited’s (TTRL) highly controversial application for consent to mine iron sand from a large area of seabed 22 kilometres off the South Taranaki coast, this reality was put into sharp relief.

Assuming it is not overturned on appeal, the EPA’s decision, which was strongly opposed by local communities, iwi, environmental groups and others, will allow TTRL to mine up to 50 million tonnes of iron sand each year for 35 years from a 66 square kilometre area of sea floor in New Zealand’s exclusive economic zone (provided all consent conditions can be met).

This decision to approve appears to have left most stakeholders (dare I say including TTRL) surprised, if not dumbfounded. This is mostly due to a number of logical factors including:  

  • the nature and sheer scale of the harm was known and accepted as being part and parcel of proposed seabed mining activity
  • the significant chance that seabed mining in the proposed location will result in greater adverse effects than those that could be predicted by TTRL and the other parties to the decision
  • the fact that New Zealand has never approved, and no one in the world has ever conducted, commercial scale seabed mining to date, let alone on the large scale proposed by TTRL
  • above all else, the fact this was TTRL’s second attempt, after their 2014 application for virtually the same activity was unequivocally refused by the EPA due to uncertainty around the potential environmental effects (practice makes perfect I guess).
Infographic via Kiwis Against Seabed Mining kasm.org.nz

The controversial and challenging nature of the TTRL application is reflected in the 2/2 split decision by the four person decision-making committee appointed by the EPA to hear and determine the matter. Committee chairperson Alick Shaw (who held a casting vote) and Dr Kevin Thompson voted to approve the consent. Deputy chair Sharon McGarry and Gerry Te Kapa Coates voted to decline, predominantly on the basis that:

  • there were “compounding levels of uncertainty in the information provided that could result in significantly greater adverse effects than predicted”, and
  • overwhelming uncertainty as to how the proposed mining would impact the environment, as well as how severe and far-reaching any impact could be, making it impossible to robustly determine what conditions the committee would need to impose to prevent severe harm resulting if it were allowed to go ahead.  

This is much more than just another controversial environmental decision

You could be forgiven for dismissing the TTRL case as just another controversial environmental decision, wherein an unfortunate few take one for the team in order that we all benefit from a bit of sweet, sweet economic development.

These decisions occur all the time, and unless they involve someone proposing to conduct a large-scale industrial activity in our backyards, our concerns typically won’t extend much beyond a cursory glance at a news headline.

The EPA’s TTRL decision this week is different. If it goes ahead, the decision will likely have significant implications for New Zealanders as a whole. This needs to be a national conversation that all of us are involved in.

The adverse environmental impacts that result from seabed mining are new to us, particularly complex, and potentially severe.

Much like open cast mining, seabed mining activities of the kind which TTRL now has consent for entail the systematic removal of millions of tonnes of material from the surface of the sea floor area. After the iron ore is removed, 90% of that mined material is discharged back into the ocean at the site from which it was taken.

The main environmental impact identified in the EPA’s 2014 and 2017 TTRL decisions was the large sediment plume that this process generates in the water column. This plume would migrate many kilometres from the initial site and remain suspended in the water column for a considerable length of time, resulting in potentially significant reductions in the production of plankton (a fundamental link in the food chain), the smothering of seafloor organisms, and forcing fish and marine mammals to avoid the area.  

Whether it concerns the current TTRL decision, the Chatham Rise phosphate mining application refused in 2015, or any future seabed mining application, these impacts may result in significant adverse effects on New Zealand’s very large and precious marine estate, which we all have a vested interest in preserving.      

Infographic via Kiwis Against Seabed Mining kasm.org.nz

The environmental effects associated with seabed mining are so uncertain that the EPA was probably obligated to decline TTRL’s application.  

As all three of the seabed mining applications considered to date have established, we know very little about the effects of seabed mining on the marine environment. The scientific tools at our disposal are simply unable to comprehensively and accurately detect, understand and predict what the likely effects of seabed mining in any given case will be.  

As McGarry and Te Kapa Coates note in their alternate decision to decline TTRL’s application, “[w]here we have identified uncertainty and inadequate information, we are required under sections 61 and 87E of the EEZ Act to favour caution and environmental protection”. Essentially this means that where there is uncertainty as to the effects of a proposed activity, the EPA is legally required to take a “precautionary approach”. This is essentially the legal version of the common sense notion “better safe than sorry” – the relatively universal practice of exercising caution and foresight when a particular course of action may result in harm that is especially grave, and there is uncertainty as to precisely what that harm is and whether will it materialise if you proceed without caution.  

A strong argument can be made that Mr Shaw and Dr Thompson’s decision to approve TTRL’s application was based on a flawed interpretation of how certain and complete the scientific evidence before them was, as well as a failure to properly understand how the precautionary requirement is sections 61 and 87E operate – an argument that will probably form the basis of an appeal of their decision.

These failures are particularly concerning as history has proven that correct application of the precautionary approach – originally a response to events like ozone depletion and climate change – is critical to our ability to avoid significant and permanent harmful effects that cannot be predicted at the time a decision is made. Borrowing old mate Donald Rumsfeld’s characterisation of uncertainty, this includes a mixture of known unknowns – things we know we do not know – and unknown unknowns: effects that we don’t know we don’t know.

These are political, not legal, decisions that New Zealanders should be involved in making.

Kiwis are continuing to place growing demands on New Zealand’s environment. We are doing this through an increasing number and array of industrial uses of New Zealand’s natural resources and ecological spaces, all of which have the capacity to alter our environment. They raise issues that cut to the core of various values and interests that communities, iwi and individuals hold dear.

Significant environmental decisions like this week’s TTRL decision can help reshuffle the weight New Zealanders give to the array of competing environmental, social, economic, and cultural values and interests impacted by the decision at hand. In this case it could reset the common understanding of the environmental risks New Zealanders are willing to take for the sake of jobs and economic gain, the perceived value we place on the marine areas that hosts such activities, and the value we place in potentially affected industries like fishing.

As David Lange explained, this is why environmental decision are more political than legal in nature. And that’s why public participation is so vital to a full understanding of a proposed activity’s environmental effects and the preferences and priorities of the impacted community. In the case of seabed mining, that’s likely the whole of New Zealand.

The Spinoff’s science content is made possible thanks to the support of The MacDiarmid Institute for Advanced Materials and Nanotechnology, a national institute devoted to scientific research.