A Kiwi approach on emissions

Luke Malpass

16 December 2011

This week’s climate fiasco in Durban should serve as a reminder of the flaws inherent in international climate policy. Hailed as a success by backers and a failure by critics, Durban’s outcome was simply to agree to another meeting. Importantly, however, it raised questions about the international treaty vehicle in the future. This is significant for New Zealand, one of the few countries with an emissions trading scheme.

New Zealand’s announcement that it is unsure whether it will use the Kyoto vehicle for future negotiations or make different arrangements with its trading partners is significant. Tim Groser, Minister for Trade, stressed that New Zealand wasn’t withdrawing in the same manner as Canada, but that, as this is the real world, New Zealand was going to act in its best interests.

The crux of the issue is that Europe is committed to Kyoto, while developing nations – New Zealand’s major and emerging trading partners – are not to the same extent. It is this painfully obvious barrier that stops any meaningful deal: smug and unimportant European nations lecturing emerging nations on their environmentally unfriendly developmental ambitions.

Given this impasse, and its own emissions trading scheme experience, New Zealand is rightly siding with the developing nations. The Kiwi carbon trading market is on the verge of collapse – the price of carbon has dropped by more than half in six months – as a result of the combination of European credits being offloaded to ease companies, debt and dodgy quality permits being sold in New Zealand. It is close to a national embarrassment, and will surely be scrapped if Australia rescinds the carbon tax after the next election.

In preparation for this possibility, the Key government has also stopped including new sectors such as agriculture, which accounts for half of all emissions, into the scheme.

Betting on the long odds of an international agreement, New Zealand now seems to be approaching climate policy as an issue of trade: working on the implications with its trading partners.

Given all these factors, and that New Zealand is a similar economy right next door, Australia ignores the Kiwi carbon experience at its own peril.

Luke Malpass is a Policy Analyst at The Centre for Independent Studies.

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