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Trees, EVs and new ways of farming key to a low carbon economy, says Productivity Commission

Tuesday 4th September 2018

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A rapid transition to electric vehicles, sustained tree-planting on a scale seen only once before, and major changes to farming methods are the key to New Zealand meeting its obligations to the global pact on climate change, the Productivity Commission says in its final report on becoming a "low carbon economy".

Carbon prices of at least $75 a tonne and perhaps higher than $200 a tonne would also be required to spur investment and land use, transport fuel and industrial heat process changes over the next 30 years, the report said, a day after the price of a New Zealand Unit of carbon pushed through the current legislated cap of $25 a tonne for the first time since the emissions trading scheme came into being a decade ago.

Ordered up by the previous government, the report takes into account the current government's more ambitious climate change target of net zero carbon emissions by 2050, rather than the target of 2100 set by the last National Party-led government.

Starting sooner rather than later is vital for what will be a "long journey through very uncertain terrain", the commission says in its 600-plus page report, which covers all sectors of the economy that produce emissions, including agriculture, industrial heat, transport, and waste management.

"Modelling for this inquiry suggests that New Zealand can make the transition by cutting its domestic emissions at costs similar to those likely to be experienced by other developed countries. But the sooner New Zealand begins to reduce its emissions, the less abrupt and costly the transition will be."

The three most important changes the commission suggests are:

• a transition from fossil fuels to electricity and other low-emissions fuels across the economy, with a "rapid and comprehensive switch of the light vehicle fleet to electric vehicles (EVs), and a switch away from coal and natural gas for industrial heat, "particularly for low and medium temperature heat users";

• "sustained rates of (forest) planting over the next 30 years, mostly on land currently used for sheep and beef farming, potentially at an annual rate approaching the highest ever recorded (100,000 hectares in 1994); and

• "changes to the structures and methods of agricultural production", including more land being used for cropping and horticulture.

That last finding follows last week's note from the Parliamentary Commissioner for the Environment suggesting methane from cows and sheep would need to reduce between 10-and-22 percent to meet the country's climate change goals, and implying a smaller national dairy herd than at present.

The report endorses a different treatment for "methane - a more powerful but much shorter-lived greenhouse gas than carbon dioxide - than for longer-lived gases.

"Putting biogenic methane within either a dual-cap NZ ETS or an alternative methane quota system, will incentivise reductions of biogenic methane in recognition of its nature as a short-lived GHG," the commission says.

As foreshadowed in its interim report, the commission also endorses the key elements of the Net Zero Carbon Bill, currently in development by Climate Change Minister James Shaw, which include legislated GHG reduction targets, a system of carbon 'budgets' to allow progress to be tracked, greater certainty about the supply of NZUs, and an independent Climate Change Commission to oversee the country's progress towards long-term change change objectives, with as much parliamentary unity as possible on long-term policy.

Other major recommendations include:

• "significantly more resources" devoted to the development of low emissions technologies than the "current modest allocation";

• 'feebates' for EVs, which would see vehicle importers either paying a fee or receiving a rebate, depending on the emissions intensity of an imported vehicle, accompanied by a requirement that both new and used imports meet national fleet emissions standards and government leadership through EV procurement;

• encouraging an "abundant supply of low-emissions electricity" to build on the country's already very high level of renewable electricity. This would include regulatory reform to ensure both grid-scale and localised renewable energy projects are built, that storage options such as batteries are facilitated, and that consumers get access to emerging technologies that allow demand management during peak periods;

• as well as its 'billion trees' programme, the government should make it "easier and less risky for small foresters to participate in the ETS and (provide) recognition for carbon sequestration in harvested wood products";

• regulate to limit the construction of new low and medium industrial heat processing plant using fossil fuels;

• improve data collection on waste emissions, and support local government waste regulation efforts;

• make climate-related financial disclosures mandatory to overcome information blindspots and help investors correctly value business and avoid so-called 'stranded assets' in the future;

• ensure that "large, long-lived, city-shaping investments fully internalise the social costs of emissions", including the use of "appropriate emissions prices over the expected lifetimes of investment options".


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