IMF: NZ Must Boost Climate Action for 2030 Emission Targets

The ETS is instrumental in New Zealand's Nationally Determined Contributions with the International Monetary Fund pushing for a lift in carbon pricing as well as growth in afforestation and carbon abatement.

Sat 02 Sep 23


New Zealand will only meet its climate commitments if it accelerates carbon abatement, according to the latest outlook from the International Monetary Fund (IMF).

And whilst New Zealand has made progress in narrowing the gap in projected emissions, it will not meet its commitments to the UN’s Climate Change Conference in 2021 without making “politically difficult” decisions.

Announced as part of COP26, New Zealand committed to reducing net carbon emissions to half its 2005 gross emission levels by 2030 as part of a Glasgow Climate Pact.

Nearly 200 nations adopted the Glasgow Climate Pact after two weeks of intense negotiations at the COP26. Footage courtesy of @WION.

Its commitments are outlined in its Nationally Determined Contributions (NDCs). NDCs are non-binding national plans countries adopt to combat climate change, specifically to reduce greenhouse gas emissions.

The IMF expects the country’s net emissions will peak next year with “a sharp decline from 2030 as recently planted forests matured and started to absorb more carbon from the atmosphere.”

It, however, estimates that the country will miss its 2030 commitment “by emitting 17 million tonnes of net emissions more than it had agreed to emit that year.”

Despite the missed target, it has recognised significant improvement on the 24 million-tonne miss projected last year.

“While welcome, the projections confirm that more abatement is needed to meet the 2030 Nationally Determined Contribution,” the IMF said in a statement.

The public consultation period closes August 11, 2023 with the recommendations to be actioned by the NZ Government after the October 2023 election. (Photo Credit: Twitter)
The NZ Government has relied heavily on carbon abatement from exotic forest plantations to meet its climate commitments.

The Emissions Trading Scheme is considered “the centrepiece” of New Zealand’s plan to cut emissions, and a carbon credit price of $75 was expected to achieve a third of the emissions reductions by 2030.

The government is looking to reform the ETS, which could see the development of two separate markets – one for emissions reductions and another for removing emissions from the atmosphere like tree planting.

Following an extensive public consultation period, a decision on the ETS will be left to the government following the national election later this year.

According to recent polling, NZ National is an odds-on favourite to form a new government. According to the party’s agricultural spokesperson, Todd McClay, National wants to recognise on-farm sequestration and create an independent board to implement a pricing system for agricultural emissions by 2030, keeping the sector out of the ETS. Footage courtesy of @StuffNewZealand.

Last month, the New Zealand government ‘tweaked the price settings’, and according to NZ Minister of Climate Change James Shaw, the ETS is a crucial tool for New Zealand to meet its climate change obligations.

“The Government has made its annual decision on unit limits and price control settings for the New Zealand Emissions Trading Scheme for 2023 – 2028 to drive stronger action on emissions reduction target,” Minister Shaw said.

“Annual reviews of the unit settings and price control limits provide an important opportunity to ensure the settings are fit for purpose.”

NZ Climate Change Minister James Shaw emphasised the importance of the ETS in meeting NZ’s climate targets. According to Andrew Cushman, the CEO of the Climate Forestry Association, “The only part of the system (ETS) working is the forestry component.” (Photo Credit: Supplied).

But the IMF said a “more ambitious price scenario” for carbon credits that would further increase the financial penalty for emitting a tonne of carbon dioxide while rewarding abatement measures could help close the remaining 17 million-tonne gap.

The push into rewarding greater abatement is supported by a Motu Economic and Public Policy Research and the Environmental Defense Fund report pushing NZ to establish stronger policy settings as the NZ Government reviews its current Emissions Trading Scheme (ETS).

The report suggests that NZ’s ETS provides lessons for global forest markets and is pushing for an ETS that balances the needs of gross and net emissions reductions, plantation and permanent forest, and exotic and indigenous species.

A report from the Motu Economic and Public Policy Research and the Environmental Defense Fund is pushing for reforms to NZ’s ETS to ensure that is fit for purpose for future generations. (Photo Credit: Supplied by Twitter Environment Aotearoa)

According to the IMF, an increase in the “real price” of carbon credits – in other words, their price before adjusting for inflation –to US $100 (NZ $165.40) would mean “about two-thirds of the gap between New Zealand’s projected emissions and its Nationally Determined Contribution could be closed.”

“This scenario is ambitious as it calls for the real emissions price to more than double in seven years, which would be politically difficult to deliver. But the analysis confirms that a price-centred approach can deliver substantial gains,” the IMF reports.

“To fully rely on a price mechanism would entail even higher prices, which may be difficult to deliver politically.”


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