While the goal of the Paris Agreement is clear, how different countries might contribute to its achievement in the medium term, and the associated economic implications, are much less so. Scenario planning can play a key role. Vivid Economics was commissioned by GLOBE-NZ – a cross-party group of 35 members of the New Zealand Parliament – to complete one of the first attempts to apply scenario analysis across the New Zealand economy, covering both land and energy, to help illuminate long-term low-emission pathways.
The scenarios involve a significant departure from the technologies and practices commonplace in New Zealand today; yet within this context, they show that there are a range of different options for meeting the terms of the Paris agreement
- Any pathway to reducing the country’s domestic emissions will involve substantial change to patterns of energy supply and use, including moving towards a 100 per cent renewables grid and substantial electrification of the passenger vehicle fleet and low-grade heat.
- It is possible for New Zealand to move onto a pathway consistent with domestic net zero emissions in the second half of the century, but only if it alters its land-use patterns.
- If New Zealand does seek to move its domestic economy onto a net-zeroconsistent trajectory, there is a choice between the extent to which it is able to make use of new technologies and the extent to which it needs to embark upon substantial afforestation. With some constraints, there will be an opportunity to flexibly adjust the rate of afforestation as the pace of new technological development and deployment becomes clearer.
- If it chooses to substantially afforest and it is fortunate enough to benefit from the extensive availability of new technologies, it could be possible for the country to achieve domestic net zero emissions by 2050.
- Although afforestation will likely be an important element of any strategy to move to a net zero emissions trajectory in the period to 2050, in the second half of the century alternative strategies will be needed.
- The New Zealand government should develop a trajectory for emissions price policy values, to apply to all government assessments and analyses, that are consistent with what is required to deliver the objectives of the Paris Agreement. This would imply significantly higher values than seen in the New Zealand Emissions Trading System (ETS) today. This would help avoid the lock-in to a high-emissions infrastructure that makes attainment of a lowemissions economy impossible without the risk of asset stranding.
- Encouraging the private sector to make investments consistent with a lowemissions future requires a robust and predictable emissions price. The extension of the emissions price to biological emissions from agricultural production would encourage land-use decisions to take account of the emissions intensity of different activities that use the land. It could therefore help facilitate the land-use change envisaged in the Resourceful and Innovative scenarios.
- Emissions pricing needs to be accompanied by a range of changed market and regulatory arrangements, infrastructure deployment mechanisms, and specific support to address a range of additional barriers and market failures.
- Globally, there is a case for further investment in the research and development (R&D) of low-emissions technologies. Given the attractiveness of the Innovative scenario, New Zealand might contribute further to this, particularly in areas where it offers comparatively strong expertise, advantages and needs. Options for collaborative research and experimentation across government, business and research institutions should be explored, while further international collaboration can facilitate rapid application of new approaches to local contexts.
- Political parties should actively seek to identify and articulate areas of common agreement on climate policy in order to enhance policy coherence and predictability, while allowing room for an informed debate and party difference over policy design.
- Independent institutions, backed by statute, can help assist both the Parliament and government in developing coherent national climate policy, and enhance informed citizen engagement. The analysis conducted by such an institution might include, for instance, identifying expected trajectories for emission prices, so as to help private-sector investors make informed decisions over long-lived investments, or identifying whether there are tensions between government plans to reduce emissions and other elements of its economic development strategy.
- Policy-making should adopt a holistic approach, including both economic and cultural interests. All stakeholder groups should be taken account of in policy design, including a process of meaningful consultation with iwi and hapū, as per the Treaty of Waitangi’s principle of partnership, to acknowledge their interests and aspirations.
- There is an important need to upgrade the evidence base to support New Zealand’s low-emissions pathway planning. The most acute need is for one or a series of energy- and land-system modelling tool(s) that generate bottomup estimates of abatement opportunities and costs, and that take account of the interactions between sectors.
- A particularly important area for further research and policy development is understanding and addressing the distributional implications of differing lowemissions scenarios, and the policy responses that might help alleviate any concerns.