Even so, there will be plenty of noise. Overseas press commentary includes a lot of scorn as carbon traders in Europe condemn New Zealand for talking “clean, green” but doing nothing about it. Their resentment of a loss of a profitable trading opportunity is shared by some forestry interests which expected the ETS to generate profitable planting (although how forestry fits into “delay” of ETS remains contested). Furthermore, specific interests will participate in any review primarily with an eye on the details which will determine how the system impacts on them.
The deeper issues are aligning New Zealand with international efforts, contributing to agreement on the balance to be sought between reliance on technology and making commitments to mitigation, balancing certainty for investors with an appropriate price for carbon, and aligning implementation with feasible responsiveness.
On the first, the most interesting development is the appointment of Tim Groser as associate minister of Climate Change (international negotiations) and minister of Conservation as well as minister of Trade.
Nick Smith led the National Party’s policy development on environment during which he showed commitment to genuine environmental thinking as distinct from the mush of the Greens. He holds the portfolios of Environment and Climate Change, but much initiative will rest with Groser simply because what is important to New Zealand is the international environment. Little can be expected before 2011/12 but negotiations will be continual.
Obama will change the atmospherics of US negotiators, but the 95-0 Senate vote remains a strong influence and the US will not be party to an agreement that does not include commitments by countries like India, China and Brazil. Commitments need not be identical, but we have plenty of evidence of the difficulty of reaching detailed packages acceptable to many parties. It is not possible to work with a simple framework of developed and developing (or in Kyoto-speak, schedule 1 and others) since the impact of climate change depends less on income levels than on characteristics such as the amount of low-lying land while mitigation obligations impact differentially according to the relative availability of coal and other energy sources and other features of history and geography. Trade negotiations provide some guidance; experience in agricultural trade negotiations may provide more.
Higher-level agreements will be needed on basic objectives (which probably cannot be far from equal per capital emission entitlements in the long-run), and on a broad balance between reliance on technical change and emission control. Any attempt to finesse those issues and go direct to emission commitments is doomed. That the European Union is suited by a reliance on Kyoto (mainly through having Soviet-era industry to dismantle) is no reason for the rest of the world to acquiesce, and sanctimonious appeals to “do something” have no greater validity internationally than they did in New Zealand or Canadian elections. In any case, the European Union is likely to be distracted by finding a formula to bribe Poland, Italy and other members to acquiesce in demanding commitments.
New Zealand also has domestic issues worthy of review while international negotiations proceed. The NZ Business Roundtable and some others have promulgated the view that there is a consensus among economists in favour of a carbon tax rather than a trading scheme. It is true that several applied and energy economists have expressed a preference for taxes, usually on the grounds of certainty for business. The weakness of the argument is readily apparent – when were tax rates ever certain? – and it is most unlikely that the consensus among economists of preference for market instruments does not extend to carbon. However, there is a case for constraining the volatility of a carbon market. The McKibben-Wilcoxen proposal which mimics monetary policy with administered short-term interest rates and market-determined long-run rates should be much more attractive than it is.
A second major domestic issue is the current plan to have a trading scheme which includes all greenhouse gasses and all industries. The unusual echo of the “first principles” approach of the 1980s is very welcome, but there are problems.
Converting all gasses into a common metric is much more difficult than it may seem – because the duration of gasses differs in patterns which do not resemble conventional calculations of CO2 equivalence – but even more important is that there is very little ability at present to change the methane emissions of livestock management. Sending signals to farmers to which they cannot respond has little appeal. Presumably the link of Conservation to Climate Change (international negotiations) owes something to the thought that conservation will be the main link between agriculture and environmental protection, and that the obligations which can appropriately be placed on agriculture will be determined primarily by international agreement (on the carbon-sink properties of grass and other crops analogous to those of forests as well as the emissions of animals.)
The potential responsiveness of agriculture is not zero, and both farming practice and research on agricultural emissions will be stimulated by a charge on emissions. Select Committee consideration is likely to look for an alignment of obligations with the wider context of opportunities – more or less as the Garnaut Report recommended for Australia in general.