*Watch the full interview in the video player above*
The head of law firm Bell Gully’s climate change team says the Zero Carbon Bill is tougher on future governments, and softer on farmers, than people realise.
Meanwhile, ETS changes announced to help move the carbon transition along will make it fairly easy for investors to calculate just how exposed big businesses are to a rising carbon price, says Simon Watt.
In a video interview with Newsroom, Watt talks about the latest round of changes to the Emissions Trading Scheme, noting that while the tweaks introduce a mechanism for bringing in a price floor, there’s still no certainty about when – or even whether – there might be a minimum cost for emitting greenhouse gases in New Zealand.
While there’s still no obligation to include climate exposure in companies’ financial reporting, Watt says the latest changes will make it quite easy for investors to work out for themselves how much a company is likely paying for emissions.
“It will be required for participants in the ETS to publicise the data on their emissions so … it’s actually not difficult from looking at the emissions and multiplying that by the carbon price to work out what the actual exposure of those significant emitters is, and that will have important implications for businesses and investors.”
The Government has been criticised for not giving the Climate Change Commission the power to enforce emissions targets on future governments.
But Watt says governments will be exposed to a real legal risk of judicial review, if they disregard the bill.
“Were a future government to disregard the Commission’s advice and change the settings without good reason, it would be exposed to the risk of judicial review. What we’ve seen internationally is a significant lift in climate change litigation, specifically against governments, and even in New Zealand we’ve seen a High Court case in which the court said the Government could be judicially reviewed in regard to the setting of climate change emission reduction targets, which is very on point for the bill we are now dealing with.”
While Watt believes the bill has legal teeth, he says the impact on agriculture has been overstated.
“Quite a bit of the commentary has overstated the impact on agriculture of the methane reduction targets. Those targets are targets that the Government takes on, so how that is actually applied to farmers is a seperate issue. For those targets to have an impact (on farmers) the Government would need to put agriculture in the ETS … and even if that happens, under the current agreement with NZ First (to form the coalition Government), it is proposed there would be a 95 percent free allocation of carbon credits, so only 5 percent of the actual cost of those emissions (would fall on farmers).”
Even regarding that 5 percent, any revenue raised from farmers buying carbon units would be recycled back into the farming sector for emissions reductions research and helping with the low-carbon transition, says Watt, “so it is a bit of a money-go-round to the benefit of the farming sector.”
* Bell Gully is a foundation supporter of Newsroom.