Many organisations want to go the extra distance to support the transition to lower emissions and fight climate change. Catherine Leining outlines Motu Research’s proposal for how to incentivise and assist voluntary climate action
Aotearoa New Zealand faces a gap in meeting its 2030 climate change target under the international Paris Agreement. And the world faces a collective gap in committed action to limit global temperature rises to 1.5 C above pre-industrial levels.
An innovative policy proposal from Motu Research could mobilise voluntary climate action to help bridge those gaps and enable organisations to make credible, transparent and marketable emission mitigation claims.
Many organisations in Aotearoa want to go beyond government requirements to help tackle climate change. Some already have carbon-neutral commitments. At the same time momentum is growing, the Kyoto-era framework for distinguishing voluntary action from government targets is phasing out.
A new approach, compatible with the Paris Agreement, is needed to support existing carbon-neutral commitments and encourage even more organisations to act.
Motu researchers have proposed a policy framework to boost voluntary climate action. The work was commissioned by the Energy Efficiency and Conservation Authority (EECA). The framework includes ambitious targets for organisations’ own emissions and two tracks for supporting further mitigation beyond their own boundaries.
The Carbon Horizon track would help Aotearoa bridge the Paris target gap — reducing Government reliance on offshore mitigation.
The Carbon Frontier track would see organisations mitigate emissions beyond the Paris target.
Carbon claims under the two tracks would be distinguished.
The proposal offers five key benefits.
1. It broadens the scope of voluntary climate action to more sectors (not just forestry) and to actions supporting the Paris target (as well those that mitigate beyond it).
2. It increases the diversity of voluntary climate action. Voluntary projects could make higher-cost investments happen sooner, redistribute mitigation costs across market participants and support a fairer transition to a low-emission future. Independent certification processes would ensure the integrity of claims under both tracks.
3. It shifts the location of voluntary climate action so more mitigation investment stays in Aotearoa rather than overseas.
4. It brings more attention to co-benefits of voluntary climate action for people and the environment.
5. It can be integrated with other types of climate reporting and social impact investment.
The private sector has a valuable opportunity to lead here — and could build from the existing voluntary carbon market. Market service providers could continue to customise their own offerings.
The Government has a role to play by deciding:
• if and how to adjust the national greenhouse gas inventory, New Zealand Emissions Trading Scheme (NZ ETS) and emissions budgets in response to voluntary climate action happening in Aotearoa
• if and how to help New Zealand organisations access Paris-compliant offshore mitigation for offsetting (there currently is no direct channel for organisations)
• what guidance to provide on integrity and marketable claims
• how to implement the Carbon Neutral Government Programme announced in December 2020.
People commonly ask how this proposal relates to the NZ ETS. First, complying with the NZ ETS and paying the ETS price in goods and services don’t neutralise emissions; they reduce emissions to the level of the ETS cap. Credited voluntary action would need to go beyond ‘business as usual’ activities incentivised by the NZ ETS and government regulations in line with emissions budgets.
Second, voluntarily cancelling New Zealand Units (NZUs) does not benefit the climate unless the Government also adjusts its national greenhouse gas inventory or target (this has not been enabled so far).
The NZ ETS sends an essential price signal to reduce emissions but is a blunt instrument. It does not address non-price barriers to change, remedy inequitable distributional effects, support local communities, value co-benefits or encourage people to cooperate.
The NZ ETS by itself will not deliver the full range of transformation needed for a successful low-emission economy. As voluntary climate action speeds up emission reduction in Aotearoa, the Government could set more ambitious ETS caps and emissions budgets.
The future of voluntary climate action is a global challenge. Given Aotearoa’s unique broad-based ETS and economy-wide emissions budgets, we should take a leadership role in designing an approach which fits our national circumstances. Broader market testing is needed to advance the concept.
The past approach to voluntary mitigation must change because of new rules under the Paris Agreement. If we do this well, we could unleash more momentum, creativity and innovation to reduce emissions — for the benefit of organisations, communities, Government and the climate.
* The work represents the views of the authors and no endorsement is implied by the New Zealand Government or He Pou a Rangi, the New Zealand Climate Change Commission.