New Zealand could face a $72 billion bill to meet its obligations under the Paris climate change agreement unless there's an effective international carbon market, an official says.
New Zealand is facing a big bill to meet its Paris Accord agreements. Photo: 123RF
New Zealand ratified the accord two weeks ago, committing to reducing net greenhouse gas emissions to 30 percent below 2005 levels by 2030.
Ministry for the Environment climate change director Kay Harrison told a conference last week that the cost to New Zealand to meet it its obligations hit $72 billion, or nearly 30 percent of New Zealand's annual GDP.
That amount would cover the period 2021 to 2030.
New Zealand's greenhouse gas emissions have been rising steadily since 1990, but the country has been able to avoid paying until now by using a combination of carbon credits issued in 1990 and additional credits from Russia, Ukraine and elsewhere. These were bought on the principle that greenhouse gas reductions in these countries would offset growing emissions from New Zealand.
The reliability of the Ukrainian and Russian units has been contested, and are now no longer accepted.
They were used to pay New Zealand's carbon bill year after year, letting many of the original credits issued in 1990 be put in the bank - allowing New Zealand to get to 2020 with a surplus.
However, Ms Harrison's comments have indicated the real difficulties would start after that.
New Zealand will start to have to pay for carbon credits from 2021 - and the price could be high.
Ms Harrison said the $72bn figure was based on the cost of carbon being a projected $50 a tonne, up from $18.90 now, and far higher than Ukrainian and Russian units which fell have fallen to well under a dollar each.
Ms Harrison's figure was also based on the assumption that there would not be a viable market in international carbon credits operating from 2021.
At present, carbon markets function in the EU, New Zealand, California and a few other places.
If a viable international market was set up, the cost would still be $36b.
Ms Harrison's comments echo findings in a report done last year by Infometrics.
It argued that from 2020, only one fifth of New Zealand's greenhouse gas targets would be met by domestic reductions in emissions.
The rest would have to come from purchasing carbon credits offshore to offset greenhouse gases that would still be pumped into the air.
The Infometrics data was also based on a $50-a-tonne price for carbon.