What Lord Stern really thinks of our ETS

Lord Stern's visit to New Zealand last week didn't upset any apple-carts, but it again raised the question of whether or not New Zealand's ETS is a world leader

Let's cut through the shilly-shallying and be clear about this. New Zealand's emissions trading scheme is a world leader... in some respects, but not in others; at least, it could be one day, depending on what other countries do; or rather, it is now, potentially, but may not be for long; not that it really makes that much difference or is really a measure of world leadership on climate change anyway.

Phew, are we clear now?


The question of whether New Zealand's ETS is a world leader or not remains dry political tinder. It has been since the 2008 election campaign when John Key promised:

The ETS must strike a balance between New Zealand's environmental and economic interests. It should not attempt to make New Zealand a world leader on climate change.

Nicholas, Lord Stern, author of the game-changing Stern Review in 2006, was one man who could have set that tinder alight, but during his brief visit to New Zealand last week, he kept his matches in his pocket, simply saying he didn't know enough about New Zealand to comment.

He is, after all, an impeccably polite, quietly-spoken, academic economist, not, as he frequently says, a campaigner.

But it got me thinking about it again, and realising there's no simple answer to the question. Any answer is true and untrue and insufficient, all at once.

Yes, an "all sectors, all gases" scheme is world-leading. No-one else has one. But then neither do we, yet. Ours is still almost five years away, and even then this government has left some wriggle room as to whether it will herd farmers into it.

All we've included thus far is forestry, energy and industry – a big chunk, but not unprecedented. One key question is what other countries do in the next five years.

The political commitment to emission reduction in Europe is, broadly speaking, stronger than here, so further action can be expected there. Labor's win in Australia means that, if Gillard can survive a year in power, our neighbour should have a price on carbon in that time. I'm not expecting much from an embattled President Obama, but a second term and who knows? And anyway, a number of states have made moves of their own, regardless of federal inaction (even though California could be wavering).

All of which suggests that by 2015, our world-leading scheme may not be as world-leading as it seems now.

The next question is, in what regard is it world leading? In emissions reduction? Well, even the minister pushing this through– Nick Smith – has said:

I’m not one that says that this quite moderate ETS is going to result in big reductions in emissions. Ultimately New Zealand's going to need to go through a revolution, not dissimilar to that we went through from 1900 to 1950 in moving from steam and coal to the internal combustion engine”.

In that light, our ETS can be regarded as pretty timid.

Which brings me back to Lord Stern. After his interview on Q+A, I asked him again about whether our "all gases, all sectors" scheme was really a shining light unto the world. He said that undoubtedly developed countries needed to lead, or else poorer, devloping countries would simply say, 'well if they won't make the sacrifice, why should we?'. And we talked about how there were few countries of four million people in the world who were as well known and well respected as New Zealand.

But he also made this particularly interesting point... That an ETS is simply one way of many to reduce emissions, and it alone doesn't make any country a world leader – or a follower, for that matter. Other countries have led by requiring lower exhaust emissions in cars; others still have stricter building regulations; others again are using carbon taxes. And on it goes.

So while the politics around whether our ETS remain hot, the question of whether we should, could or want to lead the world in reducing emissions goes far deeper.

Lord Stern's visit should remind us it's just the tip of the iceberg, should we want to still have icebergs.