How the carbon market supports the climate
First up, the 101
1. What is emissions trading? The NZ emissions trading scheme quantifies and puts a price on greenhouse gas emissions, with financial obligations to businesses and sectors that emit those gases. This creates financial incentive for businesses to reduce their emissions, and also for landowners to earn money by planting forests, as carbon offset.
2. OK, so what’s the carbon market? Emissions are quantified as units. “NZ Units” represent official Government permission to release greenhouse gas.
As there is an ever-decreasing cap of units for sale, the price is most likely to keep rising, which increases the motivation for business to make changes to reduce their carbon emissions rather than buying units to offset them.
NZ units are now sold via government-run auctions, and the first of these happened in March 2021.
3. Why are we commodifying the thing we want to get rid of? Yes, it sounds a bit crazy to be buying and selling rights to the thing we don’t want. However, the intended effect is to make the financial incentive for business so strong that they will prioritise creating change. And we’re on a tight deadline – NZ’s emissions reduction goal is that by 2030 – just nine years away now – our emissions will be at 30% of our 2005 levels.
Let’s bring in an expert
Nigel Brunel is Director of Institutional Commodities at Jarden. He has extensive experience across a range of commodities, including the NZ and international carbon markets. He sees the latest incarnation of this work within NZ’s wider and longer-term commitment to tackling climate change, and is strongly optimistic: “New Zealand has the second oldest federal emissions trading scheme in the world, which we started in 2008 as the central mechanism for dealing with climate change when we signed the Kyoto Protocol. “Since then, the world has kept changing. We’ve had the Global Financial Crisis, the Paris Agreement, our Zero Carbon Amendment Act. We are also seeing increasing numbers of corporates voluntarily committing to Environmental, Social, and Corporate Governance – and our systems have kept evolving with them. For the last 12 years, there has been bi-partisan commitment across political parties, which is highly encouraging for its longevity.”
Why the world is looking to NZ agriculture
Nearly half of New Zealand’s greenhouse gas emissions come from agriculture. This is sizably greater than the average for “developed” economies, which sits at about 15 per cent. However, New Zealand is also world-renowned for our highly efficient farming – so the world is watching for the solutions we come up with.
The good news is that, aside from the many changes in practice that NZ farmers have already been adopting, there are emerging technological and biological methods out there. These can move progress to the next level, and include methane inhibiters and soil carbon sequestration (absorption).
Many shades of green
Although the current expectations on farmers – such as recording on-farm emissions and so on – can feel like an extra burden when they are already under increasing pressure on many fronts, Nigel is quick to point out the opportunity. “Every farm and/or lifestyle block will have a woodlot of some shape or size. There will also be some land within the property that can’t be well-used for anything else.” Certainly not encouraging mass plantings, Nigel advocates for native plantings or a mix of native and exotic. He says this gives farmers the chance to join the carbon market, and to reap benefits from it.
Let’s “Covid” it!
Covid-19 has proven that the world can (on the whole) pull together in the face of an extreme crisis. Humanity is good at coming up with solutions. Nigel’s vision is one where we now generate a similar energetic focus towards climate change, and do whatever is necessary to, literally, save the world.
Nigel Brunel will be discussing the current carbon credit landscape and the future impact for both those emitting and capturing emissions at events hosted by Jarden on Wednesday 14 April in Timaru, and Thursday 15 April in Christchurch. Please contact Bevan O’Sullivan at [email protected] for more details and availability. Image credit: Native plantings, from JardenBack to Rural Living
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