The Climate Change Commission has issued a stern call to the New Zealand government, urging swift action to reduce the surplus of carbon credits available for purchase by polluters. This urgent appeal comes after four unsuccessful auctions in 2023, signaling a worsening problem that cannot be left unaddressed.
According to the Commission, the oversupply of carbon credits poses a significant risk to New Zealand’s ability to meet its emissions reduction targets, as mandated by law. Last year, all four government-run carbon auctions failed due to low demand for new units, highlighting the severity of the issue.
The Commission’s independent advice emphasizes the need for the government to clarify its plan for meeting climate targets, as uncertainty is negatively impacting investor confidence. This lack of clarity not only undermines the effectiveness of emissions pricing but also hinders progress towards achieving climate goals.
One potential solution suggested by the Commission is to tighten the supply of carbon credits, which could help New Zealand meet more of its international climate targets domestically. This approach may also reduce the need to purchase carbon offsets from overseas, potentially saving the country money.
While the government has yet to respond to the Commission’s advice, it is clear that decisive action is needed. By December, ministers must either outline additional policies to reduce emissions or take steps to fix the carbon market. Failure to do so could lead to further erosion of investor confidence and unnecessary costs.
The Commission’s Chair, Dr. Rod Carr, underscored the importance of addressing wider issues affecting the carbon market, including gaps in government policy and the exclusion of certain sectors from emissions trading. Without resolution, these issues will continue to undermine the effectiveness of emissions reduction efforts.
In light of projections indicating a decline in carbon dioxide and nitrous oxide emissions, the Commission stressed the need for immediate intervention to prevent further oversupply of carbon credits. Adjusting volume limits within the emissions trading scheme is identified as a critical step to bring supply back into alignment with targets.
Dr. Carr emphasized that delaying action will only exacerbate existing challenges, leading to disappointed expectations and increased costs in the future. Urging the government not to maintain the status quo, he emphasized the importance of creating stability in the market to support effective climate action.
As New Zealand grapples with the urgent need to address climate change, the Climate Change Commission’s recommendations serve as a crucial roadmap for navigating the complexities of emissions reduction and ensuring a sustainable future for generations to come.
