New Zealand is committed to being an active participant in the international response to the challenge of climate change and to making substantial reductions in its greenhouse gas (GHG) emissions. In 2017, the Government asked the Productivity Commission to “identify options for how New Zealand could reduce its domestic greenhouse gas emissions through a transition to a lower emissions future, while at the same time continuing to grow incomes and wellbeing” (TOR, p. 2). In 2018, Hon James Shaw, as the incoming government’s Minister for Climate Change, asked the Commission to include the target of achieving netzero emissions by 2050 in its analysis.
This draft report responds by providing insights into how and where emission reductions can be achieved and the types of policies required to drive the transition. It explores the challenges, opportunities, benefits and costs of alternative transition pathways and makes specific policy recommendations. This inquiry does not canvas the science relating to climate change. Nor does it provide advice on the overall targets set by the New Zealand Government. Rather, the report focuses on how the nation can best make its transition to a low-emissions economy by 2050 and beyond.
The Commission’s issues paper of August 2017 observed that “the shift from the old economy to a new, low-emissions, economy will be profound and widespread, transforming land use, the energy system, production methods and technology, regulatory frameworks and institutions, and business and political culture” (p.1). At this point in the inquiry process, after an extensive period of research, engagement and analysis, the Commission finds nothing to alter that view.
Decarbonising economies and societies underpinned for a century or more by fossil fuels inevitably means substantial change. It requires old technologies and even old industries to be replaced by new. How challenging the transition proves to be critically depends on what and when new technologies emerge. It also depends on which existing capital and skills will lose their value and when, to be replaced by new and different capacities.
But this is a 30-year transition. Looking back through history, other examples show profound change occurring over timeframes of that order or less, with the wellbeing of communities benefitting enormously from changes that, at first, appeared to be highly disruptive and threatening.
This report is concerned with how governments can establish the conditions – institutions, laws, prices, policies and regulations – that encourage shifts to lower emissions and ease the frictions (economic and social) that can accompany such change.