Emissions trading in New Zealand: Transition and evolution

Key messages

An emissions trading system is not a static institution. It should be designed to anticipate and respond to changing circumstances. Short, medium and long term needs are different.

Long term

• Long-run international policy must effectively limit emissions not just emissions intensity
• Long-run international policy should be efficient
• New Zealand’s key role in international policy is to encourage others to act and facilitate their efforts.
• New Zealand should achieve this in a way that minimises the long run cost to our economy.

Medium term

• Medium-term NZ policy should encourage reductions in all emissions except where those reductions would result in significant leakage
• The stringency of medium and long-term NZ policy should depend on two things: how we perceive our international responsibilities; and the levels of cooperation that others are engaging in.
• The architecture of the NZ system should be designed to be adaptable to changing targets and scientific knowledge.

Short term

• We should not do anything in the short term that we do not want to do in the long term
• We should take account of the need for short-term adjustment
• NZ should emphasise policies that will take time to take effect and that are not dependent on other policies for their effectiveness.