Neal Barclay: A real market for carbon will fight climate change

Something huge in New Zealand's fight against climate change is set to happen this year. We can unleash the tools to transform our economy and achieve our emissions reduction goals.

A bill going before Parliament and a set of regulations that go with it will collectively deliver the strongest incentive we have for people to put less carbon into the atmosphere and deliver real emissions reductions.

As a nation we've agreed, almost unanimously, to reach net-zero carbon by 2050.
Business is on board, and tens of thousands of students on the streets last year reminded us it's the right and the only thing to do. But without a genuine market that limits emissions volumes and allows units to appreciate in value, the system can't provide the push we need.

Our emissions are not reducing at the rate needed meet our commitments to the Paris Agreement. Many other developed economies including the United States and the European Union, although much bigger emitters, are reducing emissions at a significantly faster rate.

The Climate Change Response (Emissions Trading Reform) Amendment Bill will effectively turn carbon emissions into a scarce commodity, and auction them for market value.
It's a radical shift from paying a set $25 for an emissions unit for the right to release a tonne of greenhouse gases. You can also buy as many as you want - meaning we have no ability to actually reduce emissions over time.

Another problem with the status quo is that these $25 units are routinely given away at no cost, and not everyone who emits has to participate in the emissions trading scheme. It's not really a market; it's quite the opposite. We've got a watered-down scheme which hasn't delivered clear reductions domestically.
I'm a real believer in the power of well-regulated markets to unlock fresh thinking, creativity and new opportunities for participants. Take New Zealand's wholesale electricity market, which, while by no means perfect, is looked to globally as a model of competitiveness.

New Zealand's retail electricity sector is a hotbed of innovation which we're exporting to countries around the world. Our retail electricity prices are low by OECD standards and the number of challengers in our market is one of the highest, relative to our size.

It's time to unleash those same forces of innovation on the problems faced by our largest emitters. Instead of officials in Wellington deciding who pays, who doesn't and how much a unit costs, they will simply set a budget for the emissions we have each year so we're on track for a fully decarbonised economy in 2050. Businesses will then compete at auction for the right to emit. In time, the cost of doing so will outweigh the cost of investing in cleaner technology and processes.

It's a whole-country solution to a whole-country problem. The agricultural sector is working with the government to find ways to participate which are fair and workable. Phasing the agricultural sector into the ETS from 2025 and unleashing our world-class agricultural science minds to reduce livestock methane emissions are two ways for the sector to do its fair share.

I strongly support a real market price on carbon emissions because price signals in a well-regulated market are the strongest tools we can wield to decarbonise our economy.
They allow businesses to make their own decisions and invest with an eye towards a low-carbon future. They will accelerate the electrification of our transport fleet and phasing out of the coal stacks that still dot our industrial landscape.

They mean our 2050 net-zero carbon goal will be achievable, rather than a dream. It is important to get this right because I want to be able to look my children in the eye when they ask what my generation did to avert the climate emergency.

I believe investing in clean energy will ultimately improve New Zealand's productivity and competitiveness.

If climate change is to be the nuclear-free moment of the younger generation, I urge our elected representatives to share my optimism. By supporting the bill, they will create a moment in which courage and action prevail over talk and delay, and a zero-carbon New Zealand by 2050 becomes firmly within reach.

- Neal Barclay, Meridian Energy Chief Executive

Originally published 12 February 2020 in the New Zealand Herald.