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Early Success For New Zealand’s Emissions Trading Scheme (ETS)

New Zealand from space

After a year in operation, New Zealand’s emissions trading scheme (ETS) is working well despite initial opposition prior to its implementation.  A report released by the Minister for Climate Change, Nick Smith, shows that the ETS is running smoothly and has already significantly reduced New Zealand’s carbon emissions.

And since New Zealand is the first country outside of the EU to initiate a national mandatory ETS, policymakers around the world are keen on seeing how the new system plays out in the coming years.

Already the ETS has reversed deforestation across the country, resulting in a net forest gain since its initial implementation in 2008. Deforestation had been a serious problem for New Zealand in the years previous, culminating in a peak loss of 20,000 hectares in 2007. In 2012, the government projects that deforestation will decrease to 4000 hectares, with afforestation rising over 7000 hectares.

The net increase in forested areas can be attributed to the extra credits owners get for storing carbon in the trees. Plus companies in other sectors have been investing in afforestation initiatives to help offset their own carbon emissions.

But this also highlights another one of the successes of New Zealand’s ETS: companies are investing in carbon offsets within the country.

There was some initial fear that businesses would purchase carbon offsets offshore, thus sending capital outside the country. However, the trend has been for businesses to invest in carbon offsets within New Zealand, thus increasing forested areas and keeping capital in the country.

The ETS has also altered New Zealand’s energy landscape.

Renewable electricity achieved an unprecedented 12-year high of 79% in 2010. 1340MW of new power have been consented to in the past year, with 59% wind, 26% geothermal, 13% hydro, and 2% tidal. No longer are fossil fuels dominating energy generation proposals.

As a result of New Zealand’s ETS, the government claims that it is on track to “comfortably” meet its Kyoto targets. Without the ETS, the country would be looking at exceeding its target by 19.5 million units and facing $485 in international costs. Now it looks like it will be hitting its Kyoto targets with a 21.9 million surplus.

Despite heated debates prior to implementation, New Zealand’s ETS has been successful enough to garner increasing support from businesses and industry sectors. A business review panel showed 63% support for the ETS, compared to 78% in opposition two years ago.

This news is reassuring for places like Australia, which has been ravaged by debates over its own carbon tax scheme. Perhaps the Australian public will be more supportive of pricing pollution when they actually see the benefits that can result.

Do you think New Zealand can serve as a model for how to implement an ETS? Are there any ways it can improve on its current scheme?

Image credit: NASA Goddard Photo and Video

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