Download Economic and Environmental Challenges

Economic and Environmental Challenges
New Zealand in a Post Kyoto World
Institute of Directors
11 September 2007
Post Kyoto Scenarios
► Scenario
1: No global deal to continue the Kyoto
Protocol even in the medium term
– Diplomatic efforts to reach agreement fail
► Scenario
2: A universally applicable deal is
achieved under which:
– All emissions are treated equally on a CO2e basis,
irrespective of industry and country of source
– Sequestration is treated as a negative emission on an
equal footing
– The cap for each country is set relative to GDP
2
Post Kyoto Scenarios
► Scenario
3: A Kyoto-type deal is concluded
under which:
– Developed economies are subject to an absolute cap
– Developing economies are not subject to any cap
► Scenario
4: A two-tier deal is concluded under
which:
– Developed economies are subject to a cap related to
GDP
– Developing economies are subject to a cap related to
GDP but with a higher level of emissions permitted
3
Environmental and Economic Challenges
► Scenario
1:
– Climate change impact on NZ
• ??
• If accept scientists then warmer, wetter in west and drier in
east, more violent fluctuations, some sea level change
• Relatively moderate for NZ because of maritime effect
– Economic impact on NZ
• NZ agriculture will need to adjust locations and methods but it
is used to doing that
• Some impact on coastal and other property risks and costs
(ChCh?)
• Need for better, rational water management (ChCh?)
• Growing demand for our products especially from Australia
4
Environmental and Economic Challenges
► Scenario
2:
– Climate change impact on NZ
• Moderated
– Economic impact on NZ
• No competitiveness at risk issues
• Low carbon footprint of our agricultural production will mean it
is advantaged world-wide
• NZ may have comparative advantage in forest sequestration
• International tourism likely to suffer as visiting NZ carbon
intensive. Domestic tourism likely to get boost
• Transport costs generally likely to rise
• Overall in medium term not likely to be a great impact on NZ
income levels or growth
5
Environmental and Economic Challenges
► Scenario
3:
– Climate change impact on NZ
• Effectively same as for Scenario 1 but may actually be worse
• What will change is where emissions come from in the world.
More from developing economies
– Economic impact on NZ
• Major competitiveness at risk issues for our export oriented
and import competing economic activities
• Industries and agricultural production will over time leak
overseas to developing economies
• Significant impact on NZ income levels and growth prospects
6
Environmental and Economic Challenges
► Scenario
4
– A mixture between scenarios 2 & 3
– Where in the spectrum will depend on how close the
cap for developing economies is to the cap for
developed economies
– If similar caps, then impact likely to be close to
scenario 2
– If dissimilar caps, then impact likely to be close to
scenario 3
7
Implications
► The
economic impact on NZ will depend much
on the nature of the deal so we need to mount a
major diplomatic effort
► My suggestions are based on my thinking about
the situation. Solid research using complex
general equilibrium modelling to help us
understand the likely impacts of various
alternative deals is essential
► If I am right, NZ should be pushing for “all in” and
at most concede minimum concessions to
developing economies
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