Climate deal could help NZ buy credits to meet its carbon pledges

Monday, 25 November 2024

Kiwi firms are unlikely to be directly affected by an agreement on the international trading of carbon credits, but it could help the Government buy a way of meeting its emission’s reduction pledges, an expert says.

A deal reached at the COP29 UN Climate Change Conference in Azerbaijan on Sunday could pave the way for countries to attempt to fulfil their “nationally determined contributions” under the 2015 Paris Agreement by by buying carbon credits from other countries.

Article 6 establishes the framework for recognising carbon credits for the purposes of international trading.

Salt Funds director Paul Harrison said the deal wouldn’t help New Zealand businesses use overseas carbon credits to meet their obligations to offset emissions through the Emissions Trading Scheme.

“It's not going to impact ‘New Zealand Inc’ in terms of the ETS.

“But it may potentially give the New Zealand government a way to buy some cheap carbon credits from offshore to make good on its obligations under Paris Agreement,” he said.

Without such a get-out-of-jail card, the country was set to fall significantly short of its Paris pledge to cut net carbon emissions to half of 2005 gross levels by 2030, he noted.

Salt Funds runs an NZX-traded fund that effectively lets people invest in domestic carbon credits.

The agreement on Article 6 was overshadowed by a promise by developed countries at COP29 to provide US$300 billion (NZ$517b) a year to developing countries by 2035 to help them offset the impacts of climate change.

The Taxpayers Union lobby group criticised that as “a move towards global socialism” suggesting New Zealand’s share of the commitment would cost the country $500m a year.

But spokesperson Alex Emes acknowledged it was still seeking information on exactly what New Zealand had agreed to provide.

Harrison believed the election of President Trump was likely to cast doubt on the overall funding agreement.

Canterbury University political science professor Bronwyn Hayward also described the agreement as “fragile”.

Developing countries were concerned at least some of the funding might only be offered in the form of “high-interest commercial loans” that would push them further into debt, she said.