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Pricing carbon properly key to successful renewables policy

- Embargoed for release until 1.00am, Thursday 28 March -

New report: Pricing carbon properly key to successful renewables policy

Wellington (27 March 2019): Ahead of the Interim Climate Change Committee’s recommendations to Government, think tank The New Zealand Initiative today released an economic assessment of the proposed transition to 100% renewable electricity by 2035.

Authored by Research Fellow Matt Burgess, Switched on! finds that New Zealand is well-placed to increase the share of renewable electricity from its current level of 83%. However, the Initiative’s report warns that New Zealand must learn from costly policy failures overseas if we want to simultaneously achieve clean, reliable and affordable electricity.

New Zealand’s current level of electricity from renewable sources is already the third-highest in the developed world. Even without further government intervention, renewables are on track to increase their share to 95% over the next 20 years.

As Switched on! explains, replacing the last 5% with renewable sources poses a big challenge. Tackling it could add more than $800 million to the annual cost of electricity. The higher cost of electricity under such a scenario would delay the transition from fossil fuels to electricity. Perversely, this could increase overall carbon emissions.

To address such implementation problems, Switched on! recommends a greater use of the Emissions Trading Scheme (ETS). By pricing carbon through the ETS, the most efficient ways of reducing emissions can be identified without the Government selecting technologies.

Commenting on the research, Executive Director of the Initiative Dr Oliver Hartwich said: “Germany’s Energiewende highlights the dangers of the government picking winners in energy policy. The last thing New Zealand needs is a politicisation of the electricity market.”

Author Matt Burgess concurs: “A stronger ETS will increase investment in renewables as well as in R&D. The prize to be gained from a functioning ETS is huge. With it, New Zealand will achieve emissions reductions at a fraction of the cost of more interventionist policy alternatives.”

Read more:
A PDF of Switched on! Achieving a green, affordable and reliable energy future is available at the bottom of this media release (embargoed until 1.00am, Thursday 28 March).



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