VZCZCXYZ0000
RR RUEHWEB

DE RUEHWL #1009/01 3640349
ZNR UUUUU ZZH
R 300349Z DEC 05
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2205
INFO RUEHBY/AMEMBASSY CANBERRA 4262
RUCPDOC/USDOC WASHDC 0017
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS WELLINGTON 001009 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/ANP - DRICCI AND OES/EGC -SYOFFE 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA 
 
E.O. 12958: N/A 
TAGS: SENV ENRG NZ
SUBJECT: NEW ZEALAND AND CLIMATE CHANGE 
 
REF: A. WELLINGTON 603 
     ¶B. WELLINGTON 991 
 
¶1. (SBU) Faced with unfavorable greenhouse gas emission 
projections and criticisms over its current climate change 
policies, the Labour Government is poised to alter its 
course.  In the future, it will de-emphasize price-based 
measures and place greater emphasis on purchasing Kyoto 
compliant credits and exploring other approaches to reduce 
emissions.  But while the Government and most of the public 
tenaciously cling to support of Kyoto, the country's ability 
to meet its obligations under the agreement will be difficult 
if not impossible.  To date, there is no plan to bring 
agriculture -- the major source of NZ's emissions -- into an 
abatement scheme.  In the face of declining world lumber 
prices and industry mistrust of government, forest sinks are 
not a viable option.  The GNZ expects to announce a revised 
climate change policy by April 2006, but has already signaled 
one change by announcing the cancellation of the transport 
carbon tax -- its hallmark price-based mechanism.  End 
summary. 
 
Missing Kyoto Protocol Target 
----------------------------- 
¶2. (SBU) Only weeks before the pre-election campaign period, 
then Convener of the Ministerial Group on Climate Change, 
Minister Pete Hodgson announced on June 16 that for the first 
time New Zealand's estimate of its greenhouse gas (GHG) 
emissions would exceed targets set under the Kyoto protocol. 
The announcement followed Environment Ministry projections 
that New Zealand would fall short of its Kyoto protocol 
target by an estimated 36 million tons (Mt) of carbon dioxide 
equivalent.   In 2002, Hodgson had campaigned for 
ratification of the treaty, saying that not signing it would 
be setting fire "to a very big check."  At that time, 
estimates gave New Zealand an overall surplus position, due 
in large part to a sizable forestry carbon sink credit of 
100Mt.  But with revised projections, New Zealand likely 
faces an invoice of hundreds of millions of dollars. 
 
Reviewing Climate Change Policy 
------------------------------- 
¶3. (U) In July 2005 the Government initiated a review of its 
climate change policies.  Authored by bureaucrats in the 
Ministry for the Environment with input from the ministries 
of Agriculture and Forestry, Economic Development, Treasury 
and Transport, the final report of November 2 concluded that 
the GNZ should consider an alternative climate change goal 
that better manages the risks, opportunities and impacts 
associated with New Zealand's net emissions position.  New 
Zealand's current strategic goal -- established in 2002 -- is 
to "enable New Zealand to make significant greenhouse gas 
reductions on business as usual and be set towards a 
permanent downward path for total gross emissions by 2012." 
The review found that New Zealand was not on track to meet 
this goal. (NB: the report is available on-line, at 
www.climatechange.govt.nz) 
 
¶4. (U) The review noted three approaches for meeting New 
Zealand's protocol obligations to 2012: (1) reducing 
emissions through domestic action, (2) establishing 
additional forest sinks, and (3) buying credits through the 
Kyoto Flexibility mechanisms.  It de-emphasized the first 
option saying that the level of domestic reductions is likely 
to be small relative to New Zealand's net emissions position. 
 It also dismissed the second, noting offsetting New 
Zealand's Kyoto liability by subsidizing large-scale new 
forest planting would be unrealistic "because relatively 
little carbon would be sequestered" before 2012.  Concluding 
that the cost of domestic abatement measures to the economy 
would be high compared to purchasing units on the 
international market, the report recommended buying credits 
to meet New Zealand's Kyoto obligations and suggested 
formulating buying strategies. 
 
¶5. (U) Departing from the Kyoto paradigm, the report also 
suggested that a "quantitative goal may not be helpful in 
guiding policy choice in the next 5 - 7 years," and 
recognized that the economic cost "to New Zealand of 
excluding agriculture is high if New Zealand wishes to meet 
all its obligations through domestic abatement."  The GNZ 
expects to announce a revised climate change policy by April 
2006, but has already signaled one change by announcing the 
cancellation of the transport carbon tax -- its hallmark 
price-based mechanism (Ref B). 
 
Politics of Climate Change 
-------------------------- 
¶6. (SBU) The report aside, the Labour-government lacks 
sufficient votes to pass the carbon tax legislation anyway. 
As part of Coalition agreements to support the Government 
after the September 2005 elections, United Future and New 
Zealand First secured a Government commitment for a 
cost-benefit analysis prior to introducing the bill.  The 
National and ACT parties also opposed the carbon tax, and 
National in particular made Labour's missteps on Kyoto an 
issue during the election.  The only strong support for the 
carbon tax came from the Green Party, whose leader Jeanette 
Fitzsimons has now criticized the Government for "giving up 
on its goal to reduce New Zealand's carbon emissions," for 
capitulating to the anti-Kyoto lobby, and abandoning a carbon 
tax plan 10 years in the making. 
 
¶7. (SBU) The announcement that the Government would drop the 
tax was not a surprise to those in Parliamentary circles. 
Prior to the September elections, rumors circulated in 
Parliament that Labour would abandon its proposal because its 
calculations no longer supported the efficacy of the tax. 
The exemptions to the carbon tax applied to the agricultural 
sector and to "at-risk emitters" on case-by-case basis create 
unequal incentives to reduce emissions and are perceived by 
interests on both sides of the debate -- including 
environmentalist groups and the forestry sector -- as 
politically-biased. 
 
New Zealand: Clean and Green, but not Pristine 
--------------------------------------------- - 
¶8. (U) How did GNZ miscalculate the country's emissions?  In 
1990, the Kyoto baseline year, New Zealand was emerging from 
a period of low growth, associated with significant economic 
reforms and restructuring.  Since then, New Zealand's growth 
has been higher than many developed countries, and higher 
than expected when New Zealand ratified the Kyoto Protocol. 
Through 2003, total gross emissions were 22.5% above the 1990 
base level, representing an annual average growth rate of 
1.6% per year. 
 
¶9. (U) New Zealand's emissions differ markedly from those of 
other developed countries, and influence the range of 
available mitigation options.  Methane emissions from enteric 
fermentation (sheep and cattle) and nitrous oxide emissions 
from agricultural soils, account for almost half (49%) of New 
Zealand's total gross emissions.  For most developed 
countries, carbon dioxide accounts for over 75% of gross 
emissions.  In New Zealand, carbon dioxide accounts for just 
46%.  Cost-effective, significant mitigation options in the 
agriculture sector are currently limited and are likely to 
remain so over the next decade.  Given that New Zealand is a 
price-taker on the international commodities market, 
mitigation policies and measures that increase costs to 
agricultural producers raise competitiveness and 
profitability issues -- and will face resistance from the 
sector, which accounts for 54% of NZ's exports by value. 
 
¶10. (U) New Zealand's liability under the Kyoto Protocol is 
vulnerable to change in land use.  When the government 
ratified Kyoto, it "nationalized" commercially salable carbon 
credits from forest sinks.  The forest industry believes 
those credits should instead be devolved to those who risk 
their capital to plant trees and asserts the government has 
taken away any incentive to plant.  Changes in how forest 
sinks are assessed under Kyoto -- disallowing the inclusion 
of trees that were planted on land previously covered by 
scrub -- reduced New Zealand's forestry carbon sink credits 
and added to GNZ's miscalculations.  However, commercial 
forest planting has decreased from an annual peak of nearly 
100,000 hectares in 1994 to only 10,000 hectares last year. 
With a glut of timber worldwide, high land and transportation 
costs, and a high exchange rate, a large increase in tree 
planting would be unlikely anyway (Ref A). 
 
Public Perceptions lead to more Government Woes 
--------------------------------------------- -- 
¶11. (SBU) The opposition has made hay from the Government's 
miscalculations on Kyoto, and during the elections National 
Party leader Don Brash said if elected he would pull NZ out 
of the agreement.  National in particular stresses NZ's 
contribution to emissions is just 0.5% of that of all 
developed countries.  Many in industry and agriculture share 
the opposition's contempt for Kyoto.  Yet the agreement 
continues to receive strong backing by the media and much of 
the public, who applauded what they saw as NZ's principled 
leadership in the recent Kyoto talks in Canada.  In contrast, 
the media and many New Zealanders present the United States 
and Australia as climate change pariah states that selfishly 
promote short-term national economic interests over a 
long-term sustainable climate. 
 
Government-to-Government Cooperation 
------------------------------------ 
¶12. (U) In contrast to the media rhetoric, the USG and GNZ 
cooperate extensively in matters related to global climate 
change.  In July 2005, U.S. Senior Climate Negotiator and 
Special Representative Dr. Harlan Watson led a U.S. 
delegation to New Zealand for the third visit under the 
U.S./New Zealand Bilateral Climate Change Partnership. 
Initiated in 2002, the purpose of the partnership is to 
enhance and accelerate collaboration and practical 
cooperation on climate change issues.  To date, 35 
cooperative projects have been launched focusing on nine 
priority areas: climate change science and monitoring; 
technology development; emission unit registries; GHG 
accounting in forestry and agriculture; engaging with 
business; developing country assistance; climate change 
research in Antarctica; public education initiatives; and 
development of joint product and process standards. 
 
¶13. (U) New Zealand has also established a bilateral 
agreement with Australia.  Key areas of cooperation with 
Australia include agricultural emissions abatement, energy 
efficiency, engagement with business and local government, 
and working with Pacific Island countries to address regional 
challenges posed by climate change. 
 
David Parker: Minister Responsible for Climate Change Issues 
--------------------------------------------- --------------- 
¶14. (U) Groomed in the Labour Party's parliamentary stable 
for three years, David Parker rose to prominence in the 
cabinet reshuffle of October 2005.  Parker, a backbencher 
since his election as MP in 2002, was assigned three 
demanding portfolios: attorney-general, minister of energy 
and minister of transport.  He also is minister responsible 
for climate change issues. 
 
¶15. (SBU) Energy issues appear to be utmost on Parker's mind, 
as reflected in media reports on the cabinet appointments. 
"We're probably in a 50-year transition from oil-based 
technologies to other technologies," he said.  Explaining why 
he became active in Labour in the 1990s, Parker has said he 
was incensed by the then-National government's decision to 
force local authorities to sell community-owned electricity 
assets. 
 
¶16. (U) Parker was born in 1960.  Among the few attorneys in 
Labour's parliamentary top tier, he was the managing partner 
of the South Island's largest law firm, Anderson Lloyd.  He 
also helped establish several successful companies, ranging 
from agricultural biotechnology to an investment management 
fund.  His earlier ventures included forestry partnerships 
and cafes.  He is married with three children and lives in 
Dunedin. 
Burnett