A recently released Intergovernmental Panel on Climate Change report highlights the likely serious future changes for the global climate.1 The Stern Review describes the very large adverse economic impacts that climate change is likely to produce, and how a relatively small investment may lower this risk.2

From a health perspective, the World Health Organization has identified that climate change is already causing the annual loss of over 150,000 lives and 5,500,000 disability-adjusted life-years globally.3 Some of New Zealand’s South Pacific neighbours may particularly suffer from the health and environmental impacts of climate change.4 Potential adverse health impacts for New Zealand have also been described,5 including an increased risk of dengue fever.6

Given these concerns, it is desirable to examine New Zealand’s role as a good global citizen in addressing climate change prevention. We undertook a brief review of this country’s progress in using economic instruments for climate protection, given the importance of such instruments in various forms of pollution control.

Searches were conducted of relevant government websites (via http://www.climatechange.govt.nz/) for recent policy papers and print media sources (http://factiva.com/) for information on New Zealand policies in February 2007. Comparisons were made with the 29 other OECD countries.

Polluter pays pricing for carbon emissions—Prior to the 2005 general election, there was a government plan to introduce a system of carbon charges for New Zealand. However, this was abandoned and the subsequent New Zealand policy documents (put out for consultation in late 2006) only offer a range of options, including future emissions trading, greenhouse gas charges or alternative regulatory approaches.

In stark contrast, Finland has had a carbon tax since 1990.7 Other OECD countries that adopted various forms of carbon tax in the 1990s are Denmark, the Netherlands, Norway, Poland, and Sweden.7 The European Union (EU) has had an operating emissions trading system since January 2005 in which all 25 member states participate (19 are OECD countries).8 Also, the United Kingdom has a “Climate Change Levy” and Switzerland has a CO2 levy on stationary fuels and an industry-levied “Climate Cent” programme on transport fuels (with revenue recycled to fund mitigation projects).9

New Zealand is perhaps even behind the United States, which has:

Polluter pays pricing for agricultural emissions—The emissions of methane and nitrogen oxides are particularly critical for New Zealand given its agricultural base (i.e. 49% of its greenhouse gas emissions).12 There has been some initial consideration of methane charges and Treasury has advised on economic instruments for methane and nitrogen oxide (in order to prevent distortions to the economy from just having carbon charges).13 However, New Zealand is only at the stage of consulting on economic or regulatory options14 and there is no clear progress in this area. In contrast, there are EU countries that have fertiliser taxes (e.g. Netherlands and Sweden) or nitrogen oxide taxes (e.g. France, Sweden, and Galicia in Spain).15

Economic incentives for fuel efficient vehicles—New Zealand does not place any special taxes on relatively fuel inefficient new vehicles and relies only on petrol taxes. In contrast, the United States (since 1978) has had a “gas guzzler tax” on the sale of new model vehicles whose fuel economy failed to meet certain statutory levels.16 Also, there are 14 OECD countries in Europe with taxes on car ownership.17 Although these are usually based on engine size or total vehicle weight, the UK tax specifically considers carbon dioxide emissions.

International arrangements covering economic issues—New Zealand appears to have made no progress on specific economic arrangements with Australia on climate change issues (e.g. on a carbon trading system; a system for carbon charges on regional airline emissions; or for introducing GST on airline tickets within the region). Similarly, it has not substantively explored establishing links with the EU emissions trading system. By joining such a grouping, New Zealand would be in a better position to advocate for carbon taxes on imports from non-Kyoto signatory countries (as recently suggested by the French President18).

Discussion—This review is far from comprehensive, and there are many other economic measures that New Zealand is not taking and which are not covered in detail here—e.g. tax credits for renewable energy research; and research and development to promote carbon sequestration (via facilitating reforestation and plantation forests). There are subsidies for home insulation and the installation of home solar water heaters in New Zealand, but these programmes are currently funded at only very low levels.

Overall, the available evidence suggests that New Zealand is a relative laggard in using economic instruments to respond to the threat of climate change compared to other OECD countries. Nevertheless, the release at the end of last year of the New Zealand Energy Strategy, at a time of high media attention to climate change, gives cause to hope for a change in policies. Furthermore, this is a small and dynamic country with a vested interest in fostering its “clean and green” image to tourists and to international consumers of its agricultural products. Being a good international citizen in promoting global health protection should also be a major reason for decisive action.