Climate Change Minister Tim Groser announced last week that New Zealand will not be signing up to a second commitment period under the Kyoto Protocol (CP2) after the current commitment period expires at the end of this year. This does not mean that the Government will be making further legislative changes to the New Zealand Emissions Trading Scheme (NZ ETS), which is modelled on the Kyoto Protocol rules, but simply that New Zealand has decided not to be bound by mandatory Kyoto obligations for a further period, so that it has greater flexibility in how it sets out to achieve its greenhouse gas (GHG) emissions reduction objectives in the immediate future. During Question Time in the House yesterday, Prime Minister John Key stated that the Government will announce its new reduction target next year.

Instead of committing to CP2, the Government has stated its intention to set new targets under the broader, non-binding United Nations Framework Convention on Climate Change (UNFCCC), which Groser says will align New Zealand with the climate change efforts of developed and developing countries which collectively are responsible for 85% of global emissions, including the United States, China, India, Canada, Brazil and Russia.

In contrast to the UNFCCC, the Kyoto Protocol (which was created under the UNFCCC) sets binding GHG emission reduction targets for the industrialised "Annex I" countries which have ratified the Protocol.  New Zealand’s legally binding responsibility target under the Protocol is to reduce emissions across the first commitment period (CP1, which runs from 2008 until the end of 2012) to an average rate equivalent to New Zealand's emissions in 1990.

The effectiveness of the Kyoto Protocol in achieving GHG emissions reductions has been called into question ever since the United States failed to ratify the Protocol, and given that the Protocol does not set mandatory emission reduction targets for "Non-Annex I" countries such as China, India and Brazil. Canada, Russia and Japan have already indicated that they will not be signing up to a second Kyoto commitment period from next year.

By contrast, Australia and the European Union have confirmed that they will be opting into CP2 from next year, to cover the transition period before a new international agreement (still to be negotiated) is set to take effect from 2020. New Zealand's decision to opt out of CP2 therefore indicates a departure from the Australian and European approach to global climate change policy. This departure is surprising, given that New Zealand and Australia have recently agreed to future linkage between the two countries' emissions trading schemes.

The Australia-New Zealand Carbon Pricing Officials Group was established last year to work through 2012 to scope how the two schemes could be linked, but no detailed discussion documents have yet been released by the Group.

Furthermore, Australia and the EU recently announced their intention to fully link their emission trading schemes by July 2018 at the latest. Coupled with the latest divide in approaches to CP2, it is very uncertain how New Zealand will achieve future linkage with Australia or the EU in respect of emissions trading and the associated underlying emissions reduction policies. 

We note that Groser's statements about joining 85% of emitters under the UNFCCC must be taken in context; countries under this framework agree in principle to the need to reduce GHG emissions, but a new international agreement will be required in order to hold parties to further mandatory targets. The parties to the UNFCCC will meet in Doha for a week from 26 November to start work towards setting new targets and confirming a new international agreement by 2015, to take effect by 2020.