MONEY DOES GROW ON TREES: IMPACTS OF THE PARIS AGREEMENT ON THE NEW ZEALAND ECONOMY

Abstract

The Paris Agreement (PA) asserts that emissions pathways of greenhouse gases (GHG) should be consistent with holding the increase in global temperature below 1.5[Formula: see text]C or 2[Formula: see text]C above pre-industrial levels. New Zealand (NZ) committed to reduce emissions to 30% below 2005 levels by 2030. The purpose of this paper is to assess the range of economic costs for NZ derived from the commitment under the PA, conditional to the mitigation potential of forestry carbon sequestration (FCS), pricing agricultural emissions, and linking the NZ emissions tradable scheme (NZ ETS) to the European Union ETS (EU ETS). We use a general equilibrium model and “soft-link” it with the global timber model. We found that NZ can meet the PA terms; however, important GDP decreases may arise due to limited domestic mitigation potential from the energy and transport sectors. FCS plays a significant role in mitigating the negative impacts, where the benefits of FCS outweigh those of pricing agricultural emission and linking the NZ ETS.