From these key conclusions, we also draw a number of key policy conclusions, for further development.

• New Zealand should develop a trajectory for emissions price policy values, to factor into all government assessments and analyses, that is consistent with the international evidence on what is required to deliver the objectives of the Paris Agreement. This will imply significantly higher values than seen in today’s market prices and the trajectory of prices will rise over time. The trajectory of these prices will rise over time. By factoring in these emission price policy values, the New Zealand government can substantially reduce the risk that it will make long lived infrastructure investment decisions that either lock the country into a high emissions future, or which could be threatened by asset stranding at a later date.
• A robust, predictable emissions price is vital in encouraging the private sector to make investments consistent with a low-emissions future. The precise policy instrument through which this signal is provided – ETS, emissions tax or a hybrid of the two – is of secondary importance. In scenarios that envisage substantial changes to land use, the extension of the emissions price will help promote land use decisions that take account of the emissions implications of that use.
The emissions price needs to be accompanied by a range of changed market and regulatory arrangements, infrastructure deployment mechanisms, and specific support to address additional barriers and market failures. Globally, there is increasing recognition that an emissions price needs to be buttressed by a coherent set of other instruments to maximise effectiveness. There are a number of areas where New Zealand’s policy suite could be strengthened:
• To support energy efficiency – where there is a particularly strong evidence base for a need to complement emissions pricing – an array of policies can be developed including vehicle fuel efficiency standards, standards on lights and appliances, changes to building codes, and targeted support for industrial consumers to improve energy efficiency
• Agreeing on the strategy, and developing the associated regulations and market arrangements, that encourage the roll-out of electric vehicle charging infrastructure. This planning needs to start in the near term.
• Although wind and solar are low cost in New Zealand, new measures to encourage investment, beyond the revenues that can be accessed in the existing electricity market, may be needed to achieve high rates of deployment and the strategic location of generation assets. Case studies of market-based mechanisms such as renewables auctions and portfolio standards, increasingly deployed internationally, provide an indication of what works in different contexts and whether it can be transferred to New Zealand. Further work is required to investigate the precise objectives for a new mechanism in New Zealand and key design parameters.
• New investment in back-up plant and grid infrastructure is needed to support higher shares of variable renewables. Potential measures to encourage investment include improved market access for demand-side response and an incentive for investment in batteries. Detailed modelling is needed to determine the additional services that are likely to be required to ensure reliability of the New Zealand electricity system.
• In the waste sector, regulation of unmanaged facilities and greater use of anaerobic digesters at farm dumps would facilitate improved methane capture. For managed sites, increasing separation at source can help divert biodegradable household waste and construction and development waste from landfill sites.
• Reducing emissions in the agricultural sector requires continued support for R&D to enable the technological developments necessary to cut emissions. In addition, government support to overcome coordination problems will also be needed – for instance, to facilitate collaboration on breeding lower-emissions livestock. There may also be a role for government in disseminating information about new technologies and educating consumers around the use and implications of these technologies
• Additional policies may not be required for the forest sector, although applying a floor to the emissions price would encourage investment in forestry as it could other low-emission investments.
Globally, there is a case for further investment in R&D into low-emissions technologies; given the attractiveness of the Innovative scenario, New Zealand might contribute further to this. It makes most sense for New Zealand to focus on those technologies most critical to its own emis To support energy efficiency ions future and where it is most likely to find comparative advantage. Options for collaborative research and experimentation across government, business and research institutions should be explored, while further international collaboration can facilitate rapid adoption of new approaches in local contexts. While there are considerable resources already devoted to agricultural R&D, the abatement potential from methane vaccines makes this a continued priority and potential area for increased focus.
Political parties should actively seek to identify and articulate areas of common agreement on climate policy, in order to enhance policy coherence and predictability. Moving to a low-emissions pathway will take many decades and involve large amounts of investment in long-lived infrastructure. The creation of a stable regulatory and policy environment is essential for ensuring that this investment is delivered at low cost. By seeking to explicitly identify and articulate areas of agreement, political parties can play a crucial role in reducing the risks and costs of the transition. This can be supported by forums such as GLOBE-NZ. At the same time, there will always need to be room for informed debate and party differences over the speed and specifics of policy direction.
Independent institutions can help steer New Zealand’s low-emissions pathway development. Building on the recommendation above, an independent statutory climate commission could help anchor expectations regarding the stability of climate policy, just as the Reserve Bank of New Zealand helps to anchor investor expectations regarding price stability. This might include, for instance, identifying expected trajectories for the emission prices to help private-sector investors make informed decisions over long-lived investments that reduce the risk of lock-in to high emissions assets and/or the risk of asset stranding, or identifying whether there may be tensions between New Zealand’s plans to reduce its emissions and other elements of the government’s economic development strategy. The body could also provide a platform to support ongoing, more detailed scenario analysis to inform New Zealand’s low-emissions pathway planning and support subsequent coordination and implementation. A dedicated body of experts focusing exclusively on climate change and the appropriate policy response can also help facilitate flexible, adaptive decision-making.
Policymaking should adopt a holistic approach including both economic and cultural interests. While the scenarios in this report have been developed from an economic perspective, New Zealand has a diverse range of cultural interests which should form part of a more holistic approach to policymaking, particularly as it relates to land-use planning. Chief among these considerations are obligations under the Treaty of Waitangi, and to the mana whenua of a specific land area. All stakeholder groups should be taken account of in the designing of policy, including a process of meaningful consultation with iwi and hapū, as per the Treaty’s principle of partnership, to acknowledge their interests and aspirations.
There is an important need to upgrade the evidence base to support New Zealand’s low-emissions pathway planning. The most acute needs are for an energy and land system modelling tool(s) that generates bottom-up estimates of abatement opportunities and costs (to complement existing top-down macro economic estimates) and of the interactions between sectors (such as the power system implications of electric vehicle uptake, or bio energy availability given different scenarios for land use and forestry). Specific studies on heat and agriculture would also be valuable:
• In relation to buildings and heat, greater evidence on the potential and costs of electric heating technologies across low-, medium- and high-grade heat, and on the costs of a low- or zero-emission homes standard for new-build properties.
• In the agriculture sector, further efforts to narrow the cost ranges on key abatement options by exploring costs in specific contexts within New Zealand.
A particularly important area for further research and policy development is understanding and addressing the distributional implications of differing low emissions scenarios, and the policy responses that might help alleviate any concerns. The transition to a low-emissions future provides a wide range of exciting opportunities to reduce New Zealand’s emissions in a way that, in aggregate, supports diversified economic activity and can improve overall living standards. It also carries costs: the price of energy may rise, while changes in land-use patterns could imply significant dislocation in rural communities. Importantly, these costs and benefits may be distributed unevenly across New Zealand society. This analysis has been able to consider these issues at only a very high level. Future work is needed to understand in more detail the distributional implications of different scenarios, including impacts on Māori communities given the large changes envisaged to the rural economy. It should also focus on how any negative impacts on vulnerable communities and households can be best addressed. International experience points to a range of strategies that can be used effectively, including social transfers through the welfare system; increasing skills and re-training; and targeting interventions such as improvements to the energy efficiency performance of the housing stock towards the most vulnerable. The robustness of these approaches to the high emissions prices and significant changes envisaged within some of our scenarios needs particular attention.