Leading Partners in Science Interactions of metrics and alternative policy settings at a country level: a case study from New Zealand Andy Reisinger 1 Adolf Stroombergen 2 K. Riahi 2 O. van Vliet 2 P. Havlik 2,3 M. Obersteiner 2 M. Herrero 3 1 New Zealand Agricultural Greenhouse Gas Research Centre 2 Infometrics Consulting 3 International Institute for Applied Systems Analysis (IIASA) Published in Proceedings of the Tyndall Conference 2011 (McGovern and Bates, editors) Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |1

Leading Partners in Science In a nutshell Globally, different metrics have only a minor impact on mitigation costs IF the world follows a cost-minimising emissions pathway to limit long-term radiative forcing What are regional implications of alternative metrics for agricultural production and non-CO 2 emissions? New Zealand is the developed country with the largest fraction of agricultural GHG emissions (almost 50%) How would the cost of meeting economy-wide emissions targets change for New Zealand under different metrics? Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |2

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |3 New Zealand’s emissions profile under 20-, 100- and 500-year GWPs Limited abatement potential for pastoral livestock production (>95% of ag emissions) Is a lower CH 4 weight better for New Zealand?

Leading Partners in Science Complex, nested problem Metrics affect mitigation costs for an individual country in multiple, interconnected ways: Balance and quantity of CO 2 and non-CO 2 emissions, and targets and assigned amount units (under Kyoto-type regime) Global CO 2 -eq prices for the world as a whole to meet an agreed long-term goal Agricultural production costs, competitiveness, and international agricultural commodity prices In this study, we assume that the world will adjust GHG prices/mitigation efforts to meet agreed long-term goals Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |4

Leading Partners in Science MESSAGE Calculates cost-effective multi-gas emissions pathways and mitigation costs over the 21 st century to meet a pre-determined stabilisation target in the year MESSAGE Calculates cost-effective multi-gas emissions pathways and mitigation costs over the 21 st century to meet a pre-determined stabilisation target in the year MAGICC version 6 Calculates exchange rates between CO 2 and non- CO 2 gases, for alternative bio-physical metrics and policy choices for treatment of agriculture. Calibrated to complex coupled climate models MAGICC version 6 Calculates exchange rates between CO 2 and non- CO 2 gases, for alternative bio-physical metrics and policy choices for treatment of agriculture. Calibrated to complex coupled climate models non-CO 2 metrics GLOBIOM Calculates changes in agricultural production and commodity price indices up to 2050, based on detailed spatially explicit modelling of agricultural products and trade. GLOBIOM Calculates changes in agricultural production and commodity price indices up to 2050, based on detailed spatially explicit modelling of agricultural products and trade. ESSAM Calculates changes in economic activity in New Zealand in 2020 and 2050, relative to ‘no climate policy’, for prescribed economy-wide emissions targets expressed in percentage relative to ESSAM Calculates changes in economic activity in New Zealand in 2020 and 2050, relative to ‘no climate policy’, for prescribed economy-wide emissions targets expressed in percentage relative to GHG prices and bioenergy demands Commodity price index global CO 2 prices used in emissions trading metrics to account for non-CO 2 gases in emissions targets ModelLinkages

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |6 Use GLOBIOM to model agricultural production to 2050 Spatially explicit partial equilibrium model for agriculture and forestry, including trade (Havlik et al. 2010) Impose prices for CO 2, CH 4 and N 2 O and biofuel demands from global MESSAGE runs for 450ppm target: 100-year GWPs (default) Fixed 100-year GTPs agricultural non-CO 2 emissions excluded Explore regional agricultural production and GHG emissions under additional GHG costs in all regions, and effects on supply / commodity prices of livestock products Regional implications for livestock production

Leading Partners in Science Global agricultural CH 4 emission pathways Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |7 Regional changes in cattle milk production in 2030, relative to no-mitigation Metrics have different effects regionally. In most regions, the decision to impose a cost at all has a bigger effect than the choice of metric. Metrics have different effects regionally. In most regions, the decision to impose a cost at all has a bigger effect than the choice of metric.

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |8 Changes in product supply prices 0.0 Where future production increases require land-use change, CO 2 prices dominate the response. Otherwise, non-CO 2 prices are more important.

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |9 Changes in livestock commodity price index

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |10 Competing effect of metrics. Fixed 100-year GTPs would: Reduce burden of hard-to-mitigate non-CO 2 gases Raise global carbon prices and bioenergy demand Result in lower increase in livestock commodity price index Assume emissions targets -15% by 2020 and -50% by 2050 Scenarios evaluated: GWPs or fixed 100-year GTPs Policy choices: –Full global participation in mitigation of agricultural emissions –Sensitivity tests: »NZ only country to apply price on its agricultural emissions »Agricultural non-CO 2 emissions excluded from all obligations Technology: 50% reduction technology in enteric fermentation National-level implications of metrics for NZ

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |11 National-level implications for New Zealand metrics for emissions targets carbon prices commodity price index policy assumptions

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |12 Net effect of metrics on NZ depends on policy setting NZ gains from full global participation in agricultural mitigation due to increasing livestock commodity price index NZ is better off if everybody mitigates agricultural emission than if nobody does, despite having large fractional ag emissions itself and assuming no mitigation opportunities for agriculture within NZ NZ loses if it is the only country to fully price agricultural emissions GTPs mute economic effects of mitigation on New Zealand If NZ benefits, it would benefit more under GWPs than GTPs If NZ incurs costs, costs would be greater under GWPs than GTPs Benefits from any additional enteric CH 4 abatement technologies would be greater under GWPs than under (fixed 100-year) GTPs National-level implications of metrics for NZ

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |13 Alternative metrics affect different regions differently depending on the GHG efficiency of production and relative roles of CO 2 and non-CO 2 prices on production/expansion within a global trade system In most regions, the decision to fully expose agriculture to the cost of its emissions is more important than the metric Metrics matter for New Zealand net mitigation costs, but alternative policy scenarios matter much more (including determining whether NZ receives net benefits or costs from mitigation and its global implementation). GTPs would mute both positive and negative effects on NZ Caveat: weak link between models, and idealised scenarios Conclusions

Leading Partners in Science Copyright © 2010 New Zealand Agricultural Greenhouse Gas Research Centre1 MAY 2015 |14 Questions to the policy community  What regional dimensions of metrics are most important? Cost? Market access? Local food production? Most vulnerable sectors (measured how)?  How can they be expressed so that they become tractable for further scientific / economic analysis? What assumptions are relevant for sensitivity tests?  Given the intricate links between metrics and other policy choices, does it make sense to evaluate the economic effects of metrics in isolation? What real-world assumptions would be most useful and relevant to study?  What work would be useful regarding the political economy and social dimensions of metrics?