The New Zealand Climate Change Response (Moderated Emissions Trading) Amendment Bill will undergo its Second Reading in Parliament on 16 November 2009 and may be enacted as early as 17 November 2009 under urgency.

New Zealand’s emissions trading scheme (ETS) is thus not quite yet finalised. Important decisions regarding the scheme are still being made, and have the potential to drastically alter the effect of the scheme, including its health implications.

The health consequences of runaway climate change have now been extensively described.1,2 Climate change has been characterised by our Prime Minister’s Chief Science Advisor as ‘a tragedy of the commons’3—a situation where common goods are destroyed because no-one individually bears the cost of their destruction. To play our part in keeping the planet habitable, we need to halve our current emission levels—i.e. reduce New Zealand’s greenhouse gas emissions by at least 40% by 2020,1 and 80-90% by 2050 below 1990 levels.

Several mechanisms are relevant to this, including fuel economy, insulation, and renewable generation.4 The mechanism that has taken centre stage politically and governmentally is that of ETSs, which work by attaching a price to greenhouse gases. This creates a market in which the right to pollute must be purchased and can be traded, allowing emission cuts to occur where it is least costly to do so. The Government’s role is to set the limit on total emissions available to be traded in the market.4

ETSs have not previously been routine health business. However, they have major implications for health for two reasons. First, they are a key mechanism for lowering greenhouse gas emissions. Second, they may involve transfers of large amounts of money. Unfortunately, public health has not been an important consideration in the design of New Zealand’s current scheme.

Earlier this year, Dhar et al5 discussed the public health implications of emissions pricing, noting that there was the potential for a ‘triple dividend’ for health if the policies are right.

They identified potential public health gains through:

However, how much each of these health gains will occur in response to an ETS will depend on how much emitters bear the costs of emissions.

Current proposed amendments to ETS legislation provide for free, intensity-based allocation of emission units to polluters; a further 2 years’ delay for the entry of the agriculture sector into the ETS (2015); a cap on the price of emission units; and a ‘2 for 1 deal’ whereby emitters need only surrender one tonne of units for every 2 tonnes of emissions, in effect halving the emissions price to just $12.50 per tonne. All of these provisions reduce the cost of greenhouse gas emissions to emitters, and thereby reduce all of the potential benefits to health.

An ETS can provide a financial incentive to reduce emissions, since under an ETS lower emissions mean lower costs for businesses. This lessens the probability and scale of runaway climate change and the threat to basic human needs: adequate and safe water and food, shelter, political security, and human settlements.2,5, 6

The currently proposed amendments to New Zealand’s emissions trading scheme include the setting of an emissions reduction target of 50% by 2050. While the inclusion in legislation of a target is a positive step, the level is weak; we need to at least halve our emissions over this decade—not 40 years hence—and prepare for virtually no net emissions from 2050.1

Emissions reductions are needed rapidly. It may be reasonable for emitters to ask that the Government find some way to initially cushion the blow, but there is no room to delay the cuts themselves.

New Zealand has an international role. While we are responsible for only a small proportion of global greenhouse emissions, in per-capita terms we rank much higher.7 If New Zealand sets targets that are not commensurate with its status and responsibilities as a developed nation,1 then we sabotage global co-operative action on climate change, reducing the extent to which other countries are prepared to cut emissions.

More certainly, this ETS and our low target will sabotage our own economy, both directly and indirectly. Directly, for example, because we (like Australia) are a coastal society; just 3 days ago an Australian Government report said that AUS$150 billion worth of property is at risk there from rising sea levels and more frequent storms.8 And indirectly because in the global transition to low-emission economic development, ‘latecomers will be losers’.9

China, which is now positioning itself to be the global energy efficiency leader, points out that it will be very hard for countries that have weak emissions reduction targets to develop new technology of their own.9 While harmonisation with Australia (whose scheme is not yet finalised) has been part of the rationale for amending and weakening New Zealand’s ETS, this will put us further out of step with more relevant global actors such as China.

Attaching a price to greenhouse gas emissions makes low-emission strategies more financially attractive. For example, walking and cycling become more attractive options compared with private car use. A shift from car use to more active and public transport benefits health through the promotion of physical activity, safer roads, and reduced air pollution.10,11

The price signal of an ETS will also help other shifts relevant to health: more energy-efficient housing improves health by reducing the vulnerability of occupants to extremes of heat and cold and associated health effects,12–14 while reducing population intake of animal products could reduce the emissions footprint of the New Zealand diet,15 as well as reducing the prevalence of heart disease and bowel cancer.16

Appropriate emissions pricing can produce a revenue stream for governments, through the domestic sale of emission permits to large emitters, which could be “recycled” for health improvement. However, the net impact of the proposed ETS on large industries, taking account of both direct and “indirect” (via electricity use) emissions, is more than a $754 million emission subsidy.17

As well as this, by setting different proportions each sector will be liable for over different time periods (e.g. agriculture), the scheme produces wide disparities—particularly affecting households, road users, and small and medium enterprises. This has been described as ‘corporate welfare’ for big polluters.18

This is not the best use of more than $754 million dollars of taxpayer resources. It would be more than the annual budget of most of the District Health Boards (DHBs) in New Zealand, and would pay for the combined DHB deficit (at $150 million at the end of 200819) five times over.

Such subsidies for big polluters will siphon public funds away from other public services. Māori, Pacifica, refugee, and low-income New Zealanders are likely to disproportionately suffer the consequences, with adverse effects on health, social, and equity outcomes.

If New Zealand’s ETS increases health inequality, it is likely to do so in both socio-economic and ethnic dimensions. Given the higher proportion of Māori, Pacifica, and refugee families on low incomes, these groups are at particular risk from the price effects of an ETS. Although the most recent amendments to the New Zealand ETS notionally provide for a Treaty of Waitangi clause, it is difficult to see how Treaty principles can be upheld in the ETS unless accompanied by action to reduce fuel poverty and food insecurity—burdens that fall disproportionately on Māori families.

Economic instruments are essential to address climate change,6,20,21 though insufficient by themselves.4 New Zealand needs an effective all-sectors all-gases cross-party emissions trading scheme with an uncapped market price on greenhouse gas emissions. But the proposed amended scheme, now at Select Committee stage, places considerable costs on taxpayers, affecting those least able to afford it, whilst creating large subsidies for big polluters. If the Bill is allowed to be passed in its current form, we risk increasing emissions and eventually driving the New Zealand economy into the ground.

Emissions trading schemes in themselves are intrinsically neither beneficial nor harmful to health. However, depending on how they are designed, the potential health effects are great. The right ETS could have a fourfold dividend for health: avoiding effects of climate change; providing additional revenue for health and social spending or further emissions reduction; incentivising healthy transport, healthy housing, healthy nutrition and other emissions reduction co-benefits; and improving health equity. We are currently at risk of squandering the opportunity for spending on health and other public services; and increasing health and social inequality.

New Zealand has a duty to reduce emissions to an extent that is fair on a global scale1 and to influence larger nations. Reductions must also be equitable on a local scale.

New Zealand’s emissions trading scheme must therefore be better designed, to lead to both emissions reduction and health improvement. This should include:

These measures will help ensure an emissions trading scheme that benefits the economy, health, and well-being as well as the climate.

For more detail and explanation of issues raised in this article please see http://www.nzma.org.nz/journal/122-1305/3859/OraTaiao.pdf or the OraTaiao: New Zealand Climate and Health website www.nzchg.webs.com

Author information: Jamie Hosking, Public Health Physician, Auckland; Jennie Connor, Public Health Physician, Auckland, Scott Metcalfe, Public Health Physician, Wellington; George Laking, Medical Oncologist/Health Economist, Auckland; Andrea Forde, Public Health Medicine, Canberra, Australia (ex Wellington); Rochelle Phipps, General Practitioner, Christchurch

Acknowledgements: We thank John McCall, Alex Macmillan, Rhys Jones, Osman Mansoor, Richard Jaine, Graeme Lindsay, David Sinclair, Divya Dhar, Ed Kiddle, Andrew Holmes, Philippa Howden-Chapman, Stephen Palmer, Susan Wells, Anne MacLennan, Joanna Santa Barbara, Rachel Highton, Moana Tane, Marama Parore, and Liz Springford.

Correspondence: Jamie Hosking, Public Health Physician, Section of Epidemiology and Biostatistics, School of Population Health, University of Auckland, Private Bag 92019, Auckland, New Zealand. Email: jamie.hosking@auckland.ac.nz; OraTaiao: New Zealand Climate and Health website (interim): www.nzchg.webs.com