Adopting and designing New Zealand's emissions trading scheme

In Jørgen Wettestad and Lars Gulbrandsen (eds), The Evolution of Caron Markets. Design and Diffusion. London, Routledge, 2018, pp. 105-123

In 2008, New Zealand introduced the New Zealand Emissions Trading Scheme (NZ ETS) as its primary instrument for reducing greenhouse gas emissions, following a failed attempt three years earlier to introduce a carbon tax. The scheme has been heralded by some as innovative and comprehensive because of the sectors covered and its inclusion of all six Kyoto gases but it has also been heavily criticized for failing to produce emissions reductions or to set a meaningful price on carbon emissions and for lacking a concrete national cap on emissions. This chapter analyses the adoption and designing of the NZ ETS. It investigates if, and in what ways, international policy diffusion and domestic political factors interacted, leading to the scheme's design. The chapter offers a rich understanding of the processes and patterns shaping climate policy through the reflection of the complex, disjointed and dynamic contexts faced by decision-makers and officials. The chapter shows that coercive pressures and experiences from other countries were instrumental in creating the political latitude to adopt a market-based instrument by creating pressure to act and demonstrating the viability of an ETS. The dominant infl uence over the detailed design of the scheme was the need to manage the potential material consequences of climate action on New Zealand's economy. Party politics has exerted a direct influence on the scheme through post-adoption revisions, while stable institutional actors, and in particular Treasury, has had a strong influence on the NZ ETS, while difussion mechanisms played a more nuanced role.