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New report highlights economic impacts, challenges and choices that climate change poses for New Zealand

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The decisions government, businesses and New Zealanders make will have an impact on the size and nature of Aotearoa New Zealand’s climate response.  

Ngā Kōrero Āhuarangi me te Ōhanga, the Climate Economic and Fiscal Assessment (CEFA), seeks to bring together what we know about the potential economic and fiscal implications of climate change for New Zealanders.  

The CEFA, from the Treasury and the Ministry for the Environment (MfE), provides a framework for understanding potential climate change impacts, as well as new analysis on the potential costs of overseas emissions reductions to meet New Zealand’s Paris Agreement commitments. 

While the CEFA was prepared before the historic flooding in the upper North Island and the tragic, devastating effects of ex-Cyclone Gabrielle, it reinforces the breadth and scale with which climate change can impact New Zealand.  

Key points made in the report include: 

  • The costs of climate change will be large and felt unevenly across different sectors and groups in society. The size and nature of impacts will be influenced by the decisions of New Zealanders, in particular, policy choices by central government.  
  • Achieving New Zealand’s first Nationally Determined Contribution (NDC) presents a significant cost under all scenarios considered. 
  • The physical impacts of climate change will likely increase over time and will depend on global action to reduce emissions. 
  • Maintaining New Zealand’s strong economic and fiscal resilience will be an important factor in successfully meeting the challenges of climate change.  

This report is intended to help to inform strategies and decision-making across the public and private sectors. While the CEFA is unlikely to be sufficient on its own to inform key decisions, it provides a useful source of information to be used alongside details specific to the decision at hand.  

The CEFA highlights the uncertainty regarding the future costs of international emissions reductions. This reflects volatility in global carbon prices and that options for purchasing these reductions are still in development.  

The report notes that some regions and communities will be particularly exposed to climate change. Low-income communities are likely to be more impacted by higher costs from the low-emissions transition, such as higher fuel costs. However, the transition is likely to have positive impacts too, such as reducing air pollution and associated health benefits.  

The report highlights that choices made by current and future governments will affect the future fiscal impacts from climate change. These choices include where money is spent and how financial and non-financial tools, such as climate change reporting, are prioritised and utilised.   

Factors outside of New Zealand’s control also matter. For instance, physical climate impacts – both those New Zealand is facing now and what is expected in the future -- are highly dependent on global emissions.  However, New Zealand’s vulnerability to physical climate impacts also depends on the measures governments and New Zealanders adopt to reduce exposure and build resilience.  

The report is available at Ngā Kōrero Āhuarangi me te Ōhanga, the Climate Economic and Fiscal Assessment (CEFA).

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