The Paris Agreement and its impact on cattle and food sectors of New Zealand

ABSTRACT

The Paris Agreement asserts that greenhouse gas emission pathways should be consistent with holding the increase in global temperature below 1.5 °C, or 2 °C above pre-industrial levels. The purpose of this paper is to assess the economic impact of this agreement on the cattle and food product sectors of New Zealand. We used a general equilibrium approach to evaluate the economic impacts, and the Global Timber Model to estimate forestry carbon sequestration. We simulated eight scenarios where we allow accounting/not accounting for sequestration, pricing/not pricing agricultural emissions, and linking/not linking the New Zealand Emissions Trading Scheme (ETS) with the European Union ETS. We found that significant negative impacts occur if sequestration is not accounted, the ETS remains unlinked and agriculture is priced. Competitiveness, in turn, is not significantly affected if sequestration is accounted, regardless of the linking scheme of the ETS.

KEYWORDS:

• Agriculture
• emissions trading scheme
• forestry carbon sequestration
• general equilibrium
• global timber model
• linking
• New Zealand
• pricing

JEL CODES:

• C68
• Q51
• Q54
• Q56

Acknowledgements

The authors wish to thank Tommy Robertson, Suzie Greenhalgh, Pike Brown and three anonymous referees for helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Results on GDP come from Fernandez & Daigneault (2016a). For further details see Fernandez & Daigneault (2016b).