By Brian Fallow*
The Government’s reaction to the Parliamentary Commissioner for the Environment’s call for a durable statutory framework for climate policy was about as dismissive as respect for an officer of Parliament allowed.
Climate Change Issues Minister Paula Bennett’s response was not so much “No way” as “No need. Not yet. Not now.” It was consistent, in short, with the Government’s slow-motion approach to the great issue of our day and age.
Jan Wright’s last report as commissioner called for a Climate Change Transition Bill recognising the intergenerational nature of the challenge, enacting at least one emissions target and requiring a series of five-year carbon budgets be set to achieve that goal.
The budgets would be set based on objective advice from an independent and expert Climate Change Commission, though policies to meet those targets would remain the responsibility of the Government.
It is a model based on Britain’s Climate Change Act, emulated in at least eight other developed countries. It is advocated in New Zealand by Generation Zero and the youth wings of the National, Labour, Green and Maori parties, and has been favoured for some time by the Greens, Labour and New Zealand First.
A more familiar model is the Reserve Bank Act. Parliament resolved nigh on 30 years ago that New Zealand should become a low inflation economy and set up a process, the policy targets agreement with governor of the Reserve Bank, to quantify medium-term targets to that end, adjusted from time to time in light of evolving circumstances but consistent with the statutory objective of stability in the general level of prices.
The NZ economy will have to decarbonise
The overarching reality is that the New Zealand economy will have to decarbonise, that is, reduce its net emissions to zero, within the lifetimes of many of the people who already live here.
The challenge is to do that in an orderly way that reduces the risk of stranded assets and maximises the opportunities that arise from the fact that (if you do it right) one man’s cost is another man’s livelihood.
That is much more likely if climate policy is depoliticised, as monetary policy has been. It needs to reflect the fact that many of the investments required have long lives spanning several changes of government. As the forest owners like to say, “Our cycle is 10 election cycles”.
But when Paula Bennett was asked about putting carbon targets into law she said she did not think it was necessary.
When asked about a five-year carbon budgets she said, “I don’t think setting up an independent climate change body would work for us at the moment but I think it might be something worth looking at in the future.”
She is supportive of the work of Globe NZ, the local chapter of an international grouping of legislators progressive on climate change. Its 30-plus member are drawn from every party in Parliament.
You might wonder what is wrong with the other 80-odd MPs. The British legislation passed in 2008 with only three MPs opposed.
But Bennett doubts a similar consensus exists here: “I don’t think there would be enough agreement across the House on where that would land, so I think there is a bit more ground work that needs to be done first.”
Consensus not a word that springs to mind
On that the minister is probably right.
If you look at the parties’ climate change policies consensus is not the word that springs to mind.
The Government’s central policy instrument for addressing climate change is the emissions trading scheme, enacted in the last few weeks of Labour’s ninth year in power and promptly gutted by the incoming National Government.
For most of its existence it has been, on the supply side, a cap-and-trade scheme without a cap, while on the demand side it has exempted from any carbon price the majority of New Zealand’s emissions. And until two years ago emitters were able to meet their obligations from unfettered access to el-cheapo but environmentally dodgy imported carbon credits.
No wonder it has achieved five-eighths of not very much at all.
National seems content to leave it that way. The changes to the ETS Bennett announced last week do little to dispel the uncertainty confronting those whose behaviour the ETS is intended to affect.
It remains resolute in its determination to entirely exempt the agricultural gases, methane and nitrous oxide, which comprise nearly half of national emissions.
Exempting 90% of emissions from the smokestack (emissions-intensive trade-exposed) sector will continue until at least 2020 with no clarity still about how any whittling down of that protection thereafter might go.
The Government has flagged that the current price ceiling of $25 a tonne is liable to increase eventually, but there is no suggestion of a price floor which would mitigate the downside risk of forestry investors or other market participants contemplating chunky capex.
It also proposes at some stage and to some as-yet-unspecified limit to reopen the ETS to imported units from some still mysterious sources offshore, subject to yet-to-be-determined procedures for ensuring their environmental integrity.
Labour wedded to the ETS
The Labour Party strongly supports the PCE’s call for emission targets set in legislation, carbon budgets and an independent climate commission, its climate change spokesperson Megan Woods said.
Labour has yet to formally release its climate change policy but remains wedded to the ETS as designed by David Parker on an all sectors, all gases basis.
The inclusion of agriculture would involve a high degree of grandfathering. The aim is not to punish past behaviour but influence future behaviour, Woods said.
Labour is open to a “science-led” discussion about how to account for methane. Methane is a potent greenhouse gas but also a short-lived one which over time is oxidised into carbon dioxide and water.
Consequently a “two baskets” approach which treats it separately from the long-lived gases like carbon dioxide and nitrous oxide, is favoured by Generation Zero in the Zero Carbon Act it is drawing up and also by the incoming Parliamentary Commissioner for the Environment, Simon Upton.
Figuring out how to do that would require the resources available to a Government rather than an Opposition party, Woods said. “But we are sending bit of a smoke signal there.”
The Greens also welcomed the commissioner’s call for a climate law that would make emissions targets legally binding and establish an independent expert group to advise the government on climate policy and monitor progress.
Green MP Kennedy Graham is the driving force behind the Globe NZ initiative and put a private member’s bill to establish a climate commission into the hopper in 2013. “So it’s good that support for the idea is growing,” he said.
But in contrast to Labour, the Greens have written off the ETS as hopeless and favour a carbon tax, with the revenue recycled as tax cuts elsewhere, as a better way of putting a carbon price into the economy.
Climate change is of course a central concern for the Green Party and underpins its policy on a broad front, including transport and energy.
For example it wants a target of 100% renewables for electricity generation, where the Government’s target is 90%.
It would invest $900 million electrifying rail in the “golden triangle” between Auckland, Hamilton and Tauranga.
It would set up a Green Investment Bank, with $100 million of public money to pump prime private sector investment in low emission projects.
NZ First policies not costed or funded
New Zealand First also favours an independent climate commission and a series of carbon budgets (three-yearly in its case).
It would abolish the ETS. But it accepts that some form of carbon pricing is needed.
Does that mean that like the Greens it favours a carbon tax?
“We are not able to commit to a carbon tax as such,” its climate change spokesman Denis O’Rourke said. “It is our intention to further investigate how an internal system for carbon pricing would work. We have already seen one proposal that looks attractive but we are not able or willing to say anything more at this stage about that.”
New Zealand First strongly objects to the prospect of the Government spending billions of dollars over the 2020s buying carbon credits offshore.
Government projections are that only about a fifth of the 220 million tonne gap over that decade between our national commitment under the Paris accord on the one hand and business as usual net emissions on the other will be met by domestic action. The other 80% of the gap would have to be met by the purchase of credits for emission reductions elsewhere which are surplus to other countries’ commitments. Quite where this carbon is to be found remains unclear.
“We see no advantage taking $1.4 billion [a year] off Kiwis and then washing it through some Wall Street offshore-based system,” Winston Peters said last week.
“New Zealand First will take that $1.4 billion and put it into New Zealand science, research and adaptation so we meet our emission commitments.”
O’Rourke said New Zealand First was committed to meeting New Zealand’s obligations under the Paris accord.
So how would that 37% gap between the current trajectory for emissions and the Paris commitment be closed?
Requiring more use of rail for heavy freight, the large-scale introduction of light rail in the main population centres and encouraging electric vehicles by extending the exemption from road user charges beyond 2020, requiring gas stations to have at least one plug-in facility within two years and exempting electric vehicles form fringe benefits tax.
As is par for the course with New Zealand First policies none of this is costed or funded.
In addition, “Like it or not, farmers must prepare for what is coming,” its policy says.” New Zealand First will assist farmers to plant out in forestry percentages of their current farms and the carbon sequestration from these plantings will directly offset some of their future carbon emissions. A much larger additional programme of reforestation of both permanent indigenous forest and plantation forestry is also an essential part of New Zealand First’s climate change strategy.”
Clearly then, while there is some common ground among the opposition parties on climate policy, there are also substantial areas of difference.
That only strengthens the case for an independent and expert body to tender advice.
*Brian Fallow is a former long serving economics editor at The NZ Herald. This is the latest article in an election year issues-based analytical series on economic policies he's writing for interest.co.nz.
His first article is here.
His second article is here.
His third article is here.
His fourth article is here.
His fifth article is here.
His sixth article is here.
His seventh article is here.
His eighth article is here.
His ninth article is here.
His tenth article is here.