Monday, 18 August 2014

Climate Change Issues for the New Zealand Election


By Suzi Kerr

The biggest environmental issue that New Zealand must address seriously now is climate change mitigation. In doing this we need to show leadership, use science (especially economics and psychology), and have politics focus on what really matters to voters.

The following post was originally presented as a speech at the Auckland University Business School Ballot Box event on Wednesday, August 13.

Why climate change?

It is irreversible, cumulative, systematic (affects all aspects of life on earth), and complex.  While solutions need not be expensive if done well, they will involve all aspects of our society:  economy, culture, diet, identity, recreation …

Climate change is the greatest threat to our biodiversity, water resources and oceans in the long term.  In contrast to climate change, water issues are mostly reversible and biodiversity issues are more focused in both the effects and the solutions.

Addressing these other environmental issues is good and will often help with climate change but we cannot effectively address climate change only through related issues:  significant opportunities will be missed and some effort will be misdirected. For example many people still talk about insulation programs as climate policy despite strong evidence that in the short run at least, they have had almost no effect on emissions.

So what should we be discussing about climate change in the context of the election?  


There is agreement across the political spectrum that we should be pricing carbon. That’s a great place to start.  There are however political differences in how high the price should be and how we should share the benefits and protect the vulnerable (poorer households and workers and owners of assets in declining industries) during a transition to a lower emissions future.  

Some people feel cheated and disillusioned as a result of the large gains some individuals and companies are reaping through avoidable arbitrage opportunities in the ETS and are uncomfortable with the perception of large gains from free allocation of emission units in the case of industry, or exemption from the system in the case of agriculture.

The recession, which has hit the poorest disproportionately in all societies, the global discussion about inequality and the top 1%, and our growing understanding of the increased decoupling of GDP and societal wellbeing, has brought into stark relief that in periods of fundamental change, even if society as a whole benefits (which we would by controlling climate change) some individuals will lose a lot while some will reap large gains if we do not pay close attention.  

These fundamental issues of New Zealand’s overall level of effort to shift toward low emissions, and how we manage distributional issues is what political discussion should be about, not which technical instrument, tax or ETS, should be used to realise the politically determined goals.   

While carbon pricing is critical it is only one part of an integrated solution.  Beyond carbon pricing in the context of the election and beyond, we can discuss how the government can best work with the private sector (both business and civil society) to make smooth, rapid, transitions to low emissions mobility, production and homes.  

Political debate can consider different ways that government can support society’s ongoing cultural evolution to be consistent with a low emissions future.  Many futures are possible; as a society we need to choose our direction.  In these discussions we need to focus on the wellbeing of all New Zealanders where we know that income, measured as GDP, is a highly imperfect measure of wellbeing.  GDP and emissions continue to be closely linked (though they do not need to be) but wellbeing and emissions are much less linked so we have many options. 

These are questions on which people with different political perspectives will genuinely differ, and which need to be resolved through dialogue and democratic processes.  

But climate change is a global issue, and it makes no sense for discussion of New Zealand policy to focus only within our borders. How much we contribute is and will continue to be chosen in the context of what others are doing and could do. The way we contribute should also be strategically chosen to have the greatest global effect taking advantage of our strengths.

Can and should New Zealand take a global leadership role on climate change?

Yes we can – we have taken leadership roles before (women’s suffrage; nuclear free, 1980s economic reform); other similar states have taken leadership roles on climate (Sweden, Denmark, Norway, Califiornia, British Columbia; but also Costa Rica, Brazil) and New Zealand has shown climate leadership already, for example with our innovative ETS and with research on agricultural emissions.  New Zealand still has disproportionate influence for our size internationally.

So we can take leadership, but should we?

This involves two questions:

  1. Is leadership likely to be effective in increasing global effort?
  2. Will it be beneficial to New Zealand?

First, is leadership likely to be effective?  Simple economics shows that although climate cooperation is beneficial globally, every individual, town, industry and country has a strong incentive to free ride when we try to address the problem, and simple economics predicts low or no cooperation.  We often hear arguments for inaction based on this – that group X (choose your favourite – I’ve heard this from many groups in many parts of the world) is too small to make a difference and therefore shouldn’t act.  But the world can be broken into groups which each contribute 0.14% to global emissions; yet if none of them act, we will all lose.  So small size is a spurious reason for why New Zealand specifically should not take leadership.

Ultimately it is people who cooperate (or not). We talk a lot about ‘countries’ doing things but States just aggregate the preferences of people within them and States’ decisions are always strongly influenced by small groups of people.

And the good news is that simple economics is wrong about people.  People do cooperate to solve problems, all the time.  Economies would not function without high levels of cooperation.
There is now a huge academic literature in the cross-over between economics and psychology showing through experiments and case studies that people consistently do two things.

  1. Most people will contribute to a cooperative outcome, against their selfish interests.
  2. Most people will contribute and cooperate more when they see that others are contributing.  

Together these two characteristics of humans can create a virtuous cycle of rising cooperation.  That growing cooperation can be stimulated with leadership by what are often called ‘white knights’ and can be made less fragile as cooperative behaviour is, by mutual consent, embedded in regulations and institutions.

Why should New Zealand take leadership – be a white knight?

  1. We have a real stake in a stable climate – we have a wonderful country and standard of wellbeing to protect.
  2. We can only directly influence ourselves – if we want white knights to exist we can’t force others take that role  (7 habits of effective people)
  3. We are among the people with the highest level of wellbeing on earth by any measure – we can afford it
  4. Climate leadership can make us proud and can support the international reputation of New Zealand and New Zealanders from which we all benefit; and finally
  5. It doesn’t have to cost much.

Global economic modelling consistently shows that the costs of controlling climate change need not be that high if, and that’s a critical if, we do it efficiently.

We can start by putting our effort into doing things that we already know will help – e.g. a higher carbon price, providing tools to farmers so they can easily understand what drives their emissions, changing tax structures to avoid perverse incentives to over-intensify farms or over-use nitrogen fertiliser, eliminating barriers to experimentation with and diffusion of new low emission technology, controlling pests in our forests….

We can also help work out, from a strong social science basis, other ways to achieve the changes we know are technically possible.  We can experiment with promising policy ideas.  If we carefully evaluate our experience and actively engage internationally to share that experience, we could have significant global impact while improving the wellbeing of New Zealanders.

Motu, with many wonderful collaborators: business leaders, NGOs, Maori, government officials and academics, including researchers at the University of Auckland, are working actively in this space with our new Low-Emission Future programme.  That programme is showing both the great potential New Zealand has for global leadership on climate action and also the challenges of doing this type of non-political climate policy work in New Zealand.  Despite significant funding from the Aotearoa Foundation (which is funded from the US) we are struggling to raise the relatively modest local co-funding we need to sustain the programme.  Help is welcomed.

In summary, I’d like to leave you with three key points:
  1. We must talk about climate mitigation    
  2. In the election process we should focus on truly political issues: 
  • How high should we aim to set the carbon price?
  • What is our desired distribution of costs and benefits during the transition to a low emissions society?
  • What is our desired process for cultural and social evolution:  including management of constitutional and legal issues?
  • Ultimately:  what sort of society do we want in the long term? 

Within any given set of political parameters we can then explore - in a non-political way -   instruments to achieve those using the best available economics, psychology, law, humanities….

  1. We should discuss how we can lead globally, make a difference and be proud. Not by putting on a hair shirt (who would want to follow!) but by implementing policies we know are not high cost (eg. a moderate carbon price); experimenting with new ideas, especially in areas where New Zealand is globally unusual (agriculture and forestry); credibly evaluating our efforts; and letting people know what we are doing and what we are learning.
Climate change is inherently hard to address and we are likely to fail as often as we succeed.  It would be great if we could learn from failure and adapt rather than throwing the baby out with the bathwater; if we could support those brave enough to risk failure; and emphasise the water we are gradually dripping into the glass to give us heart so that we can all persist in our efforts and ultimately make a real difference. Every drop counts.



5 comments:

  1. Hi Suzi,

    Great post!
    In terms of your 3rd point, one area we could 'lead globally, make a difference and be proud', and a policy that could possibly seen be as a 'new idea' and 'low cost', could be in addressing any exposure we have to the carbon bubble. This is something that Luke Harrington's post touched on the context.

    Carbon Tracker (www.carbontracker.org), and reiterated by the IEA and IPCC, have highlighted that the amount of fossil fuels that fossil fuel companies hold on their books is far in excess of our global carbon budget- by about five times. Yes- five times more carbon than would keep us within two degrees of warming.

    Any serious discussion about climate change, needs to address investments in these companies in terms of the moral issue of funding climate change and the financial risk associated with their potential loss of value. Their value is at risk due to 80% of their reserves needing to stay in the ground- effectively these assets becoming stranded.

    In addition to NZ Superannuation Fund, ACC, & EQC, NZ has $80+ billion in its managed fund sector- that is our Kiwisaver accounts, superannuation funds, investments made by our insurance companies. Each of these sectors has legislation that governs what disclosures are required.
    The NZ government could set disclosure requirements for these sectors (or just start with kiwisaver?) so NZers can have a choice about whether they want to invest their money in the carbon bubble or in providers that do. In this sense, NZ make a contribution to the global community about the carbon bubble, transparency, and addressing the risk of the stranded assets.

    That alongside policies to address our domestic emissions, would give me heart, and put some good drops in the glass.


    Carl Chenery

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  2. Thanks Carl

    Thanks for a great comment. Yes, climate change can be addressed from various directions - they are complementary. We have all tended to focus on emissions from production of goods in the past (as the UNFCCC does), but directly reducing production of fossil fuels is another way to address the problem, as is reducing our consumption emissions (discussed in an earlier blog http://low-emission-future.blogspot.co.nz/2014/05/who-is-taking-smaller-bites-out-of.html ).

    Compulsory disclosure of investments in fossil fuels in managed funds would be an excellent first step. As we discussed in a previous blog (http://low-emission-future.blogspot.co.nz/2014/07/divestment-part-2-role-of-new-zealand.html) it would allow individuals to control their exposure to the risk that these assets may turn out to be worth less than their current value, and, more importantly, make a contribution to moving capital away from fossil fuels. Disclosure and divestment will gradually make new fossil fuel developments less attractive and also reduce the level of stranded assets that make fossil fuel use politically difficult to regulate.

    More generally we need a deeper public discussion of New Zealand's real interests in the area of fossil fuel investments and exploration. What would a careful national-interest cost-benefit analysis of the value of exploring and developing now relative to waiting for a decade look like? If we decide to wait, in a decade we could reassess; the resources will still be there.

    Suzi

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  3. Great article Suzi, I hadn't heard of your project before. Hope you get the funding you need. All your points are good ones but more could be added:

    1. Policy on fossil fuel subsidies. See http://awsassets.wwfnz.panda.org/downloads/wwf_fossil_fuel_finance_nz_subsidies_report.pdf. This WWF report describes how NZ is lecturing the world on reducing subsidies, while increasing them at home. Interestingly, the AA has called for an excise tax on diesel - at the moment it is effectively subsidized relative to petrol, especially for off-road uses (eg tractors).

    2. Emissions reduction goal. In 2011 John Key promised that he would legislate in this term for a "50 by 50" reduction goal - 50% reduction over 1990 levels, by 2050. He hasn't done so, and, as far as I can, no part of the civil service is working on such a plan. The EECA is instructed not to mention climate change. In the meantime, opinion has moved on and such a goal is now too conservative. All members of the EU are preparing plans for at least 80% reductions by 2050. Denmark plans to be entirely fossil-fuel free by then. The agricultural emissions complicate things for New Zealand, but still the target should be part of the debate. Having set a goal, the economists can hopefully tell us the best way to achieve it.

    3. Renewable electricity policy. Currently, we have none - surely the only country (or state) in the OECD to be in this position. Like "50 by 50", the "90% renewable by 2020" goal, claimed by both Labour and National, was never enacted into policy.

    4. Renewable energy goal/energy independence goal. Currently, we import $8 billion of fuel a year - 4% of GDP. Not good for our balance of payments, even if this is the most efficient way to arrange things in the short term.

    5. The UK has given authority to set carbon budgets to Parliament (ie. not to the Government) and all their major parties support their current goal of an 80% reduction by 2050. Could that be achieved here?

    Cheers,

    Robert McLachlan

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  4. Those are all good questions and ones we are thinking about in our low emissions future programme. You are right - the science has come first and is probably about as clear as it is going to get. The challenge now is getting to our global targets despite the strong incentives for everyone to free ride and for vested interests to push for delay and inaction. We do have some idea of what the carbon price should be (the social cost of carbon reflects this - see one of our earlier blogs http://low-emission-future.blogspot.co.nz/2014/07/high-profile-research-suggests-social.html ) but this is made complex by the international negotiations - some countries won't impose this for a variety of good and bad reasons, so others will have to do more.

    Yes, by 'can' I mean, it is possible - and an appropriate role for political dialogue - not that it will inevitably happen. I am also an optimist. To last long working on climate change you have to be! If we don't assume we can solve it and focus on how we can do that we will never get anywhere.


    Regards, Suzi Kerr

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  5. a SOLAR ENERGY CAR made by amateurs have crossed Australia. Why CAR´S FACTORIES do not want to know that?. Petroleum´s economic interests. Shame politicians

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