Tuesday, 4 June 2019

Integrating climate with economy needs to extend beyond government

A reaction to the Wellbeing Budget of May 2019 by Catherine Leining, Policy Fellow at Motu Economic and Public Policy Research


On 30 May 2019, the New Zealand government released its first “Wellbeing Budget.” Under this framework, new funding for climate change mitigation has been integrated with economic development. Adaptation gets only a brief nod. Is this budget allocation adequate to meet the climate change challenge before us? No – but could it ever be?

One key theme is research for a low-emission future. Examples are a National New-Energy Development Centre in Taranaki ($27m), an Advanced Energy Technology Platform ($20m), a Bioresource Processing Alliance and Product Accelerator ($18m), and an Agricultural Climate Change Research Platform ($3.2m). MBIE will advance policy on the future of work and “just transition” issues.

In terms of tangible emission reductions, the focus is mostly on rail transport (with $2.1b toward capital costs for the rail network – both passenger and freight) and sustainable land use. About $122 million will be directed to on-farm tools and advice for the low-emission transition. Funding freshwater work ($64m) in conjunction with the Emissions Trading Scheme (ETS) may signal future pricing of at least some agriculture emissions. The Billion Trees Programme ($130m added over two years starting in 2019/20) and regional forestry work through Te Uru Rākau ($49m) also benefit. Smaller-scale initiatives include funding for improved energy efficiency in schools ($6 million) and policy development for a Green Transport Card for low-income households ($4.6 million). Other expenditure supporting venture capital, research and innovation, and the Provincial Growth Fund more broadly could support aspects of the low-emission transition – if appropriate incentives are in place.

This budget plants seeds for future mitigation but will not drive near-term transformation. Our 2030 Paris target is looming large. If domestic emissions don’t fall, the government will have to pay for overseas emission reductions – provided a supply becomes available with high integrity and reasonable prices, and that is not guaranteed.

The budget’s approach to mainstream climate action into economic development makes good sense. No matter how much the government could have spent on climate change within this budget, it would never have been enough. To achieve steep emission reduction targets, we need to mobilise investment at unprecedented speed and scale where it counts most: the private sector. And that requires policy certainty with cross-party support and ambitious emission pricing.

This budget funds the new Climate Change Commission and an ETS auction platform. The next budget may see higher emission prices, ETS auction revenue, and bold emission reduction plans on the horizon. Of course, that will depend on a strong Zero Carbon Amendment Bill. Public submissions are due by 16 July 2019.

An abbreviated version of this piece was posted on The Spinoff

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