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….

3. 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.