I’ve never had that much interest in climate change. Perhaps it comes from living in Wellington. If average local temperatures were a couple of degrees warmer here most people would be quite happy. And as successive earthquakes seem to have the South Island pushing under the North Island, raising the land levels around here – you can see the dry land that just wasn’t there before 1855 – it is a bit hard to get too bothered about rising local sea levels. Perhaps it is a deep moral failing, a failure of imagination, or just an aversion to substitute religions. Whatever the reason, I just haven’t had much interest.
But a story I saw yesterday reminded me of a post I’d been meaning to write for a few weeks. According to Newshub,
In documents released under the Official Information Act, a briefing to Judith Collins on her first day as Energy Minister says the cost to the economy of buying international carbon units to offset our own emissions will be $14.2 billion over 10 years.
In the documents, officials say “this represents a significant transfer of wealth overseas”, and also warn “an over-reliance on overseas purchasing at the expense of domestic reductions could also leave New Zealand exposed in the face of increasing global carbon prices beyond 2030”.
The cost amounts to $1.4 billion annually.
The Green Party says the bill will only get bigger if no action is taken by the Government to reverse climate pollution, and it continues to open new coal mines and irrigation schemes.
Roughly speaking, this suggests we’ll be giving roughly 0.5 per cent of GDP each year to people in other countries, just because of an (inevitably) somewhat arbitrary emissions target. Many useful economic reforms might struggle to generate a gain of 0.5 per cent of GDP. These are large amounts of money, inevitably raised at a still larger real economic cost. And this is on top of the economic costs of domestic abatement policies.
Of course, whatever New Zealand does in this area makes no difference to the global climate. We are simply too small. Most people recognise that we sign up to arbitrary targets through some (not unrelated) mix of wanting to be a good international citizen and (perhaps as importantly) being seen as a good international citizen. If we were regarded as not “doing our bit” there might be a risk of trade restrictions or other adverse repercussions a little way further down the track.
If one is an emissions and climate change zealot, the New Zealand data looks like it could give you grounds for zealotry. For example, here are total emissions (in CO2 equivalent terms) per unit of GDP (using PPP exchange rates), from the OECD databases. Why per unit of GDP? Well, generating GDP takes various inputs, and emissions of greenhouse gases are often one of them.
But emissions levels are, at least in part, about geography and industry structure. They aren’t just a matter of “wasteful” choices. Thus, steps to reduce emissions might also reduce the number of units of GDP. (In emissions per capita terms, we don’t rank as far to the right – being quite a lot poorer than (say) Australia, Canada and the United States).
The self-imposed emissions reductions targets are, I gather, expressed in terms of total emissions. Again using OECD data, here is how the various countries have done on that score since 1990 (the typical reference date – and a somewhat convenient one for the former eastern bloc countries, which often had very inefficient heavy industries).
But one of the things that marks us out relative to most of the OECD (and certainly relative to those former eastern bloc countries on the left of the chart) is the rapid growth in population we’ve experienced since then. In fact, New Zealand’s population has increased by more than 40 per cent since 1990. By contrast, all the world’s high income countries’ population has increased by only around 15 per cent over the same period. And all else equal, more people tend to mean more emissions (although no doubt it isn’t a simple one-to-one relationship).
In per capita terms, our greenhouse gas emissions have actually fallen since 1990. Of course, so have those of most OECD countries. Here are the data.
Our average per capita emissions have been falling less rapidly than many other OECD countries, but not that much less rapidly than the OECD total. And all this in a country where I gather – from listening to the occasional Warwick McKibbin presentation – that the marginal cost of abatement is higher than almost anywhere in the world. Why? Well, all those animals for a start. And the fact that we already generate a huge proportion of our energy from renewable sources (all that hydro). And, of course, distance doesn’t help – aircraft engines use a lot of fuel, and neither a return to sailing ships nor the prospect of, say, solar-powered planes at present seem an adequate substitute.
So you have to wonder how our government proposes to meet its self-imposed targets, without doing so at great cost to the living standards of New Zealanders.
In fact, it seems the government is wondering just that. A few weeks ago,
The Minister for Climate Change Issues, Hon Paula Bennett, and the Minister of Finance, Hon Steven Joyce, today announced a new inquiry for the Productivity Commission into the opportunities and challenges of a transition to a lower net emissions economy for New Zealand.
The terms of reference are here. As they note
New Zealand has recently formalised its first Nationally Determined Contribution under the Paris Agreement to reduce its emissions by 30 percent below 2005 levels by 2030. The Paris Agreement envisages all countries taking progressively ambitious emissions reduction targets beyond 2030. Countries are invited to formulate and communicate long-term low emission development strategies before 2020. The Government has previously notified a target for a 50 per cent reduction in New Zealand greenhouse gas emissions from 1990 levels by 2050.
Which does look a little challenging (in 2014 total emissions were about 3 per cent lower than 2005 levels – 30 per cent looks a long way away). That isn’t too surprising. After all,
- the marginal cost of abatement is particularly high in New Zealand
- the rate of population growth in New Zealand has been rapid, and
- the rate of population growth is projected, on current policies, to continue to be quite rapid.
In fact, SNZ project another 25 per cent population growth by 2050 – quite a slowing from here, but still materially faster than the populations of most other advanced economies will be growing. And, recall, more people typically means, all else equal, more emissions. The 2050 target, in particular, requires quite staggering reductions in per capita emissions – actual emissions now are a quarter higher than in 1990 – if anything like these population increases actually occur.
The terms of reference for the Productivity Commission inquiry go on at length about all manner of things, including noting (but only in passing) that there may be “future demographic change”.
Recall that New Zealanders are actually doing their bit to lower total emissions. Our total fertility rate has been below replacement for forty years. And (net) New Zealanders have been leaving New Zealand each and every year since 1962/63. If New Zealanders’ personal choices had been left to determine the population – the natural way you might think – total emissions in New Zealand would almost certainly be far lower than they are now. Check out the low population growth countries’ experiences in the second chart above.
Instead, we’ve had the second largest (per capita) non-citizen immigration programme anywhere in the OECD (behind only Israel), a programme that (as it happens) got underway just about the time (1990) people benchmark these emissions reductions targets to.
As I’ve noted repeatedly, neither the government (or its predecessors), nor the officials, nor the business and think tank enthusiaists for large scale immigration, can offer any compelling evidence for the economic benefits to New Zealanders (income and productivity) from this modern large scale immigration. And when they do make the case for large scale immigration, they hardly ever mention things like emissions reductions targets (I’m pretty sure, for example, there was no reference to this issue in the New Zealand Initiative’s big immigration advocacy paper earlier in the year). Even if, to go further than I think the evidence warrants, one concluded that the large scale immigration had made no difference at all to productivity levels here (and remember that, for whatever reason, we have actually been falling slowly further behind other countries over this period despite all the immigration), once one takes account of the substantial abatement costs the country is likely to face if it takes the emissions reduction target seriously, the balance would quite readily turn negative. We would need to have managed quite a bit of spillover productivity growth from our not-overly-skilled immigration programme (and recall that no gains have actually been demonstrated) just to offset the economic costs, direct and indirect, of meeting emissions reduction targets which are made more onerous by the rapid increase in population numbers.
So I do hope that as the Productivity Commission starts to think about how to conduct their emissions inquiry, they will be thinking seriously about the role that changes in immigration policy could play in costlessly (or perhaps even with a net benefit) allowing New Zealand to meet the emissions reductions targets it has set for itself. On various assumptions about the economic costs or benefits of immigration, how would the marginal costs of abatement compare as between lowering the immigration (residence approvals) target, and other policy mechanisms that are more often advocated in this area? It would be interesting to see the modelling work on these issues. If the Productivity Commission doesn’t take seriously the reduced immigration option, it would be hard not to conclude that ideology was simply trumping analysis.
Of course, reduced population growth through lower immigration isn’t a solution for every country. On the one hand, people who don’t come here, stay somewhere else. And on the other, most advanced countries have much smaller immigration programmes than we do. But if it isn’t a solution for every country, it looks like a pretty sensible and serious option for New Zealand specifically. And the interests of New Zealanders should be the primary focus of our policymakers, and their advisers.
It is also brings to mind the old question as to why the Green Party in particular seems to remain so committed to large scale immigration, and the “big New Zealand” mentality, that has driven politicians here (of all stripes) for more than a century. Not only would a lower population be consistent with New Zealanders’ personal revealed preferences (birth rates and emigration) and actions, it would assist in meeting emissions targets. Perhaps to idealistic Greens that seems like “cheating” – it doesn’t reduce global emissions, although it may put the people in places where the costs of reducing global emissions is cheaper than it is here.
But even if so, then what about one of those other pressing Green concerns – water quality and the pressure on the environment from the increased intensity of agriculture? There is increasing recognition across the political spectrum that there is a major issue here, and it is an area where New Zealand actions and choices make all the difference. Cut back the immigration target and, over time, we would see lower real interest rates and a lower real exchange rate. Against that backdrop it becomes much easier to envisage governments being able to impose much stiffer, and more expensive, standards on farmers (the offset being the lower exchange rate). With a less rapidly-growing population, the (probable) reduced growth in agricultural output would be less of a concern (economically) and real progress could be induced on the environmental fronts (emissions and water pollution etc), without dramatically eroding the competitiveness of New Zealand’s largest tradables sector.
(Much the same sort of argument can be advanced in respect of congestion and pollution costs associated with growth in tourism: less rapid immigration would result in a lower real exchange rate, making it more feasible (economically and politically) to levy the sorts of charges that might effectively deal with pressures that the sheer number of tourists is imposing in some parts of the country – in a country where the natural environment is really what draws people.)
It is past time for a serious debate on just what economic gains (if any) New Zealanders as a whole are getting from continued large scale non-citizen immigration. The emissions reduction target might be seen by some as an arbitrary, even unnecessary, intervention, and is no doubt seen by others as a moral imperative, perhaps the very least we could do. I don’t have a dog in that fight. But the targets are a fact – a domestic political reality, and probably an international constraint we have to live with even if we didn’t really want to. Against that background, and given the high marginal cost of abating greenhouse gas emissions in New Zealand, and with little or no evidence of other systematic gains to New Zealanders from the unusually large scale immigration programme we run, we really should be taking more account of our immigration policy in thinking about how best (most cheaply) to reduce effectively greenhouse gas emissions, as well as the water pollution that increasingly worries many New Zealanders.