I’ve now got off my chest my annoyance at some of the “playing distraction” rhetoric David Hall used in his Newsroom piece responding to my column urging that the Productivity Commission inquiry into a transition to a low-emissions economy should at least consider the potential role of immigration (in boosting emissions in the past, and perhaps in offering a lower-cost abatement tool in future). But I wanted to come back to some of the more substantive issues Hall raises.
Bear in mind that my column was based on a submission to the inquiry the government asked the Productivity Commission to undertake. The terms of reference which the Commission is operating under are focused on New Zealand’s own policy responses, and how to (maximise the benefits and) minimise the costs of meeting the target which the government has set. The focus is – rightly in my view – on national interests (costs and benefits to New Zealanders) now that the New Zealand government has already factored in its response to the (actual and perceived) global imperatives, in establishing an emissions reduction target under the Paris climate agreement. Having determined how much reduction in emissions we will aim for, and made those commitments to other countries in an international context, the challenge now is how best to adjust, and what mix of policy instruments might enable us to deliver on those commitments.
Hall argues that “what matters from the perspective of Earth’s atmosphere is what people emit, not where they emit it”. Maybe so, but the New Zealand government is not now making policy for the “Earth’s atmosphere”, but around an emissions reduction target it has signed up to for New Zealand. In that context, where the emissions happen matters.
My submission was firmly set within that sort of framework – one set by the government and recognised by the Commission. In fact, in the Terms of Reference the three ministers were using exactly the same sort of analytical framework I was.
New Zealand’s domestic response to climate change is, and will be in the future, fundamentally shaped by its position as a small, globally connected and trade-dependent country. New Zealand’s response also needs to reflect such features as its hjgh level of emissions from agriculture, its abundant forestry resources, and its largely decarbonised electricity sector, as well as any future demographic changes (including immigration).
The focus of my submission was, in many respects, that the Commission had simply ignored that last phrase. Population growth matters to emissions, all else being equal, and in New Zealand – where non-citizen immigration is so (a) important, and (b) fully within government control – population growth can, via immigration policy, and should be considered as an instrument to reduce emissions. It might be uncomfortable for MBIE (champions of immigration), or for the Ministry for the Environment, but the point of Productivity Commission inquiries isn’t to make life comfortable for established interests.
Hall is clearly uncomfortable with the idea – the pretty basic fact – that increased populations increase emissions, all else equal. But again, discomfort doesn’t change the stylised facts. As he acknowledges, “road transport emissions have increased by 78 per cent since 1990”, but…..
But the fault here lies with New Zealand’s over-reliance on private vehicles. Migrants (and citizens) contribute to road traffic by necessity, because alternative means of transport are less available, indeed far less so than many migrants are used to, coming from places where travel by trains, trams, cycles and footpaths is not unusual. If low-carbon alternatives in places like Auckland were more serviceable, migrants would doubtlessly utilise them, as indeed would citizens. And if the excuse for underinvestment is the lack of markets of sufficient scale, then population increase and cultural change will drive progress.
In other words, if governments and people did things differently than they actually did, emissions would have been lower. No doubt, but that isn’t really the point. Each of the alternatives Hall proposes would have had both public and private costs – and the point of the exercise is to keep those costs to a minimum. Perhaps he’d prefer a world of light rail and trains. Most citizens don’t seem to, at least when confronted with real world costs – and the economics of such proposals in New Zealand is generally shocking. Actual transport emissions would have been a lot lower than they are now if, at the extreme, the population had been constant since 1990. And if – and it is a proposition for debate – the immigration that so substantially boosted the population had few, no, or even negative productivity gains for New Zealanders, those emissions reductions could have been achieved at little or no economic cost at all. There are plenty of ways to reduce emissions, but the challenge is to find the most cost-effective ones or – in markets – to set up the instruments in a way that allows private agents to identify the most cost-effective means of adjustment.
In my column and submission I had noted that it is generally accepted that New Zealand typically faces quite high marginal abatement costs to reduce emissions, relative to those faced by most other advanced economies. When I wrote that, I wasn’t even thinking of it as a controversial proposition. But Hall wasn’t happy with the claim.
This contradicts Reddell’s claim that “all informed observers recognise that the marginal abatement costs in New Zealand, through conventional means, are high”. I’ve written for Pure Advantage about the potential of forests – both production and permanent forests – to offset agricultural emissions in a way that isn’t only cost-effective but potentially profitable. This is corroborated by other “informed observers”, such as the Royal Society of New Zealand, the Parliamentary Commissioner for the Environment and Vivid Economics. The latter’s Net Zero in New Zealand report highlights other low-cost opportunities in energy efficiency, heating technologies, agricultural efficiency, and technological advances in methane vaccines and cheaper electric vehicles.
I’m happy to alter “all informed observers” to “most observers”, but I’m not resiling from the basic point. Warwick McKibbin of ANU, who has done a lot of modelling on climate change and emissions abatement first produced estimates 20 years ago showing that that the “marginal abatement cost in New Zealand amongst the highest in the world”. I’ve heard him repeat the point in various seminars and lectures over the years. Why are the costs higher here? Among other things, because a very large chunk of our emissions are agricultural, and there aren’t yet good technologies for reducing the emissions while keeping the animals. And because our power generation is already largely hydro-based, so can’t easily be switched to alternative fuels to reduce carbon emissions. This is an expensive place to reduce emissions – an equal marginal cost approach would see us adopt a less aggressive emissions reduction target than most countries. There are papers on the web from government agencies making exactly this point.
The Productivity Commission themselves recognise these points. For example, from their issues paper, on animal emissions.
Moderate emissions cuts are possible from certain agricultural technologies (eg, low-emission feds). However, a low-cost technology that delivers dramatic reductions in biological emissions appears far off, and may not emerge. While a methane vaccine could reduce CH4 emissions by up to 40%, no successful trials of such a vaccine have so far occurred.
Actually, for all the talk of alternative technologies, the Vivid Economics paper Hall links to makes much the same point about the sorts of constraints New Zealand faces. Here is text from the Executive Summary (of a report funded by various MPS, foreign embassies and other donors).
In meeting this challenge, New Zealand is distinctive in at least three respects: its significantly decarbonised energy sector; its large share of difficult-to-reduce land sector emissions; and its large forestry sector. Elsewhere in the world, more focus has been devoted to reducing emissions from the electricity sector than from any other sector. Huge efforts and costs are now beginning to translate into progress. But for New Zealand, these challenges are of less significance. Its power sector consists primarily of hydroelectric and geothermal resources, providing firm, reliable capacity. Even with the challenge of decarbonising other parts of the energy sector (transport fuels, heat), the resulting relatively low-carbon energy mix provides the country with a considerable competitive advantage in a world that is placing increasing constraints on emissions. Yet, at the same time, the importance of the pastoral agriculture sector to the economy and social fabric of the country creates a huge challenge, although one that is laced with opportunity. Biological emissions from agriculture account for almost half of New Zealand’s gross emissions, a higher proportion than in any other developed country. While other developed countries may choose to not prioritise reducing these emissions in the short term, following suit would have important repercussions for New Zealand in meeting future targets.
Wishing it were otherwise does not make it so. Marginal abatement costs are typically higher here than in other countries. Those costs may well be falling – as eg new battery technologies for example open up new options re transport emissions – but those technologies are available to other countries too. They don’t change the specific challenges New Zealand faces relative to other advanced countries. The emissions target we’ve committed to, whether through belief or interest, represent a new constraint on economic performance, and that constraint is more severe for New Zealand than for most, in a country with a long-term history of real economic underperformance.
Against that backdrop it would be irresponsible to simply wave our hands and pretend that immigration isn’t an issue (for us, as New Zealand, and our governments), ploughing on oblivious to the potential real economic costs of doing so. Immigration policy needs to be considered as one strand in thinking about how best to design a New Zealand policy response, to minimise the net adjustment costs to New Zealanders.
I’d simply taken for granted what seemed like a fairly obvious point (even Hall reluctantly acknowledged it) that increased populations will have tended to increase emissions, all else equal. But until now I hadn’t had a look at the cross-country data to see if the relationship was actually there in the data. It might not have been – after all, countries might have responded to the rising populations by finding techniques and market instruments to lower per capita emissions sufficiently that there was no relationship left in the observed data.
Fortunately, we have quite detailed data on gross emissions for almost all OECD countries from 1990 to 2015. In a few cases, the data are only up to 2013 or 2014, and in all the scatter plots that follow I’ve lined up the population changes with the emissons data (eg if for a country there is emissions data for 1990 to 2014, I’ve used percentage population change over that period). But for 30 countries there is full data for all the variables I looked at.
None of these relationships are particularly tight – these are simple bivariate relationships, and lots else was going on in each of these countries (eg in the former Soviet bloc countries, production processes had been extremely inefficiently energy-intensive).
I start with transport emissions (actually to 2015 despite the label). As Hall noted, transport emissions in New Zealand have increased a lot, as has our population.
Unsurprisingly, the relationship is upward sloping.
What about manufacturing and construction emissions?
(That outlier up the top is Korea, which has still been massively industrialising.)
Total gross emissions?
Hall seemed particularly perplexed, or perhaps outraged, by my points about agriculture
As I understand him, he argues that New Zealand’s high living standards depend upon dairy exports, which makes it politically infeasible to impose costs for environmental damages. The greater the population, the greater this reliance upon the dairy sector, and so the greater the reluctance to make polluters pay.
Again it seemed pretty descriptively accurate to me (whether it is an outcome he – or I – like or not). But even though agricultural emissions are much more of an issue for New Zealand than for most OECD countries, I was curious as to whether there was a relationship (across countries) between population growth and growth in agricultural emissions. I didn’t have a prior expectation, but in fact this is what I found.
It is actually one of the tighter relationships, so I’ll repeat the proposition from my submission/column: with fewer people it seems quite plausible that we’d have had (tighter environmental regulation and) fewer cows and fewer emissions.
I could go on showing you charts all day, but I won’t try your patience. Somewhat to my surprise there is actually even a (weak) positive relationship between population growth and per capita emissions and emissions per unit of GDP. I’m not quite sure why that would be, although in New Zealand (and Australia’s) case, the migrants are moving to some of the OECD countries with, already, the highest emissions per capita and per unit of GDP.
The bottom line for New Zealand is that our immigration policy, which has very substantially boosted our population, has also substantially boosted our emissions over the last 25 years. Our experience doesn’t look out of line with that of the rest of the OECD: growing populations are associated with more emissions, whether in transport, agriculture or just in total. Given that marginal abatement costs, even if falling, are still high here relative to those in other advanced countries, it would frankly be irresponsible for any government, concerned primarily about the interests of New Zealanders, not to have the levers of immigration policy considered when assessing the best approach for New Zealand to take to meet its commitments. The Productivity Commission should be doing so.
In the end, though, I suspect that the real difference between me and David Hall isn’t about any of these numbers. He concluded his article
Because when it comes to global warming, it’s the carbon intensive economy, stupid. The only genuine solution is to transform the world’s high-emissions economies into low-emissions economies, so that anyone entering them by way of birth or migration can lead a prosperous low-carbon life. Our national emissions targets are a means to this global end. Focusing on peripheral issues like migration only distracts from the work that needs to be done. But that’s what happens when you tell the story of a global problem through a nationalist lens.
But all policy is national, and there is (fortunately) no supra-national government. We’ve played our part in the international process with our emissions reduction commitments, which are ambitious given the high marginal abatement costs here. But Hall’s approach suggests he doesn’t really care if there are cheaper, less costly, ways for New Zealand to meet its commitments, and thus reduce costs to New Zealanders (residents and voters); what he cares about is the global. It is certainly one perspective, but it isn’t the one the government used in setting up the Productivity Commission inquiry. In practice, it almost certainly isn’t the one New Zealand residents and voters will be using in assessing how governments handle these issues over the next 20 years and beyond.
My own column ended this way
The aim of a successful adjustment to a low-emissions economy is not to don a hair shirt and “feel the pain”. It isn’t to signal our virtue either. Rather, the aim should be to make the adjustment with as small a net economic cost to New Zealanders – as small a drain on our future material living standards – as possible. Lowering the immigration target looks like an instrument that needs to be seriously considered – including by the Productivity Commission – if that goal is to be successfully pursued.
I’m probably less idealistic than David Hall. Perhaps 30 years as a bureaucrat does that to one. But in responding to a comment on my earlier post today I noted
My take is that, as a high cost abater, we should impose as little cost on NZers as possible to be seen by friends and trading partners to be making our token contribution (because obviously in global terms it is only token).
Giving serious consideration to cutting our (unusually large) immigration targets looks as though it should be good economic policy and good (national) emissions-reduction policy.