Early tomorrow morning the Productivity Commission will be releasing its draft report on how New Zealand can transition to a low emissions economy. The report was commissioned by the previous government, but this will be the first real test for the Commission in dealing with the new government – for whom this is an issue dear to the heart. The Commission has been trailing the report, with links to a recent presentation. Like most Commission reports it will, presumably, be long, and full of lists of findings and recommendations. My main interest is whether they again – as they did in their earlier issues paper – manage to entirely avoid the elephant in the room: the role that deliberate (immigration) policy has played (and continues to play) in driving up the population, and driving up emissions, in a country that is pretty widely-recognised as having some of the highest marginal abatement costs anywhere.
On that latter point, don’t just take my word for it. Here was the Ministry for the Environment – official advisers on these things – in their report last year.
(not, it appeared, that MfE had done any more thinking about it than that)
Bear in mind too that Statistics New Zealand project that New Zealand’s population will increase by another 25 per cent by 2050 – the date by when the current government aims to have net carbon emissions to zero – and all (net) that projected population increase is due to immigration policy.
One key indicator around emissions is total emissions per unit of GDP. On that measure, New Zealand has the second highest emissions of any OECD country, just behind Estonia.
But we seem to be heading for number 1. That our emissions per unit of GDP are high isn’t that surprising, given the large role that pastoral farming plays in our economy. It may even be that New Zealand – temperate climate and all – is a relatively efficient place for such farming emissions to occur.
As the chart shows, emissions per unit of GDP have been falling in New Zealand. Even if that first chart might suggest a modest fall, in fact it only illustrates how energy-inefficient much of the former Soviet bloc actually was. Here is a chart showing the reduction in total emissions per unit of GDP from 1990 to 2015 (the latest OECD data) for all the OECD countries for which there is complete data. There are four countries missing, but looking at their incomplete data, it doesn’t as though including them would change the picture.
On that metric – the change in intensity – New Zealand hasn’t done badly at all. Of the countries to the right of us on the chart, six were former Soviet-bloc countries (formerly highly resource – including energy – inefficient). And the Irish numbers are badly distorted by the way in which GDP in the last 20 years has been increasingly artificially boosted by aspects of their corporate tax regime, counting as GDP stuff that doesn’t actually happen – or generate emissions – in Ireland (details here). Relative to most of the old OECD, New Zealand emissions per unit of GDP have fallen more than most – which is all the more striking because our productivity performance has been so poor.
And yet, for the OECD as a whole gross emissions increased by only 2 per cent from 1990 to 2015, while in New Zealand they increased by 24 per cent. The big difference isn’t that somehow New Zealand has become relative more carbon-inefficient – we haven’t (see previous chart) – but simply that we have a whole lot more people. And the overwhelming bulk of that population growth is due to New Zealand’s immigration policy (natural increase – itself boosted by immigration – offset by the net outflow of New Zealand citizens would have given us a population increase of only around 250000 from 1990 to 2015).
There seems to be a real squeamishness about confronting this, pretty straightforward, series of facts:
- production here is more carbon-intensive than elsewhere among advanced economies,
- marginal abatement costs here are higher than those in most other parts of the advanced world,
- more people drive up total emissions, all else equal, and
- in New Zealand trend population growth – over the last 25 years, and in the projections to 2050 – is mostly due to active non-citizen immigration policy.
(In fact, you might have supposed that emissions/climate issues might have featured in the Fry/Wilson book on a multi-dimensional approach to thinking about immigration policy, but no.)
And here a few of the cross-country charts of the relations between population growth and gross emissions. This one is for all energy sectors (including transport).
New Zealand is very close to the line (and the line remains upward sloping even if one excludes rapidly industrialising Chile, Turkey, and Korea – the three dots at the top of the chart).
The relationship shouldn’t be a surprise: more people means, all else equal, more requirement for power, more need for transport, and so on. Over time, production processes tend to become more efficient, but for any given production technologies, more people will tend to mean more emissions.
Much the same relationships is present (again unsurprisingly) for total gross emissions.
and even, more to my initial surprise, for agricultural emissions
In fact, as I noted in an earlier post
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 apparent relationship between agricultural emissions and population growth (even across advanced economies) is both interesting, and particularly germane to New Zealand. As I’ve argued elsewhere, it is plausible that if New Zealand had had much lower immigration (and thus lower population growth) and, thus, a lower real exchange rate (according to the Reddell model), the political constraints on tightening water-quality standards (especially affecting dairy industry competitiveness) and on introducing agriculture to something like the ETS would have been less intense. The lower exchange rate would have provided a competitiveness offset. So it is likely that, all else equal, our immigration policy has even driven up our agricultural emissions.
None of which might matter much if
(a) there was compelling evidence that very high rates of non-citizen immigration had been boosting domestic productivity, or
(b) if the marginal abatement costs for emissions in New Zealand were low.
But neither appears to be so. And thus, if one cares at all about minimising the cost to New Zealanders of a forced policy adjustment towards a net zero carbon emissions world – as distinct from simply forcing us all to don a hair shirt and feel the pain – rethinking our immigration policy really should be high on the list of options for responding to the carbon goals the new government (and, less ambitiously, its predecessor) have set for themselves. I hope – but am not optimistic, based on the “part preview” I linked to above – that the Productivity Commission, who are supposed to be politically neutral analysts, have recognised this in their report. But perhaps I’ll be pleasantly surprised. We’ll see tomorrow.
It isn’t as if the issues haven’t been raised with them. Here is the link to my brief submission to their inquiry.