I wrote a post a few weeks ago responding, in part, to absurd claims made in a TV interview by the Green Party co-leader and Minister for (against) Climate Change, James Shaw about the economic impact of pursuing the net-zero emissions target he and the Labour Party are championing.
He says investing in meeting our climate change goals will be a massive economic boost, rather than a burden.
“What we’re talking about here is a more productive economy, with higher-tech, higher-valued, higher-paid jobs. It’s clearly a cleaner economy where you’ve got lower health care costs, people living in warmer homes, congestion-free streets in Auckland.
“It’s an upgrade to our economy. It’s an investment, you’ve got to put something in, in order to generate that return. If we don’t, the clean-up costs from the impacts of climate change will well exceed the costs of the investment we’ve got to make to avoid the problem in the first place.”
The same tone had been evident in the officials’ Executive Summary to the government’s document consulting on the emissions targets and related issues.
This is our chance to build a high value economy that will hold us in good stead for the future. By upgrading our economy and preparing for the future, we can help make sure quality of life continues to improve for generations to come.
Believe all this, and there are no hard choices, no trade-offs, just stepping into the sunlit uplands in which enchanced prosperity and feeling good go hand in hand.
In my post on the alleged “massive economic boost” on offer, I quoted some extracts from a draft paper by my former colleague (and now Tailrisk Economics) Ian Harrison.
Ian has now put the final version of his paper on his website under the heading
The price of feeling good
A review of the emission targer options in “Our climate your say”
It is well worth reading for those who want to dig a little deeper into some of the specific issues than I have done (or had the energy for).
Here are Ian’s key conclusions.
The Zero emissions by 2050 target is a $200 billion ‘feel good’ project. Compared to the alternative, zero carbon, target, the zero emissions target could cost an additional $200 billion; is unlikely to have a material impact on the behavior on the rest of the world; on innovation in New Zealand; or generate significant ‘co-benefits’.
The major benefit will be a ‘feel good’ factor for some people, at least until the effects of the policy start to bite.
The consultation on the options was a sham. Our Climate did not provide an assessment of the pros and cons of the three options: zero carbon; zero carbon with a cap on other emissions; and zero emissions, that were presented. The document only promoted what appears to be the preferred option of zero net emissions by 2050. The reporting of the economic analysis was fabricated to make it appear that the three options had been considered.
The economic modelling was manipulated to reduce the economic impact of the zero emissions target. The marginal cost of emissions reductions falls with a tougher target. This doesn’t make sense. Lower cost emission improvements should occur first, so the additional reductions under the tougher target will have a higher cost. The lower marginal cost outcome was achieved by restricting the amount of afforestation offsets (which are costless in the model) for the 50 percent reduction target, and giving the zero emissions target twice the allocation. The effect of this was to push most of the economic costs into the lower target option, reducing the marginal cost of the zero emissions option.
The reporting of the economic analysis obscured many of the negative economic impacts. Most of the results were presented as the difference between a 50 percent emissions target and a zero emissions target. This obscured the losses in getting from our current position to a 50 percent fall in emissions. Some of the modelling impacts, with prudent assumptions about technical change, are severe. For example, pastoral farming outputs fall by 60 percent, and household incomes could fall in absolute terms as the policy bites.
The economic modelling is deficient and needs to done again from scratch. The critical variable in any analysis is the rate of conversion of farmland to forestry, but this has not been modelled. There is no analysis of the optimal timing of emission reductions. The implied carbon prices appear to be unrealistically high which makes it difficult to draw conclusions from the analysis,
Climate change may have positive effects on New Zealand this century. The Ministry has not produced a report on the costs of climate change. Our assessment is that climate change may have a small positive impact this century. The main reason is that more CO2 in the atmosphere promotes plant growth and increases output, which is significant for an economy with a large land based sector. This outweighs the economically relatively minor impacts from changes in weather patterns, and the cost of mitigating the impact of sea level rises.
Changes in the incidence of extreme weather events have been exaggerated. Only moderate changes in extreme weather events have been projected in the UN Intergovernmental report on Climate Change. For example on the incidence of storms the report says ‘ Increase in intensity of cyclones in the south in winter but decreasing elsewhere. Increase in conditions conducive to convention storm development is projected to increase by 3-6 percent by 2070-2100 compared to 1970-2000.’
The benefits of innovations that will give New Zealand an ‘early mover’ competitive advantage have been exaggerated. Most of the reductions in emissions will come from forest plantings, imported technology (such as electric cars), closing businesses such as New Zealand Steel, and by reducing livestock numbers. Most of this does not involve much innovation. A Ministry consultant described this innovation optimism this way. To presume that climate policy could make the difference would be a kind of exceptionalism and a serious leap of faith.
Economic costs of zero emissions target are significant. The economic cost of the zero carbon target could be in the order of $75 billion. The additional cost of the zero emissions target, which requires twice the net abatements at a higher average cost, could be around $200 billion.
New Zealand’s sacrifice unlikely to change the world. The argument for zero emissions is that it will encourage other countries to meet their commitments. The argument that going from a zero carbon target to a zero emissions target will make a material difference to the actions of other is at best another ‘serious leap of faith’. Depending on your viewpoint the zero emissions target is either a $200 billion vanity project, or a noble sacrifice. There are much cheaper ways of trying to influence world opinion.
Cheaper ways to influence world opinion. Four ways of getting international attention and promoting the fight against climate change are suggested. They are: Taxes on international air travel; a ban on official business class air travel; virtual attendance at climate change conferences; travel to Wellington airport by bicycle by officials.
Or, more seriously, perhaps even to chip in an additional billion dollars a year in animal science research, to focus on the most difficult – and potentially costly – aspect of New Zealand’s emissions. It is a great deal cheaper, on the government’s own numbers, than going full-tilt for the arbitrary self-imposed net-zero-by-2050 target.
And a couple of other extracts
Emissions framework fairness. It can be argued that the emissions measurement framework is not fair to New Zealand. Nearly half of our emissions relate to agriculture, but most of the output is exported. If the assessment was done on a consumption, or carbon footprint basis, our abatement responsibilities would exclude exports and account for the emission content of imports and would be lower considerably lower than under the current system.
By contrast, Norway is a large oil and gas producer and exporter, but does not have take responsibility for the emission consequences of its exports. Norway has just
announced that it plans to be emissions neutral by 2030 (mainly by buying international carbon credits) while planning to increase its oil exploration.
New Zealand’s emission record is often painted as poor. For example, the Productivity Commission, in its Low Emissions Economy report presented a figure showing New Zealand to have the fifth highest gross emissions per capita. If the emissions were calculated on a net footprint basis, we would be well down into the low emission end of the figure.
Many other countries are not doing as much as New Zealand. As an example, consider the case of Singapore. As a high-income country [much more so than New Zealand], which is directly in the climate change firing line, we might expect a sense of urgency and substantive actions. So what is Singapore doing?
First, it signed up to a fairly soft ‘developing country’ Paris agreement target, promising that their emissions will peak in 2030. To our knowledge they have made no commitments beyond that date. In terms of what they are actually doing, we have relied on a January 2018 report from the Singapore Energy Studies Institute. The main action is the introduction of a carbon tax, apparently to be at a fairly low level, for large companies from 2019. Between 30 and 40 companies will be affected.
- 2018 has been declared the year of climate action
- Singapore will host a special ASEAN Ministerial meeting on Climate change
- There will be some financing subsidies.
Food for thought. And no sign – not in the consultative document, not in the Productivity Commission report – of any “massive economic boost” in prospect.