A new paper critiquing net-zero targets

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.

and

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.

In addition:

  • 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.

 

24 thoughts on “A new paper critiquing net-zero targets

  1. It may well be true that the government is exaggerating the benefits of net-zero emissions. But, just as in your previous post, you fail to mention that the cost of continuing to emit carbon is likely to be catastrophic, if not this century, then certainly in the next century.

    If we accept what the experts now tell us, cutting emissions as fast as possible is the only logical course to follow, and should happen regardless of the economic consequences.

    The assertion that “climate change may have a positive effect on New Zealand this century” is highly speculative.

    Even if NZ is able to maintain its own economic and social order in the face of rising sea levels and more frequent extreme weather systems, we will be severely affected by the fates of other countries are who are not able to.do this. Assuming that the world does not quickly decarbonise, by the century after this one, warming could be well over 5 degrees, at which point any positive effect this century would be well and truly obliterated.

    The assertion that “changes in the incidence of extreme weather events have been exaggerated” is not supported by the latest scientific observations, see for example https://insideclimatenews.org/news/26122017/climate-change-science-2017-year-review-evidence-impact-faster-more-extreme

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    • We should almost never do anything “regardless of the economic consequences”.

      A key question is always when and how aggressively to act, because today’s NZers are much poorer than those next century are likely to be. Gifted with foresight 100 years ago about global warming, we’d have been insane then (in my view) to have materially changed our behaviour then. Technologies exist now that didn’t exist then.

      I’d have less unease about aggressive NZ action, if we were really were fast followers ie rushing to keep up with aggressive adjustment in China, India, the US, Europe etc. But we are imposing on ourselves a more aggressive target than almost all other countries are doing, even though we are going to be less (or less quickly) adversely affected by climate change. That suggests something wrong in our proposed choices.

      I’d also be less uneasy if the govt was doing the easy stuff to wind back NZ emissions – notably cutting back immigration severely.

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      • I personally consider the issue of climate change so serious that the answers to your key questions cannot be anything other than “now” and “as aggressively as possible”.

        Obviously there is some scope for debate as to how we go about decarbonising, and cutting immigration would be high on my list too. But if we can’t at least agree that it needs to be done very quickly, then we will be deservedly pilloried by generations to come.

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      • Hamish: I agree with you about the significance of climate change. We are not totally certain about what effects it may have; anything from slow and minimal to fast and catastrophic. We need to treat it as we would the arrival of a ship that may or may not be carrying the plague: highest priority.

        An analogy would be WW2; NZ as a small wealthy country was committed and willing to make enormous sacrifice. But the allies first response was the ‘phoney war’ where little fighting occurred but plans were made and resources gathered for whatever might happen next; that planning stage was essential. The first step has to be communicating what the potential risk is and persuaded the public that sacrifices will be needed. The first step is to get all political parties committed and this is what the Greens and Govt have done. Where they may be making a mistake is asking for sacrifice without making clear it will apply fairly to the rich as well as the poor. I am bothered by the way they make it sound so simple – it is too like the ‘lets hurry to enlist because war will be over by Xmas’ that occurred before WW1.

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    • The statements on extreme climate events were all taken from the intergovernmental panel’s chapter for australasia – its all in the appendix if you want to look.

      I guess we will have to wait for the 6th report to see if there is an update fort this century

      the report actually supports the zero carbon target- for the reasons you suggest – which is in line with our paris commitments. It takes issue with the zero emissions target.

      ian

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  2. I’m all for eventually reaching net zero carbon.

    However NZ emits only 0.2% of global GHG’s. We are simply a rounding error.

    Nothing we do will make a technical difference, political perhaps. Climate change & sea level rise will happen irrespective.

    NZ should simply adopt the world carbon price (or proxies thereof) as the least cost path & manage the ETS quota and price to match.

    The PC alludes to this in the report when they note NZ can but/sell credible internal carbon credits to manage the NZ domestic ETS price.

    Otherwise it simply doesn’t make sense to impose a cost up to NZD$250 / ton (Productivity Commission est real dollar cost) on NZ, which is roughly 10x the current price, to achieve net zero carbon in NZ by 2050 if the rest of the world is not doing the same.

    If the rest of the world lets the temperature rise by 5 degrees there is nothing “technically” we can do about.

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    • And of course, what you are suggesting aligns more closely to the Paris Agreement to my mind;

      https://unfccc.int/files/meetings/paris_nov_2015/application/pdf/paris_agreement_english_.pdf

      In particular, Article 2(1)(b) states;

      (b) Increasing the ability to adapt to the adverse impacts of climate change and
      foster climate resilience and low greenhouse gas emissions development, in a manner that
      does not threaten food production; and

      whereas, as the author of this above paper points out, “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.”

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    • If you take an issue that NZ led on like the right for women to vote, your policy would be to hang back and let others do the hard yards. After all only 0.2% of women live in NZ so what can we do anyway?

      There is a big and difficult scientific challenge but the bigger one is political. What we do or don’t do can very well make a difference.

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      • Comparing it to the women’s vote is ridiculous. According to many, without all the world stopping their emissions, our tiny amount will make an unmeasurable difference. Yet our effort is looking at having a very high price to be paid, especially by the poorest. The vote for women cost nothing apart from more voting forms. If no other country had followed suit the sky would not have fallen.

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      • I was going to make many of the same points as Gissie below, with the additional observation that no credible case could have been made that votes for women would lower NZers’ future incomes so much, with the impact falling disproportionately on those on the lowest incomes.

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  3. According to soil scientist Dr Doug Edmeades, there is no benefit in making agricultural methane emissions net zero because they already are:

    “Methane is short-lived in the atmosphere. It hangs around for about 10 years before it is converted to CO2. For every unit of carbon the animal emits as CH4 it must ingest the same amount of carbon from its plant-based feed source, which, comes initially from the CO2 in the atmosphere. The animal is both the source of the carbon in methane and it is also the sink for the equivalent amount of carbon in CO2. In this sense the carbon-methane cycle – methane-to-CO2-to-forage-plants-to-animals-to-methane – is a closed cycle. The animal is CH4-carbon neutral.”

    This is, as I’m sure you’ll recognise, from here: https://www.nzcpr.com/killing-our-economy/

    Liked by 1 person

    • I guess you could make the same arguments that nitrates leaching into our waterways has a net zero impact to the environment because rainfall flushes the rivers regularly. So our rivers can’t be polluted by the 10 million cows? Dr Doug Edmeades sure does make a highly biased assessment because I can’t imagine 10 million cows belching every hour of everyday to not adversely affect methane gas emmissions levels in the atmosphere. The science just can’t be correct.

      It is like our similarly biased NZ economists that indicate that our Farmers are some of the most productive farmers in the world and that farming is a productive industry. Of course they forgot to count the 10 million cows and just counted the number of farmers to derive their obviously wrong conclusions ie our average farms just got bigger than anyone else.

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  4. If you are going to do economics on climate change then you must be doing some kind of risk analysis. Before doing this though, I’d get a climate change scientist to do the science part and then get the economist.

    You are doing it the wrong way round. ie Making a scientific call that it is a small problem and then doing the economics to show it doesn’t matter.

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    • Actually I’m not purporting to do – or take a view on – the climate science at all. The conclusion that global warming this century wont have large or systematic adverse impacts on NZ – and will have some gains – is from the IPCC discussion on Australasia, and the adverse econ impacts of climate change globally are taken from OECD modelling which, as i understand it, in turn draws on conventional views (including I imagine from the IPCC) about the likely extent of warming. My discussion of the appropriate NZ policy response takes all of that for granted.

      (As I have noted before, perhaps slightly flippantly, I do have a personal view as a Wellington resident that for this specific locality a warmer climate has some appeal. The OECD modelling in a sense generalises that in concluding that really cold places (eg Canada and Russia) will be economically better off.)

      In practice, as noted above, i’d be not uncomfortable with NZ as a moderately fast follower, esp around carbon emissions, perhaps looking to track the world price of carbon. Doing much about methane at present seems like NZ shooting itself in the foot, but technology may well change quickly and there might be quite different options available a decade hence.

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    • I would get Sir Ian Plimer or Joanne Nova to explain what is happening.
      The reference to ‘carbon’ does not make sense and carbon dioxide is not a problem.
      The chief scientist in Australia said any changes they made would cause zero or negligible difference to the climate .NZ is foolish trying to turn itself inside out for nothing.

      Liked by 1 person

  5. The PCE’s contribution in this regard is also useful, noting:

    ” Given the wording of the Paris Agreement – “in the second half of the century” – a date later than 2050, at least for some gases other than carbon dioxide, might be justified if scientific analysis supports it.

    But it is not just a target year by which emissions must be reduced that is needed. There is also the matter of exactly what sources and sinks might be required to contribute to ‘net zero’ in the New Zealand context, and whether they can all be treated in the context of a single timeframe. As many have asked: net zero what?”

    https://www.pce.parliament.nz/media/196427/zero-carbon-act-for-nz-web.pdf

    It is really useful to read that entire section:
    2.1 How should we go about setting a target?
    pp. 19-23

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    • I don’t know how you manage to read so much and find time to post and it is rumoured work and live a life. You posted 63 pages of PDF and neither were particularly fluent reading. So I skimmed. The graphs for net emissions 1990 to 2015 for UK and NZ were instructive (page 13 & 14). Both countries have had an increasing population but UK shows a steady decline from 800 to 500 whereas NZ goes from 35 to 55 with a masive drop in 2008. Lets say: UK walks the walk and NZ talks the talk.

      Searching your pdf I could find no reference to air travel. I’ve been told that international travel is ignored by country totals. I am confident Mr Shaw and his colleagues will be countering Michael Reddell’s immigration point with the argument that we have to consider the world wide effect and assuming our anticipated immigrants will have the same carbon footprint whichever country they live in. But if you make that argument then you have to admit that each and every tourist is using fossil fuels to get to NZ. A possibly unreliable figure on a recent Interest.co.nz comment stated the amount of fossil fuel used by our tourists flights equalled 60% of NZ’s fossil fuel consumption. Maybe unreliable but it seems likely. If true surely our government should be aiming to reduce it not increase it. It only seems reasonable to introduce a heavy environment tax on all tourist flights and maybe to close down our international tourist organisations.

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      • International aviation emissions are about equal to another 5% of NZ’s (within scope) GHG emissions.

        On UK vs NZ, I showed a chart of emissions per unit of GDP for the two countries. The NZ numbers are much higher than those in the UK, but the trends over the last 25 years or so have been almost identical. Differential population growth rates make a huge difference to the total emissions paths of the two countries.
        https://croakingcassandra.com/2018/06/08/the-government-consults-on-slashing-productivity-growth/

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      • Fossil fuels are a fraction of NZ emissions.

        Yes population growth has been more rapid in NZ but the graphs in Katherine’s link show dramatically different direction as does your first graph but the figures by unit GDP makes the trend clearer. I wonder what relative effects of growth in human and cow population makes to the data.

        With my amateur scientist hat on I do wonder about our govt committing to a plan that economists say will make us poorer (especially the poor poorer) that seems to be based on a solution that consists of planting trees. They are assuming NZ has the available land suitable for trees that is currently unused; maybe they are right but what happens when the last tree is planted (at a guess middle of Eden park); that will be in 2050 and I am unlikely to see it but I do have children and grandchildren. Would an environment charge for each immigrant make sense? I have done my part by planting a Kauri and a couple of Pohutukawa in my Auckland garden – of course when I move on they will be cut down for Brendon’s apartment block for recent arrivals to replace them.

        There is always hope: see https://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=12119770

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  6. If the government is serious about zero carbon, they should leave no stone unturned. For example, humans undertaking hard work e.g. sports, working out, emit 16.5 times the amount of CO2 than at rest or humans undertaking light work.(https://www.engineeringtoolbox.com/co2-persons-d_691.html). Humans working out for one hour a day therefore emit twice the CO2 of more sedentary folk. Solution? Apply the emissions trading scheme to gymnasiums and sports clubs, and industries that require heavy physical exertion. That would be fair, and logical, and could curb our emissions (albeit with some heavy perverse outcomes).

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    • I suspect my CO2 footprint is mainly heating, transport, waste disposal and consumption of food, clothing, etc besides use of public facilities such as roads and libraries – doubt if my breathing has much effect. My own cassandra attitude to achieving zero emissions was triggered by my inability to get the children to sort items into the correct waste bins. When our govt fails they will blame the public and maybe the immigrants – ‘how were we to know that 3rd world immigrants would instantly become 1st world consumers’..

      Liked by 1 person

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