The fundamental
question raised by the 2050 zero carbon proposal can be put simply: Is
selecting that year worth the price? Or, is the proposed cure worse than the
disease?
Governments and
corporations everywhere answer similar questions all the time by cost-benefit
analyses. But climate policy is an exception. No cost-benefit study of any kind
is included in the 160-page Regulatory Impact Statement (RIS) that accompanies
the ‘Zero Carbon Bill’.
We have a Government
modelling estimate that the economic losses will amount to a massive $300
billion or about $20,000 per household. Is that a fair share? Our current gross emissions are about 28
metric tonnes per household, so the modelled price might be slightly over
$1,000 for each tonne reduced. Is that reasonable value for money? Are more
cost-effective methods available?
But the RIS says it is
not possible to identify any quantifiable benefits at all. When we
achieve net zero emissions, that is an improvement in the global position of
only about 0.1%, which could have no discernible impact on the future global
mean surface temperature (GMST).
No NZ Climate Benefits
The Ministry’s
Consultation Document strongly implied that New Zealand regions would
experience less future warming (and therefore avoid weather extremes) if the
country could achieve the ‘Zero Carbon’ target. This implication was wholly
unwarranted. Future average temperatures within New Zealand are not related in
any way to this county’s own greenhouse gas emissions.
New Zealand’s efforts
cannot deliver any discernible global benefits either. See the science
discussion in the Annexe.
2050 not
science-driven
The selection of the
year 2050 for decarbonisation is a purely political choice and could have
no relationship to any estimation of its
likely effects on future temperatures either at home or abroad. Rather, its
stated driving force is “leadership at home and abroad”.
Both the Explanatory
Note and the RIS recognize that no climate effects could arise from New Zealand
choosing 2050 over any later date. This decision cannot impact on the physical
world – only on the world of marketing and spin.
This is the only
conclusion to be drawn from the official National Interest Analysis regarding the Paris Agreement which was approved by all Parliamentary parties in 2016, and relies
upon international comity as the reason for New Zealand to volunteer an
emissions reduction. This formal document is undoubtedly correct in stating
that we “cannot be seen to free-ride on climate change”. But that is the only
rational and legitimate ground for taking domestic climate action.
It is the same
reasoning that appears in the climate change policy in the Labour Party 2017 manifesto: “New Zealand must do its
part, along with the rest of the world, in reducing climate pollution. It is
not good enough to say we are too small to matter… Kiwis are not shirkers.”
Few would disagree that
the drive should be to do our fair share – not to re-interpret the IPCC or the
Paris Agreement and not to lead the world.
In any event, setting
targets is little more than bluster. Leading climate scientist David Frame says:
“The
real issue for New Zealand is not the targets, but achieving the targets. It is
not ambition we lack, but action. Current policy will not get us to the targets
we have set. This is also the case in other developed countries. The answer is
to work on the policy, not to fiddle with the targets.”
Appetite for pain
Professor Frame goes on
to dismiss the climate activists who criticise the ‘inadequacy’ of every target
and every policy in every country at all times:
“These assessments are a “view from nowhere” in the sense they are
made by people who do not have to consider the trade-offs necessary for
decarbonisation to take place. They do not need to worry about economic
performance, social cohesion and the other things that actually form the main
parts of what we expect from governments in liberal democracies.”
The fact is that every
government intervention in the cause of climate change causes inefficiencies
and distortions in our economic fabric which reduces our standards of living
and our quality of life. Climate policy is all dark clouds and there is no
silver lining. It is all pain and no gain for New Zealand, except to the
narrow extent that we may be tangibly incentivising and supporting our trading
partners in their efforts to reduce a potential planetary threat.
Activists use the
euphemism “ambition” to describe the estimated upper limit to any country’s
appetite for climate policy pain. Endless Pew surveys have established that
most people will support climate action but only up to the point where the cost
to their own households exceeds US$10 per month (call that about NZ$200 per
year). The New Zealand ETS already exceeds that general worldwide pain
threshold by about 4-5 times.
There is no reason to
believe that middle New Zealand will be prepared to lead the world in climate
masochism. Average kiwis did not participate in the Government’s misleading
consultation process in 2018 and certainly did not know that (in the words of a
former chief economist of the Reserve
Bank) :
“I would be surprised if ever before in history a democratic
government has consulted on proposals to reduce the material wellbeing of its
own people by up to 25 per cent.”
Emission drivers
Predictions of future
temperature changes rely crucially on scenarios, and the IPCC has made
considerable use of the Kaya
Identity – which states that emission levels are largely
driven by population x GDP per capita x energy intensity x carbon footprint of
energy.
By the standards of the
developed world, New Zealand’s population has rocketed over the past decade,
and we are also said to have enjoyed a ‘rock star’ economy. It could be
expected from those statistics that our
energy-related emissions would have gone through the roof. But that has not
happened because our energy intensity has been steadily improving – as a
result of cumulative small changes in many relevant technologies. In fact, the
country’s overall energy intensity (units of energy per unit of GDP) has been
consistently declining for over 30 years.
We could achieve
high targets, with relatively low pain levels (for current residents), by
cutting off the net inflow of migrants
and encouraging net outward migration. Or we could simply induce an
endless economic recession by changing
the Reserve Bank’s policy targets to include emissions reduction[1]
– if higher ‘ambition’ is required. Or perhaps reduce all speed limits to 20kph
or ration domestic flying, or put an import ban on cellphones or cars, or …
etc.
Do Taxes work?
The mainstream view of
economists is that the least inefficient way of inducing a decrease in CO2
emissions is to “put a price on carbon”. The desired “price” may be induced by
either a carbon tax or an ETS (essentiality a tax with post-hoc trading rights)
and should be at a common level worldwide. Thereafter, normal market forces
will operate to allocate all global mitigation investment into the geographic
and sectoral areas which will give the best returns for the minimum welfare
loss.
This pipe-dream is
politically impossible. Developing countries fiercely protest their right to
raise the standard of living of their respective populations to the levels long
enjoyed by the developed nations, who have already exploited most of the
earth’s “carbon budget”. Developed countries such as USA, Australia and Japan
(and perhaps Canada, in the coming year) have debated but firmly rejected
various versions of such schemes.
Instead, carbon taxes
and ETS imposts are patchily applied around the world in sundry cities, states
and nations at diverse scales and scopes. Only Europe has a supra-national ETS.
Only New Zealand has a national ETS.
We have harsh taxes on
motor spirits[2]
and an ETS take of nearly $900 million in the 2019 budget. This is all highly
opportunistic and devoid of principle, with the government recently
establishing a formal enquiry with the aim of reducing the retail petrol
price.
While the economic assumption
is that demand is always suppressed by price, the empirical evidence is that
volumes were not materially reduced when crude oil was priced at US$150 per
barrel and petrol retailed at $3 per litre. In the case of tobacco as well,
harsh taxes have clearly failed to eliminate demand.
In brief, the New
Zealand experience has been that “sin taxes” have plainly caused hardship but
have failed to bring about significant behavioral change.
Regressive effects
Raising carbon prices
is one of the most regressive instruments imaginable. Raising the price of
diesel, for example, elevates the price of food and shelter and all the other
components of the cost of living. It is “a great big new tax on everything”
which raises the CPI and eventually the OCR. These basics consume a much
greater share of the incomes of beneficiaries (whose benefits are no longer
CPI-linked) than those of the better-off.
The price-elasticity of
petrol is extremely high and the only people who will stop (or significantly
reduce) driving are those who simply cannot afford to buy the extra litre.
Better-off people just curse and pay the elevated price. This ineluctable fact
is what caused the NZIER modellers to find that people in the bottom two income quintiles will be hit six
times as hard as people in the top quintile. Such a disparity could never
be acceptable in a traditionally egalitarian country.
Aware of the high
potential for regressive policies, particularly in developing countries, the
UNFCCC (COP21) was at pains to include a caveat within the Paris Climate
Agreement itself. The operative clause (Article 2) is governed by the following
proviso:
“This
agreement …aims to strengthen the global response to the threat of climate
change, in the context of sustainable development and efforts to eradicate
poverty”. [emphasis added]
The eradication of
child poverty is a shared goal of all the current Parliamentary parties in New
Zealand but is obviously quite incompatible with an ‘ambitious’ use of taxes to
achieve a pain-filled climate goal.
Technology
Sustainable reduction
of emissions will only be achieved by the development and early adoption of
new/improved technologies on both the supply and demand sides of relevant
markets, particularly the energy market.
The strongest argument
against choosing an earlier decarbonisation date than envisaged by the Paris
Agreement is that numerous technological solutions assists and solutions will
undoubtedly continue to improve and reduce in price as time passes. As long ago
as 2005, a multi-party Select Committee of the UK House of Lords unanimously agreed that the cost of reducing emissions would be
directly proportionate to the speed of doing so.
The main conclusion of
the well-reasoned report of that authoritative Committee was that international
negotiators should be weaned away from excessive reliance on the "targets
and penalties" approach embodied in the Kyoto Protocol. They concluded
that “focussing on emissions targets will fail” and recommended that
“Kyoto-plus should focus on technology and R & D”.
This view is further
supported in “Why subsidise more
congestion?” and “The climate scare could be gone by 2030”
In “Energy solution hinges on better
technology”, a recent
thought-provoking article in ‘The Australian’, economist Bjorn Lomborg
notes:
“Yet humanity has actually
never experienced an “energy transition” — a shift from one set of energy
sources to another set. Rather, we have added more and more.”
And:
“Politicians across the
world happily promise to emit net zero CO2 by 2050, knowing they will be long
retired from politics when those vows are broken. Achieving this will be almost
impossibly expensive, likely provoking “yellow vest” street riots long before
their conclusion.
After New Zealand made its
2050 zero emissions promise, the government commissioned a report on the costs.
This found that achieving this goal in the most cost-effective manner (which
strains credulity because policy seldom if ever manages to be cost efficient)
would cost more than last year’s entire national budget on social security,
welfare, health, education, police, courts, defence, environment and every
other part of government combined. Each and every year.”
Conclusion
The onus of showing
that 2050 is the best target year lies upon its proponents. So far, the
evidence is totally lacking.
Annexe : Global
Temperature Impacts
To
begin assessing the global benefit from any climate policy it is necessary to
identify the temperature consequences of two hypothetical cases – the first
being a ‘Business as Usual’ (BAU) scenario, which provides the counterfactual
to the second scenario in which emissions are reduced by the relevant policy. ‘Temperature’
means the GMST (measured in air just above all land and ocean surfaces).
There
are endless opinions on scientific, economic and other complexities
contributing to the recognition and attribution of human-driven GMST changes
and/or the welfare impacts of such changes. However, for New Zealand
legislative purposes, the only tenable approach is to simply adhere to the
findings of the Assessment Reports of the UN Intergovernmental Panel on Climate
Change (IPCC), the Fifth[3]
of which (AR5) was signed off on behalf of the New Zealand Government in
Stockholm, Sweden, during September 2013.
AR5
offers a table of possible BAU temperature levels by 2050 and 2100
respectively, which range from beneficial to dangerous, but offer no
probabilities. Users are left to make their own subjective[4] selections, on a “believed most likely” basis, of two key
inputs:
•
an equilibrium climate sensitivity
(ECS)[5]
within the range 1.5°-4.5°C
•
a future emissions scenario (RCP)
within the forcing range 2.6 –8.5
An
important third imponderable is the likely future impact of natural internal
variability[6]
or natural forcing (eg volcanoes). Although WG1 is silent on this point, it
does find[7]
that “more than half of the observed warming” in the period 1951-2010
was human-caused – by a combination of greenhouse emissions and land use
changes. That leaves the possibility that up to half the 0.65°C that was
observed (ie about 0.3°C) could have been natural.
Activists
and the media generally choose a dramatic “worst case” approach – despite the
fact that the estimated mathematical probability of that combination is much
lower than the onset of either the next glaciation or a ‘little ice age’.
Then
there is the complex question of quantifying the damage that could be avoided
if the major future emitters – China, India, USA, EU, and Russia – were able to
achieve ‘zero carbon’. That is even more complex. Recent Nobel prizewinner
William Nordhaus says that “from the standpoint of economic rationality” it is
optimal to keep warming the planet to about 3.5°C over preindustrial levels. Professor Richard
Tol’s 2009 paper found that all published research found initial economic
welfare from climate change and was “in sharp contrast to the urgency of the
public debate and the proposed expenditure on greenhouse gas emission reduction”.
Despite
the economists, the objective of the UNFCCC Paris Agreement is to restrain GMST
from rising by more than 2°C above its calculated level of 14.10°±1.00°C in
about 1875. It has risen to 14.97°C over the last 140 years – an average of only 0.06°C/decade.
During
the past half century, GMST has been rising at an average rate of about 0.13°C/decade
– and, if this trend is projected forward, the 16.10°C limit would not be
reached before 2100. But there is widespread concern that exponential growth[8] in annual global emissions might accelerate this trend to
cause the remaining “headroom” of about 1.13°C to be dissipated much
earlier.
The
Paris Agreement, relying upon voluntary reductions by 2030, could potentially
reduce the ‘business as usual’ (BAU) GMST of 2100 by about 0.2°C in
aggregate, as long as none of the reductions are achieved by ‘carbon leakage’.
This rather modest contribution has been accepted, and indeed welcomed, by the
international community.
[1] As seems to be favored by the current Governor
[2] Approximately $1 per litre of petrol, or 50% of the retail price.
[3] Although
Working Group 1 (WG1) of the Sixth Assessment Report is now in draft, it is not
due to be published until April 2022.
[4] IPCC/AR5/WG1 is unable to offer an opinion on either input, but notes
that averaging is not an option. The range of possible 2050 and 2100
temperature outcomes is critically dependent on each.
[5] The climate sensitivity metric required for application of the Table is
known as the ‘Transient Climate Response’ (TCR)
[6] Such as the El Nino Southern Oscillation (ENSO), the Pacific Decadal
Oscillation (PDO), the Atlantic Multi-decadal Oscillation (AMO), solar cycles,
ocean thermocline changes, etc
[8] CO2 accumulates in the atmosphere over long periods. However,
incremental atmospheric CO2 has an ever-diminishing warming impact on a
logarithmic scale, as ‘saturation’ is approached.
Barry Brill is a lawyer and former Minister of Energy, who Chairs the New Zealand Climate Science Coalition.
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