Bryce Wilkinson: More false arguments against our Emissions Trading Scheme

The Climate Change Response Act 2000, the Climate Change response (Zero carbon) Amendment Act and the Climate Change Commission’s draft advice have two things in common.

First, their purported primary goal is to reduce global net greenhouse gas emissions.

Second, their proposed means depart from that goal.

The Paris Accord permits international trade in carbon credits. The amended Climate Change Response Act largely prevents it. The Commission’s draft advice necessarily aligns with the Act.

Preventing New Zealanders from trading in overseas credits prevents them from maximising their contribution to reducing net global emissions. Doing that is inconsistent with the primary goal.

Even so, the government’s Emissions Trading System (ETS) still provides the least-cost means of achieving the government’s more costly goal. The Commission itself has assessed that the ETS alone will achieve the government’s zero carbon target for 2050 - at a carbon dioxide price of $50 a tonne. There is no need for radical economic transformation.

Why then does the Commission recommend imposing high cost ‘radical transformation’? It provides no supporting wellbeing analysis for this approach. It is as if New Zealanders need to be whipped to atone for their sins of past emissions.

The Commission and the Ministry for the Environment have adopted the mantra that the ETS is good, but ‘not enough’. Not enough for what purpose?

One non-argument is equity. Of course, when rich and poor pay the same price for anything, whether a TV, a bundle of groceries, or the ETS, the burden on the poor is greater. That is not a case for price intervention. Instead, the government can use its ETS revenue to redistribute income, as it does with tax proceeds in general.

Another non-argument is that to rely on the ETS is ‘purist’. That is akin to arguing that it is purist to spend $30,000 making a car instead of $50,000. Waste not, want not.

A third non-argument prejudges New Zealanders’ preferences in order to justify suppressing them. The Commission worries the ETS would encourage ‘too much’ tree-planting. In that view, the government must stop New Zealanders from planting too many trees.

Who is sovereign here, the public or transient politicians? One of the beauties of the ETS is that it respectfully allows New Zealanders to choose, individual by individual, between emissions reduction and absorption. If only governments were folly-free.

Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of  Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE.