Wednesday, March 27, 2024

Dr Don Brash: Bans and climate change - The law is an ass

As everybody who is not blind and deaf is aware, there is a huge political preoccupation with climate change at the moment, a widespread (though by no means unanimous) belief that global temperatures are rising mainly as a result of the greenhouse gases created by humankind, and a strong view that all countries have a responsibility to take policy measures to reduce those greenhouse gas emissions.

Successive New Zealand governments, as governments in many other countries, have adopted policies designed to discourage the emission of greenhouse gases, or to encourage measures which would absorb such gases. By far the most logical of these measures is the Emissions Trading System (ETS). Other policies, such as subsidies for electric vehicles, have no logic at all: if switching to electric vehicles were the lowest cost way of reducing emissions, the ETS would already be encouraging that switching without subsidies. And if it isn’t, the subsidies push us into higher cost ways of getting to Net Zero.

Recently, there has been some focus on the impact of climate change on the banking sector, and on the impact of the banking sector on climate change.

I understand that any change in the climate, from whatever source, poses risks to and creates opportunities for banks. There may be increased storms, or an increase in the sea level. But relative to the other risks than banks routinely run, it seems to me that these risks are very small. As a general rule, banks do not lend on residential mortgages unless the properties are fully insured, and very rarely are commercial or corporate loans made for terms longer than five or six years. The risk of the sea level rising materially within six years is trivial compared with the risk that a corporate borrower may get into trouble for some other reason over that period.

But what of the greenhouse gases which banks themselves generate? With effect from this year, banks must report publicly on the greenhouse gases which their own operations generate – how much petrol they use, how much electricity, how many plane flights, how many car journeys, and so on. Well, calculating that is apparently not terribly hard, whatever you might think of the value of doing the calculation, and the small (in New Zealand) bank that I chair has just paid a consultancy some thousands of dollars to make that estimate for us.

But as of next year we will need to report also the emissions which our lending activities create or make possible. And we paid the same consultancy some more thousands to do a rough estimate of that figure for a recent year.

This is absolutely nuts, and the sooner the new Government does away with the crazy law which requires such a meaningless calculation the better.

Meaningless? Well, how does one estimate the greenhouse gases involved in, say, a loan to help build a new motorway? I suppose it is possible (if meaningless) to estimate the greenhouse gases emitted in the construction of the motorway, but what about the effect of the traffic on the motorway? Is there more traffic created because the road makes travel much faster? Does the new route actually reduce the greenhouse gases generated by the traffic, perhaps because there is less stop-start traffic or a smoother gradient than on the older road which the motorway replaces?

And if the following year the greenhouse gases generated by our lending activities increase, does that mean we have somehow “sinned”, or simply that we have made more loans?

I can be quite certain that the ANZ Bank, or Westpac, or any of the other large banks in New Zealand will produce estimates of the greenhouse gases “generated” by their lending activities which will be many times larger than the figure for the small bank which I chair, but that says absolutely nothing about their virtue, or lack of it. It is just a totally meaningless figure, produced at the cost of thousands of hours of diligent but useless work.

I won’t quote the absolute number of tonnes of Co2 equivalent that the bank which I chair was allegedly responsible for in 2023 because, until it is released publicly shortly, it is confidential. But, to illustrate the absurdity of the calculations, the consultants advised us that the actual operations of the bank itself – our electricity used, petrol used, flights taken, etc. – were responsible for just 0.01% of the total greenhouse gases for which we were in some sense “responsible” in 2023 when the greenhouse gases made possible by our loans were included. The calculation is bonkers and has no meaning at all.

Dr Don Brash, Former Governor of the Reserve Bank and Leader of the New Zealand National Party from 2003 to 2006 and ACT in 2011. Don blogs at Bassett, Brash and Hide - where this article was sourced

1 comment:

Rob Beechey said...

Climate Alarmism is an absurd notion full stop yet the pollies past and present are too gutless to acknowledge this. A very informative film on YouTube called “Climate:the movie” should be compulsory viewing for all. The current Governor of the Reserve Bank was so fixated on climate change, encouraged by his best mate Robertson, that he took his eye off his primary function and trashed the NZ economy. NIWA is another Govt entity that has been caught misleading the public with climate untruths. Its recommended closure would save taxpayers $160 million a year.