Good public policy should recognise subsidiarity. Local problems should be dealt with locally. But not all problems are local. A council issuing its own currency to address perceived failures in national-level monetary policy would not be a great idea.
Council-level policies aimed at reducing greenhouse gas emissions are about as sensible as councils trying to take on monetary policy or building up their own armed forces. It isn’t that monetary policy and national defence aren’t critically important. It’s rather that those issues are best handled by central government.
Last week, the ACT Party’s Mark Cameron lodged a member’s bill prohibiting regional councils from considering greenhouse gas emissions from consented activities when deciding on resource consents.
Unfortunately, and hopefully unintentionally, the ACT Party’s press release claimed the Bill would “prohibit regional councils from considering climate change as a factor in their plans.”
Blocking councils from planning for increased flooding and for rising sea levels would be pretty stupid. That kind of land use planning is core council business. So Twitter discussion of the Bill degenerated into fights between those defending and opposing things the Bill would not do
The Bill’s explanatory note is more helpful. The Bill “aims to clarify the framework for managing greenhouse gas emissions in New Zealand by showing that emissions are best addressed by central government… by alleviating the burden on regional councils to set rules on the basis of national environmental standards for greenhouse gas emissions.”
The subsidiarity case against councils addressing greenhouse gas emissions is straightforward.
National-level policies addressing climate change are already only second-best. Different countries setting different targets and having different opportunities for abatement winds up meaning sharp differences in the cost of mitigating the next tonne of emissions. Spending $125 to avoid a tonne of emissions in Europe, at current European carbon prices, can be good; the social cost of carbon is arguably higher than that. But that same $125 could prevent two tonnes of net emissions in New Zealand. Or even more elsewhere.
But letting councils set emissions policies would be even worse.
Imagine for sake of argument that councils were highly competent, did not lack for expertise, and could run their own local versions of the Climate Change Commission’s work to set local tracks toward regional-level net zero policies.
Even then council-level greenhouse gas emissions policies would be a very bad idea.
Different parts of the country have very different opportunities for mitigating emissions and for sequestering carbon. When New Zealand reaches net zero, parts of the country will remain net emitters and other parts of the country will have net removals. It is impossible to tell, in 2024, which greenhouse gas emissions in 2060 will remain difficult to reduce. It is also impossible to tell what path technology may take for removing emissions from the atmosphere: trees may be surpassed by other options.
Hitting the net zero target at a national level will be hard enough to do cost-effectively. Trying to do it within each region misses out on opportunities where abatement is cheaper in some places than in others. The only sensible way of bridging those differences would be allowing emissions trading between regions – and that’s what the existing Emissions Trading Scheme already does.
And the existence of the ETS really matters here. The ETS is reasonably comprehensive for emissions in sectors other than agriculture. It is not just the best way of getting to net zero. It also makes it hard for other policies to reduce net emissions.
Suppose that Wellington pushed to net zero faster than other places – and let’s consider only the sectors covered by the ETS for now. Wellington’s demand for New Zealand Units, the carbon credits that must be surrendered with every tonne of emissions, would drop. The price of credits would drop a bit. But unless the government decides to issue fewer carbon credits, Wellington’s policy would only change where emissions happen rather than whether they happen.
The only way to reduce net emissions within the sector covered by the ETS is by reducing the number of carbon credits that the government will issue between now and 2050. New units created when a tonne of carbon is pulled from the atmosphere by a tree are fine – those do not increase net emissions. It’s the number of ‘from-thin-air’ units that the government creates for auction or for industrial allocations that determines net emissions.
The ETS is not perfect, but it is hard to get around that regional ‘waterbed’ effect unless you think the most cost-effective way to reduce the number of carbon credits that the government creates is by reducing demand for credits, region-by-region. And there are better ways to strengthen the ETS.
But it gets worse than that.
Both the prior Labour government and the current National government have made housing a very high priority.
Councils have used all manner of zoning and consenting tricks to make it hard to build housing because they experience growth as a cost to be mitigated. And both Labour and National worked to block some of the tricks that councils have used. Labour required councils to allow a lot more density near transport. National will require them to release more land for development while stopping councils from imposing rules that inflate building costs, like minimum apartment sizes and balcony requirements.
Associate Minister Twyford had set an urban economics advisory group to assist with urban aspects of resource management reform; I was a member.
Members of that group provided a submission to the Ministry for the Environment on the 2021 Emissions Reduction Plan warning that councils would use greenhouse gas emissions as a new tool for blocking suburban development.
Every substantial greenhouse gas emission from suburban environments is already covered by the ETS. Councils regulating greenhouse gas emissions during consenting would not affect net national emissions but would frustrate new housing supply.
We wrote:
“We urge the Ministry to consider very carefully the place of urban planning in the Emissions Reduction Plan. Measures already underway will work to reduce urban emissions and will have substantial effects on urban form. Asking councils to consider emission reductions explicitly in planning and consenting, over and above the consideration already given to those emissions in measures already underway, with insufficient guidance puts the housing supply agenda at risk for little potential greenhouse gas abatement.”
ACT’s Member’s bill should be read in that light, at least as far as the non-agricultural sector is concerned.
Different parts of government have different jobs. And councils have very important work to do in responding to climate change, and in responding to higher carbon prices.
Councils should plan for likely sea level rise and flooding. Zoning and planning should consider likely climate change not by trying to reduce emissions directly, but by setting the urban environments that people will want to live in when carbon prices may be much higher than they are now. Zoning needs to enable the different choices people will want to make when carbon prices are higher, rather than making those choices more costly than they need to be.
And when successive governments have prioritised housing affordability through enabling greater housing supply, not giving councils new ways of blocking housing seems important.
Subsidiarity matters. Regulating greenhouse gas emissions is a central government responsibility.
If central government abdicates that responsibility for the agricultural sector, there is an arguable case that councils picking up the job instead. But for the sector covered by the ETS, council regulation of greenhouse gas emissions will be a very costly way of achieving very little.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
Last week, the ACT Party’s Mark Cameron lodged a member’s bill prohibiting regional councils from considering greenhouse gas emissions from consented activities when deciding on resource consents.
Unfortunately, and hopefully unintentionally, the ACT Party’s press release claimed the Bill would “prohibit regional councils from considering climate change as a factor in their plans.”
Blocking councils from planning for increased flooding and for rising sea levels would be pretty stupid. That kind of land use planning is core council business. So Twitter discussion of the Bill degenerated into fights between those defending and opposing things the Bill would not do
The Bill’s explanatory note is more helpful. The Bill “aims to clarify the framework for managing greenhouse gas emissions in New Zealand by showing that emissions are best addressed by central government… by alleviating the burden on regional councils to set rules on the basis of national environmental standards for greenhouse gas emissions.”
The subsidiarity case against councils addressing greenhouse gas emissions is straightforward.
National-level policies addressing climate change are already only second-best. Different countries setting different targets and having different opportunities for abatement winds up meaning sharp differences in the cost of mitigating the next tonne of emissions. Spending $125 to avoid a tonne of emissions in Europe, at current European carbon prices, can be good; the social cost of carbon is arguably higher than that. But that same $125 could prevent two tonnes of net emissions in New Zealand. Or even more elsewhere.
But letting councils set emissions policies would be even worse.
Imagine for sake of argument that councils were highly competent, did not lack for expertise, and could run their own local versions of the Climate Change Commission’s work to set local tracks toward regional-level net zero policies.
Even then council-level greenhouse gas emissions policies would be a very bad idea.
Different parts of the country have very different opportunities for mitigating emissions and for sequestering carbon. When New Zealand reaches net zero, parts of the country will remain net emitters and other parts of the country will have net removals. It is impossible to tell, in 2024, which greenhouse gas emissions in 2060 will remain difficult to reduce. It is also impossible to tell what path technology may take for removing emissions from the atmosphere: trees may be surpassed by other options.
Hitting the net zero target at a national level will be hard enough to do cost-effectively. Trying to do it within each region misses out on opportunities where abatement is cheaper in some places than in others. The only sensible way of bridging those differences would be allowing emissions trading between regions – and that’s what the existing Emissions Trading Scheme already does.
And the existence of the ETS really matters here. The ETS is reasonably comprehensive for emissions in sectors other than agriculture. It is not just the best way of getting to net zero. It also makes it hard for other policies to reduce net emissions.
Suppose that Wellington pushed to net zero faster than other places – and let’s consider only the sectors covered by the ETS for now. Wellington’s demand for New Zealand Units, the carbon credits that must be surrendered with every tonne of emissions, would drop. The price of credits would drop a bit. But unless the government decides to issue fewer carbon credits, Wellington’s policy would only change where emissions happen rather than whether they happen.
The only way to reduce net emissions within the sector covered by the ETS is by reducing the number of carbon credits that the government will issue between now and 2050. New units created when a tonne of carbon is pulled from the atmosphere by a tree are fine – those do not increase net emissions. It’s the number of ‘from-thin-air’ units that the government creates for auction or for industrial allocations that determines net emissions.
The ETS is not perfect, but it is hard to get around that regional ‘waterbed’ effect unless you think the most cost-effective way to reduce the number of carbon credits that the government creates is by reducing demand for credits, region-by-region. And there are better ways to strengthen the ETS.
But it gets worse than that.
Both the prior Labour government and the current National government have made housing a very high priority.
Councils have used all manner of zoning and consenting tricks to make it hard to build housing because they experience growth as a cost to be mitigated. And both Labour and National worked to block some of the tricks that councils have used. Labour required councils to allow a lot more density near transport. National will require them to release more land for development while stopping councils from imposing rules that inflate building costs, like minimum apartment sizes and balcony requirements.
Associate Minister Twyford had set an urban economics advisory group to assist with urban aspects of resource management reform; I was a member.
Members of that group provided a submission to the Ministry for the Environment on the 2021 Emissions Reduction Plan warning that councils would use greenhouse gas emissions as a new tool for blocking suburban development.
Every substantial greenhouse gas emission from suburban environments is already covered by the ETS. Councils regulating greenhouse gas emissions during consenting would not affect net national emissions but would frustrate new housing supply.
We wrote:
“We urge the Ministry to consider very carefully the place of urban planning in the Emissions Reduction Plan. Measures already underway will work to reduce urban emissions and will have substantial effects on urban form. Asking councils to consider emission reductions explicitly in planning and consenting, over and above the consideration already given to those emissions in measures already underway, with insufficient guidance puts the housing supply agenda at risk for little potential greenhouse gas abatement.”
ACT’s Member’s bill should be read in that light, at least as far as the non-agricultural sector is concerned.
Different parts of government have different jobs. And councils have very important work to do in responding to climate change, and in responding to higher carbon prices.
Councils should plan for likely sea level rise and flooding. Zoning and planning should consider likely climate change not by trying to reduce emissions directly, but by setting the urban environments that people will want to live in when carbon prices may be much higher than they are now. Zoning needs to enable the different choices people will want to make when carbon prices are higher, rather than making those choices more costly than they need to be.
And when successive governments have prioritised housing affordability through enabling greater housing supply, not giving councils new ways of blocking housing seems important.
Subsidiarity matters. Regulating greenhouse gas emissions is a central government responsibility.
If central government abdicates that responsibility for the agricultural sector, there is an arguable case that councils picking up the job instead. But for the sector covered by the ETS, council regulation of greenhouse gas emissions will be a very costly way of achieving very little.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
1 comment:
Actually all regulation on emissions seems to be a remarkably effective way of achieving very little at very great social expense.
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