It’s all very well for the government to set a target date and amount for carbon emissions but that’s only part of what’s required for credibility. The proof is very much in the pudding – how are we actually going to achieve whatever target they set?

Two general methods are always compared – carbon taxes and traded permits for carbon emissions. But there is much more a government can do to tilt the playing field toward meeting targets than these two macro tools. For now the focus globally is very much on mitigation (reduction) of greenhouse gases rather than policies to adapt to the consequences of a higher temperature. Once the planet has warmed there is no choice but to focus on adaptation – the horse by then, has bolted.

But on mitigation the answer lies in technologies that conserve energy, or switch to renewables. There is a tremendous amount going on globally on these fronts and across a wide range of activities. From electric cars, to computer-controlled energy usage, to processes that actually remove carbon dioxide from the atmosphere – the scope of mitigation methods is mind-boggling. And for many of these developments the profit prospects are phenomenal. Our concern is that New Zealand policymakers are asleep at the wheel in terms of setting an environment where these investments and risks are being taken by the business sector.

This is precisely what private sector entrepreneurship and investment does – it takes risks on investment in the expectation that there might be bonanza returns for so doing. The role for governments then is to provide an investment climate that is conducive to these activities proliferating.

So what are our guys doing?

Good question, great question. And the answer is five eighths of nothing. We know they’re bending right over to entice foreign fossil fuel explorers to site here, but much as Simon Bridges and Steven Joyce might believe they can entice every oil company on earth to our shores, the collapse in the oil price has made theirs a hollow gesture.

And how about on the carbon mitigation front – just what policy settings are in place to steer investment that way as opposed to the energy strategies of yesteryear? The Government have a long list of actions in their consultation document, but few of them really stand up to scrutiny:

• Top of the list of course is the Emissions Trading Scheme (which the Government has deliberately watered down);
• Increasing renewable electricity generation to 90 per cent by 2025 (where’s the action plan? Closing Tiwai Point?);
• Encouraging and supporting permanent afforestation such as through the Permanent Forest Sink Initiative (which they scrapped then reinstated – a real hit for investor certainty);
• Investing approximately $10 million annually in research for new agricultural mitigation technologies through the Pastoral Greenhouse Gas Research Consortium and the New Zealand Agricultural Greenhouse Gas Research Centre (okay, we’ll give them this one);
• Exempting electric vehicles from road user charges until 2020 (so in the absence of a price on carbon, what is the long term incentive to buy an electric vehicle?);
• Introducing a fuel economy labelling scheme for vehicles; (ground breaking stuff!) and
• Investing $42 million in biofuel research (this is historical money and now ancient history).

What is the sum total of this effort? Three fifths of stuff all. The Government’s own modelling shows that the total projected effect of current climate policy settings is to reduce our gross emissions in 2030 by just 0.4%. Even using the more generous figure of net emissions they can only rack up a 4% reduction from the business as usual projection. This is nowhere near what is needed to get our emissions under control. The graph from Generation Zero puts this in context nicely – even if we ignore other gases like methane our carbon dioxide emissions look set to keep rising.

What is the consequence of this complacency, inertia? The main one is that we will be a price taker on other countries’ mitigation strategies. They will have the patented IP, they will have the pricing power.

What could we do?

What we could do of course is make Aotearoa New Zealand the ultimate destination for talent in these fields. Not by giving them handouts but by continuing to push on our inherent strengths:

• most democratic country on earth;
• honest and transparent government;
• our unique geography;
• our innovative culture, making us an ideal test bed for new technology; and
• best environment – clean and green reputation with a can do attitude to match.

In terms of achieving the sorts of targets we are talking about we could in addition;

1. Fix the Emissions Trading Scheme – get rid of the 2 for 1 offer Key put in place, and allow the price ceiling to gradually rise over time. This would provide some much needed long-term certainty for investors.
2. Build a long-term carbon price of $60 (the low end of the IPCC estimates) into the business case of all government investments.
3. Strengthen the Government policy to ensure our fresh water quality will actually be maintained or improved. If this is implemented properly it would effectively lead to a cap on stock numbers in many catchments, which will have side benefits for agricultural emissions (nitrous oxide and methane).
4. Actually developing a plan to get electricity generation to 90% (and eventually 100%) renewable generation. One approach we’ve previously talked about is closing Tiwai – which should drop electricity prices by 10%, plus save the Government any future bribes (such as the recent $30million payout to Rio Tinto) and speed New Zealand’s transition to renewable energy generation.
5. Removing the politics. Long-term investments need long term certainty, so the politicians need to get together on this. For example the UK Climate Change Act puts their targets into law, and set up an independent Climate Commission to advise government.
6. No subsidies but turn our R&D grants into a co-investment fund which gives the taxpayer an equity return on mitigation technologies. Picking winners? Bet your butt it is. Better than picking losers like more oil wells.
7. Review the regulatory environment to ensure energy companies encourage energy conservation and household supply to the national grid.
8. Give green technologies as much of a hand as oil and gas generation is getting now – New Zealand could be a world leader in the deployment of wind, marine, geothermal and electric vehicle technologies.
9. Implementing a rational funding model for transport projects which would see less spent on motorways with terrible benefit cost ratios, and key public transport projects like the City Rail Link could get a fair look in at central government funds instead.
10. Fixing the perverse incentives encouraging and subsidising sprawl and overcoming barriers to more compact city development, which can make a big difference to transport emissions.
11. If we are too scared of getting people to pay a proper cost for carbon at the pump, we could introduce vehicle fuel economy standards. Almost every developed country in the world has these; New Zealand doesn’t. Introducing these would provide a clear advantage to electric vehicles and fuel efficient models.
12. If all this is not enough to get our emissions down and meet our targets, we need to look at developing real offsets overseas. Norway has done this in South America – providing a model that we could replicate in the Pacific. We can’t continue to buy ‘junk’ carbon offsets to cover our blushes.

About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.