Can we find consensus over Climate Change policy?

Gareth MorganEnvironment

Recent revelations from Carbon News have shown that almost everyone – officials, business groups, advocacy groups – wants a cross party consensus on climate change. Everyone that is, apart from the ruling National Party who are blinded by their perception of horrendous economic costs and ideologically are destined to stay that way. This sudden consensus seems surprising but shouldn’t be; certainty is crucial for businesses making long-term investments. The only surprising thing about the desire for the consensus is that it flies in the face of the short term thinking we have seen thus far from business lobby groups, Treasury and MBIE officials on climate change.

Who wants consensus?

All of a sudden everyone is talking about a cross party consensus on how New Zealand will transition to a low carbon economy. The politicians have been talking about it for a while – James Shaw raised it but got a glib response from John Key – if the public wanted certainty over climate change all they had to do was keep voting National.

Turns out that behind the scenes lots of people are also calling for a cross party consensus. In Cabinet papers recently released to Carbon News, officials from Treasury and Ministry for the Environment made similar noises. Even Business New Zealand has backed the idea.

Last Friday, the Green Party organised a day-long conference at Parliament to spark some cross-party dialogue and debate on New Zealand’s climate change efforts. Labour and New Zealand First showed up, along with 150 or so participants, but there was one glaring gap with not one MP from – you guessed it – National.

Why is a cross party consensus important?

The argument is that a cross party consensus on climate change policy is the best way to give business certainty. Businesses make investments in assets that last decades, so the worst possible scenario for a business is if policies change over that time, rendering those assets worthless. It is much better to know in advance that the policy will change so that the correct investment can be made in the first place. In short, business certainty makes good business sense.

This insight fits well with the evidence – the cheapest way to transition to a low carbon economy is to start acting now.

Lets try a purely hypothetical example. Say a milk company is investing in a boiler to make milk powder. The milk company might have a choice to invest in boilers that were designed to use coal or biomass. At the moment coal might be cheaper so they might choose to invest in a coal-powered boiler. But if the price on carbon were to hit $50 a tonne coal might become prohibitively expensive to use, rendering their expensive boiler pointless. Okay, maybe the example is not so hypothetical.

Two Faced Lobbyists

At the same time as they call for consensus, the same officials and lobby groups are concerned about the short term cost to the economy of any climate change targets that the government commits to. Business New Zealand and Treasury both argued that the government should aim to minimise the costs of this target – which means having the lowest possible target.

So apparently businesses want consensus and a certainty of cost – as long as that cost is low. Never mind if the target is inconsistent with that required to avoid dangerous dangerous climate change. You don’t have to probe much to see how shallow the business lobbyist’s rationale is.

Sadly, keeping the costs of climate change low is unlikely if we keep delaying action now. Businesses and Treasury are kidding themselves if they think that climate change is going away, and the National Party are dreaming if they think climate change will never be an issue as long as they stay in power. They can’t control the climate, and they can’t control our much bigger international trade partners. The only certainty is that the world needs to act or disasters will continue to mount. The only way to deliver business certainty is to start acting now.

So where would a consensus get us?

Any sort of cross party consensus would rely on the evidence, and the evidence is actually pretty clear. We don’t need to panic about reducing short-lived gases like methane (of course it helps to stop emissions growing!), but for long-lived gases developed countries need be carbon neutral by around 2050.

So any policy needs to give this long-term signal, and ultimately we need to stop thinking about this transition in terms of short-term costs whilst ignoring the costs of not doing anything. The transition to a fossil fuel free economy is inevitable and the more we stall, the more we will have to pay later on.

The one area where the cost conversation is reasonable is over the shift of production overseas. There is no point in penalizing business so much production just moves away. This is a risk if New Zealand takes action that doesn’t also get taken in other countries.

However, there are ways to reduce that risk and still take action. One of our major export industries is dairy, and simply treating methane differently – for example by capping emissions rather than reducing them to zero – would make a massive difference. There are other ways to make sure we don’t lose exporters overseas, for example by granting free emission credits.

Given New Zealand has been such a laggard on reducing emissions since 1990, there is next to no risk that we will make sacrifices that invite the outflow of businesses. More likely is that our continued negligence of taking climate change seriously could see us blacklisted in trade agreements.

What is needed

A cross party consensus over climate change would certainly be useful. It might even improve business certainty, but only if the consensus galvanizes action based on the evidence. A bunch of politicians and businesses sitting around a table agreeing to do nothing won’t alter the reality of the climate changing outside their window.

Can we find consensus over Climate Change policy? was last modified: December 15th, 2015 by Gareth Morgan
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.