Climate Change – A Bluegreen Issue

Gareth MorganEnvironment

Yesterday I argued for a Bluegreen Party – one that could act as a coalition partner to Labour or National – a party that stuck to its knitting of protecting and improving the environment while remaining relatively agnostic on the economic and social agenda of its partners in government. Then, as if to answer the call overnight the world seems to be talking about climate change. There are a whole bunch of reasons why this is the moment for the Government to act, and show there is some backbone to its own bluegreen rhetoric.

The catalyst for the current furore is the United Nations Climate Summit – a one day meeting hosted by the U.N. Secretary-General Ban Ki Moon. As usual for these things, politicians have been calling for action, and people have been taking to the streets to wave placards. What is different this time around is that business leaders (like Apple CEO Tim Cook) are adding their voice, because they see action as a win/win for growth and the environment. Last week a commission of economists released a ten-point plan to reduce emissions and improve the global economy at the same time. In New Zealand, groups like Pure Advantage have been pushing this line for a while. 

The time is right

The time is right for the Government to act on this issue, for a number of reasons. Firstly, they have a healthy majority. Secondly, they have shown they are not above cherry picking the best policies of other parties – and there’s nothing wrong with that. Thirdly, reforms are always easier to introduce when we have ‘rockstar’ economy. Finally, we opted out of Kyoto II with the consequence that our Emissions Trading Scheme has been prohibited (by the signatories of Kyoto II) to trade international units from 2015. This has been an own goal. The concessionary deal the international community met with China and India has seen those “disadvantaged” countries get a heap of carbon credits as a result of some quite modest improvements to their emissions. They have flooded the international market with those credits and driven the price of carbon to the current lows.

Because of our rejection of Kyoto II we will soon be banned from trading on the international carbon market. So instead of being able to meet our lowered emissions obligations by buying cheap international credits, we will only be able to meet our undertakings by actually cutting our own emissions. That is a tougher road to compliance than we could have had – a missed opportunity. Of course the other option we still have is just not meet our obligations and tell the rest of the world to stick that up its jumper. Don’t put that beyond the realm of possibility given our penchant for dumb and dirty growth. 

Instead of scrapping the Emissions Trading Scheme entirely and becoming even more of a pariah, the Government should do exactly the opposite, and take strong action. The costs of doing nothing are too high. 

The cost of doing nothing

New Zealand has promised to reduce our emissions by 5% by 2020 (compared with 1990), but instead we are on track for a 25% rise. We currently have no plan or policy to achieve this goal, instead the Government has gone out of its way to erode the Emissions Trading Scheme at every turn – for example through its 2 for 1 offer whereby polluters only have to have one carbon credit of every two units they emit. 

Despite international negotiations stalling, climate change is not going away. It is only a matter of time until disasters mount and the international community acts. There will eventually be an international deal on climate change. When that happens, if we are behind the eight ball we will be punished by the international community, the cost of catch up will be a major competitive disadvantage and our businesses will have missed on the opportunities that climate change presents. The ‘head in the sand’ approach of Tony Abbott is alive and well in NZ.

Climate change as an opportunity

Opportunities you say? Isn’t a price on carbon going to strangle our economy? Not if we do it right. We need our market mechanisms designed so that people and businesses make the right long term investments now, that means acknowledging that carbon has a price. Do that and the businesses that reduce emissions will grow the most –and even be able to sell their innovations to the world. The case study below on Z Energy is a good example of what is possible. 

How do we do it without killing our economy?

We need to put a real price on carbon to provide long-term certainty for investors. We should exclude methane given the uncertainties over its impact relative to carbon dioxide, and while the agriculture industry works out how to mitigate it. That should keep the farmers quiet. 

National should pinch the Green Party’s idea of returning the revenue from this change to taxpayers through tax cuts. That way John Key can deliver on his tax cut pledge sooner than expected. Now that we have no ability to trade international units, our emissions trading scheme would effectively become a tax anyway. So why not raise the price on carbon to a level that makes a difference, and return the cash to the taxpayer? 

As part of the ‘Big Ask’, Generation Zero also challenged the government to create:

  • A Climate Change Act
  • An Independent Climate Change Authority
  • Carbon Budgets to ensure we are on track for our goals

This would give our climate change policy some long-term stability, and might even create some cross party consensus.

[Tweet “If we do it right, acting on climate change is a win for business and a win for the environment.”]

If we do it right, acting on climate change is a win for business and a win for the environment. It is a classic bluegreen policy. If National won’t pick it up and run with it, then their bluegreen wing is clearly a sop, nothing more than green wash. It would be clear there is a gap for a Bluegreen party in New Zealand, as set out in yesterday’s blog. 


Z Energy and “Stump to Pump”

Despite it being complex and more expensive to make than imported fuel (at the moment), Z Energy are investing in working out how to create biofuel from wood waste. New Zealand creates a lot of wood waste, and would create a whole lot more if we processed a fraction of the wood we export. Long term there is the possibility for a win/win here if we can develop the know-how.

With a real price on carbon we would have a stronger forestry industry, and would no doubt see greater innovation around it – this is a good example. Instead we are seeing innovative businesses that are working to reduce emissions struggle and, as we saw in the case of Greenlane Biogas, get sold overseas. [/box]

Climate Change – A Bluegreen Issue 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.