Matt Burgess: To support lower emissions, oppose the Climate Commission’s plan

OPINION:

It is easy to dismiss critics of the Climate Change Commission’s plan to reduce emissions as opposed to any action at all.

Too easy. There is a consensus for lower emissions which no New Zealand institution opposes. Parliament put the matter to rest in 2019 by legislating our commitments to the Paris climate agreement and to net zero emissions by 2050.

The task now is to decide how and where emissions should come down.

Critics of the Commission’s plan, including the New Zealand Initiative, worry it does not do enough to lower emissions. In fact, the plan may not reduce emissions at all.

We already have the tools we need to meet our emissions targets. The Commission’s analysis shows existing policies including the Emissions Trading Scheme (“ETS”) gets New Zealand to net zero emissions from 2050. According to the Commission, a carbon price of $50 is enough.

So current policies tick every box: affordable, no need for international offsets, and no undue dependence on trees.

But that is not good enough for the Climate Commission. It proposes sweeping reforms of transport, energy, industry, agriculture and cities to reduce emissions.

The problem is that, according to the Commission’s analysis, these unprecedented changes will reduce emissions by about the same amount as current policies. So the plan is for decades of upheaval for little or no contribution to emissions. Their plan is not really about emissions.

Worse, the Commission’s plan is expensive. Carbon prices rise to somewhere between $250 and $800 by 2050 under its plan, between five and 16 times more than current policies. These costs jeopardise our emissions targets.

This cost inflation is the product of picking winners. Current policies are affordable because they select technologies according to their cost-effectiveness. By contrast, the Commission’s plan forces early investment in preferred technologies including electric vehicles (“EVs”) regardless of performance and years before they become fully competitive.

The result is high costs for no emissions benefits, since cost-ineffective technologies merely displace more effective alternatives. And the Commission’s strategy adds huge risks by forcing big bets on unproven technologies.

That is no criticism of EVs and other green technologies. But from a climate change perspective, these technologies are interesting only insofar as they are a competitive way to cut emissions. The Commission rejects this logic, which is why its plan costs so much.

The Commission’s plan is not just expensive, it is incoherent.

The Commission recommends combining the ETS with other emissions policies. Whatever the political merits of that approach, it makes little sense as a way to lower emissions. If the ETS caps emissions, then other policies will not reduce emissions any further.

This neutralising effect of an ETS is widely recognised including by the Intergovernmental Panel on Climate Change (“IPCC”). The Commission itself acknowledges this effect of the ETS on other policies. Yet it does not resolve the issue and proposes its reforms anyway. This is a potential showstopper for the Commission’s whole strategy.

There are also serious concerns about the quality of the Commission’s advice.

It is now clear the Commission sent many of its 70 recommendations with no supporting analysis. It appears to have no idea of the emissions, wellbeing and distributional effects of many of its recommendations.

That is an irresponsible approach from an institution proposing the most far-reaching reforms in decades. The Commission wants to ban imports of light petrol and diesel vehicles by 2032; ban new gas connections to homes and businesses from 2025; cull 15 per cent of livestock by 2030; and ban coal-fired generation and new boiler installations. It seems extraordinary to propose such radical changes without knowing the consequences.

It is not tight timeframes preventing more checks. Rod Carr, the Commission’s Chair, justifies the lack of testing by saying the Commission only offers “direction of travel.” (Actually, the legislation requires “policies and strategies.”) The upshot is that Commission looks set to take the same approach in its final report in May.

And this is just the start. We see problems in everything from transparency to legislation, strategy, capability, even basic logic. The result is a profoundly unserious plan to reduce emissions.

Were the Climate Commission committed to lower emissions, it would have embraced transparency, not run from it by withholding data. It would demand evaluations of the ETS, rather than assume the ETS is not enough. It would test its recommendations. It would acknowledge policies sometimes fail and recommend ways to manage that risk. It would stay within Parliament’s mandate. And it would avoid misleading statements.

Above all, the Commission would embrace the principle of reducing emissions at least cost, which gives us the best chance to meet to our commitments. Shamefully, the Commission’s Chair recently rejected this principle.

We support efforts to lower emissions, which is why we oppose the Commission’s plan. We need plans that work, and a competent Climate Change Commission focused on emissions and prepared to justify its plans.

– Matt Burgess is Senior Economist at the New Zealand Initiative.

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