Zero Carbon Bill ‘shuts doors’

Idon’t know if anyone ever really believed manufacturing TVS in New Zealand made sense. Importing fully assembled TVS was prohibited to encourage manufacture and assembly in New Zealand. But it resulted in nonsense practices guaranteed to make TVS more expensive.

New Zealand businessman Alan Gibbs famously found it profitable to have Japanese manufacturer JVC disassemble TVS and ship the parts to New Zealand for reassembly.

If you cared about making sure Kiwi families could afford TVS, banning or severely restricting trade was hardly the right solution.

So why does the proposed Zero Carbon Bill, to address the biggest environmental challenge of our time, only pursue those carbon emission reductions achievable in New Zealand?

The environment select committee reported back this week on the Climate Change Response (Zero Carbon) Amendment Bill. It aims for net zero carbon emissions by 2050, requiring the preparation of mitigation and adaptation plans, and an independent climate change commission to monitor progress. But, without amendments, the bill will not do nearly as much good as it could.

New Zealand will do less in the fight against climate change than we should, or spend much more than is necessary for the amount of greenhouse gas mitigation we are able to achieve, or a bit of both.

The bill requires New Zealand’s emissions budgets be met, ‘‘as far as possible’’, through domestic measures.

There is obviously a lot more that can be done domestically to reduce greenhouse gas emissions. New Zealand’s emissions trading scheme can, should, and likely will be strengthened. The ETS should be comprehensive across all sectors. As carbon prices increase, households and businesses will adjust in the same way they do with any other change in relative prices.

But as carbon budgets become tighter, domestic low-hanging emission-reduction fruit start being eaten up. Each subsequent tonne of emission reductions becomes more expensive.

And while spending massive amounts per tonne abated can be worthwhile if it is the only and best way of avoiding catastrophic climate change, it makes far less sense if there are cheaper opportunities to reduce emissions. Does it make sense for New Zealanders, collectively, to invest a lot of costly effort in the next million tonnes of emission reductions in New Zealand if, for the same commitment, we could back projects abroad that did 10 times as much good?

In 2016, Giving What We Can, a charity evaluating charitable effectiveness, found protecting Amazon rainforests can mitigate greenhouse gas emissions at a cost equivalent to a little over NZ$2 per tonne. The current ETS price is NZ$25. If that assessment is right, then every dollar spent in emission reductions here at home could do about 10 times as much good if invested in protecting Amazon rainforests.

Forcing our emission reduction efforts to be focused here can look a lot like the old import controls on TVS – a really expensive way of not doing much good. It is likely only the best motives lie behind the domestic focus. There have been a lot of dodgy emission reduction schemes and it would be a mistake to allow potentially dodgy carbon credits to contaminate New Zealand’s ETS.

But is that not the kind of thing an independent climate change commission could assess? And remember the international community is also working on this problem: the coming 25th International Climate Conference in Santiago this December will be looking at rules for carbon accounting across borders.

When 99.83 per cent of global emissions occur outside of New Zealand, it seems implausible the best opportunities to reduce the global burden will be found here. Just as trade got Kiwis better TVS at lower cost, trade can let Kiwis do more good.

Parliament should not shut the door on those opportunities.

– Dr Eric Crampton is New Zealand Initiative chief economist