Brian Fallow 's Opinion

The Economics Editor of the NZ Herald

Brian Fallow: Curbing emissions is vital

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Any delay could make adjustment to a low-carbon economy more costly

Some options which other nations have, such as switching from coal to natural gas for power generation are not really available with just two coal-fired turbines at Huntly. Photo / File
Some options which other nations have, such as switching from coal to natural gas for power generation are not really available with just two coal-fired turbines at Huntly. Photo / File

People often ask why New Zealand should incur any costs curbing its greenhouse gas emissions when we account for less than 0.2 per cent of the global total and the rest of the world is doing five-eighths of not much at all to reduce theirs.

We shouldn't, says Act leader Jamie Whyte. It would just be "moral exhibitionism".

It is an oddly obtuse view for a former philosophy don to take.

Because the answer is that it is an exercise in enlightened national self-interest.

It is not about reducing New Zealand's admittedly marginal impact on global climate, but of reducing the overall burden to New Zealanders of an inevitable adjustment to a low-carbon economy.

It is an ethical question only inasmuch as the time-frames involved are decadal and therefore there are issues of intergenerational equity and the appropriate discounting of benefits which only emerge with a lag.

The third tranche of the Intergovernmental Panel on Climate Change's fifth assessment report argues that the costs of the necessary adjustment would be relatively modest if embarked on immediately and globally, but rise substantially if delayed.

Delay means the adjustment to a low-carbon economy would be concentrated into a shorter period — making it more costly and disorderly — and there would be greater risk of stranded assets as a result of ill-informed investment decisions in the meantime.

Take the goal of limiting global warming to 2°C above pre-industrial levels which Governments including ours have sort of, kind of signed up to.

Mitigation scenarios which are likely to deliver that (that is, which have a better than 66 per cent chance of doing so) mean lowering global greenhouse gas emissions by 40 to 70 per cent from 2010 levels by mid-century and to near zero by the end of the century, the IPCC says.

In the best case scenario, in which all countries begin a mitigation effort immediately and there is a single global carbon price, the report's authors reckon that could be achieved with losses in global consumption that shave between 1 and 4 per cent off the 300 to 900 per cent increase in consumption they expect over the rest of the century. That would be a reduction of just 0.06 percentage points a year from baseline annual consumption growth of between 1.6 and 3 per cent.

It is hardly a crippling impost to weigh against the benefits of reduced climate change. But there is no show of that happening.

On the more relevant time-frame looking out to 2030, they reckon consumption losses associated with "cost-effective scenarios" would amount to a cumulative 1.7 per cent, and 3.4 per cent by 2050.

In other words we would lose the benefit of six to 12 months' economic growth over the next 16 years and as much again over the following 20 years.

The costs climb - by 28 to 44 per cent by mid-century - if mitigation is delayed until 2030.

These are global estimates. The question is whether the costs of delay would be higher or lower than that in New Zealand's case.

Most likely higher, because we are starting from a relatively adverse situation.

Our emissions are high — the fifth-highest of 40 developed countries — at 16.6 tonnes of CO2 equivalent per person.

And we have fewer options for reducing emissions than most developed countries.

Whereas for most developed countries carbon dioxide represents around 80 per cent of their emissions, in New Zealand methane and nitrous oxide from the bodily functions of livestock make up about half of emissions.

It is harder to change a cow's digestion than a car's propulsion.

Three-quarters of the electricity generated last year was from renewable sources.

So some of the low-hanging fruit other countries have, like switching from coal to natural gas for electricity generation, is not really available with just two remaining coal-fired turbines at Huntly. We are in cherry-picker territory.

But because (to vary the metaphor) we have further to go and a steeper road ahead than other developed countries, that is all the more reason not to further delay setting out on the journey.

In particular we need a carbon price that will have a meaningful effect on the choices people make when buying a vehicle, deciding what to build and where, and contemplating a change of land use.

Policies that encourage untrammelled urban sprawl or the replacement of carbon-sequestering trees with methane-belching ruminants may well look really dumb when viewed from the vantage point of 2040, say.

"What were you thinking?" they may ask us. "Couldn't you read?"

At the global level the IPCC says that baseline scenarios — those without additional measures to curb emissions — result in global mean surface temperature increases by 2100 of between 3.7 and 4.8 degrees compared with pre-industrial levels. Seriously unpleasant.

And the recent trend is not good. Global emissions grew by an average 2.2 per cent a year during the 2000s, driven most of all by rising incomes, compared with an average of 1.3 per cent year between 1970 and 2000.

The essential problem is that the harm those emissions do spills over from emitters (us) to others.

Because emissions are diffused over the whole planet and accumulate in the atmosphere and oceans, and because the costs are not sheeted home to those who impose them, the effect is the equivalent of a giant subsidy from poor countries to rich ones and from future generations to the present.

The subsidy protects incumbent high-carbon technologies and makes it harder for cleaner ones to compete. It is a destructive distortion.

Being the bludger's end of the arrangement we naturally don't want it to end.

But it will. The alternative would be a tragedy of the commons on a planetary scale.

And we don't do ourselves any favours by pretending otherwise.

- NZ Herald

Brian Fallow

The Economics Editor of the NZ Herald

Brian Fallow is the New Zealand Herald's economics editor. A Southlander happily transplanted to Wellington, he has been a journalist since 1984 and has covered the economy and related areas of public policy for the Herald since 1995. Why the economy? Because it is where we all live and because the forces at work in it can really mess up people's lives if we are not careful.

Read more by Brian Fallow

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