One challenge awaiting the next Government is how to address - and especially, how to fund - the need to adapt to climate change.

A timely paper on this by Jonathan Boston, professor of public policy at Victoria University of Wellington, and Dr Judy Lawrence, of the university's Climate Change Research Institute, makes sobering reading. Lawrence is a former head of the Ministry for the Environment's climate change office, and chairs a technical working group on climate change adaptation which is due to report next year.

The picture of the status quo that emerges is one of myopia, muddle and moral hazard.

Sea level rise is not the only climate change impact we have to worry about, but when so much of the population and so much critical infrastructure hugs the coastline, adapting to a rising sea level is fundamentally important.


The National Institute of Water and Atmospheric Research (Niwa) calculates that there are 44,000 dwellings housing 133,000 people within 1.5m of mean high water at the highest tides each month, as of the 2013 census. In all, 68,000 buildings worth more than $20 billion, as of 2011, are that close to sea level, along with five airports, 46km of railway and 2100km of roads.

So we are talking about the "managed retreat" from quite a lot of built-up land.

The political questions, and they are daunting ones, are who should bear that cost and how? Waiting until disaster has struck and then scrambling to respond to it is neither efficient nor fair.

"Ad hoc responses to climate events as seas continue to rise will be increasingly costly and socially disruptive," Boston and Lawrence argue. "A long-standing pattern of Crown 'bail-outs' not only has potential to create equity issues, but also raises public expectations of continued protection and funding assistance."

Economists call this moral hazard: if you can be confident of socialising the costs of your decisions (including where to buy a house), that reduces the incentive to avoid or reduce risk.

But at the same time, people are entitled to expect local councils will make prudent decisions regarding where people can settle and buildings can be erected. "If councils fail to take proper account of known and foreseeable risks and permit construction to occur in harm's way, then there is potential for them to be held legally liable for the subsequent damages."

As it is, local government's finances are under considerable strain. Collectively, the councils spend hundreds of millions of dollars more than their income every year and in some cases, notably Auckland, are bumping up against limits on their ability to borrow.

Either they are struggling to cope with the infrastructural needs of growing populations and visitor numbers, or they are battling an ebb tide of shrinking and ageing populations for whom the current reliance on rates is increasingly burdensome.

Boston and Lawrence consider and reject the option of expanding the natural disaster fund administered by the Earthquake Commission to include the proactive funding of adaptation measures.

Quite apart from the fact that the fund has been cleaned out by the Canterbury earthquakes, it is designed to repair damage from sudden catastrophic events, not to cover the cost of precautions against slow, inexorable ones whose location is much more predictable. In that respect, the NZ Superannuation Fund is a more relevant model.

Boston and Lawrence propose a new Climate Change Adaptation Fund with a mandate to fund, fully or in part, various specified adaptation-related costs.

Like EQC or the Cullen fund, it should be a Crown entity rather than a government department, to reduce the risk of political interference in its decisions.

It would need a secure, ongoing source, or sources, of funding. They suggest a carbon tax on fossil fuels, a levy on the rateable value of properties or an annual appropriation from the Budget.

All three present problems. We already have a price on carbon through the emissions trading scheme. Higher rates bills are unlikely to be greeted with joy and the Cullen fund had its financing tap abruptly turned off by the Government in 2009.

The designers of an adaptation fund would have to think through how wide its mandate should be. Would it include adaptation costs other than those associated with sea level rise?

Should it be tightly focused on supporting people who have to move from their properties and helping fund the future-proofing of infrastructure in new locations? Would compensatory arrangements cover only residential properties or also include business premises, losses due to business disruption, and local government assets?

Or should it be responsible for engineering works like sea walls to protect existing properties, at the risk of creating a false sense of security?

And where should the decision rights lie? If central government is a major funder or co-funder of adaptation, and especially large scale managed retreat, it will expect to have an influence on planning decisions, Boston and Lawrence say. That, in turn, raises questions about the respective roles of central, regional and local government in the planning process and about mechanisms for inter-governmental coordination.

There would also be a need for specifically designed processes for public participation and consultation.

Clearly, it is an area where the questions outnumber the answers at this stage. We can only hope that whoever sits around the Cabinet table over the next three years doesn't consign them to the too-hard basket.

Because one thing we know for sure is that no matter what governments do - or, judging by their record so far, fail to do - about emissions, adapting to climate change is an inescapable challenge ahead.

The pitilessly immutable laws of nature and mathematics assure us of that.