Region among most exposed to climate impacts: Treasury report

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

This region and some of the mainstays of our economy have been identified as being particularly exposed to the impacts of climate change in a new Treasury report that says New Zealand’s economy as a whole is well placed thanks to strong institutions and a track record of economic and fiscal resilience.

However, one expert questions its conclusions in a crystal-ball gazing exercise that relied in part on dated information, and assumed we will be able to buy enough offshore carbon credits to offset emissions and meet our international obligations.

The report, Climate Economic and Fiscal Assessment 2023, said the “modest” change predicted to gross GDP in coming decades (a 0.5 percent reduction due to droughts in 2061, and 0.7 percent fall due to bigger floods/storms) masked the huge impact it would have on some sectors — especially those whose only way to reduce emissions was by reducing output — and households.

Agriculture, forestry, fisheries and tourism were particularly exposed, as were the regions where these industries dominate or the places particularly vulnerable to flooding; Southland, Tairāwhiti, Northland, Waikato and West Coast were listed.

Rising costs of food and fuel driven by the Emissions Trading Scheme meant it was likely that poorer people would be disproportionately affected, as would Māori who were also more likely to work in high-emitting sectors, the report said.

It noted that warmer temperatures might be of some benefit to New Zealand farmers compared to other countries, and there were health and environmental benefits from slashing the use of fossil fuels.

Uncertainty around international carbon markets meant NZ’s carbon offset bill could be anywhere from $3.3bn to $23.7bn by 2030.

Treasury acknowledged that the report was done before Cyclone Gabrielle and other major flooding this year, and said modelling of the overall fiscal risk from storms, flooding and sea level rise was not yet available, but was likely to be substantial and grow over time.

Professor Ilan Noy, the inaugural chair in the economics of disasters and climate change at Victoria University, told RNZ yesterday he believed the report underestimated the costs — for instance, by relying heavily on a report from 2018 which looked at the previous decade, it missed five years of record extreme weather events.

A major issue he raised was that like many other countries, New Zealand was hoping to avoid having to eliminate emissions by offsetting them with carbon permits bought on the international market. Buying permits offshore might cost a lot more than $23bn by 2030 if supply was small for a market with high demand — which could force us to actually reduce our emissions faster.