Barry Brill: Do we need to be world leaders if it means bankruptcy?

John Key is following in his predecessor's footsteps, says Barry Brill. Photo / Mark Mitchell

Opinion

Helen Clark's Government wanted New Zealand to be a "world leader" in cutting emissions of greenhouse gases. Now the new Prime Minister has surprised supporters by taking on the same ambition.

The National Party campaigned on a promise to reduce our greenhouse gases to 1990 levels by 2050 - a cut of 46Mt (million tones of CO2-equivalent) from 2008 levels over a period of 40 years. But Mr Key now says his Government will aim to reach more than half the 2050 goal in just 10 years.

Because technologies to reduce agricultural emissions have not yet been developed, the most expensive and painful time to reduce gases will be in the early part of the 40-year period. The next generation of New Zealanders will have a range of new methods and improved science from all over the world. Why try to do most of the job before this knowledge becomes available? A Gold Medal for New Zealand?

While we have undertaken a 10-20 per cent decrease from 1990 levels, the largest emitter, the United States, is aiming for a zero decrease - if their Senate approves legislation. Canada is targeting a 3 per cent decrease and Japan 8 per cent. Australia's plans seem likely to be voted down by their Senate.

The 27 EU countries picked up a huge advantage from the choice of 1990 as the base year, but their combined goals looking forward are reductions of 15 per cent (mid-point). Russia is aiming at increases of 24 per cent. New Zealand outpoints them all by targeting forward reductions of 32-42 per cent.

On its website, the Ministry for the Environment points out that the reality is even worse, at the level of individual New Zealanders. A target of 10 per cent below 1990 levels equates to a 35 per cent per capita reduction in emissions from 1990 to 2020. A target of 20 per cent below 1990 levels equates to a 42 per cent per capita reduction in emissions from 1990 to 2020.

It gets worse - 20 per cent below 2008 levels equates to a 64 per cent per capita reduction in emissions from 2008 to 2020.

So, our country is a clear contender for the Gold Medal in the Copenhagen stakes. How embarrassing for all the industrialised countries that an agricultural country should lead the way.

How much is this ambition going to cost? The best answer is "nobody knows" because it depends on unknowns - especially the future international price of carbon offsets.

Is it capped? No - it could conceivably cost us our entire Gross National Product. How did the Government "balance the environmental and economic factors", if it doesn't have figures? Well, despite earlier promises, there has never been a quantified cost-benefit study.

But the Prime Minister has assured us that the best available guess is that we'll all be out-of-pocket by $27 per week per head by the end of the decade. This cost will start building up from now, and will continue forever.

This cost is appalling. Why aren't we rioting in the streets? Even now, we can't afford decent healthcare, education, prisons, so where will we find another $6 billion per year? How can a family of four find an extra $112 per week after tax?

The bill of $6 billion per year is more than 5 per cent of the country's GNP. We are told we need to incur this cost because it will be good for trade in an indirect sort of way.

But the cure is worse than the disease when the cost is greater than all our earnings from meat and wool exports, or equal to 60 per cent of our annual dairy exports.

While it is understandable that the Ministry for the Environment favoured this decision, the Treasury apparently advised that we couldn't possibly pay for such a commitment. There are rumours politicians ignored a Treasury recommendation of a 2020 target midpoint of plus 3 per cent.

Nobody has asked Kiwis how much of their income should be directed to attempts to change the climate. But that question was tested in a US survey conducted by the Economist which "found that 62 per cent of Americans want carbon curbs, but only 30 per cent would pay even $175 a year for them and only 7 per cent would pay $770".

If Americans jibbed at $175 per household, we can expect that (poorer) New Zealanders will have trouble at about $150 per household per annum. One can only assume that an annual bill of $5600 for a household of four would fast usher in a change of government.

New Zealand's promises in Copenhagen won't have any material impact on efforts to change the world's future climate. However, there will be endless meetings, where every country will pressure every other country to accept a bigger share of the burden.

Going into this sort of negotiation, most countries start with a low bid. Our Government's tactics of tabling a massive opening bid - one we can't afford - will have competitors scratching their heads. I predict it will become a case study in business schools and negotiating classes around the world.

* Barry Brill has a lengthy involvement in energy policy matters, including as Energy Minister in the 1978-81 National Government, chairman of the NZ Gas Council, NZ Electricity Supply Assoc, Power NZ, and director of Petrocorp, and EMCO.