Opinion: Oil and gas ban all costs, no benefits

It was revealed earlier this month that when the Government decided to ban offshore drilling, it ignored the best advice of officials.

So, what was that advice?

Ministry of Business, Innovation, and Employment (MBIE) officials advised the Government that the decision to ban new offshore oil and gas drilling would be "detrimental to a number of public policy objectives".

That's Wellington-speak for "this is a bad policy".

The costs are significant — for starters, the Government would lose the $500 million in annual royalties and tax it currently takes from the oil and gas sector.

With this revenue wiped out, politicians will have to increase taxes in other areas, leaving taxpayers poorer. If taxes aren't hiked, future generations will be on the hook for higher debt levels.

Then there are the costs to families that rely on oil and gas, and the broader economy.
Households that use gas for cooking or heating will face higher prices, and a less reliable energy supply. The economy in Taranaki will cool and workers will have to accept lower incomes, or they might leave the region altogether.

The Government must believe all these costs are simply "worth it" for the environmental benefits. But the Government's own advisers have been clear — these environmental benefits do not exist.

MBIE advised the Government the ban on new oil and gas drilling would have a negligible impact on greenhouse gas emissions at home. More importantly, global greenhouse gas emissions would "increase".

MBIE explained to the Government that, as international buyers could no longer access natural gas from New Zealand, they were likely to step up their use of cheap coal from overseas, which is far more damaging for the environment.

This global picture should be what matters to those concerned about emissions, because climate change is a global phenomenon.

A narrow focus on local emissions suggests the Government is more interested in making New Zealand appear virtuous than actually doing good.

The decision to ban offshore drilling of oil and gas is wholly bad, whether your concern is for consumers, the economy, taxpayers, or climate change.

Despite those costs, the Government still pushed the ban through.

The rhetoric of the ban sounds great — it won global headlines and earned rapturous applause from the student audience that was chosen for the announcement.

Banning oil and gas drilling appeals to every New Zealander's innate sense of environmental right and wrong, but policies should be judged on results, on costs weighed against benefits.

The result of the oil and gas ban is a damaged economy, and accelerated climate change. It's all costs, no benefits — a lose-lose.

Joe Ascroft is an economist at the New Zealand Taxpayers' Union