Not about emissions

With its Emissions Reduction Plan released last week, the government is promising unprecedented control over every aspect of your life.

How you move. What you eat. Where you live. How you heat your home.

It is little short of a revolution. Between its emissions plan and next year’s Budget, which will also be about climate change, future governments of this country will have more to say about everything.

The problem is that existing policies already have this country firmly on track to deliver emissions targets.

In both its draft and final reports, the Climate Change Commission said current policies and a $50 carbon price will be enough to deliver net zero emissions in 2050. Its analysis did not show undue reliance on removals by exotic trees, although Ministers and officials have repeatedly made misleading statements about the Commission’s findings.

Today’s carbon price is $65. So we are ahead of schedule.

Which makes the government’s Emissions Reduction Plan redundant. We get to our targets without the Plan. Emissions will come down about as quickly with the plan as without.

New Zealand should get more credit for its progress on emissions. On a per-capita basis, greenhouse gases have been falling since 2006. They are down 22% overall, and down 34% if agriculture is excluded.

Net emissions of long-lived greenhouse gases – relevant for the net zero target – are down 25% per person.

And it is not pine trees that are doing all the work. More than 100% of the fall in net emissions is due to lower gross emissions.

So current policies are already doing the business demanded by environmentalists. There is no need to add thousands of dollars to the cost of vehicle imports, or any of the many other impositions being looked at, since we are already on track to deliver the stated goal.

There should be no question existing policies will deliver all of our emissions targets if they are given the chance. That is because, apart from methane, New Zealand has set net emissions targets. Both domestic law and international agreements recognise three pathways to lower net emissions: lower gross emissions; removals by trees and other carbon capture technologies; and offshore mitigation.

Removals and offshore mitigation are each affordable and scalable enough on their own to deliver net zero emissions in 2050.

But voters prefer reductions. Fine.

So the task for emissions policies is to assemble a mix of reductions, removals and offshore mitigation which

  • delivers emissions targets; and
  • reflects the premium voters are willing to pay for more reductions, less removals and less offshore mitigation.

The government is not thinking about climate change this way. In fact, it does not seem to be thinking about emissions at all. It has published an Emissions Reduction Plan which will bring down emissions by about the same amount as existing policies to achieve the same emissions targets.

What, then, is the point of an Emissions Reduction Plan if it does not reduce emissions?

Judging from its effects, the point is control. The plan will have two clear effects. Ministers will decide how and where emissions come down, not you. Second, you will pay more – ten times more, on the government’s own analysis – for the benefit of their judgment.

What a terrible deal. For the environment. And for your back pocket.

And all based on the twin lies that reducing emissions requires central control, and that the government’s Emissions Reduction Plan reduces emissions.

How do officials think about the costs of expropriation?

The government has introduced legislation which will allow the Minister of Health and the Director General to take over private companies doing COVID testing (further description is here). The likely target of this change is Rako, which has sought a commercial negotiation with the government for the last year. The amendment, which is before the Select Committee, will give the government the option of taking Rako’s property and unilaterally determine compensation.

So, what do officials see as the costs of de facto nationalisation of COVID testing?

Here is what the Ministry of Health has to say in its Fact Sheet 5: Regulating COVID-19 laboratory testing and managing testing supplies and capacity:

The proposed change will not have any direct impacts. Orders made under the new provision may impose obligations or restrictions on testing laboratories to ensure quality of testing, integration of test results with the public testing repository and regulation of testing consumables.

It is important to note that an Order to requisition supplies or redirect capacity to the public health response would only be made if there was significant COVID-19 resurgence where there is insufficient testing capacity in the public system.

Here is what the Regulatory Impact Statement says about costs:

There may be modest costs to the Crown in administering any regulatory regime should this be required. There may also be administrative and other costs for public/private laboratories depending on what is proposed. These costs would be assessed at the time any order is made.

The RIS essentially repeats that last sentence when it says, “A full cost assessment would be undertaken should a COVID-19 Public Health Order (Order) be proposed using the new provisions.”

As for benefits, the RIS says “[t]his proposal will ensure flexibility in the legislation to make orders to effectively manage laboratory testing (if required) to ensure appropriate regulation of quality control and minimum standards in relation to testing, integration of COVID-19 test results into the public health, management of the supply of testing consumables.”

Set aside the fact that officials who cannot secure MIQ or order vaccines on time obviously cannot deliver any of those benefits.

Focus on costs. Officials seem to operating with a cost model that threatening to take a company’s IP is costless, and costs crystalise only when property is actually taken.

I wonder what Rako’s investors and employees think about that view? In fact, I wonder what every owner of intellectual property in every sector thinks about the Ministry’s view.

Because the cost of taking companies’ property is not the administrative overhead, as officials suggest in the RIS.

The cost is all the investment in innovation that will not happen in the future.

Those costs are large, big enough to be measured in percentages of GDP. So it is laughable that officials could list administrative costs as the only real downside of their proposal.

Do officials at the Ministry of Health understand how investment in specific assets works? Do they understand that investment in intellectual property, and in all sunk assets, depends on the credibility of the government’s promise not to take the property once it is created? Do officials recognise that even threatening such opportunism in one sector could have wider ramifications about security of property elsewhere? That prospective investors in wind turbines or EV charging infrastructure won’t notice the government putting in place machinery to take the property of medical companies?

Could officials and the government be any more short-sighted?

Just when you thought it could not get any worse

Having banned saliva testing for more than a year, the government is now proposing to take it. As in, expropriate inventors and manufacturers of COVID testing products.

Newsroom ($) quotes the Chief Executive of Rako, Leon Grice:

There is other legislation where the Government can come in and expropriate or requisition private property – that’s the Public Works Act. But that has more protections, like a process to determine a market rate that the Government must pay…. They can just insist we give up our stock and our reagents and our premises that we need to do our work.

This is real. The government really is proposing to give the Minister of Health the right to “insist we give up our stock and our reagents and our premises that we need to do our work.” The COVID-19 Public Health Response Amendment Bill (No 2) 2021 says:

11 Orders that can be made under this Act

(1) The Minister or the Director-General may, in accordance with section 9 or 10 (as the case may be), make an order under this section for 1 or more of the following purposes:

(e) requiring the owner or any person in charge of a specified laboratory that undertakes COVID-19 testing to—

(i) deliver or use, in accordance with directions given under the order, specified quantities of COVID-19 testing consumables that the Minister considers necessary for the purposes of the public health response to COVID-19:

(ii) undertake COVID-19 testing solely for the purposes of the public health response to COVID-19 while subject to the order, whether or not the laboratory is contracted by the Crown for that purpose.

The bill says the Minister will be able to set quality control standards in labs, manage the supply of testing consumables, and set different rules for different classes of testing.

Presumably the government’s target is Rako.

The bill provides for compensation and appeal:

11A Compensation or payment relating to requisitions

(1) This section applies if an order is made under section 11(1)(e).

(2) The owner of a testing laboratory injuriously affected by the requisitioning of testing consumables is entitled to receive compensation from the Crown at the market rate for the consumables requisitioned.

(3) The owner of a testing laboratory required to undertake COVID-19 testing solely for the purposes of the public health response to COVID-19 is entitled to be paid by the Crown for its services at the market rate for those services.

(4) All questions and disputes relating to claims for compensation or payment under this section must be heard and determined by the District Court, whose decision is final.

However, the bill does not define “market rate” or say who decides it. If the answer is Ministry of Health officials – the purchaser – then clearly there is a problem.

As I understand it, Grice has been asking for a commercial negotiation for the best part of a year. How is expropriation even on the table?

Expropriation is likely even if the quoted provisions are never used. The government will have a commanding position in any commercial negotiation when in its back pocket it has the option to take the property of the counterparty and decide compensation.

It is… breathtaking that a government which is borrowing a billion dollars a week wants to nickel and dime the developer of the one thing we need more almost than anything else right now: a rapid fast, saliva-based PCR test for COVID. If Grice’s technology means ten fewer minutes of lockdown, pay him. Let him have his millions. Or make a deal with a competitor. Either way, it’s worth it. And not just for COVID-19. We want the Leon Grices of the world to turn up in the next pandemic, too.

But, no. This government is threatening to take the property of the one company which could do more than any other to get us out of lockdowns. I look forward to the government’s explanation for how that is in the public interest. The judgment seems astoundingly poor. This looks like world class bad faith from officials and ministers.

Another worrying aspect of the bill are the proposed changes for section 12. The government wants to remove the prohibition which says a COVID-19 order “may not apply only to a specific individual”. Changes in section 12 and elsewhere in the bill are clearly designed to enable the Minister and Director-General to issue orders to specific individuals.

This is draconian legislation, yet it seems to be slipping under the radar. It deserves attention.

Here is the legislation:

Here is where to make a submission, which closes next Monday, 11 October:

Here is the Ministry of Health analysis and RIS:

Here are marked up changes to section 11:

And to section 12:

A climate policy framework

John Cochrane has written a long essay in National Review called ‘Climate Policy Should Pay More Attention to Climate Economics’ with a subtitle of ‘Without numbers, we will follow fashion.’

The article is beautifully written, hardly a single one of the 3,500 words is wasted. In arguing for economics in climate policy, Cochrane covers many of the major ideas for thinking about how to reduce emissions. The article is comprehensive enough to be a framework.

In this post, I attempt to distil the main ideas in Cochrane’s article.

To avoid doubt, Cochrane (and I) believe climate change is real and is a problem which justifies a policy response. He disputes none of the climate science. He takes the findings from science as given and thinks about the consequences for climate policies. He highlights the harmful mismatch between scientific findings and popular rhetoric on climate.

Most of the following text is directly from Cochrane, with or without quotes. I have put my favourite soundbites in italics:

Climate science and climate policy are different. Climate science concerns the relationship between greenhouse gas emissions and climate. Climate policy is about reducing greenhouse gas emissions. Attacking policy is not attacking the science. “You don’t have to argue with one line of the IPCC scientific reports to disagree with climate policy that doesn’t make economic sense.”

Climate change is not that expensive. “The U.N.’s IPCC finds that a (large) temperature rise of 3.66°C by 2100 means a loss of 2.6 percent of global GDP. Even extreme assumptions about climate and lack of mitigation or adaptation strain to find a cost greater than 5 percent of GDP by the year 2100… Five percent of GDP is only two to three years of lost growth. Climate change means that in 2100, absent climate policy or much adaptation, we will live at what 2097 levels would be if climate change were to magically disappear. We will be only 380 percent better off [instead of 400%]. Or maybe only 950 percent better off [instead of 1,000%]… Northern Europe has per capita GDP about 40 percent lower than that of the U.S., eight times or more the potential damage of climate change. Europe is a nice place to live.”

The central uncomfortable fact is that the output of an advanced industrial economy like the U.S., moving headlong into services, is just not that sensitive to climate or weather. The worst heat waves, floods, and storms just do not move national GDP.

To be clear, a modest cost is no reason not to act on climate. But a modest cost places a modest cap on the benefits of emissions policies, so caution is necessary to avoid emissions policies doing more harm than good.

Growth risk is an order of magnitude larger than climate risk. “The cost of climate change to India is trivial compared with the benefits India could obtain by adopting economic institutions more like those of the U.S. — which themselves are far from perfect.”

If the question is, “What steps can we take, perhaps costly today, to improve GDP in the year 2100?” hurried decarbonization is not the answer. If the question is, “What steps can we take to improve the well-being of the world’s poor?” climate policy is not the answer, with many zeros before you get to the decimal point. Sturdy pro-growth policies, however unpopular to so many in today’s political class and incumbent businesses and labor organizations, are the answer.

GDP is imperfect, but if anything it understates the benefits of economic progress. “It leaves out a lot — the tremendous value of free or nearly free goods, the value of clean air and water, good health, long life, a free and egalitarian society, and so forth. But all of these things are better when GDP is better, and far worse where GDP is worse.”

If the question is how to blunt the economic impact of climate change, adaptation has to be a major part of the answer. There seems to be a great disdain for adaptation, clearing the brush, building dikes and dams, moving to higher land, installing air conditioners, moving or engineering crops and so forth. Spread over a hundred years, the costs of adaptation are not large. Perhaps climate-policy advocates dismiss talk of adaptation because, by reducing the damage that might be caused by greenhouse-gas emissions, it makes emissions less scary. Climate models are also short on adaptation and innovation, perhaps for the same reason.

Miami might be six feet underwater in 2100, but Amsterdam has been six feet underwater for centuries. They built dikes. By hand. Amsterdam is a very nice place, not a poster for dystopian end of civilization. Buildings decay and need to be rebuilt every 50 years or so. Just start building in drier places.

We need rigour in climate policy. “For a small donation, pictures of cuddly animals might do. For trillion-dollar costs and regulations, they do not. To justify such costs, we need some dollar value on specific environmental damage of climate change. Yes, the numbers are uncertain. But those numbers are the only sensible framework to discuss spending trillions of dollars on climate now.”

Cost-benefit analysis matters for making the best use of limited resources. “Naming costs and benefits is particularly useful to analyze whether some of those trillions are not better spent on other environmental issues. For example, species extinction is a real problem. We are in the middle of a mass extinction. But the elephants will die from lack of land and poaching long before they get too hot or dry. For a trillion dollars, how much land could we buy and turn over to complete wilderness? How many more species would we save that way, rather than spending similar amounts of money on high-speed trains and hurrying the adoption of electric cars? The oceans are in trouble. For a trillion dollars, how much over-fishing, chemical pollution, plastic garbage, or noise could we fix? Economics is about choice, and about budget constraints.

Even though we don’t really know the economic or environmental cost of carbon, cost–benefit analysis is vital so that we do whatever we do efficiently. Avoid doing incredibly expensive things that save little carbon, and don’t ignore unfashionable things that might save a lot of carbon at lesser cost.

Without numbers, we will follow fashion. Today it’s windmills, solar panels, and electric cars. Yesterday it was high-speed trains. The day before it was corn ethanol and switchgrass. Actually addressing climate change in a sensible and effective way is likely to involve unfashionable technologies, and new technologies without political backers. A focus on cost–benefit, carbon per dollar, is vital to allow different technologies to compete, and new technologies to emerge. The alternative — and current predilection — is for different technologies to compete for political favor, a mechanism we all know well, along with its disastrous results, especially regarding innovation and cost reduction.

[MB: This is an important point. One of the costs of an ad hoc winner picking approach on climate is lower innovation. Subsidising EVs, for example, must reduce incentives for R&D in politically-disfavoured rival technologies, including technologies we do not yet know about.]

The policy prescription is simple: price + carbon dividend + R&D. “From an economic perspective, the ideal policy combines a carbon tax, whose revenues reduce other marginal tax rates, with strong support for basic R&D.”

Thus, if the question is how to reduce carbon as much as possible while damaging the economy as little as possible, an evenly applied carbon tax — even to the coal emissions used to create solar panels and car batteries — is the answer, in place of regulation and subsidies.

A carbon tax bakes in cost–benefit analysis, and otherwise incalculable carbon-reduction pledges. Just buy the cheapest option and you’re doing your bit.

Maybe rather than buying a Tesla, you should move closer to work — or carpool. Maybe cutting out one international trip does more than buying the Tesla. Maybe zoning and permitting reform will allow building houses so people don’t commute in the first place. Is it easier to decarbonize transport, home heating, cement, steel, or agriculture? Only by setting a price can we know the answers, and incent the millions of little daily decisions that go in to reducing carbon emissions efficiently.

A weak consumer response to a carbon tax argues for a carbon tax. “A carbon tax is a win-win. Many climate advocates disparage the carbon tax, on the view that people will not reduce energy consumption and carbon emissions when the price goes up. If so, great! A bankrupt government can raise a lot of money, and reduce other heavily damaging taxes. If people drastically reduce carbon emissions to avoid a small tax, the government doesn’t earn much money. Great! We save the planet at low cost.”

Carbon policy is full of economic fallacies. Mother Earth does not care if solar panels are made in the U.S. or China. She just wants them to be cheap. “Millions of green jobs” are a cost, not a benefit. Financial regulators are now taking on climate change, justifying this dramatic expansion beyond their legal authority by endlessly repeating a fantasy that “climate risk” imperils the financial system in the near future.

There is nothing in the science that justifies uniting “climate” with a left-wing political agenda. Yet even the IPCC mixes climate change with “sustainable development, poverty eradication and reducing inequalities.” Mixing anti-capitalist politics with climate change makes those skeptical of the rest of the agenda wonder about the objectivity of climate science, and whether the planet really is in such danger.

There is nothing in climate science to justify apocalyptic rhetoric. If the question is, “What threatens the collapse of civilization,” war, nuclear war, civil war, pandemic, crop pandemic, and social and political disintegration are far higher on the list. No healthy society fell apart over a slow and predictable change that came over a hundred years. There is nothing in climate science to say life on earth is threatened.

Climate advocates have done themselves and the planet a great disservice by wrapping climate policy in increasingly shrill, apocalyptic, partisan, and unscientific rhetoric. “Global warming” became “climate change,” reflecting in part effects on rainfall or different geographies, but also inviting media commentary on every weather event to become a sermon. In the Green New Deal and comparable movements, it became “climate justice,” wrapping climate inexorably in a far-left-wing politics of anti-capitalism. The required vocabulary moved on to “climate crisis.” Still not enough: In April the (formerly) Scientific American proclaimed that, in coordination “with major news outlets worldwide,” it would start using the term “climate emergency.” Will “climate catastrophe” be next?

Finally, here is what I think is Cochrane’s most important point:

Actually doing something about the climate will require decades of consistent policy. That will not happen by today’s elites crying wolf and cramming regulations down the throats of a disdained and temporarily distracted electorate. [MB: That will also not happen by seat-of-the-pants ad hoc policies, nor will name-and-shame work. Consistent policy means a system – consistent, clear, enduring rules to lower emissions. The ETS is a fine example of a rules-based approach. Policies like 100% renewable electricity are not.]

Keep climate policy focused on the social cost of carbon

A new paper in the journal Climate Policy says “Keep climate policy focused on the social cost of carbon”. Its abstract:

In the context of climate change, the application of cost-benefit analysis to inform mitigation policies can help to achieve the best outcomes and avoid the worst: spending trillions of dollars but failing to get the job done.

The job, of course, is to cut emissions.

The costs of a climate policy are the abatement costs of reducing emissions of carbon dioxide (CO2) (or other greenhouse gases). The standard measure of the benefits of a climate policy is the social cost of carbon (SCC), which measures the avoided economic damages associated with a metric ton of CO2 emissions. Recently, however, there have been calls for an alternative approach to policy evaluation that ignores the benefits of avoided climate damages and instead focuses only on minimizing the compliance costs of a given, politically determined climate objective. We argue here that a shift from use of the SCC and cost-benefit analysis to an alternative approach for evaluating policy that focuses on costs alone would be misguided. Rather than advocate for alternative approaches, now is the time to support efforts to update the SCC and its application to official climate policy evaluation.[emphasis added]

I note the Climate Change Commission used neither the social cost of carbon, nor cost-benefit analysis, nor costs alone to inform each of its recommendations to the government in its final report.

Perhaps the authors of the Climate Policy paper could write a follow up piece called “At least do something, for goodness sake” and send a copy to the Commission.

Opening statement on the Natural and Built Environments bill

My opening remarks to the Environment Committee this morning on the Natural and Built Environments bill, which will replace the RMA:

Any planning system must allow trade-offs between competing outcomes.

Property rights confront owners with some but not all of these trade-offs.

The reforms should be based on understanding which trade-offs the planning system needs to solve, who is best placed to make decisions, and how.

This bill proposes the Minister for the Environment can decide everything using regulation.

This is not a credible approach. With the best will, the Minister cannot deliver a framework which makes sense of so much complexity. Decisions should be devolved to the lowest level, and with checks and balances, which regulation does not do.

The main goal of these reforms should be to improve housing affordability. The RMA has substantially contributed to the housing crisis. Quite simply, the new system must make it easier to build a house.

The key idea I want you consider is this. Cities protect the natural environment.

London, Tokyo and New York City are among the most environmentally friendly places on earth.

People living in those cities have smaller carbon and environmental footprints. They have higher prosperity and report higher wellbeing than other people.

This idea, that cities protect the environment, is important, because it means we can solve housing and protect the natural environment with a planning system that supports urban growth.

This bill proposes to apply rigorous bottom lines for the natural environment in urban areas. Paradoxically, this could harm the natural environment by stifling growth.

Planning cannot deliver urban growth if it does not protect urban amenity. Homeowners have the clout to stop any growth which threatens their standard of living. This bill must square the circle of supporting growth by protecting amenity.

So, three ideas to make sense of the complexity.

  • Cities protect the environment. This bill can support the Minister’s environmental goals if it embeds a presumption in favour of development.
  • Don’t put decisions in one place. Ask who is best placed to consider tradeoffs. And think about scope – what problems can only be solved by planning.
  • Finally, treat urban areas separately. Urban amenity is sufficiently distinct and important to justify its own treatment. Bundling urban and non-urban areas threatens to water down environmental bottom lines, and repeat the RMA’s mistake of stifling growth while failing to protect the natural environment.

This bill is not fit for purpose and should not go ahead in anything like its current form.

Thank you.

Link, from 50 minutes:

How Musk deals with complexity

Elon Musk has given a personal tour of SpaceX’s Starbase at Boca Chica in Texas to a Youtuber, Tim Dodd aka the Everyday Astronaut. You can see the first part of the interview here.

Musk’s interview is in his capacity as Chief Engineer at SpaceX. Musk is also the CEO of Tesla and a founder of Paypal, and currently the world’s third wealthiest person. The interview is fascinating throughout.

What I find most interesting is seeing how Musk handles massive complexity. As the Chief Engineer at SpaceX, part of his job is getting the left and right hands talking to each other across the processes that support the design and manufacturing of a rocket.

His interview reveals some elements of his strategy: a clear objective; a small number of metrics to guide decisions; awareness of how problems emerge in complex design and manufacturing; preserving the option to experiment (and fail) cheaply because some things are only discoverable through trial and error; solve the problems that need solving first.

I can’t help but think some of these strategies for dealing with complexity in scalable systems is relevant to public policy. Officials and ministers are not building rockets or cars. But they have to make sense of practically unlimited complexity. I don’t know what strategies officials use to manage the complexity they deal with. Whatever they are, few of those strategies seem to make it into public discourse.

Musk makes the interesting observation that because every Space Shuttle flight had people on board, failure was intolerable, experimentation was costly, and innovation essential stopped as a result. Keeping the doors open to experimentation which does not hurt anybody is important. That seems like a relevant idea for public policy.

Here are some of Musk’s insights from Part 1 of his interview with Dodd.


Become a multiplanetary species


  • $/tonne of thrust: “What is hard is how do we make a Raptor [rocket engine] where the cost per tonne of thrust is under $1,000”
  • $/tonne to low Earth orbit: “The fundamental thing that needs to be fixed is the cost per tonne to orbit”
  • $/tonne delivered to Moon, Mars

Musk talks about thrust in tonnes, rather than the more correct measure Newtons, to make it easy to compare with the mass of the rocket the engines propel. He is happy to sacrifice correctness for clarity and simplicity.

On fuel mix, the bias is in favour of oxygen over methane because oxygen is cheaper and more dense, which reduces cost per tonne.


Musk has a five step process for managing complex processes.

1. Make your requirements less dumb. “It is particularly dangerous if a smart person gave you the requirements. Because you might not question them enough.”

2. Try very hard to delete the part or process. If you are not adding things back in 10% of the time you are not deleting enough. The bias is to keep things just in case. You can make that argument for almost anything.

3. Simplify or optimise. This is the third step not the first because a common error of a smart engineer is to optimise a thing that should not exist.

4. Accelerate cycle time. But only after the first three steps. Otherwise you are just “digging your own grave faster.”

5. Automate.

“I have personally made the mistake of going backwards on all five steps. Multiple times.” Musk tells an interesting story of fibreglass mats in manufacturing Tesla cars.

“Any requirement or constraint must come with a name not a department.” Otherwise some person years ago could randomly come up with a requirement that today nobody supports. The requirement will persist if it is not owned.

Other points

“All designs are wrong, it’s just a matter of how wrong.”

“Everyone is wrong some of the time.”

If you look at the various reasons for Starship’s landing failures, none of those reasons were on prior risk lists.

Musk has more than one optimisation metric, but he treats them in a sequence. “Fundamentally, the optimisation is for cost per tonne to orbit, and ultimately cost per tonne to the surface of Mars.”

A common problem in production is too much testing. The production line will be tested at each stage to identify where problems are occurring. Once the problem is diagnosed, it is common for testing to not be removed.

Production processes (manufacturing rocket parts at scale) requires 10-100 times more effort than the technology. “Manufacturing is underrated. Design is overrated.” So rocket science is the easy bit. Mind blowing.

Boosters and ships (the drone ships boosters land on) are easier to build than the launch pad. The pad includes the mechanism for catching returning first stages. The pad is going to catch them from the air.

Says it all, really

The Gisborne Herald reports:

Mr Robertson described the report of the independent Climate Change Commission as “the most important document of my political lifetime”.

Robertson is talking about a report that says we should spend 5-10 times more than necessary to cut emissions, threatens our emissions targets, is filled with untruths and rhetorical tricks, and all based on a strategy that does not make sense when the government has already capped emissions.

That’s the most important document in his political lifetime?

Well, it’s only important if people believe it. If you think the Climate Change Commission is independent, I have a bridge to sell you.

Why so angry?

After a recent article in the Herald (ungated version here) I received the following email:

I realise that your objective is to advance a right wing agenda rather than provide factual information, but I was sufficiently annoyed by your article that I have provided media with the attached more informative article, to help people understand the real issues.

The article from my correspondent (I will not name him) was mostly about how EVs are good and will become great in the near future. I suspect he is right.

But that completely misses the point of my Herald piece.

My point is that having capped emissions with the Emissions Trading Scheme (ETS), to then tax or subsidise vehicles or anything else already covered by the cap will make no difference to total emissions.

This has nothing to do with the merits of EVs. Of course EVs can reduce emissions. But the emissions benefits of EV subsidies must be zero under a binding emissions cap.

The question I want to consider here is why an argument against ineffective emissions policies should lead somebody who is worried about climate change to feel angry.

I do not know my correspondent. I assume he was not the only person annoyed by my article. For the purposes of this post, I will assume people who feel angry reading my article:

  1. Are worried about the climate change.
  2. Believe greenhouse gas emissions cause climate change, and
  3. Support policies and actions which lower emissions.

What could lead someone who holds those views to object to an argument that we should oppose emissions policies which do not lower emissions?

Before I try to answer this question, let me first say I do not usually spend time thinking about peoples’ motivations on policy matters. My focus is on the merits of policy. Here I make an exception because I want to reach people who are concerned about climate and who see me as an opponent. If I can understand why people get mad, I have a better chance of communicating effectively and, ultimately, helping.

So let the speculation on where the anger is coming from begin.

First, the objective (lower emissions) is bundled with specific actions. Support for action on climate is support for more EVs, more renewables, less coal and petrol. These actions go with the goal of lower emissions like peas and carrots. EVs always mean lower emissions. Coal always means higher emissions. And more is always better when it comes to favoured technologies; for disfavoured technologies, less. No exceptions.

This view does not fit well with reality. It is probably not obvious, for example, that using coal and natural gas plausibly makes it easier to reduce emissions, or that further investment in renewables beyond some unseen limit in our electricity system will make it harder to achieve our emissions targets. See the ICCC final report on electricity.

For anyone who sees action on climate and getting more EVs on roads as the same thing, any argument against EV subsidies is going to look a lot like an argument against cutting emissions per se.

Second, the only alternative to taxes, subsidies and regulations to lower emissions is to do nothing. Here is James Shaw (at 43:00) saying exactly that to Parliament’s Environment Committee at a recent appearance, for example, after being challenged on the effectiveness of policies.

Such a conclusion is surely natural for anyone who has not heard of the ETS, or who does not know that it caps emissions, or who does not see the cap as credible, or who does not understand how a cap will generally neutralise other policies.

Shaw is in none of those categories, by the way – it is his cap! He introduced the legislation which gave the ETS its hard emissions cap. The bill passed last year.

I suspect another driver of this “alternative is doing nothing” view may have something to do with the idea that human agency is a necessary part of lowering emissions. Sure, the ETS will have some effect, the thinking might go. Profit-maximising corporates will always respond to the incentives of a carbon price. But we will not succeed, the thinking may go, unless somebody decides how and where emissions come down. Many seem to believe prices alone cannot bite hard enough to shift behaviours; we need more than incentives to overcome consumers’ myopia.

Third, I wonder if people are quick to suspect trickery lies behind any question of emissions policies? Sure, this person says he wants lower emissions, but perhaps there is a hidden agenda, either a political agenda or opposition to action on climate.

Another possibility is that the response to my article is a “rally behind the flag” effect. The classic example of rallying behind the flag is America’s response to the attack on Pearl Harbour by Japan in 1941. Political accountability for the catastrophe was put to one side. The focus was squarely on the forward-looking question of winning the war.

I do not think flag-rallying explains much in climate. Bad emissions policies are not in the past – they are not sunk, as it were. Policies are very much in the here and now, or in the future. They can be changed. Those policies will determine success or failure in the war on emissions.

If anything, rallying behind the flag should encourage not deter (constructive) skepticism of policies. Yet many people do not welcome questions about whether emissions policies work. If rallying behind the flag means overlooking past mistakes to focus on the mission at hand, climate policies are not a good fit.

Whatever explains the anger towards my article, it probably does not help that I am one of the only people saying emissions policies should work. It is striking how, out of all the people who demand action on climate, almost nobody has any apparent interest in the performance of the government’s emissions policies.

Anyway, these are my guesses about the psychology behind the interesting conundrum of why well-meaning, intelligent people who want action to reduce emissions feel genuinely angry when they see someone pointing out where emissions policies might not work.

This anger has consequences. It will, and almost certainly has, suppressed questions at the government on the performance of its policies.

We now stand at a precipice. In the next few months the government could commit to policies that will cost percentages of GDP but will not lower emissions, not by a single tonne. If the current track continues, we will end up materially poorer while doing nothing to help future generations on climate.

Surely, there no political constituency for that outcome? Yet that is the path we are on. Almost nobody is asking the government this most basic question: how does your emissions strategy cut emissions?

That question helps protect future generations. So don’t be angry at the person asking it. Be angry about the answer.

A solution searching for a problem

John Cochrane may be grumpy but he is possibly my favourite living economist.

In this article he makes a number of great points about climate financial risk. Here are two:

The idea that climate change poses a threat to the financial system is absurd, not least because everyone already knows that global warming is happening

Climate regulatory risk is slightly more plausible. Environmental regulators could turn out to be so incompetent that they damage the economy to the point of creating a systemic run.

One hopes that officials working on climate financial regulation in New Zealand understand the significance of knowing what has already been priced, and that regulation has costs and risk and if sufficiently-poorly designed could be a greater threat than the underlying problem. Officials seem to find market failure in a lot of places; regulatory failure less so.

Cochrane concludes:

Climate change and financial stability are pressing problems. They require coherent, intelligent, scientifically valid policy responses, and promptly. But climate financial regulation will not help the climate, will further politicize central banks, and will destroy their precious independence, while forcing financial companies to devise absurdly fictitious climate-risk assessments will ruin financial regulation. The next crisis will come from some other source. And our climate-obsessed regulators will once again fail utterly to anticipate it – just as a decade’s worth of stress testers never considered the possibility of a pandemic.

Read the whole thing.

HT Jim Rose.