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ThepriceoffeelinggoodAreviewoftheemissiontargetoptionsin‘Ourclimateyoursay’

September2018

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AboutTailriskeconomicsTailriskeconomicsisaWellingtoneconomicsconsultancy.Itspecialisesintheeconomicsoflowprobability,highimpacteventsincludingfinancialcrisesandnaturaldisasters.Tailriskeconomicsalsoprovidesconsultingserviceson:

• Theeconomicsoffinancialregulation

• Advancedcapitaladequacymodelling

• Stresstestingforlargeandsmallfinancialinstitutions

• Regulatorycomplianceforfinancialinstitutions

• Generaleconomics.

Tailriskispreparedtoundertakeeconomicsanalysesofpublicpolicyproposalsonadiscountedorprobonobasis.PrincipalIanHarrison(B.C.A.Hons.V.U.W.,MasterofPublicPolicySAISJohnsHopkins)hasworkedwiththeReserveBankofNewZealand,theWorldBank,theInternationalMonetaryFundandtheBankforInternationalSettlements.Contact:IanHarrison–PrincipalTailriskeconomicharrisonian52@gmail.comPh.0221753669043848570

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ContentsAbourTailriskEconomics…………………………………………..………………….2Contents……………………………………………………………...……………………….3Introduction…………………………………………………………..………………………4Keyconclusions…………………………………………………………………………….4Whataretheoptions?..................................................…………………7TheNZIERanalysis………………………………………………………………………10ThecostofclimatechangeforNewZealand………………………………19Whyhavewesigneduptofightclimatechange………………………….26Theco-benefitsfromclimatechangepolicies………………………………27Thechoicebetweenthezerocarbonandzeroemissionstargets…32Alternativeactions………………………………………………………………………38References…………………………………………………………………………………40Appendix………………………………………………………………………………………43

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Thepriceoffeelinggood

IntroductionAspartoftheconsultationprocessonNewZealand’sgreenhousegasemissiontargetstheMinistryfortheEnvironmentissuedadiscussionpaper‘OurClimateYourSay:ConsultationontheZeroCarbonBill’(OurClimate).Purportedly,themainpurposeofOurClimatewastosetouttheoptionsandtoprovideinformationthatwouldhelpNewZealandersunderstandtheissues.

ThispaperdiscussesthefollowingissuesthatarisefromtheanalysisanddiscussionsinOurClimate.

• TheabatementtargetoptionssetoutinOurClimate

• Theeconomicanalysisoftheoptions

• Theimportanceofco-benefits

• ThecostsandbenefitsofglobalwarmingforNewZealand

• TheprosandconsofNewZealandbeingagloballeaderingreenhouseemissionabatement.

Finally,itsuggestssomepoliciesthatwillsecuresomeofthebenefitsof‘globalleadership’,butatamuchlowercost.

KeyConclusionsTheZeroemissionsby2050targetisa$200billion‘feelgood’projectComparedtothealternative,zerocarbon,target,thezeroemissionstargetcouldcostanadditional$200billion;isunlikelytohaveamaterialimpactonthebehaviorontherestoftheworld;oninnovationinNewZealand;orgeneratesignificant‘co-benefits’.Themajorbenefitwillbea‘feelgood’factorforsomepeople,atleastuntiltheeffectsofthepolicystarttobite.

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TheconsultationontheoptionswasashamOurClimatedidnotprovideanassessmentoftheprosandconsofthethreeoptions:zerocarbon;zerocarbonwithacaponotheremissions;andzeroemissions,thatwerepresented.Thedocumentonlypromotedwhatappearstobethepreferredoptionofzeronetemissionsby2050.Thereportingoftheeconomicanalysiswasfabricatedtomakeitappearthatthethreeoptionshadbeenconsidered.TheeconomicmodellingwasmanipulatedtoreducetheeconomicimpactofthezeroemissionstargetThemarginalcostofemissionsreductionsfallswithatoughertarget.Thisdoesn’tmakesense.Lowercostemissionimprovementsshouldoccurfirst,sotheadditionalreductionsunderthetoughertargetwillhaveahighercost.Thelowermarginalcostoutcomewasachievedbyrestrictingtheamountofafforestationoffsets(whicharecostlessinthemodel)forthe50percentreductiontarget,andgivingthezeroemissionstargettwicetheallocation.Theeffectofthiswastopushmostoftheeconomiccostsintothelowertargetoption,reducingthemarginalcostofthezeroemissionsoption.ThereportingoftheeconomicanalysisobscuredmanyofthenegativeeconomicimpactsMostoftheresultswerepresentedasthedifferencebetweena50percentemissionstargetandazeroemissionstarget.Thisobscuredthelossesingettingfromourcurrentpositiontoa50percentfallinemissions.Someofthemodellingimpacts,withprudentassumptionsabouttechnicalchange,aresevere.Forexample,pastoralfarmingoutputsfallby60percent,andhouseholdincomescouldfallinabsolutetermsasthepolicybites.TheeconomicmodellingisdeficientandneedstodoneagainfromscratchThecriticalvariableinanyanalysisistherateofconversionoffarmlandtoforestry,butthishasnotbeenmodelled.Thereisnoanalysisoftheoptimaltimingofemissionreductions.Theimpliedcarbonpricesappeartobeunrealisticallyhighwhichmakesitdifficulttodrawconclusionsfromtheanalysis,ClimatechangemayhavepositiveeffectsonNewZealandthiscenturyTheMinistryhasnotproducedareportonthecostsofclimatechange.Ourassessmentisthatclimatechangemayhaveasmallpositiveimpactthiscentury.ThemainreasonisthatmoreCO2intheatmospherepromotesplantgrowthandincreasesoutput,whichissignificantforaneconomywithalargelandbasedsector.Thisoutweighstheeconomicallyrelativelyminorimpactsfromchangesinweatherpatterns,andthecostofmitigatingtheimpactofsealevelrises.

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ChangesintheincidenceofextremeweathereventshavebeenexaggeratedOnlymoderatechangesinextremeweathereventshavebeenprojectedintheUNIntergovernmentalreportonClimateChange.Forexampleontheincidenceofstormsthereportsays‘Increaseinintensityofcyclonesinthesouthinwinterbutdecreasingelsewhere.Increaseinconditionsconducivetoconventionstorm

developmentisprojectedtoincreaseby3-6percentby2070-2100comparedto

1970-2000.’

ThebenefitsofinnovationsthatwillgiveNewZealandan‘earlymover’competitiveadvantagehavebeenexaggeratedMostofthereductionsinemissionswillcomefromforestplantings,importedtechnology(suchaselectriccars),closingbusinessessuchasNewZealandSteel,andbyreducinglivestocknumbers.Mostofthisdoesnotinvolvemuchinnovation.AMinistryconsultantdescribedthisinnovationoptimismthisway.Topresumethat

climatepolicycouldmakethedifferencewouldbeakindofexceptionalismanda

seriousleapoffaith.

EconomiccostsofzeroemissionstargetaresignificantTheeconomiccostofthezerocarbontargetcouldbeintheorderof$75billion.1Theadditionalcostofthezeroemissionstarget,whichrequirestwicethenetabatementsatahigheraveragecost,couldbearound$200billion.NewZealand’ssacrificeunlikelytochangetheworldTheargumentforzeroemissionsisthatitwillencourageothercountriestomeettheircommitments.Theargumentthatgoingfromazerocarbontargettoazeroemissionstargetwillmakeamaterialdifferencetotheactionsofotherisatbestanother‘seriousleapoffaith’.Dependingonyourviewpointthezeroemissionstargetiseithera$200billionvanityproject,oranoblesacrifice.Therearemuchcheaperwaysoftryingtoinfluenceworldopinion.CheaperwaystoinfluenceworldopinionFourwaysofgettinginternationalattentionandpromotingthefightagainstclimatechangearesuggested.Theyare:Taxesoninternationalairtravel;abanonofficialbusinessclassairtravel;virtualattendanceatclimatechangeconferences;traveltoWellingtonairportbybicyclebyofficals.

1Theseestimatesarepresentvaluescalculatedwitha5percentdiscountrate.

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Whataretheoptions?IntheforwardtothediscussionpapertheMinisterfortheEnvironment,JamesShawsaid….In2015,we,alongsidealmostallcountriesintheworld,decidedthattheworldshould

achievenetzerogreenhousegasemissionsbythesecondhalfofthiscenturythroughthe

ParisAgreement.ThisGovernmenthascommittedtosettinganetzerotargetforNew

Zealandtomeetby2050.

OurClimateexplainsthatthereareactuallytwodifferentversionsofnetzeroby2050,dependingonhowthezerogreenhousegascommitmentbythesecondhalfofthecenturyisinterpreted.Itsetsoutthefollowingdiscussion.

Threemainelementsneedtobeconsideredwhensettinganew2050target:

theParisAgreement,becauseNewZealandhassignedandratifiedthisglobalagreement

thescienceofshort-livedandlong-livedgases,giventheimportantdifferencesbetweenthe

impactofthesegasesontheclimate

economicimpacts,meetingthedifferenttargetshasimplicationsforNewZealand’s

economyoverthecomingdecades.

TheheadlineemissionsreductionobjectivesoftheParisAgreementare:

• holdingtheincreaseintheglobalaveragetemperaturetowellbelow2°Cabovepre-

industriallevelsandpursuingeffortstolimitthetemperatureincreaseto1.5°Cabove

pre-industriallevels”–Article2.1(a)

• ‘[i]nordertoachievethelong-termtemperaturegoalsetoutinArticle2[...]to

achieveabalancebetweenanthropogenicemissionsbysourcesandremovalsby

sinksofgreenhousegasesinthesecondhalfofthiscentury’–Article4.1(ie,

achievingnetzeroemissions).

AnydomesticactionneedstobeconsistentwithourcommitmenttotheParisAgreement

goals.Byhonouringourcommitments,wearebetterplacedtoencourageothercountriesto

keeptotheirs,includingcountrieswithmuchgreateremissionsthanourown.

TherearetwoscenarioswhereNewZealand’sdomesticemissionsimpactonglobal

temperaturescouldbedefinedaszero.

• Reducinglong-livedgreenhousegasemissionstozeroandstabilisingourshort-livedgases,

whichwouldmeanourdomesticemissionswouldnotcontributetoanyfurtherincreasein

globaltemperatures.

• Reducingallgreenhousegasemissionstonetzero,whichwouldmeanourdomestic

emissionswouldhavenoimpactontheclimatefromthatpointforward.Hypothetically,if

bothscenarioswereappliedworldwidethenglobaltemperatureswouldstabiliseineach

case,buttheywouldstabiliseatalowertemperatureunderthesecondscenario.

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Itthenturnsoutthattherearethreenottwooptions.

1.Netzerocarbondioxideby2050:thistargetwouldreducenetcarbondioxideemissionsin

NewZealandtozeroby2050(butnotothergaseslikemethaneornitrousoxide,which

predominantlycomefromagriculture).

2Netzerolong-livedgasesandstabilisedshort-livedgasesby2050:thistargetwouldreduceemissionsoflong-livedgases(includingcarbondioxideandnitrousoxide)inNew

Zealandtonetzeroby2050,whilestabilisingemissionsofshort-livedgases(including

methane).

3.Netzeroemissionsby2050:thistargetwouldreducenetemissionsacrossallgreenhouse

gasestozeroby2050.

Theaboveexplanationissomewhatmisleading.Itleavestheimpressionthatitisopentocountries,undertheParisAgreement,toselecttheirownmeasureofgreenhousegasemissions.Theycanselectjustlong-livedemissions,orbothlongandshort-livedemissions.WhiletheParisAgreementisopentocountryinterpretationwedoubtthatitisthatelastic,andNewZealandhasalreadyagreedtoincludeagriculturalemissions.Technicallythough,thefirstoptionis‘Pariscompliant’becauseitisjustastatementabout2050,andleavesopenwhatwewilldointhesecondhalfofthecentury.

However,thefirstoptionimpliesthatwewillnotseektoreduceagriculturalemissionsatall,whichisnotreallycredible2,beggingthequestionofwhyitwaspresented.

Underthesecondoption,wearesignalingthatwearedoingsomethingaboutagriculturalemissions,butthefocusto2050willbeonthedemanding,butmoretechnicallyachievable,targetofreducingcarbonemissionstonetzero.Wewillmoresubstantivelyaddressagriculturalemissionspost2050,whenitismorelikelythateconomictechnicalfixeswillbecomeavailable.

Thismakessense.Thereisnocurrenttechnicalsolutiontosubstantiallyreducinganimalgreenhouseemissionswithoutgettingridoftheanimals.Azeronetemissionstargetscanbeachieved,mostlybyverylarge-scaleforestryconversions

2Notethatacasecouldbemadeforexcludinganimalemissionsfromtheemissiontargetframework

altogether,oratleastamendthewayitistreatedtoreduceitssignificance.Non-Carbonemissionswillincreaseglobalwarmingbyonlyabout0.2degreesCattheendofthiscentury.Itonlyassumesimportance,becauseofthetighttemperatureincreasetarget.A2Cdegreeslimitfrompre-industriallevelsleaves1degreeinhand,andthe1.5Cdegreetargetonly0.5.The2degreestargetissometimesrepresentedasthetippingpoint,orthepointatwhichtemperaturebecomes‘dangerous’.Theseareoverstatements,thetargetisbestthoughtofasasomewhatarbitraryrallyingpointnecessarytobuildaglobalcoalitionforaction.Thecaseforomittingagriculturalemissions,ormoreacceptablyprovidingafreeallocationforemissionlevelsupto,say,1990,isthat:mostcountieswillnotcomplyeveniftheysaytheywill;theconversionofthegasestoC02equivalentsiscontroversial;andactualreductionswillhaveatrivialimpactonglobaltemperaturechange.

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andasignificantreductioninsheepandbeefand(toalesserextent)dairynumbers,butthiswouldbeverycostlyandwouldachievelittle.AnyreductioninanimalemissionsinNewZealandwilllikelybeoffsetbyincreasedemissionselsewhereasothercountriesreplacethefallinNewZealandproduction.Therewillbelittleimpactonglobalemissions,whichistheultimateobjective.

Thisstagedapproachalsolevelstheplayingfieldwithadvancedcountries.Animalemissionsarenotassignificantforthem,sotheirtasksubstantiallyreducestoreducingcarbonemissions.

Sothesecondoptioncouldbeinterpretedasfollows.NewZealandwillreduceitscarbonemissionstozeroby2050,andonabestendeavorsbasis,toreduceitsemissionszeroby,say,2070or2080.ThisisconsistentwithourobligationsundertheParisagreement.

Thusthechoicecouldbedescribedasfollows.Zeronetemissionsby2050,orzeroemissionsby2070or2080,withawaypointforcarbonemissionsofnetzeroby2050.

Thereareofcourse,otheroptions.2050isnotamandatorydate,althoughithasbecomesomethingofafashion.ItisopentoNewZealandtoselectalater(orearlier)date.Wecouldalsobesomewhattougheronshort-termemissions.Theycouldbelimitedtonofurtherincreasefromnow,oranearlierdatesuchas1990,withanyexcessemissionsbeingconvertedtoC02equivalentsandaddedtothezerocarbonrequirement.

MostlythisisnotspeltoutinOurClimate.Andthereisalmostnosubstantivediscussionofthekeyconsiderations,andoftheprosandconsoftheoptions,thatwouldbeexpectedinaseriousconsultationdiscussiondocument.

OurClimatedoessaysthatitstudiedtheeconomicimpactsoftheoptions

Wehavelookedataseriesofmodelsandotherstudies,toassesstheimplicationsforthe

NewZealandeconomy.11Thisworkcangiveageneralsenseoftherangeofeconomic

impactsofourtargetoptions.Thisincludeshowtheymightaffectdifferentsectors,regions

andhouseholds.

Thesestudieshavebeencarriedoutbyarangeofsources,includingindependentexternal

expertsandgovernmenteconomists.

Underanyofthe2050targetoptions,oureconomycancontinuetogrow,possiblyjustnotas

quicklyasitmighthavedonewithoutanyfurtherclimateaction.Table2providesasummary

oftheeconomicopportunitiesandchallengesthatcouldresultfromfurtherclimateaction

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Thisdescriptionismisleading.ThecentrepieceoftheeconomicanalysiswastheNZIERreport,buttheNZIERdidnotanalysetheoptionssetoutinOurClimate.Theylookedatpercentagereductionsinemissionlevelsof50,75and100percent.The50and75percentoptionsincludedpastoralfarmingemissions,buttheyshouldhavebeenexcludedfromconsiderationunderthezerocarbonoptions.The50percentreductionmayprovidesomeguidanceonthezerocarbonoption,whichexcludesagriculturalmethaneandnitrogenemissions,becauseagriculturalemissionsarenearly50percentoftotalemissions,butwecannotbesure.The75percentreductionisnotrelevanttoanyoftheoptions.TheMinistryhassimplyfailedtoanalysealloftheoptionstheypresented.

TheMinistrytriedtopaperoverthisomissionbypresentingasummaryofkeyresultsfromtheNZIERanalysisintablefourofOurClimate.Theheadingsfortheoptionsare:Zerocarbon,Netzerolongtermemissionsandstabilisedshort-termemissions;andzeronetemissions.Thistableisafabrication.TherewasnosuchpresentationofthisdataintheNZIERreport,becausetheydidnotdotheanalysis.Footnote11directsthereadertotheappendixformoreinformationonthestudiesusedtoassesstheeconomicimpacts.TheonlycontentintheappendixwasmoredetailontheNZIERstudy.Therewerenoothereconomicstudies.Theconsultationonthe‘options’wasasham.Theonlyoptionthatwaseffectivelyonthetablewasthepreferredzeroemissionstarget.Thebulkofthediscussionandanalysiswasdirectedtopromotingit.

TheNZIEReconomicanalysisTheeconomicanalysispresentedinthepaperisalmostentirelybasedontheNZIERreporttotheMinistry,‘Economicimpactanalysisof2050emissionstargets’June2018.Thissectioniscomplicated,aswepickapartanalysisthatwasdesignedtohideratherthathighlightsomeofthekeyresults.Thereaderwhowantstopushonmightwanttoskiptothenextsectionandtakeourkeyconclusionsetoutaboveatfacevalue.

Theeconomicmodellingwasmanipulatedtoreducetheeconomicimpactofthezeroemissionstarget

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ThedescriptionoftheNZIER’sresultsinOurClimateThesummarydescriptionofthemodellingresultsisasfollows.Overall,themodellingsuggeststhefollowing.

• Theeconomyandhouseholdincomeswillcontinuetogrowbutpossiblynotasquickly.Achievinganetzeroemissionstargetby2050couldcauseaverageGDPtogrowlessquickly,withtherateofgrowthdependingonthetargetweaimforandhowinnovation

inkeyemittingsectorsdevelops.

• Astrongeconomywillrequireinnovationandalotoftrees.Emissionspricescouldbe

higherandgrowthrateslowerifwedonotplantenoughtreesorcontinuetoinnovate,

ortheimpactscouldbemilderifweplantmoretreesorinnovatefaster.

• By2050,perhouseholdnationalincomewouldstillhaveincreasedby40percent,

insteadof55percent.Supportinglowerincomehouseholdswillneedtobepartofourapproach–otherwisetheimpactsonthesehouseholdscouldbedisproportionate.

• Theeconomicimpactscouldstillbesignificant.Somesectorsmayfaceagreater

challenge,unlesstherearetechnicalbreakthroughsorsupport,particularlythosewithhighemissionsandthosecompetingininternationalmarketsand/orthathavelimited

opportunitiestoreducetheiremissions.

• Thedifferenceineconomicimpactofmovingfromthecurrentdomestictargettoanet

zeroemissionstargetisnotsubstantial.Theannualgrowthratecouldslowbyabout0.2

percent.

Mostlythisisanodynestuff,designedtoreassure,ratherthaninform.Noonewillbeworseoffthanthearenow,andtheeffectofontheannualgrowthrateofanetemissionsemissionstargetis‘notsubstantial’.Andifthereisaproblemwithlowerincomehouseholds,itcanbefixed.

Inaddition,theMinistryfurtherdownplaystheseverityoftheNZIERresults.Thefocusinthewiderdiscussionisonthe0.2fallinthegrowthrate.Itissuggestedthattheimpactscouldbelessthatthis.ItisnotedthattheC02priceestimatesofanalysisintheVivid3reportaresubstantiallybelowtheNZIER’s.

Wecaninferthat,attheemissionspricesVividsuggestsnecessarytomeetthetargets,the

impactoneconomicgrowthwouldbemilderthantheNZIERresultsindicate.

And

GiventhedifferenceinmodellingapproachesacrossVividandNZIER,andtherangeof

scenariosconsidered,wethinkitisplausiblethattherelativecostsandbenefitsoftransition

mayfallsomewhereinbetweentheVividandNZIERresults.

3Vivid2017

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Thisdoesn’tmakesense,Vividdidnotestimaterelativecostsandbenefitssothereisno‘inbetween.’

Further

ItcanalsobearguedthattheNZIERfiguresmaybeoverestimatesoftheeconomicimpacts

becauseitisdifficulttoassesstheresponsesofhouseholdsandbusinessestochangesinthe

economy.

Itcouldalsobeargued,rathermoreconvincingly,thattheNZIERfiguresunderestimatetheeconomicimpactsbecausetheyuseanequilibiummodelthatisbestsuitedtoanalysingrelativelysmallshockstoaneconomy.Itmayunderstatetheimpactoflargestructuralshocks.

TheNZIERmodellingindetailWenowturntothedetailedNZIERmodelling.Herewehavesomeverysignificantconcerns,andsomequestions.

TheNZIERanalysisiscomplicatedbecausetheyhaveacombinationofthreetargets:50,75and100percentreductions,andthreeinnovationlevels:energyinnovation;agriculturalinnovation,whichassumesthatacostlessvaccinetoreducemethaneemissionswillbediscoveredby2030anddeployedby2035;andacombinationofbothinnovations.Tosimplifythediscussion,wecanignorethe75percenttarget,andwefocusononeoftheinnovationassumptions,energyinnovation.Thisistheleastoptimisticinnovationassumption,whichiswethinkappropriatehere,becausepolicydecisionsshouldnotrestonacostlessearlypartialsolutiontothedifficultmethaneemissionsproblem.Thereisprobablyenoughoptimismbuiltintotheenergyinnovationscenariotocoverimprovementsinagriculturalemissionsthroughchangesinmanagementpractices.

MarginalcostofabatementfallswithtoughertargetsTheNZIER’sGDPchangeestimatesshowthattheimpactonGDP,comparedtothebaselinecurrentpolicysettingscenario,willbegreaterforthe50percentreduction,thanforthefurther50percentreductiontozero.Intheenergyinnovationscenariothegrowthratefallsby0.54forthe50percenttargetandby0.73percentforthe100percenttarget.Themarginalimpactis0.19percent.Thisdoesn’tseemtomakesense.Wewouldexpectthelowercostemissionimprovementswouldoccurfirst,sotheadditionalreductionsunderthetoughertargetwouldhaveahighercost.Therelativesizeoftheeconomicimpactsshouldberoughlyinlinewiththeincreaseinthetotalcostofcarboncredits.Intheenergyinnovationsscenariotheaveragecarboncostsare$612and$845pertonrespectively,forthe50percentand100

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percenttargets.The100percenttargetistwiceasbig,sothetotalcostofthe100percenttargetis175percenthigherthanthe50percenttarget.However,theNZIER’smarginalgrowthimpactforthe100percenttargetisonly35percentofthe50percenttarget.ThemainexplanationforthisperverseresultlieswiththeNZIER’sarbitraryassumptionsaboutthecontributionsofforestplantingsfordifferenttargets,andcritically,itisassumedthatallthelandrequiredforincreasedforestryhasnoalternativeuse,sothereisnoeconomiccostintermsofforgoneagriculturalproduction.Inthemodelthe50percenttargetscenarioisassigned25milliontonsofthisfreegood.The100percentscenariogets50milliontons.Thereis,obviously,noreasontorestrictaccesstoafreegoodforthe50percentscenario.NZIERconductsasensitivityanalysiswhere40milliontonsareallocatedtoboththe50percentand100percentscenarios.Predictably,thecostofabatementforthe50percenttargetfallstozero.GDPgrowthholdssteadyat2.2percent.Thereis,however,asevereimpactforthe100percentscenario.RealGDPis12.9percentlowerby2050.Realwagesare20percentlower.Theseareoptimisticresults.Thesensitivityanalysiswasonlyconductedforthewideinnovationscenarioandresultswouldhavebeenmuchworsewiththemoreprudentenergyinnovationonlyscenario.ThemanipulationoftheforestplantingassumptionsallowstheNZIERtohidemuchofthecostsofemissionsabatementforthe100percenttarget.Costsareartificiallyshiftedintothe50percentreductionoption.Theythenarguethatweshouldignorethosecosts,becausetheyrepresentthe‘statusquo’,andfocusjustonthemarginalimpactonGDP.Theargumentisthatthepreviousgovernmenthasalready‘signedup’toa50percenttarget.So50percentisadonedealanditisonlytheadditionalchangesthatmatter.Thisisdisingenuous.Thepreviousgovernmentdidnotsignuptoastrategythatlimitedtheuseofforestrysequestrations.The0.19growthimpactfigureisanartifactofwhatcanonlybedescribedasafabrication.Abetterapproachwouldbetoallocatethe0.73totalfallintheGDPgrowthrateonthebasisoftherelativetotalcostsoftheoptions.Onthatbasisthe50percentoptionwouldhave0.19percentimpactonthegrowthrate,andthemarginalcostof100percentoptionanwouldbe0.54percent.Theotherpointtonoteisthatafallinthegrowthrateofeven0.2percentissignificant,not‘notsubstantial’astheMinistrysuggests,becausetheimpactonGDPincreasesovertime.ThepresentvalueoftheGDPlossesforthe50percenttarget(discountedat5percent)over30yearscomestoabout$150billion.Theadditional

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costofthe100percenttargetisaround$400billion,foratotalofmorethan$550billion.Therewouldbefurthercostsbeyond2050thatwehavenotcounted.PresentationoftheresultsThewaymostoftheresultsarepresentedobscuresimportantinformation.Mostofitispresentedasdifferencesfromthe‘statusquo’.Thereadergetslimitedeasilyuseableinformationontheimpactofthe50percentoption,soitishardtomakeacomparisonwiththe100percentoption.Animportantexampleistheimpactonhouseholdincome.Theonlyinformationwehaveontheenergyinnovationoptionisthataveragehouseholdincomewillfallby$46,000comparedtothe‘statusquo’.Thefallfromthebaselineshouldbemuchgreateranditispossiblethatrealhouseholdincomeswillfallinabsolutetermsfromcurrentlevels.Itishighlylikelythattheincomesofthebottom40percentwillfall.Table1:GDPgrowthresults GDPgrowth

%Avcarbonprice$

Baseline 2.2 2050%energyinnovation

1.5 612

ZNEenergyinnovation

1.7 845

50%ag.innovation 1.8 386ZNEag.innovation 1.6 60550%Wideinnovation

2.1 109

ZNEWideinnovation

1.9 272

InternationaltravelnotaddressedNoaccountismadeontheimpactofcarbontaxesoninternationaltourism.EmissionsfrominternationalflightsarenotformallywithintheParisframework,buttheyshouldbe.And,iftheworldisatallseriousaboutreducingcarbonemissionstozero,theyeventuallywillbe.Thereshouldbeashocktotouristrelatedactivities,suchasaccommodationandtransportintheNZIERmodel.Thecapacityofthesesectorsto‘mop-up’resourcesfromsectorsalreadyheavilyimpactedbycarbonpriceswouldbereducedandthenegativeoveralleconomicimpactwouldincrease.

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ImpactonexportsThereislittleinformationonwhathappenstoexports.Wearetoldthatthevolumeofexportsin2050fallsbybetween$5.2billionand$18.7billionfromthestatus

quoof$138.2billionfortheZNEtargetscenarios.

Wearenottoldwhatthebaselineexportswillbein2050.However,weknowfromtheindustryoutputimpacts(figure23)thattherearesubstantialreductionsintheoutputofthetraditionalexportindustries,comparedtothebaseline.Dairyoutputgoesfroma25percentincreasetoafallofabout60percent;horticulturefromplus55percenttominusnearly50percent;sheepandbeeffromplus40percenttominus60percent;otherprimaryplus40tominus65.

Againaseriousshockismaskedbyacomparisonwiththe‘statusquo’,notthebaseline.

Theotherissueiswhatreplacestheexportindustries,andhowplausiblearetheoutcomes.Probablythemodelwillpushservicesexportstotakeuptheslack,butasnotedabovetherehastobeaquestionmarkaboutthetourismindustry.

AresponsetotheemissionspricingshockthattheNZIERmodeldoesn’texploreisthattheeconomywillshrinkfurthercomparedtothebaseline.Theexchangerateshouldfallsubstantiallygiventheimplosionofthetraditionalexportsector,andNewZealandincomes,relativetootheradvancedcountrieswillfall.Thereshouldbeamigrationoutflow,comparedtothebaseline,asNewZealand‘climatepolicyrefugees’leaveforbetterprospectselsewhere.Thelabourforceandhencethesizeoftheeconomyshouldfall.

KeytimepathsarenotshownTheactualtimepathsofkeyeconomicvariables,GDP,familyincomeandunemploymentarenotshown.Insteadwehavetomake-dowithdifferencesfromthestatusquo,andmakesomeguessesontheimplicationsofthetimepathofcarbonprices.Giventhecarbonpricingtimepaths,whicharerapidlyincreasingtowardstheendofthemodellingperiod,itispossiblethattherecouldbearecessioninthe2040s.Thisismaskedbythefocusonaveragegrowthratesfortheperiod2017to2050.Butlittleshouldhappenintheshortterm,andtheadverseeffectswillbeconcentratedinthedecadesbeyond2030.Sotheaverageimpactonthegrowthratecouldbecloserto1percentforthatshorterlaterperiod,ratherthan0.74forthewholeperiod.Giventheshocktorealwagesgeneratedbythemodel,duetodisequilibriumconditionsinthelabourmarket,therewillbeafurthershocktohouseholdincomes.Theycouldfallinrealterms.

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CostofforestsequestrationmaybeoverstatedThediscussionsintheNZIERreport,andelsewhere,suggestthatthereisalimitonland‘suitable’forafforestation.Thisunderstatesitspotentialrole.Howmuchlandis‘suitable’willdependonthecarbonprice.Ifthepriceishighenoughthenalmostallfarmlandissuitable.Togainaninsightintotheamountoflandthatcouldswitchtoforestry,weconducteda‘backoftheenvelope’landvaluationatdifferentcarbonprices.Weassumed:

• Noemissionchargeonfarmingsothereisnoavoidedtaxbenefit.• Establishmentcostsof$1500perhectare.• Nocarbonbenefitsforthefirst5years.Ittakesawhileforgrowthtobe

materialsothisdelayroughlyaccountsforthis.• Theforestisnotharvested,andthereisnogrowthafter35years.Thisis

worsecasescenario.• Arealdiscountrateof5percent,whichisconsistentwiththe7percent

nominalrateoftenusedtoevaluateforestryinvestments.

Theresultsaresetoutintable2.

Table2:Landvalueforestry

Carbonprice$/tonne

Landvalueperhectare$

25 3650

50 8800

75 14000

100 19300

150 29500

200 39800

300 60500

800 164000

Recentfarmlandsalesindicatethatatypicalperhectarepriceforsheepandbeeffarmsisaround$6000–$8000.Theabovevaluationfiguressuggestthattherecouldbesignificantconversionsfromsheepandbeefoncethepricegetstoaround

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$75.Formoremarginalorwasteland,conversionsmaybecomeattractiveat$50orlower.

Thesecondfactortoconsideristheimpactofcarbonpricingonfarmprofitability,andhenceonlandprices.Assuminggreenhouseemissionsof8tonsahectarefordairy4,at$75pertonnethecostperhectarewouldbe$600,andthetotalcost$94000foranaverage156hectarefarm5.Emissionsof1.5tonnesperhectareforsheepandbeefwouldcost$112.5perhectare,and$74000fora600hectarefarm.Forsheepandbeefthismightbearoundhalfofaverageannualprofits.Once,after5years,whentheforestisgeneratingcarboncredits,theannualincomefromcarbonfarmingwouldbe$765,000.Whiletheincomestreamwillonlylastfor30yearsitwouldbehardtoresist.

Oncewegettohigheremissionprices,conversionsofsheepandbeeffarmsbecomecompelling.At$200asheepandbeeffarmerhasanemissionsbillof$180,000andinmostyearshastopaytowork.Ifheconvertstoforestry,in5yearsorso,hewillhaveanincomeof$2,000,000ayearandcanleadalifeofleisure.Manydairyfarmerswouldalsobetemptedtojointheleisureclass.Atthemuchhigherprices(over$2000intheenergyinnovationzeroemissionsscenario)generatedbytheNZIERmodel,farmerswhoconvertbecomefabulouslywealthy.

TheNZIERadmitsthattheyhavenotintegratedforestrysequestrationintotheirmodel,duetotimeconstraints.Butthereisalsoaproblemwithfarming.Atthehighercarbonprices,sheepandbeeffarmingshoulddefinitelybetaxedoutofexistence,andthesurvivalofmostdairyfarmswouldbeproblematic,justonthebasisofthetaxalone.Buttheyarenot,suggestinganissuewiththesensitivityofthefarmingsub-modeltocarbonprices.

Whatouranalysissuggestsisthatforestrymightsetacaponemissionprices,whichismuchlowerthantheNZIERestimatesand,alsolowerthanthehigherVividestimateof$250pertonne.Ofcoursethisconclusionisbasedonourverysimplemodel.Actualoutcomeswillalsodependonbehavioralandriskfactorsthatwouldtendtohaveadampeningeffect.Thesefactorswouldhavebeenpickedup,implicitlyintheVividanalysis,whichisbasedonempiricalanalysisofresponsestoproductmarketprices.Butitisnotclearhowapplicabletheircalibrationswillbetotheintroductionofcarbonprices,whichshouldbedrivenbylong-termstructuralfactors,ratherthanpotentiallycyclicalwoodproductpricing.Muchwilldependonthedesignofthecarbonpricingregimeandconfidenceinthearrangementsthatwilldelivercarbonsequestrationbenefitstoforesters.Ifthereisaperceivedhighrisk

4Kerretal.20145LIC2016

18

thatfuturepricescouldcollapse,astheyhaveinthepast,thentheconversionresponsewillbemuted.Ifthereisahighdegreeofconfidencethatpriceswillbehighandsustainedthentherewillbeamuchgreaterresponse.

Theotherissuewithafforestationistiming.Afforestationisnotapermanentsolutionastheforestswillmatureandthesequestrationbenefitswillend.Iftheobjectiveistomeetapointoftimetarget,thenitmakessensetoplantclosetothetargetdate.Anexoticforestplantedin2040,willbedeliveringasignificantbenefitperyearby2045.Itwillcontinuetoproducebenefits,atahighratefor,say,another25years.Atthatpointanewforesthastobeplantedtomaintainthesequestrationcontribution.Aforestplantedin2020willonlyprovidebenefitsfor5yearsbeyond2050.Fromthisperspectiveearlyactionisnotagoodidea.

WhattomakeoftheNZIERresult?PutbluntlytheNZIERanalysisisabitofamessandamuddle.

• Itdoesn’taddressthetargetoptionsthatareonthetable.• Thereisnoafforestationmodel.• Theemissionpricesareunreasonablyhigh.• Thefarmsub-modelappearstobeoverlyinsensitivetoemissionpricesand

theremaybeanissuewithothersectors.• Thereportinghasbeencontrivedtohidemuchofthecostsofthezero

emissionsoption.• Theequilibriummodelomitsimportantvariablesincludingimpactsonlabour

marketgrowthandtheexchangerate.OurClimateisprobablyrightwhenitsaysthattheNZIERresultsoverstatethecosts,thoughbyhowmuchwedon’tknow.Butifweassumethatlosseswereexaggeratedbyafactoroftwo,wearestilldealingwithsomebignumbers.The50percentreductiontargethasapresentvaluecostof$75billion,andthe100percenttargetcostis$275billion.Theadditionalcostis$200billion.Thatisourworkingnumber.Ifthelowercostisjustsomethingwewillhavetolivewithtobepartoftheinternationaleffort,thentheissuehereiswhyshouldwespendtheadditional$200billion.Whatdowegetforourinvestment?Asacomparisonofthecostsothercountriesarelikelytoincur,theestimatesofthecostspresentedinthe5thIPCCsreportareworthalook.Theyreviewedthemodellingliteratureandfoundthatthemedianpresentvalue(witha5percentdiscountrate)ofthereductioninconsumptionto2050duetomitigationeffortswas3.4percentofthebaseyearconsumption.

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ThecostofclimatechangeforNewZealandInthediscussionofthecostofthetargetoptionsitisstated.Neithermodelincludesmanyofthebenefitssetoutaboveoftakingactiononclimate

change,suchasthewiderco-benefits,orthepotentialbenefitofavoidingdamagetothe

economycausedbyachangingclimate,iftherestoftheworldactstoo.

TheinferencehereisthatclimatechangeiscostlytoNewZealandandthatthewiderco-benefitsaresignificant.

OurClimatedoesnotpresentanassessmentofthecosts(andbenefits)ofclimatechangeforNewZealand.TheMinistryfortheEnvironmentsayssuchanassessmenthasnotbeendoneforNewZealand.Thatisnotquitetrue.TheauthorofthispaperpresentedanassessmentofthecostsandbenefitstoaSelectCommitteehearingonNewZealand’sClimatechangetargets.Butthatwasmanyyearsago,sothesubmissionwouldbehardtofind.

Thesubmissionconcludedthatglobalwarmingwouldbepositive,notnegativeforNewZealand,atleastoverthiscentury.ThereasonisthathighertemperaturesandelevatedCO2levelshaveapositiveimpactonalandbasedindustryproductivity,whichmorethanoffsetsthenegativeimpactsthatarementionedinOurClimatereport:moredroughts;arisingsealevel;morefloodsandstorms,healthimpacts,andmorewildfires.

ThequestionariseswhytheMinistryhasnotcommissionedacostsandbenefitspaper.InarecentopedintheDominionJimRose6saidthatboththeMinisterandtheMinistryhadbeenapproachedbutsaid“suchanestimatewastoohardtodo”.Wesuspectthereasonisthattheywouldn’tliketheresult.

EvidenceontheeffectsofclimatechangeinOurClimate

Despitethelackofsolidanalysis,OurClimatetriestoleavetheimpressionthatthecostsarelargeandjustifyearlyaction.Therearefourpiecesof‘evidence’.

ImpactonGlobalGDPRecentanalysisalsosuggeststhatlimitingglobalwarmingto1.5degreesCelsiusinsteadof2

degreesCelsiusbymid-centurycouldleadtoanincreaseinglobalGDPof1.5percentto2

6DominionPost26July2018

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percentandavoidsdamagesfromclimatechangegloballyofaround$11trillionto$16

trillion.

Wehavereadthe‘recentanalysis’7.ThepaperestimatesasimplerelationshipbetweenvariationsinannualaveragetemperaturesandannualchangesinGDPinapanelof165countriesover1960-2010.ItusesthisrelationshiptocalculatethedifferenceinGDPwhenthetemperatureincreasesby1.5degreesand2degrees.

ThereareanumberofproblemsindrawinganyinferencefromthispaperforNewZealand.First,theresultswillbeheavilyinfluencedbyunderdevelopedcountriesinhotareasoftheglobe.Whileitisplausiblethattherewasahistoricalrelationshipbetweentemperatureandshortrunvariationsineconomicactivityinthesecounties,itisabigsteptoclaimthattheseresultsapplytoaslowsecularincreaseintemperatureforallcountries,60yearsfromnow.InanyeventtheresultssuggestthatforNewZealandtherewillnotbeamaterialimpact.ThepapershowsaninvertedUshapedrelationshipbetweentemperaturechangeandGDPchanges.Thereisaneconomically‘optimal’annualavergetemperatureof13.1degreeC,atwhichthereisnoeconomicimpact.NewZealandsitsclosetothisclimaticsweetspot.IftheMinistrywantedtocitethispaperthentheyshouldhavehavepresentedthewholestory.

DrawingconclusionsfromrecenteventsOurClimategoesontomakeacasefornegativeimpactsundertheheading“Impactofclimatechangesofar”

Wearealreadyfeelingtheeffectsfromachangingclimate.Inthepast100years,seashave

risenaround14to22centimetresinNewZealandports.Morerecently,wehavesuffered

costlydamageanddisruptionfromcoastalerosion,morefrequentandsevereweather

events(flooding,droughtsandwildfires)anddamagetoinfrastructureandassets.

Whileitistruethatsealevelshaverisen,itcannotbesaidthatrecentweathereventshavebeenduetoclimatechange,anymorethanitcanbesaidthatunusualcoldsnapsrefutetheglobalwarminghypothesis.NewZealand’sweatherissimplytoovariabletodrawtheconclusionthattherehasbeenanincreaseinextremeeventsastemperatureshaveincreased.ThiswasthepositioninthesectionoftheFifthReportoftheIntergovernmentalPanelonClimateChange(IPCC)relatingtoNewZealandtrends.

OurClimategoeson

Thecostswefacearecontinuingtorise.Asanexample,inthepast10years,thecostofweathereventstoourtransportnetworkhasrisenfromabout$20millionperyeartoover

7Burke2018

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$90millionperyear.8The2013droughtintheNorthIslandcosttheeconomyaround

$1.5billion,andclimatechangewillmakedroughtslikethismorelikely.

CosttotransportinfrastructureThesourceofthe$20to$90millionincreaseinthecostwastheMinistry’s2017report9.ThatdocumentinturnreferencedaMinistryofTransportreportasthesource.Thatdocumentwaswrittenin2009,soitdidnotandcouldnotprovideevidenceonthecostsoverthelast10years.The2013droughtOnthe2013droughttheinferenceisthatclimatechangewasresponsibleforthedrought.Inthe2017reportitisstatedthatclimatechangewas‘partiallyresponsible’butthisisnotsupportedbyanyreference.Whiledroughtsareforecasttobecomemorelikely,forthemostpartthechangesareexpectedtobemoderate.Aoneintwentyyearriskbecomesaoneintenyearrisk.Andthesedroughtsareshortdurationevents,notthemultipleyeareventsweseeinAustralia.TheexceptionsarethenortheastoftheNorthIsland,CanterburyandCentralOtago.Thefirstisnoteconomicallysignificantandinthelattertwoareasirrigatedagricultureisimportantandlessvulnerabletodroughts.CostofsealevelrisesReportsfromtheParliamentaryCommissionerfortheEnvironmentindicatethatthecostof

replacingeverybuildingwithinhalfametre(abovecurrentsealevel)couldbe$3billionand

within1.5metresasmuchas$19to20billion.

Thevalueofbuildings‘atrisk’isinteresting,butnottheimportantdata.Weneedtoknowhowmuchitwouldcosttodefendthosebuildings,orwhenitisappropriatetoretreat,thevalueoftheabandonedproperties.InthatrespectthereissomeusefulinformationinareportbyBecaLtd.totheDunedinCityCouncil10(2014).

Theirbroadbrushassessmentofthecostsofdealingwitha0.8metresealevelrise(0.6metresistheprojectedriseby2100)areacapitalcostof$75millionand$3.5millionayearinrunningcosts.Thevalueofbuildingsatriskwasover$1billion.

Unfortunately,thereisnobroadbrushoverviewofthesecostsonanationalscalethatwouldcontributetotheclimatechangepolicydebate.Togetasenseofthescaleoftheproblem,letusassumethatthefuturecostis,say$10billionforcoastalprotectionandlandloss.Thesecostswillbeincurredinthefuture,andinsome

8 MinistryfortheEnvironment(2017).

10BecaLtd.2014

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caseswellintothefuture,butsaytheaveragedelayis40years.Usinga6percentdiscountrate,whichisconventionalforthiskindofexpenditure,thepresentvalueofthe$10billionis$840million.Witha30yeardelaythecostis$1560million.Thesearenotbignumberscomparedto,say,thecostofimprovingAucklandstransportinfrastructure.

WildfiresTheonlyinformationwehaveonthecostofwildfiresisthefollowingstatementinTheWestpacreport11citedinOurClimate.

ThemostseriousriskfacedbytheForestrysectoristheincreasinglikelihoodofbushfires,asdayswith

afireindexof‘veryhigh’and‘extreme’willincreaseinsomeNewZealandlocationsupto400%by2040and700%by2090likethe2017PortHillsfireinChristchurchandthe2015and2016

Marlboroughfiresareexpectedtooccurwithincreasingfrequencyandseverity.Overthelast70

years,wildfireshavecosttheforestryindustryatleastanestimatedNZ$300millionand40,000

hectaresofplantations.

TheassessmentofthehigherincidenceoffireswastakenfromtheNewZealandchapterofthefifthIPCCreport.Theestimatedincreaseswere0-400percentand0-700percentrespectively.

Theaveragecosttotheforestryindustrywas$4.4millionayearthoughthetotalcostoffireswillbebiggerthanthisfigure.Eveniftheannualcostswerethreeorfourtimesasbigby2100,thiswouldstillnotbematerialintermsofthelargereconomy.Intermsofinsuredlosses,theonlyeventrecordedbytheNewZealandInsuranceCouncilasacatastrophiceventinthelast50years,wasthePortHillsfirewhichcost$18.3million.

TheFifthIntergovernmentalPanelonclimatereport:Chapter25onAustralasiaSomeoftheinformationandanalysisthatwouldinformanassessmentoftheextentofclimatechangeanditseffects,issetoutinchapteronAustraliaandNewZealandintheFifthIntergovernmentalPanelonClimateChangereport.Thisisthe‘goto’documentfortheMinistryandmanyothercommentators.Itwasobviouslynotwrittenbyclimatechangedeniers,soitcanbereliedonnottounderstateclimatechangeeffects.Toassistthereader,andtoavoidaccusationsofcherrypicking,wehavesetout,intheappendix,nearlyalloftheNewZealandmaterialinthereport,withtheexceptionofsometechnicaldetailthatdoesaddtothesubstance.Wehavecommentedwhereappropriate.

11Westpac2017

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Notably,theAustralasianchapter,isnotreferencedbyOurClimate,norareanyoftheassessmentsoftheclimatechangesreported.InourviewtheevidencepresentedintheIPCCreportdoesnotsupportaconclusionthattheglobalwarmingimpactswouldbestronglynegative,orevennegativeatallforNewZealand.Thereareanumberofreasonsforthis.First,theextentofthenegativeclimatechangeismuchlessthanoftenclaimed.

• ThereisnomaterialincreaseintheincidenceofseverestormsTheIPCCreportsaysIncreaseinintensityofcyclonesinthesouthinwinterbutdecreasingelsewhere.

Increaseinconditionsconducivetoconventionstormdevelopmentisprojectedtoincreaseby3-6percentby2070-2100comparedto1970-2000

• Theincreaseinextremerainfalleventsisnotlarge(upto20percentmore).• Theincreaseintheincidenceofshortsummerdroughtsismoderateover

mostofthecountry.

Second,thepresentvalueofcostsrelatingtosealevelrises,isnotlargeinrelationtotheeconomy.Third,healthcostsaretrivial(seethediscussiononco-benefits)andtheremightbepositiveeffectonhealth.Fourth,andmostimportantly,carbonfertilisationwillhaveapositiveimpactonagriculturalproduction.Thisisdiscussedinmoredetailbelow.Fifththerewillbeamenitybenefitsfromawarmerclimate.

TheMinistryofPrimaryIndustryreportonclimatechangeimpactsTheIPCCreportingontheimpactsofclimatechangeonland-basedindustryisfragmentary,andmostlyomitshardnumbers.Itdoesnotcometoanoverallconclusion,butleavestheimpressionthattheimpactisnegative.AmorecomprehensiveandbalancedassessmentisintheMinistryofPrimaryIndustry’s2012report‘Impactsofclimatechangeonland-basedsectorsandadaptationoptions:Stakeholderreport'.Themainpurposeofthereportwastolookatadaptationandresilienceissues,ratherthantomakeanoverallassessmentoftheeconomiccostsandbenefits,buttwomajorthemessuggestthattheoverallimpactwouldbepositive.ThefirstisthatC02fertilisationwillhaveapositiveimpactandthatinmanycasesthisimpactwillbematerial.ThesecondisthatNewZealandfarmersareverygoodatadapting,both

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tacticallyandmorestrategically,toclimateevents.Thiswouldhelpmitigatesomeoftheadverseimpacts,whichare,inanyevent,lessquantitativelysignifican

OnC02fertilisationthereportsaysIncreasedcarbondioxide(CO

2)concentrationsaffectallland-basedsectors.Theymean

higherpotentialgrowthofbiomassformanykeycrops,pasturesandtreesinthefuture.This

isknownas‘CO2fertilisation’.

• HigherCO2concentrationsstimulateplantphotosynthesisandgrowth.

• Pasture,treeandcropvarietiesdonotrespondequallytochangesinCO2concentrations.

TheeffectisstrongerinC3plants(ryegrass,clover,wheat,kale)thanC4plants(maize,

kikuyu).

• PlantsclosetheirstomatatocopewiththeincreasedCO2,transpiringlesswaterinthe

process.CO2fertilisationalsostimulatesmoregrowthperunitofwater,makingplantsless

water-dependent.

Inpre-industrialtimes–beforearound1870–atmosphericCO2concentrationsaveraged

280partspermillion(ppm).Inearly2012,theymeasured390ppm.Bythe2050s,those

levelscouldclimbtobetweenabout475and565ppm;andbythe2100s,tobetween540

and955ppm.TheCO2fertilisationeffectiswelldocumentedfromgreenhouseproduction

systems,wheretheenvironmentiscontrolled.

EstimatesoftheneteffectofCO2fertilisationvarywidely.ForNewZealandpastures,

estimatesrangefrom5percentto30percentincreasesinabove-groundbiomassfora

doublingofC02.

Forpastoralfarming,managementpracticeswillhavetoevolvetomaximizethepotentialbenefitsandtomitigatethedownsides.Seasonalrainfallpatternswillchangetowardsdriersummersandtherewillbemoredroughts.Inthemostproductiveareastheincidenceofshort-termsummerdroughtsareexpectedchangefromaroundoneyearintwentytooneyearinten.

Forsomeotherproductstheimpactsareclearlypositive

Assumingadequatewaterandsoilnutrientsupply,potentialyieldsoftemperatecerealcrops

couldincreasebyasmuchas20percentunderfuturetemperatureandCO2concentrations.

Similarpotentialyieldincreasesareprojectedforforagecrops,likewintercerealsand

brassicas,whichareharvestedinavegetativestateandhavelongerperiodstogrow,thanks

totheshorteningofcyclesofadjacentannualcrops.

Forothercropsandlocations,climatechangeeffectsweremorevariable,andsomewere

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slightlynegative.Withoutadaptation,yieldsofforagecrops,suchassilagemaize,alongwith

moretemperature-sensitivecropslikepotatoesandpeas,arereducedundersomeclimate

changescenarios.

Forhorticulturetheimpactisprobablyneutral.

Themainimpactsonapple,kiwifruit,andgrapegrowerswillbeincreasesinvegetative

biomass,pest/diseaserisksandchangesinplantdevelopment.

Thesectorhasconsiderableadaptivecapacity,inthatgrowerscanrelocateandexpand

relativelyrapidly,asexemplifiedbytherecentspreadofvineyards.

Themostpositiveeffectisonforestry.

WithhigherconcentrationsofatmosphericCO2,radiatapineproductivityisexpectedto

increaseinmostplantationsbyanaverageof19percentby2040,andanaverageof37per

centby2090.SouthIslandplantationswillreceiveadditionalbenefitaswarmer

temperaturesboostphotosynthesis.Precipitationmightdecreaseinsomeareas,butthiscan,

uptoapoint,actuallyimproveproductivity,astreesusewatermoreefficiently.However,

wherewaterornutrientsareinshortsupply,productivitywillfall.

TheMinistry’sassessmentin2017AllofthepositiveeffectsofCO2fertilisationareairbrushedoutoftheMinistry’seconomicassessment.Itreadsasfollows.

primaryindustriesareparticularlyexposedtotheimpactsofclimatechange.Forexample,

theyarestronglylinkedtofreshwateravailability,andclimatechangeisexpectedtoincrease

competitionforfreshwaterresources(RSNZ,2016).Whiletheseverityofimpactswillvaryby

sectorandregion,therisksandcostsfromextremeweatherandwildfiresareexpectedto

increaseacrossalllandbasedsectorsandsupplysectorswillbeaffectedbyimpactswhich

interferewiththeabilitytogetprimaryproductsfromthefarmtoprocessingfacilitiesand

thentomarketsorports.Climatechangeimpactsmayaffecttransport(forexampledueto

stormsandslipsclosingroutes)andalsotheoperationofprocessingfacilities(forexample

interruptiontothesupplyofenergyorwaterrequiredforprocessing).

Thispresentsamisleadingpictureoftheimplicationsofawarmingclimateforagriculture.

TheamenityimpactofclimatechangeThepositiveamenityeffectofclimatechangehasnotbeenconsideredinanyoftheMinistry’sassessments(orgenerallyelsewhere).TheFifthIPCCreport,however,notedthatawarnerclimatehadbeenidentifiedasonereasonforNewZealandmigrationtoAustralia.

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NewZealandhasrelativelycoolandunreliablesummers.Whilehighersummertemperaturesanddroughtsareanissueforfarmers,theyareaboontoholidaymakers.Thesummerof2017-18wasperhapsaportentofthingstocome.Manypeopleloveditandarelookingforwardtoarepeat.Manypeopletoowillbehappyifthewinterchillisreducedbytwoorthreedegrees.

Withclimatechange,perhapsnotsomanypeoplewillgotoQueenslandandelsewhereinsearchofbetterweather.Itmayalsohaveanimpactoninternalmigration.SouthernerswillnothavetogoAucklandforabitmorewarmth.Auckland’sweatherwillcometothem.

Whyhavewesigneduptofightclimatechange?IftheoverallimpactofclimatechangeforNewZealandinthiscenturyispositive,thenwhyshouldwebe‘fighting’climatechange?Therearetworeasons.

First,unabatedgreenhouseemissionsareagrandexperimentthatmayhavemuchmoresignificantandpossiblyirreversibleimpactsoverlongertimehorizons.Itisonethingtodealwitha0.6metresealevelrisein2100,butanotherifthesealevelriseis20metresorso,albeithundredsofyearslater.

Second,wemightbecomeaninternationalpariahifweentirelystandasidefromtheprocess.BeingDonaldTrump’snewbestfriendontheissueisnotagoodlook.

Fromaself-interestedperspectivetheNationalinterestreport12ontheParisAgreementputsthecaseasfollows.

Asasmallexport-dependenteconomy,NewZealandreliesoneffectiveoperationofthe

internationalruleoflawandontheleveragecreatedthroughactiveandconstructive

engagementinternationally.IfNewZealandisseentofree-rideonclimatechange,itwould

riskdamagingNewZealand’sinternationalreputationinareassuchastradeandforeign

policyaswellasourinfluenceininternationalclimatechangeprocesses.

Beinginvolvedisanactofinternationalsolidarityforwhatisaglobalproblem.Butthisdoesnotrequireustobeagloballeader,particularlyiftheimpactsoftakingtheleadaresevere.

12NewZealandGovernment.(2016).Nationalinterestanalysis:TheParisAgreement.

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Theco-benefitsfromclimatechangepoliciesItisarguedthatco-benefitswillreducetheeconomiccostsoftheemissionspolicies,anditisimpliedthatthesebenefitsaresignificant.Alistofbenefitsisthebenefitssetoutintable3.‘Potentialbenefitsoftransitioningtoalowemissionseconomy’.

Betterhealthfromdrierwarmerhomes Every$1spentonthe‘WarmUpNewZealand:HeatSmart’programmegeneratesbenefits

ofaround$4.Retrofittinginsulationcanhelpdeliverparticularlystronghealthcostsavings

fromat-riskgroups(e.g.,childrenandtheelderly).Theemissionsreductionbenefitsare

relativelysmall.

Thissuggeststhatthereareplansafoottostrengtheninsulationstandards.Thatshouldbeassessedonitsownmerits.Dothebenefitsexceedthecosts?However,thisisnotreallyanexampleofaco-benefit.Theevidenceisthatmostpeoplerespondtoinsulationbyhavingawarmerhouse,notbyreducingtheirheating.InanyeventNewZealand’selectricitygenerationisprojectedtobealmostentirelyrenewableby2050,soelectricityconsumptionwillnotbeanemissionsissue.Climatechangewill,ofcourse,initself,makehouseswarmerinwinter.BetterhealthfrommoreexerciseandimprovedairqualityAninvestmentof$630millionininfrastructuretosupportactivetransportcouldgenerate

netbenefitsof$13billionby2050,mostlyduetothehealthbenefitsfromincreasedexercise.

Theexerciseargumentislargelyirrelevanttothechoicebetweenthezerocarbonandzeroemissionstargets.Bothwillhavethesameimpactonthemodeoftransport.Itisassumedthatcarswillbemostlyelectricby2050,sousingacar,ratherthanwalkingorbikingwillnotimpactonemissions.ThesourceoftheabovefiguresisnotgivenbuttheycamefromMacmillanet.al.2014.Thispaperreportsonanumberofbicyclelaneinvestmentscenarios.Thebiggestinvestmentistheonereportedabove.Itassumes‘internationalbestpractice’ofbuildingseparatedbicyclepathsonarterialrouteswilldeliverCopenhagenlevels(thehighestintheworld)ofbicycletrips(40percentcomparedtotwopercentnow)by2051.Ifyoubuildittheywillcome.Thislookstobemorethanoptimistic.Theyhaveacomplicatedmodel,withmanyinputs,butthecriticalvariabledrivingthebenefitsisthenumberoflives‘saved’throughthehealthbenefitsofcycling.Heretheyreliedontwostudiesonthedifferenceindeathratesofcyclistsandnon-cyclists.Thefirst13wasastudyonwomeninShanghaiaged

13Mathewset.al.2007

28

between40and70.Itshowedthatcyclistshadalowerdeathratebuttheeffectwasnotquitestatisticallysignificant.ThesecondisaDanishstudy14of20-93yearolds.Itisclaimedthatcyclingtoworkreducesmortalityratesby28percent,afteraccountingforanumberofcovariatesincludingotherexercise.Inotherwords,evenifyoudootherexercise,includingleisuretimecycling,cyclingtoworkwillreduceyourexpectedmortalityrateby28percent.Itisapublichealthsilverbullet.Wedon’tbelievethis,itappearstobeamedicalnonsense.Whatmattersforthesehealthbenefitassessmentsisthenumberofpeoplewhowouldotherwisebesedentary,andwhohaveresistedadviceandpressurestoexercisemore,andhavemanyopportunitiestodo,tochangetheirwayswhenbikepathsareconstructed.Evidenceonthispointisgenerallylackinginthesekindsofstudies.Ourmainpointhereisthatitisnotenough,justtocite,orlookattheabstract,ofanarticlethatappearstosupportafavouredoutcome.Thearticlehastoberead,understood,thesourceofcriticalinputsreadandunderstood,andanevenhandedassessmentmadeofreliability.ButrepeatedlytheMinistry,aswehavedemonstratedinthispaper,doesnotappeartohavedonethis.Themessagefordecision-makersisthatifyouarepresentedwith‘evidence’basedonthe‘literature’,thatappearstobetoogoodtobetrue,itprobablyis.ReducedairpollutionHuman-causedairpollutioncancostupto$4.3billioneachyear,whichincludescostsfrom

prematuredeaths,hospitalvisitsandrestrictedactivitydays.

Thiscosthasbeengrosslyoverstated.Thisisexplainedindetailbelow.Againthereshouldbelittledifferenceonthiscountbetweenazerocarbonandazeroemissionstarget.

ReducedroadtrafficcongestionTrafficcongestioninAucklandcosts$0.9billionto$1.3billion.

ThebenefitsfromtheexistingpassengerrailnetworkinWellingtonandAucklandare

estimatedatbetween$1.1billionand$1.2billion,almostallfromreducedcongestion.

Safetyandairqualitybenefitsmademoremodestcontributions.

Trafficcongestion,andtheroleofpublictransport,islargelyaseparableissuefromemissionsreductions.Theroadswillbejustascongestedwithelectricvehiclesaswithinternalcombustionenginevehicles.Ifthereisaneffectitcouldbenegative.Electricvehicleshaveahighercapitalcost,butalowmarginalcost,sothesevehiclescouldbedrivenmore.14Andersenet.al.2000

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However,thereisonemeaninfulargumentherethatisnotusedinOurClimate.Underthezeroemissionsoptionmanypeoplewillbemuchpoorerthantheyotherwisewouldbe.Theymaycycleorwalk,ortakepublictransport,becausetheycannotaffordacar.fbenefitand/evidence BetterhealthoutcomesfromfewerroadaccidentsBikeridingismoredangerousthantakingacar. Improvedfreshwaterquality;Reducedsoilerosion;Improvedbiodiversityandspeciesprotection Forestrycanimprovewaterquality,enhancebiodiversity,reducesoilerosion,improveland

useproductivityandstimulateregionaleconomicdevelopment.

Exoticforestsdonotincreasebiodiversity.Totheextentthatrelianceisplacedonnewindigenousforests,thenmoreafforestationwillberequiredtomeetthe2050target. Nearlyonemillionhectaresofprivatelandsubjecttomoderatetoextremeerosionare

potentiallywellsuitedtoafforestation.

Possiblytrue,butmorethanthreemillionhectaresareneededtomeetthezeroemissionstarget.

Forexample,theecosystemvalueofeachhectareofplantationforestryintheOhiwa

catchmentwas$5,600perannum,overhalfofwhichisfromimprovedwaterquality.

Wehavereviewedtheanalysisinthereport‘EcosystemServicesintheŌhiwaCatchment’.Theestimateoftheeconsystemvalueofimprovedwaterqualityis,putbluntly,nonsense.Thisrequiressomeexplanation.Thepurposeofthereportwastocalculatetheecosystemvalues(includingmarketableoutputsandpostiveandnegativeenvironmentalimpacts)foralllandbasedactivityinthecatchment.

Themostimportantpositiveforforestswasthevalueofnitrogenleaching.Heretheysetupanartificalcap-and-tradescheme.Itisassumedthatforestsleach3kg.perhectare,butareallocatedacapof10kgs.Sotheyhave7kg.tosellatapriceof$400/kg.Thisgeneratesanincomeof$2800,whichis‘waterquality’benefitthatiscitedinOurClimate.

Thesourceofthe$400estimatewasashortpowerpointconferencepresentation15Undertheheading‘Likelyincentivesbelowtheline’therewasabulletpoint.15 Barns, S. (2014). Lake Rotorua: Incentivising land use change In NZARES Conference

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$400/kg?Itisnotclearwhatpointthepresenterwasmakinghere,butitcertainlydidnotproviderobustevidenceforthe$400/kgestimatethatdrovetheOhiwacatchmentresults.

Theseriouserrorhereisthatthe$400/kgisnotremotelyneartothenitrogenleachingpricethatwouldemergeinarealmarket.At$400/kgadairyfarmerwithanoperatingincomeoflessthan$1700ahectarewouldpayaleachingchargeof$12,000ahectare.Sheepandbeeffarmerswillpay$3200onanincomeof$156.Theonlyrationalresponsewouldbeimmediatelyconverttoforestrytocollectthe$2800leachingincome.Ofcoursetherewouldbenoonelefttopayandthepricewouldcollapsetozero,orclosetoit.

Theotherkeydriveristheassumptionthatforestswouldbegenerouslyallocatedacapof10kg,whichamountstoagift.

ThereportwaswrittenbytheNewZealandForestResearchInstituteLtd.tradingasScion.

Againthispoints,atleast,tocarelessnessbytheMinistry.Iftheyaretociteastudythentheyshouldreaditandensurethattheresultsarerobust.WhatismoreworryingisthatanalysislikethismaybeinfluencingtheMinistry’sthinkingonlanduseissues.

Reducedroadmaintenancecosts;Improvedroadsafety Estimatedbenefitsofcurrentrailfreightareabout$200millionperyearfromreduced

congestion,$80millionperyearfromreducedmaintenancecostsand$60millionperyear

fromsafety.Thisimpliesthatthereshouldbealargescaleswitchtorailtransport.Thisisunlikelytobeefficientinmostcases,andifartificiallypromoted,thecostscouldbeconsiderable.Theemissionreductionsarelikelytobeverysmall,andcouldreadilybeachievedbyplantingmoreforests.Againthesourceofthefiguresisnotgiven. Improvedfreshwaterquality Reducednitrogenuse(eg,fertiliser)andimprovedpasturemanagementcouldreduce

nitrogenleachingintoriversby13percent.

Muchofthiscouldbeachievedunderexistingprogrammeswithoutazeroemissionstarget.Co-costsTheeconomicanalysisassumesthatemissionsareabatedatleastcost.However,thereisariskof‘co-costs’.Aco-costoccurswhenanemissionreductioneffectisusedtopartiallyjustifydirectinterventionsandprojectswhosecostsexceedsthe

31

benefits.Theemissionreductioneffectshouldbepickedupinacostbenefitanalysisthroughacarbonshadowpriceorwillbealreadycapturedbytheemissionpricingregime.However,whatislikelytohappeninmanycases,isthattherewon’tbearobustassessmentandthattheemissionsreductionimpact,howeversmall,willbeusedtojustifytheproject.BetterairqualityAfrequentlycitedco-benefitofemissionsreductionsistheimprovementinhealthresultingfromimprovedairqualityasinternalcombustionvehiclesarephasedout.Theprimarysourceonthehealthcostsisthe‘UpdatedhealthandairpollutioninNewZealand’(HAPINZ)study(2012).Itwasreportedthatin2006thatmorethan2300NewZealandersareestimatedtodieprematurelyeachyear,with1175duetoanthropogenicsources.

ThetotalsocialcostsassociatedwithanthropogenicairpollutioninNewZealandwasestimatedtobe$4.28billionperyearor$1,061perperson,withthefollowingcontributionsattributedtoeachsource:

• 56percentduetodomesticfires• 22percentduetomotorvehicles• 12percentduetoopenburning• 10percentduetoindustry.

Thesocialcostofmotorvehiclepollutionwas$941million.Withincreasingpopulationandpricesthatsocialcostwouldnowbeupto50percenthigher.

Therearesignificantissueswiththisstudy.

Thesocialcostsarealmostentirelydrivenbythenumberofdeathsandthecostofeachdeath.

TheestimateofthenumberofdeathsappearstobegrosslyexaggeratedandbearsnorelationshipwiththeestimatesreportedbytheWorldHealthOrganizationintheirpaper‘Ambientairpollution:Aglobalassessmentofexposuresandburdenofdisease’2016.ThestudyfoundthatNewZealandhadtheequalfirstbestairqualityintheworld,andthatthenumberofdeathsfromallsourcesin2012was20.Thedeathrateper100,000peoplewas0.5comparedtotheHAPINZestimateofabout40.IftheHAPINZestimatesarecorrectthenNewZealandhasthehighestsocialcostduetoairpollutioninthedevelopedworld,notamongstthelowest.

LookingattheanalysisunderpinningtheNewZealandstudy,weidentifiedanumberofissuesthatcouldhaveresultedinoverstatedresults.Forexample,deathsare

32

estimatedtoincreaseby7percentper10mg.persquaremetreincreaseinairparticulates,buthospitaladmissionsinclassesrelatedtopollution,increasebyonlyabout1percent.InourviewtheWHOnumberprovidesthebetterestimatesforpolicypurposes.

UsingtheHAPINZestimatesofthesourcesoftheemissions,15percentofthetotaldeathscanberelatedtosectors(transportandindustry)thatwillbeaffectedbyazerocarbonpolicy.Thatgives3deathsayearontheWHOnumbers.Mostofthesewouldbesaved,undera50percenttarget,sothemarginalnumbersavedunderthezeroemissionstargetmightbe,atmost,one.

TheHAPINZupdatestudyvaluedadeathat$3.5million,whichwasthefigureusedtovaluethecostoftrafficaccidentdeaths.ThepreviousHAPINZstudyusedafigureof$750,000.Becauseairqualityprimarilycausesdeathsinoldage,itwasassumedthatonly5yearsoflifewouldbelost.TheUpdateassumedthatalldeathsshouldbevaluedequally,regardlessofage.Thesocialcostofadeathat20yearsofage,withthelossof60futureyearsoflife,isthesameasadeathat85withthelossof,say,2yearsoflife.Thisisnotajudgmentweshare.WeprefertheinitialHAPINZestimate,whichupdatedforpricechanges,wouldbeabout$1million.Savingonelifewithvalueof$1million,givesamarginalsocialcostsavingof$1millionby2050.Thisisinconsequentialgiventhemagnitudeofthecostsoftheabatementpolicies.

Thechoicebetweenthezerocarbonandzeroemissionstargets

ThecaseforazeroemissionstargetWhileOurClimatedoesnotclearlysetoutthecostsandbenefitsoftheoptions,thereisastrongsuggestionthatfasterisbetter,andthatNewZealandshouldtargetzeroemissionsby2050.Fouradvantagesofearlyactionarecitedinthepaper.

• reducethepotentialforsudden,drasticeconomicshocks

• gainaneconomicadvantageasanearlymoverinemergingmarkets

• getthemostfromwiderbenefitslikecleanerairandwaterandbetterhealth

• meetinternationalcommitmentsandencourageothercountriestomeettheirs.

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Reducepotentialforsudden,drasticeconomicshocksItisnotexplainedwhyatighterdeadlinewouldreducethepotentialforsudden,drasticeconomicshocks,andwhatthosedrasticeconomicshockswouldbe.LogicwouldsuggestthatinNewZealandmoretimewouldreducethoserisks.Inparticular,reducinganimalmethaneemissionsperanimalischallenging,andwilltaketime.TheNZIERreportshowsthatifwepursueazeroemissionstargetwithoutatechnicalsolutiontheimpactonthepastoralsectorwouldbedevastatingwithoutputfallingby70percent,frombaselineprojections,by2050.GainaneconomicadvantagefrombeinganearlymoverinemergingmarketsThisargumentisoverblownandreflectswishfulthinkingratherthanhardanalysis.Thereductioninemissionswillnotinvolve(much)marketabletechnologicalinnovation.Wewillmainlygrowmoretrees.Therestoftheworldalreadyknowshowtodothat.Wewillimportelectriccars,leveragingoffinnovationelsewhere.Norwayhasbeenanearlieradopterofelectriccars(careofsomelargesubsidies),butnoonehassuggestedthatNorwayhasinnovatedtoproducebetterelectriccars.Wemayclosedownsomecarbonintensiveindustriessuchasironandsteelandcementmanufacturing.Painful,butitdoesn’trequiremuchinnovationthatwecanselltotherestoftheworld.Someoftheinnovationthatmightoccurmaybearesponsetoveryhighemissionpricesthattherestoftheworldisunlikelytotolerate,andsowillnotbemarketableoverseasbecausetheinnovationwillnotbeeconomicatlowercarbonprices.WehavereviewedtheMinistry’sreportsonthesubjectofinnovation.Thefirst16isaMinistryreportthatreviewstheinternationalliteratureontheimpactsofemissionspricingoninnovationandcompetitiveness.

Thereportconcludedthatemissionspricingatcurrentlevelsreducesemissions,butdoesnotweakentheoveralleconomicperformanceofmostbusinesses.

Emissionspricingincreasesinnovationactivityinlow-emissiontechnologies,whichmaybeof

higheconomicvalue.Recentpreliminaryevidencesuggestsemissionspricingmayalso

providesmallpositiveeconomicimpacts.

Someemissions-intensiveandtrade-exposedsectorsshowpotentialforemissionsleakage

andnegativeeconomicimpactswithemissionspricing,althoughthesenegativeimpactsare

small.

16MFE2018

34

Theoverseasliteratureisnotreallyhelpful.Theemissionspriceswereverylow,comparedtothelevelswhichwillberequiredtomeettheNewZealandtargets,andtheemissionandindustrialstructureofthecountriescoveredisverydifferenttoNewZealand’s,withitshighpercentageofagriculturalemissions.Theresultsinsomeofthestudiesweremainlyshowingthattheshiftfromcoaltogasgenertedpowerhadnonegativeeffectoneconomicactivity.Thisisnotsuprisinggiventhefallingaspricesthatdrovethechange.

Thesecondpaper‘Countervailingforces:Climatetargetsandimplicationsforcompetitiveness,leakageandinnovation’byaconsultingfirmisnotsoupbeat.

Butempiricalevidenceaboutinnovation,evidencethatisapplicabletoNewZealandandto

climatepolicy,ishardtocomeby.Whatdatathereis,suchasonproductivitygrowth,casts

somedoubtoverwhetherinnovationandadaptationbyNewZealandfirmswillbesufficient

toovercomepotentiallywidecostdifferentials.Topresumethatclimatepolicycouldmakethedifferencewouldbeakindofexceptionalismandaseriousleapoffaith(Ouremphasis).

Thesearestrongwordsfromaconsultant.Consultantsaregenerallycarefulnottobitethehandthatfeedsthem.

Nothingofcourse,aboutthezerocarbontarget,precludesNewZealandfirmscompetinginemergingworldmarketsforemissionabatementtechnology.Intheagriculturalsectorwecan,andshould,undertaketheabatementresearch,withoutincludingthoseemissionsinthe2050target.GetthemostfromwiderbenefitslikecleanerairandwaterandbetterhealthAgain,overblown.Asexplainedabove,accordingtotheWHOwealreadyhavethecleanestairintheworldandthesocialcostsofairpollutionareverylowWewillprobably,mostly,maketheswitchtoelectriccarsby2050undereitheroption,whichwillhaveaminorimpactonsocialcosts.Watermightgetcleaneratthemargin,butthiswillcomeatacost.Theemissiontargetsareascattergunandinefficientwaytoaddresstheissueintheparticularlocalitiesthatmattermost.Theprimaryimpactwillbeonsheepandbeeffarmsnotdairying.Meetinternationalcommitmentsandencourageothercountriestomeettheirs.Theoptionofmeetingthe50percentreductiontargetorcarbonneutralityby2050doesmeetNewZealand’sinternationalcommitments.Nothingcompelsustobegreenhousegasneutralby2050.Therealargumenthereisthatby‘overachieving’NewZealandwillhaveenoughofanimpactontheactionsofenoughcountriestomakeadifference.WhileNewZealand’sactions,inthemselves,cannotmaketomakeadifferencetoglobalwarming,our‘moralinfluence’can.

35

Againthisismostlywishfulthinking.Doesanyoneseriouslyexpectthecountriesthatmatter:theUS,ChinaandIndia,tobeinfluencedbywhatNewZealanddoes.Eveniftheynoticedthereisareadyresponse.NewZealandintendstomeetthezeroemissionstargetmainlybyplantingtrees.Theyhaveplentyofsuitableland,wedon’t.NewZealandhaslargehydroelectricresourcesandthebestwindresourcesintheworld.Wedon’t.NewZealandwillincurveryhigheconomiccoststomeetitstargets,includingthedestructionofmuchofitstraditionexportbase.Wedon’tthinktheywillfollowthroughastheconsequencesstarttoemerge.Wearenotpreparedtoinflictsuchdamageonoureconomy.Moretothepointontheimpactoftheoptions,ifothercountriesarenotinfluencedbyNewZealand’scommitmenttozerocarbonby2050,whatdifferencewillthezeroemissionstargetmake?WillIndiabeinspiredtoimposeacarbontaxoncows,ordrasticallyreducetheirnumbers?Butperhapssomecountrieswillbeinspiredtoannouncemoreambitioustargets,afterallitisjustwords,whichdon’tnecessarilydriveactions.Therealbenefitshereare,first,somesectionsofthecommunitywillgeta‘warmglow’fromNewZealandbeingattheforefrontofthefightagainstclimatechange.Otherswillputapositivevalueonthedemiseoflivestockfarming.Ontheotherhand,thiswillbebalancedbynegativereactionsinsectionsofthecommunitywhoaremorelikelytobeartheconsequencesofthepolicies.’Second,politiciansandbureaucratswillbenefitbybeingabletopreenontheinternationalclimatemitigationstage.Theywillgetashort-termbenefitfromlookinggood.

Argumentsagainstemissionneutralityby2050Ontheotherhandthereareanumberofargumentsagainstazeroemissionstargetby2050.EconomiccostsItwillhaveahigheconomiccost.TheMinistryhastriedtohidethis.Theexactnumberisuncertain,butasdiscussedabove,themarginalcostofthezeroemissiontargetcouldbe,inpresentvalueterms,intheorderoftwohundredbilliondollars.

36

IncreasedriskofleakageGettingaheadofthepackincreasestheriskthatthepolicieswillresultinemissionsshiftingtoothercountrieswithweakerstandards,withlittleornoimpactonglobalemissions.Toourknowledgenocountryhasannouncedapolicytoapplychargestolivestockemissions.AsNewZealanddairyandmeatproductionisreducedwecanbereasonablysurethatitwillbereplacedbyproductionelsewhere.Otherenergyintensivetradedgoodsindustriessuchasironandsteelandcementwillcloseandwewillimportourrequirements.Again,therewillbenoimpactonglobalemissions.ForestrysequestrationresourceswillbedissipatedForestrysequestrationisnotapermanentsolution.Asthenetsequestrationeffectwearsoffwewillhavetoplantnewforeststomaintainournetzeroposition.Ifthisresourceisdissipatedearlythenwewillhavefeweroptionslater.Insectionthreeweexplainedwhyweshoulddelayforestryplantingsuntilaround2035.NewZealandnotanaturalcandidatetoleadtheworldItisgenerallyacceptedthattherichcountriesshouldtaketheleadinreducinggreenhouseemissions.However,NewZealandisnotreallyarichcountry,sittingonthemarginofbeinguppermiddle-income.ThisweakensthecaseforNewZealandbearingadisproportionateshareofthemitigationburden,particularlyiftheresultistopushusmorefirmlyintomiddle-incometerritory.Second,climatechangewillnotbecostlyforNewZealand,atleastinthiscentury.Itisnotclearwhyweshouldbemakingaspecialeffortinaglobalprocessthatwillactuallymakeusworseoffformanydecades.Third,reducinggrossemissionsfromanimalsisespeciallydifficult.Moretimeisvaluable.EmissionsframeworkfairnessItcanbearguedthattheemissionsmeasurementframeworkisnotfairtoNewZealand.Nearlyhalfofouremissionsrelatetoagriculture,butmostoftheoutputisexported.Iftheassessmentwasdoneonaconsumption,orcarbonfootprintbasis,ourabatementresponsibilitieswouldexcludeexportsandaccountfortheemissioncontentofimportsandwouldbelowerconsiderablylowerthanunderthecurrentsystem.Bycontrast,Norwayisalargeoilandgasproducerandexporter,butdoesnothavetakeresponsibilityfortheemissionconsequencesofitsexports.Norwayhasjust

37

announcedthatitplanstobeemissionsneutralby2030(mainlybybuyinginternationalcarboncredits)whileplanningtoincreaseitsoilexploration.NewZealand’semissionrecordisoftenpaintedaspoor.Forexample,theProductivityCommission,initsLowEmissionsEconomyreportpresentedafigureshowingNewZealandtohavethefifthhighestgrossemissionspercapita.Iftheemissionswerecalculatedonanetfootprintbasis,wewouldbewelldownintothelowemissionendofthefigure.OthercountriesarelikelytorenegeThereisahighlikelihoodthatcountrieswillnotfollowthroughontheirexplicitandimplicitcommitments,andthatNewZealand’sspecialeffortwillbeinvain.ManyothercountriesarenotdoingasmuchasNewZealandAsanexample,considerthecaseofSingapore.Asahigh-incomecountry,whichisdirectlyintheclimatechangefiringline,wemightexpectasenseofurgencyandsubstantiveactions.SowhatisSingaporedoing?First,itsigneduptoafairlysoft‘developingcountry’Parisagreementtarget,promisingthattheiremissionswillpeakin2030.Toourknowledgetheyhavemadenocommitmentsbeyondthatdate.Intermsofwhattheyareactuallydoing,wehavereliedonaJanuary2018reportfromtheSingaporeEnergyStudiesInstitute.17Themainactionistheintroductionofacarbontax,apparentlytobeatafairlylowlevel,forlargecompaniesfrom2019.Between30and40companieswillbeaffected.Inaddition:

• 2018hasbeendeclaredtheyearofclimateaction• SingaporewillhostaspecialASEANMinisterialmeetingonClimatechange• Therewillbesomefinancingsubsidies.

AssessmentInourviewtheargumentsareclearlyinfavourofthezerocarbonoption.TherewaslittleinthefourargumentsforearlyactionpresentedinOurClimate,andthereareahostofargumentsagainst.Therealargumentsforthezeroemissionsby2050isthatitwouldhaveafeelgoodeffectforsomemembersofthecommunity,andthatNewZealandwouldlookgoodinternationally.Theissueiswhetherthisisworth$200billion.

172018asSingapore’syearofclimateaction

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AlternativeactionsAsdiscussedabove,themainbenefitstothezeroemissionstargetby2050istogetfavourableattentioninternationally,whichhopefullywilladdmomentumtotheinternationalcommunity’spathtozeroemmissionworld.

Therearemuchcheaperwaystosecuringthesebenefits.Wehavesetoutfour.Somearealittlewhimiscalandaretheretopromotedebateandthinkingonotherpossibilities.

AtaxoninternationalairtravelInternationalairtravelemissionshavebeenprettymuchignoredintheNewZealandpolicydiscussions.ButNewZealandmusthaveoneofthemostemissionsintensiveinternationaltouristindustry’sintheworld,andNewZealander’shaveahighrateoflongdistancetravel.Ifwemovedearlytoimposeasignificanttaxoninternationaltravel,thatwouldattractfavourableinternationalattentionandmayinduceothercountriestofollow.ItwouldreducetheincongruityintheargumentthatNewZealandneedstobecarbonoremissionsneutraltoenhanceourcleanandgreenimageandsobenefitthetouristindustry.Wecouldimposeadeparturetax,whichcouldbecalibratedtoroughlyreflectarealisticCO2price.Therewouldbetwoprices,say$150forlonghauland$50forthePacificandAustralia.Alternatively,ataxcouldbeleviedonjetfuel.AirlineshavealimitedabilitytoavoidthistaxbyfuellingbeforegettingtoNewZealand.Theobjectionsarethatitwouldreducetouristarrivalswhowouldwemoreinclinedtotraveltodestinationsthatdon’timposethetax,ordivertoutwardtravelthroughAustralia.Onthelastpoint,thediversionwouldbeexpensive,sotheeffectmightbelimited,butinanyevent,$50isbetterthannothing.Therewillbeanimpactontouristnumbers,butthatisthepointofthetax.Thenegativevolumeimpactwouldlikelybeoffsetbytherevenuebenefits.Fromapuretaxperspective,anexittaxisrelativelyefficientbecausemorethanhalfofthecostwouldfallonforeigners,whosewelfaredoesnotcountfromaNewZealandperspective.WithrespecttoNewZealandersthetaxwouldbelargelyprogressive,comparedtotheregressiveelementininmanyotherproposals.ItwouldalsooffsetpartofthedistortioninthetaxsystembecauseinternationaltraveldoesnotincurGST.

39

AbanongovernmentbusinessclassairtravelAbusinessclasstravellergeneratesthreetimestheemissionsofaneconomyclasstraveller.Thereshouldbeanabsolutebanonbusinessclasstravelbyallgovernmentofficials(includingpoliticians).Thishasseveraladvantages.

• Itwouldgetinternationalattention.• Itwouldbedomesticallypopular.Mostpeoplewouldsupportapolicythat

wouldrequirepoliticiansandbureaucratstoputtheirbuttswheretheirmouthsare.Thiswouldpromotesocialsolidarity.

• Itwouldsavemoney.• Itwouldreduceincentivestogoonjunkets.

AbanontraveltoclimatechangeconferencesThetechnologyexiststoattendaconferencevirtually.NewZealandwouldsendasignalthatitwasseriousaboutclimatechangebyusingthistechnologytoreduceemissionsfrominternationaltravel.Thiswouldhavetheco-benefitsmentionedabove.Itwouldalsoaddressadivergencebetweensocialandprivatebenefits.Thepolicyelitethatattendstheseconferencesgetsaprivatebenefitfrommixingwithlikemindedcolleagues,andtheneedtogainsocialacceptancemaybiastheirjudgmentstothedetrimentofNewZealandinterests.DomestictravelAllgovernmentemployees(andpoliticians)wouldberequiredtotraveltoandfromWellingtonairportbyelectricbike(ormanualiftheywish).Therecouldbeexceptionsonmedicalgrounds,buttoreducetheincidenceofabuse,therewouldbearequirementfor(named)exceptionstobepostedonline,togetherwiththereasonfortheexemption.Inadditiontothebenefitsalreadymentionedtherearethefollowingco-benefits.

• Governmentemployeesandpoliticianswouldbecomehealthier• NewZealandwouldsecureacompetitiveadvantagebyinnovatingtomake

electricbikesandbikeclothingmore‘businessfriendly’.

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Appendix

TheFifthIPCCreportonNewZealand

Observedandprojectedclimatetrends

Naturalclimaticvariabilityisveryhighintheregion

Thisvariabilityposesparticularchallengesfordetectingandprojectinganthropogenic

climatechangeanditsimpactsintheregion.Forexample,changesinENSO(ElNINO/SouthernOscillation)inresponsetoanthropogenicclimatechangeareuncertain(WGI

AR5Chapter14)but,givencurrentENSOimpacts,anychangeswouldhavethepotentialto

significantlyinfluencerainfallandtemperatureextremes,droughts,tropicalcyclones,marine

conditions,andglacialmassbalance(Mullan,1995;Chinnetal.,2005;Holbrooketal.,2009;

Diamondetal.,2012;Minetal.,2013).

Theregionhasexhibitedwarmingtothepresent(veryhighconfidence)andisvirtually

certaintocontinuetodoso(Table25-1).ObservedandCMIP5-modeledover1950–2004

increasesinannualrainfallinthesouthandwestoftheSouthIslandandwestoftheNorth

IslandofNewZealand,anddecreasesinthenortheastoftheSouthIslandandeastandnorth

oftheNorthIsland.….ForNewZealand,annualaveragerainfallisprojectedtodecreasein

thenortheasternSouthIslandandeasternandnorthernNorthIsland,andincreaseinother

partsofthecountry(mediumconfidence).

NewZealandextremeone-dayeventsdecreasedinthenorthandeastandincreasedinthe

westsince1930.

ProjectedmagnitudeoftemperatureextremesSpringandautumnfrostfreelandtoatleasttripleby2080

Upto60morehotdays+25degreesinthenorthby2090

Comment:Othercountryreportstypicallyfocusondaysexceeding40C.TheNewZealandtestismoreameasureoftheincreaseinpleasantlywarmthanextremelyhotdays.DroughtTimespentindroughtineasternNewZealandisexpectedtodoubleortrebleby2040.

Onthefrequencyofobserveddroughtsthereisnocomment.Insteaditisexplainedhowadroughtisdefined.Windmeanwesterlywindprojectedtoincrease…..decreasesof20%inSummerandAutumn

44

FireriskChangesinhighandextremefireriskdaysby0-400%usingonemodel0-700%anotherby

2040.

PrecipitationintensityIncreaseinprecipitationintensityofrareintensehighrainfallevents(lowconfidence)Increaseofdailyextremerainfallsof8%perdegreeofwarming

Comment:Iftemperatureincreasesby2degreesthenextremedailyrainfalleventsincreaseby16percent.Thisisnotreallyaworldchangingoutcome,butanincreaseinextremerainfalleventsisoftencitedasamajorclimaticrisk.Restrictingthetemperaturechangetoonedegreedoesn’tmakemuchdifference.Thereislowconfidenceintheintensityofintenserainfallevents.

TropicalcyclonesandotherseverestormsIncreaseinintensityofcyclonesinthesouthinwinterbutdecreasingelsewhere.

Increaseinconditionsconducivetoconventionstormdevelopmentisprojectedtoincreaseby

3-6percentby2070-2100comparedto1970-2000.

Comment:Anincreaseinseverestormsisoftencitedasanimportantdriverofclimatechangecosts.Theincrease,ifany,isexpectedtobeminimal.ProjectedImpacts

FreshwaterresourcesInNewZealandprecipitationchangesareprojectedtoleadtoincreasedrunoffinthewest

andsouthofthesouthislandandreducedrunoffinthenortheastofthesouthislandandthe

eastandnorthofthenorthislandAnnualflowsofeastflowingriverswithheadwatersinthe

southernalpsareprojectedtoincreaseby5to10%.Retreatoftheglaciershasonlyaminor

effect.

InNewZealandasinglestudyprojectsgroundwaterrechargeintheCanterburyPlainsto

decreaseby10percentby2040.

InNewZealandthereislittleevidenceofwaterresourceadaptationspecificallytoclimate

change.WaterinNewZealandisnotascarceresourcegenerallyandwaterpolicyreformis

generallydrivenmorebypressuretomaintainwaterqualitywhileexpandingagricultural

activities.

Impactsofclimatechangeonwatersupply,demand,andinfrastructurehavebeen

consideredbyseveralNewZealandlocalauthoritiesandconsultancyreports(Jollandsetal.,

2007;Williamsetal.,2008;Kouvelisetal.,2010),butnoexplicitmanagementchangeshave

45

yetresulted.

InlandfreshwaterandterrestrialecosystemsInNewZealand,fewifanyimpactsonecosystemshavebeendirectlyattributedtoclimate

changeratherthanvariability.AlpinetreelinesinNewZealandhaveremainedroughlystable

forseveralhundredyearsdespite0.9degreesCaveragewarmingoverthepastcentury.

ThefewstudiesofclimateimpactsonbiodiversityinNewZealandsuggestthatongoing

impactsofinvasivespeciesandhabitatlosswilldominateclimatechangesignalsintheshort

tomediumtermbutthatclimatechangehasthepotentialtoexacerbateexistingstresses.

Thereislimitedevidencebuthighagreementthattherichbiotaofthealpinezoneisatrisk

throughincreasedshrubbygrowthandlossofherbs,especiallyifcombinedwithincreased

establishmentofinvasivespecies.Somecoldwater-adaptedfreshwaterfishand

invertebratesarevulnerabletowarmingandincreasedspringfloodingmayincreaserisksfor

braidedriverbirds.Forsomerestrictednativespeciessuitablehabitatmayincreasewith

warmingalthoughlimiteddispersalabilitywilllimitrangeexpansion.Tuatarapopulations

areatriskofwarmingincreasesintheratioofmalestofemales,althoughthelineagehas

persistedduringhighertemperaturesinthegeologicalpast.

BiodiversityresearchandmanagementinNewZealandtodatehastakenlittleaccountof

climaterelatedpressuresandcontinuestofocuslargelyonmanagingpressuresfrom

invasivespeciesandpredators,freshwaterpollutionexoticdiseasesandhaltingthedeclinein

innativevegetation.

CoastalandOceanEcosystemsNoclimatechangeimpactshavebeenreportedatthisstage,althoughthismaybedueto

insufficientmonitoring.Eventhoughevidenceofclimateimpactsoncoastalhabitatsislimitedtodate,confidenceis

highthatnegativeimpactswillarisewithcontinuedclimatechange(Lovelocketal.,2009;

McGloneandWalker,2011;Trailletal.,2011;Chapter6).Somecoastalhabitatssuchas

mangrovesareprojectedtoexpandfurtherlandward,drivenbysealevelriseand

exacerbatedbysoilsubsidenceifrainfalldeclines(mediumconfidence;Trailletal.,2011),

althoughthismaybeattheexpenseofsaltmarshandconstrainedinmanyregionsbythe

builtenvironment(DCC,2009;Lovelocketal.,2009;Rogersetal.,2012).Estuarinehabitats

willbeaffectedbychangingrainfallorsedimentdischarges,aswellasconnectivitytothe

ocean(highconfidence;Gillandersetal.,2011).Lossofcoastalhabitatsanddeclinesiniconic

specieswillresultinsubstantialimpactsoncoastalsettlementsandinfrastructurefrom

directimpactssuchasstormsurge,andwillaffecttourism(mediumconfidence;Section

25.7.5).

Comment:Thesearemostlyqualitative,andsomewhatshrill,assertionswithoutanyattempttoquantifytheextentofthe‘negativeimpacts’.

46

AstrengtheningEastAucklandCurrentinnorthernNewZealandisexpectedtopromote

establishmentoftropicalorsubtropicalspeciesthatcurrentlyoccurasvagrantsinwarmLaNiñayears(Willisetal.,2007).Suchshiftssuggestpotentiallysubstantialchangesinproductionandprofitofbothwildfisheries(Norman-Lopezetal.,2011)andaquaculture

speciessuchassalmon,mussels,andoysters(mediumconfidence;Hobdayetal.,2008;

HobdayandPoloczanska,2010).Ecosystemmodelsalsoprojectchangestohabitatand

fisheriesproduction(lowconfidence;Fulton,2011;Watsonetal.,2012).

Comment:Herewehavesuggestionsof‘potentiallysubtantialchangesinproductionandprofit’butnoactualanalysistobackitup.

ProductionforestryInNewZealand,temperaturesaremostlysub-optimalforgrowthofP.radiataandwater

relationsaregenerallylesslimiting(KirschbaumandWatt,2011).Warmingisexpectedto

increasegrowthinthesouthandreduceitinthenorthbutCO2fertilizationmayoffsetthis

(mediumconfidence;

theabovestudiesprovidelimitedevidencebuthighagreementofpotentialnetincreased

productivityinmanyareas,butonlywheresoilnutrientsarenotlimiting.Adaptation

strategiesincludechangestospeciesorprovenanceselectiontowardtreesbetteradaptedto

warmerconditions,oradoptingdifferentsilviculturaloptionstoincreaseresiliencetoclimatic

orbioticstresses,suchaspestchallengeAgriculturalproductionissensitivetoclimate

(especiallydrought;Box25-5)butalsotomanynon-climatefactorssuchasmanagement,

whichthusfarhaslimitedbothdetectionandattributionofclimate-relatedchanges

AgricultureAgriculturalproductionissensitivetoclimate(especiallydrought;Box25-5)butalsotomany

non-climatefactorssuchasmanagement,whichthusfarhaslimitedbothdetectionand

attributionofclimate-relatedchange.

Projectedchangesinnationalpastureproductionfordairy,sheep,andbeefpasturesinNew

Zealandrangefromanaveragereductionof4%acrossclimatescenariosforthe2030s

(Wrattetal.,2008)toincreasesofupto4%fortwoscenariosinthe2050s(Baisdenetal.,

2010)whenthemodelsincludedCO2fertilizationandnitrogenfeedbacks.

Studiesmodelingseasonalchangesinfoddersupplyshowgreatersensitivityinanimal

productiontoclimatechangeandelevatedCO2thanmodelsusingannualaverage

production,withsomeimpactsexpectedevenundermodestwarming(highconfidence)in

bothNewZealand(Liefferingetal.,2012)andAustralia

InNewZealand,projectedchangesinseasonalpasturegrowthdrovechangesinanimal

productionatfoursitesrepresentingthemainareasofsheepproduction(Liefferingetal.,

2012).InHawke’sBay,changesinstocknumberandthetimingofgrazingwereableto

maintainfarmincomeforaperiodinthefaceofvariableforagesupplybutnotinthelongerterm.

47

InSouthlandandWaikato,projectedincreasesinearlyspringpasturegrowthposed

managementproblemsinmaintainingpasturequality,yet,iftheseweremet,animal

productioncouldbemaintainedorincreased.

TheimpactofelevatedCO2onforageproduction,quality,nutrientcycling,andwater

availabilityremainsthemajoruncertaintyinmodelingsystemresponses(McKeonetal.,

2009;Fingeretal.,2010);

NewZealandagro-ecosystemsaresubjecttoerosionprocessesstronglydrivenbyclimate;

greatercertaintyinprojectionsofrainfall,particularlystormfrequency,areneededtobetter

understandclimatechangeimpactsonerosionandconsequentchangesintheecosystem

servicesprovidedbysoils(Basheretal.,2012).

CroppingModelingsuggeststhereisthepotentialtoincreaseNewZealandwheatyieldsunderclimate

changewithappropriatechoicesofcultivarsandsowingdates(highconfidence;Teixeiraet

al.,2012).WidespreaddroughtinNewZealandduring2007–2009reduceddirectandoff-farmoutput

byaboutNZ$3.6billion(Butcher,2009).The2012–2013droughtinNewZealandisestimated

tohavereducednationalGDPby0.3to0.6%andcontributedtoasignificantriseinglobal

dairyprices,whichtemperedevengreaterdomesticeconomiclosses(Kamberetal.,2013).

Droughtfrequencyandseverityareprojectedtoincreaseinmanypartsoftheregion

EnergysupplydemandandtransmissionNewZealand’spredominantlyhydroelectricpowergenerationisvulnerabletoprecipitation

variability.Increasingwinterprecipitationandsnowmelt,andashiftfromsnowfallto

rainfallwillreducethisvulnerability(mediumconfidence)aswinter/springinflowstomain

hydrolakesareprojectedtoincreaseby5to10%overthenextfewdecades(McKercharand

Mullan,2004;Poycketal.,2011).Furtherreductionsinseasonalsnowandglacialmeltas

glaciersdiminish,however,wouldcompromisethisbenefit(Chinn,2001;Renwicketal.,

2009;Srinivasanetal.,2011).Increasingwindpowergeneration(MED,2011)wouldbenefit

fromprojectedincreasesinmeanwesterlywindsbutfaceincreasedriskofdamagesand

shutdownduringextremewinds(Renwicketal.,2009).

Climatewarmingwouldreduceannualaveragepeakelectricitydemandsby1to2%per

degreeCelsiusacrossNewZealand.

TourismSkitourismisexpectedtodeclineintheAustralianAlpsduetosnowcoverreducingmore

rapidlythaninNewZealand(Pickeringetal.,2010;Hendrikxetal.,2013)andgreater

perceivedattractivenessofNewZealand(Hopkinsetal.,2012).

HumanhealthInthesouthernstatesofAustraliaandpartsofNewZealand,this(heatrelateddeaths)may

bepartlyoffsetbyreduceddeathsfromcoldatleastformodestrisesintemperature.

48

Comment:Thisinformationcomesfromastudythatexaminedtheimpactonmortalityofheatandcold.ItwasbasedonempiricaldatafromChristchurchpriorto2000.Itwasclaimedthatalmostallofthewinterexcessmortalitywasduetoairpollutionnotcold,andthatcoldonlybecameafactorwithtemperaturebelow0C,andthatheatwasafactorabove28C.Itisnotconsistentwithmanystudiesthatfindarelationshipbetweencoldandexcessmortalityathighertemperaturethresholds.

Intra-andInter-regionalFlow-onEffectsamongImpacts,Adaptation,andMitigationForNewZealand,thereislimitedevidencebuthighagreementthathigherglobalfoodprices

drivenbyadverseclimatechangeimpactsonglobalagricultureandsomeinternational

climatepolicieswouldincreasecommoditypricesandhenceproducerreturns.Agriculture

andforestryproducerreturns,forexample,areestimatedtoincreaseby14.6%undertheA2

scenarioby2070(Saundersetal.,2010)andrealgrossnationaldisposableincomeby0.6to

2.3%underarangeofnon-mitigationscenarios(Stroombergen,2010)relativetobaseline

projectionsintheabsenceofglobalclimatechange.

Someclimatepoliciessuchasbiofueltargetsandagriculturalmitigationinotherregions

wouldalsoincreaseglobalcommoditypricesandhencereturnstoNewZealandfarmers

(Saundersetal.,2009;Reisingeretal.,2012).Dependingonglobalimplementation,these

couldmorethanoffsetprojectedaveragedomesticclimatechangeimpactsonagriculture

FewstudiesconsidermitigationbenefitsexplicitlyforNewZealand,butscenario-based

studiesgivehighconfidencethat,ifglobalemissionswerereducedfromahigh(A2)toa

medium-low(B1)emissionsscenario,thiswouldmarkedlylowertheprojectedincreasein

floodrisks(Ballingeretal.,2011;McMillanetal.,2012)andreduceriskstolivestock

productioninthemostdrought-proneregions(Taitetal.,2008a;Clarketal.,2011)

Migration within countries, and from New Zealand to Australia, is largely economically driven and sustained by transnational networks, though the perceived more attractive current climate in Australia is reportedly a factor in migration from New Zealand (Goss and Lindquist, 2000; Green, A.E. et al., 2008; Poot, 2009). (Our emphasis).