Late last year the United Nations Inter-Governmental Panel on climate change released a special report on with alarming warnings: a global response unprecedented in scale and speed is needed to avert catastrophe. They warn that the global community has only one decade to phase out fossil fuels entirely to avoid catastrophic environmental breakdown.
In New Zealand, recent policy plans by the government show the first steps towards zero-carbon emissions. Oil and gas exploration has been banned although with controversial stipulations, while a zero-carbon bill is currently going through parliament which proposes putting a price on carbon.
Damian Rowe and Ella Christensen of The Wire spoke to Alex Macmillan and Niven Winchester about the implications of the IPCC report to New Zealand and the proposed zero carbon bill.
Alex Macmillan is a Senior Lecturer in Environmental Health at the University of Otago.
Niven Winchester is a Senior Fellow at Motu Economic and Public Policy Research.
Damien Rowe: How will the latest IPCC report impact the proposed zero-carbon bill?
Alex Macmillan: The zero-carbon bill that the government has proposed is a really crucial bill for health because climate change has huge impacts for human health in New Zealand, implications for the health sector, but also because there are enormous opportunities for health in well-defined climate action. And the IPCC report that came out late last year has a number of implications for that zero-carbon bill.
Firstly, it shows that 1.5 degrees of average warming is really different from 2 degrees of average warming. Although those two things sound really similar, what this report shows is that they are incredibly different from the perspective of sea level rise, extreme weather events, and therefore impacts on people’s lives and on their health and wellbeing. And that means that we need to be really strongly ensuring that the actions we take in New Zealand alongside the rest of the world have a good chance of keeping us within 1.5 degrees of average warming. That means we need to speed up our actions, it means that we need to aim for zero emissions well before 2050, thinking more like zero emissions by 2040, it means that the next decade of action is vitally important because the faster we start reducing now the less we have to do at the end.
And what the report also finds is that the short-lived gasses are also really important. So we have been thinking a lot about carbon dioxide which is the main greenhouse gas that is responsible for global warming that hangs around in the atmosphere for a really long time. But what this report says is that the shorter-lived gasses are also more potent in terms of their warming potential also need to be reduced in the coming decade or two to keep us within that one point five degrees. And that means for the zero-carbon bill that all sectors need to play their part and that includes agriculture.
DR: You have said we have spent three decades sitting on our hands – what do you mean by that?
AM: Most of the world and New Zealand included have spent the last three decades receiving reports from the Inter-Governmental Panel on Climate Change, from climate scientists saying that climate change is important, knowing what is causing it and yet not taking any action. We have continued to grow our emissions globally and in New Zealand over that past three decades and not taken any action to reduce them. So that has meant that now we have to take even more action, even steeper reductions across all of those greenhouse gases that cause global warming, across all sectors and faster than we would have had to do if we had started taking action when the climate scientists were telling us we needed to.
DR: What is the role of the Treaty of Waitangi in establishing smarter climate change laws?
AM: The Treaty is New Zealand’s foundational constitutional document. What we know about climate change is that from a health perspective, it is going to impact on Māori communities first and hardest, and increase the social and health inequities that already exist for Māori communities. And so we need to ensure that the Treaty is at the heart of climate policy in New Zealand to ensure that we are while addressing climate change also reducing some of those health and social inequities and not making them worse. And at the same time, we know that Māori frameworks for health and for the environment and for wellbeing can be really helpful for us in the kind of social transformation that is needed. So by putting the Treaty at the heart of climate policy we can also be learning from and taking advantage as a society the knowledge that Māori already hold about creating healthy and climate-friendly societies.
DR: So the report said the zero-carbon bill needs to be strengthened. What actions will need to be taken?
AM: So what the IPCC report means for the zero-carbon bill is that we need to be taking faster and stronger action than any of the options in the bill at the moment. At the moment the bill talks about net-zero emissions by 2050. What we know from the IPCC information that has been released is that we need to get to net-zero well before that, probably by 2040. And what we also know now is that we need to make sure that we are reducing all the greenhouse gases which are causing global warming, not just carbon dioxide but also nitrous oxide and methane. So that means that all sectors need to be part of reducing their emissions rapidly over the coming decades.
DR: So an increase from 1.5 degrees to 2 degrees would be a dangerous step for humanity according to the UN. What sort of change does a point five percent increase produce?
AM: So it can mean for example the difference between people in the Pacific being able to continue to live in their own land or needing to migrate because of sea level rise. It could mean the difference between sea level rise that we can manage with some community movement and mitigation and sea level rise impacting on many of our major cities. And it could mean the difference between us being able to manage the increase in severe weather events and those severe weather events being significantly more severe. Things like extremes of heat and storms which we know impacts on housing, and on health, and on wellbeing.
DR: Where to next for the zero-carbon bill?
AM: I urge people to take part in the consultation around the zero-carbon bill. This is one of the most important pieces of legislation for our health now and in the future and the consultation is open until the 19th of July. I urge everyone to make a submission on that bill for strong, fair, and Treaty-based climate action.
Ella Christensen: What are the main issues with introducing carbon pricing into the New Zealand economy?
Niven Winchester: Well they are certainly complex and this is why this is such a difficult issue. Historically we have all been used to doing something for free and that is emitting C02 emissions. So when we drive our car, when we use electricity from fossil fuels, we are not charged for those emissions historically. Now we want to say ‘Okay we know that those emissions are doing some damage, we want to price those emissions in accordance with the damages that are occurring’, so we are basically increasing input costs throughout the economy. So it is more heavily felt on energy-intensive sectors such as electricity sectors who will have a higher increase in cost, but that propagates throughout the whole economy. We have an increase in electricity costs, an increase in transportation costs, those are used as inputs into too many things that we consume so it is going to increase the cost of things that we buy, so we are not going to be as well off as if we didn’t price emissions.
If we were just forgetting about what might be coming down the road in terms of impacts of climate change we would be better off simply not to price emissions. So we are saying to ourselves we have got to do things in a costlier way because we are thinking about the future. So in some sense it is an investment now of bearing some additional costs now to reap the benefits of avoiding climate damages in the future. So this does seem a difficult issue. And then you have got different sectors in the economy affected in different ways. You have people’s incentives not necessarily aligned. If you are an energy-intensive manufacturer you might want to perhaps avoid any large emissions price because it is going to decrease the value of your assets. If you are not in that sector you are not going to have such a high cost from a climate policy but you are going to perhaps get the same benefits from avoided climate damages. The distributional impacts of the policy costs are important as well.
EC: It seems to me that the biggest problem is that fossil fuels are at the basis of everything that we do and we are still in the same economy but we are trying to change the thing that makes that economy possible which is cheap energy.
NW: From economist’s perspective, the best way to a solution is to price the problem and in this case the problem is C02 emissions. We should price C02 emissions at the appropriate level. So I mentioned the ETS carbon price before at about $25 a tonne, if New Zealand is serious about climate change and it appears that the current government is, we would have an ambitious cap placed on that emissions trading system which would result in much higher carbon prices which would then provide an incentive for that change to happen. So all of a sudden carbon-free electricity becomes more cost-competitive. For New Zealand the big problem isn’t energy emissions, I think we can get away from electricity emissions quite easily with our endowments of lots of wind and hydro-resources. You then look at transportation with petrol and diesel counting for a lot of emissions. There have been some quite significant advancements in electric vehicles recently so I think over time we will see the cost of batteries and electric vehicles come down for both private transportation and in larger commercial transportation. So I think that is certainly doable with current technology trends and obviously a carbon price will help make those technologies more cost-competitive. For New Zealand it is not such a problem with the energy emissions unlike most other countries, around half of our emissions are going to be from the agriculture sector so talking mainly methane from livestock. And that is where the options become quite expensive.
EC: That also raises the question: does the decision about how to pass out those costs across an economy, a population fall exclusively to government?
NW: The government can just price emissions and let things fall how they would but that is making an implicit decision on who is bearing the costs. So for example, we look at moving towards electric vehicles by putting a price on C02 emissions which increases the price of petrol. So if we think of the distributional impacts just in terms of wealthy households versus not so healthy households, the not so healthy households generally spend a higher proportion of their income on petrol than the wealthy households. That can act as a regressive policy where the lower income households are bearing a higher burden of the policy costs. So by not doing anything the government is still making an implicit decision. I think the current government is very aware of this and wants to make sure that there is some equitable distribution of these costs. I have seen some policy proposals outside of New Zealand where there is some rebate to households related to their income level. So for example, if we are driving up petrol costs, on average by let’s say $500 a year due to carbon pricing, there is a rebate to lower income households of some amount, $200-300 for example so that they are not as impacted as much by the policy costs, whereas the richer households bear the full cost of the policy.
EC: Thinking about how jobs can be affected by these things – there are obviously a lot of people who are employed by oil and gas, all of these industries and there is some discussion that introducing renewables into a country will promote a lot of jobs. What is your perspective on that?
NW: Certainly, in the short term there will be some job losses and some pain for some geographical regions. For example, if the policy causes an industry to disappear it could be quite sometime before those people are employed elsewhere. We have seen that in the past with New Zealand. If we go back to 1997 when New Zealand removed its tariff on automobiles, the automobile assemblies went away virtually overnight. Those people, however, do not stay unemployed forever, perhaps they need to move away geographically, find a job in another industry, and when you think about what is happening over generations, well you don’t get young people going into those jobs as they have been shut down. So with any policy that sort of shuts down or curtails an industry there is going to be some short-term losses.
Could there be long term gains? Well that depends. Certainly, if you move towards renewable energy then people will get jobs in that industry. If New Zealand became a global leader in renewable energy technology, that could be a new export sector for New Zealand that provides additional jobs that wouldn’t have been there in the absence of the policy. So I think it is about acknowledging the short-term costs that are going to occur to some individuals and some regions of New Zealand and doing the best to mitigate those through things like relocation programs and education and training programs.
EC: Not only are jobs lost but oil and gas contribute billions of dollars to New Zealand’s economy and agriculture contributes a lot. Who is going to take those cuts and how will they be made up?
NW: Almost certainly when we start pricing emissions at a significant level our GDP is going to be lower than it would otherwise have been and that is because we want to avoid the long-term consequences of climate change. So who bears the cost of those policies? Again, that depends on what supplementary policies there are by the government. So with the farming sector for example, if there was a significant carbon price imposed on methane emissions you would get the value of dairy farms going down. That is going to impact the owners of that land, it is going to impact the workers who might not own the land but work on it, so there is perhaps a role for the government in terms of deciding well who do they want to compensate for that or do they give enough warning to the policy such as we are going to bring agriculture into the ETS by 2035 so that there is time for people to adjust their expectations.
EC: And when you look twenty years in the future in New Zealand does it look very different from the country you see now?
NW: That will depend on what happens to agriculture and the emissions trading scheme. So if there is a significant price on agriculture emissions, particularly from livestock we could see a very large change in what the New Zealand landscape looks like. There will be a lot fewer dairy farms, perhaps a lot more horticulture and that will be quite a significant change for the country. But short of some breakthrough new technology that is able to suck C02 out of the atmosphere. I think that is what New Zealand needs to do to meet its ambitious emissions reduction targets. It really needs to tackle what goes on in agriculture.
This interview was originally aired on The Wire. To hear the audio and download this interview click here.