Analysis: As with most things in the climate space, the nerdier and more inconspicuous the policy announced on Budget Day, the greater its likely impact, Marc Daalder writes
Climate change has an image problem.
I've written about this before - a lot of people say they are very concerned about climate change, but don't really know much about it. When they hear "climate change", they imagine the oceans rising to wash away whole cities, they think of the world literally on fire, they think of seabirds drowning in oil spills ... oh, and plastic bags.
When asked what is one of the most significant things a person can do to reduce emissions, more New Zealanders say recycling plastic than say drive their car less, according to a poll last year by the Energy Efficiency & Conservation Authority. But recycling has an almost negligible impact on emissions, while driving is one of the most carbon-heavy activities the average person engages in.
The other stuff, too, is slightly off-base. The risk from sea-level rise (at least in the short-term) isn't that Wellington or Auckland or Christchurch will soon be below sea level, but that intermittent flooding will become more common, rendering vast swathes of the country's coastline unsafe and uninsurable.
Nerdy, inconspicuous policy the most important
Climate change's solutions are similarly nuanced. People look to renewable energy as a saviour, but in New Zealand, our electricity is already four-fifths renewable. While building offshore wind turbines in the place of Taranaki oil rigs, or gargantuan solar farms across former dairy farms would be welcome, some of the most effective climate policies are the most ... well, boring.
Last year, the Government announced plans to mandate that some 200 of the country's biggest companies evaluate and report on their financial and physical risk to climate change. Climate finance experts like University of Otago economist Ivan Diaz-Rainey hailed it as New Zealand's "most significant" climate policy to date. Even in the shadow of the Zero Carbon Act and banning new offshore oil and gas exploration, Diaz-Rainey said it "could be the biggest win for the Greens in this political term".
"That is the thing about the transition, it is the collection of a lot of small things - and some very big things - that will get us there," Climate Change Minister James Shaw told Newsroom after the release of the Budget.
Thursday's Budget offered up a number of other policies in this vein, like the $300 million for the New Zealand Green Investment Finance (NZGIF) fund. Shaw said NZGIF would have the ability to invest in a range of different areas.
"I know Greenpeace wanted a billion dollar fund for regenerative agriculture, which I think would be great, but the Green Investment Fund has the ability to invest in regenerative agriculture and in other things that help to reduce emissions from agriculture," he said. "And so, by quadrupling the size of that fund, they can do more of that kind of thing."
The most significant changes, however, have yet to be felt. Shaw said that, for his money, the most impactful climate policy in the Budget will be the so-called hypothecation of revenue from the Emissions Trading Scheme (ETS).
In layman's terms, the money raised by the Government auctioning off carbon credits four times a year will be recycled into emissions-reducing programmes.
"Winning slowly on climate change is the same as losing."
"The most significant announcement is actually the commitment to recycle all of the ETS revenue from next year onwards," Shaw said. On current projections, that will provide more than $3 billion over the next five years to the fight against climate change.
"What that does is it sets up - it won't be the limit of what needs to be invested, but it does set up a long-term structure for the transition. Rather than this Budget-by-Budget, 'Oh crikey, what should we fund this year?'."
That ETS revenue won't cover the entire cost of decarbonising, he conceded. It also won't be as reliable as some other sources of funding.
"The ETS revenue will be lumpy. There's a question of what is the best way to maximise the use of that particular stream of revenue."
Rethinking the Budget
Shaw said the Government is working to reform the way that climate policy is funded, as the existing frameworks under the Public Finance Act aren't suited to the job.
"My view is that the current way in which Budgets are required to be produced makes it difficult to make the sustained and long-term investments needed to fix an intergenerational, multi-faceted, complex problem like climate change," Finance Minister Grant Robertson told Parliament in his Budget speech.
"Climate Change Minister James Shaw and I are currently working on a long-term plan for the financing of our climate change goals. We will report back to Cabinet before the next Budget process gets underway on our proposals on this work."
"The way that the PFA is structured, and the way that we do Budgets, is really poorly designed to deal with challenges like climate change," Shaw told Newsroom.
"What I'm talking about is things like, if you take the transport budget for example, to say actually if you're going to hit net zero emissions, then every dollar of transport spend needs to be directed towards that. At the moment it isn't. When we talk about the institutional framework, it's things like that. How do you take what you're currently spending on something but have the outcome be different?"
That includes things like reconsidering spending that was previously committed to motorway projects, Shaw said. That was a key suggestion from a Ministry of Transport report released last week on how to reach net zero emissions in the transport sector.
Another key transport policy highlighted in the Budget was a mysterious $302 million fund to incentivise the uptake of low emissions vehicles. While few details were available in the Budget itself, Shaw said it will bear some resemblance to the Clean Car Discount or feebate scheme nixed by New Zealand First in 2020.
"It has changed, there has been more work done on it, but I wouldn't want to spoil [Transport Minister] Michael [Wood]'s day," Shaw said. An announcement will be coming in the next few weeks.
Climate advocates critical
When taken all together, the Budget's climate policies don't quite hit the mark for climate campaigners. A total of $2.3 billion has been allocated for policies with potential climate upsides - including $1.3 billion for rail - but Greenpeace says agricultural emissions are noticeably absent.
"Today’s Budget announcement offers little more than loose change for tackling the climate crisis. The $1.3 billion set aside for improving rail is good news, but the Government is really missing in action when it comes to dealing with New Zealand’s biggest climate polluter - intensive dairying," climate and energy campaigner Amanda Larsson said.
Nicola Gaston, an associate professor in the University of Auckland's physics department, said "the 2021 Budget is not the investment we needed to see, future proofing our economy for a world in which carbon costs. None of the investments signalled in this Budget are transformational."
"None of this signals a strong reset of New Zealand’s economy towards a low-carbon future," Janet Stephenson, the director of the Centre for Sustainability at the University of Otago, said.
"For the most part, these are continuations of existing projects, or initiatives that have long been flagged but not yet implemented, such as incentivising low-emission vehicle uptake. Compared to the scale and rapidity of changes required, the budget is underwhelming."
Shaw said future Budgets would have a greater focus on climate.
"The Greens have argued quite strongly that, for example, in a period of record low interest rates, that we could have had another 2 percent on the debt track, still be one of the healthiest economies in the world, and been able to devote considerably more [to climate]," he said.
"If you say, well, given that we're not writing the Budget, and the Labour Party is, within the framework that they have made, this is a pretty good investment. Clearly they made a choice to really focus this Budget on people on low incomes - and I applaud that.
"It does mean that other things need to take a back seat, but that is something that is of critical importance to the country. If you increase benefits a little bit, you haven't solved the problem. Why would you spend money not solving the problem? Whereas this feels like they are actually starting to do what it takes to actually solve the problem. I am quite keen that we start to apply that level of thinking to climate change next."
Those structural changes to financing climate policy will help with that, Shaw said. Plus, once the Government has laid out its Emissions Reduction Plan in the second half of the year, Robertson and Shaw will know where to direct the cash.
That explanation didn't fly for Larsson, who said the Government is "kicking the can down the road" when time is of the essence.
"It’s incredibly frustrating to watch this Government continue a slow and incremental approach to dealing with what is a major and urgent crisis. Winning slowly on climate change is the same as losing."
