Climate change: no policy

What is the reason for the dismal increase in New Zealand's greenhouse gas emissions over the past seven or seventeen years? The answer, as the Herald on Sunday so succinctly put it, is "no policy". While successive governments have talked a great deal about policy to combat emissions over the past seventeen years, very little of it has been implemented. And the two most successful implemented measures - the use of the government's call-in powers under the RMA for large emitters, which saw Contact Energy's Taranaki Combined Cycle gas turbine required to offset its emissions, and the current government's Projects Mechanism, which jumpstarted the wind industry in New Zealand - were both killed in short order, the first for ideological reasons and the second because Treasury used too-short a planning horizon.

So why have we had no real policy over the past seventeen years? Why have we seen the government promise and then back away from a carbon tax or equivalent economic instrument not once, but three times? There are three broad components to the answer:

• Opposition from business: The business community has opposed any action on climate change since 1990, and has fought hard to protect their ability to increase their profits by dumping their costs on the rest of us. This has raised the political cost of government action (while the political benefit has remained low), and ensured that the government has backed away from any serious policy.
• A radical policy-culture: The Revolution left us with a radical and doctrinaire policy culture, with a strong ideological preference for market-based solutions, no matter what the policy question was. In the case of climate change, this led to a fixation on the Holy Grail of a broad-based economic instrument which imposed a uniform price for emissions across the entire economy. This took years to develop, and has proven politically impossible to implement. In the meantime, more pragmatic policies have been ignored, or in some cases (e.g. use of the RMA) abandoned. Our policymakers have clearly felt that it is better to have no policy at all than one which fails to meet their rigorous standards of free-market ideological purity.
• We thought we had plenty of time: Until 2005, projections consistently showed that New Zealand would have a large surplus of emissions credits to sell even if emissions followed a high growth scenario. In 1999 we thought forest sinks would give us 65 million tons of CO₂ net to sell; in 2002 we thought it would be 55. This meant there was no real pressure to implement policy - after all, we already had the problem more than covered. The problem was that the forests weren't there - planting rates had been systematically overestimated since 1994, and while they were continually revised downwards, those revisions still overestimated. So, the forests we were depending on weren't being planted (and there was no government policy to ensure that they would be).

To a certain extent, the Bolger / Shipley National government also hid behind uncertainty, though rather less convincingly in the case of Shipley.

Fortunately, these three barriers are all much weaker now. Most of the business community has accepted the reality of the problem, and is now asking for a clear price on emissions to provide certainty. Neo-liberalism has eased, and the government is now pursuing more pragmatic solutions (some of which even involve regulation rather than market instruments). And we've woken up to the danger of relying on forests that aren't really there (though our projections still systematically overestimate planting rates), and have realised that if we want sinks we need to make sure that the trees are a) planted; and b) not cut down. So things are actually looking quite good to see serious policy implemented. Unfortunately, it's taken us seventeen years to get to this stage, and meanwhile those countries which acted early (like Norway) have seen their emissions reduce and are laughing all the way to the bank. So if we really want to lead the world on this issue, we have a hell of a lot of catching up to do...