Tuesday, September 09, 2008



Climate change: costs and benefits

The Climate Change (Emissions Trading and Renewable Preference) Bill is set to pass on Thursday tomorrow, and theDominion Post is predictably focusing on the increased costs to the consumer of the new law (Brian Fallow takes a more balanced look here). But what of the benefits? They were summed up during the second reading debate by a most unlikely person: NZ First MP Doug Woolerton:

I do not think I have to convince anybody in this House that I am not a details person, and I do not tend to involve myself with which gases are being emitted here and there, their names, and the science and technicalities, but I have sat through many, many hours under the very, very excellent chairmanship of Charles Chauvel at the Finance and Expenditure Committee. I watched and I listened. What came out of this for me, and what has also brought New Zealand First to this decision, is one word that will change New Zealand. It is a word we have been proud of for many, many years—that is, “efficiency”.

We will get greater efficiencies in our exporters because of this bill. We will be more efficient in our transport because of this bill. We will look for alternative solutions because of this bill. If I am any judge — and I have great admiration for entrepreneurs in this country — we will lead the world in innovation because of this bill. Why? Because we should no longer be paying charges for greenhouse gases; we need to lower our emissions.

This bill is about changing our country’s behaviour, and it will. This bill is about making our country more efficient, and it will. This bill is about making our exporters even more efficient than they are now, and it will. It will not—as the bill’s opponents are saying—put up costs and put exporters out of business. To assume that is to assume absolutely that there will be no change, and I say that that will not happen. We in New Zealand First are looking to a bright future because of this bill, and we will support it wholeheartedly.

Woolerton gets it right: this bill is about shifting our economy onto a more efficient and sustainable path. It uses a market and the price mechanism to do this, so it imposes costs on people and businesses. But those costs are avoidable, if we shift away from the unsustainable practices which cause them. And if we believe the economists, that is what the market will do in the long run. Don't want to pay higher power bills? The government will give you money to insulate your house. Don't want to pay more for petrol (assuming you can distinguish it from the oil price noise)? Don't drive the SUV to the letterbox. Don't want to pay more for groceries? Cut-throat competition on prices will force supermarkets to reduce their (higher) transport costs by shifting inventory and transport patterns.

The latter is an example of how this will really help: by shifting investment and consumption decisions by firms away from costly carbon emissions. And it will mean more sustainable electricity, more efficient industry, and (eventually) more efficient farms. We all benefit from that, both by not having to pay higher taxes to pay for unsustainability, but also by having a planet to leave to future generations. Which seems like a pretty good deal to me.

Update: Corrected the day it is expected to pass. Ugency last week ate Wednesday, so there will be members day to delay the bill. The next (and final) members' day for the year will be on September 24.