Friday, May 29, 2015

Climate change: Costs and targets

The government is currently "consulting" on its post-2020 climate change target. The consultation document emphasises the costs and difficulty of action, implictly trying to stack the deck towards doing nothing. But as the Herald's Brian Rudman highlights, those "costs" are a little fishy:

First, the baseline - the counterfactual with which the various emissions targets are to be compared. It is a world in which no action to reduce emissions is taken by any country.

That is hardly business as usual. New Zealand already has a target of 5 per cent below 1990 levels by 2020 and a statutory commitment to 50 per cent below by 2050.

The expectation on every country is that the coming Paris conference will see them commit to doing more. The United States, China and Europe, which between them account for most global emissions, have already tabled offers which significantly increase their effort.

Surely the more relevant baseline would have been the status quo.

[The cost of inaction, of not doing anything, is of course not included in the model. But farmers might like to ask themselves how they feel about a drought every year, and the rest of us what that would do to the New Zealand economy]

By choosing this baseline, Infometrics is able to come up with a scary cost of $1300 a year per household for the clearly preferred scenario of a 10% cut. Landcare apparently comes up with half that. But the important thing is that this is just $30 a year per household more than the cost at present, which is absolutely negligible. Its also important to note that this "cost" isn't an actual cost, money you will have to pay, but instead the result of expected lower economic growth - money you will never have. Its like counting the cost of not winning Lotto first division (which BTW is about $30 per household per year). And when you remember this, what's clear is that making a substantial move towards meeting National's "50% by 2050" target is both affordable and will not have any significant effect on living standards.

And we do need to commit to making substantial progress - otherwise we're basically saying that that target is joke and that we never intend to meet it.

As for how much of a commitment, that target was set in 2007, when our goal was simply to reduce emissions to 1990 levels. A linear effort - a 50% cut in 43 years - suggests that we should be looking at a 27% reduction by 2030, which we should round up to 30%. And given the need to make cuts early and display ambition to encourage others to do the same, 40% would be better. But anything less than 27% is simply leaving future New Zealanders to do the work we should be doing, and committing ourselves to failure. Again.