Climate Change: The "market-led transition"

A key feature of the previous government's climate policy was the idea of a "just transition". Aotearoa would decarbonise, but the government would work to protect jobs, retrain workers, and ensure it didn't fuck up people's lives any more than it had to. For the gas industry, this meant the government managing its decline, through a "gas transition plan" and bans on new connections, while helping its customers switch to electricity through the GIDI fund. But the current regime, stuffed with climate deniers, fossil shills, and ideological opponents of any government action anywhere (other than subjugating the poor, of course) hated that idea, so they scrapped it immediately on coming to power. Instead, they want a "market-led transition", where industries would just decarbonise naturally based on ETS prices and the phase of the moon.

RNZ's Kirsty Johnston has taken an in-depth look at how that is working out, and the answer is "terribly". The gas is running out quicker than expected, there's no government plan to ensure it goes to the most (rather than least-) valuable users, so businesses are facing skyrocketing prices and huge capital costs to decarbonise, with no government support to make the switch. Meanwhile, the regime's crashing of the carbon market has destroyed direct financial incentives for decarbonisation while its teasing on LNG and attacks on remaining climate policy have created further uncertainty, further delaying decision-making. Meaning the most-likely response is "demand destruction": businesses shutting down, people out of work, jobs and communities destroyed. And this isn't just a social disaster, but an economic one:

BCG estimates that once big users like Methanex and Ballance have exited, every petajoule of additional gas demand destruction hits GDP harder and harder - about $400m for the first PJ, up to $700m for the tenth. Losing 5 PJ could wipe out around $3b of GDP a year; 10 PJ, around $7.3b, or nearly two percent of total GDP.

Compare that with the supposedly horrific cost of 0.5% of GDP in 2035 which the regime is using as a justification to gut methane targets and you really have to wonder what they're thinking.

And all of this is completely avoidable. As the article points out, $200 million of government co-investment can decarbonise 10-20PJ of industrial gas use. A one-off investment of $200 million to avoid $7.3 billion a year of loss. Which should be a complete no-brainer - its like paying $20 a year to insure your house. But this regime is so cheaparse / corrupt / ideological that they'd rather destroy half of small-town Aotearoa than admit climate change exists and that they need to do something about it.

If we want action on this, we need regime-change. Whether the regime's voter suppression allows that remains to be seen.

Update: Removed sentence based on a mathematical error.