Climate Change: A weak policy

Back in 2023, Aotearoa had a serious climate policy. Non-agricultural emissions were covered by the ETS, and despite some initial hiccups, there was reasonable certainty that carbon prices (and so benefits from decarbonisation) would steadily increase into the future. ETS funding was recycled to fund further decarbonisation through the GIDI fund, which had funded Aotearoa's biggest decarbonisation initiative: halving NZ Steel's ongoing emissions. Then National came in, repealed all that, fucked up the ETS, and now we have businesses shutting down due to high gas costs rather than shifting into a cleaner, electric future.

National's response to this has been to threaten an LNG import terminal, and to make you pay for it - an insane plan which will result in high prices and high emissions for the forseeable future. But with their ally Trump's bombing of Iran and the consequent closure of the Strait of Hormuz, that might be off the table, so they've been forced to look at other options. Unfortunately, what they've come up with is a piddly loan-guarantee scheme, the weakest of all policies:

Businesses will be able to access cheaper loans to help reduce their dependence on gas as part of a new scheme in Thursday's Budget.

[...]

Under the lending initiative, the government would guarantee 80 percent of eligible loans, allowing banks to offer lower interest rates to companies switching to alternative energy sources, such as electricity or bio energy.

Finance Minister Nicola Willis said the Budget would put aside $48 million to cover potential losses, unlocking an estimated $1.2b in bank loans.

Which is better than the nothing we have at the moment, but its still shit. Why? Because as He Pou a Rangi reported last month, the core problem for decarbonisation is total uncertainty about costs and benefits. No-one can build a business case for decarbonisation because they can't be sure that the present regime won't just abolish the ETS, or withdraw from our international climate obligations, or otherwise Fuck Around and make it all worth nothing. "Cheaper loans due to government guarantees" doesn't change this, and if anything is setting the whole process up for failure because the banks actually making the loans will look at the situation and go "fuck no; that's too risky". The only way that the policy can be successful is if there is a massive restoration of credibility in government climate change policy - in other words, if there is a change of government.

But national won't care about this. All they want is a headline to suggest they are Doing Something, at the lowest possible budget cost. And if it underspends because no-one can actually get a loan in this environment, they'll think that's a bonus. But its unlikely to significantly reduce emissions, and we'll have shutdowns and bankruptcies instead. Which isn't the best way of reducing emissions, but its the one the regime has left us with.

Meanwhile, this is a reminder: if we want effective climate change policy, we need to change the government. That's the only way to restore credible policy. As long as this regime is in power, there’s simply no hope of any credible policy.