An emissions plan that does not cut emissions

Matt Burgess
Insights Newsletter
11 June, 2021

Only one thing contributes to our emissions targets: lower emissions. On that standard, this week’s report from the Climate Change Commission fails.

Consider the following two facts from the Commission:

  • New Zealand can cut emissions to net zero by 2050 with a carbon price of $50, and
  • The Commission’s plan achieves the same target with a $250 carbon price.

Which means for every $5 spent on the Commission’s plan, $1 will go to reducing emissions while $4 will go to the Commission’s favoured technologies regardless of their emissions benefits.

In any other area, such hefty and unnecessary costs might be a problem. But the Commission did not let niceties like meeting our emissions targets get in the way of its preferred version of economic transformation.

Astonishingly, the Commission sent its final report without analysing the costs and benefits of its proposals. The Commission wants to ban new gas connections in 2025, stop imports of all petrol and diesel vehicles by 2035, and plant hundreds of thousands of hectares of trees.

The Commission has no idea what effects these policies will have on emissions, wellbeing or distribution. It has not done the work to know. That should disqualify the Commission from making any claims about intergenerational equity.

Emissions policies hurt future generations if they do not cut emissions. Nobody, except the well-paid officials at the Climate Change Commission, benefit from public policy by the seat of the pants.

But try telling that to large parts of the media and environmental activists who think there is no such thing as a bad emissions plan. Massive government intervention is enough. Who cares whether it cuts emissions?

The Commission’s report shows it still does not understand how the Emissions Trading Scheme (“ETS”) works. It is the government’s policy, and since June 2020 the law, that the ETS caps emissions. An ETS cap means other policies cannot reduce emissions any further if they work within the cap.

Twice the Commission has tried to explain why this neutralising effect of the ETS does not apply to its plan. It has botched both attempts. We still do not know how the Commission’s plan cuts emissions.

Later this year, the government will table its emissions reduction plan, backed by the false imprimatur of this week’s report from the Climate Commission.

The government can cut more emissions more quickly if it ignores the Commission’s advice and instead uses a strengthened ETS to lower emissions.

Further analysis of the Climate Change Commission’s final report:

Eric Crampton on the Commission’s ETS errors: Bindingness and the ETS

Matt Burgess and Oliver Hartwich podcast on the report.

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