Council carbon counsel

Me in today's Herald, on Council initiatives to reduce carbon emissions:

Inflation being central government's responsibility hardly means that local councils can just ignore it. Inflation affects everyone: households, companies, and councils. A council that ignored inflation would lose good staff by failing to keep up with wage increases, err in estimating project costs, and blow out budgets.

A superb council could help its residents by making sure its rules do not make it too hard for residents to adapt to rising prices. Easing zoning and consenting would help housing supply to respond to changes in demand, making the Reserve Bank's job easier, while improving housing affordability.

But it would be madness for a council to take on an anti-inflation mandate and try to combat inflation directly through local wage and price controls.

It would be worse than counterproductive.

The same is true for council-level policies for dealing with carbon emissions.

There's lots that councils should be thinking about. Resident demands for all kinds of stuff will change with rising carbon prices. But councils trying to target emissions, rather than respond to expected carbon prices, get things backwards.

There is risk that councils take climate consenting tools and use them to block housing in places under NIMBY pressure. A lot of the tools that Councils use to block urban growth have been being taken off them by central government; they'll pick up new tools like costly green-building mandates if they can. 

In Monday's Dom Post, I noted Canada's carbon dividend. It was lovely seeing Canada's Environment Minister remind everyone about the carbon dividend that would make 8 out of 10 households better off from his carbon tax increase. 

And went through again the case for carbon prices and carbon dividends, while still trying to disabuse people of some very serious widespread misunderstandings of what's going on in one bit of the Climate Commission's modelling. 

Economists tend to prefer relying on the Emissions Trading Scheme in the first instance and using other policies only when they address specific additional market failures.

Section 6.3 of the Commission’s report models what would happen under a $50 carbon price within the sectors currently covered by the ETS, if there were no restrictions on forestry conversions prior to 2050.

It shows that New Zealand can reach Net Zero by 2050 at the relatively low carbon price of $50/tonne. After 2050, there would be an increase in net emissions by 2065 “if there were no further forestry planting or policy changes.”

Many commentators have taken this section as suggesting that relying on the ETS would fail because of an increase in net emissions after 2050. Olivia Wannan notes that following that scenario “would violate the [Zero Carbon] Act, which requires all budgets after 2050 to also achieve net zero.”

But the scenario is simply a demonstration of the effects of a $50 carbon price in the sectors covered by the ETS. The modelling does not include the ETS’s cap on net emissions, and it does not allow carbon prices to change.