Insufficient biofuels

This is closer to right than most pronouncements on it but it's still deeply wrong.

Climate Change Minister James Shaw said he supported the move, and he and Woods had now been tasked with quickly finding a way to fill the big hole in the budget.
“This is why we have a carbon budget right, is to say, when we make these choices, actually, we've got to plug the gap somewhere else,” he said.
"The most straightforward thing that we could do is to tighten up the ETS [emissions trading scheme] unit supply, so you simply take it out that way. But there may be other policy interventions that we could make as well.”

A biofuel mandate is neither necessary nor sufficient for a reduction in net national emissions. 

If you ran the mandate without cutting the cap, you'd just shift where emissions happen. If you ran the mandate while cutting the cap, you would reduce net emissions while also shifting where emissions happen. But it's the cutting of the cap that's both necessary and sufficient, all on its own. A biofuels mandate just shifts the location of emissions, regardless of whether you cut the cap.

So yeah, Shaw's right that you could cut the cap to reduce emissions. But there's no 'hole' created in anything by cutting a biofuels mandate. Compared to a counterfactual in which we'd have had a mandate, we get a few more emissions in transport, a few fewer emissions everywhere else, and a lower overall cost of getting down to net zero. 

Any 'hole' from not having a biofuels mandate is like the hole you make in a T-1000 if you shoot it. The thing fills itself in all on its own. More emissions in transport? There'll have to be fewer emissions somewhere else. That's how the ETS works. 

Want to stop T-1000? You don't do it by shooting at transport, or shooting at power generation. You do it by cutting the cap steadily over time to hit net zero. 

Additionality matters

One basic lesson in public finance is that you need to think carefully about the effects of grants. Give somebody a grant for something they were likely to be doing anyway, and you've mainly just increased their budget set. They can do more of the thing for which you gave them the grant, and more other stuff too. 

And that can be fine and all if that's what you wanted to do. But in that case you might have just considered giving them cash. 

Here's James Shaw, who missed that lesson:

Good to see Waikaka Primary School’s coal boiler replacement make the local paper - funded through the State Sector Decarbonisation Fund. https://t.co/TtNTeeLSEv

— James Shaw (@jamespeshaw) May 27, 2022

And here's what the school says, in the article that Shaw links:

The school had planned to replace the boiler anyway, and now the property money that had been put aside could be used on other projects.

Did he not read the piece? Or has he given up caring about cost-effectiveness in reducing emissions? Shaw isn't an idiot. He has to know that this doesn't make sense. 

The school was going to make a switch anyway, so Shaw's giving them money winds up just being a budget boost for that school. And an implicit penalty for the schools that switched earlier and consequently don't get to profit from this new slush fund. 

I've an OIA waiting on any evidence the government has received on net additionality for any of its giant industry subsidy slush fund for climate stuff - which is separate to the programme that the school used. 

Climate policy cannot afford to keep being this stupid. We will bankrupt ourselves getting to Net Zero if it does. 

The Greens' New Leader

Congratulations to James Shaw on winning the election as the co-leader (male) of the Greens. These could be interesting times. What struck me was the contrast between the comments of continuing co-leader, Metiria Turei, and Shaw. According to this story, the policy area that Turei emphasised in her congratulations speech was child poverty. In contrast, according to this story, Shaw used his first speech to emphasise policies on climate change.

I am reminded of the Yes Prime Minister episode in which the Prime Minister referred to a candidate for a bishopric as wanting to turn the Church of England into some kind of religious movement. Apparently, Shaw wants to turn the Greens into some kind of environmentalist party.

If this is the case, then there is scope for the Greens to reposition themselves. Last year, I suggested that the Greens should seriously consider being a coalition partner for National in a "teal coalition". Many others (e.g. here) have suggested that New Zealand needs a new teal (or blue-green) party for environmentalists who are turned off by the red-green tinge of the Greens.

I see no value for environmentalists in splitting their concerns across two parties, neither of whom would have any influence with the dominant partner in a coalition, due to their having no credible alternative partner. Instead, I still believe that the Greens could have more influence if they became solely a green-green party. While this would run the risk of alienating that part of the current Greens activist base who are strongly anti-business, it would enable them to pick up support elsewhere. What I am suggesting is a party that would guarantee confidence and supply to National or Labour in return for concessions on key environmental issues, and would abstain in parliament on any non-enviornmental issue. Their position, to paraphrase President Lincoln's letter to Horace Greely, would be

If we could save the environment without freeing any market we would do it, and if we could save the environment by freeing all the markets we would do it; and if we could save it by feeing some and leaving others alone we would also do that. 

If Shaw can move the Greens in this direction, politics will become really interesting in New Zealand. Even without that, the interaction between the two co-leaders is going to be facinating to watch.