Monday, 12 April 2021

Getting to Net Zero

We have not been fans of the Climate Change Commission's draft report.

New Zealand has an Emissions Trading Scheme with a binding cap, and a declining path for net emissions in the covered sector. Measures taken within the covered sector cannot reduce net emissions. NZU not purchased by one sector get purchased and used by another. Regulatory measures around coal boilers or electric cars can affect the price of NZU, and will affect which sectors move earlier or later in reducing emissions, but they cannot affect the quantum of emissions. 

Like, imagine you have a crate of 12 beers and 12 thirsty people, each of whom would be pretty happy to drink 2 or 3. They run an auction to decide who gets the scarce beers. The thirstiest folks drink two, others cut back to a half or none. The money goes into the crate. Then each of the dozen people gets a 1/12th split of the money in the crate when the beers are gone (the heaviest drinkers wind up compensating the rest this way). At next weekend's session, the crate will only have 11 beers - there's a declining cap. And so on. After the first session, all the beers were consumed, and folks split the money. And it's pretty obvious that they'd have been happy to have drunk an awful lot more if there were more in the crate. 

Regulations saying that Jim cannot have any of the beers, or that Mary cannot drink more than 3 of them, or that Fred must go to Alcoholics Anonymous because he's bidding the price of beer up too much - none of those wind up affecting how many beers get consumed on the night. They change who drinks them, and they affect the price at auction, but that crate's going to be empty at the end of the session unless you put in so many rules and constraints that they wind up more binding than the "there are only 12 beers" constraint. If the set of rules ban half the folks there from drinking any beers, restrict three people to having no more than 1, and the remaining 3 didn't want more than two drinks anyway - then the rules would reduce total consumption. But if you had really wanted to knock the amount down by three beers, it would have been easier just to pull three of the bottles from the crate at the outset and pour them down the drain before auctioning the remaining 9.  

The Climate Commission's draft report is rather less tasty than the draught beers in that crate - even if the beer were Rheineck. It's full of regulations saying that Jim is banned from having a coal boiler, that Mary can't plant pine trees, and that Fred is banned from importing petrol vehicles. But all of those are under the ETS cap. Someone else uses the NZU instead if a coal boiler gets banned. And while the Commission claimed that all of it made sense and that the economic costs of overriding the ETS were minimal, they didn't release a lot of the detail that might prove it. 

So our submission, written mainly by my excellent colleague Matt Burgess, went through those issues, urged more transparent costings of the non-ETS policies, and urged the use of a carbon dividend to address equity issues rather than a pile of costly regulatory measures that try to do it by shifting who bears the costs. Matt hits on some of this in the Herald as well

The interview between my former Vice-Chancellor, and current Climate Commission Chair, Rod Carr, and Matt Burgess is really well worth listening to. 

National is now threatening to break up the two-party consensus on climate change because it is dissatisfied with the Climate Change Commission’s Draft Consultation document. 

The party’s Climate Change spokesperson, Stuart Smith, has taken the unusual step for the Opposition of making a formal submission to the Commission highly critical of  its proposals. 

He says they are impossible to support. 

And yesterday, he wrote to Climate Change Minister James Shaw asking for a three-month extension to the consultation period on the report. 

“My concern is the draft Plan would be impossible for us to support and put us in the unfortunate position where we are opposing the Commission’s first Emissions Reduction Plan,” he told POLITIK.

“In order to avoid this, I am requesting the Minister extend the time the Commission has to develop this plan. 

“National first and foremost wants a robust emissions reduction plan that we can support. 

“This, I believe, is a constructive step to create a situation where we may be able to support the final Plan.” 

POLITIK: “Is it fair to say the Government cannot now take National’s support for the Climate Change Commission’s recommendations as a given?” 

SMITH: “Correct.”
It's tempting to think this doesn't matter, because Labour has a majority and may well just legislate everything that Carr recommends, without bothering to go ahead with cost-benefit assessment on individual measures. 

But it does matter. 

The Draft Report recommends banning petrol vehicle imports from the early 2030s. If the Commission can't show that this really is cost effective, and National consequently commits to rescinding any such ban because transport is already in the ETS, the ban becomes nonbinding - there will be a change of government before the 2030s. 

Similarly, reversing bans on other things already covered by the ETS, like fossil fuel powered industrial and process heat, or bans on new gas connections, would also matter in maintaining the viability of those setups (remember - they're all covered by the cap, it won't change net emissions). 

So we then have to plan on going back to relying on the ETS and its declining binding cap, rather than running a pile of other stuff that is unlikely to be helpful. 

Friday, 9 April 2021

In praise of paper roads

My column in the Stuff papers this week went through the merits of unformed legal roads - the paper roads that sit, waiting to be used.

We may need a few more of them.

New Zealand, like Canada, has road allowances, or “unformed legal roads”. But remaining unformed roads are not part of any systematic grid. They rather were set to ensure access to pieces of land that might otherwise be landlocked, to provide access along waterways, and to provide access to the coast.

Designating corridors for urban growth here has consequently been more difficult.

Manitoba’s land survey, 150 years ago, preserved space for roading. Here and now, it requires designating a corridor on top of land already owned and already in use. If the corridor comes to be used, the owner will be compensated under the Public Works Act. But the designation itself can impose uncompensated costs by introducing uncertainty. It is hard to make full use of your property if it hangs under the risk of compulsory acquisition for a road or highway.

Retrofitting a full prairie grid onto a topographically difficult country might not work.

But there could be promise in designating more corridors for growth well in advance of their being needed and compensating the owners of the designated land for the inconvenience. Then, when there is need for a road or busway, and the funding is lined up, council could exercise its option and use the corridor.

Here's what it looked like in Southern Manitoba. Our old farm is on the map there, south of Notre Dame. Every one of those big squares is one mile by one mile. You can see the quarter-sections within a lot of them. In a few places, like around Cardinal and Babcock, the terrain didn't allow the gridded roads to continue. So the road would wiggle a bit before snapping back to grid as soon as practicable. 

I love the bloodymindedness of it. There will be a road on the mile every mile, or allowance for one, and topographical disruptions can have only local effect. The grid must go on. 

You'll also notice an offset in the grid just north of Notre Dame de Lourdes. That's a correction line. Because a square grid doesn't sit well on a sphere, you need correction lines. As you move North from the US border, fewer square miles fit into the next row up. So the sections all offset by a bit at the correction lines. 

Morning roundup

The morning's worthies, from the accumulated browser tabs:

  • A Manhattan Institute roundup, from last January, on the problems with rent control. What would be a fair price on iPredict for a contract paying $1 if Labour brings in rent controls. $0.60? Higher?

  • Otago's tallying of the border system failures as at 30 March. Add to it this week's case of a border worker who caught it, and had somehow managed to miss vaccination appointments due to personal reasons. Minister Hipkins could issue a Public Health Order prohibiting unvaccinated workers from being at the front lines. DG Health Bloomfield could issue the same order, covering workers in Auckland. Neither has done it. They don't know which border workers are unvaccinated. The data systems are still being developed (they had to have known that they would need one since at least May of last year) and are currently a bit of a mess. Oh - and they're still not considering daily saliva-based PCR testing of everyone in MIQ, even though the capacity to do it is ready to go, right now. Instead, they're cutting down the number of MIQ spaces to reduce risk. Fundamentally, I think the problem is the one Jo Moir points to: lots of Kiwis are very happy for the country to turn into a hermit kingdom.

  • NZ's unaffordable housing makes Bloomberg.

  • NZ has a travel bubble coming with Australia - finally! Remember though that Taiwan has even fewer cases than NZ or Oz. We could add Taiwan to the bubble. Why aren't we adding Taiwan to the bubble? But keeping the bubble requires better practice at the border to keep the virus out.

  • Jacques Steenkamp at BusinessDesk says that the government isn't bothering to process hundreds of investor visas, with billions of dollars consequently not making it here. Australia is making a better fist of it, as you'd expect. 

  • I've seen a lot of snark about what counts as skilled in the skilled migrant immigration category. Brittany Keogh notes that NZ's Barista of the Year had a very hard time getting her skilled migrant visa - INZ had a hard time appreciating her skills. The result was that her employer had to go to market locally and prove that nobody local could do the job she could. It's a terrible way to run a system. It would have to be tempting to bring the award over to INZ HQ and wave it around saying "I told you!".  

  • The government banned oil exploration at Taranaki. MBIE warned them that doing so would have consequence well before new fields would have started proving up. MBIE said, "any material change to the exploration side of their business may have an impact on how they view their existing producing assets, and vice versa. Should exploration opportunities be removed, it may have an impact on how oil and gas companies consider their overall presence in New Zealand, potentially incentivising them to either sell their existing producing assets or not to invest further in extending its production life." The government banned it anyway. Now, in a dry year, we're having production issues in the existing fields and gas shortages. That means old coal generators are being brought online and the cost of power has skyrocketed. And Minister Woods is shocked! that power prices are high and wants an enquiry into why. Would an official be fired for telling her that she caused it, that they warned her it would happen, and that uncertainty over the whole sector caused by this kind of policymaking combined with the potential effects of Onslow are hindering the investment in new generation that might possibly get us out of it? 

  • After the government banned Taranaki, they held an utterly tone-deaf "Just Transitions" conference in New Plymouth. There, film subsidy mogul James Cameron said that Taranaki's dairy industry also needed to end, while highlighting his own more enlightened approach to farming - where he grew flax, industrial hemp, and vegetables. He now has hundreds of cows grazing in his paddocks, because what he was pitching at the conference doesn't stack up. 

  • And now they're banning coal boilers. Recall that coal boilers are in the Emissions Trading Scheme. Every tonne emitted by one of those boilers is a tonne that cannot be emitted elsewhere. They're also suggesting banning other fossil-fuel boilers. Meanwhile, there's an electricity shortage caused by the Taranaki ban. So they're loading more pressure onto the power grid at the same time as they've screwed up electricity supply. The ban is in response to the draft recommendations from the Climate Commission. The Commission will barely have had time to start reading submissions on its proposals. If this government's last term includes mandating electric ambulances in the middle of power blackouts, it wouldn't surprise me. 

Thursday, 1 April 2021

Afternoon roundup

The browser tabs, there are so many.