Tuesday 7 December 2021

Solutions in search of problems

Proper policy starts with problem definition. Define the problem that needs to be solved, establish that it really is a problem, assess alternatives including the option of just leaving things be, and go from there.

If you start instead with a solution, you then have to go looking for problems. 

And so we come to New Zealand Post's new fleet of electric vehicles. 

Stuff reports that NZ Post is shifting to electric vans. And that could be a great move - they're currently not paying road user charges, and could work out to be a bargain for the state-owned delivery company. I certainly wouldn't second-guess that commercial decision. 

NZ Post isn't a small shop. They've recently invested $170m in processing infrastructure. 

But to get the vans, they're going through another state-owned outfit. NZ Green Investment Finance. Here's how they describe themselves.

New Zealand Green Investment Finance is a green investment bank established by the New Zealand Government to accelerate investment that can help to reduce greenhouse gas emissions in New Zealand.

NZ Post is working with NZ Green Investment Finance to fund the fleet vehicle purchase though a complicated lease plan. 

The state-owned postal service and the state-owned green finance investor will each put up $10 million through Sustainable Fleet Finance to provide attractive and competitive finance for electric vans or low-emission vehicles. Sustainable Fleet Finance is majority owned by NZ Green Investment Finance.

The investment will initially be used to finance an order for 60 Mercedes eVito panel vans for the NZ Post fleet which will arrive in the second half of 2022. Under a four-year tiered lease plan, the vehicles will first be leased by NZ Post and then offered by Sustainable Fleet Finance to NZ Post’s delivery contractors at more affordable rates as second and third owners.

Ok. So one SOE with the implicit backing of the Crown against losses, and with a balance sheet big enough to handle fleet renewal, is running financing for fleet renewal through a finance company part-owned by another government outfit, all aimed at preventing 7.8 tonnes of emissions per diesel van per year.

Every tonne of which is already covered by the ETS, which has a binding cap.

And the annual value of the emission reduction, per vehicle, is about $500. 

So if NZ Post, backed by NZ Green Investment Finance, fails to purchase 8 carbon credits per vehicle per year, somebody else will buy the credits instead. 

I've occasionally heard arguments around credit market barriers that might be some kind of market failure. They seem ridiculous when there are plenty of non-government outfits that will finance your car for you, whether privately or for a company fleet. There's a whole industry association of the outfits that finance peoples' cars for them. And EVs being expensive isn't a market failure. They're just expensive. 

Using a government-backed investment fund to finance vehicle purchases by an SOE that doesn't have obvious barriers against just buying its own vans - that's the kind of mess you get when you set up a policy without really thinking through the problem you're trying to solve. 

This place is rapidly losing its "Outside of the Asylum" status. At least they haven't yet gone for anything as absolutely stupid as cash for clunkers. 

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