Ideasroom

Climate change a slow burn issue

The Government has promised to make climate change a priority area, with Prime Minister Jacinda Ardern arguing climate change will be this generation’s “nuclear-free moment”.

This is a bad analogy, for several reasons. One is that leadership implies followers, and in the case of the nuclear-free policy no country explicitly followed our lead. Much more significantly, it confuses a short-term political momentum issue (the nuclear-free declaration) with a long-term political structural issue (decarbonisation).

Climate change shares far more in common with other slow-burn issues like pension reform, intergenerational tax and benefit arrangements, and monetary policy than it does with suffrage movements or the nuclear-free policy. 'Moment' movements are predicated on single-shot legislative change. Slow-burn issues depend on the ability of democracies to resist the temptation to indulge now and pay later (or ask others to pay later).

New Zealand does actually have some form on that score, dating from the same era as the nuclear-free legislation: the modern independent central bank. Why was this so significant? Two reasons: (1) it worked, which is why (2) other countries adopted it.

The climate change equivalent being developed in New Zealand is the Climate Change Commission (CCC). Its mandate is still being thought through, but we can observe a couple of things about the Reserve Bank that have relevance for what the CCC ought to be like.

Central bank independence involves two important features: a narrow remit and monopoly provision of the money supply.

The Government can back its carbon budgets with prescribed penalties for noncompliance, but if these penalties are too onerous they will collapse under democratic rebellion.

A CCC needs the former, since it is impossible to believe a legislature will meaningfully cede the policy mandate over a wide remit to an independent body. Placing a significant part of the policy landscape beyond the reach of the legislature is undemocratic, and is unlikely to survive a change of government.

The CCC can have no equivalent monopoly to the central bank’s control of the money supply. It can set targets, such as carbon budgets, but ultimately these are only as meaningful as the social, political and economic will that is behind them, because the achievement of targets is ultimately up to people other than the CCC.

The Government can back its carbon budgets with prescribed penalties for noncompliance, but if these penalties are too onerous they will collapse under democratic rebellion.

The point here is that the best shot for the CCC to work would be to give it a narrow mandate and to provide it with institutional support from other entities to help its carbon budgets secure wide buy-in, and to broker interests around sectoral and regional fairness.

Some sort of high-level forum, similar to the Land and Water Forum, could help. Opinions vary on the success of the Land and Water Forum, but most people involved seem to think on balance the world in which it never happened would have been worse than the world in which it did.

Successful climate policy will involve a web of mutually reinforcing policies. The thinking among officials for a long time was that the emissions trading scheme (ETS) is overwhelmingly the main climate policy, with other policies a distinctly second-best smorgasbord of undesirables. As climate policy expert Adrian Macey has pointed out, it is quite plausible to see it the other way around: with specific, targeted regulations and prices doing much of the lifting, while the ETS quietly hums away in the background. To make it happen there needs to be a way of getting a high degree of coordination across a number of ministries to ensure policy coherence across a range of sectors, each with its own possibilities and constraints. Behind it all, technological innovation is the must-have for success.

Building that web of policies is the challenge. As is the case with all existing ETS systems, current prices in New Zealand are too weak to lead the scale of transformational change necessary to meet ambitious climate targets. The gap between ambition and action remains too large for current policies to credibly deliver the promises we have made.

Decarbonisation will take several decades, at least. Globally, it will involve concentrated costs on those leading the decarbonisation, while the benefits are diffused. This is just the sort of problem in which there are political incentives, often strong incentives, to renege on your commitment to conduct ambitious climate policy. 

Domestically, the relative location of costs and benefits is hugely important in slow-burn issues like this, because the costs of the policies keep being felt: the Government needs to be careful it doesn’t leave the provinces with the costs of new climate policy (uncompensated limits on future economic development, the inclusion of agriculture in climate policy) while the political benefits are consumed by metropolitan elites.

This danger is especially acute since the urban-provincial divide is already New Zealand’s main political faultline. For a future National government to buy in to any given decarbonisation programme, the costs and benefits need to give their voters a reason to support rather than destroy the policies enacted now.

Cynics allege that division is exactly what the Government intends: given the generational politics of climate change, keeping climate change politically contested creates momentum for the left. But I don’t think this is credible: New Zealand First polls higher in the regions than in the main cities, and the imperative not to alienate or cripple potential coalition partners is presumably fresh in Cabinet’s mind.

The intention of the CCC is to remain bipartisan. This is hard enough when the issues are as desiccated as pension reform and monetary policy. It’s even harder when the issue is potentially the weather-vane one of the age. The danger is more acute still for politicians who view their positions as morally superior to those of their adversaries, since to embrace compromise on moral issues is, for many, to sully oneself.

True bipartisanship is a commitment to a process. It requires mutual forbearance and the sharing of burdens and benefits. The young people of Invercargill and New Plymouth will have to feel in their bones the same enthusiasm for our shared low-carbon future that the students of Victoria University feel for it today.

Bipartisanship is not just a good idea; it’s the only plausible way to manage the socioeconomic transformation climate change demands.

Ardern is right that we should look to policy innovations in our past. But to look at politically divisive single-shot total victories would be a mistake. It is to the Reserve Bank we should look, nerdily, longingly, hopefully. And we should ease up on the idea that those who don’t share our specific vision of a low-carbon economy are moral degenerates.

All of that points towards a long-term, bipartisan commitment towards the development of institutions capable of creating and sustaining broad support for prices and regulations where the temptation to overturn those policies will be strong.

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