At an occasionally tense annual review of the Climate Change Commission by the Environment Select Committee on Thursday, Opposition MPs clashed with Commission executives over the modelling that underpins the advisory body’s recommendations.
In January, the non-partisan Commission released a report calling for “transformational and lasting change across society and the economy” in order to respond to climate change, but found the real costs of doing so were lower than expected – about 1 percent of annual GDP through to 2050. These projections were in line with the findings of other expert bodies, which have seen the estimated price of decarbonising fall in recent years.
For example, the United Kingdom’s Climate Change Committee estimated in 2008 reducing emissions 80 percent by 2050 would cost 1 to 2 percent of GDP. Now, the same panel projects the cost of reaching net zero emissions in the UK by 2050 to be just 0.5 percent.
“It’s that we have the very optimistic sign that we can pay it. It’s not going to be something that we can’t do,” the chair of the UK committee told Newsroom recently.
“We’re not going to destroy peoples’ lives in doing it. It isn’t a puritan misery. We don’t all have to have open-toed sandals and eat lentils. We really can actually live decent lives with all of the wonderful gifts that we’ve been given.”
Modelling doubted
However, National Party MPs Scott Simpson and Stuart Smith, who hold the environment and climate change portfolios, respectively, challenged representatives of New Zealand’s Climate Commission over the modelling underpinning the 1 percent figure. They said it was difficult for anyone to provide a submission on the Commission’s draft advice if the models weren’t available to test and examine.
In response, Commission chair Rod Carr said that the assumptions that are put into the models and the outputs from the models had all been publicly released and the models themselves were on their way.
“The Commission has released a lot of the data, the inputs, the assumptions and the outputs of the models. When we commissioned the build of the models, we contracted to have the models built so that they could be made available under the Creative Commons licensing arrangement,” he said.
“So it has always been the Commission’s intention to make the source code of the models available. And that is a matter which is currently exercising our team.”
After criticism from the business sector over the delay in releasing the models, the Commission on Tuesday extended the deadline for submissions by two weeks.
Responding to questioning from ACT environment and climate change spokesperson Simon Court, Carr was unable to say whether the models would be released ahead of the new, March 28 deadline. However, he insisted that the information that had been made available was sufficient.
“We did have the model peer-reviewed by experts in modelling, who determined that the model was indeed fit for purpose and among the best of its class. So I think we can provide some degree of confidence that it’s not just purely the work of the in-house team,” he said.
Smith pointed to modelling from the New Zealand Institute of Economic Research (NZIER) which indicated much greater economic impacts from decarbonising.
“Of course, you do understand that given that your assumption of less than 1 percent of GDP is a factor of five lower than NZIER’s work, that is creating some suspicion,” Smith told Carr.
“I can’t answer the question of whether it’s suspicion or not, it’s a legitimate area of inquiry,” Carr responded.
“The NZIER model is an older model based on earlier costing of the likely alternative and renewables technologies. It is interesting to note that both the UK and the European Union’s modelling of the cost of transforming an economy from a fossil fuels, high-emitting economy to a low-emissions, renewable economy is in an order of magnitude that we are now estimating.”
In a testy exchange, Smith also argued that little in the way of government intervention was needed to decarbonise, given the Commission had found a $50/tonne carbon price in the Emissions Trading Scheme would allow the country to reach net zero emissions by 2050.
“I think you need to be careful. You get there and you have 1.4 million hectares of new exotic forest and you have to continue planting massive amounts of pine trees into the 2060s to stay at net zero,” Carr responded, speaking over an interjection by Smith.
Marginal abatement costs
Commission chief executive Jo Hendy said that the expected costs of low-carbon technologies like renewable electricity generation (wind and solar) and electric vehicles has been consistently downgraded, which explains the rapid decline in the estimated price tag of decarbonising.
Smith further questioned Hendy about the absence of marginal abatement cost data. Marginal abatement costs are the estimated price of eliminating a certain amount of emissions, often from a certain sector.
Hendy said the Commission didn’t rely on marginal abatement costs as inputs to its model.
“Our models have inputs in terms of cost projections and assumptions around there. Marginal abatement costs are a particular way that people sometimes look at the costs of particular, individual technologies. Our approach has been using these models,” she said.
In a statement to Newsroom after the select committee appearance, Hendy elaborated on the Commission’s modelling inputs. She said marginal abatement costs were not always helpful because, for example, the cheapest abatement cost might not always be the most sustainable abatement. Some emissions could be abated through the planting of plantation forests, but this carbon sequestration eventually wanes.
Read more: Why can’t we plant our way out of climate change?
“We have used abatement costs alongside other important factors (such as co-benefits) to understand which actions will be needed to reduce emissions and meet the country’s 2050 emissions targets, and the Commission’s proposed emissions budgets,” Hendy said.
“The economic models we have developed calculate the abatement costs of different emissions reduction measures endogenously (within the model). This allows our models to capture the dynamics of cost pathways for different technologies as they are deployed.
“For instance, our modelling incorporates a reduction in the capital cost of electric vehicles over time due to increasing global production leading to learning effects and economies of scale. Therefore the marginal abatement costs for electric vehicles will change each year, depending on the capital costs, and a range of other factors such as how far the vehicle is driven. This is a proven approach currently used internationally as best practice.”
