Hazeldine on the Climate Change Commission

Professor Tim Hazeldine writes:

The NZ Climate Change Commission has just released its report. Four hundred pages; 15,000 submissions considered; hundreds – perhaps thousands – of predictions, prognoses, policy recommendations; all buttressed by 700 pages of “supporting evidence”, with 1000 references to technical research papers.

This is an extraordinary administrative achievement, and it is deeply scary, revealing a fundamental misconception of how New Zealand’s obligations to meet lower greenhouse gas emission targets should be met, in our shared battle against global warming.

Hazeldine, as you will see, is scathing of the Commission’s report. His criticism are similiar to those from the NZ Initiative. Now some people discount the latter as it is a centre-right thinktank. But Hazeldine is far from centre-right. I would regard him as one of the most prominent “left” economists in New Zealand, along with Brian Easton.

It is farmers, other businesses, entrepreneurs, innovators, inventors, scientists, workers, and, not least, households – the whole team of five million – who will get the job done, and at the lowest cost, so long as the overall cap set by the Emissions Trading Scheme (or through a carbon tax) is secure.

Also mostly pointless, are the multitude of policy recommendations that pour forth from the report. If the real decision-makers in the economy (i.e. all those listed above) are getting the correct price signal from the ETS, then there is generally no justification for further government intervention. What should be done will be done.

This is essential. If you have the ETS with an emissions cap, then emissions will be reduced but in a way which allows individuals businesses and households to decide what works best for them. The CCC approach is more akin to the Soviet Union’s five year plans where they decide for everyone.

And – not so incidentally – the expensive scheme to subsidise purchases of electric vehicles that the commission has foisted on the current government will almost certainly fail the cost-benefit test. Around 90 per cent of the well-heeled beneficiaries of the scheme’s largesse would have purchased an electric car anyway – we have just given them an $8000 present.

The $8,000 might not even go to them. The Japanese car manufacturers look at what price the market will pay, when setting prices. So the evidence seems to be they will increase prices of imports into NZ, so they get the $8,000.

Our climate change policy should be solely about climate change. “You can’t kill two birds with one stone” is a cliche but it is not trite. It is true and important in almost every policy context. Yet the Commission considers it should in future “consider broader well-being factors, like eradicating poverty, safeguarding food security and addressing other environmental outcomes”. Wrong, wrong, wrong and wrong.

The commission claims it will be its job to “hold the government to account”. No, in our democracy it is the voters and Parliament who hold the government to account.

How did the commissioners get so off-target? Hubris is probably a factor, but I will pinpoint their failure to meet the statutory requirement to “have regard to a broad range of domestic and international scientific advice”.

The Commission was meant to be the vehicle to get widespread and bipartisan support. But the path they have chosen means they have failed miserably. There is no chance that National nor ACT will support their command and control policies, and now should they. In fact there has to be a decent chance National will now rescind its support for its establishment, as the CCC has failed so badly.

In particular, they virtually ignore the substantial body of very impressive research on climate policy carried out by economists, on which of course I have drawn here.

Just one of the 1000 technical references is a well-published economics article. This, by the way, rates subsidising electric vehicles as the highest-cost of all known climate policies.

The CCC has deliberately chosen policies that will achieve less, yet cost more.

So, what to do? The Climate Change Commission has, in just a few months, seriously outgrown its boots. The Government should step in, and with polite thanks for their efforts, de-commission the commission. It should then persuade a super-smart mid-career research-grade Kiwi economist – tough-minded but humble (they do exist) – to take the reins of a slimmed-down secretariat.

I agree. They have lost all credibility.