Guest post: carbon taxes and the NZ economy

We don’t talk about climate change on TransportBlog that often, although we should – transport is a big contributor to emissions, and the most obvious opportunity for NZ to reduce its emissions.

But most economists would agree that the best starting point for tackling emissions is to price them properly, so people and businesses are incentivised to change their behaviour. Currently, we’ve got an Emissions Trading Scheme, but it has been almost completely ineffective, because the prices are too damn low. The current price for an emissions “unit”, equivalent to one tonne of CO2, is about $19 – but over the last few years, they’ve often been only a few bucks, or at some points less than a dollar.

By comparison, a litre of petrol creates around 2.3 kg of CO2. An emissions price of $100/ tonne would add about 23 cents per litre (plus GST) to the petrol price. Not much, but enough to prompt some behaviour change – a few more people might take the bus, or cycle, or simply drive less.  At current prices, it’s more like 2 cents.

But reducing emissions doesn’t come free – there’s some short-term economic pain to come from it. The challenge will be how to cut emissions, while keeping the economy going strong. To that end, Sina Mashinchi has been looking at the macro effects of different climate policies. There’s a summary of his research below, along with a ‘poster’ explaining it – which won Sina the New Zealand Economic Policy Prize at this year’s NZAE conference.

poster-nzae-2016

New Zealand’s attempt to lower climate change-fuelling emissions by trading carbon credits is failing. But there’s good news: introducing a carbon tax and beefing up the Emissions Trading Scheme (ETS) could substantially lower emissions and lower GST – a win-win for our environment and economy.

Sina Mashinchi, a University of Auckland and Energy Centre doctoral researcher, has developed a new modelling that measures the impact of carbon pricing on New Zealand economy. Unlike previous modelling attempts by the government which used computable general equilibrium (CGE) based energy models, the new modelling approach in his study follows the historical behaviour in New Zealand economy and its responses to the various shocks, crises and policy implications through the years since 1970.

According to the findings in this research, New Zealand will need to set higher carbon prices in order to close the emission gap, but even with a carbon price at $355 in 2030, emissions would fall 14.2 percent from current levels which would be only a half of target reductions (around 27 percent) in 2030.

Sina experimented with mixes of a beefed-up ETS and a carbon tax. He found if the price of carbon credits increased to $75 right now, and rose by $20 a year from now on, and a carbon tax for non-ETS sectors was introduced and set at the same levels, the government could use the extra tax take to lower GST by 2.5 percent to 12.5 percent. This would stimulate the economy, encouraging investment in new technologies, energy efficiencies and public transport, which would create jobs. GDP would rise by an average 2.2 percent per year from 2016. This still falls short of our emission targets, but it’s a lot better than emissions going up.

Sina believes this move would be a win-win-win – good for the environment, good for the economy and good for consumers who would end up paying less GST.

What do you think? Assuming the government can get past its “business as usual” stance, what should we be doing about emissions?

Mid-week reading: California uber alles, road tolls, apartment design, and election reviews

I’m back to a mostly normal post-writing schedule, but mid-week reading will continue as an intermittent feature.

One of the most interesting things I’ve read recently was Jim Newton’s long interview with California Governor Jerry Brown (in UCLA Blueprint). Brown served two terms as governor in the 1970s and 80s, left politics for a while, and ultimately returned to serve another two terms as governor. In the 1970s, he was known as a prescient environmentalist (“Governor Moonbeam”); today, he’s had to address major long-term challenges, including a brush with fiscal meltdown in 2008-2012, responses to climate change, and a poorly functioning housing market. He also inspired the Dead Kennedys’ song California uber alles.

Blueprint: Environmental issues have been very important to you for a very long time. What first captured your attention about this area?

Jerry Brown: The idea that there is an environment that we’re a part of and can’t be separated from, and that this environment can be degraded, impaired and altered in a very negative way, more than aesthetically but actually having to do with the vitality of living things and the whole way living beings all function, that this could be affected by decisions.

That was a rather startling thought to me…. Before the notion of ecology and environment, there was the notion of resource conservation. That’s a very different idea. That’s a partial idea: Let’s protect the forest; let’s protect Yosemite.

BP: And a lot of that was conservation for future use, right?

JB: Conservation, yes, but not just conservation for future use — conservation as applying to a very particular and limited piece of land or river or mountain. The environment is a different concept. Ecology is an encompassing idea. “Eco” comes from the Greek word ekos, “house.”

[…]

BP: And climate change is potentially as devastating?

JB: Climate change is slower. The trouble with climate change is that you can pass tipping points, and down the road it is going to be enormously difficult and expensive to change with all the embedded infrastructure. Enormously difficult. Even though today it’s relatively trivial. To de-carbonize the economy, even though it’s massive and would take trillions of dollars, it could be done. But it would take a real mobilization….

And there’s an industry of denial, of manufactured skepticism, all for short-term gain, or because of an ideological fear of more regulation that will curb unfettered market behavior or individual consumption. So people don’t want to believe there’s an absolute out there called the environment, called the climate system. But we know there is. We didn’t make the sun shine today. It was raining for a couple days. We didn’t do that. So what made that? What made that is the whole atmospheric chemistry.

Now, can 7 or 9 billion people, can several billion cars and coal plants affect that? Most of the scientists say yes. And if they can, how are we going to un-affect it? See, that’s the simple-minded thing. Up until 1850 you never had more than a billion people. And what did they do? Run around in their little clothes and with a little bit of gunpowder here and there.

Now we have massive technology. The human impact is multiplied, is unimaginably greater. But the human capacity for wisdom has not improved an iota. So there’s the problem.

One of the reasons I keep a close eye on California is that it’s often at the forefront of change. And while that throws up occasional perversities, like Los Angeles’ car-based sprawl and congestion or the San Francisco housing market, it also tends to develop solutions to those problems.

Speaking of technology and solutions to long-standing problems, The Age transport reporter Adam Carey reports on a pilot programme for road pricing. Transurban, a major Australian toll-road operator, has been gathering data on the behavioural implications of road tolls. They recognise that existing funding sources – principally petrol taxes – will come under pressure as electric vehicles enter the fleet… and, furthermore, that this will offer opportunities to price to manage congestion:

Mr Clarke was one of 1200 motorists in Melbourne who had been recruited, and whose every move behind the wheel was being tracked in a bid to find the best model for a switch to user-pays roads.

The matchbox-sized device plugged beneath Mr Clarke’s steering wheel was a GPS-enabled geolocator, recording his journeys so Transurban could tally up a monthly road user charge.

The charge would be entirely fictional, for the purpose of exploring the best payment model for a system of user-pays roads.

Mr Clarke also had a virtual bank account – or “piggy bank”, as Transurban cutely coins it – with regular statements he could view online and three options for how they would like to pay to drive.

Pay $1 a trip, pay 10c a kilometre, or pay a flat rate each month.

Mr Clarke chose the third option, and was given a notional monthly balance of $92, which bought him the right to drive 926 kilometres. If he exceeded the cap, the charge would double from 10c a kilometre to 20c.

As it happens, Australia’s already got a funding problem – petrol taxes haven’t kept pace with roads spending:

Infrastructure Australia published a major audit of the condition of the nation’s transport networks last year and reached the same conclusion, that Australia is increasingly unable to pay for the infrastructure it needs.

“This deficit will, on a business-as-usual basis, continue to worsen as a growing population and economy increases demand for infrastructure networks,” the federal advisory authority found.

It also found the way roads are paid for is “unfair, unsustainable and inefficient”, because taxpayers pick up most of the bill, rather than the heaviest road users.

It is a time of transition, here and elsewhere. In Idealog magazine, architect Blair Johnston writes about “how higher density is Auckland’s destiny“… and how design must respond in order to enable that.

Every successful city has at some stage experienced this growth and a similar intensification process, including places like Melbourne and Sydney where the lifestyle values are much like our own. The advantage is that we can appropriate these international models – the trees of Brooklyn streets, the construction system of Amsterdam, the vibrant low-rise laneways of Tokyo, the density of Sydney’s Paddington – and adapt them to our local conditions.

The first Auckland-specific factor to consider is our climate, and our love affair with the outdoors. And that does make development in this part of the world somewhat distinctive. All buildings in Auckland require good orientation and cross ventilation; in short, ample natural light and the ability to open windows. It may sound obvious, but it’s surprising how often this is forgotten in building developments. Creating sustainable apartments should begin with a north-facing aspect and supply of fresh air from both sides of the building. No arguments.

Johnston goes on to identify four other ways in which design must be tailored to the Auckland context, in response to our desire for privacy in our private spaces; our need for usable public spaces; our demand for flexibility in our living spaces; and the affordability challenge.

He concludes:

The truth is that four- and five-storey buildings provide a comfortable threshold of density; we can use land more efficiently than cellular homes, while still creating great streets and vibrant public places. Extrapolated out, this makes for better environments and cities everyone wants to live in. In New Zealand, our personal living spaces are integral to our social construct – we entertain, relax, work and live in our homes. We need to ensure that the apartments we develop are appropriate to these living conditions, to our climate, to cultural expectations and to budgets.

Lastly, I highly recommend reading lawyer Andrew Geddis’ summary of Parliament’s 2014 election review (on Pundit). As local body elections are coming up, we must consider how our democratic processes work, and how they don’t. The election review is a good place to start.

The Committee started where recent Justice and Electoral Committee inquiry reports always start – lamenting the continued decline in voter participation. Sure, the 2014 turnout was up a small tick from 2011 … but at 72.1% of those eligible to enroll it still was the second lowest since universal suffrage was brought in in 1893. In particular, the voting rate of younger electors is dire – less than 65% of eligible 25-29 year-olds cast ballots (and for those on the Māori roll, the figure is even worse at just over 50%).

[Incidentally, if you want to understand why the policies offered and pursued by New Zealand’s political parties look the way they do, the graph of turnout-by-age-group on page 13 of the Committee’s report will take you a long way toward doing so … but that’s a topic for another post!]

The Committee was united in thinking this declining turnout, especially amongst younger voters, is a real problem. It mirrored previous Committee reports in saying so. So what to do about it?

Unfortunately, as Geddis notes, the Parliamentary committee didn’t reach any agreement on concrete actions to overcome the youth turnout problem:

…compulsory civics classes for the youth seems to be the only solution going. Because the majority of the Committee weren’t having a bar of any more radical proposals for combating the decline in voting, such as lowering voting age to 16 (“a major change to the electoral system, requiring broad public consultation and a high level of political consensus”) or making voting compulsory (“if such a move were contemplated, the public must be consulted and a high level of political consensus achieved before any such change is implemented”).

[…] Note also that the pilot test of online voting in this year’s local body elections has been canned, meaning we won’t have even a practice run at it until 2019 at earliest – and no full roll-out for local body elections before 2022. I suspect that MPs won’t be comfortable setting it loose on parliamentary elections until they’ve seen it working without a hitch at the local level … meaning that it could well be another decade before our smartphones or tablets or neural implants begin to replace pen and paper ballots at the local school hall.

That’s it for the week. Post any other articles of interest in the comments!

Building a better city: Policies and perspectives (part 1 of 2)

This is the first half of a two-part series of posts. It summarises a few ideas that have been banging around the back of my head for a while – basically, an attempt to answer the question: “What can economics do for cities?” In this part, I discuss a couple of important concepts: agglomeration economies, which underpin cities’ existence and ongoing success, and the potential role of pricing mechanisms for managing urban ills.

What do cities do?

Cities mean different things to different people. They are places to work, places to play, places to invest, places to consume, places to conduct politics, places to realise one’s individuality, places to blend into the crowd. (And many, many more things beside.)

In fact, one of the features of a successful city is that it can mean different things to different people, and attract and retain them for different reasons. Cities exist because they are efficient and diverse.

Economists use the term agglomeration economies to describe the advantages of urban scale and density. If you operate a business, locating in a city will allow you to access more workers, more customers, and more new ideas. But even if not, an urban location still offers advantages – more restaurants and retailers, a larger dating pool, better access to education and healthcare, and more choices about how to work, live, and get around.

New research from the Netherlands finds that agglomeration economies in both production and consumption are important, albeit to a different extent in different cities. Furthermore, ignoring agglomeration economies is a risky proposition for cities:

As history has shown (see, for example, what happened to Detroit or the decline in the population of Amsterdam and Rotterdam referred to above), current successes provide no guarantees for the future. This is what Gibrat’s law tells us, growth is independent of current size. Future growth is therefore largely independent of past success. The chances for policymakers that try to row against the tide are small. A successful policy requires to ‘go with the flow’. Large investments in infrastructure in a declining city do not satisfy any real demand but lead to large financial burdens for the local population, making these cities even less attractive. However, policy can make a difference in growing cities. In order to remain on the short list of hot spots, policymakers in these cities have two margins to work on.

  • First, the city has to be attractive for innovative entrepreneurs and enterprises to locate their business.
  • Second, the city has to be an attractive choice for high-educated top talent as a place to live in.

In other words, urban success is a dynamic process. Cities can’t stand still – they must be capable of attracting new people and generating new ideas and opportunities. Simply identifying some things that people like about a city and then freezing them in amber is a recipe for long-term urban failure.

1. Incentives and prices matter, so it’s important to get them right

We need change, but we don’t necessarily need change at all cost. Most development is good, but some has deleterious side-effects. A new factory may contaminate local air and water quality. A coal-fired power plant will damage our climate. A new subdivision may pump traffic onto congested roads. A new retailer may attract more people to park on already-crowded streets.

Policy responses to these challenges can heavy-handed and inefficient. While negative (and positive!) spillovers are abundant in cities, some cures may be worse than the disease. A good example is minimum parking requirements, or MPRs, which require new developments to provide a defined minimum amount of parking. The aim of this policy is to prevent parking from spilling over onto neighbouring streets and properties.

Unfortunately, MPRs tend to be both inefficient and ineffective. They are inefficient because (a) there is usually poor evidence for choosing minimum ratios, meaning that many businesses and households are compelled to purchase more parking than they need and (b) they tend to be more costly than alternative approaches to parking management. Furthermore, they are often ineffective, as people continue to complain about a lack of parking even in places where MPRs have led to a major oversupply.

Better pricing is often a better alternative to blunt policy instruments. As any economist will tell you, if you want less of something, put up the price! This approach is applicable to a wide range of policy areas, especially in cities. For example:

There are several important advantages to using prices, rather than regulations or construction, to discourage negative spillovers. First, pricing respects people’s ability to make good choices. If we had a carbon tax, it wouldn’t prevent someone from burning petrol or farming cows. But it would make them pay the full social cost of those choices.

Second, prices can change in response to new information. AT’s new parking policy is a good example of this – they will monitor demand for on-street parking and tweak the prices up if occupancy is too high. This reduces the risk of screwing things up due to forecasting errors.

Third, and most importantly, prices provide governments, businesses, and households better information, which can enable them to make better decisions. Over time, this will result in significant dynamic efficiencies. For example, congestion pricing will help transport agencies plan infrastructure upgrades. Rather than having to guess whether people will value expanded roads – which frequently leads to errors – they will be able to measure the actual value that people place on travel.

Tomorrow: Part 2.

2015 – Auckland’s Watershed Year

The more I look at the events and data of 2015 the clearer it becomes that this has been a profoundly significant year for Auckland. It is my contention that this year the city reached a critical turning point in its multi-year evolution back to true city pattern. I have discussed this change many times before on this forum, most notably here, as it is, I believe, an observable process that has been building for years. Generally it has been gradual enough, like the growth of a familiar tree, as to easily pass unobserved, but now I think it has passed a into a new phase of higher visibility. The group who see it most clearly are people returning from a few years overseas. Many ex-pats express surprise and wonderment at the myriad of changes in quantity and quality they find here on returning.

HOPETOUN_6234

Changing City: New apartments with views over the city and harbour, a Victorian school and park, 20thC motorways, and the new LigthPath.

Below is a summary of evidence for 2015 being the year Auckland returned as a city, in fact the year it crossed the Rubicon onto an unstoppable properly re-urbanising path. Later I will add another post on how 2016 and beyond is certain to see the city double-down on these trends, and why this is very good news. This transformation is observable in all five keys areas:

  • Demographics
  • Transport
  • Development
  • Economy
  • Politics

DEMOGRAPHICS. New Zealanders returning in big numbers are one of the key metrics of 2015. Along with new migrants and natural growth, the other change driving Auckland’s demographic strength is fewer people leaving, all of which, of course, are a vote of confidence in the city as a place to want to live and to likely fulfil people’s hopes for a better future. Population growth for the year was at 2.9%, the strongest rate since 2003, the strongest in the nation, and biggest raw number on record. See here for Matt’s [Population Growth in 2015] and Peter’s [Why is Auckland Growing?] posts on these issues.

Auckland LB Population Change - 2015 2And importantly for my thesis many more people are moving into the centre, particularly into new apartments. This is a evidence that the The Great Inversion is happening in Auckland as it is all over the developed world; the return of vitality to centre cities all over. Auckland’s urban form is reverting to a centred pattern; with proximity to a dense centre as a key determinant of value.

City Centre Population - 1996-2015 2

TRANSPORT. The huge and sustained boom in rail ridership way in advance of population growth is the headline transport news of 2015, and is the result of the upgrade in quality, frequency, and reliability of the service brought by the new electric trains. Sustained growth of over 20% is very strong; this year every four months an additional million trips have been added to the running annual total; 13 million in March, 14 million in July, 15 million in November. I am not overstating it to say that these numbers change a great deal: They change the argument for further investment in rail systems in Auckland, and significantly they change growth and development patterns across the city:

2015-11 - Rail Patronage

BRITOMART JULY 15_3388

Elsewhere on our Public Transport systems the news is great too; The New Bus Network is just beginning, and is already showing huge growth in the few areas it is in effect. This year we have also seen new ferry services, including a new private Waiheke service that means there is much more like a real turn-up-and-go service there [started late 2014]. Ferry modeshare is holding its own at 7% which is a strong showing given the explosion in rail and bus numbers.

Importantly AT is now routinely rolling out long overdue bus lanes across the city. And now that they are doing this confidently and more consistently, surprise and anguish about this more efficient re-purposing of roadspace by car drivers has fallen away to nothing- there surely is a lesson there.

So total PT ridership cleared 80 million annual trips this year, for an overall growth of 8.1%, a rate running at nearly 3x population growth, evidence of a strong shift to public transport at the margin. Growth that is certain to continue despite capacity issues becoming pressing at peak times on both buses and trains.

2015-10 - Total Patronage

HOP card use also became strongly embedded this year [except on the ferries] which is another sign of a maturing system.

2015-09 - HOP Use

More population and a growing economy of course means more vehicles and more driving on our roads, [see: What’s Happening to VKT?] but because of the powerful trend to Transit outlined above the per capita number is flat to falling. This is a historic shift from last century when the two tended to move strongly in lockstep.

2014 VKT - AKL VKT + Pop

Another discontinuity from last century is that GDP and employment growth have also separated from driving VKT, as shown in the following chart from Matt’s post linked to above. Another sign that the economy too is shifting on the back of public transport, and not driving as much as it was last century:

2014 VKT - AKL Econ 2

So whereas investment in the rail network has been answered by an extraordinary boom in uptake the multi-year many billion dollar sustained investment in driving amenity has not led to massive uptake. It is hard to not conclude from this that 1. We are far from discovering the latent demand ceiling for quality Transit; only the degree of investment will limit it. And 2. Driving demand in Auckland is saturated; this mode is mature, well served and not the area to invest in for new efficiencies or growth.

2015 also saw the launch of the Urban Cycleways programme; a multiyear government led investment in infrastructure for walking and cycling. This, like the Transit boom is another shape changing departure from the past. Although the active modes are not well counted [what a culture counts shows what it values] it is clear that the shift back to the centre is also accompanied by a growth in active mode transport. This is one of the great powers of Proximity; the best trip is the one that isn’t need because the potential traveller is already there, or near enough to use their own steam:

LightPath_5971

DEVELOPMENT. All over the city investment is going into building projects of various kinds, the retirement sector is particularly strong, as is terrace house and apartment buildings, all three at levels not seen for a decade and together support the argument that Auckland is not just growing but also changing shape into a more more city-like pattern, as John Polkinghorn has kept us up to speed on all year on the Development Tracker:

Auckland Dwelling Consents to Sep 2015

Significantly there is also renewed investment into commercial projects especially in the City Centre, led by Precinct Property’s 600 million plus Downtown rebuild and tower, and Sky City’s massive Convention Centre and Hotel project between Hobson and Nelson. Additionally Wynyard Quarter is also moving to a new level soon with a mix of Hotel, Residential, and Commercial buildings. Somewhere in the region of 10 billion dollars of projects are underway or close to be in the City Centre. And as Peter clearly illustrated recently this is in no small part due to improved regulatory conditions [The High Cost of Free Parking].

ECONOMY. Cities exist simply because of the advantages for humans to be in close proximity to each other for transactions of all kinds; financial, cultural, social, sexual. And Auckland is beginning to show real possibility of opening up an agglomeration advantage over the rest of the country now that it is really intensifying. The latest data on Auckland’s performance shows a fairly consistent improvement over the last five years

GDP Growth Dec 2015 AKL

POLITICS. Two major political programmes begun this year will have profound impacts on Auckland for decades to come. The first is the Auckland Transport Alignment Process. Something we haven’t discussed on the blog because we are involved in it and are awaiting the first public release of information which will be soon. Then we will certainly be discussing the details of this ongoing work. But the importance of this process is already clear; it is a reflection of a new found acceptance but the government that Auckland’s economic performance matters hugely to the nation and that transport infrastructure investment is, in turn, critical to that performance. We are of course striving to make the case for a change in the balance of that investment in Auckland away from a near total commitment to urban highways now that motorway network approaches completion [post Waterview and Western Ring Route] and that the evidence of success from recent Transit improvements, particularly to the Rapid Transit Network, is so compelling. There are hurdles here in the momentum and habits of our institutions and politics but also huge opportunities to really accelerate our cities’ performance across a range of metrics through changing how they are treated.

The other political shift is another we are yet to cover in depth but soon will, and that’s the agreement in Paris on Climate Change. This does indeed change a great deal. The city and the nation will have to ask the question of all decisions around urban form and transport how they fit with the new commitment to reduce our carbon intensity. This will clearly lead to a further push for higher density and greater emphasis on Public and Active Transport, as these are current technology and long term fixes to this global challenge. Unleashing further the urban power of proximity and agglomeration economies. So much of the conversation around New Zealand’s carbon intensity is around the agricultural issue and this tends to ignore the opportunities our cities offer, particularly Auckland, and particularly the Auckland transport systems, to this problem.

Cities are emerging as the key organising level that are most able to react to this problem as discussed here in The Urban Planner’s Guide to a Pst-COP21 World:

In many ways, Melbourne’s experience represents a coming-of-age of the urban sustainability movement. The private sector is listening to cities and responding. Now it’s up to cities and national governments to continue the conversations that began at COP21 and continue the evolution.

“The commentary for a long time has been ‘nations talk and cities act.’ We’ve been part of that dialogue too. That’s changing now,” said Seth Schultz [director of research at C40 Cities]. “National governments are coming to organizations like ours and saying ‘help us. We get it.’ I want to change the trajectory of the conversation. Cities are a vehicle and everyone should be getting in that vehicle and joining in for the ride.”

So in summary 2015 has seen:

  • Completion of Electrification of the Rail Network and the New Trains
  • The start of the New Network
  • New Interchange Stations
  • New Buslanes
  • Improvements to Ferry services
  • Start of the Urban Cycleways Programme
  • CRL start
  • ATAP
  • Paris COP 21

I will follow this post with another looking ahead to what is going to be a huge 2016/17. Here’s a short list to start with:

  • Fare Integration
  • Further Interchange Stations
  • Western Line frequency upgrade
  • New Network rollouts
  • Queen St Buslanes [so overdue]
  • More Cycleways
  • SkyPath underway
  • CRL seriously underway
  • Huge city developments begin
  • ATAP concludes
  • Council elections
  • Progress on Light Rail [it could be closer that many expect]

For all the frustrations and compromises that we’ve highlighted over the year I think it’s very clear that there are many very hard working and dedicated people in AC, AT, NZTA, and MoT and their private sector partners and it is their collective efforts in a very fast moving and changing field go a long to making Auckland the dynamic and exciting city it is fast becoming. I am keen to acknowledge their efforts. Onward.

I also want to personally thank my colleagues here at the blog, as it has been another big year for us, Matt, Peter, Stu, Kent and John, from whom I continue to learn so much, it doesn’t look like we are going to be able to give this up anytime soon…

Also I would like to shout out to colleagues over at Bike Auckland, our sister site, they’ve had a fantastic year, so cheers to Barb, Jolisa, Max, Paul, Kirsten, Ben, Bruce and the rest.

And of course to y’all, the reader, you are what really makes this thing work, so if what we do here makes any kind of difference, ultimately that’s because of you.

Kia ora tatou…

WIRI DEPOT JULY 15_6623

Twiddling thumbs on climate change

Under the National government, being the Climate Change Issues Minister must be the easiest job in the world. Sure, Tim Groser does also have the more demanding role of Trade, but if I had to guess the number of hours each week he spends thinking “what can I do to help New Zealand reduce its emissions?” I’d guess the answer is pretty close to zero. And I’d guess much the same for the Associate Minister, Simon Bridges (who is also the Minister of Transport).

This is frustrating, when there are many things that we should be doing to cut our emissions right now – especially in transport. It’s even more frustrating when many other countries are taking climate change seriously, and gearing up to make big pledges at a climate summit at the end of the year, and our own government is so firmly on the wrong side of that line.

Because this summit is coming up, there’s actually been a flurry of articles in the Herald and other media, whereas climate change has struggled to get the attention it deserves in the last few years, in NZ at least. This reflects that our government is heading into the summit with an extremely weak pledge, where we essentially aren’t planning to do anything at all to reduce emissions.

“The Government’s refusal to do much of anything to curb New Zealand’s emissions is as economically myopic as it is morally contemptible”.

Brian Fallow, economics editor for the New Zealand Herald, 2013

Brian Fallow is a man whose pieces tend to be thoughtful and measured in tone, hardly someone who is prone to exaggeration. His recent column on the topic reads:

The legacy of woeful climate policy by the present Government and Labour before it – woeful from the standpoint of actually reducing emissions – is that emissions are running more than 20 per cent above 1990 levels. They shouldn’t be, but they are.

The ETS was enacted in the last few weeks of Labour’s ninth year in power and was promptly emasculated by National. As it stands, it exempts the great majority of New Zealand emissions altogether and has in recent years imposed on the rest a carbon price measured in tens of cents rather than tens of dollars.

Fallow continues, but, essentially National are opting for a “kick the can down the road” policy, without giving NZ businesses and individuals any incentive to actually decrease their emissions. Predictably, some recent modelling work suggests that emissions will actually increase under this scenario. The government will then need to buy credits from overseas countries that are actually doing something, so that we can meet our international obligations.

National’s stance on this has been criticised by a number of scientists and organisations, as in the article above:

Professor James Renwick of Victoria University of Wellington, an actual climate scientist, says the target is as weak as previous ones and does not come close to what is required, if New Zealand is serious about keeping warming to less than 2C, as the Government has said we are.

“The science says, compared to 1990 we need about a 40 per cent reduction by 2030, 90 per cent by 2050, and 100 per cent by 2060 – and then negative emissions (removal of CO2 from the atmosphere) for the rest of the century.”

New Zealand, he notes, is one of the highest emitters in the world on a per-capita basis.

Fallow also wrote another article three days later, which continues on this theme. My emphasis in bold:

The greenhouse gas emissions reduction target for the 2020s the Government intends to pledge has been rated inadequate by Climate Action Tracker, and as falling short of a fair share of the international effort required.

If most other countries were to follow New Zealand’s approach, global warming would exceed 3 or 4°C, a world that would see oceans acidifying, coral reefs dissolving, sea levels rising rapidly, and more than 40 per cent species extinction.

“While most other governments intend cutting emissions, New Zealand appears to be increasing emissions, and hiding this through creative accounting. It may not have to take any action at all to meet either its 2020 or 2030 targets,” Hare said.

There are no policies in place to address the fastest-growing sources of emissions in New Zealand from transport and industrial sources. For the energy system, whilst it is predominantly hydro and renewables, there is potential for further increasing renewable energy, and improving efficiency on the user end.”

It also points out, as domestic critics of the target have and as Climate Change Minister Tim Groser has conceded, that it does not put New Zealand on a direct, straight line path to its longer-term goal of a 50 per cent reduction by 2050, unlike other major economies such as the European Union or the United States.

“New Zealand’s climate policy is projected to head in the opposite direction from the world’s biggest emitters such as China, the United States and the European Union.

It has taken little or no action on climate change since 2008 – except for watering down its ETS – and we can find no evidence of any policies that would change this,” said Professor Kornelis Blok of Ecofys.

As per one of our posts from 2013, New Zealand’s emissions come largely from agriculture – which is a tricky problem to solve – and energy, including transport. Since it’s going to be hard and expensive to cut our agricultural emissions, we’re going to have to put a lot of focus on transport emissions, and reduce them significantly.

John P Emissions

How do we cut our transport emissions? Electric vehicles will help. Indeed, in the decades to come, they could actually make a huge difference, given NZ’s mainly renewable electricity supply. But that’s a long way off. In the meantime, we need to stop building huge new highways and motorways, and start investing in public and active transport instead. These things are not about NZ being a leader in reducing emissions, or even a “fast follower”. We’re slipping further and further behind on that front. It’s simply about taking cost-effective, sensible and actions which will prove themselves much more sensible in the long run.

The government has recently started to boost cycling funding, which is good – and it may well be more effective than public transport spending for our small to medium cities. But for our larger cities, we need both public and active transport. For Auckland especially, we should be investing in public transport infrastructure – the big ticket stuff like the City Rail Link, the quick fixes like bus lanes, and the intermediate things like busways. The council understands this, to a reasonable extent. But the government has stayed right out of it, overriding the priorities set by the council or Auckland Transport and instead pouring billions of dollars into motorways instead. That has to change.

Energy, transport and efficiency

Last year, the National Energy Research Institute (NERI) kindly gave us a free ticket to attend the NERI Energy Conference 2014. There were plenty of relevant topics to what we discuss here on the blog, including a great presentation from Mike Underhill, the head of EECA (that’s the Energy Efficiency and Conservation Authority, a government agency).

What were the key points? NZ has vast renewable resources. We’ve got “the highest renewable energy potential per capita of anywhere in the world”. Put another way, “we have all the energy we need in New Zealand for centuries ahead”, putting us in a rather better position than most other countries.

Energy resources

New Zealand currently gets 35% of its energy from renewable sources, and Mike thinks we should be targeting above 50%. Long term, we should be aiming for even higher than that, but you’ve got to start somewhere, and at the moment there’s very little discussion about how we’re going to improve these figures.

Over the years, and in many different forums, Mike has said many times that the best opportunities for NZ to use energy more efficiently are in transport. Why is that? A unit of energy saved in transport is going to be much more valuable to the country than a unit saved in electricity. Oil is our biggest import, so cutting down on petrol use is good for our current account deficit. Plus, our electricity is 80% renewable, so it has quite low greenhouse gas emissions. Reducing our oil consumption will have a bigger impact on the environment.

GHG issue

For electricity, there’s already 3,500 MW of extra capacity with resource consent in place, which is a lot. But we’re faced with flat or falling demand, and different expansion opportunities are competing with each other – he’s probably talking about solar here, as PV panels are potentially just crowding out the renewable electricity we’re already getting from the grid.

Mike’s presentation emphasised the role that electric vehicles could play in making our transport sector more energy efficient. That’s fair enough at a NZ-wide level. However, at TransportBlog we’ve argued for years that public (and active) transport can also make a big difference here, especially for Auckland and our other cities, and it can have an effect now, not in the decades to come. This is something that New Zealand researchers – and policymakers – should place more focus on.

Energy efficiency isn’t just good for the environment, though – it could also save New Zealand $2.4 billion a year. More than 25% of that saving could come from private vehicles, i.e. cars and similar.

Wrapping up, Mike argues that we need to focus on getting more efficiency out of our transport system (and our heat system, but that’s a bit off topic for TransportBlog), rather than our “fetish” with electricity. Sounds good to me; thinking about it, the government has goals in place for increasing our renewable electricity share to 90% (although they’re not doing anything to move towards that goal), but there aren’t any targets for our transport system that I’m aware of. In 2015, it’s time to put targets in place, and policies to achieve them. These should include public and active transport programmes.

International air travel and emissions

I’ve just come back from a holiday in South Africa, and it occurs to me that flying there and back blows my other transport-related emissions for the year out of the water. My partner and I use around 1,000 litres of petrol a year between us, travelling 10,000 km or so. Our CO2-equivalent emissions from this driving are around 2.3 tonnes. On this holiday, though, the return distance is about 28,000 km, or 56,000 km between the two of us (I’m assuming all the flights are in a straight line, to keep things simple). That’s a pretty long way to travel – almost one and a half times around the planet, and probably one of the longest trips you could make from New Zealand, although not that much further than going to Europe.

Long-distance air travel burns a lot of fuel. As a rule of thumb, the level of emissions from this fuel combustion is about the same as a single-occupant car, per passenger kilometre. Aeroplanes are usually at least 60%-70% full, of course, compared to a 20% full car, but it takes rather more energy to sling people through the sky at 900 kilometres an hour. My flights were with Qantas, and – good on them – they’ve got an emissions calculator and ask you if you want to offset your emissions. Here’s the results I got, which seem reasonable.

Qantas emissions results

In total, the calculator tells me that the flights created just over 4 tonnes of emissions per person, which you can then offset at a cost of less than AUD $10/tonne (reflecting low market prices for emissions in the schemes where they are traded, which may not be a true picture of their impact). I didn’t pay the offset – I’m wary of tokenism – but that’s not really what this post is about. I’m wanting to highlight a couple of other issues.

Firstly, the Qantas calculator, like most other ones you might be able to find, is based mainly on the direct emissions from fuel combustion. However, total flight emissions can be quite a lot larger than this. Air travel makes a big contribution to climate change through high-altitude emissions of water vapour, nitrous oxides and other gases which are believed to have a greater impact than they would at ground level. Most (all?) emissions tax/ trading regimes don’t take this into account at the moment, because there’s still a bit of debate around the size of the effect. Presumably this will change at some point, as the science becomes more precise. For now, I’d just note that the estimates you’ll get from these calculators should be considered very much at the low end.

Secondly, long-distance air travel is an amazing thing. You can now get to the other side of the world in less than 24 hours, even with a stopover or two along the way. This has made all sorts of new trips possible, and air travel has grown at an astonishing rate over the last 50 years or so. The lack of substitutes for this rapid, long-range travel makes it all the more important that some solutions are found to the problem of its emissions. Progress is being made – see this post, and I’ll write soon about the potential for biofuels to be used in aviation – but there’s a very long way to go. Realistically, it’s going to be much easier for the world to cut emissions in other areas, rather than aviation.

Thirdly, countries like New Zealand should be very aware of this kind of thing; tourism is a big earner for our economy, and many of those tourists come from distant markets like Europe or America. Greater awareness of climate change issues could affect long-haul travel. South Africa’s in a similar position, if not as remote as NZ – there was a quote I read somewhere which said that, given the problems they have with animal poaching, the only way South Africans would respect and value their wildlife and wilderness areas sufficiently would be if they could build a sustainable eco-tourism economy out of them. As for outbound tourism from NZ, i.e. Kiwis travelling overseas, the reality is that we do a lot of it, and it’s a big part of our lifestyle. I’d argue that this creates a need to focus more on emissions here at home, if we want to keep enjoying the benefits of overseas travel. There are plenty of people who, like me, actually create most of their emissions when going on holiday rather than through what they do at home.

Climate change and New Zealand cities

Environmentalists sometimes have an uneasy relationship with cities. Because they concentrate a lot of people and economic activity in relatively small places, they also concentrate a lot of negative environmental effects. All that concrete, all that energy being consumed, the kilometres of malls and highways and subdivisions! It can’t possibly be good, can it?

As it turns out, cities can be quite environmentally friendly. The same factors that make cities economically efficient – the ease of interacting with others in a dense environment and the economies of scale that arise in large, well-connected places – can also make them environmentally efficient.

However, there are large variations in environmental efficiency within and between cities. Cities which offer better housing and transport choices tend to have much lower per-capita carbon emissions – a fact highlighted by a 2011 study of carbon emissions in 100 cities:

  • In the United States, the emissions per person in Denver are double those of people in New York, which has a greater population density and much lower reliance on private vehicles for commuting.
  • In Toronto, residential emissions per person in a dense, inner city neighbourhood with a high quality public transport system are just 1.3 tonnes of carbon dioxide equivalent, compared to 13 tonnes in a sprawling distant suburb.

Auckland’s Low Carbon Action Plan presents some of this data in a fascinating infographic:

Per-capita emissions in cities

Interestingly, Auckland doesn’t come out too bad on this comparison. We’re nowhere near as efficient as Vancouver, Stockholm, or Copenhagen, but we are in the same ballpark as moderately efficient North American cities like New York and Seattle. This is probably down to our high share of renewably generated electricity, as well as our relatively short commutes.

But can Auckland become more environmentally efficient, or will it grow in a way that causes it to lose its edge? In order to get a sense of this, I took a look at variations in carbon emissions from commutes within New Zealand’s three largest cities.

The maps below presents some preliminary estimates of carbon emissions. They’ve been calculated using the Census journey to work data presented in my recent Location Affordability Index paper, which allowed me to identify how far people were travelling to work and what mode of travel they were using, as well as some supplementary assumptions and estimates from several sources (e.g. EECA, NZTA). [I will put together a working paper on the analysis when my work at MRCagney permits!] Lighter yellows reflect lower average annual carbon emissions from commute trips, while darker blues represent higher emissions.

Annual CO2 emissions per commuter DRAFT v1

A few first thoughts about these findings:

  • These maps really show the power of proximity. People near the centre of the city tend to travel shorter distances to work, on average, because they’re closer to more jobs. This is obviously good for commuters – which is why house prices are so high in Ponsonby and Mount Eden – but it’s also great for the environment.
  • They also demonstrate the importance of transport choices. Commute emissions in Wellington suburbs tend to be much lower than in similarly-situated Auckland suburbs, because many Wellingtonians can choose between driving, an efficient electric train system, a frequent bus network, and relatively good walking and cycling.
  • Lastly, these maps highlight the perils of urban growth. Suburbs at the fringe of the city are much less environmental efficient than suburbs closer in. For example, moving from Mount Eden to Flat Bush could be expected to raise your commute emissions by one ton a year. (And leave you sitting in traffic for that much longer!) This is a particular challenge right now in Christchurch, where satellite towns with long commutes have absorbed households displaced by the earthquakes.

Of course, as a coastal city Auckland has some strong incentives to reduce its carbon emissions:

Paddleboarding on Tamaki Drive

Paddleboarding on Tamaki Drive may be fun for a day… (Source)

Dr Sean Simpson from Lanzatech

On 8th October, Dr Sean Simpson from Lanzatech will be speaking at the University of Auckland, on the subject of “Climate-friendly fuel: A challenge of scale and time”.  This is part of the Energy Centre’s Energy Matters lecture series.

Sean is a great speaker – I saw him give a keynote address at the Energy Conference back in March – so I’d strongly recommend coming along if you’re interested in these issues, or even just if you’re into science or commercialising new technologies. You can register here, and it’s a public event so anyone can attend.

The synopsis for the lecture is:

World energy demand is expected to increase by up to 40% by 2030 with renewable sources playing an increasing role in the primary global energy supply. Internationally, governments have already begun incentivising and mandating the increased use of renewable fuels in the transport sector. It is anticipated that the global markets for more environmentally sustainable alternatives will exceed $100 billion by 2020 so finding sustainable, scalable solutions that will safeguard the environment while not detrimentally impacting food supplies is essential.

This talk will discuss sustainable hydrocarbon fuel and chemical production processes, ranging from available, mature technologies, to processes on the brink of commercialisation and those still further back in their development stage.

 

And the following gives more detail on the speaker:

Dr Sean Simpson is the Chief Scientific Officer and Co-founder of LanzaTech. He leads the development and commercialisation of the company’s core technology, which involves taking waste gases from steel mills and converting them into high-value low-carbon fuels and high-value chemicals. The core technology has been successfully demonstrated in a pilot plant in New Zealand and two large pre-commercial scale plants in China.

Since its inception in 2005, Dr Simpson has led the company to secure numerous rounds of venture capital funding, significant commercial and technical partnerships with leading global organisations, and government R&D grants. His leadership has encouraged collaboration between biologists, fermentation specialists, process and design engineers and business development teams to develop the technology and the company to become a global leader in gas fermentation.

Prior to LanzaTech, Dr Simpson had eight years’ experience in bio-products development and is the author of more than 20 publications and numerous patents.

If you want a bit of a sneak preview, Sean’s presentation at the Energy Conference was filmed and is on Youtube.

Anyone remember global warming?

As an economist, I get a bit annoyed about inefficient spending (which the Roads of National Significance are), and frustrated at the lack of economic thinking that goes into party policies (all political parties come out badly here – e.g. Labour’s Working For Families seriously messed up marginal tax rates and incentives to work more for mid-income earners). But I’m deeply troubled by the dismissive attitude displayed by the current government towards what I see as the biggest challenge of our time, and probably the biggest market failure the world has ever experienced. I’m talking about climate change, by the way.

Climate change isn’t really getting a lot of coverage these days. It’s not forming a big part of the media debate, or political conversations, or everyday conversations from what I can see. One of the few people who has been writing about climate change is Brian Fallow, the Herald’s economics editor. In 2013, he wrote that “the Government’s refusal to do much of anything to curb New Zealand’s emissions is as economically myopic as it is morally contemptible”, but he’s written a number of other insightful articles. Unfortunately, those who don’t read the Business section of the paper may have missed them.

Someone shared a link on my Facebook a couple of weeks ago – it was an image from Generation Zero, our collaborators on the Congestion Free Network. It reads: ‘Last night, we asked Bill English: how will you act to prevent the impacts of climate change?”‘ The reply reads: “it’s a non-issue because there are more pressing concerns”.

I wasn’t at the event where this question was asked, and I’m not sure if it’s a quote or paraphrased somewhat, and at any rate the Minister of Finance probably isn’t the best person to field this question. Nonetheless, the exchange above is a pretty accurate summary of National Party policy on climate change. Essentially, there isn’t one, except to ease back on the schemes put in place under the previous Labour government, which weren’t sufficient anyway.

Unfortunately, it seems that climate change is much less of a pressing concern for people these days. Unfortunate, because it continues to happen whether we’re thinking about it or not. Thanks to a Google tool called Google Trends, you can actually look back and see how interested in climate change people were, based on their Google searches. The following graph shows indexed interest in the terms “climate change” and “global warming”, compared to each other and over time, worldwide:

Google Trends Results - Worldwide

 

In 2007, the IPCC Fourth Assessment Report was released, everything was going pretty swimmingly in terms of the economy, and it seemed like global warming was always in the news. Environmental stories started to get crowded out in 2008, when the world recession hit, and haven’t really made a comeback – the IPCC Fifth Assessment Report, being released over 2013-2014, was barely a blip.

The graph below shows the same stats for New Zealand, from 2007 onwards – the data before that is patchy. The results are similar to the worldwide graph:

Google Trends Results - NZ

 

These trends fit with some Gallup poll results which show that, around 2008 and once the recession hit, Americans became generally less concerned with global warming, and more inclined to think it was exaggerated or made up altogether. I’m sure I’ve seen similar results for New Zealand in a report done by Roy Morgan or someone, but I can’t lay my hands on it right now.

I heard Simon Bridges (the Minister of Energy and Resources, and Associate Minister for Climate Change Issues) speak at the NERI Energy Conference in March. His keynote address was filmed (I don’t recommend watching the whole video – skip to the questions from 22 minutes in; the speech text is here but not that interesting), and Professor Ralph Sims later pulled out some of Simon’s key quotes for use in his own presentation:

“Our mixed and balanced approach to energy means that I am motivated by the opportunities petroleum development presents for New Zealand socially, economically and environmentally.”

“But remember, New Zealand is only responsible for 0.14% of global greenhouse gas emissions”.

Simon was also asked about the “90% renewable electricity by 2025” target, which was initially set by Labour but also supported by the current government. I never got round to writing the follow-up post to the one where I talked about the technical feasibility of getting to 100% renewables, but long story short, there’s wide agreement that the 90% target won’t be reached without government intervention, which National has not been willing to provide so far. Simon made some valid points in his reply, but again long story short, the government isn’t likely to change anything. In fact, the one thing it has done in this area is lift the moratorium on new thermal (non-renewable) generation, so if anything that would make the target harder to achieve.

Similarly, Simon didn’t have much to say on what the government planned to do on climate change in NZ, and again I note that they have eased back some of the measures set in place by the Labour government. Simon said there would be an announcement on the subject later this year, and we still haven’t seen anything on this, but presumably there will be something announced before the election. Since the government has gone all in on the “more roads” approach to transport, I’d imagine any policy would involve electric vehicles.

The thing is, we can’t go on just ignoring climate change, wondering whether it’s still an issue, or putting it in the “too hard” basket. We need to take steps to reduce our climate impact and figure out ways to transition our economy appropriately. For New Zealand, that means concentrating on transport and agriculture. Building more motorways is clearly not going to help us reduce our transport emissions. And subsidies for electric cars won’t help much either. We’ve got to invest in public and active transport, and allow our cities (especially Auckland) to intensify. There are so many good reasons to do this; the climate is just one of them.

The government needs to show some initiative on this, and overhaul its transport policies. But we, the public, have to make this a talked-about issue again. Tell the politicians, the MPs and the political parties that climate change is an issue we care about. Tell them that they need to change their policies if they want to earn our votes. Whoever you’re voting for this election, or whether you’re voting at all, tell them what you think, and if they hear enough people talking about it, climate change will be back on the agenda.