Muddled economics ignore reality

“The analysis of the NZIER in their latest report is muddled and superficial” Exactly. I was relieved to see this response from the Parliamentary Commissioner for the Environment, Dr. Jan Wright, to the report the NZ Institute for Economic Research has just published on sustainable development priorities.

The report’s findings on climate change are a challenge to the imagination.  It provides some criteria for measuring priorities which lead to the conclusion that “the main focus of climate change policy in recent years, emissions reduction, is not the most crucial priority for environmental policy.”

In fact the report demotes reducing greenhouse right to the bottom of the list of priorities.  Top equal are improving urban air quality and reducing pressure on biodiversity and ecosystems. Next, strangely, comes our international obligations on climate change which by some perverse economic logic do not include reducing emissions.  Adaptation to climate change is relatively high on the ranking list.  Here’s some of the convoluted reasoning:

“Maintaining New Zealand’s reputation as a constructive, pragmatic participant in international efforts is a higher priority in climate change policy than pursuing an all gases all sectors carbon pricing scheme ahead of other countries, which poses significant risk of costly short term business contraction and carbon leakage that may take some time to recover from. Focusing action on things that are controllable would give reputation a higher priority than restraining atmospheric emissions, and similarly the risks to land, water and associated infrastructure would imply a greater emphasis on adaptation issues and the avoidance of decisions that exacerbate future risks.”

Apparently the reason why we don’t need to give high priority to emissions reduction is because we contribute only 0.3% of global emissions “and even reducing these to zero would have no appreciable effect on the climatic changes experienced in New Zealand.” Why New Zealand?  Climate change is a global matter.  The very next sentence acknowledges that:

“Atmospheric composition is a global externality so it requires a co-ordinated international response to effect any change. New Zealand’s interest is in doing what it needs to support the emergence of an effective international response.”

Evidently the writers consider that “doing what it needs” doesn’t include reducing its own emissions.  I’m sure that will go down well in world forums. Imagine the NZ representatives announcing “We’re here to support an effective international response from other nations than our own.”

Some of the report could be straight out of government policy. Emissions reduction is going to hurt the economy, and must therefore be limited to what we judge the economy can cope with. Not a hint of any possibility that there could be benefit to the economy from its greening:

“…pursuing aspirational ‘stretch’ targets for emissions reduction which are unlikely to be met without incurring economic and social disruption is hardly going to enhance New Zealand’s reputation for sensible policy or attract other countries to take on binding emission reduction commitments. The ‘leadership’ that New Zealand can show is limited by the likelihood that others will follow.”

Economically timorous, internationally naive, but above all showing no sign of any understanding of the magnitude of the threat from climate change. I had just finished writing the review of Tim Flannery’s Now or Never when I sadly encountered the NZIER report. There are economists who grapple with the reality, as Nicholas Stern and Paul Krugman exemplify.  But evidently not the NZIER.

Last word to Jan Wright:

“Climate change is the biggest environmental challenge of our time. I am shocked and disappointed to see a report suggesting otherwise. The report is fundamentally flawed.”

17 thoughts on “Muddled economics ignore reality”

  1. Thanks for the link Carol. I hadn’t heard the interviews, but I have now. Rather makes me wish I hadn’t. Nick Smith is so mired in the theme of economic responsibility that I don’t think he’s able to talk about much else. He certainly didn’t sound like the climate change minister. Deeply depressing.

  2. I wonder if our dear friend Rodney has an alliance with Peter Clough? All this palava around balancing the economy with the environment is crucial but the continual bleating is getting a bit tedious.

  3. How astonishing that NZIER would fund, out of its own pocket, a report whose conclusions must give comfort to its large corporate and government clients.

    I mean, who could have seen that coming?

    PS: As I recall, in the early 80s NZIER led the charge to justify the economics of the proposed Fletcher – AluSuisse aluminium smelter at Aramoana.
    When their faulty analysis was shredded by economics professor Paul van Moeserke of Massey University, government pressure was applied and van Moeserke soon left for a position overseas.

    1. Carol: I’ll have to say that I didn’t much like his foray into sociology towards the end – I think one’s general political philosophy is more of a factor in climate change beliefs than is age, per se.

      John Quiggin might disagree with you. In his post on the taxonomy of delusion he remarks that Emeritus disease has a bad prognosis and quotes Max Plank on the subject:

      a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

      More importantly Monbiot is pointing out that repeated exposition of the scientific case, however rational it may be, is not convincing the general public of the need for urgent action and is, in fact, strengthening their opposition to the likely lifestyle changes. Know anyone who has traded a Hummer (the vehicle) for a Honda recently? Chris Goodall believes that compromise will be necessary and sets out his case in the Guardian.
      Given the lack of progress to date I think it is unwise to dismiss the social scientists as they may be able to offer framings that help to remove the roadblocks. If you are interested you can see one such attempt here.

  4. Carol, yes I’d seen that piece during the day. I agree about the sociology. I’d be inclined to explain it more in terms that climate change is new science and profoundly unsettling and some older people just don’t/can’t make the effort to understand and adjust to it. But depressing it is, whatever the reason.

  5. Bryan it’s not age – it’s one’s general political philosophy. There are as many younger people out there who just don’t want to know or don’t care as there are older people. Then there is another factor – when older people are confronted with the fact that the world is going to be a very different place to what it is now (and not for the better) when their grandchildren are grandparents (and that it is a legacy of their actions!) – that is a hard thing to take.

  6. As for the NZIER well what can one say! Economists (with perhaps the notable exception of N Stern) as a rule it seems are are fixated by the GOLDEN RULE – “Those with the gold – RULE!”

  7. Imagine the NZ representatives announcing “We’re here to support an effective international response from other nations than our own.”

    You don’t have to imagine. That is exactly what NZ’s representatives are doing.

    1. What? They are ““We’re here to support an effective international response from other nations than our own.”” – yeah thats what China and India are doing too!

      1. The emphasis is on “EFFECTIVE”.
        Africa has much to loose from inaction on global warming – we can already see the result in the running dry of the Nile, Nigeria is loosing 351,000 hectares of rangeland and cropland to desertification each year, the area of Lake Chad has shrunk 96% in 40 years . The ice cap of Kilimanjaro reduced by 33% from 1989 and 2000 and it is considered that it will be gone by 2015. Mt Kenya has lost 7 of its 18 glaciers. The rivers that are fed by these ice masses are becoming seasonal. 2 million people depend on these rivers for their water and the irrigation of their crops.
        Yes Africa wants an “effective” international response.

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