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Insights 2: 5 February 2021
Newstalk ZB: Oliver Hartwich on why a poor school curriculum plus a lack of oversight is failing students
Podcast: Matt Burgess on the Climate Change Commission's emissions report and the steps it should take to reduce emissions in NZ
Newsroom: Eric Crampton says we could do more good investing in carbon mitigation projects abroad those than doing it on our own at home

Defending the ETS
Matt Burgess | Senior Economist |
This week, the Climate Change Commission told the government it should take control of the economy to lower emissions.

The Commission’s advice, part of its draft emissions budgets to 2035, was based on doubts that New Zealand’s Emissions Trading Scheme (ETS) will be enough.

The ETS has been reducing emissions since 2008. It is a cap and trade system based on government-issued emissions permits. The permits trade for a price, which is effectively the cost of emitting a tonne of CO2. Higher permit prices lead to lower emissions.

For years, the ETS was watered-down by lenient policies and delivered only marginal emissions benefits. But recent reforms have given the ETS bite. It has a firm emissions cap and a sinking lid on emissions.

The ETS covers most of the economy, working through the price system. It raises the price of products according to their emissions, with the biggest increases for the highest emitters, to nudge consumers towards greener alternatives. The ETS is based on the same principle as alcohol and cigarette taxes.

The ETS can pack a good punch. At $38 per tonne of emissions, the ETS raises the cost of coal-fired electricity generation by around 60%. In the UK, electricity sector emissions have dropped 55% since 2013 as generators dumped coal for cleaner gas. This transition was mainly due to their ETS, according to a recent study.

It is said that the ETS cannot work because consumers make mistakes. Consumers will keep driving their petrol car even when the ETS makes electric the better choice, it is believed.

But consumer mistakes do not kill the ETS. If consumers do not change their behaviour, the ETS will simply raise the emissions price further until, eventually, behaviours change and emissions fall. Consumer mistakes mean a higher ETS price, but emissions still come down.

Of course, prices can only rise so far. But in practice it does not take astronomical prices to bring down emissions. Consumer mistakes are not frequent enough to break the system.

The ETS may be the best asset we have to get to net zero emissions. The Climate Change Commission says an ETS price of just $50 will get us to net zero emissions of CO2 by 2050.

So before the government commits to sweeping economic controls to reduce emissions, it should first check what the ETS is already delivering.

Becoming (il)literate
Steen Videbeck | Research Fellow |
It was both distressing and inspiring. In 2015, while I was a part of a small delegation to a small rural school in Northland, I met a student with an intriguing story. Despite attending school all his life, the 15-year-old boy in front of me had just learnt to read.

His pride in describing his achievement was obvious, as was his gratitude to his new school and teachers. I admired his bravery. It can’t have been easy sharing his story with us - an MP, a Ministry of Education official, and me, an advisor. However, my persistent thought was ‘How could a high school student be illiterate in New Zealand?’

This experience is one of many that have reinforced my passion for education and my drive to find solutions. My journey to the Initiative has been somewhat unusual. I studied economics in New Zealand and the United States and worked as an economist. I then left my comfortable government job to retrain as a primary school teacher.

My first teaching job was at a low-decile rural school. However, I sadly became a teacher-retention statistic, as I quickly realised that my teacher training hadn’t given me the practical evidence-based tools that I needed to succeed.

Next, I worked on a high-profile school choice policy and then travelled halfway around the world to teach at one of Scandinavia’s most progressive schools. Throughout my journey, the importance of literacy has been underlined, and I am excited that it will be my research focus at the Initiative.

International assessments of New Zealand’s reading performance paint a worrisome picture. Both PISA (for 15-year-olds) and PIRLS (for 9-year-olds) scores have fallen, and our long tail of underachievement has persisted. Troublingly, the Adult Literacy and Life Skills Survey shows New Zealand’s literacy problems continue into adulthood with 14% having very low literacy. The results were even worse for the oldest age group (55 to 65), which points to this being a long-standing issue.

Behind the statistics, it is essential to remember that our failure has a human face. The 15-year-old boy I met is a stark example, but there are many more students suffering unnecessarily. Kids who label themselves as being ‘dumb’ because they are struggling to learn to read. Kids who withdraw from learning. Kids who face lowered expectations from their teachers. Sadly, many of these students never catch up. There are also the, often overlooked, flow-on effects on families – parents worried about their children and exhausted from searching for solutions.

Despite the challenges, there are many reasons to be optimistic. Every year the evidence base on effective reading instruction grows. I look forward to sharing my research findings with you.

Simulation of life
Dr Oliver Hartwich | Executive Director |
Call me a tragic but even in my spare time, I am thinking about politics. Thus, over the summer holidays, I stumbled across a new computer game: Democracy 4.

The developers’ promotion got me interested: “Have you ever wanted to be president? Or prime minister? Convinced you could do a better job of running the country? Let’s face it, you could hardly do a worse job than our current political leaders.”

With my ego so firmly stroked, I paid the $36.99 and downloaded the game.

What followed was a sobering experience. I could do a job much worse than our political leaders.

Democracy 4 is a game for realists. It starts from the premise that voters are self-interested. There are parents, capitalists, socialists, liberals, conservatives and other groups. You must keep them all happy.

But they are not the only ones. Your cabinet ministers are a rowdy bunch. They are not all equally capable, but they make up for it by being opinionated.

Add to that your party’s donors. Change your views too much, and you lose some. Go against their views, and you lose them all.

You play Democracy as leader of one of the world’s great nations.

Well, not quite. You can only pick from the UK, the US, Germany, Spain, Italy, France, Canada and Australia. Full credits to the developers for trying to model Australian politics, though.

Then the fun begins. There are myriads of policies to introduce. But you can only do so much at each turn. Plus, it takes time for effects to show. And you are always at the mercy of your cabinet’s competence.

Life then throws unforeseen stuff at you. Or, as Harold MacMillan put it, “Events, dear boy, events.”

Players in Democracy 4 will fight fires on every front all the time.

The deficit balloons because your tax cuts do not immediately stimulate the economy. The new highway is not yet built to please the motorists, but it already annoys the environmentalists. Taxpayers don’t thank you for cutting subsidies, but the previous recipients punish you all the more.

For me, the ordeal is always over after the first term. Not because I had enough of the game but because voters had enough of me. In the low double digits, my party will be turfed out.

After many attempts at Democracy, I am happy to cut our political leaders some slack. I would never want their job.

And so, my gaming escapism has shifted back to football and flight simulators.

It’s a world where my crappy club wins the league, where we can travel internationally again – and where I need not worry about politics.

On The Record
All Things Considered
  • Graph of the week: COVID-19 vaccinations.
  • Not even exile is safe. Shouldn’t western democracies do more to protect those needing asylum?
  • Crop genetics are big business. Could a farm in Canada wind up being the ones able to legally profit from Kiwi cannabis cultivars?
  • Is this he best political ad ever?  Rachel Crosbie would like her dad to be Premier of Newfoundland and Labrador.
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