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Insights 8: 19 March 2021
NZ Herald: Matt Burgess on emissions offsetting
Taxpayers' Union Podcast: Oliver Hartwich on climate policy
Newsroom: Eric Crampton on the proposed vaping regulations

The Climate Commission’s transparency problem
Matt Burgess | Senior Economist |
It is now three weeks and three days since the Climate Change Commission extended the submissions deadline for its draft emissions budgets by two weeks.

The extension was prompted by concerns about the Commission’s refusal to release selected data from its models.

The extension pushed the submissions deadline just beyond four weeks, the required turnaround time under the Official Information Act (OIA). We immediately lodged an OIA request with the Commission for “all data on the marginal abatement costs of electric vehicles”. The Commission’s response is due in five days.

Our request aims to solve an enduring mystery behind the centrepiece of the Commission’s emissions strategy, their proposed ban of petrol and diesel light vehicle imports from 2032. Under the Commission’s plan, only electric vehicles (EVs) will be imported after that date.

The question is how the Commission’s models, which optimise for least cost reductions in emissions, could have arrived at a strategy to go hard and early on EVs. EVs are currently expensive relative to conventional vehicles. The Commission’s analysis implies EVs will only become competitive in their own right in the late 2030s. Research suggests that, for now, EVs are among the least affordable ways to reduce emissions.

On its face, the better strategy is to reduce emissions via other channels first and shift to EVs as costs come down.

So far, the Commission has refused to release all of its assumptions. It has not given a plausible explanation. Speaking to Parliament’s Environment Committee on 25 February, the Commission’s Chair and Chief Executive implied the data had already been released or does not exist. But is this actually the case?

It is conceivable the Commission has used negative costs in its models to prop up its EV strategy. In 2018, a study by the Ministry of Transport (MoT) found the Feebate policy, an EV subsidy, reduces emissions at a negative cost. MoT counted all of the benefits of EV ownership, mostly fuel savings, but appears to have counted only some of the costs.

If this is the case, then the Commission’s EV strategy, one of the more draconian policies ever seen in this country, might not survive five minutes of scrutiny.

Transparency is essential. As the Chair of the Major Electricity Users Group said, “If the modelling is robust enough for the Commission to use to make far-reaching recommendations, it should be robust enough for scrutiny.”

Better late than never
Joel Hernandez | Policy Analyst |
Since 2013, the Ministry of Education has spent $747.7 million on building, upgrading, and maintaining modern learning environments (MLEs). And yet, with nearly three-quarters of a billion dollars spent, the Ministry is only now starting to evaluate MLEs, eight years after their implementation.

Also known as 21st-century learning environments, flexible learning environments (FLEs), and innovative learning environments (ILEs), MLEs are the antithesis of traditional classrooms.

Instead of rows of desks facing the teacher, MLEs are typically large open spaces designed for ‘student-led learning. The pedagogy in MLEs is different too. Rather than a teacher leading the lesson from the front of the classroom, students are encouraged to discover knowledge and skills themselves in MLEs.

Frustratingly, the Ministry’s evaluation of MLEs will only measure air quality, warmth, and noise levels rather than students’ educational outcomes.

That is not to say air quality, warmth, and noise are not important, but they are only elements of a good classroom. A classroom can look and feel good, but it must facilitate and result in kids gaining a quality education.

In some schools, MLEs are large enough for 60 kids supported by three teachers instead of 25 kids led by one teacher. As a result, it is not hard to see why MLEs provoke mixed feelings from teachers, students, and parents.

On one side, news stories say some parents have actively avoided schools that have had MLEs thrust upon them by the Ministry. On the other hand, the Ministry of Education’s head of infrastructure told Radio NZ they had overwhelmingly positive feedback from teachers, students, and families.

Anecdotes can be helpful, but it is imperative there is rigorous empirical research to prove whether MLEs and the student-led pedagogy that comes with it are more effective than traditional classrooms and teacher-led pedagogy.

There are a myriad of ways MLEs could impact a student’s education, for better or for worse. It is therefore imperative that the Ministry not only monitor how a classroom feels but what matters the most, student’s educational outcomes in each classroom.

Standardised testing in both traditional and MLE classrooms will be crucial for identifying how each classroom performs.

My colleague Briar Lipson has argued strongly in her book, New Zealand’s Education Delusion: How bad ideas ruined a once world-leading education system, that it is the responsibility of the innovator to prove their product, MLEs in this example, is an improvement of the status quo.

Indeed, the Ministry must show why it has invested hundreds of millions of dollars in MLEs and risked hundreds of thousands of children's education.

All hail the Technoking
Dr Oliver Hartwich | Executive Director |
Filings to the United States Securities and Exchange Commission (SEC) rarely have entertainment value. That is unless Elon Musk is involved.

Electric car company Tesla just lodged a current record under Section 13 or 15(d) of the Securities Exchange Act of 1934. Its purpose: to inform the SEC about new job titles for Tesla’s chief executive Elon Musk and chief financial officer Zach Kirkhorn.

While retaining their CEO and CFO titles, Musk made himself ‘Technoking of Tesla’ and Kirkhorn ‘Master of Coin’.

Such grandiose titles are appropriate at Tesla. It is a company with a market capitalisation of US$ 700 billion. That is roughly US$1.3 million for every car produced. Just by comparison, for Toyota that number is only a measly US$ 117,000.

Tesla’s price-earnings ratio of just over 1,100 is also somewhat unusual, as the long-run average for S&P 500 stocks stands at around 15. Musk’s techno-kingdom would have to last longer than a millennium for Tesla’s annual profits to equal the share price.

With figures like that, no wonder CEO and CFO no longer cut it.

The only surprise is how modest Musk and Kirkhorn have been. ‘Technoemperor’, ‘Technopope’ or ‘Technogod’ would have been fitting options for Musk.

‘Master of Coin’ is hardly sufficient, either. As a tower of dollar coins, Tesla’s market cap would stretch to the moon and back – twice, in fact. ‘Money Master’, ‘Wealth Wizard’ or ‘Treasure Top Gun’ would better reflect that.

With all this grandiosity in the wonderful Kingdom of Tesla, now would be the time for King Elon and his Master of Coin to sort out a few minor issues.

The latest J.D. Power 2020 Initial Quality Study compared 32 car brands and how many technical issues their buyers report in the first three months. Tesla came out worst with 250 problems for every 100 new cars. The industry average was only 166.

Gaps between exterior panels, door-closing and paint-job issues are not what one would expect in a Technoking’s products.

But such misleading advertising would not be an issue for the SEC but for the consumer protection division at the US Federal Trade Commission.

In the meantime, let’s see if the SEC accepts the introduction of monarchical elements in US corporates. And let’s wait for King Elon’s next stoush with the SEC once he starts tweeting ad hoc stuff again.

On The Record

Other Initiative activity:
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