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Insights 26: 19 July 2019
Eric Crampton argues on Newsroom for a consistent price on greenhouse gas emissions to tackle climate change
Read our submission on the Climate Change Response (Zero Carbon) Amendment Bill
New Report: Work in Progress: Why Fair Pay Agreements would be bad for labour

A good decision
Matt Burgess | Research Fellow |
Lost in the government’s response to the Interim Climate Change Committee this week was the decision to put on ice its 100% renewable electricity policy to focus on other more effective measures.

It is hard to overstate the significance of this decision. First some background to explain why.

The policy, a commitment to 100% renewable electricity in New Zealand by 2035, was agreed shortly after the 2017 general election in negotiations between the Labour and Green parties. The policy is in their agreement on confidence and supply.

In December 2017, Cabinet agreed to set up an interim committee to plan the 100% renewables policy, among other things, while it established a permanent Climate Change Commission, also in the coalition agreement.

After renegotiating its terms of reference, the interim committee took a careful look at the 100% renewables policy. It found the policy would increase power prices but do little to reduce emissions in New Zealand’s already green electricity system.

The committee recommended the government focus on electric vehicles and the electrification of industrial heating. Transport and process heat together produce five times electricity emissions.

This week, the government accepted the committee’s recommendations. The 100% renewables policy is now an aspiration, something to pursue when technology permits. The policy will be reviewed every five years.

This week’s decision by the government is significant because emissions policies vary enormously in their effectiveness. Policies raise emissions with disturbing frequency.

That means the results of New Zealand’s emissions efforts will be decided by its ability to find and scale policies and approaches that work, and avoid policy mistakes like 100% renewables.

New Zealand will do more for the environment if its political leaders are granted the room by voters to let go of emissions policies that do not work.

That the government wore almost no criticism and even got a couple of pats on the back for its decision may have revealed a political market for effective action on climate.

This all points to a willingness to link decisions on emissions policy to actual results for the environment, rather a wellbeing approach for the environment.

The interim committee can take considerable credit for this week’s result. It was only on the committee’s initiative that the 100% renewables policy was tested at all.

The committee is directly responsible for saving New Zealand from a policy disaster, a historic contribution. And kudos to the government for heeding its advice.

Danish lessons
Dr Oliver Hartwich | Executive Director |
In late June, the Initiative took a delegation of our members to Copenhagen.

For a week, more than three dozen New Zealand business leaders travelled Denmark and South Sweden. We talked to business leaders, academics, journalists and politicians, and visited companies, education facilities, and government and non-government organisations.

This was not a mission to find new trading partners but a search for policy inspiration. There were plenty of opportunities on our travels for inspiration, especially in infrastructure.

In New Zealand, we know how long it takes to get even moderately sized infrastructure agreed on, financed and built. Denmark’s infrastructure, on the other hand, inspired us.

Take the Øresund Bridge and Tunnel. They connect the Danish capital of Copenhagen and the Swedish city of Malmö. At a length of 8 km, the bridge is the longest combined rail and road bridge in Europe. On the Danish side, it ends on an artificial island from where it goes into a 4 km tunnel.

More impressive still, the project was built in just five years and is entirely user-financed. After 30 years of operation, user fees will have covered the cost of this multi-billion-dollar project. Over this period, the bridge will have generated substantial economic benefits on both sides of the Øresund as Copenhagen and Malmö integrate more closely into a regional economy.

Though New Zealand also occasionally delivers new pieces of infrastructure, they rarely happen at this scale, speed or financial basis.

Denmark also made us think about wellbeing and living standards in New Zealand. We talk a lot about both. However, we often forget how both are derived from a thriving economy with high productivity.

Denmark’s GDP per hour worked is 78 percent higher than New Zealand’s. Its GDP per capita, however, is only 35 percent higher than ours.

The difference lies in the hours worked per capita. Per capita, the Danes work 24 percent hours fewer than New Zealanders. That is because of their 37.5-hour working weeks and six weeks of paid holidays per year. No wonder they celebrate their happy hygge lifestyle. They have the time to do that.

The Danes can only afford such limited working hours while still producing an extraordinary amount of GDP because they are fantastically productive.

Perhaps this, more than anything else, was the bottom line of our visit. Whatever Denmark does, it can only do so because it is backed by impressive productivity.

If New Zealand wants to improve its wellbeing, it needs to lift its abysmally low productivity first.

Cat posters and wellbeing budgets
Dr Eric Crampton | Chief Economist |
There was a line of ’80s and ’90s motivational posters, often involving pictures of cats, with quips that might help improve spirits around the workplace. One of those, from memory, read something like, “You don’t have to be crazy to work here, but it helps!” Other variants read, “You don’t have to be crazy to work here; we will train you.”

None of them would pass modern sensitivity standards, and they were never really motivational or funny in the first place. But they did come back to mind on reading through an Official Information Act response.

In May, I attended the lock-up for the first wellbeing budget, in which every dollar spent was supposed to do the most good possible to improve wellbeing.

I wondered in this newsletter then whether the government was really taking things as seriously as it should be.

The budget’s $1.9 billion commitment to improving mental health outcomes addresses a very important issue. But taking the problem seriously means making a serious commitment to figuring out which programmes and which providers do the most good. Doing it right requires designing the programmes with one eye on how they might be evaluated.

An Insights reader followed up with an OIA request of the Ministry of Health for any planned future evaluation frameworks, plans or processes for the budgeted initiatives. So we might know how seriously it’s all being taken.

He forwarded the reply to me this week.

It read, “Currently, no evaluation frameworks, plans or processes have been created as this work is just commencing.”

But it also promised that once work is underway, the Ministry would start incorporating information collection and evaluation into the implementation of the initiatives.

Fair enough that they haven’t yet gotten anything fully fleshed out, but this sounds more like evaluation has been a complete afterthought for something as important as mental health outcomes.

We might have hoped for pointers to evaluation frameworks that the government has been thinking about as models.

Or discussion of the specific outcomes it is considering measuring.

Or how it is thinking about building evaluation into programme design – that part especially matters at this point.

Instead we’re back to the cat posters. You don’t have to be crazy to work under a wellbeing budget, but if you are, we might have a hard time telling whether the wellbeing budget has helped you or not.

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