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Source: Greenpeace New Zealand

Bruce Jesson Memorial Lecture 2019

Introduction

It is a real privilege to present this year’s Bruce Jesson memorial lecture.

I was lucky enough to meet Bruce and Joce Jesson when I was studying the Alliance as a postgraduate student. Bruce and Joce literally opened their home to me and provided me with a vast treasure trove of information about the Alliance and the history of progressive politics in New Zealand. And coming as I was from Australia it was an invaluable insiders’ perspective. In addition Bruce’s books and many articles over the years provided not only an important historical record but a theoretical conversation which is often lacking.

In making these comments I am speaking in a personal capacity not in a Greenpeace capacity nor in a Green Party capacity as I resigned from the Green Party four years ago to take up the Greenpeace role.

Tonight I will address a narrow but important question which is what kind of institutional reform befits the era of the long climate crisis.

The intergenerational nature of the climate challenge and the global nature of the climate challenge means that we can’t expect our existing institutions to get us through, so what kind of institutional reform should we undertake to help us make it through the long climate crisis that we have entered already but which will carry on through the rest of this century and into the next.

I will look at this question by starting with an examination of the strengths and weaknesses of the institutional reform the Government is proposing, in the form of the so called Zero Carbon Bill, which conveniently emerged from select committee consideration unsurprisingly unchanged yesterday.

From there I will look at what we can learn about institutional reform from the last great reforming Government in New Zealand, the fourth Labour Government, and apply those lessons to the Zero Carbon Bill.

I will finish by looking briefly at some of the broader issues within which this climate debate is occurring because the institutional reform I propose is a necessary but not sufficient condition to making this transition.

Zero Carbon Bill

The current Government’s major institutional reform regarding climate change is the so called Zero Carbon Bill, so let’s start there.

The Zero Carbon Bill contains four elements which together are a kind of institutional reform. Firstly there is an independent Climate Commission which provides advice on climate change. Second there are emissions reduction targets. Third, with advice from the Climate Commission, the Government must prepare five yearly carbon budgets and have a plan to meet the budgets. Fourth, the Government must prepare an adaptation plan.

This is modelled on the UK Climate Commission established a decade ago by the Conservative Party.

There are some valuable elements in the Zero Carbon Bill, there are some really terrible parts that aim to constrain civil society, and much that makes no difference. So I want to pull it apart a little.

I will start with the targets, move on to enforceability, then the new restrictions it imposes on civil society, before turning to the Climate Commission.

Targets

Let’s start with the targets which get a lot of the headlines but aren’t what they seem.

The first thing is that the Zero Carbon Bill is in no sense a zero carbon bill. Zero Coke means zero calories and if it didn’t that they would be prosecuted under consumer protection laws. But Zero Carbon (trademark) doesn’t mean zero carbon.

Just consider the target on biogenic methane – that is methane from biological sources such as agriculture, as opposed to fossil methane.

The Zero Carbon Bill’s biogenic methane reduction target is a 24% to 47% reduction below 2017 levels by 2050. And it has a shorter term target of 10% reduction in biogenic methane by 2030.

It seems silly to have to say it but I do – this is not ‘zero carbon’ in any sense. Methane is a super pollutant, much worse than carbon dioxide in the heating it produces over the next century – and it is one of New Zealand’s biggest greenhouse gas problems. And yet this bill sets a target of reducing methane emissions by a miserly 24% by 2050- in 30 years!!

This really is an inadequate target and we could achieve this target simply by applying best practice management even if the herd size was held static.

In fact it is the target chosen by the polluters themselves by a group established by the previous Government called the Biological Emissions Reduction Group. The Biological Emissions Reduction Group has the following members: Dairy NZ, Fonterra, Federated Farmers, Fertiliser New Zealand, Horticulture NZ, Beef and Lamb, Deer Industry NZ and their Government allies Ministry of Primary Industries and Ministry for the Environment.

The Biological Emissions Reduction Group is a body set up by the previous government, which itself had a record of doing nothing to cut emissions, with a membership of the biggest climate polluters in the country, to provide advice on how to reduce carbon pollution from their industry.

It is a classic fox in charge of the hen house situation so you can hardly expect it to call for cuts in pollution consistent with the climate emergency – it will understandably be guided by the financial interests of its members who are the biggest polluters. And here’s what they concluded:

“Modelling suggests that if there was widespread adoption of currently available mitigation options (mainly farm management practices) an up to about 10% reduction in absolute biological emissions from pasture based livestock is possible”

They conclude that a 10% reduction is possible just by adopting existing practices more widely. You may recall the 10% reduction number – it is the target in the so called Zero Carbon Bill for biogenic methane reductions by 2030 – the target in a decade’s time. The polluters advisory group went on to say:

“Modelling indicated that when all mitigation options [assessed by the NZAGRC] are combined into packages [, and assuming various rates of adoption of each practice by farmers], overall biological emissions in the future could potentially be reduced between 10-21% by 2030, and by 22-48% in 2050, [relative to MPI baseline projections.]”

Now there are a couple of provisos – the biological emissions reductions they are talking about here are mostly methane but also include nitrous oxide, and the reductions are against MPI baselines which of course project increases in emissions.

Nonetheless what is remarkable here is that the biogenic methane reductions identified in the so called Zero Carbon Bill are in fact very close to the methane reduction targets that the polluting industries themselves have identified as something they can achieve – the emission reduction ambition in the Bill is in fact the emission reduction ambition of the polluters themselves.

So the ‘zero carbon’ target which is not zero carbon but is simply the 24% methane reduction target over 30 years is much the same methane reduction target that the polluting industries said they could accept in their own published report.

So it’s more like Zero Coke actually had a quarter fewer calories than the Real Thing but gets to call itself Zero Coke anyway.

But, to be fair, you can point to the carbon dioxide emission reduction targets. They are zero carbon targets by 2050 and while they are not actually zero gross emission targets they are zero net emission targets. Tree planting is meant to soak up the difference to result in a net zero carbon dioxide position. Now I don’t want to haggle too much here about using forests to offset emissions but plainly it has its limitations.

So the targets are not zero carbon targets. Nonetheless you might say they are a start, which they are, and they are at least legally binding. But are they legally binding?

This takes us to the heart of one of the problems with the Zero Carbon Bill which is enforceability.

Enforceability

The problem with this zero carbon target is that it has no enforcement. Let’s say New Zealand doesn’t meet these targets, what happens? Well, nothing.

Now you might think if the Parliament legislates for climate emissions reduction targets it must be binding on society or at least the Government itself. But that is not the case.

The Bill does make provision for carbon budgets and even for the Climate Minister to issue guidance to government departments on how to take the targets into account:

5ZL Guidance for departments
(1) The responsible Minister may issue guidance for departments on how to take the 2050 target or an emissions budget into account in the performance of their functions, powers, and duties (or classes of those functions, powers, and duties)

Which is nice. But what happens if a Government department or any other government agency doesn’t take the targets into account. Well the bill goes to some lengths to make sure nothing happens (this section incidentally was modified slightly by select committee):

5ZK 2050 target and emissions budget are permissive considerations
If they think fit, a person or body may, in exercising or performing a public function, power or duty conferred on that person or body by or under law take into account –

The 2050 target, or
An emissions budget, or
An emissions reduction plan.

So a Government department may if they think fit take the emissions targets or carbon budgets into account, and they may even take notice of an emissions reduction plan, but then again they may not.

These sections make the emission reduction targets and carbon budgets voluntary and it is difficult to see how they can be legally enforceable on the Government itself or anyone else. Doesn’t mean that they will be completely ignored but they certainly could be.

So we have a set of targets which are not for zero carbon – so not really a zero carbon bill at all. In fact the methane target is the one the polluters themselves chose!

But just in case anyone did take any of this seriously the bill makes its absolutely clear that there are zero consequences if Government ignores the target – it is in this sense that it is a zero carbon bill – there are zero consequences for any Government agency acting to increase emissions.

The courts as a last resort?

But what about the courts? What about using the courts to force the Government to take the targets seriously?

Well this is where the bill takes a belts and braces approach to stop anyone using the Zero Carbon Bill to force emission cuts. Aside from making sure the targets are not zero carbon, and that no government agency or anyone exercising public authority can be held responsible for ignoring these targets and carbon budgets, the framers of the bill were obviously still concerned that someone might try to use judicial review to make the bill actually mean something binding.

Judicial review is the process whereby someone can go to the courts and ask the courts to review an administrative decision of the government to ensure that it is lawful.

Now Greenpeace is an avid user of judicial review because the courts retain very considerable powers to make governments do things and act lawfully via judicial review. We had some involvement in the Thompson climate case which used judicial review against the last Government for failure to take its climate commitments seriously. In the Thompson case the courts held that they did have powers to make government take action to meet their climate commitments but decided not to use them because there had been a change of government and the new government indicated that it planned to do more on climate.

The Thompson case set an important precedent that the courts could act against a Government that was not meeting its lawful climate obligations.

So in response, this current government, in the so called Zero Carbon Bill, has gone to great lengths to protect themselves from the possibility of groups like Greenpeace using the courts to hold them to account for not meeting their climate emissions reduction targets. And here’s the relevant section of the bill:

5ZJ Effect of failure to meet 2050 target and emissions budgets
(1) No remedy or relief is available for failure to meet the 2050 target or an emissions budget, and the 2050 target and emissions budgets are not enforceable in a court of law, except as set out in this section.
(2) If the 2050 target or an emissions budget is not met, a court may make a declaration to that effect, together with an award of costs.
(3) If a declaration is made and becomes final after all appeals or rights of appeal expire or are disposed of, the Minister must, as soon as practicable, present to the House of Representatives a document that— (a) brings the declaration to the attention of the House of Representatives; and (b) contains advice on the Government’s response to the declaration.

So if a Government were to fail to meet its carbon budgets, or fail to have policies in place to meet its carbon budgets, or the carbon budgets were so weak that they did not meet the emission reductions targets such as they are, then Greenpeace could go to court and seek a declaration to say so.

But then what? What remedies are available to the court? Literally the only remedy available is a declaration that has to be tabled in Parliament with a government response. Literally a one minute process at the start of Question Time and that would be it.

Once the Zero Carbon Bill comes into effect, could the courts direct the Government to reconsider its climate policies, as the courts can now? No.

Once the Zero Climate Bill comes into effect, could the courts direct the Government to come back with an updated set of policies consistent with meeting the emissions reductions targets, as the courts can now? No.

Once the Zero Climate Bill comes into effect could the courts direct the Government to reconsider its carbon budgets, as the courts could now? No.

But you could have a declaration!

The so-called Zero Carbon Bill not only has weak non-zero carbon reduction targets, targets endorsed by the polluters themselves in their own reports. The Zero Carbon Bill not only has clauses that make it clear that all Government departments and indeed any public authority need not take the slightest notice of the targets and the carbon budgets. But the Zero Carbon Bill has new regressive legal protections that prevent civil society groups from using the courts to hold the Government to account for failure to meet the emission reduction targets and carbon budgets.

I’ve said before that the Zero Carbon Bill lacks teeth and that is true when it comes to the targets and the carbon budgets as these targets are essentially voluntary. But there is one place the Zero Carbon Bill does have teeth and that is when it sinks its legal fangs into the jugular vein of civil society to stop us using the courts to hold Government to account for failure to take action to cut climate pollution. Very toothy in that respect.

And let us remember that this is a Government has done precious little to cut emissions from agri business. There are the clean water regulations and the removal of the irrigation subsidies, which will help indirectly by constraining dairy intensification. But we have yet to see serious action from the Government to directly target agricultural emissions. And the previous government was worse.

Meanwhile under the Emissions Trading Scheme biogenic emissions from agriculture remain 100% subsidised by the taxpayer – a modest proposal to reduce this to 95% subsidy is currently marooned on Coalition Island where NZ First is trying to use its protection of the 100% subsidy to build an electoral lifeboat.

Hence the role of civil society to hold government to account using every means possible including judicial review is just as important as ever. And the Zero Carbon Bill deliberately and directly constrains the ability of civil society to use the courts to hold government to account for lack of action on climate change. This section of the bill is a democratic outrage and should be removed.

Climate Commission

But it’s not all jelly targets and attacks on civil society, there is the independent Climate Commission. Under the Zero Carbon Bill the Climate Commission can issue reports, provide advice on carbon budgets, advice on emission reduction targets, advice on policies to cut emissions and so on. These are all useful things. And having another public voice in the debate is welcome, assuming it is a voice for action consistent with the climate crisis and I hope it will be..

But the Climate Commission has no power whatsoever to actually cut emissions. It can’t make Government do anything and it can’t directly influence emissions or the price of carbon. And this is a problem. Had we been establishing the Climate Commission ten years ago, having a purely advisory body might have been fine given the state of the debate. But now things have moved on and we are running out of time.

We need to make significant cuts and pretty quickly and we know that Governments struggle with implementing these policies against vociferous advocates of the status quo.

Reserve Bank – Only their purpose is mad

But we could make the Climate Commission a more useful institution and here I want to draw an analogy with the Reserve Bank and inflation. In Bruce Jesson’s book Only Their Purpose is Mad he encouraged us to learn from the New Right in order to implement policies that served a different and more humane purpose. And here I want to do the same by applying the lessons of the Reserve Bank and inflation to the Climate Commission and emissions reductions.

The New Right view on inflation was that it was an evil that was driven by excessive wage increases, excessive government spending, and government intervention to keep interest rates too low – amongst other things. Short term electoral calculations by Government were getting in the way of achieving low inflation which in their view was a medium to long term goal which benefited the whole society.

In this respect there are similarities with emissions reductions, which is also a medium to long term goal which I believe benefits the whole society but as we’ve seen with for example the controversy over fuel prices, short term considerations can get in the way of achieving long term goals.

The New Right’s institutional response to this conundrum was an independent Reserve Bank with real power. Parliament voted to give the Reserve bank a set of powers it could use to influence inflationary pressures in the economy – in particular the power to alter the Official Cash Rate which in turn influenced interest rates which in turn influenced inflation. In addition the Reserve Bank was given other powers it could exercise independently to protect the stability of the banking and finance system – powers such as capital adequacy ratios for banks and minimum deposits for home mortgages, as we saw the Bank use in recent years..

Now the theory behind the inflation targeting was pretty dubious and in practice it simply meant that when the Reserve Bank thought inflation was heading too high it jacked up the OCR and hence interest rates, crushing people with home mortgages and businesses with loans, driving up the value of the NZ dollar as overseas speculators bought up the NZ dollar – it effectively cut demand in the economy and thus had a downward impact on inflation. It was deeply unpopular and controversial but it did work to some degree. Inflation did drop though there were other factors at play as demonstrated by the global drop in inflation not just NZ.

Moreover this institutional arrangement, of an independent Reserve Bank with real powers that it could exercise independently of the Government of the day, had a disciplinary effect on Government spending and borrowing. If Government increased spending and borrowing and hence demand in the economy, the Reserve Bank would identify this as a risk to low inflation and would threaten to increase interest rates in response, and the Government of the day would get the blame.

Now there was much to dislike in this institutional arrangement if you did not agree with the New Right analysis of limiting government expenditure but it did work to achieve their long term goals. This kind of institutional check on the Government of the day did work.

This also applied to the other Reserve Bank objective of financial stability, though this was not driven by the New Right, which never had much interest in financial stability as seen with financial deregulation leading to unending financial crises. When the Reserve Bank thought there was a threat to the financial stability of the NZ banking system it had the power to act independently of government. The intervention to introduce minimum deposits for home mortgages was an attempt by the Bank to protect financial stability by limiting home loans, at a time when Government had failed for over a decade to intervene to control the house price bubble. Likewise the current attempts by the Reserve Bank to increase the capital adequacy ratios of banks.

Financial stability is a medium to long term agreed goal of our society yet Government’s struggle to do what is needed to achieve it, such as intervening in the housing market or making banks carry more capital, and in the past, the Reserve Bank has stepped in, exercising its own powers.

Now this might seem like an undemocratic dimension of our governance system but it was not – the Parliament could remove the independent powers of the Reserve Bank at any time but has chosen not to do so.

If Parliament decided that low inflation and financial stability were as unimportant as Parliament considers climate change, then it could vote to give the Reserve Bank the same powers it plans to give the Climate Commission – none whatsoever.

Climate Commission with independent powers

So think about this – we as a society consider low inflation and financial stability to be such important medium to long term goals that we have given an independent institution, the Reserve Bank, powers to help keep us on track to meet those goals. Yet when it comes to climate change we are proposing to set up an institution, the Climate Commission, which while independent has no independent powers to help us achieve our medium to long term goals of low emissions.

Is inflation really a greater threat to us than climate change?

Obviously the answer is no.

We haven’t had much of a discussion in New Zealand about what kind of independent powers we believe Parliament should delegate to the Climate Commission if we are serious about cutting emissions and that is what I want to explore in the last part of this talk.

There is one obvious stand out power which the Climate Commission needs which is the power to influence the price of carbon pollution, in the same way that the Reserve Bank has the power to influence the price of money. There are of course many other Government levers which influence carbon pollution than the price of carbon, just as there are many other factors that influence inflation other than the OCR.

However, the price of carbon pollution is very important in driving emission reductions. The best way to understand how powerful prices are is not to think about it from an endpoint consumers point of view but from the point of view of businesses – businesses especially large businesses are in a much better position to understand and respond to price changes than individual consumers who seldom have the information or real choices. Carbon prices drive emission reductions across the economy.

If we gave the Climate Commission the power to independently influence the price of carbon pollution, then it would exercise this power in order to help keep us on track to achieve our agreed emission reduction targets. If we are above our targets, either because of Government inaction or other reasons, then the Climate Commission would be able to push up the price of carbon, which will have downward pressure on emissions.

This is important because currently there are powerful vested interests who have been been able to avoid paying their share and are not subject to the discipline of carbon prices – agriculture of course has a 100% subsidy under the Emission Trading Scheme.

And giving the Climate Commission the power to influence carbon prices could also work to put pressure on Government to do more. A Government that drags the chain and is planning to miss its carbon budgets will give the Climate Commission good reason to put upward pressure on carbon prices. This will in turn produce political problems for the Government – petrol prices will rise because the government is not doing enough on climate. This will constrain governments in the same way that the Reserve Bank has constrained them with the threat of OCR increases.

Mechanisms

But what is the mechanism that the Climate Commission could use, analogous to the OCR? Let me suggest four.

The Climate Commission would need to be given powers to influence carbon prices under the Emission Trading Scheme. Now my preference was for a carbon tax rather than an ETS but an ETS is what we have. And under the ETS there are multiple options for the Climate Commission to influence the price of carbon.

One mechanism is to give the Climate Commission the power to determine the number of ETS emission units auctioned each year. The ETS is being reformed to have auctioning of pollution permits, the New Zealand Units, and the power to determine the number of Units put up for auction should be given to the Climate Commission rather than leaving it with the Government. Government will always come under short term pressure from polluters to keep the price of carbon low and auction too many units.

However, if the Climate Commission controlled the number of NZUs to be auctioned it would exercise their power to help us achieve our carbon reduction targets. If New Zealand was on track to have higher emissions than our carbon budgets, then the Climate Commission would be obligated to restrict the number of units to be auctioned in order to drive up the carbon price. There are of course many NZUs already in circulation and hence it won’t be a one-to-one impact on price, no more than an increase in the OCR produces an immediate cut to inflation, but the effect will be to increase the price of carbon units and the expectation of higher prices ahead.

Secondly, beyond controlling the number of carbon units that can be auctioned, further powers we could give the Climate Commission would be to control the winddown in exemptions. Currently agriculture has a 100% exemption and other polluters have a 90% exemption, and the current Government is proposing to do very little about it because they are being lobbied by these industries. Now there is an argument about carbon leakage – if high carbon prices in NZ simply drive production overseas then it may not result in cuts in global emissions. But these carbon leakage arguments are being used by government and polluters to suit political purposes and the Climate Commission needs to be given the power to determine the phase down in these subsidies based solely on climate impacts not industry lobbying.

A third option available would be to give the Climate Commission the powers to influence the ratio between emissions and NZUs or carbon units. You may remember the previous National Party Government introduced the idea of allowing two tonnes of carbon pollution for one NZU, effectively halving the price of carbon overnight. This could be used in reverse to fractionally increase the price of carbon – if for example a company needed to surrender 1.1 NZUs to cover one unit of pollution then that would effectively be a direct 10% increase in the cost of pollution. The Climate Commission could vary the ratio depending on how we were going versus our carbon budgets.

Likewise a fourth option is that the Climate Commission could be given the power to control the exposure of the NZ carbon market to global carbon markets. Access to junk carbon credits from overseas has been used by many New Zealand polluters to cover their obligations under the Emission Trading Scheme. This access has now been cut off. But we actually do need a global system and it may be possible in the future to join the NZ carbon market to other reputable markets. This could help build the global carbon pricing system that we desperately need. But this decision should be made on the sole criteria of cutting emissions.

These are just four options or mechanism to empower the Climate Commission, there will be others.

The Climate Commission could be the starting point for a new kind of institution that faces up to one of the greatest medium to long term challenges to our civilisation. But it needs powers to do this – powers that it can exercise independently of the short term politics of the day.

These powers could be delegated by Parliament just as we have delegated powers to the Reserve Bank to protect financial stability.

A Climate Commission with these powers would mean that the emission reduction targets, and carbon budgets, and the emission reduction plans would have an independent disciplinary power sitting behind them. If a Government treated them as a ‘nice to have’ set of policies that could be dropped when they got hard, the Climate Commission would have the power to ensure that they are actually a ‘need to have’ set of policies.

After all, climate change is just as important as low inflation and financial stability isn’t it?!

Distributive effects

So in this talk I’ve first had a look at the weaknesses of the Zero Carbon Bill, as well as its anti civil society provisions. Then I’ve tried to take the institution established by that Bill, the Climate Commission, and suggest ways that we could make it fit for purpose in the era of the long climate crisis.

But there is much more to the climate challenge than this. And in my last few minutes I want to touch on the issue of equality and poverty.

One of the terrible legacies of the New Right revolution in New Zealand and elsewhere is inequality. It is tearing societies apart across the globe – witness the riots in that other darling of the New Right, Chile, just this week. It is very difficult to manage a long crisis like climate change while our societies are riven by conflict and inequality.

When I put together the Green Party’s Green New Deal proposal back in 2008 in response to the Global Financial Crisis, dealing with inequality and poverty was integrated into dealing with the climate and biodiversity crises. This is as it should be.

But there have been further important developments since then which we should integrate. The extensive use of central bank credit after the Global Financial Crisis, or Quantitative Easing as it was known, has shown us how societies can finance solutions to a crisis when they really want to. The rise of Modern Monetary Theory has given us the theoretical tools to finance the solutions to the climate and social crisis we face. And secondly wealth taxes have made a welcome return onto the global policy agenda, especially with Elizabeth Warren pushing them in the US presidential race to fund the social and environmental collective investments that that country so desperately needs. We should integrate these two tools into any Green New Deal in New Zealand.

We need to address these social and environmental challenges together. Only Government taken as a whole can manage this complete package of social and environmental policies. We can’t expect the Climate Commission to manage all these impacts any more than the Reserve Bank could manage all the social impacts of minimum deposits for housing loans.

But nonetheless we need an institutional player like a Climate Commission with real powers to keep us on track for climate change through all the turbulence we are bound to encounter this century.

Conclusion

Climate change is like a runaway train and we are all passengers as this thing gains speed racing down the mountain. Global heating is well underway and it has a lot of inertia and momentum. A runaway climate change train can’t be stopped quickly. It requires us to act today, and tomorrow and the next day and next to slow this thing down and turn it around. We need to act with long term horizons, it requires us to act globally and both of these things are difficult for us as a species. It also requires us to act in spite of the persistent lobbying efforts of status quo vested interests, in order to benefit people who are yet to be born.

Only institutions can provide the buffer and constant bulwark against the daily pressures of short time horizons, national thinking, and vested interests. We need institutions that can not only speak in favour of our collective long term climate interests, but also act on them. We need a climate commission with real power, not another talk shop.

Ends

MIL OSI