Meltdown of a big idea

Anyone living south of the Bombay Hills may have questioned global warming last week, as a series of polar blasts dealt to the remains of summer. There's also little doubt those in Wellington are feeling a change in the temperature.

Ministers opening the capital's Dominion Post on Saturday were confronted with page one, two, and three headlines that sum up neatly the approaching slow-motion train wreck that has become the Government's response to climate change.

On the front page, readers were warned of $3-a-litre petrol. On page two, they were told to prepare for 11 per cent home mortgage rates. And on page three, they were asked to find candles and matches to prepare for winter power blackouts.

Where's the connection? If you believe Labour, these are all factors well outside its control. But in politics it's not so much a matter of whose fault something is as who can be blamed, and who's at least looking to do something about it.

A bill now before Parliament seeks to allow regional councils to levy petrol taxes to pay for local infrastructure, to introduce mandatory minimum biofuel levels to petrol, and to impose a carbon emissions trading scheme, the ETS, which is supposed to begin operating from January next year.

When the Emissions (Trading and Renewable Preference) Bill was introduced by the Government last year, Prime Minister Helen Clark saw it as one of the major planks of Labour's strategy to win a fourth term. Clark made headlines around the world with her ambitious proposals to become the world's first "carbon neutral" country.

Yet barely a year later, Clark has all but dropped the word "sustainable" from her speeches. Political support for the legislation is teetering on a knife-edge. Study after study identifying serious problems with the ETS and mounting costs lands with a thud on her desk. Only Climate Change Minister David Parker still seems to be showing any enthusiasm.

What's changed? Not just the climate. A year ago, middle-class New Zealanders could afford to think about the environment. It cost $70 to fill the car, not $100, and there might even have been a dollar or two left over after shopping at the supermarket. Now, many are more worried about the mortgage than about their carbon footprint.

A year ago, assurances from Parker that petrol would rise only about 4c a litre under the Government's climate change proposals, and electricity around 6%, didn't seem too bad in return for saving the planet.

But what's dawning on people is that not only is the real cost much, much higher, but it's doubtful whether all that pain is going to make a blind bit of difference.

No fewer than four major studies released last week painted scenarios of life under the ETS, ranging from mildly irritating to potentially disastrous. But all had a common theme: climate change mitigation comes with a real economic cost – job losses, cuts to GDP, reductions in household expenditure, energy price rises, and potential power blackouts.

Perhaps bluntest of all was Adolf Stroombergen, a respected economist from Wellington consultancy Infometrics, who wrote that: "High economic growth (sufficient to move NZ into the top half of the OECD in terms of GDP/capita) and significant emissions abatement are probably mutually exclusive goals."

If this came as any surprise, it's probably because the public has been sold a pup by the Government. It's only a few years since a former minister of climate change announced that, such were the benefits of joining the Kyoto Protocol, a failure by New Zealand to sign up would be tantamount to burning a blank cheque.

Back then, we were supposed to be major beneficiaries under the protocol, entering with a $600 million head start thanks to our carbon sinks. Unfortunately someone in the Ministry of the Environment miscalculated and it was actually, er, a $500 million deficit. That has now ballooned out to close to a billion dollars, and rising.

Since that time, the Government has glossed over the costs of meeting its emissions targets, with Parker assuring the public that they would barely notice the economic impact of the ETS. The bulk of the evidence from forecasters now flowing in indicates that this is simply not true.

Even with the economic and environmental sacrifices, New Zealand is unlikely to meet its emissions reduction targets. In fact, the NZIER said it could be up to eight times cheaper simply to buy carbon credits on the world market.

The ultimate irony is that even if New Zealand meets its emissions reductions targets, it will not make an iota of difference to climate change, here or overseas.

As a net contributor of somewhere between 0.2% and 0.4% of world greenhouse gas emissions, any action by New Zealand is ultimately one of futility.

So whither the ETS and Labour's grand vision? The ballot box is likely to be its day of reckoning. Wiser heads in the party's caucus are warning that dead bodies will be required before they will enter an election campaign promising to raise the price of electricity and petrol any further.

National, which initially supported the ETS, is having an attack of cold feet over a scheme which, if it wins this year, it will cop the blame for further down the track.

The smart money is on Labour finding a reason to delay its implementation until after the election – either because of a lack of political support or because of a hitherto undiscovered complication.

It won't make the problem go away, of course. But it would buy some time for the Government to refashion its rhetoric to better reflect the new reality. Politics, after all, is the art of the possible.

- © Fairfax NZ News