February 23, 2023

Climate change is becoming more apparent in the recent succession of major adverse weather events, and New Zealand’s policy on climate change has also stepped up a gear after decades of apparently minimal activity. But a new Insight from NZIER asks whether the new policies are the right mix to restrain the effects of climate change and build resilience against that which is already occurring. 

Looking in turn at the nature of the climate change challenge and the economics of adaptation and emission reduction, the Insight examines how New Zealand’s policy responses measure up and whether New Zealand has its priorities right to meet climate change with minimum risk to lives and livelihoods. It examines New Zealand’s distinctive emissions profile, with its high proportion of methane largely derived from agriculture which has one of the world’s least emission-intensive livestock production systems. 

It shows how simple proposed solutions such as proportional cuts across sectors are not only economically damaging if they don’t reflect the marginal costs of such cuts in each sector, but also open the door for ‘carbon leakage’ if, for example, cuts in New Zealand’s farm emissions are countered by increases in more emission-intensive production systems in other countries that do not include agriculture in their emissions policies.  

It also shows how New Zealand’s greenhouse gas emissions are too small in a global sense for any emission restraint to affect the climate change New Zealand experiences unless that restraint helps engender more emission reductions in other countries in line with their target commitments made in international agreements like the Paris Accord. The measure of success is not just in New Zealand’s emissions coming down but in demonstrating to other countries that they can be seen to come down without inflicting undue hardship on particular sectors or parts of the community that would detract from economic wellbeing. 

The Insight finds current New Zealand policy is more focused on emission reduction (over which it has limited influence) than climate change adaptation. It discusses economic principles that could be used to guide a more efficient allocation of effort across the available policy options in a rebalancing of policies to reduce climate change-related harm.

For further information, please contact:
Peter Clough
Senior Economist
021 629 157

Read the insight here