New NZIER Insight launched to measure Budget 2023 spend against New Zealand’s climate goals Climate effects are unfavourable for 80% of Government-announced initiatives, Including the five-year infrastructure package
WELLINGTON, New Zealand, 7 September 2023 – As part of its Public Good Programme, The New Zealand Institute of Economic Research (NZIER) has released its inaugural climate budget assessment (NZIER Insight 108), announcing plans to assess the impact of New Zealand’s annual Budget on achieving our climate change goals each year.
The New Zealand Government has committed to net zero emissions by 2050 and a 50% reduction of gross emissions by 2030. However, New Zealand is behind the curve when it comes to reviewing the impact of its policies on the environment, with France, Ireland, Nepal, Sweden and the UK leading the way.
Budget 2023 has several new initiatives that are intended to support climate commitments. However, using its framework, adapted from international assessment standards, NZIER found that the climate effects could be unfavourable for 80% of the new initiatives’ expenditure in terms of the contribution to reducing emissions, including the five-year infrastructure package. This assessment was forced to rely on judgement and experience, where better data reporting would improve decision-making.
“With government spending being equivalent to 42% of New Zealand’s GDP in 2022, the Budget has a tremendous impact on New Zealand's emissions profile and ability to meet our international climate commitments. Meanwhile, the Ministry for the Environment’s emissions forecast shows that on the current trajectory, we will never meet our climate commitments. That’s why having the right mechanisms to report on progress and communicate the trade-offs is critically important,” says NZIER Principal Economist Michael Bealing.
Owing to the wide-ranging effects of climate change, NZIER’s first Climate Budget Monitor focuses on CO2-e emissions. For example, although rebuilding cyclone-affected areas will produce emissions, it is also essential to increase climate resilience in these regions, and building back better has the potential to lead to efficiency gains and lower long-term emissions compared to reinstating the lost infrastructure. Rebuilding activity has therefore been categorised as a neutral expense. Meanwhile, the government’s $451 million investment in scientific research centres to contribute to addressing climate change was rated very favourable.
To enable future analyses to go beyond carbon emissions to compare the environmental, economic and social effects of a policy, NZIER is also calling for standardised reporting in Budget documents. It recommends the new framework be enshrined in law via an amendment to the Public Finance Act. While the Parliamentary Commissioner for the Environment, Simon Upton, recommended that the government provide a report to the House on the expenditure it allocates to environmental outcomes and the progress that is being made, no holistic approach currently exists.
A consistent reporting framework would transcend politics, using robust methods with a focus on intergenerational welfare and fully integrating environmental impacts into the Budget-setting process. It also incentivises investment in consistent, standardised data collection and reporting across the public and private sectors.
“Firms and individuals are frequently encouraged to adjust their economic activity to cut emissions, consume more sustainably and lead the transition to an environmentally resilient economy. The benefits of robust reporting and monitoring include greater transparency, low uncertainty and better information for decision-making. It will help everyone understand whether the narrative matches the ledger. As it stands, taxpayers are likely to have to finance the purchase of international carbon credits if we fail to meet our emissions targets,” says Bealing.
“Analysing how the annual Budget aligns with our climate targets will improve decision-making, provide greater accountability and transparency on lawmakers’ decisions and show whether New Zealand is taking the necessary steps to meet its climate commitments. Our work seeks to underpin the sustainability and resilience of Aotearoa New Zealand and we’ll continue to report on this each year, to keep all New Zealanders informed.”
About NZIER Public Good Programme NZIER is an independent economic consultancy. Our core values of independence and promoting better outcomes for all New Zealanders and our Public Good programme are the driving force behind why we exist and how we work today.