We looked at three chapters of the report – Land Use, Transport, and The Built Environment. Patrick’s post focused on The Built Environment. This chapter is a discussion of buildings and urban form, and their potential to contribute to lower emissions. The Productivity Commission was sceptical of this having much impact. And they’re correct up to a point, in the sense that many of the buildings we’ll have in 50 years have already been built. But there’s definitely potential for change at the margins – we outlined a growing swing to intensification in Auckland, for example – and through things like energy-saving retrofits.
The “Land Use” chapter is about non-urban land. It focuses on different types of agriculture, which have different levels of emissions, and also looks at forestry – an emissions sink. Here’s what we had to say:
Our comments on the Land Use chapter are brief, although we agree that agriculture is a very significant source of emissions and is a critically important avenue for emissions reduction. We agree with the Productivity Commission’s findings and recommendations on this, and if anything feel that some of the key conclusions should be more prominent and expressed more plainly (e.g. in the Overview).
Under the current situation, agriculture is excluded from the ETS. This means that:
The industry is being subsidised by the rest of New Zealand, for any situation where we as a country are responsible for paying something for our emissions (e.g. under the 2008-2012 Kyoto commitment period).
Farmers have distorted incentives. They lack incentives to reduce emissions while continuing to produce the same kind of goods (e.g. dairy products). Just as importantly, farmers lack incentives to change the type of goods they produce (e.g. from dairy products to beef or forestry). This second point is rarely given the attention it deserves, and industry lobby groups obviously have an incentive to downplay it, or not to talk about it at all!
Brian Fallow summarises these issues in just one, very clearly written New Zealand Herald column. We quote this in parts below:
“The line of argument [from agricultural lobby groups] goes like this: the world needs milk, or meat, or steel, or aluminium, or whatever. Producing those things inevitably generates emissions, whether they arise from ruminants’ digestion or in the process of prising metals from their oxides.
But all of this amounts to a case for some level, even a high one, of free allocation. It is not an argument for treating pastoral farming differently from other EITE sectors, that is, to have an exposure at the margin to a carbon price that will incentivise further gains in emissions efficiency without putting them out of business.
However, a price on agricultural emissions is not just about influencing how existing farms are managed, but also decisions about land use. New Zealand might be better off with fewer cattle and more pigs, for example. They are not ruminants and they taste good too.
In the end, New Zealand is internationally accountable for all of its emissions. If those who profit from half of those emissions entirely escape that cost, the rest of us bear it”.
We agree with these points and strongly support the Productivity Commission’s conclusions that agriculture should be brought inside the ETS, so that farmers face the same incentives as other emitters. This can be supported by an allocation of free credits which abates over time, as the Commission suggests, although we note that this amounts to an ongoing subsidy to the sector.
The part about changing land use is important. Maybe it’s hard to drop the emissions from a dairy cow, but dairy farms don’t have to be dairy farms forever. Land can be converted between different types of farming, or even reforested. In the last 30 years, large areas of land have changed use; the Productivity Commission make the point that if land use continues to change at similar speeds, but in a more low-emissions direction, then it will make a big impact on our emissions.
Here’s an interesting comparison of typical emissions per hectare for different types of land use:
New Zealand doesn’t have very accurate data on land use change over the last few decades, but fortunately we’re quite good at counting animals, shown below:
Lastly, here’s what our submission said about the Transport chapter:
We agree with the Commission’s focus on transport as a major source of emissions and as one of the fastest-growing sources in the last 25 years. Furthermore, we agree that:
“In addition to producing GHG emissions, the use of road vehicles has led to several other costs not fully borne by the user (section 11.8). External costs from road transport include traffic congestion, air pollution from harmful exhaust gases (eg, carbon monoxide), noise pollution, and road fatalities and injuries.” p285
There is a lot of excellent work in the Transport chapter. We agree that a “feebate” system should be investigated, to the extent that consumers undervalue future fuel economy savings. However, some caution is required as a feebate system depends on accurate data. The gap between lab-tested and on-road fuel economy is large and seems to be growing; manufacturers have become adept at designing their vehicles to do well in the tests, and some have intentionally falsified data. Iain McGlinchy at the Ministry of Transport has presented on this. One European study found that “actual fuel consumption and data stated by manufacturers differ by almost 75%” and “15% of all UK vehicles have been manipulated”. As such, feebates should be determined based on on-road performance data wherever possible.
We agree with all transport recommendations, except for “the Government should provide financial support for charging infrastructure projects to support the uptake of EVs [electric vehicles]. Support should be limited to specific gaps in the charging network that are not commercially attractive to the private sector (eg, charging stations in lowly populated regions)”. We do not believe this is a priority in the short term.
The Productivity Commission’s six recommendations from the Transport chapter are:
- The Government should introduce CO2 emissions standards for light vehicles entering the New Zealand fleet, subject to detailed consideration of design options (for example, including or excluding small traders).
- The Government should introduce a price feebate scheme for vehicles entering the fleet, subject to identifying the most suitable design features for the New Zealand context. The feebate scheme should replace the existing road-user charge exemptions for light EVs.
- The Government should provide financial support for charging infrastructure projects to support the uptake of EVs. Support should be limited to specific gaps in the charging network that are not commercially attractive to the private sector (eg, charging stations in lowly populated regions).
- The Government should encourage government agencies where practical to procure low-emission vehicles.
- The Government should take steps to amend the pricing system for transport so that a greater share of the external costs associated with private vehicle use are internalised. For example, Government should work with councils to enable and encourage the use of road pricing tools to reduce congestion and emissions in main urban centres.
- The Government should make emissions reductions a stronger strategic focus in transport investment. This should include changes to the Government Policy Statement on Land Transport to broaden its scope to cover the whole land transport system and make the transition to a low-emissions economy a strategic priority.
At a New Zealand-wide level, the Commission assumes that electric vehicles (rather than public and active transport) are the main opportunity for reducing transport emissions. “Modelling from Concept Consulting estimates that an increase in the number of per person public transport trips (by 30%), cycling trips (by 30%) and walking trips (by 100%) over the next 20 years would achieve approximately a 1% reduction in private vehicle emissions”.
This is what Patrick was a bit frustrated about in his previous post: the Productivity Commission might be technically correct, but they’re certainly not articulating the potential for transformative change. Fortunately, they do acknowledge that public and active modes have lots of other benefits besides emissions reduction (e.g. they help to moderate congestion in our cities, and cycling is great for health).
Overall, the Productivity Commission has done a good job with the parts of its report that we looked at. The report has lots of interesting background and analysis, but what it boils down to is a series of (mostly good) recommendations.