Media Release: Joint statement from the NZ Initiative and NZ Association of Economists
Top economists agree on climate response
Wellington (Tuesday, 8 March 2022) The second New Zealand Economics Experts Survey finds consensus among the country’s top economists on climate policy.
The New Zealand Association of Economists, in conjunction with The New Zealand Initiative, invited Distinguished Fellows, life members, and former Presidents of the New Zealand Association of Economists, and recipients of the NZIER ‘Economist of the Year’ award, to serve as an expert panel.
The first survey, released in February, found consensus on issues ranging from rent control to immigration.
The second survey focused on climate policy and again revealed strong expert consensus.
Rely on the Emissions Trading Scheme
Wellington policymakers often assume it is best to complement the Emissions Trading Scheme [ETS] with additional policies, like fuel economy standards for imported vehicles, that target emissions already covered by the ETS.
However, our surveyed experts strongly agreed (31%) or agreed (54%) that tightening the ETS cap more quickly would be a less expensive way of reducing carbon-dioxide emissions than adding policies like fuel economy standards. None disagreed.
Use complementary policies to address different market failures.
If additional market failures unduly hinder adjustments to rising carbon prices, policies directly targeting those market failures could reduce the cost of mitigating emissions. Our surveyed experts again strongly agreed (23%) or agreed (54%), with none disagreeing.
For example, if a high carbon price results in harm to biodiversity because it encourages a lot of pine forest planting, separate policies outside of the ETS are best to address that potential failure, while continuing to include pine forest carbon sequestration in the ETS.
Address equity and distribution separately
Rising carbon prices may have undesirable equity implications: poorer households may feel strained by rising energy costs.
Our expert panel was asked to compare two options. The government could use regulatory measures to target emission reduction in sectors less likely to affect poorer households and use measures like subsidies for electric vehicles. Or it could use the revenues the government collects when it auctions carbon credits and provide every household with an annual carbon dividend.
The expert panel strongly agreed (15%) or agreed (54%) that carbon dividends are the preferable option. 23% were uncertain, and 8% offered no opinion.
NZAE Vice President, Otago University’s Dr Dennis Wesselbaum commented, “There is strong consensus among climate experts that climate change is real, that greenhouse gas emissions are mainly to blame, and that policy should respond based on robust evidence.”
“Our expert economist panel also has strong consensus on the best way of responding to the challenge of Net Zero.”
New Zealand Initiative Chief Economist Dr Eric Crampton noted, “Wellington’s policy community has been far too quick to support policies that cannot reduce net emissions because they target sectors already covered by the Emissions Trading Scheme.”
“The expert economists surveyed agreed that it is better to cut the ETS cap instead; to save complementary policies for addressing separate market failures; and, to address distributional consequences of rising ETS prices through a carbon dividend rather than interfere in the workings of the ETS. Not a single surveyed economist disagreed.”
“Getting to Net Zero is challenging enough. Letting the ETS do its work is the best way to get us there,” Dr Crampton concluded.
Results of the second New Zealand Economics Experts Survey are available here.
ENDS
Ben Craven, External Relations Manager
M: 022 079 2788
E: ben.craven@nzinitiative.org.nz