Analysis: Budget 2021 won’t be flush with cash for reducing emissions – that will come in future years, Marc Daalder reports
Today’s Budget will involve big announcements for a number of sectors, like health and Māori housing, but climate change won’t be among them.
There may be small amounts of additional funding, in the vein of the $67.4 million for decarbonising the public sector that Climate Change Minister James Shaw revealed on Sunday, but big green stimulus for transitioning New Zealand to a low-carbon economy will have to wait for future Budgets.
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Newsroom revealed last week that Shaw had written a letter to Finance Minister Grant Robertson after last year’s Budget calling for a green recovery and major investment in decarbonisation. That stimulus never eventuated, with both Shaw and Robertson citing better-than-expected economic conditions which meant it was no longer needed.
Shaw said he viewed this as a missed opportunity, but the policies which would have made up a green recovery can still be actioned in the coming years.
“I would say we missed an opportunity, but not the opportunity. The fact that we’ve got the emissions reduction plan coming together this year that will essentially put together a programme over the next 15 years, it will basically take the things in that letter and phase them in over time. Plus a whole lot more, actually,” he said.
That will come in the form of the Government’s Emissions Reduction Plan, which will detail how New Zealand will limit emissions over the next 15 years to the emissions budgets set out by the Climate Change Commission. The Commission’s final advice is due at the end of May and the emissions strategy will debut in the second half of this year. That’s too late to be funded in Budget 2021, Shaw said.
“We missed this Budget cycle, and then the Government’s got to respond by the end of the year. But that actually corresponds with the next Budget cycle.”
Robertson also told Newsroom he remained committed to funding the country’s transition to a low-emissions economy in future Budgets.
“We were very clear and the independent Climate Change Commission has been very clear that this needs to be a sustained, ongoing investment in emissions reductions if we have any hope of meeting the goals that we set ourselves. We obviously understand the importance of the investment there,” he said.
This doesn’t mean there will be no money for climate initiatives in Budget 2021. Bids for such proposals were certainly submitted, because they – and suggestions for potentially high-emitting projects – would have been subject to a new benefit-cost analysis mechanism. This is the first Budget to apply a “shadow price” of carbon to climate-related policies.
If the project would lead to increased emissions, the shadow price would count as a cost. If it would instead reduce emissions, the benefits would be adjusted accordingly.
We know that at least that $67 million will go to climate change – the sum announced by Shaw on Sunday. That breaks down into $41.8 million for leasing low emissions vehicles across the public sector and a $19.5 million top up to the State Sector Decarbonisation fund, which bankrolls boiler conversions and electric vehicle purchases for schools, hospitals and government departments.
Every little bit helps, but the amount of money the Government has put behind decarbonising the public sector – which is meant to be carbon neutral by 2025 – certainly meets the definition of “little bit”.
To date, $96.45 million of the $200 million fund has been spent to reduce emissions by an estimated 29,000 tonnes a year. Sunday’s announcement adds another 7600 tonnes to that toll.
Stacked up against New Zealand’s 80 million annual tonnes of emissions – or even the public sector’s (very roughly estimated) 483,000 tonnes a year – it’s clear that ambition is lacking. At the current rate, it would take an extra $1.9 billion in State Sector Decarbonisation money to reduce emissions to zero – the Government’s goal for 2025.
While there may be more efficient ways to spend decarbonisation money – targeting transport, for example, is expected to have a negative marginal abatement cost, which means the country would save money by doing so – this helps illustrate the scale of the challenge in front of us.
While the Government might tout its $67.4m in new money as a crucial step in the path to decarbonisation, far more is needed to make a real dent in our emissions.