WELLINGTON, New Zealand, 26 June 2024 – As part of its Public Good Programme, the New Zealand Institute of Economic Research (NZIER) has released its second annual climate budget assessment (NZIER Insight 113).
The New Zealand Government has committed to net zero emissions by 2050 and a 50 percent 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 and behind our targets. Each Budget that fails to shift the dial closer to our Paris Agreement target trajectory will mean that successive governments will have to do more, which will result in a more rapid and expensive transition.
Using our framework, adapted from international assessment standards, NZIER found there was a minimal emphasis on environmental outcomes throughout Budget 2024 in terms of new initiatives; the majority have a neutral or unfavourable impact on emissions, with one having a positive outcome.
Other new initiatives, especially in infrastructure such as social housing, may reduce emissions over time, but embedded emissions involved in construction initially make them incongruent with our commitments. This assessment relied on judgement and experience. Better data reporting would allow for a more robust assessment to support improved decision-making. The majority of new expenditures either directly negatively impact emissions or have no impact on our emissions profile.
“In addition to new expenditure that has been announced, the reprioritisation of other expenditure is also detrimental to meeting our emission reduction targets. There has been a clear prioritisation of tax relief at the cost of climate outcomes through the reprioritisation of revenues from the ETS (listed as the climate dividend) and the cancellation of the Climate Emergency Response Fund”, says NZIER Senior Economist Daniel Hamill.
“Currently, we are behind our targets, and that poses large financial and environmental risks. If we fail to meet our targets, the cost of purchasing credits could range from $18.3 to $23.7 billion”, says Hamill.
To enable future analyses to go beyond carbon emissions to compare the environmental, economic and social trade-offs of a policy, NZIER is also calling for standardised reporting in Budget documents. “It is important to develop a consistent framework for reporting environmental impacts to ensure we can understand the trade-offs”, says Hamill.
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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.
For more information, contact:
Daniel Hamill Senior Economist, NZIER
daniel.hamill@nzier.org.nz
027 300 0662