Sea Change is one of a set of three maritime strategies that have been drafted by the government. The Sea Change strategy is focused on transport vehicles, while the Port and Harbour strategy focuses on harbour safety, and the 4 Conventions strategy is related to tying our maritime laws more closely with international agreements.
The government’s carbon emissions trading scheme will increase the cost of running transport vehicles. As sea transport has a relatively low carbon intensity compared to other forms of transport, the government wants to implement policies that help business switch from using road and/or rail transport to using sea transport. It is this set of policies that is termed the Sea Change strategy.
The Sea Change transport strategy aims to shift more freight transport onto domestic sea vessels. In the discussion document, the government mentions a number of reasons for making this change.
The Sea Change transport strategy aims to provide the right incentives in order to help solve issues arising from these three areas.
For long-haul trips, sea transport emits less carbon or sulphur than road transport. As these factors are currently not priced (although a price for carbon will appear through the emissions trading scheme), the impact they have on the environment is not taken into account by road users, and so “too much” road transport is used.
The government’s environmental goal through the Sea Change strategy is to achieve the same overall level of transport activity but with lower environmental side effects.
Road congestion and noise pollution are other external costs associated with the use of road transport, and both these problems would be reduced by increased use of sea transport. Once again, the government’s aim is to achieve the same overall level of transport, but with lower non-environmental external costs.
“Changes in global shipping” refers to the trend for international shipping companies to send larger ships that visit fewer ports. This development is an important one for New Zealand, as external trade represents a large portion of our economy. There are fears that this structural change in shipping may be detrimental to New Zealand’s overseas trade, as we currently don’t have the appropriate infrastructure to effectively deliver goods around the country, should international companies cut down the number of trips they make to New Zealand and the ports they visit.
In this case, there may be something the government can do to help the development of infrastructure in response to this change.
It is currently unclear exactly how the Sea Change strategy will be implemented, as it is in the consultation stage. In the document, the government mentions the different levels goals they could potentially set under this policy.
Fundamentally, many of these options are the same thing using different jargon. However, there are three main distinctions.
As far as the external costs go, we believe that pricing is the most direct and effective method of achieving the government’s goals.
In terms of port infrastructure, a public-private partnership type arrangement with port companies may be advantageous. Using this mechanism, the government can help fund the required transition in infrastructure, while still allowing the private company to react to market signals.
Assuming the government implements a strategy that prices the external costs, along with direct intervention to try and improve port infrastructure, there will be significant ramifications for other transport types.
The main negative impact will come from higher costs for transport operators. As the government’s goal is to “increase the cost” of certain options (as opposed to subsidising alternatives), it seems likely that they will tax road transport operators based on the external costs they create – rather than subsidising sea transport.
Furthermore, by developing New Zealand’s port infrastructure and providing incentives for the use of sea transport between New Zealand cities, the government will reduce demand for long-haul road transport.
However, some short and even medium-haul operators may benefit from the new strategy, insofar are they are involved with the delivery of products to and from ports.
Overall, the impact of this policy is still relatively unclear given the lack of a timeframe for the policy, or a clear and quantifiable set of goals. However, if the Sea Change strategy survives the change of government at the end of 2008, it has the potential to have a significantly negative impact on current long-haul road transport operators.
Please contact Matthew Nolan for further information.
This article published on Mar 07, 2008.