As oil prices once again reach levels last seen before the global financial crisis, we are reminded that the long term trend is upwards. Consequently we can expect to see a number of changes in transportation over the coming decades – more fuel efficient vehicles, greater use of public transport, a shift to hybrid or plug-in electric cars, and fuel switching from oil products to biofuels.
The idea of user-pays conservation is untenable to many people. However, access to New Zealand’s conservation estate already includes a level of user-pays. Tourism operators pay concessions to access Department of Conservation (DOC) land, which they recover by charging their customers. Trampers pay for the use of DOC huts and camp sites, although these facilities are often heavily subsidised from the public purse. But the majority of trampers, hunters, mountain bikers, and other eco-tourists or adventure seekers do not pay directly for the use of the conservation estate.
During the last few weeks many interest groups have criticised the Emissions Trading Scheme (ETS) for making us all poorer. There seems, however, to be considerable confusion between New Zealand’s commitment under the Kyoto Protocol and the ETS. It is the former that imposes an economic cost; the latter is a way of meeting that cost.
Once again we hear Federated Farmers bleating about the potential burden placed on them by an Emissions Trading Scheme (ETS), proclaiming that farmers are doing all they can to reduce greenhouse gas emissions. Hence any carbon charge on agriculture would be pointless. Rubbish.
As the main political parties seem to support the Emissions Trading Scheme (ETS) in some shape or form, one could be forgiven for thinking that the current Select Committee review of the ETS by the government is pointless.
The sharp contrast of bush fires and flooding in Australia has been blamed by some on climate change. While attributing any particular event to changes in the climate is difficult, an increasing frequency of such extreme events is expected under climate change. This applies to New Zealand as well.
In the next few months we can expect economic policies to start being released by political parties. Last week the Green Party kicked things off with a proposal to levy commercial use of water.
The Dominion Post of Friday 18 April had a front page article on congestion charging for the Wellington region at peak commuting times. Congestion charges have much theoretical merit, but the conditions under which they deliver are beneficial are not that easy to assess. As I read through the article I became progressively more concerned about the proposed scheme. Let’s start by looking at those aspects of the proposed scheme that really are complete rubbish.
The mainstream acceptance of both the scientific consensus on global warming and the need for a globally binding cap on carbon emissions does not by itself indicate that we are close to reaching a satisfactory solution to climate change. The optimal policy response is still subject to massive uncertainty from three sources: risk around our central forecast of climate change costs, uncertainty about the cost of reducing emissions, and uncertainty about how we should share the cost burden.
Last week my colleague Gareth Kiernan discussed the importance of what economists call allocative efficiency – ensuring that the nation’s resources can flow into those activities where they are most valued. A pre-requisite to achieving such an outcome is clear and consistent price signals. An area where pricing is rapidly becoming neither clear nor consistent is carbon pricing.