3 minute read 12 May 2022

If we tighten the purse strings now, there’ll be no change to climate change.

By Gerri Ward

EY NZ Climate Change and Sustainability Services Director

Passionate about authentic leadership. Here to make a difference. Aspiration to be a positive maverick. Motivated by bringing out the best in our people, and getting what matters done.

3 minute read 12 May 2022
Related topics Economics Sustainability

The government is stuck between a rock and a hard place when it comes to spending on climate change in this budget. There are so many short-term challenges standing in the way, whether it’s rampaging inflation, interest rate hikes, supply chain issues or overvalued housing, it can seem like climate change is just another thing to worry about, and something we could tackle in the longer term. There is pressure on the Government to slow down its spending, while we also know that almost 45% of Budget 2022 was allocated in 2021, meaning there isn’t that much to go around this year anyway.

The discussion this week might be more about how we slow down spending and what we can and can’t afford, but put simply, climate change investment is something we cannot afford to ignore right now. If we put spending on climate change off for a rainy day, we guarantee it will quickly turn into a flood.

Where’s the focus and spending been to date?

Last year, there were only a handful of initiatives around sustainability. There was the $300 million attributed to recapitalising New Zealand Green Investment Finance, then there was the $67.4 million to implement the Carbon Neutral Government Programme, and the $67m dedicated to decarbonising public transport, which has helped buy Auckland’s electric ferries. But in comparison to the $200bn that’s been spent on wellbeing, for example, it’s a drop in the ocean.

What was promising is the Climate Emergency Response Fund (CERF), which will open up spending over the next few years. In Budget 2021, Minister Robertson announced the Government would be spending the proceeds of its Emissions Trading Scheme on emissions reductions programmes from Budget 2022 onwards via the CERF. Encouragingly, Climate Change Minister James Shaw recently confirmed the fund has been established with $4.5 billion from the Emissions Trading Scheme. Seeing a number in the billions, not millions, gives us hope that our decision-makers are genuinely treating the climate change crisis as “our nuclear-free moment”.

Recent research in New Zealand from Microsoft found that 32% of Kiwi businesses say they are going to miss their 2050 net-zero targets. The Microsoft report also revealed New Zealand is one of the highest per capita emitters in the world, with net emissions climbing 60% since 1990.

So why take action now? The truth is that taking faster action on climate change could save New Zealand $30 billion by 2050. Research EY undertook for Westpac, New Zealand’s first carbon zero certified bank, found average Gross Domestic Product growth is forecast to be 2.015% per year until 2050 if industries take early action on addressing climate change. If substantive action is delayed and companies have to play catch-up later, this falls to an average of 2.005%. The cumulative difference is NZD$30 billion, and that’s huge.

So, what needs to be done?

To help put the size of the changes we need to make into context – you only need to look at the impact the COVID-19 lockdowns of the past two years have had on global emissions. As this article explains, after rising steadily for decades, global carbon dioxide emissions fell by 6.4%, or 2.3 billion tonnes, in 2020, as the COVID-19 pandemic significantly reduced economic and social activities worldwide. If we could go into global lockdowns every year for the next 100 years, we might make some ground up, but let’s be honest: that’s not what any of us wants.

As a start, we think that the Low Carbon Energy Roadmap produced recently by the Aotearoa Circle, with support from EY, offers some ideas for where to put additional funding. Some of the CERF funding could be put towards:

  • A significant increase in public transport funding, effectively extending the temporary discounts that have recently been put in place.
  • Substantially increasing the Government Investment in Decarbonising Industry (GIDI) fund.
  • Increasing Warmer Kiwi Homes programme funding to $100m per year, targeting upgrading of 20,000 low-income homes per year to Healthy Homes Standards.

As well, we’d like to see:

  1. A cross-budget investment in the decarbonisation of industry and investment in key decarbonization infrastructure. 
  2. Low-carbon transport technology R&D, so we can create fleets of more efficient public transport vehicles.
  3. Funding biofuels’ development so we can find alternative ways to fuel our key industries across New Zealand. 
  4. Policy and operational support to make domestic offsetting a whole lot easier.
  5. Programmes, initiatives and funding that help the business community better understand and get on top of climate change, because most businesses are too time poor, to focus on dealing with life’s other challenges, like supply chain issues and skills shortages, to focus on sustainability.

The other point to make here is that money alone won’t solve all our problems. We need to put more thought into creating strategic partnerships, inspiring Kiwis to create better technology and innovation that helps us measure how we are progressing. We also need to consider what policy is impacting our ability to move quickly and clear the path for businesses to operate more sustainably.

The Government has an opportunity with this Budget to start putting more behind climate change action. It has a difficult task of navigating the growing sentiment around curbing expenditure as we face some short-term headwinds and balancing that with a need to protect the long-term sustainability of our planet and country.

Summary

Now’s not the time to use tightening of the purse strings as an excuse for not investing in our future.

About this article

By Gerri Ward

EY NZ Climate Change and Sustainability Services Director

Passionate about authentic leadership. Here to make a difference. Aspiration to be a positive maverick. Motivated by bringing out the best in our people, and getting what matters done.

Related topics Economics Sustainability