Download Economic Effects of Climate Change on the Transport Industry

Economic Effects of Climate Change
on the Transport Industry
Brent Layton
Sunday 16 September 2007
Is climate change the big risk?
► For
those currently involved in the road transport
sector, the big risk is not climate change itself
– The climate changing is not going to have a material
impact in the foreseeable future on the cost of
roading, the cost of a rig or the cost of running a rig
– The climate changing (if that is all that happened) is
not even going to have a material impact in the
medium term on the demand for trucking
► The
risk for the road transport sector is the
probability of policy changes with unintended
and ill-considered consequences aimed at
climate change reduction
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Good and bad policy
► If
the policy changes to deal with climate change
are well thought through and aimed at:
– effectively reducing greenhouse emissions at
minimum costs to the New Zealand economy
– being non-distortionary as regards the different
sectors and forms of emissions world-wide
– ensuring that New Zealand’s economy is not put at a
competitive risk relative to the economies of other
countries with lower or no obligations
► Then
the economic impact on New Zealand is
likely to be modest
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Good and bad policy
► In
these circumstances the impact on the road
transport sector is also likely to be modest
– Your industry is likely to gain a little business at the
expense of domestic air freight, but not much
– Your industry might lose a little business to rail and
coastal shipping (although I suspect that if the policy
playing field is truly level you will actually win a bit off
rail)
– Your industry will also lose a little because the
economy fails to grow quite as fast as it would have
without climate change policies
► Overall,
however, the impact on your industry will
be modest if the policies are good
4
Risks of bad policy
► There
are several reasons to fear that policy will
not be good
– Some reasons are general
– Other reasons are specific to road transport
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General reasons
►
Has been less emphasis on cost benefit analysis and
regulatory impact analysis in policy decision making
recently
– E.g. Telecom split, KiwiSaver, Working for Families 2
►
Policy advisors seem keen to offer advice that is
acceptable
– Acceptable advice is not necessarily the best advice
►
►
Timetables for action suggest decision making around
this topic will not involve significant consultation
Strong political interest in topic and some interest in NZ
leading the charge to “save the world”
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Transport specific
► Climate
change policy is a magnet to those
predisposed towards intervention and regulatory
controls
► To many of these people, cars and trucks are
“obviously bad” and so something which reduces
their use is “obviously good”
► Trucks (and cars) are subject to many standards
and “so what’s the problem with a few more like
requirements in regard to form of fuel use,
maximum power, etc. etc.”
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Potential forms of bad policy
► Policies
that have New Zealand “leading the
charge” globally
– Result in significant reductions in income and growth
of economy and hence demand for transport
► Policies
that in effect tilt the playing field in one
direction or another and do not allow the market
to work out lowest cost solutions e.g.
– subsidies for bio-fuels
– “subsidies” for rail and shipping
– Irrational restrictions on trucks and the choice of
technology among truckers
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What to do about it
► Apply
pressure for proper and open evaluation of
policies in terms of their:
– Benefits and costs
– Impact on various sectors and interest groups
► Point
out the unintended and perverse
consequences of regulatory constraints
► Get on with the job of seeking low emission
options in your business when economic to do
so
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