Government spent $9.8 billion on climate-damaging incentives

The government failed to build greener back into the pandemic recovery, according to new research from AUT.

Ministers allocated $9.8 billion to projects that encourage the use of fossil fuels, nearly six times what it spent on public transportation, flood protection and Jobs for Nature.

The government also missed an opportunity to tie “green strings” to cash earmarked for carbon-intensive industries, the researchers said.

READ MORE:
* Why housing is the elephant-sized hole in our climate plan
* By the numbers: the government’s sharpest carbon reduction policy
* Strings-free Air NZ loan a ‘missed opportunity’ to give NZ a low-carbon future

AUT PhD student Nina Ives and David Hall – a policy and political researcher at the university – tracked the money spent by the government on its Covid-19 Response and Recovery Fund, its aviation sector support package and the NZ Upgrade program.

Early in the pandemic, UN Secretary-General Antonio Guterres and climate activists called on governments to focus economic stimulus payments on climate-friendly infrastructure.

Ives concluded that the government “has not seized the pandemic as an opportunity to tackle the climate crisis as much as possible”.

In total, the government has allocated $9.8 billion for new highways, airport upgrades and loans and grants to airlines – and all of these projects lack measures to reduce their climate impact.

The $2 billion taxpayer loan to Air New Zealand was a major contributor. However, the flag carrier had failed to withdraw the full amount and repaid part of the loan earlier in the year by selling shares.

In addition, the government has awarded $390 million to support more than 8800 international flights – bypass its newly introduced climate impact tool when it approved the spending.

Many airlines received financial support from their governments. But loans from the French government came with “green cords,” Ives said. French airlines had to cut back on short-haul flights where there are lower-carbon alternatives, such as trains.

Because Aotearoa is an island nation that imports and exports goods, it’s important to maintain air freight, Ives added. “We had to secure routes for drugs and everything else.”

Still, the government could have made Air NZ’s loan conditional on research into low-carbon fuels or energy efficiency improvements, the analysis concluded.

By comparison, the government has spent $1.7 billion on green projects.

The contrast was greatest in the $8.5 billion NZ Upgrade package. Highways received most of this money: $6.6 billion went to roads that will promote the use of fossil fuels and there were no green cords.

The price tags for projects such as the Otaki to Levin bypass and the South Auckland motorway extension have risen following their pre-pandemic announcement in January 2020.

Roads are considered carbon-intensive infrastructure because EVs are only a “minute portion” of the vehicles on the road today, Ives said. “It is likely that more roads will encourage fossil fuel use, at least in the short term.”

$1.1 billion will be spent on upgrading the rail network. These projects are classified as promoting clean energy because they move people and freight much more efficiently – even though trains still rely on fossil fuels, either directly or through electricity generation.

There was one “unconditional” green project on the NZ Upgrade list: the $785 million walk and cycle bridge over Auckland harbour, but this has been demolished in October.

Within the Covid-19 Response and Recovery Fund, climate-focused infrastructure was given more opportunity to receive funding. Ives classified 61 of the 169 ‘shovel-ready’ projects, with construction costs totaling $2.4 billion, as climate-related.

Of this money, $515 million went to projects promoting clean energy — with $220 million for infrastructure that doesn’t rely on fossil fuels. Shared trails in Christchurch and Wellington have been given the green light.

Adaptation was a winner. The government allocated $1.5 billion to prepare areas for the effects of climate change. This included flood protection projects. The researchers also counted the $1.2 billion Jobs For Nature program as adaptation money, because one of its goals is to increase the resilience of the natural environment.

In comparison, for carbon-intensive projects that are ready for a shovel, we received $207 million. Of that, $79 million included improvements that could offset some of this effect, such as roads combined with bike lanes.

Hall said an economic shock is not an ideal environment for making decisions. “There’s still a bit of a black box about how some of those decisions were made.”

Government withdrawn from the first decision to fund a Waikato pumping station on carbon-leaking farmland, which would have exacerbated climate change. “There has clearly been some regret,” he added.

To avoid carbon-intensive stimulus packages in the future in “the heat of the crisis”, the government could develop principles for climate investment.

In addition, it could create a list of pre-screened green investment projects — and accelerate them for funding the next time it wants to get the economy moving again.

While the pandemic spending “wasn’t the green response we’d hoped for,” Ives said the funding announced as part of the emissions reduction plan was a positive development.

Ahead of the 2022 budget, the government has earmarked $2.9 billion to support the plan. The survey found that total “climate positive” money in the budget totaled $3.1 billion. This was not a “major incremental change” from 2021 — when $2.8 billion in climate-positive funding was allocated.

Since $2.9 billion for the emissions reduction plan came from the probable yield of the emissions trading system, this was not classified as new spending, Hall said.

This year’s budget funded a more diverse, broader range of policies, the study concluded.

The policies in the emissions reduction plan could also be used for economic incentives, Hall said. “Government investment in fixed infrastructure has a less inflationary effect than direct payouts.”

The investigation didn’t count every dollar in the government’s pandemic response, Ives said. For example, health expenditures and business support payments do not fit into the carbon-intensive or green category and were therefore excluded from the analysis. “We focused on spending that would have clear climate-related impacts.”

Ives warned that adding and comparing the figures from the budgets, the Covid-19 Response and Recovery Fund, the aviation financing and the NZ Upgrade program was challenging, especially with the high inflation of the past year.