Finance Minister Grant Robertson describes the $1 billion-odd a year earmarked for a new Climate Emergency Response Fund (CERF) as "just a down payment".
Given the magnitude of the climate challenge, let's hope so.
The announcement in Wednesday's Budget policy statement of the creation of the fund, initially tobe funded by the proceeds of the Government auctioning units into the emissions trading scheme, follows through on what Robertson said back in his Budget day speech in May.
"The current way in which Budgets are required to be produced makes it difficult to make the sustained and long-term investments needed to fix an intergenerational, multifaceted, complex problem like climate change," he said. He and Climate Change Minister James Shaw would be working on a long-term plan for financing the Government's climate change goals.
The still unripe fruit that work has borne, the CERF, is to be "an enduring, multiyear funding mechanism to support our transition to a low-emissions and climate resilient economy, in a way that protects vulnerable communities." At this stage, the only money allocated to it will come from the decision, also announced in May, of ring-fencing the proceeds of auctioning units into the ETS, which the Treasury estimates will amount to $4.5b over the next four fiscal years.
The Budget policy statement goes on to say — with what we must hope is droll understatement — "We know that more funding is required ... We expect to review the CERF alongside the main Budget allowances and increase the funding available as necessary to invest in high-value initiatives."
Next year's Budget will have two main areas of focus. One is a surge of spending to address a health system Robertson described as being in urgent need of repair and reform. The other will be the emissions-reduction plan which is to lay out how the Government expects to deliver the sort of emissions cuts the Climate Change Commission estimates are needed to be on track to the statutory goal of net zero by 2050.
If that plan does not involve some serious fiscal cost, it will not be much of a plan. Decarbonising the economy cannot be left to private sector initiatives alone as curbing greenhouse gas emissions is a public good, so left to their own devices firms will underinvest.
But next year will also see the release of a National Adaptation Plan to cope with the impacts of climate change.
Future Budgets beyond next year's, we are told, will extend the scope of the CERF to fund adaptation measures on top of those required to reduce New Zealand's rather conspicuous contribution to the global problem.
Quite how much climate change New Zealand will need to cope with will of course be determined by what the other 99.8 per cent of the world does, or fails to do, to cut emissions.
The wretched failure of global governance on this issue in Glasgow last month is discouraging. The Glasgow Climate Pact recognises that if global warming is to stay below 1.5C above pre-industrial levels — a threshold we should dread to cross — by 2030 global emissions will need to be 45 per cent lower than they were in 2010.
But in the next breath, the world's governments "note with serious concern" that their current nationally determined pledges would see us emit 14 per cent more than 2010 levels by the end of the decade. In other words, twice as much as we should.
One of the three successors to the Resource Management Act is to be a Climate Change Adaptation and Managed Retreat Act.
Devising that legislation will involve some difficult decisions about where to draw the line between costs which must be socialised and those where caveat emptor and moral hazard considerations apply.
At this stage the scale of those adaptation costs which do have to be socialised can only be guessed at and they are acknowledged in the latest accounts only as unquantified fiscal risks.
Initial $1 billion a year earmarked for climate response fund will have to be much bigger. Photo / AP
The establishment of the CERF reflects Robertson's belief that there is a systemic bias in the way Budget decisions are made which has entrenched a myopic penny wise, pound foolish approach to spending public money.
Short-term thinking in health, housing and infrastructure has led to deficits in all those areas, he said.
The Parliamentary Commissioner for the Environment Simon Upton sees a similar short-term bias on the environment.
In a detailed and trenchant report tabled this week, he argues that governments setting budgets need to get a whole lot better at recognising how what they do, or fail to do, will affect natural capital and the wellbeing of future New Zealanders.
Because environmental impacts occur over extended timeframes and are enduring, environmental spending proposals are often difficult to compare with those whose costs and benefits accrue over much shorter periods.
Cost benefit analyses try to address this sort of problem by applying a discount rate in calculating the net present value of future benefits.
But too high a discount rate is a recipe for intergenerational injustice. "In situations when current activities impose a high burden on future generations, these costs appear insignificant when discounted back to present-day dollars," the commissioner says.
"Similarly, actions taken now that offer a potentially large benefit to future generations may see those benefits significantly understated once those benefits have been discounted using standard assumptions."
While acknowledging there is no objective way of deciding on a "right" discount rate, Upton says the Treasury's 5 per cent rate is much too high, especially for issues such as climate change which will continue to have impacts over many generations and where a precautionary approach to potential tipping points requires a greater weight to be given to worst-case scenarios.
The Treasury reckons the commissioner is too hard on them, insisting that the 5 per cent rate is a default only and departments are encouraged to make the case for a lower rate appropriate to the timeframes over which the benefits of an investment proposal would accrue.
