Trading off growth for the good of our souls

Sometime this month Pete Hodgson will flesh out his Kyoto protocol strategy with some policy — not least, on who will get emissions credits and how they will be traded. That will stir another round of futile business resistance to him ratifying Kyoto.

Hodgson will argue, once again, that of all developed countries New Zealand, dependent on climate-sensitive exports, has most to lose from unabated climate change. Industry will argue that investment will dry up and some companies scarper if they have to pay for Kyoto and competitors in other non-Kyoto countries do not.

New Zealand Steel has warned that it might shut down if the impost is too high. Uncertainty over Kyoto terms is holding back forest industry investment.

So Hodgson, whose party must keep industry growing if it is to meet its social policy ambitions, has a difficult balancing act.

Some balancing emerged in his national interest analysis of Kyoto in February.

* He would not pursue policies which drove a polluter offshore to continue its emissions anyway — what is known in the Kyoto trade as carbon leakage.

* And he might not charge big emitters the full price of their emissions. That way Comalco and New Zealand Steel and the pulp and paper mills might not suffer too much.

But in the absence of detail — not least on the cost of carbon (and maybe methane) — neither of his protests has carried much weight with industry.

And with reason, quite apart from competitor Australia’s refusal to ratify Kyoto. For the first target period — 2008-12 — we don’t have to lift a finger.

Under the agreement signed by National’s Simon Upton this country is supposed to cut emissions of greenhouse gases — mainly methane, carbon dioxide and nitrous oxid — to 1990 levels by 2008-12. On current behaviour we are heading to be one-sixth above that.

But we have enough trees planted since 1990 and earning emissions credits — “removal units” — to easily more than cover the amount by which emissions will exceed 1990 levels in the target period on current projections.

So a less green government might relax and accept the industry argument. But not Hodgson. He is the green tsar of a government that is green without the Greens.

He wants emissions down to 1990 levels, regardless. This government believes Kyoto is not just in our national interest but good in itself.

That was the mentality that banned logging in government forests. It is the mentality that wants “zero waste” and big cuts in energy use under strategies announced last month and last year.

This thinking says we will be better people for changing our personal and industrial behaviour to low energy use, low waste, pristine national parks and lower carbon and methane emissions. That behaviour will stamp our membership card of the first world — up there with Scandinavia, the mecca of 1960s and 1970s social democrats who dominate the cabinet’s upper reaches.

There is an economic point to “zero waste”. It is that we trade on being “clean and green”. Actually we are “dirty and brown” but there aren’t many of us. One day we will be rumbled and the game will be over — unless we clean ourselves up.

The same goes for energy conservation and Kyoto.

But search the waste strategy for this economic argument and you will fail. The cabinet is after zero waste for the good of the planet.

The catch in this beautiful ambition is that Scandinavia has Scandinavian wages. We have Portuguese wages. Portuguese wages pay for Portuguese social services and environmental standards, not Scandinavian ones.

The simpleton would go for growth to catch Scandinavia up, thereby to afford its high social and environmental standards. That means temporarily trading off some social spending and some environmental ambitions in favour of fast-tracking the economy.

But the government repeatedly trades off growth in favour of social measures and the environment.

Its way out of this box is to push “innovation” and measures to lift investment. But its green fingers are even in innovation, with a moratorium on genetic modification trials and tighter rules on research. Yet biotechnology is where innovation holds most promise for us because we have a history of it.

For the moment this circle does not need to be joined. Luck delivered a benign economic environment which has soothed even business critics.

But luck is transitory. In a second term Hodgson and Co might find green politics harder going.