Sustainable World

Geoff Bertram

Climate Change

Geoff Bertram is an economist and Senior Associate Institute for Governance and Policy Studies Victoria University of Wellington, Geoff has written extensively on climate change, macro-economics and regulation.

In the past half century we have a new imperialism. It’s the imperialism of transnational capital operating with, instead of navies, ISDS and international trade agreements, and so on. And the opportunity for progressive movements is in wanting to get countervailing power back into the system. That means trade agreements which respect national democratic spaces for protecting values that matter to people, while seizing the opportunity to exercise global citizenship on something that is collectively important to us like climate change. We need new international architecture that will take us there. It’s a new conjuncture, but social democrats ought to be standing there simultaneously holding their national spaces, because like it or not the nation is the repository of countervailing power in the world system still, while stepping out to create something new collectively. That’s my little manifesto.

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I want to make it clear that whatever else is in a progressive trade strategy, climate change is unavoidable as a central topic. Either because the global economy will be coping with the consequences, or because it has done dramatic stuff to meet the targets. The central business challenge is to save the planet. That may sound trite, but we are talking about enormous opportunities in business, investment, employment across the global economy. The problem at the national level is that the talk is all about the competitiveness impact on trade exposed sectors, especially agriculture. So government is simply neutered by exemptions to biggest polluters of heavy industry and agriculture. That can be amazingly persuasive to people who have not thought about trade theory.

I want to talk about how to handle that in a progressive setting. Getting a global price on carbon, or even at a national level, is central to getting structural shifts in the economy. It is unlikely that we will get a globally harmonised carbon price in the foreseeable future, so we have to be looking at nationally set carbon prices, and we have to look at the consequences of high carbon prices for the trading sectors in this economy, that is our export sectors and to some extent our import-competing sectors.

Because there won’t be global harmonisation there has always been a strong case for border adjustments. To understand that you have to look at the way we apply GST in NZ – we mark up prices of goods and services bought here to provide revenue for the government. With a carbon tax you mark up the prices of things that are being traded in the NZ economy to capture the externality of carbon emissions. So the goal is a little different but the instrument is the same, it’s a tax. What do we do with GST? If NZ exporters had to export with 15% added on to the price they would be considerably less competitive. At the border as things leave, the tax comes off and they go out at the pre-GST price. Stuff coming in arrives without the GST added and is competing with local products so they put GST on after it crosses the border. This is not rocket science.

But we are talking about the space for democratic national action, which was also talked about earlier today. What kind of space is needed for states to address the climate change challenge? If they are going to use carbon taxes, how do we need to protect their ability to do that? I want to emphasise that if we have border adjustments in place for carbon tax, all this stuff about trade exposure is gone – you don’t have to exempt anybody or run around having lobbyists telling you about how the Tiwai point smelter will close, etc. You trade in the real world outside our borders on the prices that prevail out there. This is fully consistent with the principle of free trade. It keeps the playing field level, while enabling individual economies or groups of economies to use carbon taxes to pursue zero carbon economies.

There are 2 other points: 1. Bill Nordhaus has been proposing carbon clubs of nations who get carbon taxes harmonised and form a trade area with a single tariff to protect them from dumping from high carbon economies. That principle of dumping has always been there in trade literature. It’s always been the case that dumping is a breach of the spirit of free trade. We are talking about countries that sell untaxed high carbon goods into an economy where low carbon strategies are being pursued, in which case you put an anti-dumping duty on when they come over the border. At same time, exporters from low carbon countries that are fully competitive, aside from the carbon tax they pay on them, have to be able to sell their goods free of the carbon tax in overseas jurisdictions that have high carbon policies.

A carbon club can start with one country: a lead country does it and invites others to sign on. Ideally others will. Maybe no one does. But there is no downside. For example, Tuvalu could be the first mover. When there is a critical mass, the club has its own dynamic and grows. There is nothing to lose. Incentives to join will become stronger as climate change pressure comes on and the damage from not joining becomes bigger over time.

This is not an ideal world. You can see this is second best response to the inability of the global economy to get a harmonised global price in place. The moment it does that you can let the border adjustments off. It’s a pity that there’s positives and negatives of Trump. He is weaponising tariffs as geopolitical manoeuvring in an offensive against China. It does mean, though, that the strategic use of tariffs and subsidies to pursue strategic objectives is now back on the trade agenda and progressives don’t need to be fearful of that. Once you have those options being played around with you can harness them to progressive objectives.

More broadly, Russel Norman talks about global citizenship and opens up the challenge that local identity and a place to stand is where a lot of progressive politics will come from. I want to stand back and sketch some big picture stuff to identify the 2 strands that have to go into progressive trade policy. One is the Maori, tangata whenua stance and the Treaty, and the other is the progressive tradition in the white settler society. If you think back to the 1940s when Labour was in power and Peter Fraser was Prime Minister and NZ went off to the UN founding meetings and so on. Social democrats in NZ had an internationalist vision of constructing a better world order, coming from a strong place to stand under the First Labour government.

If you look back, we had a global economy that was dominated by the old empires and Rod Oram talked this morning about asymmetric power. But power is asymmetric. That’s what power is. If you get symmetry, power loses its bite. Power against countervailing power gives you balance. In a sense that’s what happened in the 1940s – the great powers ruled the world and sent their navies around to enforce their will. That was broken. Decolonisation took large chunks of the world out from the control of the great powers. We moved into an internationalist vision of a global economy in which people could realise their own identities within their own spaces.

Then in the following half century we have a new imperialism. It’s the imperialism of transnational capital operating with, instead of navies, ISDS and international trade agreements, and so on. And the opportunity for progressive movements is in wanting to get countervailing power back into the system. That means trade agreements which respect national democratic spaces for protecting values that matter to people, while seizing the opportunity to exercise global citizenship on something that is collectively important to us like climate change. We need new international architecture that will take us there. It’s a new conjuncture, but social democrats ought to be standing there simultaneously holding their national spaces, because like it or not the nation is the repository of countervailing power in the world system still, while stepping out to create something new collectively. That’s my little manifesto.

Question: If we have a border tax adjustment for exporters, how do we keep the pressure on them to cut their emissions if they are exporting to countries that have high emissions?

Geoff: This is second best policy, how a nation can operate within its own borders. Second best, where others aren’t being global good citizens. A ring fence enables an efficient national policy without it being overwhelmed form outside.

Simon Terry,

Environment/Trade Intersection

Simon Terry is Executive Director of the NZ Sustainability Council, who has previously been an investment banker and financial journalist.

Trade needs to be constrained within environmental limits. Investor-state dispute settlement (ISDS) provisions create risks for government of being sued. One response is the “chilling effect”, where governments avoid legal risk by backing off progressive reforms. When we have excess demand on the environment and need to raise standards, this ISDS becomes a deterrent. The asymmetry is quite stunning. Private wealth is protected, but there are no reciprocal rights to protect global or local commons for the public good. Foreign corporates should have no greater rights, especially for something indigenous. Explicit statements should say these are the constraints within which the policy is framed, so there is no ambiguity. The emergency around climate change will be number one, and the question will be how to do it

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Trade needs to be constrained within environmental limits. Investor-state dispute settlement (ISDS) provisions create risks for government of being sued. One response is the “chilling effect”, where governments avoid legal risk by backing off progressive reforms. When we have excess demand on the environment and need to raise standards, this ISDS becomes a deterrent. The asymmetry is quite stunning. Private wealth is protected, but there are no reciprocal rights to protect global or local commons for the public good. Foreign corporates should have no greater rights, especially for something indigenous. Explicit statements should say these are the constraints within which the policy is framed, so there is no ambiguity. The emergency around climate change will be number one, and the question will be how to do it.

It’s good that the government now says no ISDS in new agreements, but the real test is more fundamental: economic activity can only take place sustainably within environmental limits. As Herman Daly said, “Economy is a wholly owned subsidiary of the environment”. These are deeply ethical questions ultimately. For Indigenous peoples, if something can be sustained for 7 generations, then that’s a test to indicate if it is right.

We need a fundamental acceptance that environmental limits take priority in structuring the economy. Trade agreements would need to reference environmental treaties, embedding them and with strong enough provisions to guide judgments about trade. Agreements also need to be framed from a public good perspective, not that of the foreign investor. We need to establish principles that foreign non-state actors don’t get rights to engage with governments that locals don’t get. Another element is environmental border taxes – a country setting strong environmental performance standards wants to ensure its companies are not undercut by cheap imports that rely on low environmental standards, for example by taxing countries that don’t have a strong carbon tax, which neutralises the impacts for countries that do take responsibility. Carbon emissions for international transport, about 6% of global emissions, impose a burden on future generations.

Barry Coates: You said that standards should be democratically determined for the environment. That there should be national sovereignty over environmental standards. How do we avoid the race to the bottom? Does that mean stronger environmental agreements adopted multilaterally of how does that happen?

Simon: Let me take a current example. The US is a major exporter of GM foods and is seeking to harmonise standards around GMOs – including conditions under which they are approved for growing. Such assessments consider both how safe the food is, and the risks and benefits to the environment. If a global standard on risk assessment is set, it will be a lowest common denominator on – the agreements say not more burdensome than necessary – burdensome to whom? Corporations? People? The public interest? That test does not take account of local attitudes to risk and so will undermine local democratic processes. Trade treaties must preserve the right for countries to each set their own standards for this. Risk has to be locally determined. Taking it away is an offence to democratic processes.

Question. Climate change and inequality – we can’t address one without another. What changes do we need when we also look at social inequality as well?

Simon: We need to keep a clear focus on climate change, and as Aroha Mead says keeping a focus on integrating thinking. A clear focus on climate change mitigation, just transition and other factors. We have been advocating a Climate Change Commission to address those links and ways and spaces to do it. Rather than an exclusive focus on dollars, you pick another variable which is carbon and run budgets according to that and see what the world looks like. If we look across the impacts on communities, we can think about programmes of government to support that change. This is the paradigm shift we need to go through.

Russel Norman

Finite Resources

Russel Norman is Executive Director, Greenpeace NZ, previously a list MP and co-leader of the Green Party.

We have no choice but to embrace a progressive global agenda. When you think about climate change in particular, along with other environmental challenges, there are only global solutions and we cannot solve them without great global governance. We need strong structures to resolve a problem like climate change. Which means we need to have an identity and a call to being global citizens if we are to solve these kinds of problems. … That is one of the really important parts of what the solution looks like. It’s not just protecting the right to regulate in agreements – it’s also about good global agreements that are enforceable across the planet and set minimum environmental standards.

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I endorse what Simon Terry and Geoff Bertram said. We need explicit in the text of future agreements that MEAs trump trade agreements. If there’s a case against you, and officials are always concerned about such cases, you need to point to an absolute defence to achieve the goals in an MEA. For example, ending oil exploration to achieve the goals of Paris Agreement. If massive oil seismic blasting corporations were to threaten action against your government if it proceeds with the policy, which is currently on the cards at the moment, then you have an absolute defence of achieving the purposes of an MEA. There is a national security absolute defence under many agreements, which Trump relies on in recent occasions. If a case was brought against you under ISDS, there may be issues about whether the action is proportionate, the right way to go about it, but nonetheless creating an absolute defence of an MEA seems essential to achieve goals such as climate change.

The State is always working within the context of legal risk. That’s a reality of state power. The problem with ISDS is it is hard to judge the risks because it is such an arbitrary system. Some really clear direction would help create some real certainty. There are now dozens of cases are underway against governments for taking action on mining, environment, and so on.

There’s a bunch of other environment issues that are not immediately global in nature in the way climate change is. Water can be like that. If we have a freshwater crisis in NZ, in many ways its specific to NZ. It’s not a global crisis although they are not unrelated. If the NZ government does what it needs to do and introduces a haircut on all existing consents to reduce the water extraction and pollution rights of consent holders in the country, there would be a bunch of foreign-owned consent holders who would potentially be able to take action against NZ under ISDS provisions. So there needs to be a defence about MEAs, but also to protect the NZ environment through specific use.

We need these two levels of environmental defence relating to local issues. Currently we have both the freshwater crisis and Treaty rights around freshwater. Dealing with both issues inevitably will involve a haircut on existing consent holders, first to reduce the pollution going into water and the extraction of fresh water from rivers etc, and to create the headroom to deal with the entirely valid Treaty claims around freshwater. If you are Synlait or any foreign owned dairy producers in NZ you could rightly argue that the value of your investment in NZ could be reduced as a result of that and that would be a form of indirect expropriation under a classic ISDS case. So we need defences under both levels.

Finally, I want to talk about the political ground to win these battles. We can’t just win them domestically. It relates to the bigger problem of the turbulence in the global government system, much of which rests on a nationalist call, whether it is Trump or the far right in Europe or many other places. Nationalism is being mobilised as discursive power to win a number of these battles. It seems to me that we should be mobilising globalism, be the champions of global governance. The problem is that the neoliberal version of global governance has dominated the global narrative, so the very people who introduced the neoliberal revolution in NZ and elsewhere are the ones who got control to define what it meant and to form global governance institutions. Even when we beat them at a national level, such as the argument around neoliberalism, which is pretty much won in NZ now, these people are still at these international meetings instituting that framework in those global agreements. So it happened that globalisation got defined in a very neoliberal kind of way.

It doesn’t need to be like that. We have no choice but to embrace a progressive global agenda. When you think about climate change in particular, along with other environmental challenges, there are only global solutions and we cannot solve them without great global governance. We need strong structures to resolve a problem like climate change. Which means we need to have an identity and a call to being global citizens if we are to solve these kinds of problems. We cannot solve them at a national level or trying to mobilise a national sovereignty discourse. Obviously, those kinds of sovereignty discourses are important, but we must also mobilise a global identity or citizenship discourse. It’s a powerful narrative and many people in the world are yearning to see themselves as part of a global progressive community which supports things like a Paris climate agreement, as without that it is an intractable problem. That is one of the really important parts of what the solution looks like. It’s not just protecting the right to regulate in agreements – it’s also about good global agreements that are enforceable across the planet and set minimum environmental standards.

Barry: That’s a great challenge of how to get that global movement to support the kind of MEAs and changes to trade rules. We’ve been much better on trade rules at fighting the things we don’t like rather than fighting for things we do like. Do you, as a campaigner, have ideas as to where the touch points are to take a campaign forward that would pick up from of the discussions today about alternatives and changes to the fundamentals of trade agreements that might build a really strong coalition behind them.

Russel: For organisations like Greenpeace, they are in a strong position to promote the idea of global identity. We don’t see many doing it. There are very few in the progressive movement. That’s not surprising. If extra-terrestrials arrived on the planet tomorrow and threatened its future, we would instantly have a global identity as earthlings. We do have an existential threat to life on this planet, which comes from us, and we need to gather together to confront this. There is no other solution. Responsibility falls especially on multilateral environmental organisations, but also for all progressives as well. That’s especially relevant now because of the rise of nationalism. First and foremost I am an earthling, a citizen of this planet. That identity is not very present today.

Question. Climate change and inequality – we can’t address one without another. What changes do we need when we also look at social inequality as well?

Russel  Talking about the politics of it, you need to get as broad a consensus as you can for action. So you need to take people with you as much as you can. That doesn’t mean you are going to take everyone with you, you’re not. I don’t think the Zero Carbon Act needs to have the National party vote for it. I’m not a big believer we can only do this through consensus. We have to be ambitious and future conservative governments will follow it. In terms of the politics, you want a just transition and help people as much as you can.

But we also need to speak the truth that climate change is the biggest social justice calamity the earth and human beings have ever faced. We mustn’t let the perfect be the enemy of the good. We need to make some rapid transitions. There will be some communities that are pretty heavily hit as a result of that, especially if they depend on a fossil fuel economy. We need to help them through that transition. But we should also acknowledge that if you worked in the oil industry and were being paid $150,000 a year and will transition to something not quite like that, you are not going to be celebrating that. We shouldn’t pretend this kind of profound economic transition won’t cause a lot of pain for some people. It doesn’t mean we shouldn’t try to deal with the justice issues, we should. But some dislocation shouldn’t prevent us taking action to prevent the biggest social justice calamity we have ever experienced as a species.

Aroha Mead

Wai 262 And Kaitiakitanga

Aroha Mea is from Ngāti Awa and Ngāti Porou, Aroha is a political scientist who works across many disciplines, including indigenous rights and sustainable development. She is chair emeritus of the International Union for Conservation of Nature Commission on Environmental, Economic and Social Policy and has recently been appointed to the advisory board of Fonterra.

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[He mihi]. I am going to take us into a very different space and come back to some of the issues you have been hearing since the beginning when Ngati Whatua welcomed us here. You have seen there remains some fundamental issues of a constitutional nature that have yet to be resolved in Aotearoa in relation to the Treaty of Waitangi and the rangatiratanga and kaitiakitanga of hapu and iwi over their taonga, the treasures inherited from the ancestors. These treasures include not just lands and waters, but landscapes and ecosystems and species and the genetic resources, as well as a very rich cultural heritage that includes a knowledge system about the environment and the interaction of people with the environment that is deeply embedded in inter-generational wisdom and values and practices.

Until such time that these fundamental issues are satisfactorily worked through there will always be an underlying scepticism about the promises of global trade. And when the Crown says that it has a priority to protect and enhance national interests as a bottom line in the various trade agreements it enters into, we can’t help but have reservations about who is actually included in the national interest. We can’t see ourselves in there. Because if there is no agreement at the national level about hapu and iwi have kaitiakitanga over their taonga tuku iho then there is a high risk that Maori rights and interests will be eroded rather than enhanced through trade agreements.

In 1999 you may have heard of the Wai 262 claim, the number of the claim with the Waitangi Tribunal. The claim is known as the indigenous flora and fauna claim. The claimants sought confirmation of Maori rights and interests through Article 2 of the Treaty. The Tribunal conducted two sets of hearings and after 19 years in the system finally released their report, Ko Aotearoa Tenei, in 2011. And 8 years later we are still waiting for the Crown to respond to the report. The Wai 262 claim challenged the colonial culture of asserting ownership over everything and anything. Not just Maori land, but also native flora and fauna. This colonial culture uses legislation to assert ownership, and be very aggressive about ownership, almost treating it as a hoarder collecting and collecting and dumping somewhere with no order to it, no structure to it.

We would argue that the same attention that the Crown has put into claiming ownership has not ever been paid to the duty of care, caring for what it has assumed ownership of. As a result in the latest report over 4000 indigenous peoples are threatened or at threat of extinction. Put another way, between 2010 and 2016 nearly 80% of our birds, bats, reptiles and frogs are classified as at risk of extinction or highly threatened. Our rivers are degraded. According to the Ministry for the Environment Our Land 2008 report 192 million tonnes of soil was lost through erosion. I recently saw a video that my whanaunga from Ngati Porou put out of going deep into the heartland of the Raukumara ranges. You would expect in the heart of these native forests to hear all the birds and have thick undergrowth. Two days into tramping and the undergrowth was all gone. You could just walk through the forest and there was nothing there. No sound of birds. That’s the kind of care the Crown has given to what it says it owns.

What I have always found as a really unusual and puzzling dynamic in NZ is that many who are committed to the environment, even though they know how much harm is being caused through neglect by government, they still would rather have that than have lands returned to Maori. They will do anything but actually return the lands to Maori. And even though we have had some quite innovative Treaty settlements – we have had part of our nature become legal personality, we have co-governance, we have co-management, we have everything on the table except the return to Maori outright of the right to make decisions. Part of that comes from this fear that Maori will somehow do exactly what the Crown has done, which is regulate, not allow access, and perhaps further diminish.

For me, a progressive future is one where people have more trust that Maori as tangata whenua actually have the best interests of the environment and the richness of this country at heart. The harm that’s been caused wasn’t a century ago, or during the time of the moa that is constantly dragged up. These were quite recent. These are poor policies and poor decisions that are being made right now. And Maori cultural expressions are still being appropriated by overseas companies, including companies that NZ has free trade agreements with.

I just want to come back to my initial point that until such time as government has the very discussions with Maori that it has been steadfastly avoiding – the constitutional status of the Treaty, tino rangatiratanga of hapu and iwi, responding to all of the issues raised through Wai 262 – the scepticism of government to adequately factor Maori interests will remain. And I also want to say to this concept of a global citizen. While I can relate to it as in terms of a global community of people, I think the fundamental issue of your identity as a tangata whenua person belonging to a land is of such paramount importance to making wise decisions that I wouldn’t want to see this leap into global, because the whole part of being local is that it makes you make wise decisions to protect the resources.

Barry Coates: Perhaps a counter-point of the global identity is a greater connection of indigenous peoples around defining those rights and restoring those rights. To what degree do you think that has power as a concept, or is it necessary to struggle on a country or iwi by iwi basis?

Aroha: That is not an easy question. What I am suggesting is more than an acceptance that Maori and indigenous peoples have rights and interests that should be protected. It is that the societies in which we live should also be comfortable with those values and trust them a little bit more, that wise decisions can be made by applying indigenous values. Especially around the environment, where the knowledge system of that interaction has existed and survived and been proven to be robust. It is there and able to offer some sound solutions to many of our problems. But it is being denied purely because it is indigenous.

Question. Climate change and inequality – we can’t address one without another. What changes do we need when we also look at social inequality as well?

Aroha: Any environmental issue has social dimensions. Displacement of indigenous peoples from their lands is an obvious example. But marginalisation of indigenous peoples from their lands has been a global phenomenon. It’s behind a lot of the poverty we are experiencing in the world. And although it might be complex, if we haven’t yet got the picture that you have to deal with the environment and culture and social and economic factors all together at the same time then you are going to inevitably repeat the mistakes of the past and only deal with one fraction. We need policies that can go across all of them.

People are always impacted upon by decisions. Let’s just take it as given that every decision has a social dimension. When we are talking about resources, and there are indigenous peoples in those countries, it’s also going to impact on them, that’s a given. We have to fundamentally change the intellectual framework we use to analyse things. I always found it amazing that it took until 1992 for the governments of the world to acknowledge there was a link between environment and development. That’s pathetic. Since then the link was acknowledged they have carried on as if you can separate the two. We will not change the environmental degradation or eradicate poverty or deal with any of the other millennium development goals or the new sustainable development goals, without bringing all these elements together.

Question. Climate change and inequality – we can’t address one without another. What changes do we need when we also look at social inequality as well?

Aroha: Any environmental issue has social dimensions. Displacement of indigenous peoples from their lands is an obvious example. But marginalisation of indigenous peoples from their lands has been a global phenomenon. It’s behind a lot of the poverty we are experiencing in the world. And although it might be complex, if we haven’t yet got the picture that you have to deal with the environment and culture and social and economic factors all together at the same time then you are going to inevitably repeat the mistakes of the past and only deal with one fraction. We need policies that can go across all of them.

People are always impacted upon by decisions. Let’s just take it as given that every decision has a social dimension. When we are talking about resources, and there are indigenous peoples in those countries, it’s also going to impact on them, that’s a given. We have to fundamentally change the intellectual framework we use to analyse things. I always found it amazing that it took until 1992 for the governments of the world to acknowledge there was a link between environment and development. That’s pathetic. Since then the link was acknowledged they have carried on as if you can separate the two. We will not change the environmental degradation or eradicate poverty or deal with any of the other millennium development goals or the new sustainable development goals, without bringing all these elements together.

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