We pay insurance on our car, homes and contents, so why not on our planet? Why aren't we preparing for the worst, for our grandchildren's sake?
The politics of climate change is enough to make your head explode. We seem to have come to a consensus in New Zealand that carbon should have a price, but we're still re-arranging who pays that price. The previous government had one plan, the new government and the Maori Party, however, have fiddled with that, asking the taxpayer to subsidise polluters in the early years. We've got an emissions trading scheme that will be the first in the world to cover "all-sectors", but we can't settle on when each sector will join the scheme. We've agreed to cut emissions by 10-20 percent by 2020, but is it enough? The science seems to demand closer to a 40 percent cut if we are to keep the average global temperature from increasing by more than two percent. Do we need a tax or is an ETS sufficient? Seriously, head-exploding stuff.
The political realist might say that amounts to sure and steady progress in a country with a surprisingly high number of climate change deniers and a risk-wary government. But is it enough? The science seems to demand more. And what if, God forbid, that still isn't enough and we need more again.
I've been mulling over an idea about how we might do 'more' since I read Professor Sir Peter Gluckman's nifty summary of climate change that he published in August. This point in particular stuck with me:
There is a remote possibility that if we did little or nothing then the temperature would not rise to unacceptable levels. But we cannot gamble the future of the whole planet on the low probability of that occurring. We do many things in life that are based on the balance of probabilities, for example we think it prudent to insure our houses and wear seat belts in our cars not because we plan to have a fire or a crash, but rather because we are weighing the cost of the insurance premium or the minor inconvenience of putting on the seat belt against the significant risk of damage to our finances or ourselves if those events were to happen. It is the same with climate change – the collective wisdom of the scientific community is that action is needed to address global warming because without action the potential risk to the planet and ourselves is too high.
Likening the action needed to address climate change to taking out an insurance policy makes sense. At a time when most New Zealanders have given up on ever understanding the whole greenhouse shooting match and we risk confusion turning into apathy, it's the kind of thing most will understand. If you insure your car and house against an unlikely but potentially crippling event, doesn't it make sense to treat our planet – the only home we have – in the same way.
To me that suggests a policy alternative in the debate about what we can do about climate change; a debate that often focuses on carbon tax versus emissions trading or the structure of the ETS and our emissions reduction target. That is, earth insurance.
Why would we take out earth insurance? As it stands, we're relying on emissions trading, trees and hoped-for new technology to cut our greenhouse gases. But it's a cautious approach; as the government has repeatedly said, it won't risk harm to the economy when we don't know exactly how much the climate will change. Other nations are saying much the same thing. Around the world, nearly every country is committed to only moving as fast as the slowest mover, lest they sacrifice economic advantage.
But what if the worst happens; the equivalent of the house being burgled or the diamond ring disappearing down the drain? What if we need to act much more urgently that we think? What if we fail, and are faced in 50 years with what climate scientists call "dangerous climate change"? What if that undermines our economy and we are faced with a desperate world on our doorstep?
We're hoping for the best, not preparing for the worst. We're not taking out insurance.
Why not? Few households and even fewer businesses are that cavalier. It's an expense that both understand and accept as a sensible precautionary approach, it can be kept relatively cheap and it can be easily targeted.
I'm not sure of the best way of configuring it; you all might have some ideas on that. It would need to be mandatory; but KiwiSaver hardly caused a revolution, so I think that's possible.
We could make it an insurance paid by land-owners. I can't begin to think what level to set it at, but essentially the more land you own, the more you pay. That would tend to ask more of farmers and business owners, which seems fair. It would have the added benefit of providing a (small) disincentive to multiple home-owners.
Or it could be a surcharge on top of car registrations. The more cars you have, the more you pay for the risk you're taking with the environment. Or it could be aligned with the ETS sectors and be gathered from business alone.
How would it work? It would create a capital fund not unlike the Super Fund. Part of the money would be used to plant trees and buy carbon credits. That would help us in the meantime. The rest would be invested and saved just in case... in case we face climate migration, in case we need to bail out pacific atoll nations, in case our land-based industries take a hit, in case we fail so miserably in the next decade that our grandchildren and great-grandchildren need our help.
And that last point is the political message – we're doing this for our grandchildren. If the climate changes more than we hope and if later this century the country needs to rapidly adapt to a very different kind of world, don't we want our grandchildren to be prepared? Given that we know there's a chance of catastrophe, don't we want to take out some insurance for their sake?
How could we look them in the eye and say, well, we knew it could go really bad, but we did nothing?
Of course the flip side is that if we are successful in containing climate change or adaptation is less dramatic than we might fear, that insurance can be paid back. In introducing this insurance, the government could set conditions. If the money isn't needed by 2060, or 2090, or whenever, it could be shared amongst taxpayers, or paid back proportionately to those who paid it.
That's a better deal than your insurance company would offer, but it would make it more politically acceptable. Who doesn't want to look after their grandchildren?
In other words, if the worst happens, our descendants are covered. If it doesn't, they simply have a nice nest-egg. What a legacy to leave.
This, as you can tell, is a skeleton of an idea without any flesh on it. Any suggestions?
Comments (5)
I think that the concept is spot on, as a method of explaining and selling policy.
Translated from concept into policy, I doubt it would look a lot different from the way the ETS (or, alternatively, a carbon tax) is supposed to operate. Those are polluter pays mechanisms, as opposed to your preliminary approach of "those with the biggest stake in society" (land owners). But the basic concept ought to be more than a tax grab - either you pay your "premium" by effecting reductions at, probably, some personal/business cost (initially, although not necessarily long term); or, you pay it by having to buy carbon credits. If the latter, the government or the country to whom the money is paid ought to be reinvesting it in mitigation/adaptation. Long term, that's almost certainly the lowest risk best "insurance" strategy - banking the money is unlikely to be much help.
I've been meaning to pursue what follows, but haven't yet had a chance to - perhaps someone out there can help. When Nick Smith's been challenged in the House about the revised shape of the ETS, he responds that under Labour's previous proposals, it would have been a massive revenue-gathering exercise for the government; National is not taking that approach. My hunch is that, assuming Smith's correctly done the sums, the plan would have been to reinvest that money, as outlined above.
For me, the "insurance" idea really comes into its own at home. That is how I've always thought about it, without it ever occurring to me to extrapolate to government policy. It's a different kind of disaster kit: if the worst happens, will you and your family be ok? It's not, actually, solely a climate change issue. If oil peaks pre-economically viable alternatives, as some predict, or food insecurity raises world market prices, the issues will be much the same.
Two things. First, we would need stable global governance to universalise your suggestion. Second, we would, as Bhagwati and others have suggested, need to create something like a 'development tax' of those who have benefited hugely from development, to those who have not, thus equalising to some extent global wealth and opportunity in a resource and climate constrained world. Once that standard of living question has been addressed, then we might see buy-in to a global 'insurance' scheme.It is that standard of living question, which is the elephant in the corner.
Robert,
I was really only considering it on a national level; that would be hard enough! Creating a global insurance policy would be just too ambitious and it would be too difficult to figure out different premium rates for different countries.
For all that, you'd want cross-party support for something like this in NZ.
And Claire, would it be best to be polluter-pays only? Or just polluter pays most? Politically, you'd need to get mass buy-in for this, as with Kiwisaver or the health system.
And I didn't mention this, but given that we've got some decent number of years before we could hit the 'dangerous' zone, the premiums could be quite small to start with.
We've got a decent number of years before we hit the dangerous zone, in terms of actually seeing and recognising major effects. If we wanted to prevent / mitigate that, we've got about half a dozen years pre-2015 for global emissions to peak and decline. There is a lag effect.
I guess it follows, from framing your discussion in terms of "insurance", that we're talking about paying for / being otherwise prepared for the clean-up afterwards. Personally, I'm pretty keen on mitigation, as are insurance companies in setting their premiums (age, state of health, drivers under 25, car in garage, etc). If you want the premiums to be quite small, you have to do some other risk-mitigating stuff; conversely, if we don't take steps to mitigate, I'm not sure the premium is going to be affordable, let alone any use.
Agree that mitigation should be part of the fund's purpose. But it won't be the only source... Planting trees, for example, will be a big part of mitigation and the ETS should encourage more of that and there's no reason why there can't be other specific incentives on that front.
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