Climate change comes into considerations, in the New Zealand Productivity Commission’s draft report on local government funding and financing arrangements.
Releasing the report, commission chair Murray Sherwin said the inquiry had been initiated in response to a perception that rates have become less affordable over time, but the commission found no clear evidence of that. Rates, overall, have broadly kept pace with population and income growth over the past three decades, but have not become relatively more burdensome.
“However, even with a robust funding base, there are important areas where local governments will need assistance in the future.”
Sherwin is talking – among other things – about rising sea levels and more intensive rain events and their threat to local government infrastructure, especially roads and waste/storm water infrastructure.
“These risks are very large, but not evenly distributed across the nation. There is a case for establishing mechanisms that assist in sharing the cost of research and policy analysis, and spreading the financial risk that would otherwise be unmanageable for the most affected communities.
The draft report makes 30 recommendations to deal with the evident stresses and to better align council and ratepayer interests.
The report and supporting documentation can be read here.
The Science Media Centre has focused on the report’s contention that central government could do more to help councils deal with the growing threat of climate change.
The commission suggests the Government should extend the NZTA’s co-funding role to assist councils facing climate change-related threats to transport infrastructure, and create a new agency and resilience fund to work with at-risk councils to redesign – or possibly relocate – wastewater and stormwater infrastructure.
The SMC asked experts to comment on the Productivity Commission’s draft report.
Here are the responses –
* Professor Lisa Ellis, Director, Philosophy, Politics, and Economics Programme, University of Otago, comments:
“Every day that passes without clarity on climate change adaptation policy brings new losses: we are investing in risky coastal development without knowing who will protect those investments or how they will be protected; we are making decisions about existing assets without knowing our real options; in the face of increasingly frequent and extreme natural hazards, we are hoping rather than planning for the future.
“The Productivity Commission rightly puts helping councils adapt to climate change at the top of its list of urgent actions. Noting that councils now face a double-bind of possible legal liability for both action and inaction, the Commission calls for central government leadership in providing a coherent legal and regulatory framework.
“We know that effects like coastal erosion and flooding are ‘locked in’, but we cannot know how frequent or extreme they will be. The Commission rightly concludes that adaptation planning has to be ongoing, collaborative, and respond dynamically to new information; it also has to be able to help communities make unpopular decisions.
“Recognising that local government resources are inadequate to respond to problems like replacing billions of dollars’ worth of at-risk infrastructure, the Commission recommends new central government co-funding for water and land transport. They left the harder issue of compensation for losses of private property to central government to decide. That cannot happen soon enough: every day without certainty is another day of losses for all of us.”
Conflict of interest statement: Prof. Ellis receives funding from the Deep South National Science Challenge.
* Associate Professor Anita Wreford, Lincoln University; Programme Lead, Impacts and Implications, Deep South National Science Challenge, comments:
“The Productivity Commission’s report on local government funding is a comprehensive evaluation and addresses issues that are well overdue for consideration in New Zealand. In relation to Section 8 on adapting to climate change, the report identifies the major types of challenges local government face in this area, which are unprecedented in their scale and complexity. Local government are the primary authorities dealing with the impacts of climate change and are currently without sufficient direction, support, or funding from central government.
“In many cases, infrastructure is not sufficient to cope with extreme events and sea-level rise in the current climate, let alone in the future when these will become more frequent and intense. The report identifies the need to begin planning now for the longer term through flexible, adaptive strategies that support these complex decisions in an uncertain future, as well as for current impacts.
“The report also highlights the challenge of funding adaptation through the current model. There is a strong case to be made for a national adaptation fund to support local authorities, particularly in developing infrastructure that will reduce climate risk for future generations. Refocusing the current civil defence and emergency management to concentrate on prevention rather than responding and repairing after an event would be an important signal of a change in emphasis to preparedness.”
No conflict of interest.
* Dr Judy Lawrence, Senior Research Fellow, Climate Change Research Institute, Victoria University of Wellington, comments:
“Acknowledgement by the Productivity Commission of the increased funding burden on local government from climate change impacts such as sea-level rise and more frequent and extreme weather events is applauded. Shifting from a reactive mode of decision making to weather events, to an anticipatory and flexible approach recognising the dynamic nature of the risks, is highlighted as necessary to address the dynamic risks facing councils.
“Making additional funding conditional on use of such decision making is an excellent way forward to shift council practice. A call for national partnership with local government in funding adaptation to climate change would help fund the scientific support necessary and for a climate-resilience agency to help councils redesign and relocate public services, driven by fairness and equity to minimise long-run costs. The Commission also calls for the alignment of legal frameworks to give councils more backing to make land-use planning and infrastructure decisions that fit the changing climate risks and support enforcement of any voluntary assumption of risk by landowners.
“The Commission report supports and extends the recommendations of the Climate Change Technical Working Group 2018 and provides the necessary changes for funding adaptation to climate change by councils.”
No conflict of interest.
* Professor Ilan Noy, Chair in the Economics of Disasters, Victoria University of Wellington, comments:
“Local government is often not able to deal with the problems that climate change and extreme weather events lead to because it often lacks the resources and knowledge required, and appears to find it more difficult to deal with local interests (for example, by preventing development in future high-risk areas or attempting to initiate managed retreats).
“Central government needs to be involved much more heavily than it currently is in both providing resources and guidance to local government, and in sometimes assisting it in making difficult choices. For example, while local government may find it tempting to approve coastal developments with the caveat that future risks will be the responsibility of the owners/developers (indeed figure 8.1 suggests this is viable), this is not really a binding commitment. Central government should not allow that to happen.
“Managed retreats will be increasingly necessary in various locations (especially coastal). Central government needs to develop a coherent and transparent policy of funding such retreats that appropriately incentivises early adoption but does not create more moral hazard or ends up being regressive. The Residential Red Zone in Christchurch provides an interesting and successful precedent whose lessons should be explored in this context.
“As the report points out, insurance is not part of the solution; at this point, there appear to be expectations that insurance will protect homeowners in at-risk locations indefinitely. As such, these expectations exacerbate the problem as the risk remains ‘hidden’ until the insurance companies themselves choose to retreat from providing coverage. This gap in expectations may create pressure on the government to socialise this risk (for example, by extending EQC coverage to all natural hazards, including full coverage for flooding).
“This is bound to create even more moral hazard, so these expectations need to be managed now, rather than later. Current reviews of the EQC and the Insurance Law should take these concerns into consideration and formulate a long-term strategy to deal with these conflicting aims.”
No conflict of interest.
Sources: Productivity Commission; Science Media Centre