A report from the highly respected NZ Institute of Economic Research contended the Ardern government’s ban on new offshore oil and gas exploration will reduce the country’s GDP by between $15bn and $38bn, raise prices and shrink investment during the next 30 years.
The $28bn GDP loss incurred in NZIER’s mid-range scenario, if the industry kept operating and achieved only medium exploration success, is roughly equivalent in annual terms to the government’s capital expenditure on schools, or its annual spending on disability services. In Taranaki, real regional GDP falls by between 35% and 53% – or $16bn to $40bn – out to 2050.
A powerful argument, one would think, to re-consider the ban?
No sign of that from the government. It is sticking to its argument the ban, which also bars any onshore exploration other than in Taranaki, is necessary to set a long-term direction for the country’s climate change efforts. Existing reserves and exploration permits are deemed sufficient to ensure security of gas supply for industry and power generation.
The NZIER, in underlining what it calls large GDP impacts, says taking the net present value shows that, even in the low scenario, the GDP loss from the ban is equivalent to the current GDP value of New Zealand’s commercial fishing sector and larger than the forestry and logging sector.
While the ban’s impact will be felt most keenly in Taranaki, the impact on the national economy is “strongly negative”, the institute says. Employment in, and exports from, other regions improve, but those “few and incidental” benefits are “dwarfed” by the scale of the other losses.
Far from being disconcerted by the NZIER’s analysis of the dire impact of the exploration ban, Energy Minister Dr Megan Woods, answering questions in Parliament took the line that the report ignored the fact that the government is protecting 100,000 square kilometres of existing exploration area—an area the size of the North Island.
“Nor does the report consider new jobs that may be created via the transition. A report concluded that in NZ, green energy could create more than 25,000 jobs. Secondly, this government has a comprehensive plan for transitioning to renewable energy—the growth area for jobs. Among other things we’re producing a renewables strategy that will remove roadblocks and accelerate them coming on stream, and we’ve already got people on the ground in Taranaki to work alongside locals on the transition plan for the coming decades”
Woods says far from the sky is falling in, she believes the medium-term outlook for gas is firming up.
“We’ve just seen the largest exploration firm in NZ invest a further $500m in Taranaki, we’ve seen Todd Energy investing $100m in a new gas peaker in Taranaki, and we’ve seen Methanex advertising for high-skill, high-wage jobs in the last couple of weeks. It’s also worth pointing out that Westpac’s climate change impact report, carried out by EY and Vivid Economics, released in April of last year, indicated that if NZ took faster action on climate change, it could save $30 billion by 2050. This government has a plan to transition away from fossil fuels over a number of decades and grow new jobs and new industries”
In that answer Woods seemed to be having a bob each way, saying green energy could create 25,000 jobs, while pointing to investment in exploiting available gas reserves.
As for Taranaki bearing the brunt of the government’s ban on further offshore exploration Woods says :
“There is actually a lot of positivity in Taranaki about the positivities. I point to the $20m this government has committed through the Provincial Growth Fund (PGF) into that region, including a million dollars towards a green hydrogen feasibility study that will utilise the existing skills in that area. What we have seen is a series of community workshops, because we actually do think it is important to talk to those people that will be impacted by change as it comes. This Government knows that we need to plan beyond a fossil future. We have certainty that we can continue to use thermal peaking for the next couple of decades, but we are not burying our heads in the sand and leaving communities and this country high and dry”.
So while Woods thinks there is a “lot of positivity in Taranaki about the positivities” the people in that province (which has been one of the most prosperous in NZ) will have to adjust, according to the NZIER, under the medium scenario, to a fall in real GDP per Taranaki household of $623,000 over the 30-year period – equivalent to a $20,774 fall in household incomes annually.
Some would say that’s a pretty high price to pay for the government to “ set a long-term direction for the country’s climate change efforts”.