The government has spent $9.8 billion on climate-damaging stimulus


The government has failed to build back greener in the pandemic recovery, according to a new AUT study.

Ministers allocated $9.8 billion to projects encouraging the use of fossil fuels, almost six times what they spent on public transport, flood protection and nature jobs.

The government also missed an opportunity to tie “green threads” to cash intended for carbon-intensive industries, the researchers said.

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Nina Ives, a doctoral student at AUT, and David Hall – a policy and policy researcher at the university – tracked the money the government has spent on its Covid-19 response and recovery fund, the support program for the aviation sector and New Zealand’s upgrading programme.

Early in the pandemic, UN Secretary General Antonio Guterres and climate activists called on governments to direct economic stimulus payments towards climate-friendly infrastructure.

Ives concluded that the government “failed to seize the pandemic as an opportunity to tackle the climate crisis as much as it could have”.

In total, the government has earmarked $9.8 billion for new highways, airport upgrades and airline loans and grants – all of which lack measures to reduce their climate impact.

In 2020, the French government provided Air France with a €7 billion support package with green conditions.

Philippe Noret/Wikimedia Commons

In 2020, the French government provided Air France with a €7 billion support package with green conditions.

The $2 billion taxpayer loan to Air New Zealand was a significant contributor. The national carrier had not drawn down the full amount, however, and had repaid part of the loan earlier in the year by selling shares.

Additionally, the government granted $390 million to support more than 8,800 international flights – bypassing its new climate impact tool when it approved spending.

Many airlines have received financial support from their governments. But French government loans come with “green conditions”, Ives said. French airlines have had to reduce short-haul flights where there are low-carbon alternatives, such as trains.

Because Aotearoa is an island nation that imports and exports goods, maintaining air cargo is important, Ives added. “We had to secure the routes for the drugs and the like.”

Even so, the government could have made Air NZ’s loan conditional on finding low-carbon fuels or improvements in fuel efficiency, the analysis concluded.

By comparison, the government spent $1.7 billion on green projects.

The contrast was most stark in the $8.5 billion NZ upgrade package. Highways got the bulk of that money: $6.6 billion went to roads that will promote fossil fuel use and lacked green ropes.

Prices for projects such as the Otaki to Levin Bypass and Auckland South Freeway Extensions have increased after their pre-pandemic announcement in January 2020.

Roads are considered carbon-intensive infrastructure because electric vehicles make up only a “tiny proportion” of vehicles on the road today, Ives said. “More roads are likely to encourage increased use of fossil fuels, at least in the short term.”

$1.1 billion will be spent to modernize the rail network. These projects are classified as promoting clean energy because they move people and goods much more efficiently – even though trains still rely on fossil fuels, either directly or through electricity generation.

The government has canned a proposed cycle and pedestrian bridge across Waitemata Harbor in Auckland.


The government has canned a proposed cycle and pedestrian bridge across Waitemata Harbor in Auckland.

There was one “hardcore” green project on the NZ Upgrade list: the $785million pedestrian and cycle bridge over Auckland Harbour, but it was scrapped in October.

Under the Covid-19 Response and Recovery Fund, climate-aligned infrastructure was more likely to receive funding. Ives classified 61 of 169 “shovel-ready” projects, with construction costs totaling $2.4 billion, as climate-related.

Of that money, $515 million went to clean energy projects, including $220 million for infrastructure that doesn’t rely on fossil fuels. Shared paths in Christchurch and Wellington have been given the green light.

The adaptation was a winner. The government has allocated $1.5 billion for work that would prepare areas for the effects of climate change. This included flood protection projects. The researchers also counted the $1.2 billion Jobs For Nature program as adaptation money because one of its goals is to improve the resilience of the natural environment.

By comparison, off-the-shelf, carbon-intensive projects received $207 million. Of these, $79 million included improvements that could offset some of this effect, such as roads paired with bike lanes.

Hall said an economic shock is not an ideal decision-making environment. “There’s still a bit of a black box around how some of these decisions were made.”

The government has reversed its original decision to fund a Waikato pumping station on farmland with carbon leakage, which would have worsened climate change. “There have clearly been regrets,” he added.

To avoid carbon-intensive stimulus packages in the “fire of the crisis” in the future, the government could develop principles for climate investment.

Additionally, it could create a shortlist of green investment projects – and fast-track them for funding when it wants to revive the economy.

Although pandemic-related spending “hasn’t been the green response we hoped for,” Ives said the funding announced under the emissions reduction plan was a positive development.


Deputy Prime Minister Grant Robertson gives details in the government’s emissions reduction plan.

Ahead of the 2022 budget, the government has earmarked $2.9 billion to support the plan. The research found that the overall “climate positive” money in the budget was $3.1 billion. It was not a “major change” from 2021 – when $2.8 billion in positive climate finance was allocated.

Since $2.9 billion for the emissions reduction plan came from likely proceeds from the emissions trading system, it was not classified as new spending, Hall said.

This year’s budget funded a more diverse and broader range of policies, the research concluded.

The policies in the emissions reduction plan could also be used to stimulate the economy, Hall said. “Public investment in fixed infrastructure has less inflationary effect than direct payments.”

The research hasn’t counted every dollar in the government’s response to the pandemic, Ives said. For example, health spending and business support payments do not fit into the carbon-intensive or green categories and were therefore excluded from the analysis. “We focused on spending that would have clear climate impacts.”

Ives warned that it was difficult to add and compare figures for budgets, the Covid-19 Response and Recovery Fund, aviation funding and New Zealand’s upgrade program – in especially with high inflation over the past year.


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