The Real Fiscal Hole – $52 billion for Climate Change Costs

Even $52 Billion Underestimates the Risks

There has been a lot of media coverage about a leaked Ministry for the Environment report on climate change  which the Government has tried to keep hidden until after the election.  The coverage has concentrated on an estimated $19 billion replacement cost of buildings which could be threatened by sea level rise. Once that figure was originally reported, other media took up the story and quoted the figure without further investigation. The $19 billion figure is a huge underestimation.  A more accurate figure is $52 billion.

For a start, the figure is for the replacement cost of buildings only and is expressed in NZ$2011. Replacement costs have risen hugely since 2011. Secondly, the figure does not include all regions in New Zealand.  Regions like Taranaki, Whanganui, and the West Coast of the South Island are not even included. Thirdly the figure is for buildings only, but not land.  A home or business owner who is forced to retreat from rising seas will incur losses for the land value as well. Fourthly, the figure does not include the replacement cost for roads, railways, airports, and underground services such as stormwater and wastewater.   It is obvious that the $19 billion figure is a gross underestimation.

But it gets worse, unfortunately. The $19 billion figure is only for properties which are situated less than 1.5 m above current sea level. The report prepared for the Parliamentary Commissioner for the Environment has a massively greater figure for the replacement cost of properties which are situated less than 3 m above current sea level. That figure is $52 billion.  But again does not include all regions in New Zealand or the replacement cost of roads railways underground services etc.


You can understand why a Press editorial came to the conclusion that “the Government wanted to keep this report on the disastrous impact of climate change away from the scrutiny of an election campaign”  The $52 billion-dollar figure – even the $19 billion figure is not something this government wants to be talking about in the lead up to the selection. They would much rather talk about imaginary “fiscal holes” in Labours’ budget.

The other huge emission in the press coverage (apart from a New Zealand Herald article) are the implications in the leaked Ministry report that local authorities will have to “stress test” all new major infrastructure projects and greenfield developments on the coast which are less than 1.9 m above current sea level. This new “minimal transitional sea level value” in the guidance report from the Ministry will have huge implications all around New Zealand’s coast, and is yet another reason why the government has suppressed the report until after the election. Unfortunately, the media have not recognised the huge significance of this new requirement and have failed to highlight it.

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Jacinda Ardern has highlighted climate change as this generations “nuclear moment”. Hopefully, with a change of government, we will see the immediate official release of this Ministry report.  Bill English looked very uncomfortable in the Stuff Leaders Debate when Jacinda challenged him as to why the report had not been released. He initially stated falsely that the report had been released and then said: “it didn’t matter much”. Jacinda was incredulous at that reply and pointed out the importance of the report not just to local councils but to every coastal homeowner in the country.  

There are some very disturbing figures in the Report on the massive multi-million dollar climate-change related replacement costs for many towns in Thames Coromandel and Hauraki.  Watch this space.