Analytical note

Assessing the economic and fiscal impacts of climate change in New Zealand (AN 24/03)

Staff and teams are writing in their individual capacity and the views in this paper are not necessarily a “Treasury” view. Please read Disclaimer for research and commentary publications.

Abstract#

More fully understanding the impacts of climate change to New Zealand is a critical step in evaluating the potential threats or opportunities posed to New Zealanders’ living standards. Ngā Kōrero Āhaurangi Me Te Ōhanga | Climate Economic and Fiscal Assessment 2023 (CEFA), a joint report by the Treasury and the Ministry for the Environment, contributed to this task by collecting, organising and providing information on the economic and fiscal impacts of climate change to New Zealand. The CEFA also presented a framework for assessing these impacts. While new, this framework is strongly aligned with and has built upon a number of international approaches. The CEFA framework categorises climate impacts into two categories: physical and transition. These impacts are then presented as flowing through economic channels to economic impacts and feedback loops. These then flow through to fiscal impacts. An important characteristic of the framework is the influence of choice, including those made by policymakers. This paper serves as a background paper for the CEFA framework. It details the influence of other international frameworks and then walks through the components of the framework, explaining how they fit together to paint a more comprehensive picture. We also consider the framework to serve as a useful guide to identifying areas for further work and deeper understanding. This paper concludes by identifying and suggesting key questions to inform future direction of work in this space.