Motu News May 2019

May 31, 2019

From the Executive Director of Motu Research
Kia ora,

Climate change should be the top of the pile issue for business leaders right now. I've been thinking about this issue for a long time and, spurred by the recent student protests, the first in my upcoming series of opinion pieces at NBR is on how business should recognise and manage the risks associated with climate change. The introduction of the Zero Carbon Bill is a turning point in New Zealand for every organization that manufactures or sells products or services. The changes resulting from this Bill mean that just like with workplace health and safety, any responsible Board of Trustees will scrutinise its organisation’s climate change strategy. The businesses that continue to thrive will be those that develop strategies to reduce both their contribution and vulnerability to climate change.

A business’s climate change strategy will need to deal with investors, customers, financial markets, government regulation, measurement and accounting systems for carbon emission. It should also cover how to manage the financial and reputational risks of emissions. I feel very grateful to work with researchers who have the knowledge to help prepare Aotearoa and our businesses for the future. The in-depth understanding of Catherine Leining and the rest of our environment team in this area is something from which kiwi businesses could benefit.

Please do contact me on john.mcdermott@motu.org.nz if you would like to know more.

John McDermott
Executive Director

Farmers and mitigation

We recently released a package of papers that look at how farmers relate to investments, technologies or practices whose adoption reduces the farm’s greenhouse gas emissions, and does not reduce the profitability of the farm.

Research has shown that there are several options for farmers that could be no-cost. In particular, the project looked at the following proposed no-cost practices: reduce stocking rate and improve animal productive performance (e.g., high-breeding-worth cows); reduce replacement rates; reduce Nitrogen fertiliser use/replace some pasture with lower Nitrogen feed; increase scanning percentage (better feeding/feed; and increase live-weight gain in lambs. Among the different findings and conclusions drawn from the project we recommend several practical and technological options for farmers as well as some training and awareness raising suggestions.

Motu has also constructed a model looking at dairy stocking rates and mitigation. This is freely available online at https://moturesearch.shinyapps.io/FarmTool. 

Human Rights Measurement Initiative

It’s been a busy and encouraging few months at HRMI, collecting and analysing data on the global human rights situation, ready to launch next month. Nine months of hard work from around 30 staff and volunteers is about to come to fruition. On 6 June we will launch the 2019 HRMI Human Rights Country Reports, with measurements tracking the progress of over 170 countries on at least some rights, including 19 countries with extensive sets of civil and political rights data.

In 2017 we included 13 countries in our ground-breaking civil and political rights data collection; for the 2018-2019 data collection we expanded to 19. For our next round we will expand to all the countries and territories of the South Pacific, taking our total to close to 40. To kick off this work, we will host our fourth international co-design workshop, in Auckland, with around 40 people from Pacific nations and territories to help us shape the expansion of our data collection. If you know someone who works in human rights (researchers, journalists, lawyers, civil society) in the Pacific region, please send them this link.

You can sign up for occasional HRMI newsletters here or follow us on Twitter, Facebook and YouTube for regular updates and interesting links.

Comparing poverty rates across countries

The comparison of poverty rates across two countries, or across regions within a country, is a common occurrence in analysis produced at the World Bank and other development agencies, as well as in published academic papers. For any poverty comparison to have meaning, however, the analyst needs to norm the various observed states of the world to a known standard of living.

A major constraint on valid poverty and inequality analysis is the lack of spatially disaggregated price data. It turns out that local experts, at least those in Vietnam’s communes, have accurate knowledge of prevailing prices. The price expert survey is also cost-effective: John Gibson and Trinh Le estimate the opinion survey cost about one-sixth the price of the benchmark market price survey. The use of mobile technologies may be able to further reduce the cost and increase the frequency of price collection without accuracy taking a hit.

You can read the World Bank blog on this paper or the paper itself. 

Are NZ research stars shining?

‘Star’ researchers—those who produce the most influential research outputs—have been shown to play an important role in the overall impact of a country’s research and innovation system. This means the behaviour of stars—where they come from, whether they tend to be the same people over an extended period of time, and the likelihood that they will leave New Zealand—has important consequences for innovation policy.

A relatively small number of outstanding New Zealand researchers are responsible for a disproportionate share of New Zealand publications, citations and home-runs runs (a paper where the number of citations places it in the top 1 percent of the distribution for its field, publication type and year). But the concentration is not extreme: just over 300 researchers produced about 5 percent of New Zealand-affiliated papers, 15 percent of citations and 25 percent of home-, on a fractionalized basis, over the period 2002-2013. And within this group, the concentration is also not extreme; the top 10 percent of this group produces about 20 percent of its output.

Check out the MBIE working paper prepared by Motu here.

Zero Carbon Bill and the NZ ETS

Reforming New Zealand’s climate change legislation is a complex tango. Where the Zero Carbon Amendment Bill leads, New Zealand Emission Trading Scheme (NZ ETS) amendments must follow. The government’s latest NZ ETS policy decisions will help ensure future emission prices rise in step with our targets.

Check out our “Top Ten” list of alterations to watch for as we outfit the NZ ETS for the important job ahead, or read Catherine Leining's blog on proposed ammendments to the NZ ETS. For comments on the Zero Carbon Bill check out this blog post. 

Motu News

New Motu Publications

Motu Note #36 David Fleming, Pike Brown, Sandra Cortés Acosta, Cecile de Klein, Robyn Dynes, Loic Henry, Suzi Kerr, Jorie Knook and Bruce Small. 2019. "Barriers to adoption of no-cost agricultural mitigation practices."
For New Zealand to transition to a low-emissions economy, pastoral farmers need to reduce the biological greenhouse gas (GHG) emissions that come from their operations. One way to achieve this is by adopting or expanding the use of practices and/or options that could mitigate biological GHG emissions in dairy and sheep and beef systems. This project focuses on identifying barriers that can curtail farmers’ adoption or expansion of these mitigation practices. The project established three general objectives: develop a typology of possible reasons (barriers) why under-adoption of no-cost mitigation options occurs; test and verify the no-cost status of selected mitigation options; and through interviews and a survey with farmers, explore if no-cost options exist, what the barriers are to adoption, and how these could be addressed. To address these objectives, different research methods and analyses were conducted, which resulted in a range of findings described and discussed in six different papers/reports. This report summarises the main points and findings described in these papers and presents the key messages and policy implications derived from this work. It also includes findings from a final multi-stakeholder symposium, held in March 2019, to discuss the policy implications of the project and to define its final, most important takeaway messages.

Motu Note #35 Levente Timar. 2019. "Climate and Land Use Change: A Synthesis of LURNZ Modelling."
Climate Changes, Impacts and Implications (CCII) was a four-year project (ending in September 2016) designed to tackle a broad research question: What are the predicted climatic conditions and assessed/potential impacts and implications of climate variability and trends on New Zealand and its regional biophysical environment, the economy and society, at projected critical temporal steps up to 2100? The CCII project brought together an interdisciplinary research team with experience and modelling capabilities in climate, ecosystems, land and water use, economics and sociocultural research (Ausseil et al. 2017, Rutledge et al. 2017a, Rutledge et al. 2017b). This note summarises Motu’s contributions to the land-use modelling effort within the project. We completed simulations of land-use change using a version of the Land Use in Rural New Zealand (LURNZ) model that had been adapted to consider climate change scenarios.

Motu Note #34 Catherine Leining and Suzi Kerr. 2019. "Outfitting the NZ ETS in post-Paris style: Top Ten list for 2019."
This year will be pivotal for designing New Zealand’s climate policy portfolio in the lead-up to the Paris Agreement, which kicks off in 2021. Emission pricing has an important role – but not the only role – in New Zealand’s mitigation strategy. The ETS can help NZ to transition strategically toward net zero domestic emissions while supporting global progress under the Paris Agreement. Under its more flexible (and evolving) carbon market mechanisms, we are unlikely to see convergence of international emission prices toward one that makes sense for New Zealand. In this context, aspects of the NZ ETS design are outmoded and need an update. Setting aside the issue of agricultural emissions, this briefing presents a “Top Ten” list of alterations to watch for as we outfit the NZ ETS for the important job ahead.

Motu Working Paper 19-11 Fleming, David, Suzi Kerr and Edmund Lou. 2019. "Cows, cash and climate: Low stocking rates, high-performing cows, emissions and profitability across New Zealand farms."
Using the New Zealand Monitor Farm Data (NZMFD), this paper explores the cost-effectiveness of two mitigation options to reduce biological greenhouse gas (GHG) emissions on farms: reducing stocking rate (SR; the number of cows per effective hectare of dairy land); and increasing animal performance (AP; measured by production of milk solids (MS) per cow). These mitigation options have been defined as “no cost” because, if applied together, they could reduce the carbon footprint of farms while also maintaining or even improving profits (de Klein & Dynes, 2017). We evaluate the effect of these mitigation options on three main variables: milk profitability of the farm (cash operating surplus (COS)/ton of MS produced); emissions intensity (ton CO2eq/ton of MS produced); and the value of emissions (COS/ton CO2eq). The paper has two main findings: high-AP farms show significantly lower emissions intensities and higher milk profitability; and higher SRs on farms are significantly associated with lower emissions intensities while not being significantly associated with milk profitability or negatively associated with profit per hectare. These results imply that higher levels of AP reduce the GHG intensity of the farm and increase profit – a “no-cost” option – but unless either the SR or the area under dairy farming fall, an increase in AP will lead to an increase in absolute emissions. However, our results cast doubt on the idea that reducing SR is a no-cost way to achieve absolute emission reductions. The two options do seem to constitute a no-cost outcome when combined, but potentially the same mitigation could be achieved with lower loss of profit by reducing the area of dairy land while maintaining high SRs and increasing the performance of the animals.

Motu Working Paper 19-10 Cortés-Acosta, Sandra, David A. Fleming, Loïc Henry, Edmund Lou, Sally Owen and Bruce Small. 2019. “Identifying barriers to adoption of “no-cost” greenhouse gas mitigation practices in pastoral systems.”
New Zealand scientists have suggested that multiple pastoral farming practices could reduce on-farm biological greenhouse gas (GHG) emissions while maintaining (and in some circumstances even increasing) farm profits (e.g. de Klein and Dynes, 2017). However, these win–win practices (which we define as “no-cost” mitigation practices) are reported to be under-adopted in New Zealand (Reisinger et al. 2018). The focus of this paper is to identify barriers affecting the adoption or expansion of no-cost mitigation practices by farmers in New Zealand. We define and categorize barriers to adoption using a typology of barriers developed by Jaffe (2017). This typology provides a comprehensive list and precise/accurate description of multiple barriers that might be present in farming contexts. First, we confront the typology with empirical evidence in the literature studying the barriers to the adoptions of technologies and practices in the context of pastoral farming. Although the evidence on perceptions and adoption of GHG emissions mitigation options in New Zealand is very limited, several of the barriers in Jaffe’s typology have been evidenced by researchers as affecting the decisions to adopt different innovative technologies and practices on farms. To complement the literature review and, more importantly, focus on no-cost GHG mitigation practices, we conducted interviews with 14 farmers in different regions of the country. In these conversations we discussed different managerial and practical implications of five different no-cost farming practices, with the aim of identifying barriers that affect their adoption or expansion. We describe in the paper more than 40 quotes obtained from farmers, from which we identified the occurrence of 16 different barriers. Among these, the “Unsureness about practicality”, “risk and uncertainty” and “complex interactions” barriers showed as the most frequent barriers identified as causing under-adoption of the evaluated practices. In addition, different types of perceived costs (financial barriers), such as “modelling mismatch” and “learning and adjustment”, have been pointed out as a limitation for adoption (which are captured by barriers category “arguably efficient” in Jaffe’s typology). We also found that in some cases non-financial barriers seem to be interconnected – in especial the case when the interactions’ complexity increases the riskiness of the outcome (the “risk and uncertainty” barrier) and makes it difficult to see whether the mitigation option is practical (a barrier of “unsureness about practicality”).

Motu Working Paper 19-09 Kerr, Suzi, and Catherine Leining. 2019. ‘Paying for Mitigation: How New Zealand Can Contribute to Others’ Efforts.”
Purchasing international emission reductions (IERs) can help New Zealand make a more ambitious and cost-effective contribution toward global climate change mitigation and support developing countries in accelerating their low-emission transition. However, New Zealand must avoid past mistakes by ensuring international purchasing does not derail its own decarbonisation pathway. Furthermore, the Paris Agreement has fundamentally changed how countries will trade IERs over the 2021–30 period. This working paper, which evolved under Motu’s ETS Dialogue process from 2016 to 2018, focuses on how we can balance our international and domestic mitigation efforts. It explores how many IERs we may want, how we should integrate international mitigation support with participants’ obligations under the New Zealand Emissions Trading Scheme (NZ ETS), and what mechanisms we can use to fund international mitigation effectively. Fundamentally, the New Zealand government will need to ensure that all IERs counted toward its targets and accepted in the NZ ETS have environmental integrity and are both approved and not double counted by seller and buyer governments. This paper presents a working model for New Zealand’s purchase of IERs, in which the quantity is controlled by government, purchasing is managed by government for the foreseeable future (with potential participation by private entities), and the quantity is factored into decisions on the NZ ETS cap and price management mechanisms. If NZ ETS participants are able to purchase IERs in the future, then a quantity limit should apply as a percentage of the surrender obligation and the volume should offset other supply under the cap. The paper also highlights an innovative “climate team” mechanism for international climate change cooperation that could facilitate purchasing by the New Zealand government.

Motu Working Paper 19-08 Kerr, Suzi, and Catherine Leining. 2019. “Uncertainty, Risk and Investment and the NZ ETS.”
The NZ ETS cap will require a further accessory: a price collar (price ceiling and price floor). In the current policy and market context, there is value in managing both supply and prices under the NZ ETS. No one knows the optimal value for either. While managing emission quantities in line with our emission targets and budgets, we can guard against unacceptable price extremes in both directions. In December 2018, the government signalled it planned to replace the current fixed-price option (FPO) of NZ$25 per tonne with a volume-limited cost containment reserve (CCR) implemented at auction. However, the FPO will be retained for surrenders due in 2019. The government will investigate potential options for a price floor. In our preferred approach, the CCR would be bound by the cap and would operate using a tiered approach.

Motu Working Paper 19-07 Leining, Catherine and Suzi Kerr. 2019. ‘Managing Scarcity and Ambition in the NZ ETS.”
To date, New Zealand has focused on the “trade” in cap-and-trade. We are long overdue for our own cap on unit supply and it is finally on the horizon. The role of the cap is to constrain domestic emissions and enable the market to set an efficient emission price in line with our targets. Since 2012, the government has had the option in legislation to auction units under an overall limit (essentially a cap) on auctioning plus free allocation, but this has never been actioned. In December 2018, the government announced its intention to begin auctioning under a cap in 2020. In the context of the Paris Agreement, the cap architecture in the NZ ETS must accomplish two critical goals: enabling the government to exert domestic sovereignty over New Zealand’s decarbonisation pathway, and sending a clear and credible signal to the market about long-term supply to guide ambitious low-emission investment.

Motu Working Paper 19-06 Kerr, Suzi, Juan-Pablo Montero, Ruben Lubowski, Angela Cadena, Mario Londoño, Adriana Cavallo, Lisa Lafferty, Soffia Alarcon, Oscar Rodriguez, and Angela Solanilla. 2019. “Designing a prototype emissions trading system for Colombia.” (forthcoming)

Motu Working Paper 19-05 Maré, David C and Jacques Poot. 2019. “Valuing Cultural Diversity.” (forthcoming)

Motu Working Paper 19-04 Kerr, Suzi, Steffen Lippert and Edmund Lou. 2019. “Financial Transfers and Climate Cooperation.”
We investigate the impact of side-payments to countries that have a low net benefit from participating in efficient climate cooperation in a repeated games framework with investment in different technologies. We consider different timings of these payments and different degrees of commitment. If countries cannot commit ex ante to transfer funds to low-benefit participants to an agreement, then there is a trade-off. Investment based agreements, where transfers occur before emissions are realized, but after investments have been committed, maximize the scope of cooperation. Results-based agreements minimize transfers whenever these agreements implement cooperation. If countries can commit to transfer funds, then agreements in which countries with high benefits of climate cooperation pre-commit to results-based payments to countries with low benefits both maximize the scope of cooperation and minimize transfers.

Motu Working Paper 19-03 Fabling, Richard and David C Maré. 2019. “Improved productivity measurement in New Zealand's Longitudinal Business Database.”
Accounts information that businesses supply to Inland Revenue for tax purposes provide over 96% of the observations in the productivity dataset in the Longitudinal Business Database. In 2013, material changes in the data collected halted the annual updating of the productivity dataset. This paper describes a method for accounting for these raw data discontinuities, and revisits the prior productivity dataset methodology, implementing wholesale changes that improve the overall quality of the data and the versatility of the productivity dataset.

MBIE Working Paper Adam Jaffe and Kate Preston. 2019. "Bibliometric analysis of New Zealand research performance."
Bibliometric databases on publications and their citations offer the possibility to quantify the scale and impact of this key output of scientific research. But there are many decisions to be made about how to construct these bibliometric measures, and no global consensus on how best to do so. We consider several measures of research output across scientific disciplines in New Zealand and test their sensitivity to a number of methodological choices. Factors considered include which publications to include in the analysis, ways to count publications co-authored by both local and international authors, and procedures for normalising citations. We also explore the potential to assign publications to disciplines by semantic analysis and a way to construct confidence intervals for the measures. The findings provide insight into the extent to which these methodological considerations impact on bibliometric results, and their interpretation, and how uncertainty in the results can be quantified.

MBIE Working Paper Adam Jaffe, Kate Preston and Dominic White. 2019. "Research 'stars' in New Zealand: concentration, persistence and mobility."
‘Star’ researchers—those who produce the most influential research outputs—have been shown to play an important role in the overall impact of a country’s research and innovation system. This means the behaviour of stars—where they come from, whether they tend to be the same people over an extended period of time, and the likelihood that they will leave New Zealand—has important consequences for innovation policy. In this report, we identify a set of star researchers in New Zealand, based on the publication of very highly cited papers. We then investigate the concentration of such highly cited papers across authors; the persistence of stardom across time, and the extent to which stars come from abroad or leave New Zealand after their stardom.

Motu Technical Paper David Fleming, Pike Brown and Jorie Knook. 2019. "Barriers to adoption of win–win mitigation farm practices: evidence from New Zealand pastoral farmers."
This paper uses survey data from 167 New Zealand sheep/beef and dairy farmers to explore the non-financial barriers that affect their decision-making when deciding whether or not to adopt or expand particular on-farm greenhouse gas (GHG) emissions mitigation practices. We focus on six practices that have the potential to reduce the carbon footprint of animal operations, four of which have been defined by New Zealand scientists as win–win, or what we call “no-cost” practices. We identify barriers following the typology of Jaffe (2017) and find that 12 different barriers preclude the decision to adopt/expand practices, even after the farmers have perceived the practice as “no-cost”. Of the identified barriers, “Unsureness about practicality” appears as the main cause for under-adoption across all farmers, while “Salience bias” and “Principal-agent or split-incentive problems” are the main barriers noted by sheep/beef farmers and dairy farmers, respectively. We discuss these findings from the perspective of policy makers to provide insights on how these barriers could be confronted so as to enhance the adoption or expansion of win–win practices.

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