Gareth Hughes
A Green Investment Bank for a smart green future

This blog post was originally published over at The Daily Blog:

windmillYesterday Dr. Russel Norman launched the Green Party’s Green Investment Bank proposal designed to accelerate investment in the green economy.

In a nutshell the Green Investment Bank will be a government-owned, for-profit bank. It will partner with the private sector to fund new projects ranging from renewable energy and biofuel production to new clean technologies. You can read the policy here.

I think this could be a game changer for the New Zealand economy. National’s economic ‘vision’ is simply cramming more cows on paddocks ruining our rivers, more coal and emissions, more pokies, more motorways and hoping for more oil. In other words – simply more of last century’s old economy. The Budget on Thursday will demonstrate surplus of inequality, a surplus of carbon emissions and a surplus of ‘deals for National’s mates.’ The Green vision is to orient our economy to the future and global trends and investment patterns building a richer future for us and our kids. The world is crying out for clean energy solutions and as Pure Advantage point out there is a $6 trillion green tech sector we could get a slice of but look like we are missing out on under National. There is a limit to how much milk powder and raw logs we can export but there’s almost no limit to the clean energy services, technology and intellectual property we could be exporting, leading Pricewaterhouse Coopers to identify it as a potential $7-$22 billion annual opportunity.

The lack of Government leadership to transition to the smart green economy is one barrier, access to finance is another. The Green Bank will specialise in financing new, currently unfunded opportunities in the green economy. This package is about supporting Kiwi companies and the New Zealand economy whereas National seems more interested in supporting the Rio Tintos, the Trans-Tasman Resources and the Anadarakos with taxpayer funds. This concept has been successfully used in Europe, the US, Japan, and Australia amongst other countries.

Like Kiwibank, the Green Investment Bank could be an important, enduring institution driving good change. What do you think of this policy?

12 thoughts on “A Green Investment Bank for a smart green future

  1. I absolutely agree that a ‘Green Bank’ could be an “important, enduring institution driving good change”. It is a policy that clearly signals where any government that implements such a policy believes our society should be going. It is a policy showing leadership in difficult times.

    But Gareth, you destroy your own leadership credentials in the way that you criticise National’s economic policy. Yes there is so much to criticise in their economics’ policy. But cramming more cows in to paddocks is not part of their policy. Nor is more pokies. More motorways is not a big part of their agenda either (but completing the ones previously planned is). Yes hoping for oil finds and coal extraction is, and that needs to be resisted. But including more emissions as an item of economic policy?

    There actually is no practical limit to the milk powder or raw logs we can export. The world demand vastly exceeds our ability to supply.

    I so much want Green Economy policies giving direction to our economic development. But in confusing policy and the effects of policy, you do not give me cause to trust your ability to run our country. Regrettably.

    My wish is that instead of vehemently criticising what this government do and propose, that you and the Green Party propose well-reasoned, costed and rational green economy policies. Only then will the Party gain respect and thus the possibility of forming a future government.

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  2. This is exactly the kind of well researched policy initiative that is needed now. Russel has shown that we can achieve all our economic and sustainability concerns with a sensible and practical finance system to move us in front of the pack in green tech and infrastructure.
    it shows the Greens vision, dedication and suitability to lead into the future. The Greens have deep leadership potential from the many smart agents within it. The right move of NZ is a Green Party Government.

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  3. I think it’s a great idea. New Zealand should take advantage of Tony Abbot’s destructive behaviour in Australia to attract green industry innovators to relocate to NZ. A bank is perfect as it can provide loans with conditions that will benefit NZ.

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  4. Review your words. Do you see the contradiction? I really need to see what you really meant to say, as this…. surely… cannot be it. :-)

    There actually is no practical limit to the milk powder or raw logs we can export. The world demand vastly exceeds our ability to supply.

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  5. Yes there is so much to criticise in their economics’ policy. But cramming more cows in to paddocks is not part of their policy. Nor is more pokies.

    Actually, it can be argued quite strongly for various reasons, that these things ARE part of their policy.

    They just aren’t part of the policy they are willing to write down, as their ethical bankruptcy is currently apparent only to those who watch what they DO at least as closely as we listen to what they say.

    The more cows in paddocks however, isn’t JUST National… it is Labour too. The inability of either major party (and most New Zealanders) to recognize that “comparative advantage” wasn’t meant by Ricardo to mean we should do NONE of the things we don’t/can’t do competitively is a bipartisan error. Somehow this misconception has been accepted by almost the entire country.

    http://www.huffingtonpost.com/ralph-gomory/manufacturing-and-the-lim_b_227870.html

    … and it is in the long run, a fatal mistake to make. PARTICULARLY for an island nation like New Zealand.

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  6. @bjchip: mmm… Yes you are right – a poor choice of adjective (practical) to describe the limit of production.

    What I was getting at was that we are nowhere near our limit to produce logs and milk powder. We know we can sell those products and could produce more if we were of a mind to.

    The absolute limit of course is the land area available to produce it. Which on reflection, may be the point that Gareth was making.

    Gareth’s follow-on point, that we could/should be exporting more green tech products, is absolutely something to encourage through government policy.

    My post was about expressing a preference for Gareth to make well-ground points like this and to set down rational policy positions to support them. Instead, he takes another swipe at a mainstay of this country’s economy – dairying. This does not give me confidence in the ability of a future green government to do the right things.

    I think my lack of confidence is matched by many voters and is one reason that the Green Party continues to trail Labour.

    My hope is that this criticism will be listened to as a positive one to learn from. A Green Party in government is something I want to see. Sooner rather than later.

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  7. Actually, it can be argued quite strongly

    Yes it can be so argued. But to do so is not productive. For two reasons.

    First is that mentioned in the above post – the Green Party need to build confidence that they can a viable government by expressing policy rationally and in the positive.

    Second is that the claim that it is policy to cram more cows in to paddocks is just plainly wrong and plays an unnecessarily emotive game. In playing that game, the Green Party discredit themselves.

    The dairy industry’s document “Strategy for Sustainable Dairy Farming 2013-2020″ is a responsible policy that does not provide for ‘cramming’. Increasing dairy productivity by increasing the number of cows per hectare is nonsensical and counter-productive to the comparative advantage you talk about. Increasing dairy productivity by increasing the grass yield per hectare is a part of the policy. As is increasing the milk yield per cow. As is increasing the number of hectares in dairy production.

    Yes there are problems that increasing the number of cows in production brings. But there are practical solutions available now to solve these problems and more are in development. I do not see the Green party acknowledging those solutions.

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  8. According to Jigar Shah there is more money for renewable projects then there are renewable projects to place money into.

    So, if he is right, (a) why isn’t this money flowing into Kiwi renewable projects, and (b) why do we need a fund to kickstart such things?

    We’re clearly doing something wrong.

    (And I’d advise following the above link, and then going to the panel discussion “Are Renewables Still Relevant?” in which he is involved.)

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  9. RJ

    What I am getting at is that the incentives that the government (not Fonterra or the industry) has created in terms of taxes, investment, environmental protection and other things that impact each farmer’s decisions, are not focused the same way as the the dairy industry strategy document. The results are, to the extent that it is possible for most of us to discern, the cramming of more cows into paddocks… or worse.

    IF we can manage to increase the cow population, keep them grass-fed, and keep the end product of their digestion (and other fertilizers) out of our water, that increase is acceptable. However, I believe that there’s a lot less room for expanding those herds than you are acknowledging.

    We do need to diversify our manufacturing. Most of the government’s “growth in manufacturing” remains agriculture. Many New Zealanders still accept without question, the erroneous idea that we should not even try to manufacture anything that can be made cheaper anywhere else on the planet, because of “comparative advantage”. The situation for anyone who is NOT interested in being a farmer is as a result, a matter of deciding which low paying service job to accept, or when to buy a plane ticket somewhere else.

    For the society and the nation, this is a wrong answer, even if it brings in the most short term gain.

    Emotive reasoning is why people vote for, and trust, John Key. It has nothing to do with actually thinking things through. Being from New York his persona and presentation has the opposite effect on me. I couldn’t ever have trusted him, and that has only gotten worse with time.

    Asset Sales, TPP, offshore drilling, increased GST, decreased tax on the wealthy, no CGT.. the list is actually pretty much the history of the activity of the National Party.

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  10. @bjchip: I hear what you are saying but as someone who is working on a solutions to the dairy industry’s issues (not as a dairy farmer), I need to clearly state that increasing cow density per hectare is not a goal.

    It will be a consequence of other strategies but the cost is that the industry must move towards factory farming principles. That move towards industrialisation is inevitable and has its own set of solvable problems.

    I raise the issue again because the Green’s propensity to bash dairy farmers and dairy farming is entirely misplaced. Yes there are issues, but those issues are not restricted to this country and so they represent an opportunity for us in the green economy.

    I see the potential for a 30% increase in milk productivity with a decrease in nitrate leakage to waterways, a decrease in carbon emissions and an improvement in animal welfare, all without sacrificing our comparative health yield advantage of our milk products. The cost is an increase in capital requirements which is where our price comparative advantage disappears.

    The thing is, that we do not need to sacrifice the dairy industry in any way to build a manufacturing-based economy. In another stream, we discussed the need to to build our manufacturing capability if we are to become resilient in the face of catastrophic climate change (CCC) that is happening around us.

    I absolutely agreed with the arguments presented in the comparative advantage article you referenced. We can have both a healthy and sustainable agricultural industry and a profitable, healthy and sustainable manufacturing sector. To me, that is a preferable strategy than focusing on a services-based economy which will disappear overnight once the real impacts of CCC bite.

    To me, a Green investment Bank is a great way to start the process of becoming a world leader in green tech products. On this issue, I am 100% supportive of Russell Norman. As I said in the first post, I just wish that Gareth would argue the case from a positive, forward looking perspective rather than criticising National.

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  11. This is something I absolutely agree with…

    The thing is, that we do not need to sacrifice the dairy industry in any way to build a manufacturing-based economy.

    Between sacrifice and expansion is a wide range of lower growth or shrinkage options. If you tell me that we can manage that 30% I’ll say that it sounds pretty optimistic to me, but I don’t advocate telling farmers to stop being farmers, or stop being productive. I don’t think we need shrinkage… but would something more like 15% than 30. Not really an important difference.

    Nor do I have it in for the farming industry. The problem is the notion, and I do not think that this is a notion that farmers themselves have, that farming is the only thing NZ can do (apart from selling off assets) and therefore the only way we can strengthen the economy is to grow the agriculture sector.

    One of the changes that climate change is apt to bring though, is going to be pressure on the grass productivity owing to changes in rainfall. Flip side is that it may make some land in the deep south more hospitable for farming.

    Not knowing how it will play out makes me nervous about counting on increases in productivity.

    Try to remember that National calls us loony and offers insult every time it discusses Greens. This is not something that is easily ignored when one considers that I can count on the fingers of one hand, and have several left over, the policies that they have implemented that have actually been GOOD for New Zealand as a whole. To explain my mistrust of John Key, that has deeper roots, but my problems with National, its view of the economy, and of the country as “New Zealand Inc” are deep enough for me to regard them in much the same way as I would a rabid animal. I used to be more patient. Now I am just disgusted.

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  12. @bjchip: I share your mistrust of the National Party and particularly the Key/Joyce cabal but perhaps for different reasons. They are idealists of a different colour and so cocksure that they are right and therefore the rest of us are wrong, that they will just rollover anyone that disagrees with them. I think there is a growing awareness of this aspect of them but will it grow fast enough to ensure their defeat in September? That remains to be seen. But my consistent argument on this blog site has been that the Greens keeping shooting themselves in the foot with inadequately (IMHO) researched policy and strategically inappropriate wordage that they are not shedding that old perception that the Party has amongst NZ voters. Which works only to National’s favour.

    BTW – I am very confident that a 30% increase in milk productivity, with all the environmental gains I mentioned, is achievable. And yes, CCC will will impact that. Quite how that translates through to increased profitability is work that has not yet been done.

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