The Finance and Expenditure Committee of the New Zealand Parliament yesterday issued its final report on a cross-party inquiry into climate adaptation. Among its recommendations is the proposal for the government to investigate the idea of proactive financing instruments, working alongside insurance companies and banks.
The purpose of the inquiry is to develop and recommend high-level objectives and principles for the design of a climate change adaptation model for New Zealand, to support the development of policy and legislation to address climate adaptation.
The “Inquiry into Climate Adaptation” report contains a summary of recommendations made by the Committee.
Objectives, principles, and system design:
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The climate adaptation framework should have the following objectives:
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- Minimising expected long-term costs to the Crown and society from the impacts of natural hazards on where people live and work and the associated infrastructure.
- Ensuring that responses and funding support to property owners, if any, are predictable, principled, fair, and rules-based — Give as much clarity and certainty to New Zealanders as possible about the Government’s response to adaptation challenges and the roles of insurers, local government, iwi/Maori, and other groups.
- Improving information flows about climate risks and responses—Increase consistency of and access to quality information about hazards and risks to support sound decision-making.
- Addressing market failures and supporting market efficiency—Contribute to maintaining effective housing, financial, and insurance markets.
- Achieving a balance between central government leadership and community-led approaches by taking a decentralised, rather than top-down, approach.
- Ensuring people and organisations, including insurers and banks, have the incentive and the ability to manage risk.
- Reducing hardship due to the impacts of climate change and adaptation.
- Upholding te Tiriti Waitangi (Treaty of Waitangi) —The adaptation framework should ensure that the Crown is fulfilling its obligations as a partner in te Tiriti o Waitangi. Options could include:
- resourcing for planning and adaptation action
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bespoke arrangements that recognise whenua Maori and cultural infrastructure
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incorporation of matauranga Maori in risk assessments
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collaboration in decision-making and governance.
- Allowing asset prices to better reflect long-term natural hazard risk
- System clarity and continuity—There needs to be alignment across policy, including resource management and emergency management systems. The system should also be consistently developed over time, rather than being subject to significant changes or reversals.
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The climate adaptation framework, in seeking to achieve its objectives and navigate trade-offs, should be guided by the following principles:
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- Fairness and equity for and between communities and across generations
- National consistency—Standards and processes should be broadly consistent across regions to ensure fairness.
- Subsidiarity—Decisions and resourcing should sit at the lowest possible or practical level that bears the direct impact of decisions.
- Local flexibility—Communities should have the opportunity to tailor adaptation responses to local circumstances and preferences.
- Incorporating the specific rights and interests of Maori—Iwi/Maori should have the ability to make their own decisions and be involved in governance: a partnership approach.
- Fair warning—Individuals should be responsible for managing their own natural hazard risk when making decisions. The longer the information about the risk has been available, the less case there is for socialising the cost if the risk is realised.
- Minimising moral hazard—Situations should be avoided where property owners are disincentivised to manage risk because they do not face the full costs of risks materialising.
- Accountability—All actors in the system take the actions they are responsible for.
- Transparency and clarity—Rules are applied, and seen to be applied, clearly and consistently.
- Consideration of co-benefits—Consideration of the costs and benefits of mitigation actions should include co-benefits (such as emissions reduction, and improving biodiversity).
- Evidence-based decisions—Decision-making is resourced and supported by data, information, local knowledge, and matauranga Maori where available.
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The climate adaptation framework should include meaningful performance reporting measures that can show how the framework is performing over time and the extent to which it is achieving its intended outcomes.
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Who does what?:
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There should be a comprehensive national framework set out in legislation that establishes a clear mandate for local and central government, and resourcing and financing arrangements, as it relates to climate adaptation. The framework should establish a system where all actors are incentivised and able to act on climate adaptation.
- All decisions about infrastructure, planning, and development must consider climate adaptation. This includes policy workstreams such as regional deals, the infrastructure pipeline, the Regional Infrastructure Fund, the replacement for the Resource Management Act, and interim planning measures that prevent development and intensification in risk-prone areas.
- There should be a lead agency on climate adaptation that can support an all-of-government approach, partner with iwi/Maori, interact with the public and key stakeholders, and have responsibility for reporting on climate adaptation progress and the framework’s performance.
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Who pays for investment in climate adaptation?:
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The Government should work with local government, researchers, and the private sector to compile information about what is currently being spent on climate adaptation and improve estimates of the potential future costs of adaptation.
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Investment in climate adaptation should be paid for by applying a combination of the following principles: beneficiary pays, exacerbator pays, public pays, and ability-to-pay.
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How are costs shared for residential property retreat?:
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A key consideration of the adaptation framework should be to ensure there is adequate housing for people who need to relocate, including those who do not own their own property.
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The Government should consider the Expert Working Group on Managed Retreat’s recommendations regarding the Government’s role in planned relocation.
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The Government should consider the Expert Working Group on Managed Retreat’s statement: “Avoiding hardship by structuring funding to provide adequate housing to those who must relocate was a key consideration. Based on the outcomes and principles for planned relocation and funding, we did not consider that preserving people’s wealth or protecting property owners from the risks of property ownership were legitimate objectives of the funding system.”
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Any policy work the Government undertakes regarding residential property retreat or managed relocation should include a focus on affected renters and people who do not own property.
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The Government should investigate the idea of proactive financing instruments, working alongside banks and insurance companies to do so.
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The Government should undertake further work to identify what amendments to legislation and regulations would be required to enable residential property retreat.
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Kaupapa Maori (Project Maori):
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The climate adaptation framework should involve bespoke arrangements for whenua Maori, recognising the different models of land ownership and the effects of climate change on that land.
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The climate adaptation framework should recognise a role for matauranga Maori alongside other knowledge systems.
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Data and information:
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The Government should develop an accessible public data commons for data on natural hazards and climate risk, with the aim of improving the data’s quality, consistency, and availability.
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The Government should prioritise funding research that seeks to improve the data on natural hazard and climate risk.
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ICNZ
Responding to the report, Mr Kris Faafoi, chief executive of the Insurance Council of New Zealand (ICNZ), said, “The report is an important signal from Parliament that there is a general political consensus on the challenge facing New Zealand. We now need cross-party consensus to face that challenge.
"It is a valuable reminder of the urgent task ahead. This is an opportunity for New Zealand to act now and reduce the risks climate change poses to future generations.
"We encourage the Government to consider a lead agency on climate adaptation to support this approach and bring together central government, councils, the private sector, and communities to effectively mitigate risks and ensure sustainable adaptation measures."
He added, "We are committed to working with the Government and other groups to explore the options available, including the development of financial instruments such as resilience bonds.”
The Committee’s final report is available on the Parliament website at this link.