In its climate inquiry findings report, the Finance and Expenditure Committee says there needs to be clear mandates for climate adaptation funding and responsibilities in the Government’s future adaptation framework as there’s still ‘who pays’ uncertainty

Parliament’s Finance and Expenditure Committee (FEC) is recommending a future national climate adaptation framework establishes a “clear mandate” for local and central government when it comes to adaptation resourcing and financing arrangements.

A more proactive approach is needed and the committee believes the Government’s framework needs to establish a system where “all actors” are both incentivised and able to act on climate adaptation.

The cross-party committee was tasked by Climate Change Minister Simon Watts back in May to decide how the country mitigates the risks and costs of severe weather events as well as developing objectives and principles for a climate adaptation framework. 

The Ministry for the Environment (MfE) and the Treasury were appointed as advisers on the inquiry. During July and August committee hearings, the Committee heard from 88 submitters ranging from the insurance industry to Federated Farmers.

The committee’s report of its inquiry findings, released on Tuesday, finds the current system of managing natural hazards and climate risks is “under stress”. 

The potential costs associated with climate adaptation were described as “seriously uncertain” and the committee was clear that the Government’s framework would need to clarify what parties paid for investment into climate adaptation.

“Currently, managing natural hazards and climate risks, the risks, costs, and responsibilities are shared across private asset owners, councils, insurers, and central government,” the report said.

“Councils are statutorily responsible for land use planning and addressing natural hazard risk. Approaches to climate adaptation include responses to major weather events, and to projected or emerging local needs.”

MfE advisors had found there was a “lack of clarity” about the role of the central government in funding pre-disaster and post-disaster events. 

“There is also a lack of visibility about government agency and local authority investment plans, which can strongly influence personal and wider community decisions,” the report said.

The role of private sector players like infrastructure owners and banks wasn’t found to be clear either. The report noted that the functions of banks and infrastructure have “broader social and economic benefits” and the way they operate constrains the choices of others like home owners or councils.

The committee has a slew of framework recommendations in the report which include the need to improve information flows about climate risks and responses and achieving a balance between central government leadership and community-led approaches.

They also made the recommendations that asset prices should be allowed to better reflect long-term natural hazard risk and minimise expected long-term costs – for both the Crown and society.

The “short turn around” the Government gave the committee for its inquiry had “limited the value, quality, and scope of this report and its findings”, the report noted.

“While the intention was to find cross-party consensus on critical issues – and important progress has been made – at the point of deliberation some members feel we have still been left with a number of recommendations that remain vague, open to very different interpretations, and seem at times contradictory,” it said.

“These members worry about the report not answering some of the most challenging questions around, for example, the weighting given to allocative principles on ‘who pays’, and thus worry about its value in directing officials in legal drafting.”

Green Party co-leader Chlöe Swarbrick, also the Green’s spokesperson for climate change, said a Green Party adaptation approach would focus on creating clear guidance for local governments on land-use and adaptation planning. 

“There remains work to do. The inquiry’s recommendations represent a step forward in the parameters of current broad cross-party support but the devil will be in the detail. I am confident after discussion with the Minister that we will continue working collaboratively through these gaps in developing the Climate Adaptation Bill,” she said.

Amanda Whiting, the Chief Executive of IAG New Zealand which is the country’s biggest insurer, said the the Finance and Expenditure Committee had been given “an incredibly difficult task” and a short time frame to complete it.

“They have done a good job of describing the problem and have come up with sensible recommendations,” she said. 

“Forging political consensus is a critical foundation for New Zealand’s ability to adapt. It includes answering questions such as, when to intervene, whose interests take precedence, when we compel people to act, how much personal responsibility people must take and the level of compensation they receive.”

A spokesperson for NZ's second biggest general insurer Suncorp NZ said the insurer was pleased that the FEC’s report had found consensus on several areas Suncorp believed were critical, including making high quality, consistent information on natural hazard and climate risks widely available.

“We agree that decisions about infrastructure and development policy should consider climate adaptation, including the replacement for the Resource Management Act and the interim planning measures that prevent construction and intensification in risk-prone areas,” the spokesperson said.

Insurance Council Chief Executive Kris Faafoi said the report signaled there was a need to “urgently tackle” the impact of climate change on communities and protect people’s lives and property.

“New Zealanders need certainty about the way natural hazard risks are going to be managed, both now and in the future. We support a framework that would create a consistent approach nationally but allow for local flexibility,” he said.

The summary of some of the FEC’s key objectives and recommendations are below. The rest of the recommendations and report can be read here. 

• Minimising expected long-term costs—Minimise 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. This will include managing the Crown’s fiscal exposure and other social costs and incentivising investment in the long-term interests of New Zealanders.
• Ensuring that responses and funding support to property owners, if any, are predictable, principled, fair, and rules-based wherever possible—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/Māori, 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. Focus on areas where there is market failure.
• Achieving a balance between central government leadership and community-led approaches—Empower individuals and communities by taking a decentralised, rather than top-down, approach.  
• Ensuring people have the incentive and the ability to manage risk—Central government should focus on ensuring that others, including banks and insurance providers, have the incentive and ability to reduce risk where they can. Decisions and resourcing for adaptation should sit at the lowest level that internalises costs. This will encourage a more efficient response and reduce moral hazard created when individuals or groups do not face the downside risk from their own decisions.
• Reducing hardship and supporting an equitable approach—Reduce hardship due to the impacts of climate change and adaptation. Consider that distributional effects and associated hardship of price impacts are managedover time
• Upholding te Tiriti o Waitangi—The adaptation framework should ensure that the Crown is fulfilling its obligations as a partner in te Tiriti o Waitangi. The Government should work with iwi/Māori to develop what this means in practice for the adaptation framework. Options could include:  
  • resourcing for planning and adaptation action
  • bespoke arrangements that recognise whenua Māori and cultural infrastructure, similar to the Kaupapa Māori pathway in FOSAL (Future of Severely Affected Land)  
  • incorporation of mātauranga Māori in risk assessments  
  • collaboration in decision-making and governance.
• Allowing asset prices to better reflect long-term natural hazard risk—The more that asset and insurance prices reflect risk, the more efficient outcomes will be. However, price impacts that arise as risk increases over time and the associated hardship may be considered inequitable. 
• System clarity and continuity—There needs to be alignment across policy, including resource management and emergency management systems. The system should also be consistently implemented and developed over time, rather than being subject to significant changes or reversals.