The Fossil-Free Economy Myth

The economic and societal implications of ending fossil fuel use in New Zealand by 2035 are severe, costly and disruptive.

“Aotearoa will lead the world in reducing gross domestic emissions of all greenhouse gases and will be on track to end fossil-fuel use and production no later than 2035, through legally binding mechanisms,” reads the manifesto of the Green Party of Aotearoa New Zealand.

As  Shane Jones, in his capacity as  Associate Minister for Energy and Minister for Regional Development  explained in the New Zealand parliament this week: “You, can't run the electricity grid on unicorn kisses.” If New Zealand alone stopped all fossil fuel use by 2035, the measurable effect on global climate change would be negligible. New Zealand's total greenhouse gas emissions constitute only around 0.17% of the global total.

The climate system responds to the accumulation of long-lived greenhouse gases like carbon dioxide in the atmosphere from all emission sources collectively over long time periods. So even eliminating a small contributor like New Zealand has little direct climate impact compared to the volumes still being emitted elsewhere.

Within New Zealand itself, the economic upheaval of rapidly terminating all fossil fuel use would be severe, costly and disruptive. The previous Labour government came to power with New Zealand’s net debt to GDP at 19% and left a situation for the new government to deal with of net debt at 42.9% of the size of our total economy.

Major pillars of its economy like agriculture, transportation, electricity generation, manufacturing and construction all currently depend heavily on fossil fuels for energy inputs and processes. A hard stop would require re-tooling these entire sectors rapidly towards renewable power, sustainable bio-based fuels, hydrogen, electric propulsion and more not-yet-scaled solutions.

New Zealand also has domestic oil and gas production, processing facilities and distribution infrastructure potentially valued at billions that could become stranded assets if prohibited from operating. Decommissioning or repurposing these capital investments prematurely represents another economic externality.

Of particular concern is the agriculture sector's reliance on fossil fuels for mechanised equipment, transportation of goods, fertiliser production and more. As a major food producer and agricultural exporter, hasty disruptions in productivity and export capabilities prior to fully viable substitutes could impose heavy costs.

This sector already faces unique decarbonisation challenges given biological emissions from livestock and soil that may prove harder to mitigate than energy-related emissions in the near-term. An overhaul could be extremely high risk.

Perhaps most noticeably to households, businesses and the overall economy is the likely spike in energy prices that would accompany a rapid fossil fuel phase-out and heavier short-term reliance on more expensive renewable electricity sources, next-generation biofuels or other transitional energy sources.

These increased costs would ricochet throughout supply chains, increasing the costs of nearly all goods and services unless matched by extraordinary energy productivity gains. Careful policy design would be required to avoid excessive inflation or economic shocks from higher power prices while incentivising clean adoption.

New Zealand pursuing a post-fossil fuel economy is risky economic recklessness. New Zealand’s climate contributions are small enough that even completely decarbonising would fail to measurably ‘move the needle’ on global emissions trajectories. Too abrupt of a shift like cessation of fossil fuel use would severely disrupt vulnerable industries, supply chains, trade relationships, energy systems and more, while even a massive climate policy upheaval like eliminating New Zealand's fossil fuel use could still only directly reduce global temperatures by around 0.0038°C this century.

Pursuing an aggressive national goal of eliminating fossil fuel use would undoubtedly have profound societal impacts across New Zealand, beyond just the economic upheaval. One of the most visible societal shifts would be how New Zealanders get around, both for personal mobility and transportation of goods/services. With fossil fuels barred, there would need to be a comprehensive overhaul towards electric vehicles, public transit, cycling infrastructure, railway systems, sustainable aviation fuels and more. Rural communities would face particular challenges maintaining transportation access.

Pursuing an aggressive national pivot away from fossil fuels risks sparking serious societal disruptions, frictions and even unrest. Any rapid policy shifts that directly impact pocketbook issues like energy prices, jobs, costs of living and overall economic activity run the risk of fueling public backlash if the disruptions and dislocations feel unnecessarily abrupt. We've seen this play out with events like the Yellow Vest protests in France which were initially sparked by gas tax hikes.

Even if climate policies like carbon pricing or fossil fuel phase-outs are grounded in solid evidence, perceived unfairness in how impacts are distributed would alienate segments of society who feel they are bearing too heavy a burden through no fault of their own. Working class communities already struggling could rebel against energy transition policies viewed as deeply regressive taxes.

For many individuals and groups, fossil fuels have been deeply intertwined with cultural ideals, ideological values and perceived national identity over decades if not centuries. Rapidly severing those connections would feel like an attack on peoples' worldviews, heritage and ways of life.

Certain industries like agriculture, manufacturing, mining and more have built entire communities and multi-generational family legacies around fossil fuel enabled practices. Having those livelihoods and identities disrupted in short order by climate policies will inevitably breed resentments if on-ramps to new opportunities aren't carefully cultivated. We've seen this dynamic play out in every industrial transition in history.

With concentrated urban populations generally being wealthier and favoring climate policies, and rural communities tied to emissions-intensive industries feeling existentially threatened, this could exacerbate already troubling urban/rural, class and cultural divides within society. Fears of being left behind in a transition would make some communities dig in against change.

Without place-based, tailored transition assistance and inclusive policymaking processes, resentments could fester around narrative lines of elite, urban priorities, being imposed through centralised decision-making disconnected from on-the-ground realities. Climate policy could become a proxy battle for deeper schisms in society.

The sheer complexity of transitioning an entire economy away from fossil fuel dependencies will result in public trust being eroded in the key institutions guiding this process, from scientific advisors to government bodies. This would create openings to stoke unrest. We've seen eruptions of unrest in recent years already around perceptions of unchecked overreach by detached “experts” pursuing unpopular changes.

Our already hyper-polarised political environments mean any far-reaching climate policies will inevitably become a new battlefield for broader ideological conflicts around the role of government, appropriate paths to progress and priority-setting. If decarbonisation policies become framed through divisive “us vs them” partisan lenses, it becomes easier to mobilise opposition by politicising the stakes.

At the extreme end of the unrest spectrum lie potential escalations into violence, property destruction, and clashes over perceived policy injustices. History contains many examples of localised grievances broadening into destabilising civil strife with security risks to infrastructure, supply chains and public safety. Well-resourced anti-transition movements seizing on legitimate concerns could seek to instigate violence to undermine climate policies as well.

While important for global climate stability, pursuing aggressive fossil fuel phase-outs by national economies risks governance breakdowns, violence and discord on multiple fronts if a rigid top-down doctrine alienates key constituencies and social fault lines are inflamed in the process.

While the carbon emissions math highlights New Zealand's potential to pioneer pathways off fossil fuel dependence, the degree of societal upheaval required to completely restructure systems, behaviors and interconnections around energy, transportation, production and consumption cannot be overstated.

The binary framing of the climate issue as a clash between Chicken Littles and those with their heads in the sand is an unproductive trap. Rigorous, continually reassessed science should inform policymaking, mitigation, and social preparedness. We must not give in to alarmist predictions of climate hellscapes descending by a certain year.

A realistic stance may not attract the most agitated voices, but it represents a constructive path for steering ourselves toward solutions commensurate with the measurable risks and benefits we face. With stakes this high, level-headedness is not an excess of virtue, but an ethical necessity.

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