Making New Zealand Prosperous, Clean and Green

Rodney Hide
Wednesday, 30 November 2005
Speeches - Environment & Conservation

Speech to New Zealand Hydrological Society 2005 Conference.

It's a great honour to be here.

The late Dr John Hayward introduced me to hydrology. John had a big impact not just through his science but through the many students that he taught and inspired. I know. I was one of them.

John's vision was for a clean, green New Zealand. A prosperous New Zealand. He was dedicated to good science and sound public policy.

John's research in the Kowai river basin in the Torlesse Range, Canterbury, overturned the view that after a short rain the ground becomes saturated. He described how he was outside the Torlesse hut tipping out the teapot after a long, hard rain and the tea just disappeared into the ground. That suggested that the soil could absorb almost any amount of water.

The implication is that the flood waves moving down the alpine stream are caused by rain falling only on or immediately beside the river, not by overland flow. John set in train a series of investigations to explore the contribution of partial area hydrology to stream flows.

The only proviso to John's work was that he only ever drank coffee! It wasn't the teapot that John was emptying. We used to joke as students that Sir Isaac Newton had his apple and our John had his pee!

John's second major area of research was sediment transport in mountain streams. The theory at the time held that the river beds were mobile with the material constantly being reworked.

John built a flume on the Torlesse Stream that flowed into the Kowai with a couple of Venturi pipes sunk in the bottom to draw off sediment.

He showed that stream bed sediment was only activated during storm events and seldom moved during normal stream flow. The implication was that much of the soil conservation work of the time was misdirected. Planting poplars and retiring high country land made little difference.

My initial interest was the life sciences. My particular concern was human impact on the planet. At school I read Rachel Carson's Silent Spring, Paul Ehrlich's The Population Bomb, the Club of Rome's Limits to Growth and the Ecologist's magazine's Blueprint for Survival.

The scenario was human population and consumption growing exponentially in a fixed and finite world. We were soon to hit the wall and be wiped out by either resource depletion or ecological catastrophe. It was a toss up what would get us first. The only sustainable way forward was rapid depopulation and deindustrialisation.

It's easy to see why the Rod Donalds of the world became political activists. The prospect of life as we know it coming to an end is a great motivator.

I too was motivated. But my focus was science, not politics. I thought the green activists lacked scientific understanding. I still think they do. I figured that to save the planet we first had to understand it.

I went to the University of Canterbury where I studied Zoology and Botany and especially ecology. I loved it. We had great teachers and great courses.

After my degree I worked in the North Sea first on the oil rigs and then in the Shetland Islands on a gas-stripping plant. Drilling for oil in 400 feet of rough water demonstrated to me how resources aren't defined physically but by science and technology combined with our ability to organise and to make use of them.

That's why the human race continues to flourish and prosper 30 years after the environmental doomsday books so terrifyingly predicted our imminent demise.

We didn't run out of resources for a very simple reason: we can expand our knowledge and thereby expand our resource base. We now have more resources than ever before. We will have even more tomorrow.

I did travel to countries that had run out of everything. These were the eastern bloc countries. Their problem wasn't the physical limits of their resource base but their failed economic system.

That's the other problem with the doomsday books.

They said a lot about ecology, systems and feedback loops, but ignored, first, the economic system within which natural resources are defined and used and, second, the feedback loop that prices provide. The failure was fatal to the models' predictive power. If something gets scarce, its price goes up, spurring conservation, the search for more supplies and discovery of alternatives. The doomsday models failed because they were too narrow.

To expand my understanding I enrolled on my return to New Zealand in the Joint Centre for Environmental Studies' post-graduate programme run jointly by Lincoln and Canterbury Universities. That's how I met John Hayward. He headed the programme.

We studied environmental science as well as law, planning, economics and, of course, John's specialist subject hydrology. My fellow post- graduate students weren't all environmental scientists like me but lawyers, economists and sociologists. It was a great programme. It was very exciting.

After completing my Masters Degree in Resource Management I had the good fortune of staying on at Lincoln University as a researcher and lecturer working with John. My particular focus was the institutions, rules and organisations within which resources like water are managed and allocated amongst competing uses with conflicting objectives.

I subsequently completed a Masters degree in Economics at Montana State University specialising in natural resource economics. I went to Montana because the Professors there had set up the Political Economy Research Centre and undertaken path-breaking work on resource markets, property rights and environmental management.

I mention all this simply to show that it's not only the Greens who care about the state of the planet. We all do. What we disagree about is how best to conserve and manage our natural resources.

The Greens want to upend society and return to a more basic lifestyle.

What I believe we need is more science and better environmental policy.

By science I mean the critical testing of our understanding against the real world. That's something the Greens fail to do. They put activism ahead of understanding. It's their political programme that drives them, not science.

Let me explain with just one example. The Greens campaigned on "Peak Oil" last election. "Peak Oil" is another imminent doomsday scenario of an oil-starved post-industrial world of war, famine, and international chaos. Green co-leader Jeannette Fitzsimons says the "terrible tipping point" of "Peak Oil" is less than ten years away. The only way to avoid this apocalypse is to "transform our civilisation". That means de- industrialise, depopulate, and submit ourselves to a command-and-control economy.

The difference between me and the Greens is that I think we should check the facts before we rush to force everyone to live in caves and hoe at the local commune in the hot sun all day.

The "Peak Oil" scare dates from 1956 when M. King Hubbert hypothesised that because fossil fuels were finite their production would follow a bell curve. Production would increase from zero to a peak and then fall back to zero.

Certainly the production data Hubbert produced for the United States showed a slowing rate of increase of production. His data for Ohio showed a rough bell curve with the peak in 1895. On this basis, and armed with an estimate of ultimate reserves, he predicted world oil production would peak in the year 2000 and then fall dramatically. His wasn't a doomsday scenario though. He saw nuclear power replacing fossil fuels and effectively lasting forever. The Greens never quote him on that.

What they do is quote Hubbert's bell curve as a "geological fact".

It's not. It's a hypothesis. And not a good one. That's because production from a particular field or country is determined by prices and technology - not just geology. Hubbert's original data for Illinois showed two maxima. Illinois oil reserves after the first production peak were expanded in the late 1930s by use of the seismograph. "Peak Oil" is demonstrably not a fact.

Hubbert predicted that world oil production would peak in 2000. But production last year was 4 million barrels a day higher than in 2000. More telling, is that Hubbert predicted the peak at 33 million barrels a day. But oil production last year averaged 83 million barrels a day. That's two-and-a-half times Hubbert's predicted peak.

At the hands of the Greens the Hubbert bell curve hypothesis has become first a geological fact and then a piece of propaganda to push for the political "transformation of our civilisation".

Besides, the best response to resource shortage is the free market, not a planned economy as the Greens promote.

That's why good policy is important. We care for our environment like the former Eastern Bloc countries cared for their economies. The results are similar.

The Resource Management Act pinches private property rights, overturns the market and ignores prices in favour of a political process that grants temporary government consents to use resources. The Act was developed by Labour and implemented by National. It stands as last century's biggest land grab.

The Resource Management Act establishes a political process to allocate resources that is slow and costly. It misallocates resources because it pays no regard to prices or cost. It's bad for the economy.

But it's also bad for the environment. It turns environmental assets into liabilities. When you conserve native habitat, you run the risk with the Resource Management Act that government will come along and pinch your land.

One district plan recommended that a solitary rimu tree be "protected" along with an area of the surrounding pasture that comprised the entire working area of a Banks Peninsula farm. The farmer complained: "If I'd known the problem that tree was going to cause me, I would have cut it down twenty years ago". That's the message that the Resource Management Act sends to landowners right throughout the country.

The way to protect environmental assets like native habitat is to value them and pay for them - not pinch them as happens now.

The Resource Management Act also promotes short-term thinking without regard to the costs of resource use. For example, water rights are of fixed duration. That discourages longer-term thinking. What's the point of investing in a development project with a 30-year life if the water permit has only ten years to run?

That's why it's better to make water rights perpetual. It encourages investment and better resource use.

We need greater flexibility too. The way to achieve more innovative use is to make water rights freely tradable. That allows water use to change without having to wait for resource consents to expire.

But more particularly it allows water to be priced and valued. That encourages water to be put to its most valued use and encourages conservation because it gives water a value.

There is no incentive to conserve water on a water permitting system because water saved cannot be on-sold.

We should make the rights to use water perpetual and allow them to trade. That would put a price on water use and enable more flexible and innovative allocation.

It's not like perpetual and tradable water rights haven't been tried in New Zealand. The old mining privileges in Central Otago operated for over 100 years. The rights were perpetual and tradable. The system worked for over a century for some of the most valuable water in the country.

The system of prior appropriation saw farmers have to cease irrigating in favour of senior water right holders. The system was well-understood by the users and, of course, the rights of the senior water right users were more valuable than those of the junior users. The rationing system worked without dispute and without government interference as prices and trades allocated the water rights instead of government.

Sadly, the Resource Management Act phases out the Otago Mining Privileges in favour of resource consents. A system that worked and worked well has been replaced by one that doesn't.

The command-and-control approach to managing resources crumbled in the Eastern Bloc countries. We should learn the lesson for environmental policy.

To provide for our environment we need to uphold property rights and extend them.

That's the way for a more prosperous country. And a cleaner, greener New Zealand too.

Thank you.

ENDS

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