Publications

Our report provides advice on the Government's final decision about the second emission budget. In addition to a wide range of policies considered in our earlier (May) report, the current report further investigates the impact of: - alternative carbon pricing policies, - the Electrify NZ policy, - the EV charging network investment, and - the Carbon Capture, Utilisation and Storage (CCUS) and the Refrigerants Regulated Product Stewardship scheme assumptions. Our high-level results suggest that: - the high carbon price of the Fourth Pathway scenario leads to larger adverse economic and equity impacts. - a decrease in GDP is associated with lower household consumption, lower real wages and lower exports (volume). As will be discussed, the short, medium and long-term dynamics of these effects are important for households (as well as the emission and economic outcomes). - the emission targets are achievable, but there is a significant adverse impact on economic and equity outcomes. We sensitivity tested the results for seven different Nationally Determined Contribution (NDC) scenarios. Our extensive modelling of the government policies provides a comprehensive database for various policy and investment assessments as well as the ESG planning.

## Abstract The National Land Transport Demand Model (NLTDM) was developed between 2011 and 2012. It was intended to be a tool for considering how transport demand may evolve, rather than a tool for providing point estimates of demand. The model takes a hybrid approach to forecasting transport demand. This simplifies the relationship between transport demand and macroeconomic aggregates. However, it combines top-down relationships with additional details of behavioural parameters and often includes reduced (that is, simplified) forms of conventional regional transport models. With policy discussions focusing more on equity, emissions and inclusion, there is an increasing demand for more flexible policy models and tools. The Regional Land Transport Demand Model (RLTDM) provides a useful framework for current policy discussions. However, it was developed using the MATLAB software package, which is rarely used by practitioners. New Zealand Transport Agency Waka Kotahi (NZTA) commissioned Principal Economics Limited to recode the RLTDM in Stata, using its matrix language (Mata), and provide further notes for practitioners on how to use the model. The hybrid approach means the NLTDM can be manipulated by people with differing degrees of modelling expertise. This enables researchers and policy advisors to further investigate transport-demand factors, which is useful given the inherent uncertainty with transport modelling. The model evaluates transport-demand scenarios 30 years into the future, taking account of mega-trends in: - population growth - spatial demography - technology - income and economic growth - industrial composition - policy and prices in relevant areas This report provides a technical tagline: of the Regional Land Transport Demand Model (RLTDM), which is a hybrid approach to forecasting transport demand across New Zealand regions. The model’s outputs include deterministic and stochastic forecasts of a wide range of economic and transport series. We re-coded the model in Stata and Mata.

The Commerce Commission is in the process of the 2025 reset of the electricity default price-quality path in a time of uncertainty and high-inflation. The Commission tasked Principal Economics to provide a solution for dealing with supply chain and economic uncertainty for regulating $25 billion of assets of the electricity distribution businesses over the DPP4 (2025-2030) period. For that work, we used a combination of methods, including stakeholder engagement, CGE analysis (for the impact of climate policy on cost categories), econometric analysis and forecasting. The work included significant stakeholder engagement and inputs from the electricity distribution businesses from their submissions (to the Commission). The outputs are adopted in the Commission's latest decision and are available here.

The Emissions Reduction Plan 2 (ERP2) delineates Aotearoa New Zealand's strategy to attain its emissions reduction objectives for the 2026-2030 period, alongside setting a path towards achieving long-term emissions reduction objectives. ERP2 aims to reduce annual average emissions from 72.5 MtCO2e to 61 MtCO2e. The Ministry for the Environment (MfE) engaged Principal Economics Limited, the Centre of Policy Studies, and Infometrics Limited to evaluate the comprehensive impact of the proposed policies. This includes: - Assessing the comprehensive economic repercussions of emissions mitigation policy packages within ERP2. - Estimating and understanding of secondary or indirect consequences. - Carrying out distributional analysis of these ramifications. **The critical policies investigated in our report include:** - Increasing renewable energy through Electrify NZ - Targeting 10,000 public EV chargers - Lowering agricultural emissions - Investing in resource recovery - Improving public transport - Investigating carbon capture, utilisation and storage. **Cite this article:** Torshizian E, Adams P, Stroombergen A. 2024. Economic Impact of New Zealand’s Second Emissions Reduction Plan. Report to Ministry for the Environment by Principal Economics Limited in collaboration with the Centre for Policy Studies and Infometrics Limited.

Accreditation is a crucial part of New Zealand’s quality infrastructure. The accreditation services provided by International Accreditation New Zealand (IANZ) increase the confidence of New Zealand and overseas consumers to purchase products that are produced or tested by accredited organisations. In this report we provide an independent assessment of the economic impact of IANZ. Accreditation services create an 8 percent price premium for exporters through reduced transaction costs, which leads to improved productivity and profitability. We used our extensive Computational General Equilibrium (CGE) model of the New Zealand economy and identified that IANZ’s accreditation services lead to: - a total increase in exports by $3.4b, consisting of an $8.2b increase in exports of industries using accreditation offset by a decrease in exports of industries not using accreditation, - 1.6 per cent higher real wages, which increases consumption by $3.3b, - $2.4 billion increase in annual GDP of New Zealand.

Transportation decisions can have large and varied impacts on travellers and their communities. It’s important to measure these effects and consider their impact on various groups when planning projects. Waka Kotahi uses a framework to decide which transport projects and programmes to pursue. The economic business case must contain a cost–benefit analysis (CBA). CBAs assess the economics of a proposal by valuing (monetising) the costs and benefits to all members of society. However, CBAs sum across a wide range of people and don’t calculate inequities between groups or individuals, or who ultimately benefits from the project. Transport equity discussions focus on social justice. Equity impact analysis helps policymakers to make good decisions for a wide range of people. Distributional impact analysis needs to be complemented with wider investment and planning considerations. This includes any comprehensive policy framework that accounts for the overlapping effects of transport, housing and taxing policies. Cite this article Torshizian, E., Byett, A., Isack, E., Fehling, A., & Maralani M. (2022). Incorporating distributional impacts in the cost–benefit appraisal framework (Waka Kotahi NZ Transport Agency research report 700).

Climate change is increasing the frequency and severity of extreme weather events, creating deep uncertainty for decision-makers. To build climate resilience, flexible evaluation methods that account for a range of future scenarios. Adaptive Decision Making (ADM) provides this flexibility by enabling adaptive planning that evolves as new information emerges, ensuring more effective investment decisions in an unpredictable climate. Based on scientific studies and recent climate events in New Zealand, climate is beginning to exacerbate extreme “one-in-100-year” events. Higher temperatures mean more evaporation and moisture in the atmosphere and stronger storms, droughts and heat waves. Climate resilience means recognising that extremes are not necessarily extraordinary, and effective project evaluation methodologies are needed to support the ability to efficiently select between project alternatives, to prepare, respond and recover quickly. In this report, we identify the available methods for ADM in climate change and their pros and cons. We then provide suggestions for considerations of climate change adaptation within an investment decision making framework.

Aotearoa New Zealand suffers from an infrastructure deficit. Without the key infrastructure needed now for our economy to thrive, we deprive future generations from significant economic prosperity. While transformational infrastructure projects necessitate time to be developed into sound technical solutions to our needs, many New Zealand projects are further delayed by policy decision and financing constraints. In this novel application of the infrastructure Wider Economic Benefits approach, we quantify the cost to society of these further delays for the first time, by using the example of the Waikato Expressway. We used our subregional CGE model to estimate the downstream benefits of the Expressway. At a high-level, results of our analysis quantify the annual benefits of having the Waikato Expressway in the economy. Without the expressway in function as early as possible, $334 million of economic benefits were forgone each year. Cite this article Principal Economics. (2022). Great decisions are timely: Benefits from more efficient infrastructure investment decision-making. Report to Infrastructure New Zealand.

Dunedin City Council appointed Principal Economics to provide a comprehensive assessment of the sufficiency in development capacity of business land within Dunedin to fulfills requirements of the the National Policy Statement on Urban Development (NPS-UD 2020), including an investigation of: * the locational requirements of business including shape, size, access, reverse sensitivities, and other market factors; * the external pressures businesses are facing (such as the uncertainty of the COVID-19 pandemic, and the impact of coastal hazards); * impacts on business activities from reverse sensitivities; Locational accessibility to labour markets and customers; Changes in demand from population growth; changes in residential distribution; * infrastructure requirements for different business sectors. In our assessment of demand and sufficiency we identified existing businesses across New Zealand and their locational attributes including but not limited to land size, shape, access, reverse sensitivities and other market-based factors. We use industries' revealed preferences to assess the features of land that they have determined as being suitable. This was then matched with the supply of business land in Dunedin City after applying a range of spatial analysis techniques.

The Ministry for the Environment (MfE) engaged Principal Economics and Urban Economics to review Housing and Business Development Capacity Assessments (HBAs) across councils, with the exception of Rotorua and Wellington, whose HBAs were unavailable at the time. Our review focused on compliance with the National Policy Statement on Urban Development 2020 (NPS-UD 2020) and identified key areas for improvement to guide future HBAs for both councils and the ministries (MfE and HUD). Reviews that have been published online can be found below: - [Dunedin - Otago Regional Council and Dunedin City Council](https://www.dunedin.govt.nz/__data/assets/pdf_file/0005/853277/Final_Review-of-Dunedin-HBA_Principal-Economics_December-2021.pdf) - [Futureproof - Waikato Regional Council, Hamilton City Council, Waikato District Council and Waipa District Council](https://futureproof.org.nz/assets/FutureProof/Final-Review-of-Future-Proof-Partners-HBA_Principal-Economics_December-2021.pdf) - [Tasman - Tasman District Council](https://www.tasman.govt.nz/document/serve/Final_Review%20of%20the%20Nelson%20Tasman%20HBA_Principal%20Economics_December%202021.pdf?DocID=33106)