Deepfake and other ‘synthetic media’ will be the next wave of online content causing concern, but there’s no need to rush to create new laws to cope.
A new report funded by the Law Foundation cautions against rushing to develop new laws to respond to synthetic media. Instead, the authors say there is already a long list of laws that cover the issue, including the Privacy Act, Copyright Act and the Harmful Digital Communication Act.
The SMC asked experts to comment on the report and deepfakes more broadly.
Dr Amy Fletcher, Associate Professor of Political Science and International Relations, University of Canterbury, comments:
“Barnes and Barraclough make a substantial contribution to the emerging debate about ‘deep fakes’ and synthetic media. They are correct to caution against knee-jerk regulatory responses.
“As a political scientist, I think we also need to consider synthetic media within a broad geopolitical context. Around the world, we see that democracy is under intense pressure — confronting challenges arguably not seen since the 1930s — with political polarisation and extremism on the rise, while trust in institutions, politicians, and the mass media continues to decline. These issues are not necessarily new, but they are increasingly urgent and pervasive, particularly as the speed and reach of advanced media technologies ramp up emotions and decrease response times.
“In this sense, the prospect of rapid proliferation of deep fakes in the political/electoral sphere does concern me. I think the question posed in Scientific American in 2017 remains spot-on: will democracy survive big data and artificial intelligence? Our track record to date suggests that we still do not know how to overcome the downsides of social media tools such as Twitter or Facebook, let alone deep fakes.
“As the United States gears up for what promises to be a very hard-fought presidential election in 2020, the potential use of synthetic media by both domestic and international actors who have a vested interest in undermining the integrity of the process and further destabilising American institutions is a legitimate and abiding concern, both for Americans and I expect the wider world.”
No conflict of interest.
Dr Minh Nguyen, Senior Lecturer & Academic Advisor, School of Engineering, Computer & Mathematical Sciences, AUT, comments:
“From what I understand, ‘deep fake’ is a combination of the two of the most powerful models of Deep Learning: Convolutional Neural Network (CNN) and Recurrent Neural Networks (RNN).
“Deep Learning models (simulate similar neural networks in the human brain) have proved extraordinarily efficient at learning the inherent features of data (images, sounds, and texts). CNN is used to implement the Face Swapping part, it detects faces and many other features of the two people, learns them and stores what they learnt in a very deep artificial neural network. After that, the machine can acquire the face of one and map all the expression on the other person’s face.
“For the sound part, they use RNN, which is widely used for natural voice generation, originally used in Text-to-Speech Systems and AI-based personal assistant such as Google Duplex, Apple Siri, Amazon Alexa, etc. The idea is, if provided with enough data (e.g. voices), the machine can learn very well the speech synthesis and mimics specific human voice with the same tone, sound, and accent. It is very hard to determine which one is real and which one is generated.
“Deep fakes are potentially dangerous, but creating realistic video is not easy for most people. However, the voice generation is easier to achieve and could be used for scamming over the phone to replace today’s scamming with email or SMS text.”
Great journalism shone at the 2019 Voyager Media Awards on Friday night.
Eloise Gibson from Newsroom won the SMC-sponsored Science and Technology Award at the Voyager Media Awards on Friday for her coverage on Sir Ray Avery’s plan to manufacture low-cost infant incubators and the legal threats he made to suppress studies.
Stuff’s Environment National Correspondent Charlie Mitchell won big this year, taking out the Feature Writer of the Year (long-form) and the Environmental/Sustainability Reporter of the Year for his work on snails, phosphorus, land reform, and sea-level rise. He was also named joint runner-up in the Science and Technology Award. Judges described Mitchell as “an exemplary current affairs feature writer who is original in his ideas, dogged in his research, and whose crisp writing carries the reader through in-depth, often complex stories”.
Hannah Martin from Stuff won the junior nib Health Journalism Scholarship, with the Senior award going to Catherine Hutton from RNZ. Nicholas Jones from the NZ Herald was named runner-up for the senior award for his work investigating rest homes.
New Zealand Geographic won Magazine of the Year for the third time running. In her acceptance speech, editor Rebekah White urged media companies to think about the diversity of views when hiring and that today’s short-form winners are her future stable of long-form writers. The magazine’s writers were well represented as nominees at the awards, and contributor Ellen Rykers won Best Junior Feature Writer. The judges said: “Ellen Rykers’ impressive research, craft and surprising insights delivered an entry well beyond the junior category and feature writing at its best.”
Veteran reporter Phil Pennington from RNZ was honoured with the Reporter of the Year accolade, and in true style, apparently, he stopped to do an interview on the way.
Our advisory board member and Stuff editor-in-chief Patrick Crewdson was named the Editorial Executive of the Year and also received the prestigious Wolfson Fellowship, which provides for 10 weeks’ study at Cambridge University’s Wolfson College.
Reforms to bring the Emissions Trading Scheme (ETS) in line with the Zero Carbon Bill will also improve transparency and compliance.
The reforms will allow the public to see who is using the ETS from 2021 – including the emissions of individual emitters – making the system more transparent.
Auctions within the ETS are expected to start by late 2020, with the current fixed price ceiling of $25 to be removed by December 2022. The reforms also allow for a price floor to be added in the future if necessary.
The SMC asked experts to comment on the reforms.
Dr Ivan Diaz-Rainey, Associate Professor of Finance, Climate and Energy Finance Group, University of Otago, comments:
“The NZ ETS has been going through a reform process started by the previous National government and picked up by the current administration. The decision related to this reform process was split into two tranches. This latest release provides the second tranche of decisions in this process. A number of things stand out.
“First, once the reform process is complete, the government will have a mechanism for implementing a floor on carbon prices (by being able to put a reserve price on auctions). This is potentially an important development since, if used, it will give green investment greater certainty and should help to release private capital towards decarbonisation. The focus on a price floor is a marked contrast with earlier concerns (by the previous National government) about managing prices if they went too high. The latter has been done through the fixed price $25 option.
“Second, auctioning of units will start in 2020 and it is expected that the Fixed Price Option will disappear at this point or at the latest in 2022. Carbon prices have been hovering around the $25 Fixed Price Option so this announcement should allow them to climb beyond that mark.
“Third, the government is getting tough on compliance by increasing penalties for those who do not play by the rules (do not submit the required number of allowances or give inaccurate returns).
“Fourth, the government intends to increase transparency by publishing emissions and removals data at the level of individual participants – this is really important as it will help the market work more effectively but it will also help shine light as to which participants are responsible for the largest portion of emission – the data should be of interest to campaigners, researchers and investors.
“This is in line with international best practice but sadly this is not due to happen until 2021 and the Minister has given himself some wriggle room should this data prove to be too ‘commercially sensitive’ (I fear the largest emitters who do not want to be embarrassed may try and kick this into the long grass).
“As a researcher, I would like to see the data made available now and for as long as the scheme has been in existence. It is hard to see how the commercially sensitive argument can be used for historical data. This said, and, all-in-all, this reform tranche is taking NZ ETS in the right direction.”
No conflict of interest.
Catherine Leining, Policy Fellow, Motu Economic and Public Policy Research, comments:
“Reforming New Zealand’s climate change legislation is a complex tango. Where the Zero Carbon Amendment Bill leads, NZ ETS amendments must follow. The government’s latest NZ ETS policy decisions will help ensure future emission prices rise in step with our targets.
“Two sets of decisions address price safeguards for the NZ ETS.
“As previewed in December 2018, the $25 fixed-price option will be removed as soon as auctioning is operational – but no later than December 2022 – and regulations will enable its replacement by a cost containment reserve. Given the urgent need for mitigation action, it’s alarming to imagine a scenario where our emission price would still be locked at $25 per tonne in 3-1/2 years. Delaying this change imposes significant target and fiscal risks to the government and disadvantages low-emission innovators trying to compete. There is a compelling case to launch auctioning with a cost containment reserve as soon as possible.
“Importantly, the government will enable regulations for a price floor in the form of an auction reserve price – but has not committed to actually use it. Although both the cost containment reserve and auction reserve price would be optional under regulations, Cabinet has provided notably less assurance about the latter. An auction reserve price would signal the direction of travel for minimum emission prices and build confidence for low-emission investors and innovators. It would also provide greater assurance to government about the minimum level of auction revenue to expect. Markets need policy certainty to thrive, and the NZ ETS would benefit from clear cross-party commitment to safeguard against extreme emission prices in both directions.”
“Three sets of decisions will help secure the integrity of the NZ ETS, while a new work programme will address broader market governance issues.
“The first addresses compliance. The financial penalty for failing to surrender units will be strengthened from $30 per unit to three times the market price. Changing from a fixed to an indexed penalty for surrenders will better deter non-compliance under rising emission prices. A new series of penalty bands for reporting failures will align the consequences with the infringements. Participants will still need to ‘make good’ any unit shortfall, as currently required. Individual cases of non-compliance will be published as a further deterrent. The Ministry of Justice advocated for separation of the regulator, enforcer, and adjudicator, but this recommendation was not adopted. The chosen approach is modelled on New Zealand’s tax system.
“The second addresses transparency. The government will begin reporting emissions and removals data for individual NZ ETS participants, not just in aggregate. There are obvious trade-offs between increasing market information about unit supply and demand, and withholding commercially sensitive information. The government’s choice to prioritise transparency will likely attract attention in participants’ submissions to the Select Committee.
“The third addresses auctioning. An independent auction monitor will be appointed to oversee the new unit auctioning mechanism scheduled to begin in late 2020. We will need to wait for further details about the auction mechanism – including the critical issue of what will happen with the auction revenue.
“These and forthcoming decisions will be integrated into amendments for consideration by Parliament later this year.”
A public survey about whitebait fishing finds 90 per cent of respondents support efforts to make the fishery sustainable.
Almost 2,900 people completed the survey put forward by the Department of Conservation, including iwi, recreational and commercial whitebait fishers, and scientists.
The responses will help inform a discussion document coming later in the year that aims to improve whitebait management. This document will then go out for wider public consultation.
The SMC asked experts to comment. Please feel free to use these comments in your reporting.
Dr Mike Hickford, Research Biologist, Marine Ecology Research Group, University of Canterbury, comments:
“I am very pleased to see that DOC is progressing to public consultation on future whitebait management in New Zealand. It has been over 20 years since the whitebait regulations were last reviewed, and in that time the pressures on whitebait populations have changed markedly.
“The influence of intensive agriculture, reduced water quality, land-use changes and introduced predators has changed, even in New Zealand’s most pristine areas, and these factors, together with the whitebait fishery, need to be considered for the conservation of New Zealand’s whitebait species.
“Fishing methods and the reasons for whitebaiting have also changed in many areas and there is some doubt as to whether the current regulations have kept up with these changes.
“The whitebait regulations are not consistent throughout New Zealand and the underlying reasons for these differences are not clear. This has caused feelings of inequity. I anticipate that the consultation will generate much debate because people are passionate about the species that support the whitebait fishery and passionate about the fishery itself. Passion and debate is good; disinterest and inertia is not.”
An application to mine a fossil-rich site near Dunedin for animal food has been met with fierce criticism from environmental scientists, who say the site is like New Zealand’s version of Pompeii.
A majority-Malaysian company wants to create an open pit mine at the Foulden Maar site to collect diatomite – the fossilised remains of water-borne, single-cell algae called diatoms, which are full of silica deposits – and turn them into pig and cattle feed.
In June last year, scientists were assured they would continue to have access to the site in spite of the mine, but a report leaked to the Otago Daily Times has prompted fears that the applicant, Plaman Resources, intends to fully mine the maar.
Foulden Maar was formed 23 million years ago when a volcano erupted and formed a deep crater lake, Newsroom’s Farah Hancock wrote. The lake has since filled with the sediment from the microscopic diatomite plant and dried out, leaving behind a cache of fossils.
“From a scientific perspective we don’t yet know the importance of what it contains,” University of Otago geologist Daphne Lee said, who wants at least half the site to be preserved in perpetuity.
“If it’s completely destroyed now, in the future people are going to say it would be like destroying Pompeii, ‘Why did you do that?'”
Nic Rawlence, director of Otago University’s paleogenetics lab, told RNZ’s Jesse Mulligan that the site was the only one of its kind in the Southern Hemisphere that contained a record of the first major glaciation of Antarctica.
A petition has been started asking the Government to reject Plaman Resources Limited’s application, currently with the Overseas Investment Office, to purchase the neighbouring farm, which would improve the viability of the mining operation.
The issue has been covered widely by local media, including:
The accompanying discussion document contains data on the number of drug and alcohol-related fatal crashes. Analysis by ESR forensic scientists of the blood samples of drivers killed in crashes between January 2014 and May 2018 shows 29 per cent had used alcohol, 27 per cent had used cannabis, 10 per cent had used methamphetamine, and 15 per cent had used other drugs.
The Government is looking for feedback on:
the methods that could be used to screen and test for drugs
the circumstances in which a driver should be tested
what drugs should be tested for
how an offence for drug driving should be dealt with by police.
The SMC asked experts to comment.
Dr Fiona Hutton, Senior Lecturer, School of Social and Cultural Studies, Victoria University of Wellington, comments:
“It is excellent to see that there is a focus on impairment rather than simply detecting drugs in a person’s system, as there are problems with the concept of ‘impaired’, particularly in relation to drugs like cannabis which stay in people’s system for a long time. Are people impaired or have they just smoked a joint two weeks ago?
“If someone smokes cannabis on a Saturday night and tests positive on a Monday morning they will have cannabis in their system but not be impaired – similar to if someone drank a glass of wine or had a bottle of beer on a Saturday night, they would not be impaired on a Monday morning.
“Any impairment that affects people’s driving and has the potential to cause accidents is a cause for concern.
“Roadside testing must not fall into the trap that workplace testing has, and make sure that drivers who are drug tested at the roadside are actually those who are impaired. However, drug impaired driving is already happening. Many prescription medicines, particularly opiate based ones like tramadol (also sedative antidepressants, antipsychotics, antihistamine, and some antiepileptic medicines) impair people’s driving, so drug driving is occurring on many levels in New Zealand (as well as in other countries).
“It is also excellent to see public consultation on this issue as well as a focus on reducing the harm from drivers who are impaired by alcohol and other drug use.”
Prime Minister Jacinda Ardern and French President Emmanuel Macron are hosting a summit in Paris on May 15 (local time) with world leaders and tech company CEOs to discuss how they can prevent social media being used to organise and promote terrorism.
Ardern hopes the attendees will agree to a pledge called the ‘Christchurch Call’ which aims to eliminate terrorist and violent extremist content online.
The SMC asked experts to comment. Please feel free to use these comments in your reporting.
Associate Professor Alistair Knott, Dept of Computer Science, University of Otago, comments:
“It’s great to see Jacinda Ardern taking the initiative in calling for regulation of social media companies in the wake of the Christchurch attacks. Jacinda’s focus is on preventing the posting and dissemination of violent extremist content on social media sites. That’s understandable, given the trauma caused by the Christchurch video – and given its potential as propaganda and precedent for other like-minded extremists. However, removing videos of atrocities is essentially a reactive process, that happens after the event. We should also be thinking about proactive reforms to social media platforms, that prevent the growth of extremism.
“What turns people into extremists? Videos of attacks have an effect at one end of the extremist spectrum – but we should also be thinking about processes that move people towards extremism, from more neutral positions. Obviously these are complex processes, but here again, the way information is shared in social networks may play a role. In platforms like Facebook and Twitter, users are shown the kinds of items they have previously shown some interest in. There is some evidence that this pushes users into ‘bubbles’ of increasingly narrow political or religious viewpoints. When Jacinda and colleagues consider how to regulate social media companies, they might want to think not just about removing depictions of terrorist atrocities, but also of exercising some control over the algorithms that choose items for users’ feeds. Small changes could potentially have large effects in reducing the polarisation of opinions that lead to extremism.
“Social media companies have become hugely powerful distributors of information in our society. In some ways, the policies of these companies are like government policies: they affect everyone, and small tweaks can have big effects. At present, tech companies’ policies are dictated solely by commercial considerations, rather than the public good. There are good arguments that governments should get more involved in their operation.”
No conflict of interest.
Associate Professor Dave Parry, Head of Department, Computer Science, AUT, comments:
“In technical terms, simply making preference setup clearer, allowing people to have a ‘whitelist’ of approved sources and only allowing upload by verified users would go a long way to reducing the viewing of despicable videos like the one recorded in Christchurch. A set of expectations for this and takedown response times, including automated systems to detect suspicious behaviour could form the basis for a reasonable set of rules that can be enforced.
“Although not perfect, this could be enforced on a national level and issues of different levels of censorship avoided. The key element is that social media companies will have to take steps to ensure that users are verified including their age, and that at least within the company, users can be linked to real people. Because of privacy issues, this will also bring the need for the regulations to stop companies simply using this information to increase advertising revenue.
“A set of ‘best practice’ guidelines may be the most we can hope for from the current meeting, along with some sharing of techniques for suspicious activity detection. Unfortunately, automatic recognition techniques are extremely useful to intelligence agencies, and it is unlikely that much will be revealed from those sources.
“The major conflict in these cases is not between free speech and censorship, it is between convenience and harm. These interventions will make it slightly more difficult to upload your snowboarding exploits, but they will also reduce the number of people who could be greatly distressed and damaged by offensive material. If the leaders can make this point then the meeting will be a success and lead to sensible and acceptable measures.”
The Climate Change Response (Zero Carbon) Amendment Bill, designed to reduce our greenhouse gas emissions to under 1.5C over the next 30 years, has been introduced to Parliament today.
Last year, the Government sought public consultation on how they should treat different emissions sources, either net-zero carbon dioxide only, net-zero emission for all greenhouse gases, or net-zero long-lived gases (e.g. carbon dioxide, nitrous oxide) and stabilised short-lived gases like methane.
The Bill treats emission sources differently, with carbon dioxide emissions set to net-zero by 2050 and a staggered target for biological emissions like methane, aiming for a 10% reduction by 2030 and between a 24% to 47% reduction by 2050.
The SMC asked experts to comment on the announcement. Please feel free to use these comments in your reporting.
Professor Dave Frame, NZ Climate Change Research Institute, Victoria University of Wellington, comments:
“It’s good to see the targets go some way towards reflecting the underlying science of warming by differentiating between long- and short-lived gases. It’s also good to see in-built flexibility with the periodic revisions to the targets. I’m a bit surprised that the Government have opted for methane targets that go well beyond the level of cuts needed to stabilise temperatures, which may invite a future government to re-open the issue, but it’s important to note that the steeper end of the range of possible methane cuts would only be triggered if the rest of the world gets much more serious about climate mitigation. That’s an important caveat and I hope it doesn’t get lost in the inevitable noise from the pro- and anti-farming lobbies.
“Finally, as always, it’s also important not to make too much of targets: credibility flows outwards from actual policies, not aspirations for 2030 or 2050. It will be interesting to see what voters make of the targets, and it will also be interesting to see if the details of the policies in support of the targets can move beyond Kyoto-era thinking to incorporate some of the great work done in the last year by the Productivity Commission and the Parliamentary Commissioner for the Environment.”
No conflict of interest.
Associate Professor Ivan Diaz-Rainey, Climate and Energy Finance Group, University of Otago, comments:
“The Government has put forward its long-awaited Climate Change Response (Zero Carbon) Amendment Bill. As advised by the PCE, the Government has finally decided to differentiate methane and carbon emissions. This is – as per my previous comments (see SMC and The Conversation) – consistent with science (as nicely summarised by the recent PCE report) but should also increase the chances of the Bill passing through Parliament.
“The Bill sets a 10% reduction target for biological methane emissions by 2030. This is important as it suggests agriculture will also have to seek to reduce methane emissions – how these reductions will be achieved will be interesting.
“Will farmers be able to do this via offsets as suggested by the PCE? As such there is potential devil in the detail. If 100% offsets against forestry are allowed for methane it would allow a continued push towards farming intensification. This is clearly undesirable from a climate perspective. I suspect this sort of detail will be debated intensely in Parliament. Also depending on progress and scientific advances, there is a range of further reductions of between 24% to 47% by 2050. Carbon emissions are targeted to be zero by 2050.
“All-in-all, it is great that the Bill is now out there for discussion and we have a ‘split gas’ approach. But there are important details that will be debated and that will ultimately determine how much agriculture will be made to work on methane emissions reductions. The rest of the economy, for sure, will have to work hard, so a 100% offset option for methane would be unfair.
What we need now are policies. Policies that will start putting PV on rooftops despite the howls of protest from the large ‘gentailors’; policies making new homes passive homes; policies ensuring more of us drive EVs and that we don’t import petrol and diesel vehicles that the rest of the world is offloading because they are switching to EVs. The Bill provides a structure for allocating emissions budgets which is very important, but without associated policies those budgets will be embarrassing fictions in the years to come.”
No conflict of interest.
Dr Judy Lawrence, Senior Research Fellow, NZ Climate Change Research Institute, Victoria University of Wellington, comments:
“Excellent outcome on adaptation. This will provide the much needed impetus for the country to get with the adaptation remit. We have no time to lose planning to reduce risk and avoid further exposures as the impacts get worse.
“Having an institution of state dedicated to this important task will get us better prepared.”
Conflict of interest statement: I was the Co Chair of the Climate Change Technical Working Group 2016 to 2018 that recommended to the Government a national risk assessment, a national adaptation plan and an independent monitoring and reporting process through a Climate Commission like agency.
Professor Tim Payn, Chair of Sustainable Forestry, Toi Ohomai Institute of Technology and Scion comments:
“In addition to the commitment to a net zero carbon approach, it is good to see adaptation planning included in the Bill.
“New Zealand will see increasing impacts from storms and other extreme weather-related events, such as drought or fire, under climate change. These will be especially important for the primary sector. Soil erosion and land degradation are one key issue affecting productivity and our wider environment.
“Designing new mosaics of land use to minimise these risks and impacts are one adaptation approach – trees will play a major role here to both minimise degradation and store carbon.”
Conflict of interest statement: None: I undertake research on climate change issues related mainly to forestry through Scion and Toi Ohomai.
“We know the medical science says that the human brain is still developing up to the age of 25, but if you put too high of an age on it, you just encourage the black market,” Minister Little told 1 News.
It also proposes to limit the potency of products, and having a licensing regime to control all stages of the supply chain and all available products – including edibles and resins, the NZ Herald reported.
“Permitting use at specifically licensed premises recognises that some people, such as tenants and people with children at home, cannot or may not wish to use cannabis at home,” the paper says.
Managing freshwater by cap-and-trade would help address iwi claims, manage contaminants and fairly allocate the freshwater estate, according to the New Zealand Initiative.
The report says the current system allows too much water to be drawn from some catchments and too much pollution back in, so we need a better way of managing our freshwater at a catchment level.
The SMC asked experts to comment on the report. Please feel free to use these comments in your reporting.
Dr Viktoria Kahui, Natural Resource Economist, University of Otago, comments:
“A cap-and-trade system governed by a trustee arrangement is a step in the right direction for New Zealand’s water management.
“First-come, first-served is not an efficient solution for water allocation in New Zealand because it does not allow for the transfer from low value uses to high value uses. For example, a company may have secured access for the sale of bottled water but a subsequent proposal, such as an avocado farm, is denied even though it may be more beneficial to the region in terms of income and employment.
“The New Zealand’s Initiative’s suggestion of a cap-and-trade system for water addresses this type of inefficiency, and in theory, is an improvement to the status quo. An important part of the Initiative’s report centres around ownership. If no one owns water, it will be overexploited, something that is known as the tragedy of the commons. A trusteeship rights arrangement such as for the Whanganui river would provide a solution in two ways; it implements kaitiakitanga and it recognises the complex interactions in an ecosystem.
“There are caveats. If water is priced, it becomes valuable. People can ‘capture’ water elsewhere as it rains (on their farms and properties), thereby reducing the flowback of water into the catchment. In Australia, the initial over-allocation of water rights due to previously unused rights led to a costly buyback program. In Chile, trading was slow because owners retained their surplus rights.
“The trustees of a self-owning river as decision makers need to be aware of these issues and guide the process carefully to get good outcomes, both environmentally and economically.”
No conflict of interest.
Dr Julia Talbot-Jones, Victoria University of Wellington School of Government, Motu affiliate, comments:
“The New Zealand Initiative’s latest report on freshwater management is a welcome addition to the freshwater debate. The report lays out a framework for addressing water scarcity in New Zealand using market mechanisms and expands on a management model that was first outlined in the Global Water Forum in 2017. Similar to the original model, the new NZIER report proposes that a cap on water take be determined jointly by community, iwi, and hapū and then the trade and exchange of consents be permitted between water users in order to achieve greater efficiency in use.
“Elsewhere in the world, water trading has helped meet the demands of changing economies and growing populations. It has played a vital role in encouraging conservation and stewardship and helped address cultural, social, and environmental priorities. However, water markets are not a panacea. Getting the cap right is difficult – you set it too high and users have no incentive to change their behaviour; you set it too low and the costs imposed on users could be too great. You also need to make sure property rights are well defined and defended, transaction costs are low, water rights are decoupled from land rights, there are enough active traders responding to price signals, and there is regular monitoring and enforcement.
“Because of this, shifting from the status quo in New Zealand is likely to be costly. Significant changes in legislation at the national and local level will be needed, as well as meaningful investment in determining initial allocations, capacity building, and Crown-iwi negotiations. Yet, should assessments indicate that net benefits from trade could be gained, establishing a water entitlement and allocation system that makes rapid, low-cost water trading possible is certainly one policy tool that could build flexibility and resilience into New Zealand’s water management system going forward.”
No conflict of interest.
Professor Troy Baisden, Freshwater scientist, University of Waikato, comments:
“The New Zealand Initiative’s Eric Crampton has released the first paper in a two-part series proposing to solve New Zealand’s water woes with market economics in the form of cap-and-trade systems. What’s proposed in this paper – using markets to manage water quantity – is worth considering. The end-point of the series, a focus on cap-and-trade for nutrient pollution will be more problematic.
“Crampton leans heavily on the first use of cap-and-trade systems to solve acid rain. This worked because the big power plants could predict and manage their emissions well. What came next hasn’t been so promising.
“In the last 20 years, the same cap-and-trade systems have been tried in many forms to manage greenhouse gas emissions causing climate change. Has this worked? Many would say no, and I suspect this includes both Greta Thunberg and foresters heavily exposed to price fluctuations in New Zealand’s emissions trading scheme (ETS). Crampton’s proposal suggests we haven’t learned from what hasn’t worked.
“The problem is that the complex process of designing market-based trading schemes is a source of first delay, and then uncertainty mixed with confusion. Delay happens because ‘allocation’ of permits within the cap to use or pollute a resource is difficult. Determining allocation means determining who gets what – and is a profound argument of fairness and equity reaching into the past and the future.
“Even more than setting the cap, determining allocation requires science that we typically don’t have. It is a stretch to say we can account for all the freshwater flows across New Zealand. At catchment scale we’re not too bad off, but can we always do this fairly for each farm?
“Problems with our modelling frameworks make accounting for nutrient pollution even harder. For every three or four units of nitrogen that leaches from the root zone in the Overseer model, only one typically shows up downstream in water. We lack frameworks for determining where this nitrogen went, and whether anyone should get credit for its removal prior to causing impacts on our freshwater.
“These are the factors that cause confusion in cap-and-trade schemes. If too much uncertainty or complexity undermine the ability of managers to make good decisions at the scale of their operations, then little is resolved. At the scale of farms, rather than giant power plants, this is almost sure to go badly.
“The only hope for cap-and-trade schemes, and a hope not covered in this paper, would be that the design of the market results in greatly improved information on our water resources, down to the scale of management decisions.”