Hi-Cane ban to enhance or reduce national wellbeing?

TDB’s latest National Wellbeing Analysis assesses the wellbeing impacts of the EPA’s proposed ban on the use of Hydrogen Cyanamide (Hi-Cane). Our findings were presented recently to the EPA Decision Making Panel on behalf of New Zealand Kiwifruit Growers (NZKGI).

We assess whether the potential health and environmental gains from a ban of the chemical are sufficient to offset expected the economic, environmental and other costs. If so, national wellbeing will be enhanced, even at a lower level of GDP. If not, society will have to accept lower levels of other wellbeing-enhancing activities or investments

Our analysis found:

the expected costs of the ban amount to $1,561m in 30-year present value terms;
the quantified benefits amount to around $8m;
representing a benefit-cost ratio of just 0.005, considerably below the break-even level of 1.0 normally considered as the minimum level to justify public policy changes

Report link:

National Wellbeing Impacts of EPA Policy on Hicane – Feb 23

Wellbeing Analysis of Livestock Export Ban – Aug 22

Wellbeing Analysis of Gambling in NZ – Apr 21

Assessment of Proposed Fonterra Capital Restructure – Dec 21

Dairy Sector Review for Prod Com – Oct 20

Smoked Tobacco Amendment Act Review – Jul 23

The benefits that can be quantified in monetary terms include the reduced risks to birds and terrestrial animals (with a present value/PV of $5.3m); reduced acute health risks to spray operators ($0.6m PV); and the reduced risk of male infertility for spray operators ($2.5m PV).

Costs expected from the ban include: a reduction in kiwifruit harvest yields leading to a $100m per year reduction in GDP ($1,537m PV); an increase in greenhouse gas emissions from kiwifruit orchard conversions to dairy ($15.7m PV); wellbeing costs from involuntary unemployment (one-off cost of $3.6m); and mental health stress of declining kiwifruit activity (one-off cost of $4.8m).

Some benefits of the ban – e.g., the potential effects of the ban on the aqueous and soil environments – were not able to be quantified. On the other hand, our quantification of the net costs of the ban was conservative in many respects including by using a potentially low price for carbon and conservative assumptions relating to the efficacy of the chemical.

Since our original analysis, the EPA has updated its assessment of some aspects of the effects of the ban. In particular the EPA has withdrawn its initial claim that Hi-Cane might have carcinogenic effects and has increased its estimate of the economic effects of the ban from $100m to $143m p.a. reduction in GDP. These changes reinforce our assessment that the ban is not likely to be in the national interests.

The scale of any regulatory change should be proportionate to the scale of the verified risk. A policy that has the potential of reducing GDP by $100m per year needs to yield comparable improvements in other forms of wellbeing for it to be in the best interests of the nation.