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Climate change direction the right one

11 December 2006

Media Release

Business leaders: Energy and climate change direction the right one

Business will welcome the fact the Government has extended its energy policy horizon to several decades.

That will provide more certainty about its future policies to manage climate change, the New Zealand Business Council for Sustainable Development says in reaction to the release of the Government's draft energy strategy and climate change management discussion documents this morning.

Business will also welcome discussion on how the Government might use its RMA and research policies to help the country adapt to a lower emissions future, according to the Business Council's Chief Executive Peter Neilson.

"In taking the long view, they've done what we asked when we published our Sustainable Energy Future for New Zealand 2050 research last year." Mr Neilson says it seems clear the country will head for a cap and trade system in a bid to lower greenhouse has emissions.

"Today's documents and business believe a system to set a cap on emissions, and then starting a trade in emission credits are the better options.

"We believe Government research indicates that and it's just a matter now of when they'll move to it," the Chief Executive of the New Zealand Business Council for Sustainable Development, Peter Neilson, says.

The Business Council, whose 51 member companies' annual sales of more than $40 billion equate to 30% of the country's productive output, says the draft energy strategy and climate change discussion show the Government is now looking at what the country needs to do over a much longer horizon. It is also trying to engage business in discussion on how the country will meet its energy needs, to finance growth and a lift in living standards, while managing climate change and protecting the country's quality of life.

Mr Neilson says the "devil will be in the detail".

The country needed to design an emissions trading regime which covered all sectors, not just electricity generation.

The country would be emitting 398 million tonnes of CO2-equivalent greenhouse gases during the first Kyoto commitment period (2008-2012). Latest official estimates were that, after emissions reduction measures, the country would fall short of its CO2 emissions target by up to 41.2 million tonnes (Mt). At the current carbon price of $14.77 per tonne, the country would face a $609 million bill.

"The country will welcome some down to earth policies to start tackling emissions in a way which doesn't damage our international competitiveness. People will also welcome some commonsense policies hinted at in the strategy – like speeding the RMA process for lower-emission energy production; and encouraging more solar use to heat water; localised power production; tax credits for research and development and setting up an accelerator fund to help get new ideas to market. The idea of encouraging electric car use is a welcome follow-on to other countries' efforts in this area.

"However, the test will be how bold the Government is in deciding the scale of these activities. For example, 400,000 homes are unhealthy and need insulating. In the UK the Government has announced it will insulate another 250,000 homes this year, both as a health and climate change measure. Here we need to be bold enough to fix the sick housing stock, and lower energy use and emissions, on a far bigger scale.

"The Government here is looking at measures to lower vehicle fleet emissions, but it needs to concentrate not only on the age of imports and engine size, as its apparently most-favoured options, but also do something very popular to deal with the huge bulk of the car fleet which is three generations behind the latest low-emissions technology.

"That's why we advocate cash grants of up to $3000 for people buying new and imported vehicles which meet fuel efficient and low emissions criteria. In this way we'll get more than 450,000 lower-emission vehicles into the fleet within five years. The Government needs to look closely at similar incentives introduced in the United States and Europe. These incentives could also apply to plug-in electric cars as the technology develops."

Mr Neilson says the other real test of the policy longer term will be how comprehensive it is in covering all sectors.

Energy was forecast to emit 91.3 Mt of CO2 during the first Kyoto commitment period, transport 78.8 Mt and industrial processes 22.9 Mt. Agriculture would emit 198.8 Mt.

"It's obvious that how we engage agriculture and fund research and practices which cut emissions in that sector is going to be critical," Mr Neilson says. "The agriculture and forestry policy discussion documents are yet to come, but the devil will be in the detail. The broad direction outlined is the right one."


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