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Fitzsimons: Surely the time is now?

28 November 2005
Surely the time is now?
Jeanette Fitzsimons, Green Party Co-Leader

Opening address of 'Solar 2005' - the Australian and New Zealand Solar Energy Society conference at the University of Otago, Dunedin, delivered 8.45am, 28 November 2005.

Thank you for the invitation to open your conference, and welcome to those of you who have travelled from overseas to be with us. I hope you enjoy your time in New Zealand.

In the thirty years that I've been working to advance sustainable energy, it would seem there has never been a more propitious time to get the solar future seriously underway.

Oil prices have doubled in 18 months. Our oil dependence is showing up in the current account deficit and in the inflation rate. During the last few months I've been meeting with groups of 100 or so people around the country and showing The End of Suburbia. Citizens, unlike governments, are taking it seriously and are deep in discussion about what we should do.

New Zealand has passed peak gas. Our gas reserves peaked in 2001 and Maui is in rapid decline. New finds are likely but uncertain and will almost certainly be much smaller and much more expensive.

Energy demand is growing at an alarming rate, fuelled by rapid and, in my view, unsustainable economic growth, but outstripping even that. The growth is especially fast in transport fuel, the hardest of all to supply in a post-oil economy.

Electricity prices are rising in real terms and wind farms are becoming a highly visible flagship for renewable energy.

Awareness of climate change is growing and there is less debate about its reality, as New Zealand suffers severe weather events consistent with a climate-changing future.

The economic costs of not responding to climate change have been quantified as our projected surplus of carbon credits has turned into a projected deficit because of high growth in energy emissions, low forest plantings and conversion of forested land to dairying.

There is strong local opposition to proposals like the Happy Valley coal mine, which would destroy pristine biodiversity, the Marsden Point coal-fired power station, whose greenhouse gases cannot even legally be considered in the planning process now, and the 400 kV power lines in the Waikato which would perpetuate the centralised electricity generation model.

It would seem we have everything going for us.

But, despite all these indicators, the combination of fight back and head-in-the-sand is still preventing progress. Renewables are growing fast in absolute terms, but reducing as a percentage of total energy use. Energy efficiency has hardly progressed beyond the 'business as usual' scenario. We are going backwards in the phase out of fossil fuels.

While Treasury no longer holds to its forecast in the 2004 Budget that oil prices would return to $19/bbl by the end of last year and stay there indefinitely, they still see much of the recent rise as temporary and caused by short term perturbations like Katrina and the Iraq invasion. I cannot find any government decision-making that has been seriously changed as a result of awareness of Peak Oil.

One new gas-fired power station is being built, and another planned, for which there is no assured gas supply. The Government has underwritten the first, passing the risk to taxpayers rather than electricity consumers.

Proposals for LNG import would, if they proceed, choke off renewables and efficiency investments for many years as promotion of wasteful uses of gas becomes necessary to justify the large initial investment. We've had 30 years of energy policy being driven by a glut of gas and contracts that obliged us to use it or lose it. We don't need another Maui gas contract all over again.

Coal mining and use is on the increase and there is a strong push from industry to ignore climate change issues and burn more coal. Proposals have been floated to make transport fuels from coal with no apparent consideration of carbon emissions.

New transport legislation and institutional arrangements, developed by the previous government and the Green Party, have brought public transport, cycle ways, rail and traffic demand management into the planning frame, and I'm hugely optimistic about where this will eventually lead, but the bulk of money still goes on big new roads. There is strong lobby group for still more roading which is blind to the likely effects of oil prices and depletion.

Perhaps most worrying of all is the fight back that is underway on climate change policy.

Amory Lovins used to say that it is always either too soon, or too late, to invest in energy efficiency. He meant that as long as there is surplus supply capacity it was too soon, and as soon as there wasn't, it was too late to avoid building new supply. Some commentators have taken the same approach to climate policy. For years they head-butted the science, saying there is not enough proof to change the way we do things, or it was so far in the future we didn't need to do anything yet.

Now I've heard the first comments starting - that climate change is so far advanced that it is too late to stop it and we should instead adapt to the new situation rather than try to curb emissions. The ignorance that betrays is dangerous. It suggests there is some new stable state into which climate change will propel us and we can just adjust to it. The reality is that there is no new stable state as long as greenhouse gas emissions keep rising. Stabilising then reducing emissions is just the first step to stabilising climate in some new state, provided we don't trigger runaway feedback effects, some of which seem to have already started.

Other arguments advanced are even more self-serving. New Zealand is too small to matter - never mind that our greenhouse emissions per capita are high by world standards and far above those of China, which comes in for so much criticism. In absolute terms they are small so some argue that we should derive a competitive advantage from free riding on the rest of the Kyoto countries.

There has been much approval among media commentators of the so-called 'alternative' approach to Kyoto put forward by the United States, Australia, Japan, China, India and South Korea, who propose to use technology to solve the problem. Most of our media are too uninformed to know, or too lazy to find out, that Kyoto was always - and remains - about using better technology to reduce emissions. There is nothing proposed in this 'alternative' that could not be done under the Kyoto agreement as it stands. What they are really saying is that they refuse to accept a mandatory target. All care, no responsibility. If the technology doesn't work out, it's no skin off our nose.

The current review of New Zealand climate change policy is both an opportunity and a threat. Some of the settings obviously do need to be changed. New forest plantings have virtually dried up and conversion of forest to dairying has accelerated. While I believe this is the result of market prices rather than government management of the carbon sink credits, it is clear that we need a market incentive to plant and retain more forest if we are to counter the current low prices for forest products compared with dairy products.

Biomass fuels are our biggest strategic advantage in reducing net emissions and we need to move now towards a wood-based energy system. I remain unconvinced that simply handing the credits to the owners of the existing forests will achieve this, but we do need to use the return to New Zealand from any Kyoto forests we still have, to incentivise retaining them and planting more. The best mechanism to achieve Peter Read's vision of balancing land uses should be under active discussion.

The review appears to have begun under the previous government as an effort to find the best policies to turn the projected Kyoto deficit into a surplus - or at least to neutralise it. There are worrying signs that it is now driven by post-election commitments to Winston Peters and Peter Dunne, both determined to abolish the proposed carbon tax, and Dunne even seeking our withdrawal from Kyoto itself.

A carbon tax has been proposed by successive ministers since the early nineties when Simon Upton failed to get support from his Cabinet. It was signalled as policy under the previous government, when there was a clear parliamentary majority in favour, but delayed till now, when there may not be, although that is not yet established.

The current mix of regulation and the market in the energy sector is not working well and also needs review. But if we are to retain any market elements, and I strongly believe we should, then any economist will tell you it is essential to get the pricing right. Users of fossil fuels currently pay nothing for the environmental damage caused by their emissions, so compete unfairly with investments in renewables and efficiency, which have no emissions. The carbon tax is designed to level this playing field.

It is valid to examine at this stage whether the carbon tax is the best way to give this economic signal. Many things have changed since the Green Party advocated it in 1992 and costed it in terms of both revenue and prices. Rising oil prices are now giving a strong signal to motorists to economise on the use of transport fuel and an extra two to four cents-a-litre would be hardly felt against the noise of fluctuating crude prices. Major energy-intensive industry has been offered negotiated greenhouse agreements that achieve world best practice in that industry and exempt it from tax. However that process will stall without a carbon tax and there will be no further incentive to upgrade plant.

The three areas where a carbon tax is capable of influencing investment decisions, which are much more important than day-to-day decisions, are electricity generation, process heat and freight transport. Here a pricing mechanism is essential to ensure that all the costs of choosing coal are internalised, so that wind, wood, efficiency investments and co-generation can compete fairly. There are signs that planning for increased use of coal has proceeded because industry has been convinced they would be able to knock out the carbon tax with heavy lobbying. That appears to be working. Diesel is a much larger component of the price of trucking than it is of rail. While rebuilding our rail system is the primary tool to ensure freight goes by the most efficient mode, true cost pricing would also help.

Opponents of true cost pricing label the carbon tax as punitive, and a drag on the economy. They ignore the fact that the money does not go into a black hole, but is recycled into the economy. I believe we need to make it far more explicit that taxing carbon enables us to reduce other taxes. Ecological tax reform will create the incentives to reduce our use of environmentally damaging goods and services and have more to spend on benign ones. Public opinion will be with us if we link eco-taxes to tax reductions for everyone.

Thanks to Kyoto, the costs of carbon emissions can now be seen to be in real dollars - a projected deficit of half-a-billion real dollars - rather than 'just' environmental costs, which are so easily ignored. But it is still valid to discuss whether a carbon tax is the best instrument to internalise the costs of carbon. I wish this was the review we were having. There are some who argue an emissions trading system - either just among energy users or also including methane emitters, or also including carbon sinks, would be more economically efficient. That would mimic internally the instrument used internationally under Kyoto, and as with Kyoto there would be major concerns about how the initial units for trading would be allocated. But it is a debate we should have. Instead I hear no acknowledgement that if the carbon tax goes, we must replace it with another economic instrument.

I have dwelt on pricing at some length because I know many of you who are trying to operate in this current unfair market know how important it is. But there are other obstacles we must overcome as well. The main one, in my view, is the public perception of energy efficiency and renewable energy.

Energy efficiency is seen as boring. I've seen so many boring presentations - earnest, fact-filled, admonishing, but nothing to fire the imagination. No-one gets excited about wrapping their water cylinder. They may do it, but it's not what they get out of bed for. Energy conservation has an even worse press. It is seen as 'going without', a miserable existence of cold baths and candles. That has not been helped by government announcements in the last term that new security of supply arrangements - for which read costly, rarely used fossil-fired plant - aimed to ensure there would never again have to be a public conservation campaign. Never again should we have to tell you to turn your computer screen off at night! This is despite the duty the Act imposes on the minister to promote energy conservation, as well as energy efficiency and renewables.

Renewable energy has a better image, but is still seen as fringe and expensive. Wind has captured the public imagination and over 80 percent of New Zealanders want to see wind as the next power station fuel. But energy analysts spend all their time telling us it won't be enough, it needs storage, it's ugly, it's noisy, it kills birds, none of which needs to be true. Firewood is invisible, because so much of it is not traded, or traded locally and unreported. Yet the recent HEEP figures show that more than half our households have a solid fuel burner and these are mainly wood.

Public reaction to my own house has been instructive. The 1kW wind turbine is what excites people, though it makes the smallest contribution to our energy use. PV panels also look interesting and fit the model of the consumer society where if you want energy efficiency there has to be a gizmo you buy. The wood stove is less admired though it provides at least five times the energy the turbine does - cooking, top-up space heating and top-up water heating. The passive solar house design inspires no great interest, even though it is the major contributor to comfort and cost saving, with almost instantaneous payback. Insulation is out of sight, out of mind. Living very comfortably within 2kWh/day by understanding where to cut waste is seen as rather bizarre.

Motor vehicle sales are also instructive. The industry reports an increase in the demand for smaller more efficient cars when petrol and diesel prices peaked, but this has dropped away as prices have eased a little. Proposals first from the Green Party then from the Business Council for Sustainable Development for a feebate system to encourage import of more efficient vehicles was greeted with anger by those who claim they get a better ride in a V8 and fervently believe their right to this should be subsidised by the climate. There is a lot of interest in hybrids, clever but complex and expensive technology, but not a lot in the impressive fuel efficiency that can now be achieved, along with safety and space, in an ordinary five-seater small car like the Jazz.

We have to turn these attitudes around.

We need to make energy efficiency a selling point for all buildings. Home energy labelling will help. We can use the new perception of Peak Oil to drive home the message that cars we import today will have to be run for years in the future on increasingly expensive fuel.

Can I remark at this point on the dearth of papers about transport at this conference? It is the hardest, the most neglected, but by far the most important challenge in the transition to a sustainable energy future. Electricity is the easy bit.

I'd like to finish by telling you a little about my plans for the next three years.

Under the post-election agreement between the Greens and Labour the new Minister of Energy has effectively delegated me the job of working directly with officials in EECA and elsewhere to enhance the operation of the Energy Efficiency and Conservation Act. The Greens are not part of Cabinet or the Executive, as dictated by the Government's support parties, so Cabinet decisions will be through the Minister of Energy, but on a day-to-day basis I will be doing the work.

The Government recognises that energy will be a crunch issue in this term and plans to give it special attention. I have always believed that energy efficiency, energy conservation and renewables are a major component of the work needed to turn around our climate changing emissions and prepare for Peak Oil. The two keys to that are getting the pricing right and building public confidence in, and excitement about, a sustainable energy future.

A new, flagship project will be to build capacity in the solar water heating industry in order to get half-a-million square metres of collector installed on roofs over the next five years. The purpose is not just the energy savings to be gained from those installations. My mailbox over the last few years has made it very clear that there is strong support from the public for solar water heating; they cannot understand why it is not compulsory for new homes, and routine on prisons, hospitals and other large buildings. They want to buy one for themselves, but find the price just a bit too high at present.

If we want to create some excitement around sustainable energy, with a technology that is proven and cost effective, I believe solar water heating can do it. It accepts that people want something visible and purchased to show they are making an effort to be sustainable. So it panders in one sense to consumerism. But at the same time, it demonstrates that you don't have to generate additional electricity to be ahead - technologies that save it or substitute for it are just as good. So it may prepare the ground for grid-connected PV when that becomes economic.

My current view is that to build capacity we need to build the confidence of firms to invest in expansion and I doubt that incremental support will do that. I have asked officials to come back to me with an analysis of a different approach - a bulk government tender to supply and install this greatly increased quantity over five years, with a place for all market players who can use this opportunity to plan, expand, meet quality requirements, ensure there are adequate trained installers, and bring their price down with economies of scale.

As the units are on-sold to the public with the resulting price saving, it presents an opportunity for education in the host of energy efficiency improvements they could also make to their homes and their behaviour.

Along with this I want to see efficiency standards for vehicles and for more appliances; more urgency in the finalisation of the household building standard; and a step-up in retrofitting home insulation and damp proofing.

This focus on the household is deliberate. If we want to change a culture we can do it best where people live. The family is still the foundation of culture. I cannot believe that people who accept this new view of sustainable energy in their homes will fail to carry it over into their businesses. Even in business, while the bottom line apparently drives everything, in fact it does not. There are so many business opportunities to reduce energy bills through efficiency investments that are ignored. Even business has a prevailing culture and it is that culture that regards energy efficiency and renewables as boring, marginal or unreliable that needs to change. Along with our efforts to demonstrate it is cost-effective and profitable, we must also demonstrate that it is modern, fashionable, and fun.

Best wishes for the conference. I'm looking forward to hearing the other speakers and hope to catch up with many of you during the two days I am here.

ENDS

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