Clark: World Environment Day Business Symposium
Embargoed until 9.15 am
Wednesday 4 June 2008
Opening Address to
World Environment Day Business Symposium “Towards a low-carbon economy: business opportunities and innovative solutions”
Main Hall, Royal New Zealand Yacht
10 Curran Street, Westhaven, Auckland
Wednesday 4 June 2008
The theme of today’s symposium is business opportunities and innovative solutions to help move New Zealand towards a low carbon economy.
It is pleasing to see people here today from a wide range of business sectors. Your presence – and I understand the event is sold out – signals that many in the business community want to focus on how to do business and be profitable in an economy – domestic and global – where the price of oil is high and there is a pressing need to reduce greenhouse gas emissions.
I see climate change as one of the biggest environmental and political challenges of our time. It is a truly global issue which impacts on all countries, all economies, and all people.
The sheer scale of the challenge and the way in which it affects all of us, from householders through to multi-nationals, means we need comprehensive responses, which are inclusive of all sectors in the community. Government, business, and community share a common interest in finding solutions and reducing the risks to our country which are inherent in not acting. In short, we are all in this together.
It is the role of government to provide leadership at a strategic level as our government has done from the outset. During this term of government in particular, we have been rolling out a comprehensive package of strategies, policies, and initiatives to put New Zealand on the path to greater sustainability. The package includes :
• the Emissions
Trading Scheme legislation currently before
• the New Zealand Energy Strategy
• the New Zealand Energy Efficiency and Conservation Strategy
• revision of the Building Code and transport and tourism strategies to emphasise sustainability
• investment in insulation and energy efficiency retrofits for households, and
• a raft of initiatives within government on energy efficiency, procurement, eco-verification, and support for programmes aimed at enabling households and businesses to become more sustainable.
This is an ambitious programme, reflecting our belief that pursuing greater sustainability is not only the right thing to do, but is also an investment in New Zealand’s overall future.
I believe that in the future sustainability and prosperity will go hand in hand.
We face significant risks to our export industries if we do not act to become more sustainable.
New Zealand has a clean and green reputation, which is priceless in a world where affluent consumers will increasingly demand that products and services are sustainably produced. But we have to ensure that there is substance behind our country’s brand.
As I see it, the risks of inaction on sustainability are great, while the opportunities from taking leadership are substantial.
An important step towards developing a low-carbon economy is putting a price on greenhouse gas emissions. That can drive behaviour change and business innovation which lowers emissions.
And that is the simple principle behind the Emissions Trading Scheme announced last September which is now before a select committee. The Bill is called the Climate Change Emissions Trading and Renewable Preference Bill.
The scheme has been designed to reflect New Zealand’s unique emissions profile – in particular the fact that agriculture accounts for around fifty per cent of our nation’s emissions. All greenhouse gases and all sectors are covered by the scheme.
Submissions received on the Bill represent diverse opinions, as you would expect. But there has been a strong core of support in principle for the use of emissions trading as the mechanism by which New Zealand puts a price on greenhouse gas emissions.
The debate on the scheme boils down to the question of how best to apportion the scheme’s costs between New Zealanders. An all sectors, all gases approach is a good start to that, as everyone should play their part. Some sectors, however, will take longer to prepare for the introduction of the scheme, or have more limited short term options to reduce emissions. Others may not be able to pass on costs in the short term due to exposure to international competition from countries which do not at this time put a price on emissions.
One change to the Bill which the government is advocating to the select committee is to delay the beginning of the phase out of free allocations of emissions units by five years from 2013 to 2018.
That would give trade-exposed businesses at competitive risk more time to adapt to a price on greenhouse gas emissions. It also recognises concerns expressed by industry about the pace of phase out of allocations.
The government is also proposing to review the phase out period for free allocation of emissions either before the end of each commitment period, or five yearly if no commitment period exists. This means that in setting the phase out period, we can take into account factors such as the emission reduction options available to emitters, any new climate change obligations, and the policies of competitors and trading partners.
A further change proposed by government is to delay the entry of transport fuels into the Emissions Trading Scheme from January 2009 to January 2011. That is because right now the very steep spike in oil prices is doing much of the Emissions Trading Scheme’s job for it. Fuel consumption is moderating, as consumers switch to more fuel efficient modes, or to outright alternatives like public transport.
While adjustments like this can be made to the scheme, we can’t avoid the costs of meeting New Zealand’s international climate change commitments. Those commitments under the Kyoto Protocol were negotiated by the National Government in the 1990s. It has fallen to our government to lead the way in working out how New Zealand can meet them in practice. The Emissions Trading Scheme does not create the costs New Zealand faces from these commitments, but it can reduce them.
The effect of delaying implementation of the scheme would be to increase the proportion of the cost of emissions borne by the taxpayer. But I don’t think it is fair or sensible to expect the taxpayer to pick up the tab for New Zealand’s emissions indefinitely. That doesn’t create incentives to reduce emissions, or prepare New Zealand to compete in an increasingly carbon constrained global economy in future. Delay also deprives business of the certainty it needs to plan ahead.
That’s why our government doesn’t favour the calls from some to slow down implementation of the scheme, or to become a mere ‘fast follower’ on emissions trading. We believe there are far more gains from being a leader than being a follower. The emissions trading scheme has been well designed, and it is in line with similar schemes either already in place or under development around the world. The calls for delay are destructive of New Zealand’s ability to front foot the climate change challenge and meet our international commitments.
Nor does it make any sense to wait for Australia to catch up with us as they develop their emissions trading scheme. New Zealand officials are staying in close contact with Australian counterparts as both our countries develop their schemes. The two are very likely to be compatible, but obviously our first priority has to be to design a scheme which suits our needs, and not Australia's.
The five yearly reviews of our scheme provided for in the Bill before Parliament will ensure that it remains in line with efforts made in other countries to combat climate change, and that the allocation of responsibilities to sectors of the economy remains fair.
The way the New Zealand Emissions Trading Scheme works means that most businesses will not themselves be directly engaged in it, but we will all – businesses and householders – be indirectly incentivised, as the cost of greenhouse gas emissions is reflected in prices through the Scheme.
With those incentives come opportunities for business in developing new products, new services, and new production and distribution methods. The business landscape is already changing as astute investors see that being sustainable is an opportunity to profit by doing the right thing.
Some examples :
• In the energy sector,
signficant new investment is being planned and taking place
in renewable energy generation across windfarms, geothermal
energy, and in entirely new sectors such as tidal
generation. As well, just a few weeks ago I opened a new
manufacturing facility in Christchurch for New Zealand’s
only wind turbine manufacturer, Windflow Technology. It’s
good to see that capability developing in our
• In the transport sector Air New Zealand has announced a trial of biofuels in its fleet, and has committed to investing $2.6 billion in modernising its aircraft. These plans will position Air New Zealand with one of the youngest, most technically-advanced, fuel-efficient, and environmentally-friendly fleets in the world.
• In the retail electricity sector, Pulse Utilities, measures usage and demand for each customer every 30 minutes to encourage use of cheaper off-peak electricity.
Efforts like these are at the leading edge of New Zealand’s adaptation to a low-carbon economy. They are demonstrating that a lower carbon future is possible, and that high value, high technology solutions have multiple benefits. This response is well aligned with our government’s long-term vision of transforming the New Zealand economy into a producer of sustainable, innovative, high value products and services.
That more sustainable economy will be based on improved productivity, smarter use of resources and technology, the application of higher skills and research, and be underpinned by modern infrastructure – which these days must include broadband.
The government investments which help drive economic transformation – in skills and education, infrastructure, research and science – also provide vital support to businesses which want to innovate and develop products in response to the demand for more environmentally-friendly goods. These investments help future proof our economy.
Long term, firms need to factor into their business planning the likelihood that pressure on countries to reduce their greenhouse gases will intensify, not diminish.
At a minimum, this requires firms in New Zealand to be more sustainable, and to be able to demonstrate the environmental integrity of their goods and services in increasingly demanding and discriminating world markets.
It’s important for us all that we front foot these challenges. If we are slow on the uptake, market opportunities will be taken by other more nimble producers. So New Zealand business needs to invest now in these products and markets, and take advantage of the opportunities which present themselves.
Those opportunities may come from unexpected quarters. For example, during my recent visit to Japan, a group of New Zealand officials and businessmen sparked interest amongst car industry executives with the observation that Wellington would soon be 100% carbon neutral in electricity supply, thanks to a major new wind farm being developed nearby.
Suddenly a small and remote market for cars was seen by car industry executives as a more interesting proposition for the trial introduction of new low carbon emission vehicles. Even if nothing comes of this particular matter, it shows that we do have strengths which we may not be fully aware of until seen through the eyes of others.
While we will often be importers of the technologies we need to reduce our emissions, we can gain from being lead adopters in partnership with suppliers. If we just sit back and wait for things to drop in our laps, we risk falling behind in an increasingly competitive world. By being prepared for, recognising, and acting on opportunities, we can be much better placed in a carbon constrained world.
There are already a number of sectors which are meeting these challenges head on. Take tourism – the vision of the updated New Zealand Tourism Strategy is for the sector to be valued as the leading contributor to a sustainable New Zealand economy. To achieve that, the strategy envisages tourism being the first and most visible sector to meet, or exceed, new environmental standards and take up new environmental initiatives.
Extending this kind of response, and that of our wine growers which is also impressive, across more sectors is critical to moving our whole economy onto a more sustainable and profitable future. Through our government’s Business Partnerships for Sustainability Initiative we are working on how to support improved business capability to achieve that. The three key areas identified for support are :
• helping sustainable
businesses access new markets here and overseas
• developing sustainability strategies and action plans for business sectors, and
• working with business organisations, such as the Chambers of Commerce, and through the Sustainable Business Network, to roll out business sustainability programmes.
At the broader strategic level on sustainability and climate change response, it’s important to have ongoing quality dialogue between government and business. The Growth and Innovation Advisory Board, chaired by Stephen Tindall, is playing an important role in that – and so is the Climate Change Leadership Forum which has been providing advice to government on the Emissions Trading Scheme.
A further critical part of New Zealand’s ability to respond to climate change is access to quality scientific research which helps us understand what's going on in our atmosphere and climate, and on our land and in our waters. It can also provide business, communities, and government with the solutions we need to future-proof ourselves against the effects of climate change, and reveal new opportunities for us to act on.
New public investment is going into climate change–related science. This year’s Budget allocates $64.5 million new funding for research into sustainable primary production and renewable energy, and the major Fast Forward fund for innovation in the pastoral and food sectors will also have a sustainability focus.
Last year’s Budget introduced the fifteen per cent tax credit for private sector investment in R & D. Inland Revenue estimates that up to $260 million will be foregone in tax revenue as a result – but that’s $260 million more spent on innovation. The cut in the business tax rate from 33 cents to 30 cents in the dollar is also helpful to business investment in innovation.
For our pastoral sector, climate change presents undoubted challenges – both to production from more erratic climate, and to our ability to export to distant markets concerned about emissions.
Yet the global demand for protein can only increase as the world’s populations grow, and as middle classes grow in size in the developing countries. New Zealand can take a global leadership role in developing low-emission ways to produce protein. The investment here in research to reduce nitrous oxide and methane emissions is critical to that.
The climate change challenge requires strategic thinking, long-term vision, and leadership at all levels – government, business, science, education, research and community. Through partnerships across these areas we can make our country more sustainable and transform our economy to one of higher value at the same time.
Our country is well placed to meet these challenges and to take advantage of the opportunities. There is strong community support for becoming more sustainable, and our research and science base and adaptive business practices can help us develop innovative ways to reduce carbon emissions and lower our impact on the environment.
In government we have made our intentions clear – through major policy initiatives and by making the investments needed to boost innovation, research, skills development and new infrastructure – all the things needed to build a more sustainable economy.
We see the business community as essential partners in the shift to a low-carbon, sustainable economy. I hope today’s symposium will be helpful in showing the way for more of our businesses to become part of the shift which has to happen.