Sunday26th July 2009: Q+A’s Guyon Espiner interviews Climate Change & Environment Minister, Nick Smith.

Points of interest:
- Climate Change Minister rules out 40 percent emissions reduction target
- New government advice: 40% cut would cost $15 billion at 2020, or $60 per household per week… but Minister admits an even bigger “trade risk” if emissions aren’t cut
- Developed countries such as New Zealand must cut first and faster than developing countries
- Minister admits failure to keep election promise on Emission Trading Scheme; wants ETS in place by December
- Smith confirms agriculture “is going to be part” of any ETS

The interview has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can be seen on tvnz.co.nz at,
http://tvnz.co.nz/q-and-a-news

GUYON Thank you Dr Smith for joining us on the programme this morning we really appreciate that. I'd like to start with how seriously you take this issue. The former Deputy Prime Minister Michael Cullen described it as akin to averting nuclear war. Do you see this issue of climate change on that sort of scale?

NICK SMITH – Climate Change Minister
It certainly is the biggest environmental challenge of our generation, you know we're talking about fundamental change in the way in which the whole global atmospheric system works. The difficulty is it's quite a slow burner, you know it's not one of these issues that jumps out at the public every day, but the reliable science indicates that over the 150 year period what's going on is going to have a fundamental impact on human life on planet earth, and so yes it's a huge issue.

GUYON What about here in New Zealand. What sort of climate effects are we going to see here and by when if we don’t get this under control?

NICK Well if we take the sort of estimates that have been made by NIWA scientists, you know we're looking sea level rises over the course of the century of about .6 of a metre, we're looking at temperature rises of about two degrees. We're looking at the areas in the east coast becoming dryer, more droughts, we're looking at the areas of the west coast having higher levels of rainfall, and perhaps the most worrying part of the science is in terms of the increased frequency of major cyclone storm events, and certainly in the impacts on people's lives, that’s the area where I think some of the biggest costs and impacts would be.

GUYON Okay the world is going to try to find a new agreement to follow on from Kyoto at Copenhagen at the end of this year. The focus seems to be on how much we reduce greenhouse gas emissions by 2020, what is New Zealand's target going to be there.

NICK Well we're having a very in depth analysis, that’s a big call for New Zealand, this is a huge issue, and so it's not a decision to be made lightly, that’s why I've spent the last couple of weeks engaging with New Zealanders and being up front, and saying hey look this issue is of huge importance to the future of not just our country but all humankind. On the other hand there are really big economic costs associated with change.

GUYON And you’ve done some analysis that you're releasing this morning. Greenpeace has been running a campaign wanting to cut emissions by 40% by 2020, what does your economic analysis show that that would cost the average Kiwi household or average Kiwi person?

NICK Well the government's commissioned this report from Infometrics and NZEIR to try and get a feel for what those numbers would be if we went for the target that Greenpeace is promoting of minus 40, that indicates a cost of about you know 15 billion dollars per year at 2020, you know that’s more than the entire expense of our health system, and the thing that makes me cautious is that this area of climate change has been riddled with big bold promises and very little delivery. If I look over the course of the 90s New Zealand's emissions went up by about 10%, they’ve gone up about another 14% since, so given that we're talking about 1990 levels it's a very big ask to show that we're gonna get emissions down by 40% on 1990 levels, because that really means a reduction of about 64%. So look I am wanting to get some realism into the debate about what is achievable, because we do New Zealand's reputation no good at all making big bold promises and not being able to deliver.

GUYON So this report shows doesn’t it that wealth per person would be 46 thousand dollars per person rather than 49 thousand dollars per person.

NICK Yeah that’s a cost of about three thousand dollars a year, 60 bucks a week, and the real question that we're trying to make the assessment about is people do feel passionate about climate change, and about New Zealand's clean green image, how much are they prepared to cough in terms of addressing that.

GUYON What you're saying this morning is you are not prepared to wear a 40% reduction by 2020, the economic impact is simply too great.

NICK I do. Look we're in the middle of a recession, we've got a thousand people a week losing jobs, if we go for a target one I don’t think is achievable, I don’t think you'd get there, I think you'd do more damage to New Zealand's reputation and certainly you're not going to get. When I look at the track record of what's been achieved, the analysis that I've been getting from Ministry of Economic Development about how much progress we can make in the electricity sector, how much progress we can make in improving transport and getting a better efficiency there. If I look at the agricultural sector where New Zealand's got a ginormous challenge.

GUYON I want to talk about all those things a little bit later, but let's just focus on this target for a little bit longer. The other model that you’ve run through this economic scenario really is a 15% target which would cost us roughly about fourteen hundred dollars per person by that 2020 deadline. Now is that going to be your target, 15% greenhouse gas?

NICK What I want to stress is that submissions don’t end to the end of this week, there's been no Cabinet discussion yet on a target, so I'm not going to announce the target here. I would note though that we campaigned on New Zealand doing its fair share.

GUYON Well in campaigned Minister on a 50% cut by 2050, that roughly gets you to about 15% by 2020 wouldn’t it, it seems that all the arrows are pointing in that direction, is that roughly what you're aiming at?

NICK Well I'd also note that – and if we look at the countries that have tabled their targets to date, in the negotiations, the overall average comes in at about 15%, but I'd note – and the really hard part for New Zealand – is that when you’ve got 50% of your emissions coming from agriculture, limited technologies to be able to constrain those, and unusually, and for our benefit, is that we've got a huge portion of our electricity is produced renewable, unlike Australia, US, bulk of Europe, and so getting our emissions down is actually going to be a whole lot tougher in New Zealand, and that’s largely why over the last 20 years we've seen our emissions continue to rise, it's actually a really tough ask for New Zealand.

GUYON Let's look at how tough and ask it's going to be for the world in Copenhagen at the end of the year, trying to get an agreement, it's going to be fiendishly complex, these international agreements always are, you're going to have a divide between rich and poor countries essentially. I mean do you accept the argument from developing countries, the poorer nations that developed countries got rich spewing out carbon and now it's their turn that we in the developed world have to move first and fastest on climate change?

NICK Yeah I do, I think that argument is incontrovertible, you know how can we, emitting about 17 tonne a year, per New Zealander, say to the Bangladeshi who's doing a tonne a year, hey guys you’ve gotta get your emissions down because we've got a global problem. But the other part we have to understand is this, even if every one of the developed countries signs up to a zero target which is totally unrealistic, and you see the continued growth in emissions from China, India, Brazil, those countries, we are not going to beat this problem, you know the projections are that you'd get emissions up to sort of 650 parts per million, even with zero from the developed world, and so that really shows how important it is in Copenhagen that we get the developing countries to come on board. China is now the biggest emitter in the world, they're big players, and the real key part of the argument here is around technology transfer, that is, rich developed countries saying to these countries, look we know we've got some of the technology, now look truth is we're a small player in this, but the one area of which we could make a big difference is around the agricultural greenhouse gas emissions, and that’s why the government is putting a lot of emphasis around this idea of an international research consortium. Just one last point, you take a country likes of Uruguay, 80% of their emissions come from agriculture, our emissions profile looks more like one of those developing countries, and if we can play a constructive part here it's about sharing and being part of a solution around that tricky problem.

GUYON Okay most of the world is looking for emissions trading schemes as part of a solution to this problem. Just so that we're on the same page, because a lot of people's eyes glaze over when they hear the words Emissions Trading Scheme, can you explain to us briefly concisely what an Emissions Trading Scheme is?

NICK Oh it puts a price on pollution. It says that if you're a gas coal fired power station, if you're gonna burn petrol, if you're going to be involved in an industrial process that produces a greenhouse gas then you're going to pay. Equally so it says to someone like a forester who absorbs carbon, helps solve the problem, reduces the carbon pollution, that you're going to get some money and you're going to be able to trade that.

GUYON Okay, you were promising to have an Emissions Trading Scheme, a modified one, after nine months in office, you’ve failed haven't you?

NICK Well that was our policy at the election.

GUYON And you're not going to deliver it are you?

NICK Well immediately we had our confidence and supply agreement and as part of that with ACT we have done a Select Committee Review.

GUYON Well the ACT Party denied the problem even existed, haven't you just been wasting your time?

NICK Well no I think not, and we made a very deliberate choice here Guyon to ask Peter Dunne to chair that Select Committee.

GUYON Yeah but you’ve failed on that promise though haven't you Minister, you're not going to get it in within nine months.

NICK No we're not, I tell you we need to have our eye on the big picture here.

GUYON No I'm asking you when are you going to have the scheme in place?

NICK Let me make this point. Climate change policy in New Zealand has been a flip flop in an area of great difficulty, particularly around the policy instruments, and it is the government's view that if we could get a consensus agreement like trade policy between National and Labour that would be an enormous step forward. Now we put Peter Dunne in charge of that Select Committee because we thought that was a constructive way forward. I am having discussions with Labour on this.

GUYON Can you tell us when, because people want to know this, you’ve told us this morning how urgent this problem is, how we need to move on it, when are you going to have an Emissions Trading Scheme in place?

NICK We have to have an amendment bill, the previous legislation was quite rushed, officials advise me that even if you wanted to bring it in place on the timetable that’s available at the moment, you just couldn’t do it, you'd break the law, it's not workable. There are over 20 mistakes in the legislation that need to be repaired, so we are going to have after the Select Committee has completed its review, later this year we're going to have an amendment bill to make that ETS into a workable proposition, I'm going to be working hard to get as broad a political consensus around that, and I think it would be ideal for us to be able to go to Copenhagen and for New Zealand to have the details of our Emissions Trading Scheme sealed.

GUYON So by December you're going to have that?

NICK That’s my aim.

GUYON Okay, but we're not going to have energy in by 2010 are we as Labour had promised, they were going to bring energy into the scheme by 2010 you’ve missed that deadline?

NICK Well as I said, the officials have advised me that that timetable was unworkable, we need to have a timetable, it is my view that it is absolutely vital that as soon as possible we get a price signal particularly in the electricity market, that’s the area where our emissions are most ugly, they’ve more than doubled, and every day we want a price signal that says it's preferable to have renewables, we need to get new investment in renewables rather than in thermal. So getting that price signal and getting that ETS settled is my number one priority as Climate Change Minister and I think we can get there by year's end.

GUYON Can I just talk through a couple of areas where ordinary folk are going to be impacted by this that is electricity and petrol? If you look at electricity, the previous government was estimating that the average household power bill would rise by about 5% under their scheme. Is that the sort of magnitude of rise we're looking at, and is that acceptable to you?

NICK Well the advice I've had to the existing law, the existing ETS would have petrol price go up by about six cents a litre, power price up by about 10%.

GUYON Ten percent? That’s a big cost isn't it, it's a big cost, and in a recession where people are under pressure. Are you prepared to tell people that that’s what they're going to have to do?

NICK Well that’s where this debate about the 2020 target – people want to be big and bold on climate change, but the moment you mention putting petrol prices up and power prices up, it gets politically pretty ugly, and I think that what this really shows is the government's got some really tough choices here, and that’s the trade off.

GUYON You’ve mentioned this a couple of times – agriculture. Now agriculture is responsible for 48-50%, roughly half of greenhouse gas emissions, yet they're essentially getting a free ride aren’t they?

NICK Well I think that’s going way too far to say they're getting a free ride, no other country in the world is proposing to bring agriculture into the ETS.

GUYON But about half the burden, shouldn’t they be responsible for half the cost?

NICK They’ve gotta be, and I've noticed the said farmers have sort of been wanting to get agriculture out of an ETS, that’s not a startable proposition.

GUYON And will they be in? Labour was going to have them in by 2013, is that you're timeframe?

NICK We haven't made decisions on that, I think I would not this though.

GUYON Is that too soon?

NICK Well I'll tell you the real point in the economic analysis that we've released highlights this. For those sectors that are trading internationally it's a whole lot harder for them, and also the mere technology of measuring greenhouse gas emissions from basically cows and sheep burping, is incredibly difficult, and so yes, agriculture's going to have to be part of it, but what you're going to see from this government is a realistic practical approach that says hey look you need to be up front about how tricky and what the costs are in this.

GUYON What the report isn't up front about that I've read, it doesn’t really look at the economic costs of not doing anything, the cost to our reputation, the cost to our clean green image, in fact people in Europe are talking about food miles, and potentially boycotting our food, why doesn’t this report look at the cost of actually not doing enough?

NICK I want to reassure you, that in the government making its decision both on the ETS and the 2020 target, that needs to be at the front of our mind. You know if we look at the new bill that’s in the United States Congress, they’ve specifically made provision there for tariffs against countries that don’t take climate change seriously, and so what the sort of balance that the government's going to have to strike here, is one that has us not getting out too far of the pack. What that economic report shows if you get too far out, the costs really escalate.

GUYON So we could face a trade ban, so your 15 billion dollars pales into nothing if we are getting our goods boycotted by an international trading ban.

NICK Absolutely, and that’s why I say to farmers in the agricultural sector, look guys climate change has gotta be taken seriously, not only is it an environmental risk, it is a trade risk, and that’s where New Zealand needs to find this balance, recognise that we've got a tough job, but saying that look too far ahead, costs get too high, too far behind and the costs get ugly as well.

GUYON The last government wanted to be a world leader on climate change, when you look at the kinds of things that you're talking about and how important our image, our brand of being clean and green is, why not lead the world in this?

NICK Oh simply if you look at the record, you know New Zealand's emissions growth over the last 18 years has been the very highest, we're 25% above 1990 levels, and the reality is because of that big chunk of agricultural emissions, all of the analysis shows it's going to be a whole lot harder for New Zealand to reduce emissions than other countries, and that is why we need a good dose of realism here, and very much what we campaigned on, and that was a realistic approach getting good balance between our environment and our economic policies, taking climate change seriously, but no I don’t think it's realistic for New Zealand to be a world leader here, we are so far behind it's going to be a big ask to catch up.

GUYON Alright, thank you very much for coming and joining us this morning, Climate Change Minister, Nick Smith.

ENDS

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