Pete Hodgson Speech

Strategies For NZ Business On Energy Efficiency And Climate Change

Good morning. I am here today to talk about environmental and sustainable development issues and to explain further the government’s early decisions and directions on one of the hottest topics on the worldwide environmental and economic agenda – the threat of climate change and our response to it.

We have known for a number of years that this issue has to be tackled. The international tide on this matter is irresistible. We couldn't avoid addressing our emissions even if we wanted to.

The evidence for climate change has got to the point where a smart risk management approach says “Just do it – get on and start reducing emissions”. The international community is also saying, “Yes, let’s not put it off any longer.”

New Zealand must, over time, introduce measures to ensure we meet our obligations to reduce greenhouse emissions. In doing so, we can also become a lot more energy efficient.

Energy use, including that used for domestic transport, accounts for about 45% of New Zealand’s total greenhouse gas emissions. Energy efficiency measures can be implemented quickly and bring multiple benefits. Many of these measures improve businesses’ bottom-line economic performance – as many of you will already know first hand. They can also clean up our act and reduce our air pollution.

In tackling our environmental and sustainable development issues, the Government's first priority is to revive efforts to directly reduce emissions by improving energy efficiency.

Two weeks ago, I released Cabinet papers on New Zealand’s domestic climate change policy. I said our initial focus will be on energy efficiency measures. Work is continuing on more complex economic and regulatory options. They will take longer to get sorted.

As the Convenor of the Ministerial Group on Climate Change, I can assure you the Government will consult widely as it develops the details of a climate change action plan.

Development of a climate change plan will enable New Zealand to ratify the 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change by mid-2002. The Protocol obliges New Zealand to stabilise its greenhouse gas emissions at 1990 levels, on average, over the period 2008 to 2012.

It’s less than a decade to the mid-point of that commitment period. And every day we take capital spending decisions - we buy a car or build a house – which “lock in” a little more of our emissions in 2010.

One of the concrete measures we are taking to achieve stabilisation of emissions is revitalising the Energy Efficiency and Conservation Authority’s work programme. Other recent measures taken to improve energy efficiency include increased funding for public transport through Transfund and new requirements under the Building Code.

EECA is also preparing public education material on energy efficiency options, and investigating the opportunities for business and economic development arising from climate change. Assessments of gains from waste management and road transport initiatives are already in progress.

As a statutory Crown entity, EECA’s most important task will be to take a lead in developing a National Energy Efficiency and Conservation Strategy. This results directly from the passing of the Energy Efficiency and Conservation Act earlier this year.

It is critical that the Strategy incorporates the collective wisdom of business, environmental and professional groups. I urge you to take part in this process. I want to see an active grass-roots effort to bring forward new ideas in this process.

The Strategy will raise a host of issues.

How are we to meet future electricity demand without resorting to more large thermal power stations or steeply rising prices? How will we meet that demand and also meet international obligations, which will inevitably tighten over time? How will we improve the efficiency of our nation’s energy use, or conversely reduce our energy intensity, so that we can begin to catch up with other developed nations?

New Zealanders demand guaranteed availability of energy, as citizens of every modern nation do. But there are no easy, cheap and sustainable answers to the energy questions of New Zealand. Instead, we must do a little of everything.

Energy efficiency means better technology and changing attitudes. It means attention to detail. It means innovation. And it means leadership.

Some of you may have heard me talking on National Radio about practical proposals to improve energy performance, through the management of public sector vehicle fleets and buildings. We will be looking at proposals for leadership in this area later this year.

I want to say a few words now about so-called “price measures”, or measures that reach across sectors.

One option is a carbon charge. If there is a decision to include a carbon charge in a climate change package, the work will be coordinated with that of the tax review process which reports next July. Any tax changes emerging from the review would not be implemented until after the 2002 general election.

Many of you will be aware of the so-called Voluntary Agreements for carbon dioxide reduction covering major greenhouse gas emitters. These agreements expire in December 2000. Consultation is about to begin on “enhanced industry agreements” - new agreements which could also allow pilot trading between emitters to emerge.

Forward trading in emission units is also being examined. This sounds complex but the idea is simple. Under such a scheme emitters would be required to ensure they had enough units of New Zealand’s “assigned amount” to ‘cover’ their emissions, after 2008. If emitters could cut their emissions more, they could sell units. Or if they were running short of assigned amount, they would need to buy. In principle, they could anticipate these possibilities before 2008 and start trading early.

As we speak, negotiations are going on in Lyon in France over a number of rules under the Kyoto Protocol. New Zealand will continue to participate in international negotiations to develop rules for international emissions trading and for assigning credit for carbon ‘sinks’ – primarily plantation forests, which absorb carbon dioxide. We have stated publicly that New Zealand will participate in any international emission trading system that has environmental integrity.

It is however useful to remind people that no decisions have been made by the Government on whether to allocate some or all of these credits to forest owners. It is possible that some forest owners will use futures markets or some other market to pre-sell credits they don’t yet have and may not get. If they do, and end up losing money by undervaluing their eventual asset, or not being able to deliver the real goods later, then that will be on their heads.

The design of any price measures will involve careful consultation with emitters and other interested people.

So, what do I expect from business?

As Minister of Energy and convenor of the Ministerial Group on Climate Change, I expect a number of basic things from the business sector:

First, I expect you to engage in constructive debate on climate change policies - no doubt you will put me to the test at question time after my presentation. Government expects to raise the quality and coverage of the climate change debate by making options easier to understand and by directly facilitating consultation.

Second, I expect to see the application of strategic thinking – not posturing. Some businesses are still in climate change denial. Climate change is a reality that demands practical responses geared around strategic positioning that aligns the interests of business with that of New Zealand and the international community.

Third, I expect business to make rational and informed business decisions, particularly concerning their use of energy. As members of the Network you will be acutely aware that reductions in greenhouse gas emissions only result from changes in behaviour and application of technology. Hence our focus on helping businesses make real-world energy efficiency improvements.

These are not ‘big asks’ – especially when you consider that world leaders from business and government at the World Economic Forum in Davos in Switzerland early this year identified climate change as the world’s most pressing issue.

Before I wind up, I’d like to focus your attention on the government’s response to transport issues, given that transport is a growth sector in the economy, and – regrettably – is also a growth sector in terms of emissions.

Local air quality problems, traffic congestion and transport fuel price hikes are current and high profile issues for Aucklanders. In each case energy efficiency measures form an important part of the solution.

Auckland’s air quality concerns are being addressed through the “Clean Air Auckland” Campaign. This a joint initiative led by the ARC and supported by the Ministry for the Environment. It is a public education programme aimed at encouraging Aucklanders to help clean up their own air pollution problems.

Campaign messages stress the need for regular vehicle maintenance and tuning to reduce emissions and improve fuel efficiency. EECA is helping to promote fuel efficient driving tips and is developing fleet fuel efficiency guidelines. A high quality video-based fuel efficiency and safety education kit is also available for truck drivers and heavy fleet operators.

I hear that companies such as WestpacTrust have entered into the spirit of the campaign by offering their staff incentives to car-pool and have their vehicles tuned. Not surprisingly EECA’s own rideshare software is in hot demand.

It is time for business to take the issues seriously and get stuck in to cut fuel waste and save money in your own vehicle fleets.

Government is also looking to a brighter and efficient future with a raft of new transport policies. These are in various stages of development.

A review of the automotive fuel specifications has started. This aims to ensure that fuel we have in NZ is compatible with modern engine technology . Emission standards for all vehicles entering the country (new and used) are also being developed as part of a Land Transport Rule.

The Ministry for the Environment is currently revising the Air Quality Guidelines and the Government will consider whether they should become mandatory national environmental standards. The guidelines should be out for public discussion late this year.

The Ministry of Transport has a full environmental work programme. This includes implementing the Vehicle Fleet Emission Control Strategy. While targeted at improving local air quality, it is also expected to contribute to reductions in greenhouse gas emissions.

The Transport Ministry is also assessing a full range of possible measures to reduce transport sector greenhouse gases. A full report, including specific policy recommendations, will be made to the Government later this year. A quantitative model is being used to evaluate the policy options.

The Transport Ministry recently produced a major new report on road corridors – ‘Environmental Capacity Analysis’. It highlights the problem areas and shows how to monitor and evaluate the effectiveness of strategies to reduce exhaust emissions on our roads. New computer software is now available from the Ministry of Transport to assist local authorities nationwide to better monitor and manage emissions on local roads.

Government involvement doesn’t end there. A New Zealand Transport Strategy will promote the integration of environmental, economic and social goals within New Zealand’s transport system. It will provide guidance for the development of Government transport policy and the preparation of local authority transport planning documents. Proposals for the form of this Strategy will considered by the Government before the end of this year.

Finally, EECA is leading the charge to deploy more eco-efficient vehicles. The focus will on fuel efficiency information provision and government leadership.

All in all you can see that the Government is setting a hectic pace to improve the country’s energy and environmental performance, particularly in the transport sector.

It makes sense and you’re right in saying it’s about time. I’m very keen to recover ground lost as a result of the previous Government’s inaction.

Energy and environmental issues are squarely on the New Zealand Government’s policy agenda. But the Government cannot make progress alone. Our leadership is critical but not sufficient.

Partnerships with strategically aware businesses lie at the heart of improving the country’s economic and environmental performance.

It’s great to see the Auckland Environmental Business Network working constructively with government in the interests of all New Zealanders. Please ask if you want copies of the Cabinet papers on ‘Early decisions and directions on climate change’. They have been released with you in mind and I hope their availability will help the development of an informed debate on climate change policy.

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