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NZ's Climate Change Action Plan - Pete Hodgson

Hon Pete Hodgson Speech Notes
Address To A Greenhouse Policy Coalition Seminar, Wellington Convention Centre.

NZ's Climate Change Action Plan

Thank you for the invitation to address this meeting, which I can see includes most of the major greenhouse gas emitters in New Zealand. Opportunities like this for a dialogue between business and Government as we develop climate change policy are highly valuable. In fact they're essential.

I want to cover a lot of ground in this speech and I want to begin at the beginning, by explaining why this Government has stepped ahead of the last one by deciding to ratify the Kyoto Protocol in mid-2002. There are a host of good reasons.

The first point to make is that we are not catapulting New Zealand into the international vanguard with our decision to ratify. We are in fact acting out of a desire to drag New Zealand up from the laggard status we have acquired as a result of a decade or so of relative inaction.

Ratification in 2002, or 'Rio plus 10' has already been indicated by the majority of western nations, including all of the European Union and a bunch of non-EU nations such as Norway. New Zealand is simply joining that line-up as others – including for example Japan – are expected to do before too long.

Ratification is also a concrete way of recognising the necessity of collective international action to address climate change. New Zealand is responsible for 0.4 percent of the world's greenhouse gas emissions. We cannot make a difference on our own.

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We do, however, have a very real national interest in securing action on climate change. Our economy, more than the economy of any other developed nation, is based on growing stuff. Our climate is a very large part of why we're so good at that. Biosecurity threats from imported pests and weeds can be magnified by climate change. Our primary sector is vulnerable to the storms, floods and droughts that seem to be occurring with increasing ferocity and frequency worldwide. And of course we have one of the longest stretches of coastline per capita in the world – a coastline on which many of us live, work and play. We have much to lose if sea levels rise.

Many of our South Pacific neighbours have even more to lose. Some Pacific islands, like Tuvalu and Rarotonga, have especially close political and social ties to New Zealand. Our leadership position in the region demands that we recognise the risks climate change presents to Pacific nations and that we play our part in defending their interests.

Developed nations generally must be prepared to meet their commitments if we want to encourage wider participation. Relatively wealthy countries like New Zealand cannot ask developing countries to take action without doing something on our own account.

Ratification also serves as a focus for public attention. The Greenhouse Policy Coalition is focused on climate change policy options and their implications but the wider New Zealand public is not. We must increase awareness and acceptance of the need for some significant changes in our behaviour – both as consumers and as producers – or we have no hope of playing our part in an international effort.

We are actually well past the time for action, given the timetable the international community has set itself. We are halfway between 1992, when 154 nations decided at the Rio Earth Summit to act, and 2008, when those international commitments start to bite. Article three of the Kyoto Protocol requires us to have made demonstrable progress in achieving our commitments by 2005. We haven't done nearly enough to achieve that.

A commitment to ratify is also a positive spur to improving this country's energy efficiency.

We are inefficient users of energy. Our production efficiency has increased somewhat, but further increases will be difficult for us – we don't have a lot of brown coal burning power plants we can back off.

The good news is that improvements in our end use energy efficiency will not come at a high cost. There is a lot of low fruit to pick. The household and transport sectors, where there has been virtually no action to date, are particularly good examples. Industrial power users, including Greenhouse Policy Coalition members, have shown how end use efficiency improvements can be both significant and profitable.

Energy efficiency is one example of how actions flowing from ratification are worthwhile in their own right, and worth doing now. Others include improving public transport and vehicle emission standards.

The final point I'll mention is that the scientific evidence for climate change is getting stronger, not weaker. The 3rd Intergovernmental Panel on Climate Change scientific assessment is due out early in 2001 and is likely to add yet more weight. The sceptics are losing their credibility, losing their audience and in some cases losing their voices.

That's a pretty solid list of reasons in favour of ratification. It has moved this Government, unlike the last one, to set a date. But there are other important differences between us and the previous administration.

At the top of the list is our determination to use all measures to address emissions, not a select few. We want to use a mixture of both price and non-price measures. The National government, in its free market purism, was ideologically allergic to the idea of a few practical non-price interventions of the type we intend to use - and other governments have been using for years.

A simple example is the recent updating of energy efficiency standards in the Building Code. Those standards for domestic buildings had not been changed for more than 20 years. They were introduced in the late 1970s, under Muldoon, as a temporary measure in response to the oil shocks.

We also intend to use minimum energy performance standards and mandatory energy performance labelling. These are common throughout the developed world, including Europe, Canada and Australia.

We'll be using transport emission standards. We are the only country in the western world that doesn't have any – a remarkable position to be in, especially when you think about the green face we like to turn to the world. Many other nations are also well ahead of us in using sophisticated regulatory interventions like congestion pricing to manage vehicle use. We are certain to follow in due course.

This Government accepts that there will need to be some regulatory intervention to achieve an effective response to climate change, because the market is not perfect. There are endless papers and books and library shelves full of evidence of that.

If we adopt some form of regulatory intervention - like the Building Code or energy performance standards – we are likely to get more rapid technology transfer. That will apply to advanced technologies as well as relatively simple things like insulation. Petrol-electric hybrid vehicles, for example, are likely to become more common in the next five years or as Europe and parts of America take the lead in regulating against inefficient fuel use.

Our intention to use various regulatory interventions sits alongside our willingness to use the price measures the last Government preferred.

Let's start with the question of a carbon tax, which I know the Greenhouse Policy Coalition firmly opposes as a universal measure.

A carbon tax is one of the tools in our toolbox and we will not agree to forgo it. We may or may not use it – we haven't decided. But we're not going to rule it out just because some people say we should. We're not going to spring it on anyone either. We've made it clear that if we decide we want one, we won't introduce a carbon tax until after the 2002 general election. Voters will go into that election knowing whether or not a carbon tax is on the cards if they re-elect this Government.

The other price measures on the table – carbon trading and so on – are as important to us as they were to the last Government. So they're very important.

The prerequisite we bring to them, the difference in our approach, is that we insist those mechanisms must have environmental integrity. That applies to the three Kyoto trading mechanisms – emissions trading (including sinks), the Joint Implementation scheme that gives credit to developed countries financing emissions reductions in other developed countries, and the Clean Development Mechanism that gives credit for financing emissions reductions in developing countries.

We think the science is good enough to demand environmental integrity in the application of Article 3.3 of the Protocol, which requires transparent and verifiable reporting of greenhouse gas emissions and removals associated with afforestation, reforestation and deforestation since 1990. Integrity is more problematic in application of Article 3.4, which requires countries to provide data establishing national levels of carbon stocks in 1990, enabling an estimate of subsequent changes.

Of course insisting on environmental integrity does not mean that is the full measure of the value of carbon trading. Economic efficiency is a fundamental reason for developing a trading system. We are saying trading can have both qualities, integrity and efficiency, and we want to ensure that it does.

It is a general characteristic of this Government that we like to get on with things and our response to climate change is no exception.

It might give you an idea that we're serious about that if I tell you we've got 10 Cabinet papers on this issue coming up for consideration before Christmas. Some of them are for action, such as minimum energy performance standards. Some are progress reports. You'll probably find out as much as you want about them, because we want to be as open as we can about this policy development process and the default position with Cabinet papers on climate change is that we release them publicly very soon after they've been decided on.

This Government is also more positive than the last in seeing benefits and opportunities for New Zealand in responding to climate change, not just costs. There is the obvious likely benefit, of course, of the credit value of our "Kyoto forests" – those planted since 1990. But there are other possibilities.

If there is to be any breakthrough in the adaptation of ruminant physiology or in forage research to reduce methane emissions from farm animals, that research will most likely be done in New Zealand. There's no reason why we might not secure the intellectual property from it. Equally, New Zealand could easily be the source and beneficiary of innovation in IT systems for energy use management, or international geothermal consultancy, or the use of biomass as an energy source.

Like the previous Government we are technological optimists. Unlike them, we are actively investing and developing policy to bring the future closer.

We are spending more on science and scrutinising the funding system to see how we can maximise value for money. As I've just mentioned, we're designing regulation to speed technology transfer. For a different example this time, look at the recent electricity policy changes, where we've set out to enable demand-side bidding, distributed generation and the use of advanced micro generation like fuel cells.

In the next couple of weeks I'll be leading a New Zealand delegation to the World Conference on Climate Change in The Hague, otherwise known as COP6.

I'm delighted that the Greenhouse Policy Coalition will be represented at the conference. It will be an intense two weeks as people seek to crunch more and more decisions on less and less sleep.

New Zealand has prided itself on punching above its weight in such negotiations. I'm sure that's true. In fact I would like to pay tribute to Simon Upton, to officials and to non-governmental groups like yourselves for the quality of New Zealand's past contributions.

I'm relatively new to the game. But I have an intense interest in climate change and it goes back a few years. I don't know of another global issue as complex and far-reaching. I certainly intend to maintain the high standard of New Zealand's contribution to negotiations.

The words environmental integrity will be used a lot by me in The Hague. They are words to challenge much of the cant that will inevitably be spoken. They can be used to challenge sloppy science. And they can be used to challenge posturing and greenwashing.

Environmental integrity means that our nation is interested in initiatives that deliver measurable outcomes. Wishful thinking has no value. Accountable gains do, all the more if the world heads down the path of creating new property rights.

Environmental integrity is also a useful phrase for concentrating the minds of some non-Annex 1 countries, whether in negotiations on the finer points of the Clean Development Mechanism or in considering their future listing in an annex.

New Zealand will of course be committed to maximising the application of the flexibility mechanisms in the Protocol. Rigidities in the trading mechanisms will only introduce inefficiency, which will tear at and weaken the fabric of the agreement.

Flexibility also enables developed nations to make a start on limiting emissions in a cost-efficient manner. Abating cheaply is important both in limiting the cost of cutting back and demonstrating to developing countries that cutting emissions can be done efficiently.

Given its track record New Zealand will probably punch above its weight again in The Hague, but I guess one of the key things I'm saying today is that the days of talking smart abroad while acting dumb at home are gone. The Government has changed, time has ticked by and credibility increasingly depends on actions not words.

Our domestic policy position and our domestic actions are based on COP6 being a success. If it fails, the problem simply becomes more urgent. Climate change is an issue that will not go away.

That brings me to a matter close to the hearts in this audience, namely voluntary emissions reduction agreements and their successors – referred to variously as enhanced industry agreements or negotiated greenhouse agreements.

The voluntary agreements negotiated in the 1990s are running out now. They have been useful and those involved are to be congratulated. But voluntary agreements have done their dash. Energy use per unit of output has fallen, but carbon dioxide emissions have risen.

We are actively investigating the possibilities for enhancing industry agreements on emissions reduction, to see whether they are worth including in a pre-2008 package of measures. Some of you may have been involved in the industry consultation meetings held in September and October.

To be worth including such agreements in a pre-2008 package, several conditions probably need to be met.

From a government perspective any scheme would need to be transparent and credible, especially if participation implied a degree of exemption from other potentially costly measures. Also the level of abatement achieved would need to exceed that of the earlier “no-cost” voluntary agreements.

Clearly industry would need to consider it worthwhile to go to the effort of participating and undertaking pre-2008 actions. This is one reason why the Government has agreed that participation in such a programme would not disadvantage firms in subsequent or parallel policy initiatives.

In all areas, business and Government have expectations of one another and the way to progress those is constructive debate. That's why I'm here today and no doubt you will put me to the test during questions. The Government is setting out to raise the quality and coverage of the climate change debate by making options easier to understand and by directly facilitating consultation.

Strategic thinking, rather than posturing, is very important. The businesses represented here today are taking up that challenge, but some businesses are still in climate change denial. There is work to be done here, by both you and me. The idea of enhanced industry agreements should be as widespread as possible.

That raises the issue of communication. We have some catching up to do in New Zealand. Public awareness of climate change as a phenomenon is high. Awareness of almost any of the detail below that level is low or very low. As a Government we aim to tackle this on several fronts.

First, our own process will be as open as possible. Cabinet papers, as I mentioned earlier, will generally become available publicly.

Second, the development of New Zealand's first ever national energy efficiency and conservation strategy is under way. Jeanette Fitzsimons of the Green Party must get a lot of the credit for that. The newly strengthened Energy Efficiency and Conservation Authority is doing the legwork and next autumn the strategy development moves from interested parties to the public as a whole. That will help plug some information gaps.

Third, the Government is developing a communications strategy on climate change. We are committing some money and effort to it because we need a higher level of debate in New Zealand, both in quality and quantity.

I'll finish on a positive note with a rather remarkable statistic about the size of the business opportunity presented by climate change. A recent US Agency for International Development report predicts dramatic growth for environmental technologies to reduce greenhouse gas emissions. Currently this market is estimated as being about $US30 billion in developing countries alone. That is expected to reach almost $US52 billion by 2010.

New Zealand's business and energy mix may result in some unique local solutions to managing emissions. Those of you in business are well placed to identify them.

I am asking all sectors to join us in this leadership challenge. We need to find forms of sustainable energy and abatement technologies appropriate to New Zealand's unique circumstances.

I know that the coming months will involve many of you in extensive consultation with government. That will concern industry agreements, the treatment of forest sinks, and matters like point of obligation, instrument design and, eventually, the allocation of carbon credits and debits.

This will present many challenges for the Government as well as our community partners. I ask you to bear with us as we make up for lost time. While such effort is demanding, it is also a great opportunity for you to ensure that your interests are considered.

I ask you to have a close eye on New Zealand's interests as well.

Thank you.

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