Hon Pete Hodgson
Thursday, 5 April 2001 Speech Notes
9.30am

Business and energy

[Address to Target Zero Club, Fendalton Service Centre, Christchurch]

Thank you for inviting me to speak to you today.

To set the scene on business and energy I’d like to start by discussing New Zealand’s climate change commitments.

I would also like to share with you some thoughts on waste management and how this fits with energy efficiency policies.

But I will focus most of my attention on what is currently the big news item for energy and business, and that's the recently released Draft National Energy Efficiency and Conservation Strategy.

Since 1990, New Zealand's emissions of carbon dioxide from the use and production of energy have increased by 22 percent.

This is a trend we have to change if we are going to fulfil our intention to ratify the Kyoto Protocol of the Framework Convention on Climate Change in 2002.

Ratification would legally bind New Zealand to reduce its greenhouse gas emissions to 1990 levels by 2008-2012, or otherwise take responsibility for any surplus in its emissions over 1990 levels.

Businesses that manage their energy use in a more efficient manner will help New Zealand meet these commitments They will also reduce their energy costs.

Many people are far too quick to assume that taking steps to address climate change will be bad for business. In fact there will be business opportunities arising from the need to meet our Kyoto protocol responsibilities.

The need to reduce emissions of greenhouse gases and improve energy efficiency will directly encourage technological innovation. Promotion of energy efficiency as a response to climate change will encourage innovative business developments and industries, such as renewable energy generation through fuel cell technology and alternative fuels.

A proactive business approach to climate change will minimise risk, build public image, prepare for possible incentive and trading programmes, reduce costs, increase productivity, and refocus operations or investment.

Proactive businesses are likely to gain competitive advantage over businesses that are slow to respond. For example, Designline in Ashburton is an international leading manufacturer of energy efficient buses.

Turning to the government side, there are two broad types of policy measures we can take.

The first, price measures, including a carbon charge and emissions trading mechanisms, will have financial implications for some businesses.

The purpose of price measures is to change behaviour – to encourage a shift to activities and consumption patterns that internalise environmental costs in current prices.

The second type of response is to use so-called ‘non-price’ measures to manage greenhouse gas emissions.

These include measures such as efficiency standards for domestic appliances and vehicles, the provision of information and education, and the promotion of waste minimisation.

I’m aware that many if not all of you here today have contributed to the work of the Waste Minimisation and Management Working Group, convened in July last year by the Ministry for the Environment and Local Government New Zealand.

No doubt you are all waiting with interest for the final National Waste Minimisation Strategy to be produced by the middle of this year

There are strong links between energy efficiency and waste minimisation.
They aim to achieve the same goal, namely more efficient resource use to reduce detrimental impacts on the environment.

We need to changes both production and consumption practices to promote both waste minimisation and more efficient energy use.

Diverting waste from the waste stream and then using it as a resource promotes energy efficiency when it reduces the need for raw materials to be extracted from the environment.

This is true as long as the energy used in the collection, sorting, and processing of the waste is less than that needed to extract and process the raw material.

For example, recycling aluminium cans uses approximately 90 percent less energy than mining raw bauxite and processing it into aluminium. It has the added benefit of reducing the disturbance of natural areas.

But the energy benefits of recycling will depend on a number of factors, such as the distance and type of transport required to move materials, and the energy intensity of the recycling process compared with processing and transporting virgin materials.

Avoiding waste at its source is the most efficient way to reduce environmental impacts.

Waste that's prevented doesn't need to be managed. By designing out waste, we avoid all environmentally detrimental upstream and downstream effects.

The same applies to inefficient use of energy, which is effectively waste.

The passage of the Energy Efficiency and Conservation Act last year brought in a statutory requirement to produce the National Energy Efficiency and Conservation Strategy.

I released the first draft of the strategy a week ago today.

Let me tell you what it means for business.

It means saving money.

Because energy inefficiency is money down the drain. The draft strategy estimates that most New Zealand businesses could cut their energy costs by 20 to 30 percent through cost-effective energy efficiency measures.

It proposes an overall target of a 20 percent gain in energy efficiency by 2012.

This is an ambitious goal which will mean both fundamental and incremental improvements to the way things are done in every sector.

For industry this target will be particularly challenging, because of the dominance of large, very energy-intensive sites and industries with long investment cycles.

The Dutch experience suggests that serious government policies and programmes for energy efficiency are necessary to achieve such rapid improvement.

Industry focused measures in the draft strategy revolve around voluntary commitment programmes.

Negotiated Greenhouse Agreements may well be the instrument of choice for larger carbon dioxide emitters, while a Business Commitment programme could be used to bring in less energy intensive and smaller businesses.

Businesses are already realising that they need to be more competitive in their use of energy resources. Many also appreciate that environmentally sustainable use of energy and physical resources is of growing consumer interest.

Companies cannot risk their reputations by ignoring their environmental performance. Consumers today expect ethical and environmentally responsible performance.

The risk of not keeping your corporate house in order is potentially large. It can directly undermine your most valuable asset – your reputation. Being able to actively market the environmental performance of your business or products is becoming more and more important.

Any energy commitment programme will need strong support and leadership from by Government if the overall target is to be achieved.

Under the draft strategy, each industry sub-sector would be assisted to progressively identify, commit to, and achieve international best practice in energy efficiency.

This means conveying information on best practice technologies and practices. It means doing sector studies and energy audits to identify the scope for improvement.

A role for financial incentives has also been flagged. It notes that a tax concession could be applied to foster capital investment in energy efficient plant.

Obviously Government would also expect individual businesses to gear up their own management systems, expertise, information and financial resources to deliver on their energy and greenhouse commitments.

In turn, increasing reliance will be placed on building partnerships with industry associations able to provide, or channel, appropriate expertise.

From architects and engineers to management consultants, each would have to play their part.

The development of sustainable business networks over recent years is a sign of the changing business environment

Government is not asking business to do anything it's not doing itself. We are already implementing an Energy-Wise Government programme, targeting 15 percent energy savings by 2008 in the public sector.

Our hosts today, the Christchurch City Council, will be interested in a proposed scheme, with the same target, covering the local government sector. This Council has of course already secured very considerable savings.

Businesses also stands to benefit from energy efficiency measures in other sectors.

The buildings sector would be engaged in a 15 year programme to bring existing buildings up to acceptable energy efficiency standards.

The mechanisms proposed include funding improvement projects, providing better targeted information and new market incentives.

New buildings would achieve “best practice” energy performance by improving energy standards and codes, as well as instilling better energy design and management skills. These represent potential growth opportunities for businesses servicing this sector.

Some energy supply measures would focus on increasing the use of renewable energy sources. The proposals here include introducing a mechanism to halt the decline in renewable electricity generation. Another example is the greater use of wood and wood waste to fuel industrial heat and cogen plants.

The draft strategy represents a balance of information, pricing, standards, and financial incentives. It links those measures to institutional mandates, funding criteria and priorities that are designed to boost the uptake of energy efficient options – to make energy efficiency the easy choice.

I urge you to find out more about the draft strategy. There's plenty of information available from EECA or their website. And look out for the workshops that will be run through April and May.

We're taking written comments on the draft until I June. The final strategy will be published by 1 October this year.

It has long been my view that New Zealand’s overall energy efficiency and conservation performance has been poor. It’s time for us to lift our game. That's simply good business.

Thank you.

ENDS

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