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Climate Change After Bonn - Pete Hodgson Speech

Hon Pete Hodgson Speech Notes

[Address to the American Chamber of Commerce, Hotel Intercontinental, Wellington]

A month in climate change politics is a very long time.

Three weeks ago I had just arrived in Bonn for the portion of the climate change talks where ministers try to achieve the agreement that senior officials haven’t been able to reach.

I didn’t know exactly what lay ahead. I knew, like everybody, that we were in Bonn because we hadn't been able to agree in The Hague last November.

Back then we were supposed to have finalised the rules for implementing the Kyoto Protocol. But try as we did, we couldn’t nail it down. It is, after all, the most complex multilateral environment agreement ever attempted.

With the luxury of hindsight it is easy to see why we failed. Last November there was insufficient understanding by the various groups of participating countries of the expectations and constraints of others.

The Protocol seeks to address a major environmental challenge by means of economic activity. It seeks to reach in to virtually every aspect of human activity by challenging the ways we use energy. So it is a very serious economic negotiation as well as an environmental one.

Put major environmental and economic issues into the same negotiation process and you have a highly political situation. And so it has proven with this Protocol — in Bonn, in The Hague and all the way back to December 1997 when the Protocol was agreed in Kyoto.

The Hague negotiations took place mid November, immediately after the US elections but before the result was to hand. The certainty which it had been hoped the elections would provide about the United States' direction on climate change was completely missing as the drama of the Florida vote count dragged on. So the talks began against a backdrop of uncertainty about the position of the world's largest economy — and largest producer of greenhouse gases.

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The European Union then held firm to a position at odds with that of the Umbrella Group of countries, being the United States, Japan, Canada, New Zealand, Australia, Norway, Ukraine and Russia. This group works together, well, but we are not bound together as the EU is.

We wanted the choice of using market mechanisms to meet our obligations. We wanted rules which were easy to understand and hard to break. We wanted action to be available at the lowest possible cost. We also wanted clear acceptance that emissions could be mitigated by carbon sequestration in forests, not only by reducing them at source.

The EU was more resistant to market mechanisms, except as they would apply within the EU itself. It was also suspicious of some aspects of the proposals on carbon sinks.

We came very close to an agreement in those final hours in The Hague, but not close enough. The so-called Portacabin meeting of 12 people, of which I was one, secured an agreement. Two hours later the EU caucus, which included key Portacabin participants, pulled it apart. John Prescott of Britain was “gutted”, as you may recall. We all went home knowing that climate change negotiations had suffered a major setback.

The eventual result of the US presidential contest provided an additional twist to the process. The total change of senior personnel that accompanies a change of president forced something of a pause, meaning negotiations would resume in late July rather than in May.

Then came the bombshell from President Bush, the announcement of his rejection of the Protocol.

Of course the Kyoto Protocol wasn’t wildly popular in many parts of the United States. For the nation that produced 36 percent of developed country greenhouse gas emissions in 1990 and about 25 percent of global emissions, the challenge of meeting its target of a seven percent reduction overall on 1990 levels was always going to be a major one.

But the United States had still been an active and innovative player in the negotiations on the Protocol. It worked constructively with other countries in the Umbrella Group to get agreement on the use of market mechanisms to minimise economic disruption. There was also strong US support for the central environmental purpose of the Protocol, and a recognition that technology and innovation were keys to success in this area.

It is important to remember also that this was not just a government-driven process within the United States. Many of the largest national and multinational corporates saw action on climate change issues as being in their interest. And this is still the case.

Some of you will know of the Pew Foundation and its Center for Climate Change. This Washington not-for-profit organisation produces some of the most thoughtful and useable material available on climate change. It gives particular attention to the involvement of the business community and has attracted considerable support for its activities. Through its Business Environmental Leadership Council it has brought together US based business leaders to address climate change. The council members accept four basic statements :

1. Enough is known about climate change for members to take action to address its consequences.
2. Businesses can and should take concrete steps in the US and abroad to reduce emissions and invest in new, more efficient products, practices and technologies.
3. The Kyoto Protocol represents a first step. The market-based mechanisms must be used and the rest of the world must be more involved.
4. Significant progress is possible in addressing climate change and sustaining economic growth by adopting reasonable policies, programmes and transition strategies.

The companies signing up to these statements have a combined annual turnover of more than US$700 billion. They include Du Pont, BP, Shell, Sunoco, Toyota, Rio Tinto, Enron, IBM, Georgia Pacific, Lockheed Martin, Deutsche Telekom and several dozen others. These are serious players in the US, and global, economy.

These are companies looking forward to the opportunities offered by the challenge of climate change. I predict we will be hearing rather more from them on the issue of climate change in the coming months than we have since March this year, when President Bush declared the Protocol to be “fatally flawed”.

Fortunately it isn’t my job to advise the US Administration on climate change. I do have some aspirations for them, however.

As the world’s largest economy and its largest producer of greenhouse gases the US is needed back in the negotiations. As the world’s biggest source of innovation and technology that will be a major contributor — or perhaps the major contributor — to resolving the key problems of climate change, the US has a vital part to play in the international response. Equally, if the US stays out, that technology and innovation will be less integrated into solutions, at everyone’s expense including the US.

At the negotiations in Bonn the United States placed itself firmly on the sideline, leaving to others the task of getting agreement on the Protocol's rules. My hope is that it will not choose to stay sidelined for too much longer.

In the past week there have been encouraging signs that attitudes in Washington might be starting to shift. Many of you will know that the Bush Administration has been undertaking a thorough, Cabinet-level review of US policy on climate change. So far there have been several statements of good intentions but little evidence that the hard choices are being focussed on. The hoped-for policy is still some distance away.

The key sign of a shift in attitude in Washington was a unanimous resolution of the 19-member Senate Foreign Relations Committee, urging the Bush Administration to return to active engagement in climate change negotiations. The committee also called for specific US proposals to be ready for the next negotiation session in Marrakesh in late October.

This resolution is not binding on the Administration but it came from a truly bipartisan and highly influential group of senators, including Chuck Hagel and Jesse Helms. We need to see how its message is received and whether the Administration signals a willingness to re-engage. I certainly hope that it does.

Undoubtedly a new climate change position from the United States will not sit comfortably alongside the package of options offered by the Protocol. That must not prevent us and others from looking very carefully at it and seeing how the US can play a full and positive role in combating climate change.

In Bonn the rest of the international community made it clear that it was not prepared to wait indefinitely for a new US position and for specific proposals. So without the United States we finished work on the Protocol’s rules. We now know how it will work and we have agreed on extra support for those few developed countries that were clearly going to have the most trouble meeting their obligations.

Hard political negotiation produced a workable compromise. I think the result was a good one for New Zealand and an adequate one for the environment. It offers us a chance to get started on the long road towards a solution for climate change.

It won’t decrease greenhouse gas emissions much. But it does promise two other things. First, no increase from Annex 1 countries. Second, and more importantly, it puts in place the mechanism: the trading systems, the reporting systems, the verification systems and the compliance systems. That is significant progress indeed.

There has always been a clear case for the use of least-cost methods of reducing emissions. The Protocol provides a range of highly cost-effective means by which a company or country can meet its obligations while still growing its business or economy.

Equally important, the Bonn agreement does not shut out the possibility of future United States involvement.

I’ve spent quite some time commenting on the position of the United States. Its dominant position in creating the emissions that cause climate change justify that attention.

But what do the decisions taken in Bonn mean for New Zealand?

We have always stressed that we want to ratify the Protocol. To be able to do that we needed certainty about how it would operate and what policy tools we could use to meet our obligations.

With the key elements of the Protocol’s rules finalised in Bonn we now have the certainty that enables us to move to ratification. Our intention therefore is to work towards having legislation passed by Parliament later next year that enables New Zealand to ratify the Protocol in September 2002.

September 2002 is the date for the World Summit on Sustainable Development, usually referred to as Rio+10 — the ten-year review meeting following the 1992 Rio Earth Summit. It was in Rio that President Bush senior signed the United Nations Framework Convention on Climate Change. The Kyoto Protocol causing the current President so much trouble is a direct result of that Framework Convention.

Before New Zealand can ratify there is still much to do. We now know what the policy options available to us are. The hard work is now to determine the right mix of those options. No final decisions have been taken yet — and none will be until we have had an opportunity to consult far more widely than has been possible up to now.

Various sectors of the business community have been actively promoting their preferred options. Some have called for New Zealand to wait until all others have taken action. The Government does not accept that approach. We will not be the last cab off the rank in response to climate change.

Admittedly I wish we were already much further down the road of energy efficiency and conservation than we are. But we have started. I will be releasing the final draft of New Zealand's first ever National Energy Efficiency and Conservation Strategy on September 27.

Similarly we need to expand our use of renewable energy sources — and you will understand that I don’t just mean hydro power.

Many of you are associated with business and sector organisations that are actively engaged already in the consultation process. I encourage you to stay involved. Strong, clear commitment and involvement of the type being shown by the members of the Business Environmental Leadership Council in the United States is what I am looking for from New Zealand business.

Let me make a last point. I think it is the most important of all and I would welcome the chance to be challenged on it by way of questions.

I can't stress too strongly the opportunities that exist for New Zealand as we tackle climate change.

Clinging to an economy of wasteful use of energy is not the way of the future. Nimble businesses that keep their competitive edge by creating or embracing innovation and new technologies are the ones that survive in the new economy. The Kyoto Protocol creates pressures in favour of that kind of business.

New Zealand business must respond to those pressures — not least because doing so will pay off. Of course we must have one eye on the risks. But we must have the other on the opportunities, because that way lies the future.

Thank you.

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