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Climate change beyond Bonn: New Zealand's approach

Thursday, 30 August 2001 Hon Pete Hodgson Speech Notes

[Address to the Diplomatic Club, Duxton Hotel, Wellington]

When I accepted the invitation to speak to you today, I thought I might be speaking to you from quite a different vantage point to the one I have now.

Six weeks ago, I arrived in Bonn with other climate change Ministers to try to reach a political deal on the remaining issues in the Kyoto Protocol negotiations. The prospects of success did not look great. The United States' rejection of the Protocol seemed set to stop the process in its tracks.

But that gloomy view was not borne out. The situation has changed — and remarkably so.

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 was clear from the beginning of the Bonn session that most had come determined to make real progress. We were all, I suggest, rather wiser about what was achievable than had been the case in The Hague.

Negotiating blocs and individual countries began to show greater flexibility, a willingness to listen and to compromise. Add to that a clear recognition on the part of several of the major developed countries that they stood to benefit from the Protocol — and that a revision of it might be quite detrimental to their national interests — and there was incentive enough for some serious negotiating.

I don’t plan to provide you with a critique of the performance of each of your countries at Bonn. But I do want to make a few points about positions taken.

Belgium’s leadership of the EU throughout was straight-up and positive. The EU had come to cut a deal.

Iran’s chairing of the Group of 77 developing countries group was particularly impressive, given that in reality the G77 is many groupings, bound together uneasily by the job in hand.

Pacific island countries through the Alliance of Small island States (AOSIS) under the very able leadership of Samoa’s UN Ambassador Neroni Slade continued to play a substantial and positive role. The realities Pacific countries face on climate change were repeatedly and clearly highlighted.

Japan's role was pivotal. Environment Minister Kawaguchi worked tirelessly, always in the spotlight of media and NGO attention. Around the conference centre there were thousands of badges with the Japanese flag on them and the words “Honor Kyoto”. Japan certainly did that, as did all those who were able to support the political agreement reached in Bonn.

Senator Robert Hill, Australia’s Environment Minister, and I continued to work together well in Bonn, at times seeing issues differently but still managing to sustain the close co-operation that is a hallmark of the trans-Tasman relationship. Umbrella Group membership also meant co-operation with Canada was a feature of our efforts in Bonn, as it is elsewhere on many issues.

The United States delegation acted professionally. They did not seek to block or obstruct. In response other countries respected their position, while regretting it. The door was left open for the United States to re-engage on climate change issues. For New Zealand I can certainly say that we look to the day, not long in the future we hope, when the US will resume its place in the international process.

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

The Government has consistently said it intends to ratify the Protocol. With the decisions taken in Bonn, the case for ratification is all the more compelling.

I am not asserting for a moment that the Protocol is perfect. It isn’t. As it stands it will, at best, only slow the rate of climate change. But that misses the point.

The Protocol is the necessary first step in setting in place a global regime to address greenhouse emissions. While the US may wish to remain outside for the present, the agreement at Bonn showed clearly that other developed nations believe it is the best mechanism on offer.

From 2008 onwards — the beginning of the Protocol's first commitment period — we will be operating in a different world. We need to start adapting now.

An impressive example of forward thinking is now occurring in the US, despite the US Government's rejection of the Protocol. Thirty-three companies have signed on to the newly created Chicago Climate Exchanges, signalling their willingness to look seriously at market-based steps for limiting emissions through a voluntary cap.

The list of companies includes names like BP, Ford, DuPont, International Paper, and Waste Management. The Exchanges will enable them to get credits for voluntary reductions in emissions and then trade them, to find the most cost-effective way of achieving reductions.

To quote the leader of the project: "The private sector’s response to the proposal has been incredible. These companies really believe that a proactive approach to climate change advances everyone’s long-term interests. It’s simply good business."

Other companies thinking ahead are members of the Business Environmental Leadership Council in the US. That list includes some of the climate exchange members and other major players such as Toyota, Rio Tinto, Enron, IBM, Lockheed Martin. They have signed up to four clear 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.

These companies are alert to the importance of climate change and to the opportunities as well as the risks it presents. The trend is clearly in this direction. We in New Zealand would buck it at our peril.

I think the opportunities that will come out of addressing climate change will be an important part of the new knowledge wave. Officials have begun a process of working with the New Zealand business community to identify these opportunities, to find where this country’s best prospects lie and identify areas where Government can work with business to develop a successful "climate change sector".

With the key elements of the Kyoto Protocol’s rules finalised in Bonn, we now have enough assurance to enable us to move to ratification. Our intention therefore is to work towards having legislation passed by Parliament 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 at Rio that the world set in place the United Nations Framework Convention on Climate Change that underpins the Kyoto Protocol. The countries that met in Bonn hope to have the Protocol enter into force by that time.

I am in the process of seeking Cabinet approval for a work programme aimed at developing the ratification legislation and the policy decisions required for New Zealand to meet its obligations.

While the Government believes that New Zealand should ratify, we also understand that the issues are very big ones. We will be consulting widely and carefully before we take a formal decision to proceed with ratification.

The package of polices needs to be credible. The message I hear consistently from business is that the measures we take must be carefully balanced and integrated. That is precisely what we want to achieve.

The timetable for getting the necessary policy work done has been put under considerable pressure by the delay in securing international agreement on the Protocol's rules. There will be a lot of officials working nights and weekends over the coming few months to get the policy package finalised for consultation.

This compression means the legislation introduced next year will provide a framework for ratification, rather than set out chapter and verse of how, for example, emission trading will operate. Later there will be a second Bill. We are taking this two-step approach to ensure we do not crimp on the consultation we must undertake.

The National Energy Efficiency and Conservation Strategy will be crucial to getting early and on-going action in reducing emissions. The strategy could be described as a very large number of generally small steps, which together will start to redirect the way we provide and use energy.

I will be releasing the final draft of the strategy — which is, rather unfortunately, New Zealand's first — on September 27. Some aspects of it will be subject to further consultation, especially issues concerning new renewable electricity generation.

An important issue in the strategy is the relationship with climate change policies. Also linked is the question of whether we introduce a carbon charge before the commitment period.

The carbon charge issue is currently with the Taxation Review Committee, which is due to submit its final report to the Ministers of Finance, Revenue and Economic Development by the end of September. If there is a decision to introduce a carbon charge as part of our action plan for ratification of the Protocol, we will take that as a policy proposal into the next general election. The Government's policy is to introduce no new taxes before 2003 and that is not changing.

Some of the biggest decisions in front of us concern who takes responsibility for emissions in the 2008-12 period. Should management of emissions be the responsibility of businesses or sectors? Should the government take responsibility for some sectors? If so, how does the government ensure equitable treatment between sectors? How do we ensure that everyone has broadly comparable incentives to abate emissions?

Emissions trading is a significant part of the Kyoto mechanisms, designed to ensure abatement at lowest cost. But establishing trading mechanisms is easier and more sensible in, say, the energy sector, than it is in some areas of primary production. Those decisions are still in front of us.

Adapting to a new framework won’t be easy for everyone. But the Government is committed to setting policies in a manner that help firms reduce emissions in the most cost-effective way possible and with as little disruption as possible. That is what the flexibility mechanisms in the Protocol are for. Carbon trading will help us ensure that costs are kept to a minimum, while those incurred are a sensible investment in the future.

Two weeks ago I launched a process to secure Negotiated Greenhouse Agreements with significant emitters. Such agreements aim to secure lower emissions while ensuring the parties to them get fair credit for reductions. They will be an important point of engagement between the business sector and government as the policy process continues.

My message to the New Zealand business sector on climate change is simple: engage with the issue, understand your emissions and your abatement opportunities, look for the innovations and technological advances that will give you an edge, and contribute to the wider process of policy development. Do that and you’ll stay ahead of the game.

The same thinking drives our approach to international negotiations. New Zealand's watchwords in this process are flexibility and environmental integrity. That will remain the case as we move into the next phase of building on the agreement at Bonn, starting in Morocco in November.

Thank you.

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