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Parker: The way forward on climate change

Hon David Parker
Minister responsible for Climate Change issues

6 October 2006

Speech notes

The way forward on climate change
Address to the Climate Change Policy Symposium
8.55am, Wellington Convention Centre

Good morning. I’m delighted to be joining you today. My thanks to Jonathan Boston of the Institute of Policy Studies and welcome to our distinguished guests, particularly, Dr Bert Metz, co-chair of Working Group 3 of the IPCC; Professor Michael Grubb, Chief Economist of the UK Carbon Trust, and to Dr Steve Hatfield-Dodds, convenor of the CSIRO Integration Network in Canberra. You are most welcome in New Zealand.

Today's symposium is about the policy challenges created by climate change nationally, and internationally, and this provides useful parameters for my speech.

Climate change is widely recognised as a serious global problem. As scientific understanding of climate change deepens, the trend is for the expected impacts to be both more serious, and to happen sooner.

There is a growing sense of urgency among governments and citizens that action needs to be taken now.

Take Scotland for example. This week, the Scottish Environmental Protection Agency released a report stating, and I quote: "climate change is leading to changes in temperature, rainfall patterns, snow cover, wind and storm events, flooding and coastal erosion. All of these could have significant impact on Scotland's environment, economy and people."

You may think the Scots might welcome warmer weather, but the report highlights the significant impacts these changes could have on their environments as well as their economic and social well-being.

Climate change is an issue which we cannot solve overnight, or with any one policy. It is an intergenerational issue which we need to address by ensuring that all policies which impact on how we live on this planet take climate change into account.

So we have changed the way we address the problem.

First, we recognise that people need to see climate change as something real - and something they can personally do something about.

So we have been announcing a range of initiatives which will gradually change the choices we all make about the transport we use, our heating, how we build our homes and so on.

Then we need to address the overall economic issues - like how to bring our productive sectors into a better balance with respect to emissions. We have international obligations arising out of the Kyoto Protocol which we intend to meet, but we need to ensure we do this in ways which don't unfairly penalise any particular export sector, nor our exporters overall.

And, we have to prepare our economy for the way the world is going to be in the future. The existing Kyoto protocol commitments apply until 2012. The world is still deciding what the rules should be after that.

Whether or not we will have Kyoto II, or some other agreement, we think it is a fair bet that by that time the world will be moving to a position where greenhouse gas emissions carry a cost. Our economy will need to be positioned to deal with this.

Before I set out how the Labour-led government intends to respond to these challenges, I want to commend you for holding this symposium.

It's good to see this level of debate occurring in New Zealand. As Tony Blair said during a similar event in March, none of us want on our conscience, or the conscience of our generation, that we were told what this problem was, but did nothing about it, leaving our children, and their children, to deal with the consequences.

That is certainly not the intention of this government.

In August I spoke about climate change to the New Zealand Business Council for Sustainable Development.

In that speech I spoke of the need to build a consensus about how we should collectively respond to the challenges posed by climate change. That need hasn’t changed. It is not an issue the government can deal with in isolation.

As a biologically based economy, and trading nation, New Zealand's environmental and economic interests are threatened by climate change. I recently released the "Energy Outlook" report. It projects that 'business as usual' will lead to a 30 percent increase in New Zealand's energy-related greenhouse gas emissions in the next 25 years.

Given the imperative for the world to reduce greenhouse gas emissions, and the likelihood, in future, that emissions will carry an economic cost to the country, it is vital that New Zealand alters its emissions path.

How does the Government intend to respond to these challenges?

We have developed some strategic principles and assumptions which will underpin current and future climate change initiatives. These strategic principles include:

1. Recognising that while action to reduce greenhouse gas emissions will have moderate costs, the predicted costs and risks of inaction are unacceptably high
2. Recognising that effective international action is needed to reduce global greenhouse gas emissions, New Zealand should help by reducing its own emissions, and by encouraging other countries to act.
3. Recognising that New Zealand's response should maximise the economic advantages of using energy and resources more efficiently.
4. Agreeing that our response should start with the most easily-achieved and least-cost solutions.
5. Agreeing that a combination of sectoral and economy-wide measures, including voluntary, price-based and regulatory measures, is likely to be needed, and
6. Agreeing that all sectors of the economy should play an equitable part in the nation's response to climate change, reflecting the fact that some sectors are able to achieve emissions reductions more easily than others. It's important to consider there are sectors in which there are few low-emissions technologies available at reasonable cost.

To these principles we have recently added two more.

First, when considering what action to take on climate change, policies which have other wider co-benefits will be given priority, like enhanced public health, improved land and water management, reduced energy wastage, and improved energy security. We will look to initiatives that also have a positive climate change effect.

Second, we agreed that our response to climate change must include policies to help New Zealand adapt effectively to the impacts of climate change.

The pace and extent of New Zealand’s response needs to take account of our national interest. It should be in step with what major emitters are doing - including our major trading partners. This is in line with the long-term position being taken by other developed countries. Acknowledging this reality is important to building the consensus we desire for a durable domestic climate change response.

So what is the government doing?

At the beginning of this speech I highlighted the need for people to see climate change as real, and as something they could personally do something about.

Recent initiatives to this end include:

- Proposals for a biofuels sales obligation. Amongst other things, we are seeking feedback on whether a 2.25 percent biofuels minimum is the right level to start with for transport fuels.

- Jim Anderton's launch of the Permanent Forest Sinks Initiative creates an incentive for forests to be planted on erosion-prone land.

- Along with Greens' co-leader Jeannette Fitzsimons, we have announced a commitment to increase the uptake of solar water heating in New Zealand homes.

- My colleague Clayton Cosgrove this week announced additional measures to improve the energy efficiency of buildings. Measures include improving insulation standards in new homes. Lighting, heating and ventilation of commercial buildings, and consideration being given to energy efficiency standards for water heating.

All of these reduce or sequester greenhouse gas emissions.

Another colleague, David Benson-Pope, will soon be announcing greater leadership from central government to reduce emissions from its buildings, and transport fleet.

I started today by speaking of the need to build a consensus and to empower people to make changes to their everyday lives which, over time, will have a positive effect.

The initiatives I've just highlighted are but some examples of concrete actions that this Government is taking to address climate change, and which can help every New Zealander make the necessary changes.

It is easy for the issue of climate change to become overwhelming, and for people to throw their hands up in the air and do nothing.

This government recognises it has a role to play to motivate businesses and citizens to make the incremental, but vital, changes needed to make a difference.

Using energy more efficiently means we pay less for electricity, and petrol. Tuning our cars improves our air quality, and our health. Insulating our homes means they are warmer and we get sick less often. Planting trees stops erosion, and improves water quality.

These are all sensible actions that we might want to do anyway, to save money and improve our quality of life. They also contribute to the fight against climate change.

The 10-page document distributed to you, summarising the large number of programmes with climate change benefits the government has underway, illustrates the breadth of endeavour required.

Making changes can be challenging. But with change comes opportunity.

Climate change is no different.

For example, we may experience longer growing seasons in some areas. This will give New Zealand the potential to develop new crops or increase the productivity of existing crops.

The New Zealand Wine Company, producer of Marlborough's award-winning Grove Mill and Sanctuary wines, has already seized an opportunity created by the new international environment.

The company has just released the world's first carbon neutral wine, which places it at the cutting edge of global sustainability.

Looking at the broader work we are doing in economic transformation, New Zealand also has the potential to be at the forefront in the development of low-emission technologies, especially in agriculture.

We will be well placed to take advantage of these opportunities if our policy framework around climate change is in place and working well.

I have outlined initiatives already underway, but there is more in the pipeline.

For example, policies to encourage the planting of forests, and to discourage deforestation. Ways in which the agricultural sector can contribute, given the fact that farming accounts for half of all New Zealand's greenhouse gas emissions.

All of these measures are driven by the strategic principles I outlined earlier.

It is inevitable that some climate change is on the way due to the greenhouse gas emissions which have already occurred or undoubtedly will.

We need to continue to work together to help New Zealanders prepare for and adapt to climate change.

This means better coordination between central government agencies, new partnerships with local government, the agricultural sector, insurers, engineers, and NGOs.

This will create greater understanding of the risks, and what should be done to manage them.

To support this work, more information will be made available about climate scenarios to raise awareness amongst all New Zealanders.

Engaging internationally is an essential part of the government's response to climate change.

To this end, the government will be exploring options to create links with the Asia Pacific Partnership on Clean Development and Climate. Its current members, China, India, Japan, South Korea, Australia, and the United States, represent half of the world's economy and population, and account for half of its energy use.

I must emphasize that this does not signal a move away from the Kyoto Protocol or emissions reduction targets. However, in view of the scale of the challenge posed by climate change, and New Zealand's desire to use all means to respond to it, there could be value in having closer links with this Partnership.

On the transport front, we have a very real challenge. The Energy Outlook to 2030 shows transport emissions increase by 45 percent over the next 25 years if we do not change our policy settings. We cannot - and will not - let that happen.

Biofuels and plug-in hybrids powered by renewable electricity will both be needed.
The government is planning further measures to reduce carbon dioxide emissions in the transport sector. These include mandatory fuel efficiency labelling at point of sale, so that consumers are empowered to make an informed choice every time they buy a new or used vehicle.

Other measures will be introduced to improve the efficiency of the vehicle fleet, and we expect to make announcements about this in the coming fortnight.
All of this is on top of a six-fold increase in funding for public transport over the last seven years, and the purchase back of the rail corridor and track.

Looking to the future, I would like to take this opportunity to make it clear that the government recognises that economy wide price-based measures for emissions are likely to form part of the mix of post 2012 policies.

The types of measures that will need to be considered are mechanisms such as emissions trading, also known as cap and trade, and offset planting of forests that sequester equivalent quantities of carbon.

Let me say a little more about this. The world economy is moving towards the cost of reducing emissions being devolved to emitters. This is another way of saying that in the future, emissions are likely to carry a cost. This is not a New Zealand government initiative. It is an international reality.

I have met with most of the energy intensive multinational companies operating in New Zealand. They are being told by their overseas owners that they must minimise their direct emissions, and their indirect energy related emissions, because of the cost of future emissions.

In a world where emissions carry a cost, it is the government's job to work out how to minimise and apportion that cost.

We will all pay the cost of greenhouse gas emissions, one way or another, so the question is how to allocate it fairly. Everybody will be affected, and we cannot, in the long term, allow any sector to expect to be exempt.

However, sectors where it's harder to reduce emissions will not be expected to reduce their emissions as quickly as those who can do so more easily.

It's true that action to reduce greenhouse gas emissions will have some moderate cost, but we should not overstate it. We should also remember that the predicted costs and risks of inaction are unacceptably high.

The principles that we are applying to our long-term policy are these:

- While there is uncertainty about the exact nature of future international climate change obligations, it is reasonable to expect that in the future there will be increased international effort to reduce emissions, and this will, directly or indirectly, have a moderate economic cost;

- As the world’s major industrialised economies move towards a low-carbon future, countries can apply price-based measures to support least-cost mitigation. This can lower the risk of companies being locked into high emissions technologies, which would compromise their international competitiveness;

- In the design of New Zealand’s climate change policy, it is important to recognise the international context, including the extent to which the world’s major emitters take effective action;

- The government thinks it is likely that a mix of sectoral and economy-wide measures will be needed, including price-based, regulatory, and voluntary measures.

- In the longer term, a broad price-based measure such as emissions trading could potentially be applied across major emitting and sequestering sectors of the economy;

So, while no decisions have been made, the government does recognise price-based measures applied broadly across the economy are likely to form part of the policy mix for the period after 2012.

A level of uncertainty remains about the shape of future international agreements on climate change. Because of this uncertainty, it will be desirable to build flexibility into long-term policies so that they can be adapted to changing conditions. This may mean conditionality as to when, or how stringently, any particular policy measure might be applied.

Against this, the clearer we can be now, the greater the certainty we can provide for investment and business planning.

Shorter-term measures developed under sectoral work programmes should not preclude the implementation of broad price-based measures in the longer term.

These are complex issues that we must engage with.

Contributing to the debate will be the Climate Change Advisory Panel, which I will soon establish. This underlines the Government's commitment to building a broad consensus on these issues.

As Kofi Annan emphasised this week in the United Nations, climate change must be viewed as much more than an environmental issue.

As the Secretary General stressed, climate change has potentially profound implications for jobs, growth, health and almost all other aspects of human well-being, including national security.

This Government wants to ensure that the unique quality of life we enjoy as New Zealanders is passed on to our children, and our children's children.

We have that obligation, and with the whole of government approach I have laid out today, supported by everyday choices made by all Kiwis, we have the chance to make a difference.


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