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Cullen: Partners in sustainability

Hon Dr Michael Cullen: Partners in sustainability

Address to Federated Farmers National Council Conference, Icon Room, Te Papa, Cable St, Wellington. 10:00AM Tuesday 20 November 2007.

Good morning and thank you for that introduction.

Federated Farmers do not need me to tell you that this is a very important time for New Zealand’s farmers.

Our agricultural sector is changing and growing rapidly. Rising international commodity prices – not least of all for dairy – are providing new opportunities for farmers to invest in the expansion and improvement of their operations. The threat of global climate change is forcing the entire agricultural sector to think about how we will cope with rising temperatures and extreme weather patterns into the future. Global trade talks remain a source of frustration, but the real potential for major progress on eroding protectionism remains. The proposed changes to Fonterra’s capital structure are very significant developments for the single largest company in our economy.

In the face of all this change, opportunity, and challenge, one thing remains constant – New Zealand farmers are not just the backbone of our economy, they provide much of the heart and plenty of the brains too. What I hope I can demonstrate to you this morning is the depth to which the Labour-led government understands that truth.

I know Federated Farmers has a wide variety of issues that are of concern to your membership. From taxes to the RMA I am sure we will have a lot to discuss in the questions following my speech.

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But I want to focus my opening comments on New Zealand’s pursuit of sustainability and I want to recognise the enormous contribution farmers are making in that pursuit. It is, I feel strongly, the biggest issue facing our economy and the most important player in our economy, the primary sector. I also want to express this government’s understanding that the path ahead is not necessarily an easy one.

I want to start, however, with a reflection on the Labour-led government’s relationship with the agricultural sector, and particularly with Federated Farmers.

It was not too long ago that New Zealanders would have seen some reasonably angry exchanges between the government and Federated Farmers popping up on their television screens and in their newspapers. Now, I am not going to pretend that we will ever agree on the problems we have had in the past and I certainly will not pretend that the road ahead will always be characterised by constant agreement and consensus. Clearly there are issues today that we still do not agree on.

But I want to recognise that the relationship has improved and I hope you feel the same. Over the past two years my colleague Jim Anderton has been a tireless Minister of Agriculture, as was his predecessor Jim Sutton. Minister Anderton has been a constant advocate at the Cabinet table for the needs of the sector. He has made sure farmers’ views are heard on a wide range of issues and has made sure that every Minister is aware that the fate of our farmers will in many ways determine the direction of our nation.

I will add that with a Prime Minister who is the daughter of a dairy farmer and a Deputy Prime Minister who lives in the Hawke’s Bay, the issues of farmers and rural communities get a good hearing at the top of the Cabinet table as well.

A major step forward in the relationship between Federated Farmers and the government came on 20 September this year with the announcement of the Emissions Trading Scheme. The government listened to the concerns of the agricultural sector when designing the scheme, and agricultural groups engaged constructively with us. This was recognised by Charlie Pedersen’s press release welcoming the announcement on that day.

I do not have to tell you what a step forward it is for all of us that the government and Federated Farmers are putting our heads together on climate change issues rather than butting our heads together. I want to thank you for the way you have engaged with us in recent months. I know that concerns remain, but I hope you feel that this government is listening to what you have to say.

The need for listening, for consultation, and for constructive engagement is only going to get more important in the months and years ahead as we move forward in our pursuit of greater sustainability and carbon neutrality.

What I want to do today is give you an outline of how I, as Minister of Finance, see the role of sustainability in shaping the economy.

The government has been talking a lot about economic transformation in recent years. But farmers will know better than most that our economy has been significantly transformed over the past quarter century.

In that time New Zealand has seen two distinct periods of transformation. The first, beginning in 1984 and lasting through the 1990s, saw tariff barriers fall, agricultural subsidies eliminated, and our previously closed economy opened to the global market. It unfortunately also saw a huge increase in poverty, stubbornly high unemployment, and a general decline in the principle of fairness that had underpinned the New Zealand economy for generations. Farmers felt some of the sharpest edges of this period. Although the New Zealand agricultural sector that emerged is arguably the world’s strongest and most competitive, there can be no denial of the pain felt at the time.

The second phase of transformation, beginning with the election of the Fifth Labour Government in 1999, has sought to restore the place of fairness in our economy. By focusing on fair labour laws, support for families and seniors, and investing in skills and education, we have achieved a great deal.

  • At 3.5 per cent our unemployment rate is the lowest on record and the envy of the developed world

  • 360,000 jobs have been created and more New Zealanders are in work than ever before

  • We have seen the longest period of sustained economic growth in more than a generation

  • New Zealand’s GDP is now 28 per cent larger in real terms than it was in 1999

  • Wages are up and profits are up more

  • Work stoppages are down

  • Over 100,000 children have been lifted out of poverty

  • Regional economies that were in decline are now thriving

And as a result of this success, we can broaden our sights even further.

If the first wave of economic transformation applied only a policy test of growth, and if the second wave added a focus on fairness, the next wave of transformation will be about building an economy that is strong, fair, and sustainable.

I believe that pursuing sustainability is an enormous economic opportunity for New Zealand. We have a real chance to be an example to the rest of the world on how to deliver more jobs, higher wages, and higher profits all while protecting the environment.

Already our firms and our farmers are seizing this opportunity.

Our primary sector industries are supporting the research and innovation which will help lower their greenhouse gas emissions.

The wine industry wants all its businesses in accredited sustainability schemes by 2012.

Air New Zealand is trialling biofuels.

The tourism industry has put sustainability at the heart of their new strategy released earlier this month.

As Federated Farmers has pointed out, New Zealand farmers are already among the best in the world at producing the maximum amount of food with the smallest carbon footprint.

The list goes on.

What is interesting about all of this is that it is happening before the government is introducing a price on carbon through the Emissions Trading Scheme. Businesses, farmers, and communities in New Zealand are leading the world in sustainability and pushing ahead with a transformation of our economy as we speak.

The reason is simple. The vast majority of New Zealanders – including the members of Federated Farmers – know that the threat of climate change is real. And we all are beginning to realise that New Zealand is more vulnerable than many countries.

Some of the clearest evidence of this came from the Stern Review, released in October last year. It showed that if climate change is left uncontrolled, global GDP could fall by as much as 20 per cent per head. Countries like New Zealand that are so dependent on our primary sector would be particularly vulnerable.

But even if you don’t look at the numbers, the threat of rising sea levels and extreme weather patterns no longer seem as distant as they once did.

It is true that New Zealand is only a very small contributor to global emissions. But those who are still calling for New Zealand to free ride on the back of the efforts of other nations completely misunderstand the way climate change is influencing purchasing decisions around the world and will increasingly influence the competitiveness of firms.

There is a growing understanding of the challenges posed to our exporters by the misleading food miles debate, which must be seen as a very serious warning. We all know that the food miles debate is nothing more than neo-protectionism. A Lincoln University report completed last year showed that our agricultural exports result in fewer emissions than the same primary products in Europe, even when you account for travel distances to eventual markets.

When food miles first gained a significant profile last year, Jim Anderton and Trade Minister Phil Goff wasted no time in moving to point out the argument’s illogical foundations. Both here and overseas, the Ministers made it clear that New Zealand would not allow a new wave of protectionism to be built up against our agricultural commodities. You can be sure that our government will continue to fight against the threat that ill-informed constructions like food miles pose to our farmers and our economy.

But the lesson of food miles is a serious one that is not going away.

Our long-term economic competitiveness will be increasingly grounded in the success of our clean and green national branding. If we expect people to continually buy our products, if we want a steady increase in the number of foreign tourists who fly to New Zealand, and if we want to be seen as an acceptable place for foreign investment, we cannot allow any questions about our sustainable credentials to linger.

We must pursue sustainability in every way and we must be seen internationally to be pursuing sustainability in every way. That means support for domestic policy like the Emissions Trading Scheme, home insulation programmes, sustainable government procurement, energy efficient building code changes, pastoral emissions research, waste minimisation, public transport investment, renewable energy generation, and energy conservation campaigns.

Again, the threat is real – to our economy, to our environment, and to our way of life. And it is leadership on all levels – from families, from business, from farmers, and from government – that is required to combat it.

The announcements made by the government over the past few months are fundamentally about supporting this leadership.

The Emissions Trading Scheme is a major step forward in our efforts. Despite some of what has been said by our critics, the scheme will not see New Zealand out in front, ahead of the pack and on our own in the fight against climate change. In fact, this is one area where we are not yet part of the leading pack. The European Union and a number of American states already have emissions trading schemes. Australia looks set to head down this road as well, regardless of who wins this week’s Federal election.

What will make our scheme world-leading is its comprehensive nature. It will include all sectors of our economy and all greenhouse gas emissions. This will have enormous benefits for the international branding of our agricultural products and for our entire economy, and will enhance our diplomatic standing as we push for all nations to do their part to combat climate change.

It will of course involve major challenges for our farmers and you will not hear any representative of the Labour-led government underplay those. The primary sector is the biggest sector in the New Zealand economy and accounts for half our greenhouse gas emissions. There can be no ignoring that fact.

What I have found interesting over the past few months is that the government has been accused in some quarters of letting agriculture “off the hook” by not bringing the sector into the Emissions Trading Scheme until 2013. This could not be further from the truth. The government feels that the five-year lead-in for agriculture is as long as can be reasonably provided, but we also know the enormous amount of work farmers have in front of them.

The reality today is that the only straightforward way to reduce emissions on our farms is to reduce production. The impact on our economy of such a step would be very negative and we must explore other options.

From 2013 the agriculture sector will be expected to not only meet its increase above 2005 emissions, but also progressively meet a greater proportion of its total emissions. We have made an in principle decision that all sectors of the economy will have to meet the costs of their total emissions from 2025.

We have not yet decided whether responsibility for emissions will lie at the processor level, with individual farmers or with levy-funded industry organisations. We will be consulting widely on this issue over the next year. But it is clear that the flow-on costs from ETS will affect everyone in the sector and we must all pick up the pace in finding ways to continue the strong growth in agriculture while substantially reducing emissions, especially from livestock.

To do our part to assist the sector, Jim Anderton has announced that the government will invest $175 million over the next five years on a plan of action on land management and climate change. The plan will focus on how the sector can adapt and prepare for the future and will be led by a group of representatives from across the primary industries.

A key element of the plan centres on making sure New Zealand continues to be the world leader in agricultural emissions research. The emissions mitigation techniques being trialled on our farms around the country are at the cutting edge of pastoral research, and the Labour-led government will invest $45 million over the next five years to accelerate progress in this area.

The action plan also includes over $40 million for an eight year programme of technology transfer and education and a $10 million investment in commercialisation and research into bioenergy and energy efficiency opportunities in the sector.

What I hope you take from all of this is that while we know a lot is being asked of New Zealand’s farmers, the government is serious about doing our part to help you to continue to be the world leaders in sustainable agricultural practice.

Fighting climate change is about protecting our economy from real threats posed by rising sea levels and changing weather patterns. Pursuing sustainability is in many ways about protecting our economy from the threats to our clean and green branding and those posed by ill-informed arguments like food miles. And in building our profile as world leaders in these efforts, New Zealand has a chance to transform our economy and seize major opportunities for growth.

For farmers the stakes are high, but I believe strongly that the opportunities presented by greater sustainability and the real risks of inaction have built a compelling case for taking action. What I can assure you is that the government is serious about working with you on these issues.

Federated Farmers will play an important role in the months and years ahead. I hope very much that what we are experiencing now is a renewed spirit of partnership between your organisation and the government on the challenges facing the primary sector and by implication our entire economy.

Again, thank you for your time and I look forward to your questions.


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