The following is by Rod Oram and was in the Sunday Star Times today. If you are in business in New Zealand then you need to read this!
OPINION: NEW Zealand companies should worry a lot about the emissions trading scheme (ETS). Not because it will harm them. On the contrary, it will drive beneficial change for them and the economy if they play their cards right.
But because a large majority of them have barely even thought about it, let alone started to prepare for it. Worse, many of their Australian counterparts are far ahead of them, particularly in identifying the opportunities emissions trading is opening up for them.
This divergence between the two countries for both business and government was obvious at the fifth Australasian Climate Change and Business Conference held last week in Melbourne.
The tone was set early on by the two countries' climate change ministers. Australian government studies show that countries that act soon, reduce their long-term costs. They are the most competitive in a low carbon world, said Penny Wong, the Australian minister.
Australia intends to play an influential role in the run-up to the global climate change negotiations in Copenhagen in December and at the forum itself. While these strong words were clearly designed to help the government force opposition politicians into approving the Australian emissions trading legislation before Copenhagen, there was no doubting the government's commitment to ensuring Australia would benefit economically and environmentally from this revolution.
In contrast, Nick Smith, New Zealand's climate change and environment minister, offered a much more limited economic and political ambition.
His comments, such as the need to recalibrate the ETS in light of the recession and the unrealistic timetables for bringing sectors into the ETS, left the strong impression that the New Zealand government was planning to water down an already weak ETS once the select committee reports.
On the corporate front, a wide range of Australian companies expressed enthusiasm at the conference for getting on with the huge challenges of the huge shift to a low carbon economy.
Needless to say they were leaders. Across the Australian economy the level of engagement varies, said Professor Philip Adams, director of Monash University's Centre of Policy Studies. About one-fifth of companies were prepared, one-fifth were oblivious to the issues, and the rest somewhere between.
It's hard to assess the level of engagement among New Zealand companies. A few large ones such as Fletcher Building, Rio Tinto, Holcim, Air New Zealand and the electricity generators are on to the issues. But anecdotal evidence suggests that the vast majority are not.
Getting ready for the ETS is not easy. The legislative framework here and in Australia is not yet finalised. Once it is, there will still be rafts of regulations to devise.
Businesses would be making a huge mistake, though, if they believed the ETS will affect only the few hundred large emitters that will be directly engaged in it, or that time was still on their side. Indeed, the government might well delay the 2010 entry of electricity generators into the ETS. But as soon as legislation is in place, it will start affecting markets, business strategies, investment decisions and operations long before electricity and fuel prices rise once they are in the ETS. At an absolute minimum, all organisations need to start collecting data on their energy use and begin to work on achieving greater energy efficiency to help them deal with rising costs. These should be sensible actions all businesses are doing now anyway.
Companies should also begin investigating new technologies that will help them use all resources more efficiently, not just carbon from fuels and electricity generation.
Fletcher Building is one of the leaders among New Zealand companies on these issues. Jonathan Ling, its chief executive, had good stories to tell the Melbourne conference about its increasing use of wood waste as a fuel and of making fibreglass insulation from recycled vehicle and building glass, two developments that have delivered big gains in resource and energy efficiency.
Beyond simple efficiency lie limitless business opportunities in products, services and technologies that will shape the low carbon economy. Give us certainty of legislation and regulation and we will start accelerating these dramatic developments, business leaders said repeatedly at the conference.
Thankfully, certainty in both Australasian and global frameworks, might be closer than some imagine. In Australia, the Rudd government is politicking furiously to pave the way to trying to get its emissions legislation through the senate in November. Likewise, our government says it is determined to pass revisions to the ETS by the end of September. Bipartisan support is essential to give business confidence that the system will be a stable, long-term framework to underpin investment.
Charles Chauvel, Labour's climate spokesman, said his party would, in principle, support the legislation, as long as it did not significantly weaken the ETS, or much delay the entry of sectors into it. That declaration gives Labour some power to push back against any undue easing of the ETS that the government might be considering.
The global picture looks quite promising too, according to a variety of experts at the conference. While the odds on the Copenhagen negotiations achieving a full-blown treaty are virtually zero, there is a possibility that a protocol outlining the main architecture could be agreed. Developing it into a complete agreement could take another couple of years, a staged process similar to the one that delivered the current Kyoto treaty.
The odds on achieving a Copenhagen protocol were at least 50%, estimated Henrik Hasselknippe of Point Carbon, a global carbon market consultancy.
The odds would rise if the US passed climate change legislation by December, although the politics of that, particularly in the senate, is a big challenge.
The protocol would likely include a quantifiable greenhouse gas reduction target of 15% from 1990 levels by 2020 for developed countries such as New Zealand that are Annex 1 signatories to Kyoto; and reduction commitments from some developing countries under a new mechanism that allows each to specify what it believes it can achieve given its particular circumstances.
One of the new buzz phrases for such approaches is "nationally appropriate mitigation actions". It would include big progress on forestry that could see forestry credits gaining a share of up to say a third of the global carbon market trading by 2020, up from nothing now in the regulated markets.
Special treatment is also likely for some heavy emitting sectors. Under a no-lose approach they would have reduction targets, but not be penalised for failing to meet them. But they would have an incentive to do so they could sell emission allocations they had spare from going below the target.
But by far the single most important element of a protocol would be new mechanisms to channel money from developed countries to help developing countries invest in cleaner, more efficient technology.
Governments would supply a small part of the funding British Prime Minister Gordon Brown suggested in June a $US100 billion a year global facility. But it would be the private sector that would play by far the biggest role through the likes of direct investment in green projects that earn carbon credits.
Many more types of projects, credits, trading mechanisms and other tools are expected to develop quickly as international carbon markets grow very rapidly in scale and scope under Kyoto's successor treaty. Hopefully, such opportunities will not only encourage developing countries to take the first steps towards engaging in global climate change treaties, but they will also hugely reshape for the better the global economy and environment.
This is the future that we've barely begun to think about, let alone plan for.
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