Pete Hodgson: Climate change: impacts and opportunities

[Address to New Zealand Water and Wastes Association's '2003 Environment Summit', Duxton Hotel, Wellington]

Mark Twain is quoted as saying that everybody always complains about the weather, but nobody ever does anything about it

If he were still alive he might be pleased by the current international effort to do something about the weather — or more accurately the world's climate.

In December 2002 New Zealand ratified the Kyoto Protocol. We joined more than 100 countries, representing over two thirds of the world’s population, in seeking to reduce the rate of global warming.

I’m here to talk about why the Government has ratified the Protocol, how New Zealand will meet its Protocol obligations and the impact the Protocol will have on this country and the world.

But first let me congratulate the New Zealand Water and Wastes Association for your part in reducing greenhouse gas emissions.

About 6% of New Zealand’s methane emissions come from landfills. And since 1990 gross methane emissions from landfills have increased about 17%.

But thanks largely to the efforts of Association members in diverting organic waste and capturing emissions, New Zealand’s net methane emissions from landfills have decreased since 1990 by close to 20%.

That is a useful achievement and a profitable one for the waste management business.

The use of landfill gas to generate electricity shows how innovative waste management makes economic sense.

A report on new renewable energy sources done for the Ministry of Economic development last year estimated the potential for new landfill gas generation in the coming decade at 13 megawatts, or 100 gigawatt-hours a year at low cost.

That is a small but useful source of energy for the nation, revenue for waste managers and reduced greenhouse gas emissions.

New Zealand needs more businesses to wake up to the opportunities that arise from the transition to a low-emission economy.,

By ratifying the Protocol New Zealand is committed to reducing greenhouse gas emissions to 1990 levels, on average, over the five years 2008 to 2012 — assuming the Protocol comes into force.

We have accepted this commitment because there are compelling environmental and economic reasons for New Zealand to support international action on climate change.

This country owes its status as a developed nation to a stable, equable climate that is ideal for pastoral farming. This means climate change is, profoundly, an issue of economic security for this country.

Do not be fooled by sceptics. Climate change is already happening.

The evidence extends from the bleaching of coral reefs throughout the Pacific, to the retreat of glaciers in the Southern Alps, to the crumbling of homes and roads in Alaska as the permafrost melts.

For those who, like myself, like making decisions on scientific evidence the next speaker, Dr Greg Ayers will provide you with a feast of scientific information.

Climate change is also a problem worth solving. It is true that New Zealand receives some initial agricultural benefits from a warmer climate, with possible increases in the growth rate and range of some crops. There will be opportunities in those changes, and we would be foolish not to make good use of them when they occur.

But floods and droughts are expected to become more frequent and more extreme. Biosecurity will come under increasing pressure from subtropical pests and diseases. Sea level rises would create problems with saltwater intrusion into groundwater, as well as threatening infrastructure through eroding coastlines.

Further problems with water supply and infrastructure would arise from higher rainfall in the west of the country and drier conditions in the east. New human health risks would arrive from pests and diseases, such as dengue fever, that presently thrive in warmer countries. Native species would be also threatened by climatic changes in what remains of their habitats.

Climate problems can be very, very expensive. Flooding costs this country an estimated $125 million a year, not counting the millions spent on flood protection measures and insurance. In 1997, floods cost our agricultural industry an estimated $1 billion. The worldwide reinsurance sector, has sounded repeated warnings that the growing numbers of weather-related disasters are becoming less and less insurable.

The costs of inaction on climate change are essentially inestimable, but there is good reason to expect they would be huge. And because global warming is a cumulative process, the costs only magnify with time. Doing nothing is not the low-cost option.

Remember too that we are a major supplier of food to world markets, many of them sophisticated and increasingly influenced by perceptions of environmental integrity. A positive response to climate change will underscore that integrity. But ducking responsibility on climate change will not go unnoticed. Neither can we duck our responsibilities towards our Pacific Island neighbours, many of whom are likely to be hit much harder by the effects of climate change.

If we accept that the question is not whether to do something about climate change, but what to do about it, then we are confronted with the Kyoto Protocol.

Climate change is a global problem, which means concerted international action is the only remedy. And the Protocol is simply the only concerted international action on offer.

The Government has adopted a broad package of policies to enable New Zealand to meet its Protocol emissions target. There will be a price on emissions from 2008. An emissions charge on fossil fuels will increase their cost relative to other energy sources.

The beauty of pricing emissions to achieve reductions is that it works. An emissions charge lowers the relative price of lesser emitting processes and technologies and encourages their greater use.

Importantly, an emissions charge induces companies to make emission cuts where they are cheapest. Firms can therefore decide how they will reduce emissions, or simply pay the emissions charge.

As the emissions charge is to change behaviour rather than to raise revenue the Government will be recycling charge revenue back to those from who it was collected. The mechanisms for revenue recycling are still being determined, but the Government is committed to making recycling happen.

In creating an emissions charge the Government recognises that for some firms the cost would threaten their competitiveness with producers from countries with less rigorous climate change policies.

Such “at risk” firms will be able to enter a Negotiated Greenhouse Agreement with the Government, under which they will receive an exemption from the charge in exchange for moving towards world’s best practice in emissions management.

The Government will also be supporting initiatives to encourage emissions reductions, through what we are calling a Projects mechanism.

We have an open mind on the kinds of initiatives that will qualify, providing they meet the fundamental criterion that they are not just business as usual. They might be projects involving individual firms, groups of firms, or industries. They might involve innovations at the smokestack end of a business, or in energy supply or other inputs.

The first example of how Projects will work was announced just a couple of weeks ago. The Government has agreed to provide carbon credits to the electricity generators Meridian and TrustPower, in recognition of the emission reductions that will arise from two new wind farms.

The companies get financially valuable credits – or more precisely, at this stage, promissory notes for those credits. The Government gets the comfort that those windfarms will reduce New Zealand's future need for thermal generation and the greenhouse gas emissions it causes.

Those two deals came early, because those companies were quick off the mark. Others will come forward when we launch an exploratory Projects round some time around the middle of this year.

The projects mechanism is important to New Zealand for more than just climate change. I hope it will play a key role in determining our energy future. The extent that new renewable electricity generation is brought on in the years ahead will determine our ability to deal with the uncertainties due to the winding down of Maui.

The same dual role is played by the National Energy Efficiency and Conservation Strategy.

If we achieve the target of a 20 percent improvement in energy efficiency by 2012, we will have cut by a third our estimated excess of business-as-usual greenhouse gas emissions over our Kyoto target. We will also have improved our ability to maintain secure energy supplies by starting to decouple economic growth and growth in energy demand.

Because responding to climate change means changing behaviour, the Government is committed to providing relevant information on emission reduction — and helping councils, businesses and individuals to make use of this information and bring in changes.

These initiatives include partnerships with Local Government New Zealand through a “Communities for Climate Protection” programme that will begin in July this year. Initially this will involve partnerships with 10 leading councils in a voluntary programme for local government to help measure and reduce emissions. If you would be interested in joining in this programme then please contact Local Government New Zealand.

I want to close by stressing again the opportunities that the Kyoto Protocol presents.

The Protocol will change our energy use habits for good, by accelerating the shift away from finite fossil fuel resources to renewable energy and encouraging more efficient use of fossil fuels while they remain important.

The countries that ratify the Protocol will be those where the sustainable energy technologies of the future are most rapidly developed and adopted. The Kyoto stragglers will risk being spectators to growth and innovation elsewhere.

In the post-Kyoto world there will be international demand for new technologies, and improvements to existing ones, that reduce greenhouse gas emissions and make more efficient use of energy. Industrial processes, consumer products and agricultural technologies will be redesigned. There is no reason why New Zealand should not be a country that originates and profits from such advances.

This is particularly true concerning agricultural technologies: no other developed nation has a greenhouse gas profile as heavy in agricultural emissions as we do, which means none has the same incentive to develop processes and technologies for reducing agricultural emissions.

I hope that the members of the Water and Wastes Association will continue to be amongst the innovators in responding to these opportunities. Your record suggests that you will — and that you will profit from the experience.

Thank you for your attention

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