Pete Hodgson Speech: Why climate change matters

[Address at Dairy Expo 2004, TSB Stadium, New Plymouth]

For those of you who don't know me, or came in by mistake thinking I was going to be Ian Jones, I'm the Minister of Energy, Science, Fisheries and a few other things including climate change policy. It's that last one that has taken me up close and personal with dairy farmers and brought me the invitation to speak here today. So let's talk about the weather.

I'm not about to tell you that the storms we're going through now are the result of climate change. I'm not a climatologist and I don't think even a climatologist would offer any conclusions on that score.

But what I will tell you – and what a climatologist would tell you – is that this is what climate change looks like. One of the significant consequences expected from climate change is an increase in the frequency and severity of extreme weather events.

This is why we use the term climate change in preference to global warming, because it more accurately captures the range of climatic effects that the enhanced greenhouse effect is expected to produce. A long-term increase in global average temperatures is the key indicator and consequence of the build-up of greenhouse gases in the Earth's atmosphere. But the expected effects of that change on the world's climate systems are multiple and diverse.

The New Zealand dairy industry is founded on the superb conditions this country's climate provides for growing grass. This is why climate change matters to dairy farmers and – because of the economic importance of your industry – to New Zealand.

We know climate change is already under way on a global scale and there do appear to be some measurable effects emerging in New Zealand. A study done for the Ministry for the Environment said a southward shift in subtropical pasture species might be one indicator, along with an increased frequency of warmer winters in recent decades. It also suggested that a recorded halving of the planted area in kiwifruit in Northland over the six years to 2001 could be at least partly attributable to a warming climate, leading to reduced productivity.

More than one farmer has suggested to me that a little global warming might not be such a bad thing for farming. And it is true that warmer average temperatures could bring some benefits, including better pasture growth in milder winters.

Some of the predicted impacts of a moderate rate of climate change for Taranaki include changes in average temperature and rainfall patterns, and a rise in sea levels. In general, Taranaki, like much of the west coast of New Zealand, is likely to become warmer and wetter – perhaps up to 3°C warmer, on average, over the next 70-100 years.

That might not sound like much, but it compares to a temperature increase in New Zealand during last century of about 0.7°C. And to put these figures in perspective, the 1997/98 summer, which by New Zealand standards was particularly long, hot and dry, was only about 0.9°C above New Zealand’s average for the 1990’s.

Taranaki could be up to 20% wetter with more varied rainfall patterns. That means more rain for the pasture, certainly, but it also means flooding could become up to four times as frequent by 2070.

We've been looking at another reminder in the last few days of the damage associated with extreme weather events. The cost of dealing with stock losses, replacing or repairing damaged roads, bridges, houses and stormwater drains, and dealing with increased soil erosion and loss of soil nutrients can be formidable. And the key thing to remember about climate change is that it is a cumulative process. If the rate and magnitude of climate change is not slowed down by a reduction in greenhouse gas emissions, any beneficial effects are expected to diminish while the costs and risks continue to increase. The negative effects predominate in the longer term.

This is why New Zealand can't afford to ignore climate change – and why we can't refuse to play our part, however small, in trying to do something about it. We are a small nation, and we can do very little on our own, but we simply cannot ask the rest of the world to act while doing nothing ourselves.

By thinking ahead and acting with foresight, we can also seize opportunities to maintain or secure competitive advantage in global markets.

Acting on climate change is primarily about changing our energy habits, particularly our consumption of fossil fuels. Humans invented the fossil fuel economy not that long ago and one day we will look back at it as we look back at the ages of horse and sail power. It is important that New Zealand catch the next wave in energy technology, rather than watch it pass by. The countries who catch that wave will be those that are actively moving towards renewable and low-emission energy, and pursuing innovation and efficiency in the way they use energy and natural resources.

The Government decided its climate change policies in late 2002. They work across the economy, to spread costs and opportunities as widely as possible.

No doubt many of you will know something about the policy concerning agriculture, and I will talk about that shortly. But first I want to mention the policies concerning other sectors, because I have been made aware in a number of conversations with farmers that their breadth and even their existence is not widely understood.

The foundation policies of our response to climate change are long-term strategic programmes that serve a number of other useful purposes as well as reducing greenhouse gas emissions. They are the National Energy Efficiency and Conservation Strategy, the Waste Strategy and the Transport Strategy.

Each of these is detailed and wide ranging, so I won't try to summarise them except to say they are concerned with improving energy efficiency and increasing renewable energy, reducing pollution and waste, and improving the efficiency of our transport systems, including public transport. They are all funded, or mostly funded, by the Government. Between them, the foundation policies are expected to reduce New Zealand’s excess emissions over 1990 levels by about a third over the next decade.

Another key policy is the proposed carbon charge, which will apply to fossil fuels and industrial emissions from 2007/08. This charge, of no more than $25 per tonne of carbon dioxide, will increase the price of fuels like petrol, diesel, gas and coal, making cleaner energy sources more competitive. A small part of the revenue will be used to fund climate change policies, essentially for the support of clean energy options, and the bulk will be recycled back to the economy — for example, through the tax system.

Large energy-intensive businesses whose international competitiveness would be threatened by a carbon charge have the option of entering what we call a Negotiated Greenhouse Agreement with the Government. This is a binding agreement that commits the firm to moving towards world's best practice in managing its greenhouse gas emissions. In return, the Government provides a full or partial exemption from the emissions charge.

An NGA is not a 'get out of jail free' card for large businesses – far from it. Moving towards world's best practice in managing emissions will require investment by the companies concerned, often significant investment over an extended period. In 2003 the Government signed the first NGA with the New Zealand Refining Company, which runs the Marsden Point oil refinery. We are currently entering negotiations with six more major corporates and processing further applications.

A further important climate change policy that is progressing well is a programme called Projects to Reduce Emissions. Through a competitive tendering process fifteen energy projects, including wind farms, hydro-electricity schemes and industrial heat plants, have won a share of ‘carbon credits’ from the Government for reducing emissions of greenhouse gases.

Some of these projects could start reducing emissions of greenhouse gases into the atmosphere as early as next year. What’s more, the bulk of them will help to make New Zealand’s electricity supply more secure in the next few years.

The key feature of the Projects programme is that it enables clean energy projects to proceed sooner than they otherwise would. The carbon credits are tradeable internationally – indeed some have already been sold – and this adds value to projects that are otherwise economically marginal. Essentially the Projects policy offers tangible rewards for developments that take us further towards a sustainable energy future. Wind power, for example, is expanding very rapidly in this country as a result of the availability of carbon credits. It is about to quadruple in the next few months.

Now, agriculture.

One tonne of methane, the chief agricultural greenhouse gas, has the global warming potential of 23 tonnes of carbon dioxide. A dairy cow produces about 75 kilograms of methane a year, equivalent to over 1.5 tonnes of carbon dioxide.

The cow, of course, is only doing what comes naturally. But people are inclined to forget, it seems, that farming is an industry. We cleared the land, sowed the pasture, bred the stock, and so on. It’s a human business, not a natural one. We're pretty good at it, which is why atmospheric concentrations of methane increased by 150% globally over the last 250 years, while carbon dioxide concentrations increased by 30%.

About half New Zealand's total greenhouse gas emissions come from agriculture, which is unique for a developed nation. Most of the western world is far more industrialised than this country and carbon dioxide, from transport and industry, makes up the bulk of their emissions.

If we want to contain and reduce New Zealand's greenhouse gas emissions, as we do, obviously we can't ignore emissions from agriculture. Just a small success in cutting methane and nitrous oxide would deliver us a useful improvement at a national level. But the problem is that there are currently no readily available, practical ways for farmers to significantly reduce emissions, apart from the undesirable one of reducing stock numbers.

That is why the Government was clear from the beginning that agricultural emissions would not be taxed in the way that emissions from fossil fuels and industrial processes will be. Emissions charges make sense where they provide an incentive for emitters to reduce emissions by improving efficiency, adopting new technologies, switching fuels or other measures. It does not make sense to tax emissions from a sector that has no practical options for cutting them. Instead, the Government decided that the right approach for agriculture was to pursue a solution through research. And we decided that the agriculture sector should fund most of this research, not only because it should take some responsibility for its emissions, but because success with the research was likely to benefit farmers directly. Because methane is waste, the potential productivity gains are exciting. But there are also likely to be significant business opportunities in selling New Zealand solutions to the world. Developed nations, and developing ones when they take on emissions targets, will need solutions to agricultural emissions.

Research into reducing methane and nitrous oxide emissions is also likely to have other environmental benefits. For example, reducing nitrous oxide emissions through more efficient nitrogen fertiliser application is likely to reduce nitrate leaching into groundwater, as well as lower the cost of producing more feed. Many of you will have noticed announcements quite recently from Ballance and Ravensdown about the release of new nitrogen inhibitors which they believe offer just this combination of productivity and environmental benefits.

You might also have noticed a recent announcement that the Government and agricultural sector groups have signed a partnership agreement on research into agricultural greenhouse gas emissions.

This agreement is underpinned by an industry-led research strategy, which aims to develop safe, cost-effective greenhouse gas abatement technologies that will seek to reduce methane and nitrous oxide emissions from livestock by at least 20 percent by 2012.

Consistent with its climate change policy, the Government will bear the cost under the Kyoto Protocol of the agricultural sector's non-carbon dioxide emissions. It will also maintain at least its current level of investment in agricultural greenhouse gas abatement research.

In return the sector will undertake and fund its research strategy, coordinated by the Pastoral Greenhouse Gas Research Consortium. The research will seek to identify, establish and develop practical on-farm technologies for reducing emissions, with particular emphasis on technologies that will also improve productivity.

I'm very pleased with the industry's commitment to a comprehensive self-funded research programme. It's what we wanted from the beginning, because the long-term interests of the sector and New Zealand mean we need a thorough and sustained search for practical ways to reduce emissions.

New Zealand has been successfully exporting agricultural products for more than a century. We are increasingly exporting agricultural expertise. The industry's greenhouse gas research programme offers new opportunities for that, as well as addressing a fundamental threat to this country’s agribusiness. I think it will pay off, because wherever you look, in whatever sector, research and development pays off.

Thank you.

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