SMELLIE SNIFFS THE BREEZE: My cup 'freezeth' over

SMELLIE SNIFFS THE BREEZE: My cup 'freezeth' over

By Pattrick Smellie

Sept. 29 (BusinessDesk) – Suddenly, it’s time for John Key’s government to start putting the big political ideas away in preparation for the traditional months of inaction before a general election.

We’ve already seen it on water, where a major report will very certainly not produce legislation before the election, expected in Nov. 2011, hopefully after New Zealand has won the Rugby World Cup.

Jenny Shipley’s government behaved heroically in Sept. 1999, despatching New Zealand defence forces to secure the peace in East Timor with Australia, and could have gone to the polls on it.

Shipley hung on for a fillip from the World Cup, which never came. In her defence, it was the dying days of a nine-year-old government.

For John Key, the Cup is much better-timed, and the strategy being pursued emphasises New Zealand and its visitors enjoying the tournament, no matter who wins. Clever, but perhaps a little optimistic for certain die-hard fans.

At the very least, the Cup will stimulate short-term economic activity and, if the weather holds, a lot of word-of-mouth endorsement and repeat visits from tourists both local and foreign.

It is next year’s big story.

That means that this year’s big, hard stories can afford to take a rest for at least the next 12 months. All round Wellington now, the shutters will slowly go down on the big, new policy issues and ideas, if this government’s caution and the pattern of every other government is anything to go by.

Some, like compulsory savings, may be plucked from the bunch and used as a campaigning platform, but Key’s pragmatism and caution mean he won’t want to fight on too many fronts.

The noticeable casualty in the past couple of weeks has been water, where a landmark report last week will produce legislation probably in 2012. Another is that hoary old beast, the emissions trading scheme.

Yep, it’s time already to review the ETS, much unloved by all, with current half-way house provisions due to run out in mid-2013 and a report on options required just before the election.

What might happen?

Well, for a start, we might stop kow-towing to the Aussies. Having adopted something a bit like the scheme they eventually never implemented, it would be madness to follow them and switch now to a carbon tax, which the new Gillard Government is apparently discussing as it gets its first taste of coalition politics.

It shouldn’t sway New Zealand back to the sterile carbon tax versus ETS debate.

The fact is New Zealand has an ETS, and so do a lot of other countries. The countries that don’t have them either will or will do something similar. Even a change in the balance of the U.S. Senate making President Barack Obama unable to pass federal climate change measures wouldn’t necessarily stop Meridian Energy collecting Californian state subsidies that make its U.S. solar generation investment worthwhile.

In other words, even if acting global is taking too long, there is momentum for “acting local.”

The more that’s the case, the more it will become acceptable to tweak the local rules. New Zealand, for instance, gets between 60% and 70% of its electricity from hydro-electricity, compared to Australia, where three-quarters of the electricity comes from coal.

Our “heavy” industries – mainly agricultural processors like Fonterra, which are making an effort to impose environmental disciplines on their farmer suppliers – have nothing like the relative carbon intensity of a milk processing plant in coal-powered Australia.

Yet the Australian company is shielded from that country’s ETS – or would be, if they had one – while New Zealand has adopted the Australian intensity factors, which bear no relation to reality here.

Those kinds of oddities need sorting out, and careful explaining if they make sense.

Likewise, there should be a discussion on whether the commitment to an “all gases, all sectors” approach is negotiable. What about excluding certain gases – say methane, while keeping nitrous oxide in – instead of framing everything as an attack on certain industries?

There would be logic to this, in that technologies to control nitrous oxide – accounting for 16% of New Zealand’s greenhouse gas emissions – are emerging fast.

Methane, on the other hand, accounting for fully one-third of all our GHG emissions, has no easy answer yet. We’ll need to find one, though, if Energy Minister Gerry Brownlee’s dream of exploiting deep methane hydrates for natural gas and transport fuels is to be realised.

That’s why New Zealand will and should keep investing, particularly in agricultural science, not only to cut those emissions, but to collaborate with our new-found, fast-growing, non-Western trading partners in Indonesia, China, India, South Africa, and South America.

These are the issues the ETS review, which will occur next year, will address, but not decide on.

For a definitive answer on what comes next, don’t expect anything much till 2012.

(BusinessDesk)

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