A CHANGING CLIMATE OF OPTIMISM
24 August 2008ROD ORAM
If you worry a lot about high fuel prices, New Zealand's economic prospects in a carbon-constrained world and related climate change issues, you would have taken heart from three days of conferences in Auckland this past week.
The realisation that the world has begun historic shifts in technology, economics and politics to address these issues - and how abundant are New Zealand's opportunities flowing from them - came through very powerfully.
The sessions began Monday morning with a half-day symposium on clean technology organised by the NZ Business Council for Sustainable Development. The huge scope to build new businesses around these emerging technologies was demonstrated in particular by Stephen Tindall in two ways: he described the wide range of investment he has made in the sector and he released a research paper on clean tech prospects produced by his foundation.
One of his most interesting investments is LanzaTech, an Auckland company that is developing the technology to take flue gases from the likes of the Glenbrook steel mill and use bacteria to turn it into ethanol for biofuel.
The company, which is on track for pilot plant testing, has attracted substantial backing. In addition to Tindall, investors include Vinod Khosla, one of Silicon Valley's most successful venture capitalists who is now applying his money and skills to clean technology. It has also received a $12m grant from the Foundation for Research, Science and Technology.
Forestry offers even bigger opportunities for biofuels, thanks to the work of Scion, the Crown Research Institute, and its partners. Using wood waste from harvesting operations, or even the trees themselves, Scion can produce ethanol at $US1 a litre.
Scion and its partners are planning to start up a bio-refinery pilot plant in 2011 capable of producing 2 million litres of fuel a year. They then hope to have a commercial plant of 100m litres a year running by 2015.
Given New Zealand's potential to grow trees for biofuel on marginal land unfit for other purposes, Scion believes this fuel can replace 50% of our imported petroleum products by 2030. Such volumes would partially insulate us from world oil prices, replace $3.2 billion of petroleum imports a year (based on current prices), save some $680m a year in carbon charges and open up business opportunities exporting the technology to other countries.
The fourth Australia-New Zealand Climate Change and Business conference took up the rest of the three days of discussions. Founded and still run by New Zealand's Environmental Defence Society, the event has grown rapidly. This year's attracted some 450 delegates from 15 countries.
One highlight this time was the conference dialogue on climate change issues between prime ministers Helen Clark and Kevin Rudd. They both demonstrated deep knowledge of the issues, strong commitment to achieving effective policies in their own countries to reduce emissions and create new business opportunities, and belief that their countries can work together to help achieve international progress.
And they both tackled head-on the difficulties and dangers involved in the journey. Rudd, for example, said that coal would continue for decades to be the main source of Australian electricity generation, hence the country's big commitment to research in clean coal technologies. Clark, for example, warned of the dangers to our trade if we failed to take robust action to ensure we deliver on the clean, green promise we make to consumers overseas.
But one dramatic difference between the two countries on climate change was evident at the conference: while the Australians exhibited high optimism, strong purpose and a sharp eye for the big opportunities, some of the Kiwi participants seemed rather exhausted by policy development and bogged down in its minutiae.
This was particularly evident in back-to-back panel sessions on the progress towards emissions trading schemes in the two countries. In two senses, though, the Australians had a far easier task in their session.
First, they were asked to imagine life in 2015, some five years after their scheme is due to start. The participants struck a good balance between progress made and problems yet to be solved, suggesting that emissions were falling and Australia's transition to a prosperous, low-carbon economy well under way.
Second, they are enjoying a brief honeymoon. They have just enjoyed the publication of a bold but broad green paper on policy options. The hard slog of writing and passing legislation, a process that will be steeped in bloody political battles, has yet to start. Draft legislation is due in December, tabling of a bill next March and passage by late next year.
In contrast, the Kiwi panellists were intensely focused on the final stages of our legislation. The process remains fraught to the last, with lobbyists pushing their own agendas and political parties scrambling for advantage. The panellists identified a number of large issues to solve and a raft of details yet to be provided, either in the legislation or subsequent regulation. But some of them were brave enough to suggest some progress was being made.
The do-or-die moment for the legislation is imminent.
The government has been busy negotiating with minor parties, trying to gain their support by offering sweeteners in the bill to address their supporters' particular concerns.
With parliament resuming this week, we should know shortly whether the government has enough backing to get the bill through a second reading.
National has different plans. Deputy leader Bill English took the opportunity of the conference to reiterate his party's opposition to the bill and the ways it would change it if the party formed the next government.
His speech was problematic, though.
In tone and content it came across as rather parochial and defensive compared with presentations by other politicians or public officials and business people. While he made some references to new markets for Kiwi businesses, his speech failed to convincingly place New Zealand in the global contexts of climate change and energy crucial to our future, both in terms of threats and opportunities.
One example, is National's promise to give the country security of electricity supply by allowing gas to be used for new base load generation. Yet, it hasn't explained how our least secure supply of fuel could do the job. Our major gas fields are dwindling fast; exploration so far is providing only a few, tiny new fields; and exploration money and efforts are switching massively to oil.
If National continues to push gas, it runs the high risk of forcing generators to import LNG. But that would expose us to volatile prices and perhaps ultimately unreliable supplies from gas fields abroad.
His speech was also seriously misleading on some crucial points.
For example, he continues to characterise the government's climate change policy as a hasty, ill-prepared and reckless attempt to be a world leader at great expense to our economy.
These comments suggest he and his colleagues have limited understanding of the issues at home or progress of the debate abroad. That's particularly true on the question of timing.
If the ETS bill fails to pass in this parliament, National is wildly optimistic to suggest it could pass its own legislation within nine months of taking office.
The subject is far too complex.
Far worse, failure to pass a bill this year would mean New Zealand would have a deeply diminished role next year in the crucial international negotiations on a successor to the Kyoto Protocol.
We particularly need to fight for changes in the way forestry and agriculture are handled in treaties in order to maximise our potential.
Thus National's jockeying over the bill for short-term political advantage at home will come at the very high cost of long-term disadvantage for those crucial two sectors internationally.
© 2008 Fairfax New Zealand Limited.
Sunday Star Times
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