KEY POINTS:
Five years ago, when debate was raging over ratifying the Kyoto Protocol, business was not too receptive to change. A report by the Business Council for Sustainable Development, Business opportunities and global climate change, fell largely on deaf ears.
Today, the political climate has changed and even vehement critics of the view that human behaviour is contributing to global warming are willing to talk about greener solutions in the pursuit of economic growth.
For its part, the business council is less dogmatic in supporting the climate change theory and persuading business to embrace Kyoto commitments.
The council has not, of course, withdrawn its support for Kyoto or its core belief that climate change is occurring and is most likely caused by humans. It has also not departed from the "prudent approach to take reasonable steps to reduce emissions of gases that contribute to global climate change".
But its statement of principles and recommendations on climate change, released in November 2005, reads more like a long-term business plan than a diktat. Its 12 recommendations (see box) recognise that business is more likely to support climate change policies by collaboration rather than coercion.
The recommendations will not win over diehard sceptics of climate change but the list offers some comfort, dealing with the means by which business can adjust to climate change policy without suffering irreparable damage.
Even so, the view of big-business lobby the Business Roundtable is that climate change policies could damage the economy.
Executive director Roger Kerr said the business community has not closed its mind to climate change. A meeting in March of several business lobbies, including the Roundtable, Chambers of Commerce, Business New Zealand, the Major Electricity Users' Group and the Greenhouse Policy Coalition agreed to keep an open mind.
"The first point is to work towards the confirmation that climate change is going on," Kerr said. "The range of the IPCC [Intergovernmental Panel on Climate Change] is about 1C to 4C and New Zealand is expected to be within two-thirds of that - 2C to 3C.
"An official report positively affirms that this degree of warming would be good for New Zealand for that period - better agriculture and forestry, better health and general pleasantness."
Kerr said the meeting agreed that science suggested human-induced warming was going on. "But the economists - not Sir Nicholas Stern [adviser to the British Government on climate change] - say there is not a case for aggressive early action. We need to allow time for science to come up with the information."
If New Zealand had to act to combat climate change, those actions should be broad-based and market-led, he said.
"Better to go for a market-based mechanism rather than regulations. Better to have a tax subsidy regime or a tradeable permits regime."
Completing New Zealand's infrastructure, such as the Auckland motorway network, would reduce fuel costs caused by traffic delays and cut carbon dioxide emissions, he said.
"There should also be business opportunities to create sinks to reduce carbon emissions. There are lots of business opportunities out there without involving government action.
"We should not kid ourselves that action we take on climate change is of benefit to the economy or business overall. The whole debate is really about how much harm it will do the economy."
A member of the Business Council for Sustainable Development, Rob Fenwick, said the council had shown early leadership on climate change and enhanced the community's understanding of the issue.
"The business council has always maintained that it can make much more progress on policy development by collaborating with business rather than taking an advocacy approach."
Fenwick said that for a small country like New Zealand spectacular business opportunities could arise from mitigating the effects of climate change.
His view differs from the Government's approach, which tends to focus on technological advances in energy-intensive industries.
The consensus from business, if there is one, is that these changes will happen anyway if they result in lower energy costs. In short, price signals rather than government direction will determine the environmental efficiency of energy-intensive industries.
One industry that will almost certainly benefit from higher oil prices and New Zealand's commitment to the Kyoto Protocol is hydroelectricity. It is the ultimate clean, green energy but, until recently, many proposed small-scale hydro schemes were economically marginal. The same can be said of wind farms. Now they are becoming economically viable as they are politically correct.
This might explain Mighty River Power's confidence when it announced in March it would not be recommissioning the Marsden B coal-fired power station.
Chief executive Doug Heffernan said more renewable energy would be available in the next decade than was thought in 2001-2003 when analysis suggested Marsden B could be essential.
Heffernan said shelving Marsden B was not a politically correct "green" response to climate change. "The market is a whole lot different than it was in 2003. This [decision] is more fundamentally related to the rise in the gas price and the replacing of gas in the market."
Climate change policy is likely to stimulate niche companies, especially those involved in energy efficiency, but the sectors most likely to burgeon are law, accountancy and consultancy. Sustainability, which encompasses climate change, could become the moneyspinner that Treaty of Waitangi law has become in recent years.
The Business Council for Sustainable Development estimates business opportunities could be worth more than $350 million a year in five areas - building energy efficiency, converting wood waste to energy, the clean development mechanism (where countries can get credit for investing in emissions reduction in developing countries), methane reduction through improving ruminant efficiency and "climate-friendly" branding.
The council based its figures on 32 potential business opportunities that six companies identified within their operations. It also identified emissions savings of around nine million tonnes of carbon dioxide a year - the equivalent of taking more than two million average family cars off the road.
If the council is correct then New Zealand can expect a significant green dividend. If not, the country will still be greener, if not necessarily richer.
The Business Roundtable argues that New Zealand could end up poorer if it embraces climate change policy to the letter. It is not alone: the Institute of Economic Research observed in 2002 that New Zealand appeared to have failed to negotiate sufficient room under the Kyoto treaty to "offset the relatively high burden of adjustment faced by this country".
But such concern five years later has to be balanced against the risk of doing nothing in a risk-averse business climate.
Risk management consultant Phil Cooper, who advises companies and organisations on both sides of the Tasman, said climate change was now a legitimate business risk. "Quite frankly, weather and climatic conditions have always been part of assessing risk ... Climate change is part of that."
He said the world seemed to be experiencing more extreme weather - a view echoed by New Zealand-based Landcare Research, which is devising strategies to combat climate change.
"Scientists expect that the world will continue to warm over the next 100 years. However, global warming can be slowed if enough countries take action."
Whether the doomsday scenarios are accurate remains to be seen but what cannot be denied is that business has to treat climate change as a risk, plan accordingly and identify opportunities.
POINTERS FOR CHANGE
The Business Council for Sustainable Development recommends:
Policies should aim to establish the lowest-cost emission-reduction methods that minimise economic harm. They should be sensitive to the different costs each sector faces in reducing emissions.
Where benefits outweigh costs, greenhouse gas emissions should be better measured and monitored. More rigorous tools should be put in place for monitoring the economic, financial, environmental and social impact of climate change and climate change-related policies and initiatives.
Climate change policy should be consistent, with wider multiparty support.
The adjustment to a less atmospheric carbon-intensive economy should include long-term strategies with clear price signals.
The transport sector can offer the greatest short-term opportunities to cut emissions. The Government should provide leadership and incentives to encourage businesses and private motorists to take up low-emission vehicles.
Investigation is needed into how greenhouse agreements are going to be made compatible with a carbon tax or a trading scheme.
Where possible, market mechanisms should be used in preference to regulation.
Carbon and fuel tax revenue should be used for research and innovations that increase fuel efficiency, reduce emissions and promote more sustainable energy.
The Government should work with industry to determine how to accelerate the use of less carbon-intensive technologies.
The Projects to Reduce Emissions framework should be closely linked to the review of the national energy efficiency conservation strategy (especially biofuels) and renewables programme.
New Zealand should take part in international actions on climate change on the principle that they provide for continued global economic growth.
Clear language should be used to explain the benefits and risks of climate change, to promote achievable behaviour change and offer practical solutions.
