David Venables: NZ must play cards well at climate change table

Twelve months ago, world leaders were preparing to converge on Copenhagen to hopefully put the finishing touches to a global agreement on climate change. The whole thing fizzed.

Next Monday, negotiators head to Cancun in Mexico to try again. This time, expectations are much lower.

Parties have been meeting on and off all year, going over the same ground time and time again. Realistically, the best that can be expected at Cancun is for last year's Copenhagen Accord to be brought into the official negotiating text and for progress in important areas, such as financing climate change work in third world countries.

So, how might Cancun affect New Zealand? What do we want out of it and how will we look to the rest of the world in terms of what we've done about climate change?

Last things first - we are going to look good. We have carbon pricing via an emissions trading scheme, something our main trading partners lack. If anything, we are further ahead from where we could reasonably be.

We are also leading where we can do the most good - in research into agricultural emissions of methane from stock and nitrous oxide from fertiliser, through the Global Research Alliance on Agricultural Greenhouse Gases.

The alliance is probably the most meaningful thing New Zealand can do to reduce global emissions.

New Zealand is also well placed among countries to protect its own interests and play a constructive role in negotiations. As a member of the "Cartagena Group", we are doing our bit to bring developing and developed countries together.

We also have status among the big players. The evidence for this was Tim Groser, Climate Change Negotiations Minister, receiving an invitation from the United States to attend the recent Major Economies Forum meeting in Washington.

They would not want us at the high rollers' table unless we were seen to be a positive influence on negotiations.

Some think New Zealand is not doing enough about climate change and that we will get a roasting at Cancun. This simply will not happen. But that's not to say the negotiations will be straightforward, or that there are no risks for New Zealand.

Discussions are proceeding along two tracks - the Kyoto Protocol and the Long-term Co-operative Action track. The former is about drawing up a new agreement for the parties to the Kyoto Protocol to take over once the first emission-reduction agreement runs out at the end of 2012.

The latter is focused specifically on climate-change mitigation, adaptation to its effects, financing and technology transfer.

The Kyoto Protocol has a serious weakness - only developed countries, minus the US, representing about 28 per cent of global emissions, are required to actually cut emissions. China and the US, far and away the world's biggest emitters - accounting for more than 40 per cent of the global total - are not required to make cuts, nor are other big developing emitters such as India and Brazil.

Developing countries, led by China, want developed countries to commit to further emission cuts before they will agree to any international rules. In reply, developed countries want the US and major developing emitters to make their own commitments before they agree to make more cuts.

Japan, Russia and Canada have already vowed to make no more commitments under the Kyoto Protocol, cutting the emissions it covers to just 16 per cent.

New Zealand's negotiators want all developed countries and major developing countries to sign up for action commensurate with their capabilities. They also want agreement to be reached about the rules before we commit to new cuts under the Kyoto Protocol.

Having an international agreement is important. If there is no agreement from 2013, New Zealand will be left hanging because of its emissions trading scheme. Under this, businesses have a carbon liability. We need other countries to catch up and start pricing carbon so our trade competitors face the same costs that our businesses face.

With no new agreement driving global emissions trading, the Government will have no choice but to hold current support measures for business in place. It will also have to delay the entry of agricultural gases to the emissions scheme.

The biggest concern is that if there is no new agreement, New Zealand might consider linking with other trading schemes, such as the European Union. This could be disastrous.

The union's emissions scheme has different rules and offers more protection for its companies than does the New Zealand scheme. Also, the carbon price in the EU is set to shoot up over the next few years.

Swiss bank UBS suggested recently that it could rise to more than €40 ($70) a tonne as early as 2013. That could cost New Zealand companies a fortune if they have to buy carbon credits in the absence of a price cap.

For one member of our Greenhouse Policy Coalition, such a development could cost $150 million a year by 2013 or three times current expectations.

There will be no global agreement at Cancun and there is unlikely to be one in December next year in South Africa. As the pressure goes on to reach an agreement, one can only hope that common sense prevails and New Zealand does not sign up to something, either global or bilateral, that damages our economy more than our competitors'.

David Venables is executive-director of the Greenhouse Policy Coalition, which represents New Zealand's energy-intensive sector on climate change issues.