Balancing the challenges in climate change policy

Climate change is coming, arguably for real, certainly in policy. Businesses that ignore it or fight the government on it might take a lesson from Telecom.

Telecom tried the government’s patience too long and got whacked. Had its internal debate last year gone the other way and voluntary unbundling and wholesale/retail split been started then, Telecom would have won marks with the public and the government.

It might have managed the financial fallout better, ultimately with more customer goodwill and so higher returns after the transition. Instead, Telecom can expect no benefit of the doubt in future ministerial decisions for some time, no matter how much it now conforms to and even anticipates and gets ahead of the government’s wishes.

Lobby groups have the same choices. Federated Farmers’ feral politics of the past half-dozen years has parked it in this government’s dogbox.

The federation’s response to David Parker’s announcements on climate change and energy policy last week was finger-wagging. Yet arguably no group has more at stake — for the country’s good besides its own.

Clean and green is a great brand. Having your products shunned by rich consumers who think them un-green because they use up a lot of carbon coming from halfway round the world is a potential disaster. Doing green things to offset that has logic.

Cherry-picking what works for one sector or another and stonewalling on the rest is a recipe either for being ignored or, if listened to, for unworkable or uneven policy (like the policy the government had do dump last December).

Cherry-picking what is right and wrong about the science is also no longer a useful pastime. Insurance companies are factoring climate change into premiums. Carbon is being traded, even if the market is rickety and, in Europe, rigged. A growing number of governments — including, notably, a growing number of state governments in the United States — are beginning to develop policies that presume climate change is under way.

Even if their presumption is wrong, their policies will over time have an effect on business here, whatever this or a future government does. The logic for strategic thinkers in business is to anticipate change and prepare for it, not fight it at every step.

In any case the government here is convinced there is climate change and the die is cast for the next 30 years and that has far-reaching implications for energy and economic policy.

So it will make decisions that will affect business. And, if Climate Change and Energy Minister David Parker has his way, as he probably will, there will be “bold goals or objectives”.

Much of the reporting of last week’s announcement of the “work programme” and accompanying terms of reference for the energy strategy due in a few months focused on the short term, the Kyoto protocol period, leading up to 2012.

But the real focus of the announcement was post-2012. The government will build its policy decisions around best-guess assumptions about the shape of the global framework it is confident will succeed Kyoto, even though there has been little progress so far. One assumption is an international price on carbon emissions.

Scoffing at Kyoto or complaining that New Zealand is ahead of trading partners is not relevant to that post-2012 debate. Picking up and reinforcing the new balance in Parker’s approach is relevant.

Parker’s approach balances mitigation with adaptation — measures to reduce or slow the increase in emissions are balanced with measures to adapt to the changing climate. It will not agree to reduce emissions (such as by animals) unless there are ways of doing it. It insists “our actions must first and foremost protect and advance New Zealand’s interests” and not undermine international competitiveness. And it focuses on opportunities — in research into methane admissions, for example.

But, given the importance of the clean-green brand, the government will not just tag along in other countries’ wake. Even China — conspicuously outside Kyoto and a big and rapidly growing emitter of greenhouse gases — is beginning to experiment with ways to offset its environmental impact.

So Parker indicated that he is likely to aim for targets for renewable electricity and heat generation — “even going 100 per cent renewable or carbon-neutral in a long-term timeframe” — and for takeup of biofuels for transport (mitigation). He mused on targets for reforestation of unstable land (adaptation) and for water quality, runoff and emissions in agriculture (mitigation).

It should be obvious from those comments that climate change is a major driver in developing the energy strategy. Security of supply is not the only criterion. If we wanted to, we could over time supply all we need from coal and biofuels and even go into export. Parker wants to meet energy needs within a climate change frame.

There are two pointers for business.

One is to take the government’s more balanced approach seriously and make constructive suggestions to Parker. Waiting for National to undo whatever Parker does is no longer a way out. National is right now going through its own rethink which is likely to bring it closer to international currents.

A second is to focus on opportunities. Of course, that might mean closing down or moving to a dirty country. But there might alternatively be scope to make money.

Which means looking past the quarterly bottom line.