Nick Smith sums up climate challenges at conference

With over one month having passed since the ETS launched in New Zealand, Nick Smith rounded up the schemes implementation and impact on business, at the Australia New Zealand Climate Change And Business Conference in Sydney this week.

In his speech the Minister spoke about his nationwide ETS roadshow and said the main confusion for Kiwi’s was over the science behind emissions, with some feeling they are carrying a disproportionate share of emissions produced by others.

He maintains that the Government’s approach to progress has been “realistic”, with a focus on protecting New Zealand's clean, green brand and finding the most cost-efficient way to meet our Kyoto obligations without making businesses and households pay unreasonable costs.

The Minister's speech primarily reflected on the Government’s four major climate change goals:

  1. To settle New Zealand’s domestic policy on emissions trading and implement a workable and balanced scheme;
  2. The need for practical complementary measures that will help New Zealand make the transition to a less emissions intensive economy;
  3. Make a global contribution in New Zealand’s research efforts to tackle agricultural greenhouse gas emissions and;
  4. Help secure a robust and effective post-2012 global agreement to combat climate change.

Smith maintained that steady progress had been made on the domestic front but said it was clear that insufficient progress had been made in regards to international negotiations. 

NZ’s moderated ETS

Smith criticised the previous Government’s rules on allocations for trade-exposed, emissions intensive industries.

The former rules discriminated against small and medium sized businesses and acted as a disincentive to growth, “ said Smith.

“It is our view the qualifying limit should be based, not on an absolute level of emissions, but in proportion to a business’ turnover.”

He discussed the move to make allocations production-based. In other words, if companies grow, their allocations increase and if they cut their production, their allocations drop.

“This change reflects the Government’s ambition of wanting the ETS to encourage more efficient production and investment in new technology and not reduced economic activity or result in the exporting of industries offshore.”

In discussing the agricultural industry, he said the decision to defer agriculture entry into the ETS by two years to 2015 as a significant change. He said the difficulties on including agriculture emissions cannot be understated. 

The final challenge in allocations was in phasing out industry support. 

“Our approach of 1.3 percent per year starting in 2012 generated much more debate than it deserved. The truth is these rates are subject to regular review and it is inevitable they will be altered in response to progress internationally.” 

Smith concluded that the ETS had not received universal support. 

“I have received strident opposition from both extremes of the political spectrum. Some say the ETS doesn’t do enough; others say it goes too far.” 

ETS implementation 

On the implementation subject, Smith said the July 1 start date had has passed with only modest price changes, in spite of what the pre-hype might have suggested.

“We expect to allocated 11.7 million units worth $290 million to the industrial sector between now and the end of 2012.” 

He said the values in electricity and fuel prices were modest and consistent with what the Government expected.

He specified the fishing, industrial and forestry sectors as part of the allocation process, paying particular close attention to the forestry industry, saying that approximately 75 million units will be allocated to the sector in the period to 2012. The large allocation, he says, reflects the importance of forestry in New Zealand in relation to climate change.

“It is only through the substantial plantings of the new forestry since 1990 that New Zealand has been able to offset its significant 25 percent increase in gross emissions."

“Without these plantings New Zealand would face a substantial Kyoto deficit.”

Complementary measures

Smith went on to discuss other carbon reducing tools, including theResource Management Act (RMA). Smith said the RMA has not been useful in facilitating desirable renewable generation, even going as far to say it has done the opposite in some cases.

“It has been easier to get a consent for a new thermal plant than for renewable wind, hydro or geothermal generation,” he said.

With that in mind, he said it was the Government’s intention to have a National Policy Statement on Renewable Electricity Generation in place by the end of this year. 

“As a result of this National Policy Statement, decision makers will need to place greater weight on the benefits to be gained from renewable electricity generation when deciding on resource consents.”

He also mentioned the Government’s Warm Up New Zealand: Heat Smart programme, which will see the allocation of $347 million to improve at least 188,000 homes over four years, as well as Government grants used to support the installation of solar water heating in homes.

Biofuels got a brief look-in with mention of report Some biofuels are better than others, by Parliamentary Commissioner for the Environment Dr Jan Wright.

While the government is optimistic about the long term contributions biofuels can play, we are cautious of the market distorting expensive subsidy schemes that have occurred in other countries.” 

Global Agricultural Research Alliance

Smith acknowledged that agricultural emissions are one of New Zealand’s biggest challenges, with 50 percent coming from methane and nitrous oxide from the pastoral farming industry. He cited that in most developed nations, this amount is less than10 percent.

He went on to discuss the Global Research Alliance on Agricultural Emissions, established by New Zealand at last years Copenhagen climate talks. The Alliance now has 29 country members.

“We are particularly encouraged by the number of developing countries that have joined the alliance. Their emissions profile, like New Zealand's, has a far greater weighting towards agricultural emissions and food security is critical to their future.”

International negotiations

Smith expressed disappointment at the outcome of Copenhagen, saying there has been little progress since the conference.

“It is difficult to predict the structure of any future international agreement but it is clear that global action to reduce emissions is required. This means that each country will need to develop domestic policy that best suits its economy while contributing to the global goal of reduced emissions."


In concluding his speech, Smith said he was happy with the progress New Zealand has made on the “challenge” of climate change.

“Our efforts are a work in progress and much is still to be done, but as a small nation that is proud of its clean, green brand we are determined to do our fair share to address this global problem.”

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