Biz goes schizoid over the ETS

The Emissions Trading Scheme goes beyond a simple ‘business vs environment’ discussion

Vincent Heeringa photograph

There’s a really interesting debate going on between business groups about the pros and cons of the proposed Emissions Trading Scheme. It’s now beyond a simple ‘business vs environment’ discussion, in which business is cast as the polluting villain and the environment is the long suffering victim.

At issue is whether the ETS creates a net cost or a net opportunity to the economy. One the one side is Business NZ representing large companies such as Fonterra and Holcim; on the other is the Business Council for Sustainable Development, representing such large companies as Fonterra and Holcim.

As I said, it’s interesting.

Business NZ argues that the costs of the current ETS are too high and that our biggest companies will possibly move offshore to countries where carbon-emissions are not so highly regulated or priced. It also says that the ‘cap’ on emissions is a poor way to measure and control GHGs because it doesn’t reward companies for reducing carbon intensity (that is emissions per tonne of product). Phil O’Reilly of the Business NZ says “some of New Zealand's main exports, such as processed dairy products, pulp and paper and aluminium, cause significant unavoidable emissions. So having an emissions trading scheme based on a cap would simply be a cap on growth of our main exports.”

In effect, Business NZ wants to remove the cap and slow down the ETS implementation.

By contrast, the NZBCSD is warning that failure to launch the ETS will have a profound effect on the lack of investment into sustainability projects in agriculture, energy, food production and tourism. An effective ETS will encourage $12.3 billion of investment and 9,600 jobs in the next 10 years.

“However, if MPs defeat or delay the start of emissions trading when they vote on it shortly, they run the risk of postponing these benefits—and subjecting agriculture and tourism exports to a loss of international reputation and sales which could cost New Zealand more than 20,000 jobs,” says the report.

The NZBCSD report caused a firestorm within its own membership, because not all members approve of the ETS as proposed (they are more inclined to take O’Reilly’s view). It was also criticised by the NZ Herald’s Fran O’Sullivan as being hastily produced and containing too many caveats to be regarded seriously.

Hastily produced or not, I like the NZBCSD’s tone: optimistic about the kind of economy we can have if the focus shifts from cost to opportunity. We all know that carbon will and must be priced. Let’s get on with it. It’s hard to not view Business NZ’s stance as the boy with his finger in the dike. Just pull it out and let’s building some ships!

A recent UNEP report shows that in 2007, investment in clean energy rose 60% from 2006 to US$148 billion. The report is called Global Trends in Sustainable Energy Investment 2008, and is prepared by UK-based New Energy Finance for UNEP’s Paris-based Sustainable Energy Finance Initiative.

It says: “Wind energy again attracted the most investment ($50.2 billion in 2007), but solar power grew most rapidly: attracting some $28.6 billion of new capital and growing at an average annual rate of 254% since 2004, driven by the advent of larger project financings.”

This dramatic rise in investment is due in large part to public policies such as the European ETS and similar government incentives to invest in clean tech. High oil prices helped too. “With world temperatures and fossil fuel prices climbing higher, it is increasingly obvious to the public and investors alike that the transition to a low-carbon society is both a global imperative and an inevitability. This is attracting an enormous inflow of capital, talent and technology. But it is only inevitable if creative market mechanisms and public policy continue to evolve to liberate rather than frustrate this clean energy dawn.”

“Creative market mechanisms”: now that’s something we don’t hear enough of downunder.

To get more on this story, here are the three best comments in the last week’s media. Business media seems to be the only group covering this important stuff.

Fran O’Sullivan: Rushed report promises too much

Phil O’Reilly: Carbon plan needs to gauge intensity

Rod Oram: Exporters show up bleaters

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