The Australian government’s Clean Energy Future Plan includes not just a carbon charge on the 500 biggest emitting companies but also proposes that billions should be invested in renewable energy, energy efficiency and agricultural emission reductions. Households are to be compensated for likely cost increases.
It has proven to be incredibly controversial in much the same way as New Zealand’s Emissions Trading Scheme did a few years back. Yet the sky did not fall in as a result of the New Zealand ETS and it is now an established part of doing business. So from across the Tasman, there is a sense of déjà vu – although Australian politics seems more brutal than ours.
New Zealand’s ETS, which has been criticised by many for being too soft, is actually more comprehensive than the Australian proposal, which exempts many sectors, including transport fuels for households and small businesses. The New Zealand scheme is an all-sectors, all gases ETS, although it has slow transition pathways to full obligations. All transport fuels are included in the New Zealand scheme.
If the Australian government gets its measures all passed into law, it could have a positive impact on New Zealand in three main ways.
First, the carbon charge, an interim measure with a price of $A23 per tonne, will convert to a full ETS in 2015. This gives New Zealand’s ETS greater credibility. If there was any prospect of it being abandoned, it has now gone and the markets have responded accordingly: there has been a reported upsurge in sales of forest credits as ETS confidence builds. The ETS now has bi-partisan support in the New Zealand parliament.
Secondly, at the point that both Australia and New Zealand have similar schemes, I think there could be opportunities for linking them to create a larger, joined-up market for carbon trading across the Tasman. Further down the track there could be Australasian linkages with the European ETS and other schemes around the world. This would be a big boost not just to those providing forest sinks, but also to the burgeoning cleantech sectors – those who sell low-carbon technologies that achieve real emission reductions.
Thirdly, the Australian Scheme includes a $10 billion Clean Energy Finance Corporation, a $3.2 billion Renewable Energy Agency and a $200 million Clean Technology Innovation Program. Together these are expected to leverage $100 billion of investment in the low-carbon economy. It’s not clear the extent to which New Zealand companies might be able to directly access those funds, but at least there will be opportunities for businesses providing specialised advice: New Zealand has expertise in areas like geothermal power and agricultural emissions.
From a New Zealand perspective, we can see that transitioning to a low-carbon economy is a huge challenge for Australia. More than 80 per cent of Australia's electricity is coal-powered. In contrast, New Zealand generates 70 per cent of its power from renewable sources. With all that investment, Australia expects to get to just 40 per cent renewable by 2050; New Zealand in that time-frame will get close to 100 per cent.
The key difference between the two approaches to addressing climate change is that Australia is not just relying on a carbon price. It has also proposed a massive investment in complementary policies. New Zealand doesn’t have many of them and could learn from this approach and put in place more incentives for businesses to invest in science, innovation and clean energy solutions.
Whatever governments may do, businesses are taking the initiative themselves and providing leadership. Here, BusinessNZ has set up its Sustainable Business program. A group of prominent New Zealand business people has kicked off Pure Advantage, an initiative to foster green growth. Hundreds of clever start-up ventures are already greening our economy. Business is responding in a similar fashion in Australia.
New Zealand still has some work to do. Solid Energy is expanding coal production and products in the absence of any viable carbon capture and storage scheme and full ETS coverage. Genesis Energy still runs our largest thermal power station on coal even though it can run on gas. Agriculture accounts for 50 per cent of our emissions and is still not in the ETS. The price signal from our scheme is half what it should be so the incentive for renewables is still weak. There are many exemptions.
So while both Australia and New Zealand may finally end up with an ETS there will still be work to be done. It will take the combined effort of governments and business over many decades to transform our economies and avoid the worst excesses of climate change.
Gary Taylor is the convenor of the 7th Australia-New Zealand Climate Change and Business Conference, Wellington, 1-2 August 2011 which examines the business risks and opportunities arising out of climate change.
The Australian government’s Clean Energy Future Plan includes not just a carbon charge on the 500 biggest emitting companies but also proposes that billions should be invested in renewable energy, energy efficiency and agricultural emission reductions. Households are to be compensated for likely cost increases.
It has proven to be incredibly controversial in much the same way as New Zealand’s Emissions Trading Scheme did a few years back. Yet the sky did not fall in as a result of the New Zealand ETS and it is now an established part of doing business. So from across the Tasman, there is a sense of déjà vu – although Australian politics seems more brutal than ours.
New Zealand’s ETS, which has been criticised by many for being too soft, is actually more comprehensive than the Australian proposal, which exempts many sectors, including transport fuels for households and small businesses. The New Zealand scheme is an all-sectors, all gases ETS, although it has slow transition pathways to full obligations. All transport fuels are included in the New Zealand scheme.
If the Australian government gets its measures all passed into law, it could have a positive impact on New Zealand in three main ways.
First, the carbon charge, an interim measure with a price of $A23 per tonne, will convert to a full ETS in 2015. This gives New Zealand’s ETS greater credibility. If there was any prospect of it being abandoned, it has now gone and the markets have responded accordingly: there has been a reported upsurge in sales of forest credits as ETS confidence builds. The ETS now has bi-partisan support in the New Zealand parliament.
Secondly, at the point that both Australia and New Zealand have similar schemes, I think there could be opportunities for linking them to create a larger, joined-up market for carbon trading across the Tasman. Further down the track there could be Australasian linkages with the European ETS and other schemes around the world. This would be a big boost not just to those providing forest sinks, but also to the burgeoning cleantech sectors – those who sell low-carbon technologies that achieve real emission reductions.
Thirdly, the Australian Scheme includes a $10 billion Clean Energy Finance Corporation, a $3.2 billion Renewable Energy Agency and a $200 million Clean Technology Innovation Program. Together these are expected to leverage $100 billion of investment in the low-carbon economy. It’s not clear the extent to which New Zealand companies might be able to directly access those funds, but at least there will be opportunities for businesses providing specialised advice: New Zealand has expertise in areas like geothermal power and agricultural emissions.
From a New Zealand perspective, we can see that transitioning to a low-carbon economy is a huge challenge for Australia. More than 80 per cent of Australia's electricity is coal-powered. In contrast, New Zealand generates 70 per cent of its power from renewable sources. With all that investment, Australia expects to get to just 40 per cent renewable by 2050; New Zealand in that time-frame will get close to 100 per cent.
The key difference between the two approaches to addressing climate change is that Australia is not just relying on a carbon price. It has also proposed a massive investment in complementary policies. New Zealand doesn’t have many of them and could learn from this approach and put in place more incentives for businesses to invest in science, innovation and clean energy solutions.
Whatever governments may do, businesses are taking the initiative themselves and providing leadership. Here, BusinessNZ has set up its Sustainable Business program. A group of prominent New Zealand business people has kicked off Pure Advantage, an initiative to foster green growth. Hundreds of clever start-up ventures are already greening our economy. Business is responding in a similar fashion in Australia.
New Zealand still has some work to do. Solid Energy is expanding coal production and products in the absence of any viable carbon capture and storage scheme and full ETS coverage. Genesis Energy still runs our largest thermal power station on coal even though it can run on gas. Agriculture accounts for 50 per cent of our emissions and is still not in the ETS. The price signal from our scheme is half what it should be so the incentive for renewables is still weak. There are many exemptions.
So while both Australia and New Zealand may finally end up with an ETS there will still be work to be done. It will take the combined effort of governments and business over many decades to transform our economies and avoid the worst excesses of climate change.
Gary Taylor is the convenor of the 7th Australia-New Zealand Climate Change and Business Conference, Wellington, 1-2 August 2011 which examines the business risks and opportunities arising out of climate change.