Once price is put on greenhouse gas emissions, the focus will move to avoiding it.
Large emitters, whose businesses are at risk from offshore competitors which do not face price on carbon, will be sheltered with appropriate transitional emission subsidies, but still benefit from cutting emissions. Exposing businesses and households to the cost of emissions will have major effect.
The incentive to avoid or reduce the cost of emitting will ripple through all businesses and households through electricity and fuel costs. It will make major investments in low-emission capital projects more profitable. The incentive will drive the hunt for ways to reduce current emissions – and extend the life of, and cut emissions from, potentially stranded assets, ranging from cement works to coal-fired power stations.
It will also see the demand for more energy-efficient, lower-emissions products and services mushroom.
It will accelerate current trend to buy goods and services on whole-of-life cost basis, rather than day-one price. The latest ShapeNZ research indicates 21 percent of organisations are now procuring sustainably. With this practice spreading through the $25 billion in state procurement contracts, this market segment can only grow.
According to ShapeNZ polling, business people most of all understand the value of sustainable procurement and practice.
The effect of pricing emissions on infrastructure development could be valued at billions. The Minister for Climate Change Issues, Nick Smith, says he wants carbon price signal on energy as priority – to influence investment in renewable energy.
Research by SKM, commissioned by the Business Council in September last year, estimated emissions pricing, through an emissions trading scheme (ETS) should:
• Result in immediate and long-term investment valued at more than $12.358 billion over the first 10 years. Some $913 million year of this is available immediately.
• Generate 9600 new jobs. Of these 4815 will be created directly, 4215 immediately. Large numbers will be created in agriculture, forestry, wind, geothermal, bio energy, bio fuel, bio char, ocean energy, and energy-efficiency industries, and more in new emissions trading and services.
• Result in $5.56 billion in new wages being paid in the first 10 years.
• Increase dairy farm incomes by $714 million year by applying current emission reduction technology, providing 1728 new direct jobs, with an annual wage value of $98.5 million. This will cut dairy farmers’ emissions liability by $98 million year.
• Cut emissions by 18 million tonnes of CO2e year equivalent – valued at $455 million year. Of these, 10 million tonnes ($256 million) are available immediately. (The emissions price has recently risen to $28 per tonne and may go above $50 after the world reaches new climate change agreement, to apply from 1 January 2013.)
In some cases carbon pricing won’t result in extra investment, but redirect it. For example, it is estimated $3.5 billion could flow into geothermal electricity developments over the first 10 years. Ocean energy could attract $3.3 billion, wind energy $3.1 billion, bio energy $936 million, afforestation at least $460 million.
Complementary measures to encourage lower emission behaviour and investment might also include more research into new low-emissions technology, incentives to rapidly commercialise and export new New Zealand low-emissions technology (like turning steel mill emissions into biofuel, hoped for breakthroughs in reducing methane emissions from ruminant farm animals – with prospects for selling into market of billion farm animals worldwide).
Huge potential and public support also exists for moves to help households reduce their energy use and emissions, get people to trade-in middle-aged, high-emissions and fuel-inefficient vehicles for climate friendly ones, plant more forests and encourage shift to cleaner freight transport.
The rewards for businesses which cut emissions, lift profits and help solve the environmental crisis will increase with time. In the past, environmental laggards were often rewarded. General Motors entering bankruptcy shows what happens when you ignore the need to build and sell greener vehicles.
Consumers will also drive businesses to compete on this basis – or switch their custom. Already 32 percent of the New Zealand market will shift on this basis, and even more in some of our key overseas markets. The trade opportunities in our key markets are also estimated to be worth billions.
Of course, new jobs and skills flow from this – along with the development of new skills and services, including in the new carbon-trading markets.
The smart money is now shifting to invest and make billions from growing the clean economy. Don’t get left behind. M
Peter Neilson is chief executive of the New Zealand Business Council for Sustainable Development. www.nzbcsd.org.nz
