Emission critical

We're getting there. Thanks to diligent work from business, government and other interested parties over the past couple of months, the emissions trading and energy bill tabled in parliament on Tuesday is shaping up to be a practical and effective piece of legislation.

The very strong and constructive level of engagement by players has resulted in some good ideas the government has incorporated in the bill, thereby improving the architecture and mechanisms for emissions trading and electricity supply it proposed.

One of the most important is the government's acceptance of a review clause in the legislation. Once every five years, it will compare New Zealand's climate change targets with our trading partners' targets. If, for example, ours required deeper cuts in emissions than theirs, our timetable for phasing them in could be modified.

The first review would be finished by March 2012, near the end of the Kyoto first commitment period of 2008-12. This will allow the government to make well-informed decisions about commitments to further reductions we would make in the treaty that, hopefully, will follow on from Kyoto.

The government has had a lot of pushback from business on this issue of the rate of reduction in emissions. It proposed giving emitters credits equal to 90% of their 2005 emissions when they enter the trading system. The credits would then be phased out by 2025 at which point emitters would bear the full cost of the carbon dioxide and other greenhouse gases they produce.

Government and business will be doing a lot more work on these allocation issues. But businesses would be making a great mistake if they thought the review clause will make their lives a lot easier.

Judging by legislation in place in Europe, pending in the US congress, and likely in Australia since its change of government and signing last week of the Kyoto Protocol, our trading partners will be working to demanding targets. Thus, the first review could result in tighter not easier reduction targets.

Thanks to these improvements, the bill is more than a framework for these complex issues. It has real substance that should start to shift investment, technology, business practices and personal consumption toward lower emissions of climate-changing greenhouse gases, at least in some sectors.

But the work is far from done. Not only will the parliamentary process of select committee hearings and debate develop the bill some more. The government has also identified three areas it will keep working on with representatives from industry and other sectors to ensure that regulations that will flow from the bill are well designed.

The three areas are the treatment of forests planted before 1990, the base year for our Kyoto commitments; credit allocation and phase out; and whether to allow Assigned Amount Units, a rather controversial type of credit created by the Kyoto Protocol, to be allowed in our trading system.

And beyond those big issues, there are lots of details to sort out still. But it is clear that two vital resources in all this work are the Leadership Forum of 33 senior representatives from business and other sectors and the technical advisory groups with industry and government members.

This high level of constructive engagement by business leaders will probably comes as a complete surprise to businesses around the country and the public itself. All they have heard so far is the vitriolic, unbalanced and unreasonable outpourings of the Greenhouse Policy Coalition and its members. It groups together the main business lobby groups such as the Business Roundtable, Business New Zealand and Federated Farmers but it does not include the NZ Business Council for Sustainable Development. At one level this strategy is no surprise. These groups have a long history of confronting this government in public but working with it more constructively in private. They behaved as dishonestly and dysfunctionally, for example, in the debate in 2000 over replacing the Employment Contracts Act with the Employment Relations Act.

None of the dire consequences they predicted, such as the rebirth of rampant union power or renewed rigidity of labour markets, have come to pass. Quite the contrary, the ERA plus related mechanisms such as the massive rebuild of the skills training infrastructure have made for better workplaces.

But the lobby groups' strategy damages their credibility with public and government; worse, the wide gap between their public and private stands makes the process of good policy development far harder.

Instead, the lobbyists should learn from some of their more enlightened counterparts overseas. For example, the Confederation of British Industry is deeply committed to helping its members understand the risk and opportunities that climate change presents and to work with government on effective policy.

Similarly, on November 30, 150 global companies with $US4 trillion in market capitalisation called for "strong, early action on climate change" with a minimum 50% cut in greenhouse gas emissions by 2050.

They said climate change was an issue of human risk and business risk but it was also a source of "significant business opportunities" in areas such as developing non-fossil fuel energy sources and other examples of better technology.

They included Shell, GE, Rolls-Royce, United Technologies, Nestle, Unilever, Volkswagen, British Gas, Dupont Coca-Cola, British Airways, Nike, GAP, News Corp, Barclays, Nokia, Pacific Gas, Virgin Group and Johnson & Johnson.

And in May, the US Climate Action Partnership of major US corporates such as GM, Ford, Caterpillar, Duke Energy and Alcoa called for an 80% reduction in US emissions by 2050.

So what's the level of understanding, debate and commitment among New Zealand businesses to these issues?

Nowhere near enough yet but somewhat more than you might imagine from their leaders.

Take, for example, Business New Zealand.

This past week it said, "It is extremely important that the views of New Zealanders are taken account of and given genuine consideration from now until the legislation is reported back from select committee."

Quite right too. And in order to help inform that national discussion it published A Stable Climate for Business, a slender publication on climate change and legislation.

The trouble is this superficial effort will do quite the opposite. It reads like a light version of the extremely unbalanced report on the emissions trading and electricity proposals that the Greenhouse Policy Coalition commissioned from Castalia, a Wellington consultancy.

Like it, the Business New Zealand report stacks up all the risks, negatives and problems with the proposals. But it makes no attempt to balance them out with any analysis on the cost to New Zealand in trade, tourism and other ways for failing to adequately address energy and climate change.

Unlike Castalia, it makes a passing reference to the business opportunities climate change might bring. But this is barely one page out of 20 in the booklet. It is unbelievably simplistic and the only concrete action it suggests is one it says government should take reorient taxpayer spending on research and development. It says nothing about business's own responsibility to rise to the great opportunities and challenges.

And even worse, the pamphlet has some deeply embarrassing howlers. It says, for example, that the term "global warming" was superseded by the term "climate change" because scientists were unsure whether the world really was warming.

That is plain wrong. The United Nations and other knowledgeable parties conclude temperatures are rising. And they use the latter term because the climate is underdoing many more changes than simply temperature, such as dramatic shifts in rainfall and droughts, more intense and frequent storms and rising sea levels.

And from a business point of view, Business New Zealand makes a number of serious errors. Its biggest is to say there are only four ways to reduce emissions: become more efficient; offset the gases; capture and store them; and reduce production.

It completely ignores the development of clean technologies and better business practices that lie at the heart of the excitement outside New Zealand about the opportunities of climate change.

If this pamphlet indicates that the debate among New Zealand businesses really is this ill-informed, then they are missing out on the profoundest change in global business disciplines and opportunities in a generation or two.