Fran O'Sullivan: 'Carbon down' equals 'profit up'?

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When Al Gore came to town, chief executives and politicians turned out to soak up the environmental celebrity's climate change evangelism.

Many businesses had been on cruise control since New Zealand signed up to ambitious Kyoto targets to lower national greenhouse gas emissions.

The targets - as with other government proposals for carbon and "fart" taxes - were not met.

But publicity over the Gore movie, the Stern report and the UN Intergovernmental Panel on Climate Change's latest report has woken New Zealand businesses up to the clear and present danger many face, if they do not take a pragmatic approach to global warming.

Prime Minister Helen Clark has driven a new political stake into the ground by declaring she wants New Zealand to be the world's first "carbon neutral country".

National has committed to a legislative target to reduce emissions by 50 per cent (relative to 1990 levels) by 2050.

But Climate Change Issues Minister David Parker will not release the Government's official target until later this year.

This tardiness is causing business uncertainty - but firms would rather the Government set realistic objectives under a "cap-and-trade" regime, so that the right signals are sent to critical sectors.

Clark's Government has been slow to give effect to its sloganeering, but Air New Zealand chief executive Rob Fyfe says New Zealand's international competitiveness will be impacted if we don't take a lead on carbon neutrality.

Air NZ is among a number of New Zealand companies that are endeavouring to position themselves as "leaders, not laggards" by reducing their industries' carbon footprints.

Meridian Energy was the second to be certified as carbon neutral. Some 400 companies are now seeking certification through Landcare Research's carboNZero process. Companies are adopting a "carbon down equals profit up" approach. But it's too early to tell whether the new business equation will bear substantial financial fruit or will simply enable businesses to protect themselves from brand damage if consumers declare them climate change pariahs.

For Air NZ and dairy giant Fonterra, it's a bit of both.

The companies are making huge efforts to reduce their greenhouse gas emissions in response to the furore over air miles and food miles, and they have managed to produce considerable cost savings as a result.

But they also hope to position themselves against other international competitors by taking a progressive approach - as do a raft of domestically oriented firms who are branding themselves in the green space.

"People care about this stuff," says Fyfe.

The Herald's 2007 Mood of the Boardroom survey revealed that 82 per cent of chief executives believe New Zealand should prepare for a carbon-constrained economy; 65 per cent think the national brand or exports might be impacted if emissions are not reduced.

But 68 per cent are concerned that New Zealand's competitiveness might be impacted if the country becomes carbon neutral ahead of others.

New Zealand Institute chief executive David Skilling warns there is a need to guard against the risk that the proposed solutions will "cause more damage than the problems they are designed to address". He says there is a range of possible strategic approaches.

New Zealand could position as a global leader by carving out a distinctive position and committing to "very ambitious" targets for emissions reductions. This would be an extension of the country's existing clean, green brand. But it might also generate "first mover" advantages for firms that would get used to operating in a carbon-constrained domestic market ahead of external competitors.

New Zealand could "move with the pack" by participating in international agreements and by reducing emissions in line with other developed nations. This assumes that the country responds to climate change and avoids the risk of negative brand value that might be associated with inaction.

But even moving with the pack will require considerable ambition, given the commitments being made by European countries, including the UK, and Japan.

The third alternative is to do as little as possible, as any constraints on New Zealand's emissions would impose a competitive disadvantage on the economy and encourage firms to leave for other locations.

Government officials emphasised to the Herald that the choice is not one between "prosperity and austerity". New Zealand is already facing substantial economic risk due to the domination of the agriculture and tourism sectors - a field where consumer choice has a huge influence.

Skilling calculates that about 60 per cent of New Zealand's export base comprises goods and services that have a first-order exposure to changing consumer preference, such as the food and beverage and the tourism sectors.

Hot industries

The following industries and technologies are tipped to offer great opportunities in the future:

Wood-processing: high-efficiency motors, high-efficiency fans, dehumidifier driers.

Food-processing - high-efficiency boilers, heat recovery on refrigeration plants.

Basic metals - high-efficiency electric motors, induction furnaces.

Non-metallic products - variable-speed drives, high-efficiency lighting.

Paper and paper products - variable-speed drives, high-efficiency motors.

Tourism transport - driver training, biodiesel-powered vehicles.

Glasshouse crops - high-efficiency lighting and control, greenhouse management systems, including the control of venting with heating use, thermal screens and twin-skin plastic construction.

Fishing - heat recovery on refrigeration.

Irrigated dairying - heat recovery on chilled milk vats, variable-speed drives on motors and soil-moisture measurement to regulate irrigation.

Irrigated arable crops - soil-moisture measurement to regulate irrigation, variable-speed drives on pumps.

Source: Ministry for the Environment and the Energy Efficiency and Conservation Authority.

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