KEY POINTS:
The wakeup call from New Zealand Institute chief executive David Skilling over the clear economic exposure New Zealand faces if it makes the wrong call on climate changes policies is well timed.
Skilling's latest report - titled "We're right behind you" - suggests New Zealand replace its existing
target under the Kyoto Protocol to reduce carbon emissions to 1990 levels by 2012 with a 2020 deadline, pull the plug on international commitments to fund an estimated $500 million annual Kyoto liability (as Canada plans to do) and aim for a 30 per cent reduction on 1990 levels by 2050 (the Government's aim appears to be 40 per cent).
The Government is already facing flak from major businesses over the haste with which it is steamrollering its proposed emissions-trading framework into the legislative arena without leaving sufficient time to get the detail right.
But so far there are no indications that the Government is prepared to slow down - rather wanting to keep the hammer on so it can have legislation in place to establish the emissions-trading regime in early next (election) year.
Climate Change Minister David Parker has adopted a "prevention is cheaper than the cure" approach.
"Taking no action to address climate change will be much more expensive than the costs of any actions we might be considering. Taking action now is like taking out an insurance policy for the future," is the quote attributed to Parker on the opening page of climatechange.govt.nz
What Skilling's analysis does is put a question-mark over the wisdom of paying out-of-whack premiums that might be an incentive for companies to seek cheaper investment destinations. Skilling says the international evidence shows a large gap between the rhetoric around global climate change and the actions that have been undertaken by consumers, firms and Governments to address it.
His report suggests New Zealand adopts a "fast follower" approach - instead of the "first mover" approach some politicians prefer - to avoid unnecessary harm to some of our major export sectors from moving too quickly down a binding commitment framework that might penalise New Zealand in a competitive sense internationally if other major partners hang back.
The Government should take on board the Skilling analysis. It may not like the message. But Skilling cannot be pigeonholed as a greedy, self-interested business person (or worse, in some people's eyes, a business lobbyist) as some politicians prefer to categorise anyone who raises issues with the programme.
What's important is that the Government considers the ample lessons Kyoto provides of the damage that can be wrought from bad economic decision-making.
Warwick McKibbin, a professorial fellow at Sydney's Lowy Institute, foreshadowed the Kyoto stuff-up in a 1997 report titled "Impact on the NZ economy of commitments for abatement of carbon dioxide emissions".
McKibbin found the marginal abatement cost in New Zealand to be among the highest in the world and raised issues over whether emissions could be kept to the target of 1990 levels.
By 2005 emissions were already 24.7 per cent higher than 1990 levels and Treasury figures suggest our liability for the first Kyoto period will be at least $750 million. "As in most countries, ratifying Kyoto is not sufficient to reduce emissions," said McKibbin.
At the Pacific Economic Co-operation Council meeting in Sydney this year McKibbin used our Treasury's failure to properly scope the Kyoto cost as a illustration of why Australia had to do better in designing its own climate-change policies.
New Zealand business has been too buried in the policy detail to refocus on Skilling's strategic analysis.
But with the strong concerns within the Government's Climate Change Leadership Forum over the haste with which the proposed emissions trading scheme is being pulled together, a strategic reappraisal is more than necessary.
A letter to Prime Minister Helen Clark from the Greenhouse Policy Coalition and various business bodies - including the Chambers of Commerce, Federated Farmers and the road transport lobby - was telling. "Unless there is an adequate timeframe for consultation and a full and thorough analysis of the economic and social impacts of the scheme, there is the risk that it will prove unworkable and chaotic, be economically and politically unsustainable, and hence fail to provide any certainty for business," the group said.
The Government has since gone some way to overcoming the coalition's concerns on the information front by releasing general equilibrium modelling by Infometrics, a regulatory impact statement and two Point Carbon reports dealing with international carbon markets.
But there are still concerns over the lack of research on specific sectoral emissions analysis and the fact that the Government is not making the information available in a timely fashion.
On Thursday, the Government's emissions trading group met representatives of the Greenhouse Policy Coalition, the Major Electricity Users Group, Business NZ and some major companies that included Fonterra, Solid Energy, Carter Holt Harvey, Fletcher Building and Norske Skog.
Government officials were again given a message that the process was inadequate given the legislative timeframe necessary to meet the political desire to get the legislation in place before Christmas.
What bugs business is the perception that officials are approaching the meetings more like "presentation" opportunities than as opportunities for consultation.
Business people say there is no clarity over which parliamentary select committee will study the resultant legislation - or whether a special committee might be appointed to the task.
There is also a growing sense that the Government is steam-rollering the policy process for electoral reasons so that it can tick-box a raft of policies in the leadup to the election.
The Greenhouse Policy Coalition and the Major Electricity Users Group between them represent corporates such as NZ Aluminium Smelters, NZ Steel, Fonterra, Carter Holt, Solid Energy and Auckland International Airport.
These substantial business interests approached Parker in June asking to work more closely with the Government.
There is still time for Government to change tack and adopt a much more inclusive approach.
But with the Ministry of Foreign Affairs and Trade negotiating to bring Californian Governor Arnold Schwarzenegger's chief environmental adviser, Terry Tamminen, down here to talk about the Californian emissions trading market, it's more likely politics will take precedence over hard-nosed reality.
