COMMENT:

Initiatives and announcements made in recent weeks show how the New Zealand business community is embracing the climate change challenge. The Climate Leaders' Coalition, launched in July, is a group of chief executives and businesses committed to the measurement and reporting of their greenhouse gas emissions.

The group has publicly supported the Government's zero carbon goals to set regular carbon "budgets" and establish a Climate Change Commission. This follows hard on the heels of the agri-food sector giving support to the Government's goal of New Zealand achieving net zero emissions by 2050.

These are substantial commitments from significant parts of the New Zealand economy. Some may cynically see this as "green washing" but these public commitments, and developing consumer expectations for lower emissions goods and services, will hold these businesses to account over time.

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Many people are now familiar with our greenhouse gas emissions profile. Approximately 50 per cent is from agriculture, 40 per cent from energy use (including transport) and the balance from industrial processes and waste emissions. The way we use energy in New Zealand is a core focus for the Energy Efficiency and Conservation Authority, EECA, and the emissions produced from energy use is an increasing priority.

Currently our transport energy needs are almost entirely provided by fossil fuels. Shifting to lower emission fuels and vehicles is key to reducing emissions. This centres on the transition to electric vehicles, at least in the light vehicle fleet. While this is happening in a small way in New Zealand, international predictions are that this will accelerate dramatically over the next decade.

Another key focus area is improving the efficiency and proportion of renewable energy used for process heat. This is the energy used for industrial processes such as metal processing, drying milk into powder, processing other food such as meat, and in the commercial sector to heat water and spaces.

PwC has just completed research commissioned by EECA into the investment decision-making processes of a number of larger process heat users in New Zealand. The findings provide useful information about what changes would increase the use of renewable energy for process heat, which is predominantly produced by boilers, as well as ovens and kilns.

Frequently these assets are expected to last for decades. Therefore, it is more critical than ever that long term, strategic consideration of energy efficiency and carbon reduction measures are applied to investment decisions on upgrades, or the purchase of new process heat assets.

This should sensibly also include assumptions about the future price of carbon given the current price is now close to the regulated maximum of $25 per tonne, and is likely to increase in the future.

The PWC report identifies the concerns of large process heat users about how major boiler or process upgrades or retrofits might impact on production. These are valid concerns but most process heat users have scheduled maintenance shut downs and any new energy efficiency or renewable projects could be done at the same time.

Another key aspect of the findings is that businesses don't ring-fence capital for energy efficiency and carbon reduction projects; these must compete with all other investment proposals and achieve commonly-expected payback periods of 12-18 months.

While energy efficiency and renewable energy projects often manage to achieve this, there is room to include wider consideration of the benefits they achieve — longer-term energy savings and the benefits of carbon reduction.

The companies also identified the potential operational risk of adopting new technologies. The adage, "I'll believe it when I see it", applies here. EECA is taking a pro-active approach with international literature searches to ensure any applicable technologies are made known to New Zealand-based companies so they can be considered, supported by our Technology Demonstration Fund and, wherever possible, more widely deployed to reduce emissions.

The announcements from groups across the economy on climate change, suggest there is growing momentum to tackle the problem. Recently the dairy processing company Synlait pledged to reduce their milk processing emissions by 50 per cent within the next 10 years.

Such commitments suggest our industries are seeing the opportunities to deploy new technologies and responding to increasing societal and consumer expectations to take action. It is an exciting period and all of these initiatives are illustrating our industries are up for the challenge of achieving ambitious goals.

Andrew Caseley is chief executive of EECA, the Energy Efficiency and Conservation Authority.