Pure Advantage’s strong central message

Simon Johnson, in his recent Hot Topic post, challenged the failure of Pure Advantage’s  report New Zealand’s Position in the Green Race to highlight the importance of putting a price on carbon, and Duncan Stewart offered a robust response. It’s not my purpose in this post to pursue that topic, but rather to dwell on the strong central message of the document — that New Zealand has a much brighter economic future as a green growth economy than as one stuck with the fossil fuel dependance we remain reluctant to address. The report considers government action is necessary to drive the change, but at the same time sadly recognises that the government is currently stuck in a different and inadequate strategy which is hindering advance.

Just how much we are failing to measure up to our proclaimed green image is revealed in the sobering reality check the report performs on various economic fronts.

From the climate change perspective there are a number of serious shortfalls. Our energy supply is heavily reliant on fossil fuels. About 60% of our total energy comes from fuels such as coal, oil and gas. 40% is imported, mostly in the form of oil. And we’re not moving in the right direction. The proportion of energy derived from renewable sources is declining. In 1975 renewable energy accounted for 90% of electricity generation in New Zealand. By 2010, despite recent gains, the figure was down to 76%. Neither Labour nor National-led governments have faced up squarely to the issue.

Our greenhouse gas emissions are the fifth highest per capita in the OECD. Emissions have increased 23% since 1990; most other countries in the OECD managed to reduce per capita emissions. New Zealand will overtake the US in terms of per capita emissions in fewer than eight years. The report recognises that our emissions have a unique profile because of the high relative proportion of emissions from agriculture and doesn’t suggest that mitigation of that source will be easy.

But it’s rightly less sympathetic when it comes to the transport sector:

Between 1990 and 2006, total transport emissions increased by a shocking 64%. About 40% of carbon dioxide emissions come from road transport, equivalent to about 20% of New Zealand’s total greenhouse gas emissions.

New Zealand lags far behind other OECD countries in policies and measures to improve the energy efficiency and emissions reduction of the national transport fleet. Two of the biggest problems are low fuel excise taxes (and low use of road charging to capture external costs more fully) and inadequate public transport infrastructure.

We have one of the lowest user rates of public transport in the world, with only 2.5% of trips made by public transport. Moreover public transport infrastructure funding in New Zealand will be cut from an already low 1.8% of the current land transport budget to 0.7% by 2021.

We’re also laggards on energy efficient housing. New Zealand’s housing stock is notoriously difficult to heat due to poor insulation and the very rare use of double-glazing. Our housing efficiency equates to where the Scandinavians were in the 1960s. We’ve made some progress in that since the building code review new houses now consume 30% less energy than houses built to the old code. But we’re well behind the passivhaus or zero carbon standards adopted by other countries.

Extensive land use change for which we’re paying the cost in the form of higher carbon emissions is another cause for concern. In addition, erosion, nutrient leaching, and loss of biodiversity are all associated with changes in land use. New Zealand forestry is characterised by low levels of new planting.

Issues less directly related to climate change but of crucial importance also figure in the litany of environmental failure. Water is one. The Yale University Water Quality Index ranks New Zealand 43rd out of 132 countries with a score of 40.3 out of 100 for ecosystem vitality for freshwater. High nitrate levels in water have come with the intensification of dairy farming.

On biodiversity issues the report acknowledges some progress on threatened species but notes that 77% of New Zealand’s threatened species still lack targeted recovery work and will most likely continue to decline in numbers due to a lack of resources needed to support protection measures. It considers much more explicit direction is needed.

In the face of all these contradictions of our green image the report explores a number of directions in which green business growth can both remedy some of the deficiencies and open up new profitable directions for the economy which will give better substance to our Pure brand. The list includes bioenergy, energy efficiency in buildings, more sustainable agriculture, geothermal technology, water management technology, liquid biofuel production, smart grid development, well-managed aquaculture, and biodiversity protection. Electric vehicles are also a significant part of the mix, and the report includes this enticement:

New Zealand’s renewable electricity generation has, according to our Energy Efficiency and Conservation Authority, enough spare capacity in the national grid during off-peak times to recharge all New Zealand’s cars if they were to be replaced by electric models. This is a major opportunity to reduce our dependency on imported oil.

But much depends on a strategic willingness by government to induce change. There’s not much sign of that. The Government’s current growth agenda includes a determination to expand the exploitation of natural resources, such as coal and oil. These are largely considered ‘dirty industries’, as they involve unsustainable extraction of finite resources, large scale industrial production and high emissions intensity.

It’s not only environmental issues that arise from this: the economy can be seriously distorted too. One only needs to look at the difficulties that Australia faces. The development of the ‘two-speed’ economy – one based upon dirty commodities and one based upon the rest – has undermined Australia’s value-added manufacturing exports

The tone of the searching questions the report puts to the Government over the growth path it has chosen may be sweetly reasonable, but there’s underlying steel:

• Which criteria were used to conclude that further investment in dirty industry is the best long-term strategic outcome for New Zealand? Were these criteria solely economic or did they include purposeful consideration of local, regional and global environmental issues and obligations? Did the economic evaluation include the cost of path dependency and the consideration of the possible need for retrenchment of these industries in future?
• Which low carbon or green growth options were considered and on what basis were they excluded?
• What is the difference between New Zealand’s ‘must have’ requirement for oil and mineral extraction and the point at which the country is simply exploiting the resource because it is available?
• Is the greening of dirty activities sufficient to maintain a 100% Pure status? Is it sufficient for New Zealand to be green at some things but not green at others?

These questions have a business edge but they also bear directly on climate change concern. They expose the short-sightedness of a government complacent even in the face of the fearful consequences of climate change and in spite of the promise that accompanies a green economy. Pure Advantage does well to ask them, but it’s not surprising that their report sees little likelihood of serious government investment in green growth in the foreseeable future, albeit recognising that a few steps have been taken. They place their main hope in the leadership of industry, “as it has the largest financial imperative and the greatest ability to invest”. The most they hope from government is that in due course it may prove willing to follow along, to remove policy roadblocks and provide incentives.

Pure Advantage is focused on galvanising industry. Let’s hope that the green growth strategy that it will be elaborating in subsequent reports succeeds in doing that. Industry may yet put backbone into government.