Thursday, 26 September 2002 Speech Notes

Hon Pete Hodgson

Towards a sustainable energy future

[Address to “Walking the Talk”, a seminar on the business case for sustainable development organised by the New Zealand Business Council for Sustainable Development and the Energy Efficiency and Conservation Authority, at the Sheraton Auckland.]

I want to get quickly into the nitty-gritty of the energy and climate issues facing New Zealand in the next few years. This session is about “walking the talk” on sustainability, after all.

Sustainable development is the label for a contemporary set of expectations about business behaviour. It calls for economic development that goes hand in hand with social and cultural development and that does not harm the environment.

The companies here today as members of the Business Council for Sustainable Development have been listening, and are showing that they can operate within these boundaries. And they are showing the advantages of working that way.

Right now the government is drawing up a Sustainable Development Strategy for New Zealand. We’re identifying options and priorities and we’re close to announcing the next steps. Some of the priorities are already evident – such as managing economic growth, dealing with the implications of continuing global population growth for New Zealand, decoupling economic growth from environmental harm, and providing leadership and appropriate institutions for sustainable development.

New Zealand’s economy, more than any other developed country’s, is very dependent on the natural environment – agriculture, forestry, fishing, tourism. This makes environmental sustainability central to any future growth strategy. Environmental sustainability is not an optional add-on, it is a fundamental requirement for our future prosperity.

We have a variable record on doing things in a sustainable way, but our performance is improving. Government is only part of the answer, but at our place we are looking hard at what we must do to continue and if possible accelerate that improvement.

One key area that I know a bit about is energy and climate change.

Our commitment to join the international effort to combat climate change will bring significant shifts in behaviour and technology. There will be costs, and if you focus on those you might see only another hassle for business. But there are also opportunities, particularly for those who are wise enough to think strategically, those who position themselves for the future rather than fight against change.

The future business environment will be a carbon constrained one, not only in New Zealand, but globally. The New Zealand Business Council for Sustainable Development recognises that and is showing some much-needed leadership with its programmes to help businesses identify and manage their carbon ‘footprints’. Those who take advantage of this opportunity to anticipate the post-Kyoto world will find they have the competitive edge when it arrives.

The Government’s Energy Policy Framework commits New Zealand to move to a sustainable energy future. The pursuit of environmental sustainability – including the response to climate change – requires us to reverse recent trends in our reliance on fossil fuels. We face a transition, gradual and managed, from fossil fuel dependency to a sustainable low-carbon energy economy.

Economies of scale will reduce the costs of renewables in the longer term. A progressive transition to renewables is important but it is not the single answer. The use of ‘cleaner’ fossil fuels, notably gas, will be necessary. And more efficient use of energy is essential.

The likely depletion of Maui earlier than expected is a challenge, but not a crisis. The end of Maui will mark a return to a more normal gas supply situation. It is not normal for a country to have one enormous, cheap gas field dominating supply for so long.

As Maui production tails off, many smaller gas fields will become economic. New Zealand will draw its gas from a larger number of smaller fields. They will not be as cheap as Maui. Known reserves might typically stretch forward a decade or so, rather than Maui’s thirty years.

Gas will remain an important fuel for New Zealand for the foreseeable future. It produces less greenhouse gas emissions than coal, and new gas plant — which produces lower greenhouse gas emissions than old gas plant — will help us met our commitments under the Kyoto Protocol. There will often be a case for making more direct use of gas, depending on distribution economics, rather than converting it to electricity before using it, for example, as a source of industrial heat.

That’s a question of efficiency and the National Energy Efficiency and Conservation Strategy is a crucial factor if we are to achieve a sustainable energy future. It addresses both energy efficiency and renewables. If we achieve our targets it will double our rate of improvement of energy efficiency over ten years.

The Government is close to announcing a final target for renewable energy under the strategy. The preferred target, announced in April for consultation, was an additional 30 petajoules of consumer energy from renewable sources by 2012. This would be a 22 percent increase from the year 2000.

The strategy is one of the foundation policies for our climate change response, because both increased renewables and improved energy efficiency will help contain greenhouse gas emissions.

Other elements of the preferred climate change policy – negotiated greenhouse agreements, projects and the carbon charge that will apply by 2008 – will further reinforce the signals to business that a shift in favour of renewables and energy efficiency is desired, and will be profitable.

The energy intensive industries that enter Negotiated Greenhouse Agreements will be required to move to world best practice in managing their greenhouse gas emissions, in exchange for exemption from the carbon charge. Moving to world best practice in energy management is an obvious way to reach for that goal — and that can’t be bad for business.

The Projects mechanism will enable businesses, partnerships or industries to push for emissions and energy management gains where a little government help is needed to tip the balance in favour of economic viability. I know you need more detail on how it will work. We need to design it carefully, so we only support projects genuinely additional to business as usual. That’s tricky. But it’s do-able, and I expect Projects to be a flexible and useful tool for both business and government, limited only by the degree of innovation we both bring to them.

On my more optimistic days I like to think that last year’s low hydro-lake levels will have brought home to many more New Zealanders the vital importance of making energy conservation and efficiency a routine part of business. As we become more acutely aware of the constraints on our energy use, whether in resources or the environment’s capacity to absorb waste, we must become more willing and able to manage our demand. Today’s electricity industry and the Kyoto Protocol are both introducing new incentives for improving our energy habits. The basic business case for energy efficiency and conservation just gets stronger and stronger.

ENDS

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