Pundit

The blinkered attitudes of the New Zealand business community towards climate change – with some notable exceptions – is fundamentally depressing.

It is those attitudes that have led the new government to put the Emissions Trading Scheme up for review. Arguments are now being marshaled to replace the entire scheme with a carbon tax.

All this rather tragic. Not because a carbon tax is a bad thing – it’s actually quite similar to emissions trading – but rather because we’ve already had these arguments. Continuing them is really just an attempt to further delay the action which is desperately needed if we and the rest of the world are to do anything about global warming.

The overwhelming scientific consensus is that climate change presents an unprecedented challenge – for the global community, for the world environment, for the world economy – and therefore for New Zealand as well. The overwhelming scientific consensus is that without global action to reduce and stabilise greenhouse gas emissions, the world is projected to experience a rise in temperature, increasing sea levels, more frequent extreme weather events and a change in rainfall patterns.

New Zealand is not immune from these effects. Climatic changes will have a severe impact on our native ecosystems, industries, infrastructure, health, bio-security and economy.

Just as we are not immune from the effects, nor can we be aloof from the response. While New Zealand’s emissions comprise a tiny proportion of the world’s emissions at around 0.2 percent, our per capita emissions are high by international standards. While reducing our emissions will not, by itself, make a major contribution to the global problem of climate change, all countries need to do their bit.

As a small trading nation, we need to recognise the shift in attitudes in our key overseas markets where climate change issues are having a growing impact on the thinking of governments and consumers. As a result, lowering our emissions will be crucial to building a New Zealand brand that supports the development of a high-value, high-wage, export-led economy.

Yet, despite the perils they face from inaction, the New Zealand business sector prefers to whine and moan about measures which are being imposed throughout the developed world.

The truly amazing thing about the growing support for a carbon tax is the sheer hypocrisy of its new-found supporters. Readers might recall that a carbon tax was what Labour initially proposed before the 2005 election, only for it to be rejected by NZ First and United after that election, on the urging of business and farmers.

Having had its carbon tax proposal flatly rejected by the business community, the Labour government consulted broadly on possible policy directions on climate change through the release of five discussion documents. The discussion documents released in December 2006 identified a wide range of potential policy options to achieve an overall climate change objective of meeting our international obligations. These options included emissions trading, a narrowly-based carbon charge, incentives, subsidies, direct regulatory measures, and voluntary approaches. The feedback showed broad, although not universal, support for the use of emissions trading as a preferred approach for reducing emissions in the long term.

The odd thing about the latent enthusiasm for a carbon tax is that it and an ETS will have similar effects on business and individuals – they both introduce a price on carbon into the economy. An ETS does it with more flexibility for individual businesses to manage their emissions and trade carbon units. A carbon tax provides more certainty on price – but at the cost of flexibility.

One of the deciding factors in preferring the cap-and-trade ETS model is that the rest of the world is heading that way. If the rest of the developed world is going to be trading carbon units, it makes sense that we do too. Also, as a market economy, we tend to favour market-based responses.

But our scheme has been designed to switch to a carbon tax if needed (an influential American economist – William Nordhaus – is suggesting the world do just that). Many of the requirements on large emitters (the so-called ‘points of obligation’) to calculate and register their emissions are the same for either system.

New Zealand must be part of the international response. We cannot sit back and wait for others to take hard decisions. We cannot sit back and demand that others act while we promise that if they do we’ll be a ‘fast follower’. The world, including New Zealand, needs to be taking action now. More talk, more reviews, and more delays is inaction. While the Neros in the business community fiddle, the world burns.