1. Competitiveness in a carbon-constrained world
John Carnegie, BusinessNZ
Wood Processors and Manufacturers Association
Rydges Hotel, Latimer Square, Christchurch
Thursday 4 April 2019

2. The BusinessNZ Energy Council
the BusinessNZ Energy Council (‘BEC’):
is an apolitical group of New Zealand organisations taking on a leading role in creating a sustainable energy future for New Zealand
brings together business, Government and academia
is the New Zealand Member Committee of the World Energy Council (WEC)

3. Our members

4. Wood processing an industry characterised by
energy and capital intensity
highly competitive (tight margins)
global in reach
New Zealand-specific features
often not at world scale
high proportions of energy from biomass and renewables
increasingly disaggregated from forest ownership
not automatic participants in the NZETS
all face higher fuel and electricity costs
only a handful of businesses receive free units as trade-exposed, and emissions intensive

5. Fuel demand and GHG emissions
Source: EECA, MBIE

6. Current climate change developments
Zero Carbon Bill (target and Commission)
establishment of independent Climate Commission
100% renewable electricity target in a mean year by 2035
should agriculture be brought into the ETS, and how
Productivity Commission's report on transition to a low-emissions economy, and government response
emission trading scheme review
one billion trees by 2027

7. Ambitious targets
New Zealand’s net emissions from 1990 to 2013, current emission targets for 2020, 2030 & 2050, as well as new proposed target (red dot)
Current target
Proposed target
Source: Ministry for Environment (2015)

8. Economic costs to New Zealand
NZIER estimate of adopting a net-zero (by 2050) target:
10 to 22 per cent of GDP

9. NZETS price path
Source: Frazer Lindstrom

10. Estimated NZ ETS pass-through
Vehicle fuel users, including household consumers
Effective carbon price
Effective carbon price NZ
ETS
cost
$50
$100
per litre of premium 95
fuel
$0.12
$0.24
per litre of regular 91
fuel
$0.12
$0.24
per litre of diesel fuel
Effective CO₂ price $100
$5.36/GJ
$9.04/GJ
$9.16/GJ
$0.13
$0.26
Consumers, including households
Effective carbon price
Effective carbon price NZ
ETS
cost
$50
$100
per
kWh of
electricity
$0.02
$0.04
per
kWh of
natural
gas
$0.01
$0.02
Industrial users
Effective carbon price
Effective carbon price NZ
ETS
cost
$50
$100
per GJ of natural gas
$2.68
$5.36
per GJ of sub -
bituminous coal
$4.52
$9.04
per GJ of lignite
$4.58
$9.16
Estimated annual NZ ETS costs passed through to households
Effective carbon price
Effective carbon price
$100
$290
$322
$140
$752
Annual NZ ETS cost for an average NZ household:
$50
Petrol
$145
Electricity
$161
Natural
gas
(if
used)
$70
TOTAL
$376
Source: Ministry for Environment

11. We don’t know the future
“Prediction is very difficult, especially if it’s about the future”
Niels Bohr
Martin Cooper photographed in 2007 with his 1973 handheld mobile phone prototype

12. Uncertainties are non-trivial
we’re not talking about variables which have a prospect of only a minor differences
played out over decades, each of the uncertainties could produce a substantially different outcome
the presence of strong or weak climate change action globally
the compounding effects of growth in our major trading partners
the transformational potential of alternative transport on our energy system

13. A target is not a vision nor is it a strategy
it’s a political number – we might know where we’re heading but not how we are going to get there
it’s a necessary but not sufficient condition
doesn’t tell us what our New Zealand story is

14. Otherwise we get this…

15. Start with the right question
what might New Zealand be known for in years time?
need to build a coherent competitiveness story around that, which drives our decisions
our future will differ depending on the extent to which we choose to pursue certain societal, economic and environmental outcomes, or not

16. Resilient policy Averaging Procurement – more life cycle costs
we advocate for a wide range of pro-competitive policies for all businesses:
lower corporate tax rates
better government procurement policies
less regulatory compliance
education that delivers the required skills
flexible employment relations
better targeted immigration
energy and carbon pricing
R&D policies
more permissive FDI
Averaging
Procurement – more life cycle costs
Broader outcomes including social, environmental and regional

17. Summary we don’t know the future – its unknowable
but we do know it’s a tough business environment
energy costs on upward trajectory – energy reducing investment proposals have more credibility
competitiveness concerns ever-present
CO2 cost faced vs other’s subsidies to manufacture and/or promote renewable energy
business needs predictable, durable and resilient policies that last beyond electoral cycles

18. Thank you