Climate change is a fairly murky issue. The data can be interpreted in different ways, and many players have an interest in claiming either that the world is ending or that it’s ‘business as usual’.

Neither is an appropriate response in my view.

It’s true that climate change data is inconclusive. We don’t know the extent to which carbon emissions are causing climate change. But there is enough evidence to suggest we should be doing sensible things to curb the growth in emissions.

Large numbers of  BusinessNZ members are doing just that. Their initiatives include recycling, reducing waste, cutting unnecessary energy use and developing improved technologies.

But there is also a larger task to be addressed – we have to start thinking about emissions trading.

Much of the world’s thinking is moving towards consideration of emissions trading. It makes sense for New Zealand get up to speed with what can be achieved through emissions trading, so we are prepared from a policy point of view should we wish to implement a trading regime.

Emissions trading – often called carbon trading – is a useful way of getting incentives for people and organisations to emit less: an agreed limit is set on the amount that can be emitted, and those who emit beyond that are required to buy credits from those who emit less. The system rewards those who reduce their emissions and increases costs for those who don’t.

The likely date for an emissions trading scheme to start is after 2012, when the first Kyoto Protocol commitment period finishes and the countries involved start seeking new approaches to climate change.

 BusinessNZ decided some time ago that we should get involved in developing a framework for emissions trading, to be ready for any ‘new order’ that might emerge after 2012.

BusinessNZ members Genesis Energy, Mighty River Power, Contact Energy, NZ Steel, Solid Energy, Rio Tinto Aluminium, Fletcher Building and Fonterra agreed to invest substantially in the work required to develop such a framework, which will be undertaken by the New Zealand Institute of Economic Research in association with Frazer Lindstrom.

This is large-scale research.

The project will review emissions trading schemes that are already in operation or being designed internationally. This is important because whatever we do in New Zealand must align with systems in other places. The need for a critical mass of participants is similar to the world’s free trade system that only works because most nations are involved.

The project will evaluate and make recommendations on emission/carbon credit allocation methodologies for different sectors. We want any system that eventuates to be able to work for all sectors and all sizes and types of organisations.

BusinessNZ’s members support this project because they want to get a straightforward, workable system that is as apolitical as possible.

Any emissions trading scheme that comes about is going to depend on long-term business investment and business would not want the threat of political changes damaging that investment.

It’s also important that the system doesn’t harm business competitiveness – it’s our hope that it will actually enhance competitiveness.

It would be great if we achieved a system that not only succeeded in reducing overall amounts of carbon emissions, but also provided incentives for innovative New Zealand businesses to come up with world-class technological solutions to sell to the rest of the world.

There is an enormous amount of potential contained within the challenge of climate change, and I hope we can realise that potential.

We will report regularly on progress being made in this important area.

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