Climate Change Commission’s Advice: A Three-Month Window for Business

The Climate Change Commission’s Final Advice to Government lays the foundation for the transformation of the New Zealand economy over the next 30 years. The detailed nature of the Final Advice reinforces the idea that the transformation will be government rather than market led. Climate change policy is therefore entirely consistent with the Labour Government’s centralising instincts elsewhere in policy.

Those advocating better use of the Emissions Trading Scheme to reinforce market signals have not succeeded in shifting the Climate Change Commission’s fidelity to their current approach. This means business will need to be more engaged with government as complexity is heaped on top of complexity in climate policy.

Government relations will continue under the Labour government to be a crucial mechanism for business, industry and governmental sectors to both understand and influence policy.

The Report landed fairly well in the marketplace, aided by the Commission having only advisory rather than statutory powers to direct government action.

This is reflected in much of the conditional language of their recommendations. The report is resplendent with advice for the Government to “develop”, “enable”, “support”, “collaborate”, “encourage”, and “enter into partnership” with affected sectors.

One historic artefact that attracted little media attention is the Commission’s discussion on eventual reductions in biogenic methane, having been asked by Minister of Climate Change James Shaw to give separate advice on them.

The previous agreement to keep methane split from other gases could be threatened. The date the agriculture sector should have on their radar, therefore, is 2024, when the Commission will review the methane targets.

There is another election before their review so the agriculture sector will need to better understand the future direction of travel in the lead up to, and after the next General Election. We suggest it will depend on whether Labour need the Greens to govern. If they do, change is likely.

Bandwidth Challenge

Climate change policy is a hugely complex undertaking. The law of unintended consequences looms large for the Government as it progresses its climate change policies.

For a government that has attracted criticism for its delivery problems, climate transformation presents as its greatest policy challenge yet. The risk of a growing bandwidth problem is heightened by large scale reforms already signalled in Health, industrial relations, immigration, social insurance and elsewhere. And lest we forget: Covid still dominates the Government’s day-to-day energy and focus.

Exacerbating Labour’s bandwidth risk is the difficult challenge facing Minister of Climate Change James Shaw. It is hard enough for government ministers to drive change in their own portfolios, so Shaw’s is a formidable political challenge for a Minister-Outside-Cabinet who must drive workstreams across any number of his Cabinet colleague’s portfolios.

Climate change policy is akin to shooting a moving target. Changing methodologies, new and revised data, and refined modelling means there is rarely a static position to help business with its forward planning.

In this vein, Minister Shaw asked the Commission to provide separate advice on whether the country’s first Nationally Determined Contribution (NDC) is compatible to limit the global average temperature increase to 1.5 percent above pre-industrial levels.

The Commission advised the Minister the first NDC was not compatible and recommended that political decisions that reflect the Government’s tolerance for climate and reputational risk, and their economic impact, were required to be made. The NDC is in a sense the forward posture of New Zealand’s international climate change leadership ambitions. The Minister and the Labour-led Government wish to lead, and they have the support of New Zealanders to pursue their preferred path. Translation: it is going to be revised upward.

But there is an old saying, there is many a slip between cup and lip, so December’s translation of the Climate Change Commission’s Final Advise will reveal the extent of any slippage. For businesses with a point-of-view on progress towards Carbon Net Zero, now is the time to get your voice heard and influence the direction of that slippage.

What does the Climate Change Commission’s Final Advice mean for business?

Given Labour’s centralising tendencies, Wellington will continue to be the centre of decision making. The Commission encourages the Government in its Final Advice to “collaborate” with business and other groups across its recommendations.

The Commission believes this crucial to advance climate policy, but it will be a test for a Labour Government not renowned for this approach from its first term (think the Oil & Gas ban, for example).

Acumen thinks that for businesses and industries with substantial points of difference with the Commission’s advice, there is only a short three-to-four-month window to make representations to government.

For clients in agricultural, building, food manufacturing, technology and transport sectors, particularly, the time to engage with government is now. Further opportunities to engage with Ministers will arise after the announcement of its first emissions reduction plan in December. However, path dependencies will begin to take shape so to the extent that policy development is malleable, the window is short, and it is open now.

In December the rubber hits the road. The challenge for the Labour-led Government is to translate the Commission’s advice into an emission reduction plan that carries affected sectors and the public with it. The challenge for business, industry and government sectors is to take the initiative in engaging with government. Give the team at Acumen a ring to start the conversation.