Westpac's Karen Silk argues New Zealand's government and businesses, including the agriculture sector, stand to benefit from being proactive rather than reactive when dealing with climate change

By Karen Silk*

It's too easy to put off climate change until tomorrow.

Immediate, pressing, and individual priorities like paying bills, serving customers, or just buying the next consumer product, overtake the distant and shared problem of a warming world.

But, at some stage New Zealand will need to speed up tackling climate change if it's to meet its obligations under the Paris Agreement.

Based on research we commissioned from EY and Vivid Economics, there could be a cumulative $30 billion boost to GDP by 2050 if Government and industry are proactive rather than reactive in dealing with climate change.

Furthermore, if we are slow to act the carbon price, which will be an increasing factor in prices for a range of household goods, could end up 48% higher than otherwise. That would impact every household in New Zealand.

Westpac asked EY to model the effect on the economy of two scenarios - taking action earlier and taking action later and having to play catch-up.

So what would early and concerted action look like?

In practice, this could mean the uptake of new technologies, electrification of passenger and freight vehicles, changes in land use towards afforestation and the phased introduction of agriculture to the Emissions Trading Scheme from 2020.

The researchers tested this possible chain of events against an alternative "shock" scenario in which substantive efforts to reduce our emissions are delayed until 2030.

At that point, New Zealand would be forced into action by external factors, perhaps through the threat of trade tariffs or something similar.

Were that to happen, the pressure of a sudden and dramatic transition to a low carbon economy would create greater disruption across our economy, suppressing growth and probably having an impact on jobs.

Crucially, the EY analysts say agriculture performs better economically if producers are subject to an early and phased transition to the ETS, rather than joining in late in a more abrupt way.

The new report comes to the conclusion that a gradual adjustment to the structure of the economy - including agriculture - will provide greater certainty to business, a more gradual adjustment for households, and reduce the efficiencies lost through rapid price-driven resource reallocation.

As a specialist in minimising financial risks and maximising opportunities, we make it our business to advocate for market structures that foster sustainable growth.

It's why we've previously pushed for an independent Climate Commission, which would set hard targets around emissions reductions.

We think it would provide clarity and certainty to industries, and allow them to plan more effectively.

At this point you might be wondering what Westpac is doing to address the effects of climate change.

In New Zealand, we have cut our own carbon emissions by 55% since 2008 and continue to make further reductions. We offset the remainder through the purchase of New Zealand carbon credits to be carbon neutral.

Since 2012, we have also reduced lending to companies involved in fossil fuel mining and production by 55%.

And, we've lent more than $1.5 billion to green businesses and want to lift that to $2 billion by 2020.

Some businesses and households will hold the view that adapting industrial and social practices too suddenly will present a substantial risk.

I understand that thinking, but would argue that the greater risk - commercially, financially and certainly environmentally - lies in inaction.

Change is coming.

I encourage businesses to set the pace rather than try to play catch-up down the track.

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*Karen Silk is Westpac NZ's general manager of commercial, corporate and institutional banking.

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17 Comments

Hmm I kind of think that avoiding the collapse of our agriculture system that feeds 7billion ppl kind of a bit important. I mean by 4C rise the multiple impacts on food production will quite possibly finish us off as a species but certainly finish off any civilisation some of us now enjoy.

Well, lab-grown meat could have a massive impact on agriculture soon. And a pretty devastating impact on NZ's economy, if it does.

I just can't see it working. There is a clear drive away from "Lab"/"Processed" food towards "real" food.

Who is really going to eat completely artificial constructs?

If we are going to head down those routes we might as well just go the whole way and develop an all in one miracle food.

"Here have this tube of homologous gloop. 3 tubes a day gives you 100% of all dietary requirements with none of the nasties."

I imagine we'll have a mix and match. If meat is identical then much of the market will be happy with it (heck, a bunch of people eat McDonalds now without really knowing what's in the "meat"), while the high-end will push the "organic" boat further along. So, farmers markets vs. Walmarts, business as usual.

Whether there are any benefits to organic food is doubtful indeed, and if lab-grown meat undercuts animal-grown meat significantly then I reckon many people will choose it because of its much lower environmental impact (or for some, the reduced levels of animal suffering).

Lab grown meat will certainly replace what's in things like mince and cheese pies and ready meals. If I were an NZ farmer I'd be specializing in very rare breed, organic, premium beasties, premium prices. Massaged and fed only on grain rolled on the thighs of organic fair trade South Americans.

Bit of hipster thrown in, grow a beard, get a few tattoos and it's an Artisan farm, meat packaged in hemp and/or bioplastics, delivered in electric trucks. Back to fallow fields to allow the bees and insects to replenish themselves, carbon neutral or even negative/positive whichever way it works where you take out more carbon than you put out.

Africa is a worry. The population is expanding like a petri dish until all available resources are exhausted. South Africa will go the way of Rhodesia which was once a food basket and since transgressing the white farmers now imports food.

China while being much more productive than Africa also has an expanding population. They know that democracy is a weakness. Bribe a few people and you have the food chain under your thumb.

Yet western countries with low birth rates are expected not only to foot the bill for climate change but we're also expected to also commit demographic suicide by allowing open door immigration of groups who act against our interests. To do otherwise would be racist or xenophobic.

Stop thinking its only "africa" its the entire human species is expanding exponentially in numbers and expectations.

In terms of climate change developed nations should indeed foot much of the bill as they have mostly created the problem.

but then really you pretty much come across as a racist in your writings anyway.

Aren't the less developed countries that purchase the outputs from the advanced economies they can't and will never manufacture themselves just as responsible for any emissions issues if one believes they are a problem ?

Look at NZ's car imports running at over 300,000 pa with massive emissions generated in their country of production

Imports of Boeing 789's - again massive associated emissions - yet not to our account.

As the worlds most efficient dairy producer - we need to expand NZ's domestic production - not tax it to lower global emissions. That assumes the ever expanding population - the real environmental threat - is going to eat an ever increasing quality diet - just as we have done since time immemorial.

Oh and this scenario is climate change and ignores Peak oil which will impact sooner, faster and harder. This will mean everyone will be scrambling to move and that means higher costs of resources. However we are already too late to move early on that we just dont know it yet.

How's that LNG deal going in Papua New Guinea?

I think it is the best option for NZ to be a follower in tackling climate change.

That's not our style X..and we have a lot to loose, besides someone has to feed those infants in China. How are you enjoying the warmest start to the year on record?

Cauliflower at $7 a pop should give an indication of how this is going to go.

ah but then your opinions as a extremist right whinger that doesnt surprise.

Forget about what others are doing. We have to get off oil as soon as possible or we will be unable to convert later on as all the resources get sucked away by others.

This article is very lightweight. No rigor at all.

""New Zealand will need to speed up tackling climate change if it's to meet its obligations under the Paris Agreement"". True but it will not solve climate change, that depends on the majority of the big countries doing something drastic. Will other countries renege on their commitments? Should NZ have made a commitment based on per capita consumption? Either that or have a population policy?

Lord Stern in 2006 put the cost to mitigate at 1% of GDP. By 2008 he estimated 2%. Now ???
https://www.theguardian.com/environment/2008/jun/26/climatechange.scienc...