Private industry must take the first step in the green race

Over the past two years, Pure Advantage has dedicated significant resources towards understanding and identifying the opportunities for New Zealand to foster green growth and create skilled jobs while at the same time contributing towards the conservation of natural resources and the environment in New Zealand. Pure Advantage has just released an independent report called ‘Green Growth: Opportunities for New Zealand’, which was prepared by Vivid Economics of London in conjunction with the University of Auckland Business School and includes a foreword by Lord Stern.

The macroeconomic review ‘Green Growth: Opportunities for New Zealand’ is claimed to the first robust analytical assessment of New Zealand’s green growth economic opportunities within a global context.

Rob Morrison, the Chairman of Pure Advantage, says the organisation intends to use the macroeconomic report as a basis to establish, in consultation with industry, seven industry-specific green growth programs.

“We firmly believe on the basis of this significant macroeconomic report that New Zealand has the potential to generate billions of dollars in new high-value economic growth, whilst at the same time improving New Zealand’s environmental performance,” says Morrison.

Kathryn Smith, one of the key authors of the report from Vivid Economics, says that it is a landmark report because it looks at New Zealand’s position and global green growth opportunities holistically. It addresses a detailed set of questions around three core areas:

1. NZ’s green growth performance in the context of global opportunities,
2. A sectoral assessment of comparative advantage and green performance, and
3. The extent of future green growth opportunities and specific sectors, which could benefit and ultimately transform the NZ economy.

“This is a chance for New Zealand to raise its environmental and economic performance and we know that the measures highlighted by the report could be formed into an integrated and concerted approach,” says Smith.

‘Green Growth: Opportunities for New Zealand’ can be summarised into six points:

1. A green economy offers the opportunity to improve the overall wellbeing of all New Zealanders, by viewing economic growth and environmental improvement in a holistic manner.
2. New Zealand could benefit from global green investment patterns in two main ways: by exporting to nations investing in green goods and services and by importing new technology and ideas to create efficiencies at home.
3. The potential economic opportunities are significant - the IEA estimates that global investments in low-carbon energy alone could reach more than US$3 trillion per year by 2050, if the world shifts to an ambitious green growth trajectory.
4. New Zealand should focus on sectors where it already has an advantage or where its natural capital is best suited to capturing future advantages.
5. The best green growth export opportunities for New Zealand include sustainable efficient agricultural products and services, geothermal energy, biotechnology and forestry, including second-generation biofuels. In the domestic economy, opportunities include improvements in building and transport energy efficiency, electricity grid technology and matching brand credibility through improved biodiversity management.
6. These opportunities generally require action from both industry and government; however, there are steps which private industry can take immediately and unilaterally.

The foreword to the report is written by Professor Lord Stern of Brentford, Chair of the London School of Economics’ Grantham Research Institute on Climate Change and the Environment. Lord Stern warmly welcomes the report, which shows there are important economic opportunities for a commodity trading nation like New Zealand in rapidly transitioning to green growth.

“More broadly, the green growth transition can protect New Zealand’s current competitive advantages and create new sources of wealth” says Professor Lord Stern.

“Green growth integrates environmental concerns, especially climate change, into growth. It is the only growth that allows humanity to develop and flourish, reduce poverty and achieve development goals while at the same time protecting natural capital, such as climate stability, without which growth and development will be retarded or reversed.

“In addition to being necessary, the green growth model is also attractive because it creates prosperity, builds community and reduces risk,” says Professor Lord Stern.

Rob Morrison says the value in the report lies in the fact that it gives feasible export-orientated and domestic solutions to allow new green growth within each of New Zealand’s key sectors, but importantly, the actions needed to achieve these with priorities based on relative lead and implementation times.

Morrison adds that Pure Advantage has used the macroeconomic report to focus on seven key ‘advantages’ that New Zealand has in the green race, which are:

1. Home Advantage: Retrofitting an efficient building environment
2. Geothermal Advantage: Creating a significant geothermal export industry
3. Agricultural Advantage: Investing in sustainable and efficient agricultural technologies
4. Waste-to-Energy Advantage: Installing bio-energy and waste-to-energy infrastructure
5. Smart Grid Advantage: Installing the building blocks of a smart grid
6. Biofuel Advantage: Establishing a woody mass biofuel and bioproducts industry
7. Biodiversity Advantage: Establishing a world-class, biodiversity-driven ecotourism and conservation education program.

“Pure Advantage has selected these seven advantages because they are all significant, deliverable and can leverage existing investment, skills and knowledge.

Morrison notes that government can augment the state sector’s existing activities in these identified areas and accelerate these seven advantages.

“While there have been positive steps taken by the current and previous New Zealand governments as well as many New Zealand companies, the green growth opportunities Pure Advantage are talking about have yet to be fully realised. If they had been realised, we would already be seeing significant economic and environmental gains - but as of yet we are not.

“In the built environment, for example, while Pure Advantage acknowledges the progress made by the government so far in insulating New Zealand’s houses, around 750,000 New Zealand houses remain poorly insulated and heated. Deriving the full potential from this opportunity will take a comprehensive, coordinated effort aimed at fixing the vast majority of our remaining uninsulated housing stock that involves both industry and government.

“In all instances, Pure Advantage sees industry taking the next steps towards full realisation of the identified potential. That way industry can prepare the business case and establish the tangible means to strategically work together.

“The next step is concerted and focused discussions at boardroom level followed by direct actions which will enable the delivery of a wide range of benefits. Pure Advantage intends to be as constructive as possible in the debate as we chart the next steps in this very important journey to enhancing New Zealand’s economic prosperity and improving our environment. We welcome ideas and input from anyone in industry that is keen to join us in making a difference to New Zealand’s future,” says Morrison.

Pure Advantage www.pureadvantage.org.nz

Vivid Economics www.vivideconomics.com

*Kathryn Smith is an economist from Vivid Economics and one of the key authors of the report. Her research interests and expertise focus on the economics of climate policy design and assessment. They include the effective mix of price and non-price policies to address different mitigation issues, potential tensions and synergies between efficiency and equity in national and global climate and energy policies, and technical issues associated with using cost benefit analysis to assess global and national mitigation strategies. Previous career positions include working as a Special Adviser during a pivotal period of climate change policy development in the Australian Department of Climate Change and Energy Efficiency, and as a macroeconomist at the Reserve Bank of Australia. Kathryn holds an MSc in Environment and Development (with distinction) from the London School of Economics and Political Science and Bachelor’s degrees in Economics (with first class honours) and Science from the Australian National University.