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CHRISTCHURCH, NEW ZEALAND – MAY 25: Dairy farmer Leon Doherty milks cows at night at Synlait dairy farm on May 25, 2015 in Christchurch, New Zealand. New Zealand-based dairy producer, Synlait, has commercialised a dairy-based milk powder said to aid in sleeplessness by collecting milk from cattle in the dark hours of the night when the animal’s production of the melatonin hormone is at its highest. A clinical trial conducted by Otago University’s WellSleep Centre and part-funded by Synlait, proved the product, iNdream3, is a sleep-promoting ingredient. iNDream3 has been sold in Korea since January of this year. (Photo by Martin Hunter/Getty Images)
CHRISTCHURCH, NEW ZEALAND – MAY 25: Dairy farmer Leon Doherty milks cows at night at Synlait dairy farm on May 25, 2015 in Christchurch, New Zealand. New Zealand-based dairy producer, Synlait, has commercialised a dairy-based milk powder said to aid in sleeplessness by collecting milk from cattle in the dark hours of the night when the animal’s production of the melatonin hormone is at its highest. A clinical trial conducted by Otago University’s WellSleep Centre and part-funded by Synlait, proved the product, iNdream3, is a sleep-promoting ingredient. iNDream3 has been sold in Korea since January of this year. (Photo by Martin Hunter/Getty Images)

ScienceAugust 21, 2017

Climate change is coming for the economy, and New Zealand needs to adapt

Guest writer
CHRISTCHURCH, NEW ZEALAND – MAY 25: Dairy farmer Leon Doherty milks cows at night at Synlait dairy farm on May 25, 2015 in Christchurch, New Zealand. New Zealand-based dairy producer, Synlait, has commercialised a dairy-based milk powder said to aid in sleeplessness by collecting milk from cattle in the dark hours of the night when the animal’s production of the melatonin hormone is at its highest. A clinical trial conducted by Otago University’s WellSleep Centre and part-funded by Synlait, proved the product, iNdream3, is a sleep-promoting ingredient. iNDream3 has been sold in Korea since January of this year. (Photo by Martin Hunter/Getty Images)
CHRISTCHURCH, NEW ZEALAND – MAY 25: Dairy farmer Leon Doherty milks cows at night at Synlait dairy farm on May 25, 2015 in Christchurch, New Zealand. New Zealand-based dairy producer, Synlait, has commercialised a dairy-based milk powder said to aid in sleeplessness by collecting milk from cattle in the dark hours of the night when the animal’s production of the melatonin hormone is at its highest. A clinical trial conducted by Otago University’s WellSleep Centre and part-funded by Synlait, proved the product, iNdream3, is a sleep-promoting ingredient. iNDream3 has been sold in Korea since January of this year. (Photo by Martin Hunter/Getty Images)

Climate change is going to dramatically disfigure New Zealand’s economy, cutting up to half our GDP, according to fund manager Lance Wiggs. The good news? We have a chance to lead in a new low-carbon world – or we could do nothing and perhaps see our economy, and society, collapse.

Sometimes the future is easy to predict.

I was an early owner of several digital cameras and the iPhone 3G, and it quickly became clear what the future of photography and phones was going to be. The demise of Nokia, Blackberry, Motorola and Kodak was dictated only by how quickly the new entrants could deliver their new products in bulk at realistic prices.

Today’s prescient product is from Tesla, their electric cars an evolutionary moment that has clearly signalled the era of the internal combustion engine in automobiles will soon end.

Like the original digital cameras and iPhone Tesla’s electric vehicles are currently expensive and rare. But we now know that electric cars are already quieter, faster, intrinsically safer and cheaper to run than current cars. We also know that they have less parts, are simpler to design and build and have lower maintenance costs, and that means they will become better, faster and cheaper than anything current technology can provide.

Meanwhile Tesla’s home and utility scale batteries and solar panels (including solar panel roof tiles), along with global investment into renewable power, are showing that electricity generation and distribution is forever changed too.

It’s now 100% certain that we are witnessing the downfall of the fossil fuel powered automobile industry as well as the oil, energy coal and natural gas industries. We can expect some survivors; we will still need some fossil fuels for industrial products, chemicals and plastics, and some of the automobile manufacturers will migrate to the new electric economy. But as Nokia and Kodak proved, changing the course of a slow moving giant company is almost impossible and we can expect their investors to lose a lot of money.

Smart investors can, of course, make a lot of money by forecasting change. I managed to ride the rise of Apple for a long time and I’ve also invested a little in Tesla. Punakaiki Fund, which I help manage, has focused investments on newer businesses that will survive and thrive in a low carbon economy. And just this week New Zealand’s Super Fund announced that they have moved their investments in global shares to low-carbon intensive industries. Will the New Zealand government have the foresight to lead our economy in the same direction? Or will we be like the global publicly listed coal companies, which fell in value by 90% over past seven years?

Tesla’s electric cars signal the end of the fossil fuel era.

It’s been five years since the Tesla S was introduced, but for our Prime Minister Bill English his lightbulb moment arrived only recently, after an experience with an electric car in Australia. That moment sparked a policy change for the New Zealand Government to invest an electric car fleet. While that’s good it’s also too little, as English committed to converting only a third of the fleet to electric by 2021.

The deeper concern is that the former Finance Minister, despite abundant evidence that New Zealand faces a low carbon future, needed to get inside an electric car in order to change policy. New Zealand should be well beyond the stage where personal experience is trumping evidence when it comes to driving policy.

We should instead take note when people predict the future, especially when they have a track record of success. We have an opportunity react more quickly than other investors, companies and countries in order to protect and grow our economy.

Imagine if we were able to assemble hundreds of the very best experts from across the world, and get them to predict the future. Imagine if their regular reports made predictions that kept on becoming true. Now imagine if they had agreed on a future where half of GDP was at serious risk.

Those experts are climate scientists, and the reports are the regular IPCC Assessment Reports. Their predictions are dire.

The Financial Evidence

As Bill English’s actions show, it’s hard to make brave and expensive decisions unless we are really confronted with the evidence. And it’s also hard to make policy or investment decisions when the status quo is so comfortable, and when so many other things demand immediate attention.

Help has arrived in the form of an analyst report on the climate crisis by Schroders Bank. Tagged “for professional investors and advisors only” it describes climate change issues and consequences in a way that economists, policy makers and politicians can love.

Not that there is any loveable news. The chart below shows that the world is on a trajectory to lose over 10% of GDP over the next 33 years to 2050.  That assumes we will spend US$700 billion each year in annual global climate investment – a courageous assumption given the current state of global politics and the chance of more wars as the crisis intensifies.

An expert annotated vision into our economic future.

What can we do?

The only effective way for the world to reduce the impact of the climate crisis is to sharply drop emissions of greenhouse gases like CO2, and the only way to do that is to make those emissions costly. Whatever the mechanism this will result in vast increases in the prices of oil and coal, and high costs allocated to other emitters like methane belching cattle. The winners in this new world will be suppliers of emission-free technology, like electric cars and solar panels and producers, and regions who switch production to low-carbon methods early.

At some stage judgment day will come, and high carbon producers will be marginalised into non-existence.

New Zealand will be less affected by sea and temperature rise than other parts of the world, but our carbon dependent export economy will be at tremendous risk. We still have the choice of positioning ourselves for the future and taking a global leadership position to help the shift to a post-carbon economy. Or we could do nothing, which could see our economy, and thus society, collapse.

Our entire ICT sector in New Zealand is already ready for climate change, but our dominant agricultural sector is not. Our tourism sector will suffer deeply unless we take a world leading approach to managing our emissions, and we can expect fossil fuel powered air travel to decline anyway. But if we change now it we will create the environment to help launch a series of global companies that are fit for purpose in a post-carbon world. Why can’t the replacements for the current automobile and oil companies emerge from New Zealand?

We need the Government

In New Zealand we are in a race, a war even, with the other countries to be the first to put in place strict rules and regulations that would accelerate  our transformation into post oil economy.

The way to do this is simple – tax all carbon emissions, including from agriculture, perhaps using a GST-like approach where the tax cascades down from the producers to the customers. Use the tax to subsidise the affected end users, the companies that invest in change, and even to lower other taxes or provide social welfare. Like GST there can be no exceptions, and we need to ramp up the tax over time.

As the crisis deepens we can expect an increasing share of our markets to be forced to introduce a carbon tax, and if we are prepared then we will be producers with the lowest cost and highest quality products.

More Reading

    The choice is simple – impose a simple change and perhaps create the next General Motors or Toyota from New Zealand, or do nothing and risk losing half of our GDP or worse.

    Climate Change Week at The Spinoff is brought to you by An Inconvenient Sequel – in cinemas August 24.

    A decade after Al Gore’s film, An Inconvenient Truth, brought climate change into the heart of popular culture comes An Inconvenient Sequel – highlighting the perils of unmitigated climate change and the need for more action. See it in cinemas from Thursday August 24.

    Keep going!
    a stormy purple sky, with some houses on a pale islane and a pale turquoise swish of water in the foreground
    Eita, a small village in Kiribati that becomes a separate island during high tide due to sea level rise. (Photo by Jonas Gratzer/LightRocket via Getty Images)

    ScienceAugust 19, 2017

    Climate change is already destroying lives in the Pacific

    Guest writer
    a stormy purple sky, with some houses on a pale islane and a pale turquoise swish of water in the foreground
    Eita, a small village in Kiribati that becomes a separate island during high tide due to sea level rise. (Photo by Jonas Gratzer/LightRocket via Getty Images)

    Climate change is the defining challenge of our times. The Spinoff is devoting a week of coverage to the issue, its advocates, complexities, and solutions. Today, former President of Kiribati Anote Tong says that while the rest of the world ignores the gradual onset of climate change, the lives of Pacific peoples are already being drastically affected.

    In 2006, when former US Vice-President Al Gore came out with the film An Inconvenient Truth, the subject of climate change was precisely that – an inconvenient message threatening the established way of life of especially the developed world. It also challenged the relentless pursuit of economic growth of those countries that were aggressively trying to catch up to the nations that had achieved levels of material affluence never before seen in the past.

    But in my country Kiribati and other similar island countries in the region like Tuvalu, the Marshall Islands, Tokelau, and communities across the Pacific, we have long known the severe impacts from what is happening to our world. Positioned barely two metres above sea level, there are already communities in Kiribati and other Pacific Island countries that have had to relocate due to the flooding of their villages, the loss of land, contamination of potable water and destruction of food crops. The change in the weather pattern has also subjected several island communities to more severe storm events. Kiribati is theoretically well beyond the hurricane belt. Yet for the first time in 2015 a cyclone, having devastated Vanuatu, veered northwards and flooded all of the islands of Tuvalu and our southernmost islands.

    A young girl lies on her back in seawater that has flooded the village street in Eita, Kiribati. (Photo by Jonas Gratzer/LightRocket via Getty Images)

    When I gave my first address at the United Nations General Assembly in 2004, climate change struggled to attract international attention away from the global focus on terrorism. But I had no hesitation appealing to the world about the issue that mattered most to my people. I did not have the luxury to ignore this problem. It was not until the Fourth Assessment Report of the IPCC was issued in 2007 that there was relative global consensus that climate change is indeed the result of human activity and that the scenarios of global warming and sea level rise would be disastrous for the planet, and more urgently for the most vulnerable communities.

    That consensus came too late. For Kiribati, Tuvalu, the Marshall Islands, Tokelau, Wallis and Futuna, and other low lying countries in the region the brutal reality is that the future existence of our communities is in serious jeopardy. The current projections of sea level rise of around a metre within the century would be disastrous for all of these communities.

    Already there are indications that these predictions are underestimates and that the melting of the polar ice sheets are accelerating faster than earlier predicted. The IPCC further predicts that even if the global community were to achieve a zero emission level today, the momentum of the greenhouse gases already in the atmosphere would continue to drive up global temperatures and sea level rise beyond the capacity of the most vulnerable countries to survive.

    Beyond the Pacific we are hearing of bush fires in North America, and in Europe severe heat waves of an unprecedented scale. Closer to your home in New Zealand, a study by the National Institute of Water and Atmospheric Research (NIWA) finds that the Southern Alps has lost 34% of its permanent volume of snow and ice since 1977.

    No country or people are immune to the impacts of what is happening. There is no negotiating with nature on how it should respond to the abuses we continue to pile upon her fragile system. The diversity of the landscapes for which New Zealand is so blessed and the source of her unique beauty are without doubt being threatened.

    Anote Tong, with Al Gore, and Prince Charles at the 2015 United Nations Climate Change Conference in Paris. (Photo by Carl Court/Getty Images)

    I have always believed that the greatest obstacle to achieving a really effective response to climate change has been, and continues to be, the inability or unwillingness of national leaders to fully grasp the global nature of the problem. As long as we continue to view the issue from our individual national perspectives climate change will not be resolved. So the successful conclusion of the Paris Agreement in 2015 was perhaps the most significant achievement in international collaboration reflecting a rational response to a threat of global proportions. Yet that was not an easy process.

    One of the major obstacles during the final stages of the Paris discussions was whether we as a global community should aim to maintain the global rise in temperature below 2 or 1.5 degrees celsius. Ultimately a compromise text was agreed which is still a long way from addressing the problem effectively.

    Even within the vulnerable islands of the Pacific, self interest pervades the response to climate change. I recall very well the press conference held in Port Moresby, Papua New Guinea following the conclusion of the Pacific Islands Forum (PIF) shortly before the Paris conference. The leaders of the more developed PIF countries argued that to go below 2 degrees would be too damaging for their economies, whereas the more vulnerable argued that it is a matter of survival for their people.

    Most regrettably climate change continues to be viewed through a political lens. Within our very Pacific region we have seen radical reversals of policies on climate change with the changes in government, and of course the 180 degree turn by the United States of America on its commitment to the goals set out in Paris Accord was the most radical of all.

    The science coming out of the work of the Intergovernmental Panel on Climate Change (IPCC) sounded a very loud alarm for the powerful oil and coal multinational corporations and all those whose livelihood depended on it. And of course these powerful corporations fought back, challenging the validity of the science and deliberately embarked on a very aggressive campaign to cast doubt on the conclusions of the IPCC and the fact the planet is warming.

    My own personal experience in the course of my advocacy on climate change has been most revealing. In addition to the direct arguments I’ve had with fellow leaders, I have also been subject to veiled threats that the aid provided to my country could be affected by the position I take on climate change. I received a message from one of the world’s largest coal companies that told me I am wasting my time on this campaign.

    But amongst the fear, Vice-President Al Gore’s An Inconvenient Sequel sounds a welcome message of optimism. That we still may be able to save this planet; that we no longer need to continue burning fossil fuel in order to maintain the lifestyles and momentum of development to which we have become addicted; that renewable and alternative energy sources are now being produced at lower costs than fossil fuel; and that coal as an energy source for the poor is no longer a valid excuse to open new coal mines.

    So against these developments and with all of the science available on the dangerous path fossil fuel is taking us, why do we continue to allow those pursuing their own agenda to mislead us towards our own destruction? For the most vulnerable of us, for whom climate change is already an existential threat, our world is headed towards destruction and so far no solutions are in sight. For the rest of the world this reality is just around the corner unless we recognise that this is a crisis that affects us all, and work together to prevent it becoming a catastrophe.

    Climate Change Week at The Spinoff is brought to you by An Inconvenient Sequel – in cinemas August 24.

    A decade after Al Gore’s film, An Inconvenient Truth, brought climate change into the heart of popular culture comes An Inconvenient Sequel – highlighting the perils of unmitigated climate change and the need for more action. See it in cinemas from Thursday August 24.