Hon David Parker - 19/02/2007 - Address to 2007 Annual Motor Trade Association CocktailsWestpac St James Theatre, Wellington, 13 February, 2007

Introduction

Thank you for inviting me here this evening, and thanks for that positive introduction.

I welcome the opportunity to address you on climate change, an issue I believe to be one of the most significant challenges we face in the world, and as New Zealanders.

I want to begin tonight by reflecting on the words of one of the pioneers of the motor industry: Henry Ford.

As Mr Ford remarked, “Nothing is particularly hard if you divide it into small jobs.”

That is why I am very pleased at the pro-active approach that the Motor Trade Association has taken to climate change. Stephen Matthews, your chief executive, just mentioned fresh and innovative solutions. That's the approach we want, and we want to work with industry to achieve this.

Together we must leverage our expertise to shift New Zealand to a cleaner motor industry. Climate change is not something the government can solve alone.
It will, (to paraphrase Henry Ford), take many people doing many small jobs.

Furthermore, although there will be some change as we transition to a cleaner motor vehicle fleet, there are also opportunities. You will still import and sell cars, but there will be an increased focus on sustainability. Many of our actions on climate change will have co-benefits such as stimulating technical innovation, increasing our energy efficiency, reducing our fuel bills, protecting our economy from volatile oil prices, and reducing local air pollution.

My purpose tonight is to encourage you in your commitment to addressing climate change. I will first underscore the urgency for action by outlining some of what I see as the forces driving change in the transport sector. Second, I will highlight some proposed policy solutions with an emphasis on the role of the MTA and its members.

Drivers for change

Let’s now look at how climate change is driving change in the motor trade industry. I want to stress that that these changes are not, in essence, created by New Zealand government initiatives. Rather they are driven by global regulatory and market forces motivated – in part – by an international tide of rising public support for action.

Shifting towards a price on emissions
At the global level, there's growing momentum that carbon emissions will carry a cost. Regardless of what happens with Kyoto, there is increasing likelihood that there will be an international cost attached to greenhouse gas emissions. This arises from the environmental objective of reducing emissions. Reducing emissions requires us to act differently in future to how we acted yesterday. This carries with it a cost. Not a high cost, but a cost. It is the cost of transition that causes a cost of emissions, because as with other costs these should be reflected in costs of goods. Kyoto is a measure of that cost, not the cause of it.

There's even change afoot in the United States and Australia - the only developed countries that have not ratified Kyoto. Nine states in the USA have joined forces to discuss the design of a regional cap-and-trade programme. In Australia, companies including Shell and Rio Tinto, are pressuring the Federal government for a domestic emissions trading scheme.

While we're yet to see the final shape of these future international and national regimes, it is clear everyone will be affected, and all sectors, including agriculture, forestry, electricity generation and transport, will have to play their part.

We can limit the future economic cost of emissions by reducing them.

These changes will impact on the motor industry –
They will drive a diversification of vehicle and fuel systems.
They will drive improvements in the efficiency of the vehicle fleet and put increased emphasis on maintenance for fuel economy.
They will drive new investments in public transport.

Consumers will be willing participants, doing their bit to address climate change.

As the sellers, maintainers and fuel providers of New Zealand’s motor fleet, your contribution will be key.

Shifting towards cleaner vehicles and fuels
A shift that I want to emphasise this evening is the move by automotive and oil companies towards cleaner vehicles and fuels.

Automotive manufacturers are developing more fuel efficient vehicles and more vehicles that can run on biofuel. Biofuel already powers around six million vehicles in the United States and many more in Brazil. Hybrid vehicles are already on the market in New Zealand. Prototype electric vehicles show that a commercial range of electric vehicles is on its way in the next few years. Our low emissions electricity, which is very cheap by world standards, will provide a lower cost fuel option which will be popular amongst consumers.

Such shifts are driven not only by concerns over climate change, but also by considerations for oil security. Most countries are requiring manufacturers to meet increasingly stringent fuel economy targets and New Zealand as an importer will be a beneficiary.

I believe these trends have the potential to transform the sustainability of the motor sector. The Motor Trade Association can play an important role in preparing New Zealand and the industry for these vehicles. Supporting maintenance and repair services will be required. There may also be new standards to respond to or develop with the relevant authorities.

Shifting towards increased public pressure
Thirdly, as the science on climate change becomes more robust, the public are demanding action. What’s more, they are willing to take action. A Herald Digipoll last month stated that 77 percent of New Zealanders believe that they need to make lifestyle changes to reduce climate change.

In short, the three issues I have highlighted illustrate that we need to adapt to new realities. For New Zealand to keep pace with these changes our industries must work in partnership with government. As the Stern Review demonstrated, the cost of inaction outweighs the cost of action. Doing nothing is neither rational nor realistic.

A shared solution

Let’s turn to some possible solutions.

I believe that addressing climate change requires transformation in every sector of the economy. We must find a shared solution. Every sector must play its part.

The transport sector is challenging. Around 40% of our carbon dioxide emissions come from transport (18% of total greenhouse gas emissions). Furthermore, the Energy Outlook to 2030 shows transport emissions increasing by 35 percent over the next 25 years under current policy settings. We cannot let that happen.

We must improve the efficiency of our vehicle fleet, introduce better public transport and new, lower emission transport fuels.

We are moving forward. We are consulting on five discussion documents related to climate change over the next seven weeks. I stress that these are discussion documents. They require input from industry groups like the MTA to evolve into policy that is durable and effective.

The documents are:

The New Zealand Energy Strategy
The replacement New Zealand Energy Efficiency and Conservation Strategy
Sustainable land management and climate change, addressing both agriculture and forestry;
Transitional measures to reduce emissions in the stationary energy sector before 2012; and
Options for a longer-term (post 2012) broad-based climate change instrument or instruments, such as emissions trading.

I encourage all of you to participate. This evening I’d like to highlight three areas in which the MTA and its members have a key role.

Vehicles
It is important that over time there is improvement in the average fuel economy of vehicles sold. Two of our documents, the NZES and the companion NZEECS, have a focus on light vehicle sales.

I recognise that vehicles are needed for a range of tasks, but where a more fuel efficient option is available there should be a trend for the purchaser to buy the more fuel efficient option. There should also be clear labelling. This should in my view be compulsory.

We are also considering whether a sales weighted average is appropriate for vehicle imports, be they new or second hand. The second-hand and new vehicle industries are very different and there are a number of data and technical issues to overcome.

Officials have been asked to work with the industry on ways forward and the MTA will be key in contributing to this discussion.

The government will be leading by example with the crown fleet. New vehicles have been required to meet increasingly tough environmental standards for some time. Last year the government looked at the challenge of the older imported vehicles entering our fleet. We have decided to implement regulations that require these vehicles to meet increasingly stringent standards for harmful exhaust emissions.

The next stage is a draft document on the proposed standards and the lag time before they apply. I hope that the MTA will help to ensure that members are made aware of this work and also support the stance to restrict less efficient technologies entering the fleet. Motorists will benefit from lower fuel bills.

Fuels
Shifting now to fuels, you may have caught up with the Prime Minister's statement in Parliament today, where she announced the new minimum biofuels sales obligation. As you are aware, our proposal was for a 2.25 percent minimum to be in place by 2012. We have revised this upwards to 3.4% by 2012. 2.25% would have brought on biodiesel but little substitution of petrol by bioethanol. The 3.4% is intended to advance bioethanol.

Looking to the more distant future, we are also proposing a group of experts to advance planning for a higher percentage of biofuels post 2012.

Our aim is provide a catalyst for further innovation. New Zealand companies lead biofuel innovation. For example, Aquaflow Bionomic is investigating biodiesel from algae grown on municipal sewage and dairy shed effluent. This has co-benefits: it solves environmental problems while developing new income streams and it reduces the balance of payment costs of imported oil.

Our biofuel efforts are gaining international attention. I met British entrepreneur Sir Richard Branson last month to discuss potential investment here.

Biofuels are another area where the MTA has an important role in preparing its members, particularly fuel retailers and mechanics. It will require awareness, education and new infrastructure.

Driver behaviour
The third area I want to highlight is driver behaviour. The Government and MTA are already working together to increase fuel economy.

The recent campaign on “Choke the Smoke” highlights the value of government and industry working together. I gather that this has been a very successful campaign and I welcome that.

I hope the next phase, which emphasises the benefits of reduced fuel use for a low carbon future, will build on the early success.

These are small, practical steps that will benefit the pocket books of New Zealanders and, in doing so, our climate, our economy and our health.

Conclusion
I’d like to finish this evening by returning to where I began – Henry Ford’s assertion that nothing is hard if divided into small jobs. The climate challenge which confronts the motor industry will bring change. Many small jobs will be required as we transition to a low carbon future.

As leaders of the motor industry your role is critical. Now is the time for us to work even more closely together. Together, I am confident that we can make the most of these opportunities for the benefit of all New Zealanders.

Thank you.