Business opportunities in the primary sector arising from climate change
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Project background
There is shift in perception of climate change – from being a business burden to being a potential business opportunity. Industry bodies are increasingly putting pressure on governments to respond to climate change with decisive action that creates more certainty for businesses. For example, in November 2007, 150 global companies signed a communiqué1 calling for a legally binding UN agreement to reduce greenhouse gas emissions by at least 50% by 2050 to provide the required certainty to "scale up global investment on low carbon technologies." The signatories, including Shell, General Electric, Cadbury Schweppes, British Airways, Adidas, Nestlé, Nokia and Virgin Group, advocated that a shift to a low carbon economy will create significant business opportunities, and suggested that "new markets for low carbon technologies and products worth billions of dollars will be created if the world acts on the scale required."
Increased political backing and commitment to a global response to the risks of climate change have also led business leaders to identify emerging opportunities in low carbon enterprises. The Climate Group released a summary report in late 2007 which demonstrates that "businesses in renewable power, energy-smart products and clean technologies are generating revenues, profits and jobs at rates that would have been unthinkable a few years ago."2
In September 2007, the New Zealand Government released the Sustainable Land Management and Climate Change (SLM&CC) Plan of Action3 which committed to investing more than $175 million in a range of programmes to assist the primary sector in adapting to, mitigating, and exploiting the business opportunities of climate change. This strategic analysis is one of the activities being undertaken as part of that Plan of Action. Examples of other activities being undertaken include:
- The development of tools for calculating the carbon footprint of parts of the primary sectors;
- Research projects, information dissemination and capacity-building programmes relating to a range of opportunities arising from climate change and climate change policy. Examples of opportunities include voluntary carbon offset markets, markets for emission-reducing technologies, clean development mechanism and joint implementation opportunities;
- The development of a Sustainable Building Strategy to promote greater use of wood;
- Research, development and commercialisation of biochar, biofuels, and opportunities for energy efficiency; and
- Research on, and implementation of, an international strategy for avoiding deforestation, and related issues.
The Ministry of Agriculture and Forestry (MAF) has commissioned this strategic analysis to identify emerging opportunities resulting from the indirect impacts of climate change (defined below) for New Zealand's primary sectors. The research project will inform the MAF Working Group (set up through the Government-Primary Sector partnership under the SLM&CC Plan of Action) on potential primary-sector opportunities, how the primary sector can take advantage of these business opportunities, and potential initiatives to be included in the Government's Primary Sector five-year work programme.
The 'primary sector' is taken to include the agribusiness and forestry sector component of the production, processing and distribution of agricultural and forestry products, and the manufacture of farm machinery, equipment and supplies. For this report, the primary sector excludes fishing, aquaculture and mining.
The objective of this analysis is to identify business opportunities in the primary sector indirectly related to climate change – both physical changes in climate and opportunities relating to mitigation policy. While the review identifies a range of opportunities, the focus is on opportunities where the government may have a role in increasing the commercial attractiveness or feasibility, from a business perspective, of identified opportunities.
The primary sector in New Zealand will be affected by climate change both directly and indirectly, and therefore the need to adjust to a changing economic environment is potentially more critical than for some other sectors. The difference between the direct and indirect impacts of climate change is discussed below. The focus of this report is on the indirect impacts of climate change.
Direct impacts of climate change
For the purposes of this report, the direct impact of climate change includes impacts that are a direct consequence of changing global climate. Therefore, any impacts associated with physical exposure such as in response to changes in rainfall patterns, frost etc, which in turn may result in changing land use, productivity, and global competition, are all categorised as direct impacts of climate change. To avoid doubt, the impact on the New Zealand primary sector which is in response to changing climate conditions overseas (e.g. the increased world price of dairy in response to limited drought-induced supply), is considered to be a direct impact of climate change.
Indirect impacts of climate change
The indirect impacts of climate change refer to any consequence of climate change not defined above as a direct impact. These can generally be categorised as impacts relating to the private sector and public sector responses to climate change, and especially how these affect both public policy and the markets for goods and services. Examples of these responses include policy interventions such as emissions trading schemes and carbon taxes (in New Zealand and other countries), changing consumer demand for low greenhouse gas footprint products and voluntary offset markets. These issues are explored in more detail throughout the report.
1Known as the Bali Communiqué, more information is available at http://www.balicommunique.com/
2The Climate Group (2007) In the Black: The growth of the low carbon economy - A Summary Report
3For more information on the New Zealand SLM&CC Plan of Action, refer to http://www.maf.govt.nz/climatechange/slm/
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
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