Future Focus: Signposts to Success for New Zealand's Primary Industries
1. Global Warming, Climate Change, Extreme Weather: “Adapt or bust”
The debate about human-induced global warming is essentially over in the scientific community. In any case, there are now strong political and commercial imperatives for regarding global warming as a reality – whatever the status of the scientific evidence – and this is increasingly acknowledged worldwide.
For example, the United States Climate Action Partnership (USCAP) comprises major corporates such as BP, Shell, Siemens, DuPont, Ford, General Motors, General Electric, PepsiCo, and Rio Tinto, alongside leading environmental organisations such as the National Wildlife Federation, Environmental Defense, and the Pew Center on Global Climate Change. USCAP urges the federal Government “to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions”. 2
The most authoritative consensus statement to date of the likely direct effects of climate change is provided by the Fourth Assessment Working Group reports issued by the Intergovernmental Panel on Climate Change (IPCC)3 during 2007.
These reports make it clear that the global warming and climate change process that has been caused by human activity will occur irrevocably for hundreds of years – whatever measures are taken in the near future. It is therefore critical to appreciate that some adaptation is inevitably required.
As an illustration, the insurer Lloyd’s of London recently issued a report on climate change entitled Climate change: Adapt or bust. Major insurers and reinsurers such as SwissRe are leading climate change foresight initiatives worldwide, as the increased frequency of extreme weather events, flooding, etc. already being experienced directly impacts on their business.
Moreover, given the consensus nature of the IPCC predictions, they are widely regarded as rather conservative. The latest science indicates that future climate change may take place more rapidly than previously anticipated.
Key impacts of global warming
It is useful to consider a cascade of effects, with climate change a major consequence of global warming, and extreme weather events a manifestation of climate change.
Among the key impacts worldwide will be:
• an acceleration in the frequency of extreme weather events, and an increase in their severity. The most common of these events will be storms with very strong winds and heavy rainfall. Other events include unseasonable frosts, snow and hail;
• increases in the severity and frequency of floods and droughts;
• gradual rises in sea levels;
• possible opening of Northern Hemisphere sea lanes previously blocked by ice;
• possible radical change in the structure and dynamics of ocean currents. One example: possible collapse of the Gulf Stream thermohaline conveyor, which would cause huge and rapid reductions in water and air temperatures in northern Europe and the north-eastern seaboard of North America;
• changes in plant and animal habitats, so that some species decline or disappear, while others arrive. One example: the encroachment of shrubs on the global grasslands covering about 40 percent of the earth’s surface4 – a trend that could eventually jeopardise the use of these lands for cattle grazing.
As climate change occurs, some of the most strategically important consequences are:
• changes in the alignment of established land-based enterprises and production systems with local environments of climate, topography, and soil type;
• altered comparative advantages of international competitor source locations with respect to particular international markets;
• differential shifts in customer needs, preferences and purchasing power across international markets, at the product category level;
• potential for future conflict over the control of water resources, in areas such as central Asia, the African continent, the Middle East, and parts of South America;
• increased risk for (re)insurance companies providing cover for extreme weather events, which will likely respond by increasing insurance premiums – and withdrawing cover completely in some cases.
What will New Zealand be like?
Drier in the east, wetter in the west, and growing warmer
Compared internationally, the direct effects of climate change on New Zealand over the next 50 or so years appear relatively moderate. However, a key issue for agriculture is the projection of drying conditions and water shortages in eastern areas.5
Hawkes Bay and Gisborne, in particular, could be vulnerable to an increased frequency of successive dry years in the future. Other agricultural areas that do not have Alps-fed rivers – such as Northland, Tasman, and Marlborough – are also likely to face greater shortages of water.
On the other hand, there will be more rainfall in the west, and undoubtedly more frequent and more severe extreme weather events across New Zealand, resulting in costly flooding, erosion, etc.
New Zealand’s climate is also influenced by normal (but unpredictable) year-to-year variations in sea surface temperatures in the equatorial Pacific Ocean,6 and it is uncertain whether these will exacerbate or mitigate the effects of climate change.
Other key effects with implications for New Zealand primary industries include:
• biosecurity and pest incidence:
- warming-induced increases in the range and incidence of existing pests and diseases (due to faster growth and reproduction), causing greater damage;
- extension of ranges towards the poles and to higher altitudes; hence, for example, migration southwards of subtropical pasture species and weeds;
- arrival and establishment of new pests that could not have persisted under previous conditions;
- reduced plant and tree resistance to pests and diseases due to e.g. drought stress;
• farming systems more reliant on irrigation, given the likelihood of more river capacity in winter and less in summer;
• the impact of rising sea levels, especially salt-water intrusion into fresh water aquifers in low-lying coastal districts;
• early beneficial effects of rising carbon dioxide levels and warmer/longer growing seasons (in the west, with increased rainfall) on pasture production, Pinus radiata forests, and some crop types, but possibly reversing later;
• a possible necessity for shifts in location of particular systems of pastoral agriculture – and/or changes to systems – in different regions of New Zealand, perhaps particularly in drought-prone eastern regions;
• uncertainty about the sustainability of ecosystems vital to agriculture and forestry.
• Adaptation will require that businesses:
• identify specific categories of risk in farming/forestry systems (such as flood damage, wind damage, and erosion), and develop mitigation strategies;
• identify risks to essential infrastructure, and develop mitigation strategies;
• assess the sustainability of certain enterprises and systems in environments subject to erosion and inundation, and prepare for any required adaptations in land use.
BC beetle battle
Photo: Natural Resources Canada – Canadian Forest Service
Mountain pine beetle (Dendroctonus ponderosa) is endemic to high areas of North America from Arizona to northern British Columbia (BC). In Canada, where the beetle’s favoured lodgepole pine (BC’s most commercially important tree) thrives, its population is usually controlled by winters with early cold snaps or long killing spells of -20°F.
Forest management practices to limit forest fires have inadvertently provided the beetle with an abundance of mature pine to feed on. Moreover, unusually hot, dry summers and mild winters in central BC during the last six years – the average winter temperature has risen by more than 4° in the past century – have led to an epidemic of beetles. They are attacking younger trees, and at altitudes at which they have never been seen before. Their advance is marked by broad swathes of rust-red forest (see photo), as the pines gradually die.
So far, the beetles have destroyed an area the size of the North Island, and they are expected to wipe out 80 percent of BC’s pine forest by 2013. There is concern that they will make their way across the Canadian Rockies and decimate forests in tourist areas of Alberta, and even the jack pine-dominated boreal forests of the Taiga, which account for nearly one-third of the world’s total forest area.
New Zealand’s pine plantations have in the past benefited from their geographical isolation, and from the fact that there is no native pine, so that indigenous pests have not co-evolved. But with increased biosecurity risk at the border, the genetics of pine becoming narrower, and the impact of climate change, will this position of relative security persist into the future?
Indirect effects – risks and uncertainties
New Zealand’s exposure to climate change is not limited to the direct effects just outlined. Indirect effects – related to customer demand, competitive positions, regulatory obligations, and insurance constraints in domestic and international markets – are just as likely to impact on the New Zealand economy in the coming decades. They compel a response from industry irrespective of any uncertainty about the way climate change projections will play out.
An analysis of these indirect effects would enable an assessment of the implied risks in international value chains and stimulate strategic thinking about risk management. For example, trade barriers may arise from an increasing incidence of pests and human and animal diseases.
It may even be that the most immediately relevant impacts will arise, not from changes in the climate itself, but from attempts to mitigate climate change by reducing emissions – such as the global price of carbon.
Some uncertainty has been removed for land-based industries by the Government’s announcement in September 2007 of its package of climate change responses, including an Emissions Trading Scheme (ETS).7
Uncertainty remains around climate change responses in key markets such as Australia and the USA, and the world scene in general post-Kyoto (2012).
Snapshot of the future: Carbon labelling
The increasing importance of non-tariff barriers to trade – e.g. around genetically modified (GM) food and animal welfare – is well acknowledged. Expressed consumer concerns – particularly among the high-income consumers that New Zealand exporters are most likely to target – increasingly cover an ever-wider ambit of food provenance.
There are numerous campaigns: by “locovores” to eat regional and in-season food; and to buy “fair trade” products. There is already a major trend to alter purchasing decisions in favour of goods and services perceived as not significantly contributing to the exacerbation of climate change, e.g. by avoiding “air miles”.
The spurious “food miles” concept has captured consumers’ imaginations, albeit largely in the United Kingdom rather than continental Europe or the USA. The large supermarket chains, whether driving or responding to this consumer preference, are investing accordingly (see also Section 3).
Supermarket giant Tesco is working with Oxford University’s Environmental Change Institute to develop a carbon footprint rating for all its products, and is investing around $NZ1.4 billion over the next 5 years in reducing energy use. Meanwhile competitor Marks & Spencer is investing $NZ540 million in making its UK and Eire operations carbon neutral, as part of a 5-year “eco-plan” to be achieved in partnership with conservation organisation WWF.
In New Zealand, the Government and industry are moving rapidly to develop a greenhouse gas footprinting strategy for the land-based industries.
Opportunities?
There are investment and business development opportunities arising from climate change in consumer products, services, or technologies such as renewable energy (photovoltaics, fuel cells), energy efficiency of production or supply chains, and “clean technologies”
(e.g. carbon dioxide absorption technology). There are also emission reduction/sequestration and carbon trading opportunities.
Opportunities are apparent for New Zealand to be world-leading in land-based climate change initiatives founded on sound research – for example, in mitigating methane emissions – and to brand pastoral industry as the most climate-friendly animal protein production in the world.
New business models may develop which, for example, move production closer to customers.
Since Māori are major collective owners of resources, there is a point of leverage of economies of scale in order to address climate change issues.
The relatively moderate direct impacts of climate change on New Zealand, when compared internationally, could result in this country being regarded as offering a more attractive location than other parts of the developed world. In the most positive scenario, this could result in New Zealand attracting talented immigrants, firms, and investment.
2 www.us-cap.org
3 www.ipcc.ch
4 These traditional open rangelands occur from the Great Plains in the USA to Mongolia and Kazakhstan; this trend has been apparent for at least 200 years and is now linked to increasing atmospheric carbon dioxide.
5 Wratt DS, et al. Costs and benefits of climate change and adaptation to climate change in New Zealand agriculture: What do we know so far? Report prepared for MAF Policy, July 2007.
6 They include the El Niño Southern Oscillation (ENSO) and the Interdecadal Pacific Oscillation (IPO).
7 A sustainable land management and climate change Plan of Action will be implemented jointly with the sectors, covering climate change adaptation, mitigation additional to the ETS, and business opportunities arising. The Government is investing $175 million over 5 years.
Contact for Enquiries
Strategy and Performance Group
Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: +64 4 894 0593
Fax: +64 4 894 0738
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