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Commercially credible policy needed on climate change

Election Survey 2023

Deloitte's perspectives

By Jane Fraser-Jones and Louise Aitken

Farmers turned out in force for this year’s Election Survey, with nearly half the respondents coming from agriculture, forestry, and fishing. This underscores two factors: the primary sector is hugely important to our economy, and it’s also feeling considerable pressure on a range of fronts, including labour force availability, regulation, the cost of inputs and the need to act on climate mitigation and adaptation.

Ahead of Election 2020, the primary sector was lauded for its continued production and contribution to economic stability in a time of great uncertainty. Three years on, and the sector, like the rest of New Zealand, will be hoping that COVID-19 is well behind us. However, farmers have borne the brunt of both flooding and drought events and are now feeling the burden of increased regulation in a post-COVID economy. Representing 50% of New Zealand’s emissions, our agricultural sector is critical to not only our economic success, but also to our ability to transition to a low-carbon, productive and innovative future.

Considering factors like the COVID-19 recovery and weather events, just under 6% of respondents felt the Government had an action plan focused on lifting the country’s economic performance, and over 90% felt the Government’s policies had increased the cost of doing business over the past three years.

The impact of climate change mitigation and adaptation tells an interesting story. Consistent with other research and analysis we’ve conducted, survey respondents are keen to see clear and consistent policy direction issued, which would then give them confidence to invest. Respondents have said they’d like to see the Government define sustainable and acceptable practices, to help businesses to achieve net-zero targets without regulating the "how".

With over half of respondents believing New Zealand needs to increase its investment in our ability to adapt to climate change, they’re also keen to see transition assistance, through the provision of the resources and support to achieve those goals. One suggestion made was accelerated depreciation on sustainable investment, which would incentivise businesses to adopt environmentally friendly measures to reduce their carbon footprint.

Across the board, survey respondents were feeling the cost of climate policies, with nearly 60% saying climate change was affecting the costs of inputs, significantly up from 26% in 2020, and the future cost of energy is also a concern for over three quarters of businesses surveyed. Correspondingly, over 40% of respondents in 2020 felt climate change wasn’t impacting their business but that has dwindled to just 11.9% this year.

However, the impact of climate-related policies doesn’t appear commensurate with what respondents thought was needed to achieve sustained economic growth, coming last at 5.8%, behind improving the economic environment (43.2%), and skills and human capital (23%)

This last point is interesting, as it represents a significant increase on the 7.5% who rated it as an important issue in 2020. A host of topics in this area were deemed important by respondents, including aligning immigration settings with demand, and improving compulsory education by reviewing literacy and numeracy attainment, school attendance and the curriculum overall.

It’s an equally salient point that businesses feel people are massively important to their workforces. Similar to the 2020 and 2017 surveys, around half of respondents felt technology would have a significant impact on the size and composition of their workforce.

For all political parties, the issues raised by respondents show there are some big hills to climb to gain trust and confidence. They need to reassure businesses, and those in the primary sector, that their contribution is valued, their concerns are real, and their willingness to support and grow the economy in encouraged rather than impeded.

Chapman Tripp's perspective

By Alana Lampitt and Nicola Swan, Chapman Tripp

The cross-party support for the Zero Carbon Act may be holding together (just) but there is no consensus on how to reach New Zealand’s net zero 2050 target.

All parties agree the Emissions Trading Scheme (ETS) is a key tool but National and Labour are likely to differ on the details of its operation – even outside the fraught issue of agricultural emissions.

Following a crash in the carbon price, the Government launched a consultation in June on the possibility of a fundamental ETS overhaul. A Labour-Greens coalition would likely progress this proposal, making exotic forestry offsets less attractive to promote gross emissions reductions.

National has said only that it would “work to ensure the ETS is credible and effective”, indicating a centre-right Government would leave the ETS largely as is.

The election outcome could therefore have major implications for green investments - not only in carbon forests, but also in emissions mitigation. Uncertainty creates price volatility whereas decarbonisation business cases rely on a steady carbon price.

The next Government must clarify the future of the ETS as a matter of priority so that businesses can plan and invest with confidence and policy certainty.

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