New Zealand is at a crossroads. We face a dual dilemma: a serious productivity problem at a national level, and an international environmental crisis.
The conventional wisdom may suggest that these two issues are at odds, but they both ultimately impact our economic prosperity.
As you lead NZ, I urge you to show that environmental responsibility and productivity are not at odds, but reinforce each other. The long-term solution to our productivity and environmental issues will be market driven, but short-term government action is required to set us on the right course.
On the global stage, NZ is considered a leader in the environmental movement. We have a compliance-based Emissions Trading Scheme and are developing a biodiversity credit. We are early in both areas.
In doing so, we are attracting local and international capital that wants to invest in a “nature-based solution”. The extent of capital looking for credible nature-based solutions is not to be underestimated.
Chris, there are an increasing number of progressive farmers who are ready to step into a market for nature-based solutions. We tend to look past climate campaigns that have villainised farmers, and see that the statistics that underpin this activism are largely right. A 2019 report issued by the Ministry of the Environment stated that NZ has the highest portion of threatened indigenous species in the world, with over 90% of our seabirds falling in this bucket. This fact would not sit comfortably with any New Zealander, farmers very much included.
As someone whose livelihood is tied to the natural world, I look at that statistic and see something else – a threat to my farming business. Because my farming operation exists under the same biophysical conditions as those seabirds, their current level of decline signals a potential loss of productivity for me.
The storms, droughts, pollutants, weather extremes and other volatile environmental conditions that impact them will impact me too. My productivity, and the productivity of all other businesses that rely on any natural resource, would plummet if seabirds (or any other species we might use as a leading indicator) could no longer survive in their natural environment.
I do not proclaim to know all the threatened species, nor do I know how to save them, but I do know that the solution will be a combination of science and markets for nature-based solutions.
Scientific solutions will reduce emissions and land-based solutions will act as long-term sinks for stubborn emissions and as habitats for our declining biodiversity. Food producers across NZ have land that could be a vitally important part of solving this problem. They just need a credible market to participate in.
When setting up the ETS, we were early and aspirational. We now have the mechanics to place a monetary value on a tonne of carbon. Any system that attempts to place a value on biodiversity at this point will be aspirational too.
Standing up a credible market for biodiversity is a complex task. Fundamentals like an initial price per credit, market mechanics and regulation mean a system-level approach is required. To start, this system will have to be engineered by the government. Much like the ETS, any early value created by government intervention will flow on to free market adoption when frameworks such as the Taskforce on Nature-related Financial Disclosures become mandatory over the next five years.
As you are aware, markets function on trust and credibility. Capital will only be allocated to nature-based solutions that are credible. An example of this is the 20x premium paid for a tonne of carbon listed on a compliance market rather than a voluntary market.
After you have created value, be sure to set up a system that doesn’t get caught in the three-year political cycle. Arm the Climate Change Commission with the same autonomy and oversight as the Reserve Bank to avoid another $900 million hole in your budget when rejecting their advice.
The political term moves at a very different cadence to that of a biological system. Three years is a rounding error, yet important foundational steps can be achieved during a three-year term to set about building the foundations required to entice the free market to solve this problem.
To the Chris who takes the reins post-October, we need two things from you: a genuine mindset that sustainability equals productivity, and an aspirational framework that puts NZ farmers on the front line of the greatest biodiversity recovery in human history.