New Zealand businesses must start to plan for the consequences of climate change at board level this year, or they risk being caught out as proposed legislative change shakes up emissions trading.
A new report by law firm Bell Gully highlights proposed changes to the New Zealand Emissions Trading Scheme (ETS) which could mean businesses who have emissions obligations around climate change may, in the near future, start to find it harder and more costly to gain access to the units they need to do so. If these changes are accepted by the government, business leaders could also see unit prices rise sharply as availability reduces.
Simon Watt, lead author of The Big Picture: Climate Change and head of Bell Gully's climate change practice said businesses may have previously passed all costs down the supply chain and relied on availability of New Zealand units at a modest cost to meet their obligations, but this will soon become more difficult.
"Meeting ETS obligations has been a fairly administrative and relatively low-cost thing to do over the last five or ten years, but soon it is going to need to be more actively managed and require more attention. Now is the time to get ready," he said.
"Businesses that are exposed to climate change risks should feature it on their board agenda at some point this year – and once it gets on the agenda it should stay on and be kept under review."
The report notes the greater certainty offered by proposed climate change legislation will be good for business. If businesses take the chance to review climate change risks early, seek out new opportunities as the economy transitions, and make good decisions around processes and how carbon emission risks are allocated in their supply contracts, there is scope to reduce and minimise costs in the future.
However, the direction of travel is ultimately one-way: to a low-emissions economy. Climate change will pose real challenges for some businesses, and the rising cost of carbon could materially affect asset values and operating costs. "Business must adapt or risk getting left behind," said Watt.
Click here to view the full report.