Immediate action on climate change could save $billions

Both the environment and business could benefit in New Zealand if early action is taken on climate change.

NZH: To act now or later: the $30 billion climate change question

Immediate action on climate could save New Zealand tens of billions of dollars, according to a Westpac report.

Based on research conducted by EY and Vivid Economics, the report shows the New Zealand economy could benefit by $30 billion by 2050 if government and business take early action on climate change.

It also shows that New Zealand could simultaneously reduce carbon emissions and achieve economic growth.

The report models two scenarios, one that involves an earlier and smoother transition to a lower carbon economy, while the other hypothesises a decade-long delay in action followed by a shock event that forces the nation to act.

The report makes a business case for acting immediately.

Westpac NZ chief executive David McLean said the report shows the need to take immediate steps to reduce greenhouse gas emissions.

“The alternative is waiting and taking action later, but that is likely to require more drastic changes in behaviour and over the long-term hit people harder in the pocket,” he said.

“The average gross domestic product growth is forecast to be 2.015 per cent per year until 2050 if industries take early action on addressing climate change. If substantive action is delayed and companies have to play catch-up later, this falls to an average of 2.005 per cent. The cumulative difference is $30 billion.”

While the report shows that action on climate change will result in a reduction of the economic contribution of some industries – including forestry and fishing, dairy meat and other food products and non-renewable energy generation – these will be countered by significant gains in renewable energy generation.

Inaction is unlikely to insulate food production businesses from the market changes due to climate change mitigation.

This trend is already being reflected in the financing decisions being made by Westpac.

“Our lending to green businesses that are helping to provide solutions to climate change stands at $1.5 billion. We’ve set a new target to lift that to $2 billion by 2020,” said McLean.

Since 2012, Westpac has also reduced lending to companies involved in fossil fuel extraction and production by 55 per cent to $318 million.

McLean said Westpac commissioned the report to get better insight into the risks facing the bank from climate change.

“We believe businesses need to be thinking about and planning for climate change now, not only from a risk perspective but also for the growth opportunities it presents to many parts of the economy,” he said.

“Smart companies should start focusing on those opportunities as part of their business strategy.”

Businesses planning for their futures need to be considering the possible effects of climate change, and the certain effects of market changes.