Overview
There is now a high profile debate in New Zealand about how best to respond to climate change, with various political parties making commitments to reduce New Zealand's emissions. However, before making such commitments, it is important to understand the nature of New Zealand's exposure to climate change and the costs and benefits of various possible responses.Climate change will have both direct and indirect effects on the New Zealand economy. In terms of the direct effects, New Zealand's climate is projected to change with increased temperatures, greater variation in rainfall patterns, and an increased incidence of extreme weather events. Overall, however, these climate changes are unlikely to have a substantial negative effect on the New Zealand economy over the next several decades.
However, New Zealand has a significant exposure to the indirect effects of climate change - shifts in consumer preferences towards goods and services with a lower emissions footprint, the pricing of emissions, and the development of new technologies and business models. For example, the food and beverage and tourism sectors could be hurt if global consumers develop a preference for local products. On the other hand, opportunities exist if New Zealand firms can develop business models and brands that are regarded as environmentally friendly.
These indirect effects ought to be the primary focus of New Zealand's climate change response. In developing a response to these indirect effects, both government and business need to be clear as to how their actions will address New Zealand's exposures, the costs associated with various courses of action, and also understand that there is significant uncertainty as to how these indirect effects will play out.