The reality of green markets

Simon Upton at the NZIF conference.

01-06-2008 |

The dawning of ‘green markets' around the globe means New Zealand producers must respond to keep their place in world trade.

Consumers in developed countries are increasingly demanding sustainable products - and want evidence to support the claim.

Simon Upton - chairman of the OECD's (Organisation for Economic Co-operation and Development) Paris-based Round Table on Sustainable Development and a former science and environment minister - offered insight into green markets at the NZ Institute of Forestry conference held in Palmerston North in mid May.

He suggested the growth of green markets amongst some of NZ's key trading partners such as the United States and Europe will give compelling leverage for what could effectively become trade protection mechanisms.

"We as Kiwis have long railed against European protectionism - that hasn't stopped them persisting in their folly, or the Americans from piling grotesque subsidies into their farmers' bank accounts."

He said like it or not, public concern about the environmental damage of production and processing systems will provide more powerful justification for government's to be discriminating about imports rather than simply protecting farmers.

Upton predicted countries would start to examine the involvement of their trading partners in key environmental treaties.

"There's a trade reason for that, because you can actually object to imports on environmental grounds but one of the things you have to do under WTO (World Trade Organisation regulations) is to show you've exhausted your efforts to reach a multi-lateral agreement."

He said the attitudes of the current US administration had lulled some people into a "false sense of security" with respect to their attitudes around climate change.

"But that is all going to disappear, I think, in November. The new Republican candidate has announced ambitious plans to engage on climate change, so have the two Democratic rivals ... And I can't see them stepping away from taking an interest in who else steps up to the plate on a treaty like that."

The development of border tax adjustments are one way major economies like the US are likely to put pressure on countries not engaging with environmental treaties.

"The idea is that you have your price, your carbon, then the imports will have a surcharge put on them to do what you didn't do, for you.

"Provision already exists - it's written into the Warner and Lieberman Bill which is before the [US] Senate to impose countervading [sic] measures where the US considers that trading partners aren't doing enough."

There is a growing proliferation of systems designed to "measure" sustainability in a way that is accessible to consumers.

Upton said despite the huge gaps in scientific knowledge around the subject, the persuasive power of these systems, right or wrong, would guide markets. In the absence of anything better, these were going to capture people's imagination - this is what people are going to start to seize on.

"You seize on what you've got, not what you haven't got in terms of information."

He touched on one such measurement system available right now - the Global Footprint Network (GFN).

The GFN takes into account things like how much land is available for the production of food, the maintenance of bio-security, absorption of carbon and so on, and balances that against per capita demand.

In round figures, they have calculated out of the Earth's total area of 51 billion hectares, there is roughly 11 billion "biologically productive" hectares. Upton said that with a population of 6.6-6.7 billion people, that equates to 1.8 biologically productive hectares/capita.

They have calculated that on a per capita basis people are currently consuming the equivalent of 2.2 biologically productive hectares - demand is exceeding supply.

Upton pointed out these figures were a "complete fiction", but in the absence of information people seize on to whatever they can.

When the numbers are crunched on a national scale, Upton said the footprint calculations could become politically powerful.

"You could say well here are the ecological debtor and creditor nations; people who are using more than the productive hectares available to them in their own little country, and those who are using less."

This could subsequently throw up barriers to trade.

"This information can be packaged in any number of ways to make any number of points about ‘who done it', so to speak."

Businesses as well as governments are taking steps to minimise exposure to unsustainable practices.

Upton used the example of US retail giant Wal-Mart who has introduced a packaging scorecard.

He referred to the company's website to outline the scorecard's purpose:"To measure and recognise it's entire supply chain, based on each company's ability to use less packaging, utilise more effective materials in packaging, and source these materials more efficiently relative to other suppliers".

Upton is under no illusion about the commercial application of this regime.

"Recognise - I think we can make no mistake that that word ‘recognise' includes de-recognition."

He said Wal-Mart is interested in profit; it can drive down costs and drive out unnecessary energy and materials use. But it's also linking up with consumers and monitoring the growth of those product lines, and it's marketing them on their attributes.

"Large retailers like this are influential and they can create de facto standards over time."

In the future Upton said businesses will be under pressure to disclose more about the impact of their production and process measures. Governments will also be compelled to impose environmental standards. Both of these factors will lead to greater expectations around product assurance.

"Obviously branded products are more at risk than commodity products, and you could argue that the rising commodity prices are going to dampen the effects on a country like NZ ... But we are fuelling global supply chains - we are to some extent at increased risk."

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