NZ is well behind many countries especially the UK in considering climate change issues, though our new Government has signaled a much more proactive approach. However it is not yet clear what this really means.

Climate Change

Whilst climate change might affect agriculture and water supply for hydro generation, it is generally regraded that the threat to our coastlines is the most imminent and potentially disruptive impact, and it doesn’t help that the eastern coastline has been in degradation mode for some time. The Ministry of the Environment has produced a review of the situation in regard to coastal issues (1, 2), as has the Parliamentary Commissioner for the Environment (3). The Ministry has also formed an advisory committee on adaption to climate changes which published a relatively comprehensive and seemingly damning report in December 2017 (4). They observed that there is ……

no strategy, plan or common goal for how New Zealand can adapt to climate change unclear roles, responsibilities and liabilities (which makes investment in resources to deliver adaptation action challenging) inconsistencies in timeframes and in some instances competing objectives across legislation and policies related to climate change adaptation, resilience and disaster risk reduction limited enabling tools to help facilitate adaptation, including the use of national direction tools lack of alignment in how climate change adaptation and resilience objectives are incorporated into legislation and policy

And a further comment……. ‘the current decision-making framework does not support or incentivise effective adaptation at the scale we consider necessary for maintaining and/or improving the well-being of New Zealand’s current and future communities in the face of a changing climate………overall there is limited evidence of proactive action that reduces medium- and long-term changing and increasing risk profiles. In most cases, actions have been reactive and part of a sector’s natural hazard management response after extreme events occur, rather than being proactive and undertaking preventative measures which take a long- term view and consider the wider impacts.’ The committee is due to report again in March on possible options for addressing the issues raised.

The Zero Carbon Bill The established view is that the world is awash with oil following the collapse of the OPEC cartel, the discovery of new Artic reserves and the Canadian tar sands, and the new cheap and highly successful fracking technology. The lower oil price implied suggests the world will not readily reduce its carbon consumption, notwithstanding the latest projections make for a seriously faster temperature rise than expected, impacting on agriculture, weather and sea levels. However informed commentators are talking about the world having to become a net carbon absorber by about 2050 to avoid serious harm.

It may be that the new electricity technologies in development will provide a step reduction in the cost of low carbon electricity. These opportunities for a more electrical economy involve improved solar electricity technologies in development using new exotic films with graphene and perovskite (a form of calcium titanium oxide) along with new storage technologies including new battery technologies such as lithium – air and its variants. These would edge us closer to a fully distributed electricity system, and allow the a progressive reduction in the massive costs associated with generation and distribution in the current electricity system.

NZ’s emissions make up only about 0.15% of the world’s total emissions, although we are right up there with the largest emitters on a per capita basis, for example four times higher than Sweden. Unusually, half of our emissions are made up of non-CO2 gases – CH4 and N2O – due to our large agricultural sector and abundant sources of renewable energy for electricity.

NZ has so far relied heavily on international trading of carbon credits to deliver its emission reduction contributions. The (prior) Government has stated its intention to contribute its “fair share” to tackle climate change. However it clearly believed that because of the high proportion of biological and transport emissions the cost of mitigation is likely to be higher for New Zealand than for most other developed countries, and that remaining competitive with trade partners, while taking responsibility for emissions reductions targets, would present a challenge for NZ.

The new government has wasted no time in commencing the drafting of the Zero Carbon bill. The general ideas behind the bill are set out in a cabinet paper released in late December (5). The aim is table the bill in October 2018. The Cabinet has already approved new funding and the formation of an interim Climate Change Committee as a precursor to the Commission to be established in the bill and to undertake preparatory investigations for it.

Some of the key ideas in the paper are:

net zero carbon emissions by 2050100% renewable energy in a normal yearspecial focus on agriculture and energyinternational leadership by example (obviously not by impact)building a low emissions brand around exportsbuilding new low emission technologies that can be exportedtree planting, ev’s

The intention seems to be to model the bill on the UK’s approach (6) including the setting of carbon targets, an independent Climate Change Commission, a trading scheme that works, adaption planning, and incentives to produce less domestic waste.

The basis for this policy is a report called ‘Net Zero in NZ’ prepared by the London-based Vivid Economics for a consortium of organisations and donors called Globe NZ and published in early 2017. I understand a significant number of labour politicians attended the discussions (7).

In August 2017, the Productivity Commission produced an issues paper on a low – emissions economy and sought feedback (8). The final report is imminent. The report is largely a rehearsal of policy and economic tools available to deliver a low – emissions economy. A lengthy appendix describes the UK Act and its application to NZ (9). It appears that the Act has propelled the UK into a leadership role in this area and that the UK CCC has become a really valuable and contributing organisation.

The CCC advises on the UK’s transition to a low-carbon economy and preparing for increased climate risk. Its main functions are:

Advising on UK carbon budgets and the steps required to meet them.Monitoring progress toward meeting these.Advising on climate change risk assessments.Providing government with advice.Conducting independent analysis of climate change science, economics and policy.Communicating.See the current business plan at (10).

References 1. Coastal Hazards and Climate Change, Ministry of the Environment, Dec 2017http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/coastal-hazards-guide-final.pdf

2. Preparing for Coastal Change Min Env Dec 2017 http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/coastal-hazards-summary.pdf

3. Stepping stones to Paris and beyond Climate change, progress, and predictability, Parliamentary Commissioner for the Environment, July 2017http://www.pce.parliament.nz/media/1724/stepping-stones-web-oct-2017.pdf

4. Adapting to climate change in New Zealand: Stocktake report from the Climate Change Adaptation Technical Working Group, completed July 2017, released Dec 2017http://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/adapting-to-climate-change-stocktake-tag-report.pdf

5. The 100 Day Plan for Climate Change, Cabinet Paper, 17 Dec 2017 www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/cabinet-papers/100-day-plan-climate-change

6. An Appendix provides a short summary of the UK legislation http://www.mfe.govt.nz/sites/default/files/media/media/Cabinet_paper_100_day_plan_Appendix%202%20%282%29.pdf

7. Net Zero in NZ, Summary report, Vivid Economics, March 2017 http://www.vivideconomics.com/wp-content/uploads/2017/05/Net-Zero-in-New-Zealand-Summary-Report-Vivid-Economics.pdf https://www.sbc.org.nz/__data/assets/pdf_file/0006/99438/Net-Zero-in-New-Zealand-Technical-Report-Vivid.pdf

8. Low-emissions economy, an issues paper, Productivity Commission, Oct 2017https://www.productivity.govt.nz/sites/default/files/Low%20emissions%20economy%20issues%20paper%20FINAL%20WEB.pdf

9. Examining the UK Climate Change Act 2008, Research Note September 2017 by Teresa Weeks from the Productivity Commissionhttps://www.productivity.govt.nz/sites/default/files/Examining%20the%20UK%20Climate%20Change%20Act%202008.pdf

10. UK Committee on Climate Change 2017 Corporate Planhttps://www.theccc.org.uk/wp-content/uploads/2017/07/Committee-on-Climate-Change-Corporate-Plan-2017-2020.pdf

Joint standards between NZ and Australia are the norm with some exceptions for NZ specific situations or when international standards are used directly. Standards Australia (SA) holds nearly all the secretariats that monitor and develop standards. NZ has two secretariats in electrical safety. SA require an upfront NZ $ contribution where deliberations on updating joint standards are involved. The cost of this process looks like around $NZ 30,000 - $NZ 50,000. This is a new arrangement that SA requested and negotiated when the new Standards NZ (SNZ) was created in 2015. If this is not forthcoming SA plan to dejoint the standard. Government has made it clear in memos to Worksafe NZ for example they have no intention of contributing these costs – it is up to industry to pay.

This user pays approach has been introduced with some suddenness and there has been little consideration on how industry and consumers might deal with this situation, how to fund future standards development, and how to prioritise effort. In fact it is not clear how it came about, though there is a suspicion that SA wasn’t overly impressed with the way NZ was going about its restructuring of standard setting processes.

The outcome is that the number of dejointed standards looks like it might increase quickly, leaving the old jointed standard as the NZ standard. NZ then becomes progressively disconnected from international standards, which has long term negative impacts on both consumers, and manufacturers and suppliers. The real problem arises in sectors where the regulators is not collecting levy revenues which have traditionally contributed to standards development. For example in electricity and gas, Worksafe normally contributes fully to these SA standard development processes.

Three recent examples illustrate the process emerging – the short time frames, the clear intention of MBIE Standards to offer no financial support, and the expectation in MBIE that a few industry organisations will pick up the tab.

Harness standards have wide reach for example the electricity, arboriculturists, recreation and scaffolding industry to pick a few. The SA required without warning $40,000 for NZ participation in the upgrade of the two codes involved. The EEA offered $2,500, but was alone. The AS finally relented and have issued it as a joint standard but without NZ participation of any significance.

The review of water microbiology standards is following the same pattern. At short notice, MBIE Standards advised that NZ involvement required WNZ and the CRI ESR to pay $28,000. Both declined.

MBIE Standards asked for $80k to cover the costs of the redraft of a 20 page standard (Concrete Production NZS 3104) which Concrete NZ were going to redraft themselves in its entirety.

The pragmatic view is that though the system is still unsatisfactory (standard development and management is now wholly run by a small unit in MBIE), the real problem is that there is a lack of government support for standard development – that asking industry bodies to fund development is unfair as it ignores the public good component of the standard development. (NZ is the only OECD country that operates like this.)

In recent discussions with industry, MBIE Standards have conceded that they find it difficult to prioritise standard development, and they have no technical capability to know which standards are important and which SA development programmes should be supported. Industry has responded that it is willing to assist but that a rethink by government on the public good argument in standard setting is essential.

Notwithstanding the best efforts of the MBIE staff involved, this is a system in disarray, as predicted at the time the new arrangements were forced into place against industry wishes.

Submission on Closure of the Centre for Materials Science and Technology (November 14)

I understand that the University of Otago is considering the disestablishment of the Centre for Materials Science and Technology (CMAST), and that in the process this would terminate the Universities’ ability to teach textile and fibre science and technology, and as a consequence all postgraduate research programmes in textiles and fibres.

I am concerned that the University could contemplate such a decision, for the following reasons:

The CMAST capability in textiles and fibres technology and research is unique in New Zealand, and though it is relatively small, CMAST is one of the leading research centres in the OECD.Textiles and fibres are a huge industry world-wide and growing. I have written about the desirability of CMAST linking with the Deacon University carbon fibre capability, the wool research being undertaken at AgResearch and the Wool Industry Research Limited in Christchurch, and in the natural competitive advantage of linking CMAST technology with the University of Otago’s medical school and developing new technical fibres for medicine. I attach to this letter the textiles and fibres section of my recently published book Innovate!, and I also attach my speaking notes at a 2016 seminar at CMAST to provide background material on these points. The CMAST, along with the Dodd-Walls Centre for Photonic and Quantum Technologies, are the most obvious and promising research centres in the University of Otago, by far, for the development of new technologies that could catalyse new industrial developments of scale. The University of Otago should recognise that the science funding regime currently in place together with the PBRF are so disconnected from the real economy that it is inevitable they will be reviewed and reformatted. I assess that research funding will flow increasingly to economically relevant research and technology development, and to centres which can catalyse new industry development as has happened in the UK, Canada and in Australia, in fact generally around the OECD. CMAST is exactly the sort of research centre that would benefit from these changes. The current situation with CMAST does not reflect on the capability or potential of CMAST but instead reflects in my view on the unwillingness of the University of Otago over some time now to recognise the CMAST ‘as a jewel in its crown’ and to support at the highest level approaches to MBIE for long-term funding to support the development of CMAST and its international connectivity - such as the University of Auckland achieves routinely, and has been achieved recently by the Wool Industry Research group in Christchurch.

The closure of CMAST would in my opinion be a serious mistake not only for the University of Otago but for New Zealand.

Yours sincerely

Richard J Bentley CNZM

BE (Hons), (Civil), M. Commerce, Distinguished Fellow Institution of Professional Engineers NZ, Fellow Institute of Directors

Positions held by the writer in fibre and textiles:

Director from June 2001, Chairman from 1 January 2003 until 31 Dec 2007, NZ Institute for Crop and Food Research LimitedMember, Business Advisory Board, School of Business, and Member, Advisory Board, Degree of Applied Science at Otago University, 2001 to 2009Chairman, NZX listed Wool Equities Limited, January 2003 to December 2006. Chairman, Canesis Networks Limited (formerly the Wool Research Organisation of NZ), from October 2004 to February 2006. Chairman, Keratec Limited, 2003 to 2004, and from July 2006 to January 2007.

Book reference:

Innovate!, Transforming New Zealand’s technology-based economy, Richard Bentley, Steele Roberts, 2017

This opinion piece was published in the DomPost on November 13 2017

The Government intends to be more proactive in developing the economy with new plans for infrastructure spending and a new focus on the development of manufacturing and technology-based exports.

Many small countries have focused their efforts, coordinated their businesses, and developed sophisticated niche export sectors. These include Denmark in food, Israel in military technology, Ireland in agritechnology and Korea in manufacturing.

We have never attempted this kind of top - down planning, and as a result our technology - based export sectors have evolved in a somewhat haphazard manner reflecting the successes of numerous outstanding entrepreneurs.

However, my analysis is that ‘business as usual’ is highly unlikely to deliver a step change in the growth of our sophisticated technology - based exports, and further, the evidence is that they are significantly threatened by new technologies, changing markets and increasing competition.

For example 3D printing technologies enables large multinationals to operate in the very custom-designed and niche markets that our manufacturers compete in. And our advanced food sector, which is the most fragmented and leaderless of all our export sectors, looks likely to be threatened by transformational technologies and completely new approaches to food manufacture.

Further, the Government inherits an economy that has the lowest labour productivity and the lowest rates of public and private investment in research and development in the OECD. Our low productivity reflects that we are not nearly as innovative as we think we are.

One reason for this is the gulf that exists between our researchers and our businesses.

Creating and delivering science and technology that is ready for adoption by business requires complex interwoven networks linking markets, technology, education, design, quality control and capability. A precursor for innovation to occur is therefore a highly networked economy with feedback loops between researchers and businesses that enable knowledge to be shared and boundaries to be pushed back.

Our singular focus on research and development subsidies needs to be replaced with a much more holistic approach to being innovative. Expert after expert tells us that research and development subsidies do not create innovative businesses or innovative sectors.

They argue that research and development investments are an outcome of being innovative and that if you are not innovative a research and development subsidies or grant will have little affect.

I propose that a new network of university-based technology hubs be created. These hubs would become the place where planning for our important exporting sectors occurs - where competitive advantage is sought in production and product design and where knowhow about markets and technologies is pooled. The hubs would also explore ways to better influence or control the value chain to market, identify where the Government should invest in science research to better assist the sector, and encourage businesses to start collaborating on new projects.

I also suggest that to make headway quickly the Government should transfer the day to day management of the science and innovation system from MBIE into a new Innovation Council comprising New Zealand Trade and Enterprise, the exporting community, and the universities. The Council would commence its work by reviewing the state of our export sectors and how they can supported into a new period of innovation.

Croaking Cassandra (Michael Reddell ) has recently written a number of interesting blogs discussing the poor performance of the export sector, and what might be done about it. This is a topic that has been ignored for years by MBIE and Treasury, so it is very interesting to see an experienced economist’s perspective.

Michael has come up against the same problem I had in writing Innovate! which is that there is no data of the technology-based export sector level of any quality that is useful. The SNZ classifications are simply useless. He resorts to the TIN 100 report, but this is a partly government funded exercise which involves interviewing firms ICT firms and presenting their information, and it contains little commentary on sector prospects or dynamics.

In Innovate! I decided to segment the export sectors into fifteen groups and to describe their current situation and prospects based on my personal knowledge of the main companies and by accessing a variety of reports and supporting documents. This is what I found:

Advanced manufacturing - good prospects, highly competitive sector, needs support

Medical technologies - good prospects, disorganised, still very small (except FPH)

Steel and Aluminium - big FX earner but very fragile

Info and Comms Technologies - struggling, poorly connected to the unis

Food - Fragmented, leaderless, challenged by new technology

Agritechnology - Fragmented, very poor export performance

Biosecurity - New opportunity to export our technology

Biotechnology - Static, poor technology base, disappointing

Forests and Timber - new engineered timber technologies are exciting but lack support

Fibres and Textiles - Lots of opportunities but ignored by MBIE

Professional Services - Static

Oil and gas - Vast reserves await discovery, but difficult sector

Minerals - Several very large opportunities are available

Geothermal technologies - Lost opportunity for NZ

The EEZ - More investigation needed

It is immediately obvious that any kind of approach to increasing technology-based exports needs to start at a near sector level. There is no single bullet here. Each sector has its own problems and opportunities, and each needs a support plan that deals to these. As one example amongst many, the advanced manufacturers need much more and easier access to the computing technologies held within the university system – manufacturing is increasingly becoming bound up in internet –based management of the service from design to maintenance.

Here are the links to Michael’s blogs, and I plan to comment on them in due course.

https://croakingcassandra.com/2017/10/26/is-there-a-plausible-economic-strategy/

https://croakingcassandra.com/2017/10/19/the-tech-sector-and-ongoing-economic-underperformance/

https://croakingcassandra.com/2017/09/13/mr-joyce-tries-to-defend-new-zealands-export-record/

Economist Bill Rosenberg writing in the DomPost (Opinion Piece, Friday 11th August 2017) tackled the widely held misconception that minimal government is good government, and especially in regard to business development and the development of the economy.

Throughout the wealthy countries of the OECD, governments are proactive in developing innovative, competitive and growing technology-based economies. They create environments where businesses grow through easy access to science and technology, where businesses work together and collaborate as opportunities emerge, and where resources are focused on science and technology development and transfer that’s good for business development.

Take the UK position ‘…….The overarching objective is to create a coherent framework within which we can improve how well the UK innovation system identifies opportunities, builds capabilities and infrastructures, and allocates financial and skilled resources and co-ordinates across relevant actors.’

In contrast, and since the 1980’s deregulation of our economy, our governments have adopted a passive - almost hands free approach - to developing an innovative economy and to the development of business.

The outcome of this is that we have very poor interactions between business and researchers, and very few business facing centres of technology – and even the government’s own manufacturing - focused technology centre (Industrial Research Limited) recently collapsed through low sales. I call it the technology vacuum. This dysfunctionality was first revealed in the authoritative report Powering Innovation way back in 2011.

In contrast, we have a superb science system, led by the Centres of Research Excellence, but nearly all the science research vote is allocated to university scientists on the basis of best science and not to research needs informed by business.

Notwithstanding this, our manufacturing sector includes sophisticated exporters like Buckley Systems and Fisher and Paykel Healthcare, and there is an emerging group of exciting businesses. However, the new paradigm amongst wealthy nations is to be preeminent in advanced manufacturing as manufacturing especially has extensive spillovers to the wider economy. As a consequence new manufacturing technologies and processes are appearing, markets are becoming more competitive, and large multinational companies are adapting their businesses to tackle the very niche markets that our companies supply.

We also have exciting but unrealised opportunities in medical technologies, ICT and textiles, but our manufactured food, agritechnology and biotechnology sectors are fragmented and underperform.

Government, having stripped itself of all its technology capability, needs to form a new Innovation Council comprising the universities, business and NZTE, to look into the situation in each of our fifteen important export sectors and to work out how to assist them better. Each has its own issues and opportunities. These initiatives will give businesses better access to the science and technology capability in our universities, they will create environments that encourage more coordination, collaboration and innovation between export businesses, and they will deliver OECD type energised innovative environments.

Only our government can make these changes. It is time for New Zealanders to remind government that governments create innovative economies not markets. Much more effort is needed to bring Sir Paul Callaghan’s dream of a sophisticated technology-based export sector to reality to assure our future standard of living and to enable us to be less reliant on commodity agriculture exports and tourism.

16 October 2017

Original article: Idealog.co.nz.

With technology being predicted to become New Zealand's number one exporting sector, the time has come to set out the vision. CEO of the Centre for Advanced Engineering and author of the recently released book Innovate! Richard Bentley shares his thoughts on how we can speed up the process.

Professor Shaun Hendy (9 August) commented on the slow progress New Zealand has made toward the development of a technology-based exporting sector. As he reflected, the occasional successful start-up is not nearly enough.

In my recent book Innovate! , I present a detailed analysis of the state of our fifteen export-focused sectors, their prospects for growth, current thinking on being innovative and how our government supports exporters.

I find that amongst our advanced manufacturing sector we have a number of sophisticated exporters like Buckley Systems and Fisher and Paykel Healthcare, and that there is an emerging group of exciting businesses. However, the new paradigm amongst wealthy nations is to be preeminent in advanced manufacturing - as manufacturing especially has extensive spillovers to the wider economy. As a consequence, new manufacturing technologies and processes are appearing, markets are becoming more competitive, and large multinational companies are adapting their businesses to tackle the very niche markets that our companies supply.

We also have exciting but unrealised opportunities in medical technologies, ICT, textiles, and in minerals developments, but our manufactured food, agritechnology and biotechnology sectors are fragmented and underperform. Thus our emerging technology-based economy has the feel of still being in start – up mode, and this seems to be reflected in recent data that shows exports as a percentage of GDP slowly falling, why the government’s often stated goal of doubling exports has been quietly dropped, and why our productivity remains so low.

So how do we address this challenge? The wealthy countries of the OECD are proactive in developing innovative, competitive and growing technology-based economies. They create environments where businesses grow through easy access to science and technology, where businesses work together and collaborate as opportunities emerge, and where resources are focused on science and technology development and transfer that’s good for business development.

In contrast, and since the 1980’s deregulation of our economy, our governments have adopted a passive approach to developing an innovative economy and to the development of business. This is why we have very poor interactions between business and researchers, and very few business facing centres of technology. This dysfunctionality, which I call the technology vacuum, was first revealed in the authoritative report Powering Innovation way back in 2011, as Shaun noted, and there has been no attempts to remedy the situation. Compounding the situation has been the collapse of the manufacturing - focused CRI Industrial Research Limited from low sales.

Paradoxically, we have a superb science system, led by the universities and the Centres of Research Excellence (the CoREs), and we have numerous world class scientists. However, nearly all the science research vote continues to be allocated to university scientists on the basis of best science and not to research needs informed by business.

Government, having stripped itself of all its technology capability, needs to form a new Innovation Council comprising the universities, business and NZTE, to look into the situation in each of our fifteen important export sectors and to work out how government could assist them better. Each has its own issues and opportunities. These initiatives will give businesses better access to the science and technology capability in our universities, they will create environments that encourage more coordination, collaboration and innovation between export businesses, and they will deliver OECD type energised innovative environments.

My preference, set out in detail in Innovate!, is to create a network of university-based technology hubs, effectively a technology – focused business facing version of the CoRE network. They would be wholly funded by government and established for example in robotics and sensing, IT for manufacturing, cyber technologies, technical textiles, agritechnology, and advanced food, to name only a few areas to illustrate. These are the technologies that underpin the development of a competitive exporting sector. I would scrap the R&D grant system as it does not create innovative firms or innovative collaborative sectors, and I would put these funds into the network. The hubs would also become the place where businesses within sectors meet, collaborate, agree sector strategies and inform research needs as occurs at the Auckland University - hosted Product Accelerator. And I would collapse the economically focussed CRIs and Callaghan Innovation into this network.

Governments create innovative economies not markets. A step change in effort by our government is required to bring Sir Paul Callaghan’s dream of a sophisticated significant technology-based export sector to a reality and to reduce our dependence on commodity agriculture exports and tourism.