Carrot or Stick? Sweetener or Bitter Pill? Now That the Government Has Enshrined Environmental Sustainability in the New Zealand Lexicon, Business Wants to Know Just How the Politicians Will Attempt to Get Them Onside in Their Latest Bid to 'Green' the Economy

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It's a matter of record now that the Labour-led government wants us all to be carbon-neutral in our economy and our way of life. To underline that it means business, as the Department of Internal Affairs' VIP car fleet is replaced, vehicles that are more fuel efficient and have lower emissions will be acquired.

The Government estimates that this will lead to 550 fewer tonnes of carbon dioxide being emitted, 400,000 fewer litres of fuel being used, and $500,000 being saved over three years.

Charles Willmer, managing director of LeasePlan New Zealand, welcomes the government move. "They're showing a certain degree of leadership."

What does this mean, though, for large companies with anything up to 400 vehicles under fleet management?

Willmer: "You could be cynical and say they're leading now, [but] the next thing is going to be legislating for everybody else."

He hopes the Government will use its sustainability campaign as an opportunity to incentivise, rather than penalise, business. For some companies, there is no doubt that moving to more carbon-friendly technologies for vehicles is economically, at the moment, "the wrong decision".

An average hybrid car now costs $35,000 to $40,000 whereas an equivalent, but more conventional, car would be about $25,000.

"There is going to be no measurable increase in second-hand value, not at this stage, and certainly you're not going to get that sort of cost differential back in fuel savings, over the typical life of a company car," says Willmer.

He believes some form of relaxation in vehicle-related taxes would be one way of getting business onside, possibly through tax breaks in FBT, vehicle registration or fuel.

Otherwise, he believes the private sector won't keep pace with the public in changing vehicle procurement programmes.

"Some companies have the token two or three hybrid-type vehicles in their fleet. A number of larger organisations, where vehicle status isn't really an issue, are looking at more economic, lower-emission vehicles."

The new Euro IV diesel vehicles the Government is moving to will use an average of 30 percent less fuel than a similar petrol vehicle and will emit significantly less greenhouse gas, says Energy Minister David Parker.

"We've also committed ourselves to reviewing this standard annually so we can keep pace with new sustainable vehicle technologies as they're introduced to the market," says Parker.

Since as far back as 2004, fleet management companies like Custom Fleet NZ have been aware of an incremental shift in environmental awareness and of the need to keep pace with that mindset.

Managing director Geoff Tipene says that awareness has lifted again in 2007 with the increasing profile carbon trading has gained.

Custom Fleet is busy doing comparisons based on manufacturer specifications for clients who want to know the relative efficiencies between petrol-based vehicles and diesel or hybrid-based vehicles.

Tipene says five years ago a lot of local corporates' vehicle procurement policies focused heavily on occupational health and safety. That has changed as greater environmental awareness has percolated through the business community.

One of Custom Fleet's largest South Island customers is negotiating to replace with hybrids some of its petrol-based cars before the expiry of their contract. While, in normal circumstances, the client would be financially penalised for doing that, Tipene says his company is working with them to minimise any penalty. "We're trying to support that kind of activity."

Demand for hybrids can't be universally satisfied, not only because of health and safety considerations, but because of restrictions on their availability. That means in some cases companies need to retain vehicles which Tipene says fall outside the realm of environmental friendliness. …