More action is needed than previously anticipated to meet future emissions targets without becoming an international outlier that uses trees to offset burning from fossil fuels, Marc Daalder reports.
Analysis: The Climate Change Commission says New Zealand is on a path that would see it still heavily reliant on fossil fuels in 2050, while meeting net zero greenhouse pollution targets solely through planting ever-increasing swathes of the country in permanent pine forests.
“Not only keep planting new ones, we’ve got to maintain all of that inventory as well. So every time a storm comes through or disease comes through or fire takes it out, we’ve got to build back that, keep the pests out, make sure it doesn’t die, if it does replace it all – and keep adding new forest footprint,” chair Rod Carr told Newsroom on Wednesday.
“While the rest of the world is now getting the benefits of low-emissions businesses, low-emissions products and services, low-emissions ways of living, we’re sitting there going, ‘No, we’re just planting'.”
This is one of several issues the commission found need urgent action, in its latest round of advice to the Government. A draft report released Wednesday evening lays out what may be needed to meet the second emissions budget, which constrains planet-heating pollution between 2026 and 2030.
“The commission is optimistic about the opportunities which New Zealand has to deliver those emissions budgets but our current pathway of policies will not get us there. Interventions and change in the policy settings is going to be necessary,” Carr said.
Second budget at risk
That may be a surprise to policymakers and commentators, who have viewed the second and third budgets as much more achievable than the current one, covering carbon released between 2022 and 2025.
While the current budget demands a much smaller reduction in pollution, there’s also little time to implement policies that still take effect before it ends.
The later targets are more ambitious, but the end of the second budget is still the better part of a decade away.
Cabinet was also reassured by the modelling produced as part of the first Emissions Reduction Plan last year, which showed the second budget was within the range of outcomes achieved by the raft of policies that plan contained.
Emissions need to be 8.7 million tonnes lower than expected in each year from 2026 to 2030 to meet that budget. With the Emissions Reduction Plan policies, they would be between 6.2 and 18.9 million tonnes below baseline, according to that modelling.
The commission said there were flaws with that work, however.
“We think there are degrees of optimism about what is likely to be the starting point [of the budget period] and that, informed by that, more urgent, bolder action is likely to be needed in the second emissions reduction period to make up for the fact we may not achieve the first budget period outcomes,” Carr said.
Driving this analysis are both changes in circumstances since the modelling was done and a view that some of the assumptions were overly optimistic.
In the first category: The carbon price has crashed since last year and the biofuels mandate scrapped by Chris Hipkins creates a 7 million tonne gap in the second budget as well.
Among the optimistic assumptions: Agricultural emissions cuts were based on the introduction of new technologies that have not yet been developed or proven at scale, while transitions away from fossil fuels in the energy and industry sectors may run into bottlenecks that need addressing.
While the commission didn’t quantify the size of the gap itself, it did pull from more recent government projections which show emissions would only be an average of 4.6 to 5.9 million tonnes below expected levels over the second budget period, compared to the target of 8.7 million below baseline.
That means, across the five years, another 14 to 21 million tonnes of cuts still need to be found.
Science-based policy
In its advice, the commission offered familiar ideas for how to close that gap in each sector, from cutting barriers to consenting wind farms to upgrading the electricity grid to enable more EV charging.
Looming over all of this, however, was a major unanswered question from the commission’s first advice package two years ago. It’s something the commission has repeated in almost every report to Government ever since.
What balance of pollution cuts versus carbon sequestration in trees does the Government want to end up with, when it reaches net zero? Does it want gross emissions to decline steeply, with trees offsetting the remainder? Or does it want New Zealand in 2050 to look pretty much the same as it does today, only with a lot more pine trees?
The commission prefers the former.
“A path that relies heavily on planting new forests to achieve net zero would increase exposure to risks such as fires, pests and diseases. This could mean carbon is released back into the atmosphere and carbon storage is lost,” Wednesday’s report found.
It also incorporated the latest science, which shows reducing emissions (through polluting less) and carbon removals (through sequestration) are “not directly equivalent”. This is due to “inconsistent timeframes”, the commission found.
“The carbon stored in fossil fuels has been locked away deep underground for millions of years. When fossil fuels are burnt, this carbon is released to the atmosphere and adds to the ‘active’ carbon cycle – the continual exchange between the atmosphere, land and ocean.”
Removing carbon from the active cycle takes hundreds of thousands of years, meaning new fossil carbon “is therefore effectively permanent on human timescales”.
By comparison, land-based carbon storage or burning involves carbon that is already part of that active cycle. Reversing it takes years or centuries.
“Releasing fossil carbon is fundamentally different from the release or storage of carbon on land from human activities,” the commission wrote.
In other words, while our accounting systems allow one tonne of carbon dioxide absorbed by a pine forest to offset a tonne of CO2 produced from burning coal, the atmosphere reacts differently.
Incorporating this physical science into New Zealand’s climate policy is somewhat unusual. It is most reminiscent of the Zero Carbon Act targets, which are based on a 2018 International Panel on Climate Change (IPCC) report into what is needed to limit warming to 1.5C.
“We want the evidence. Part of evidence is science. Part of evidence is practice. Part of evidence is evidence about behaviour or regulations or impediments and enablers. So it’s not all just about physics and chemistry but there’s no doubt that part of the evidence is definitely the science,” Carr said.
“The IPCC in its work is increasingly concerned that offsetting is obfuscating the nature of the challenge and the risks that we’re taking on. That net zero under the Paris Agreement was to help get buy-in about an achievable pathway for emissions reduction, but it’s almost become a reason not to reduce gross emissions – ‘Trust us, we’ll offset’.”
There are non-science reasons to be concerned too, the commission argues. To start with, as long as we keep emitting, we’ll need to keep sequestering. Even under the current accounting systems (which aren’t aligned with the science), that still means planting ever-larger areas of the country with trees – likely exotic pine, with current policy settings.
The planting programme wouldn’t stop in 2050, because we need to maintain net zero emissions beyond the middle of the century too. More and more land would be planted in pines, further fraying social licence for the transition.
Delaying gross emissions cuts could cost New Zealand too, doubling the expected costs of reaching net zero emissions.
Moreover, the opportunities present in the transition would be lost. We wouldn’t be able to lead the world with cutting-edge technologies or innovations and would lose our clean, green reputation.
“I am very concerned that we will end up not taking up those technologies until much later than is in our own best interest to take them up,” Carr said.
To avert all of this, two things are needed, according to the commission.
First, the Government needs to identify the balance of gross reductions and carbon removals it wants to use to meet the budgets, as well as an indicative pathway for both reductions and removals out to 2050.
“Failure to specify the intended levels of gross emissions reductions will mean that it is difficult to ensure that appropriate and comprehensive policies are put in place to achieve the necessary gross emissions reductions,” the commission said.
Second, it needs to reform the Emissions Trading Scheme to split the price incentive for gross reductions away from the price incentive for planting trees.
The problem here is that the same price applies to forestry as to all the other sectors (bar agriculture). Since planting trees is cheaper than cutting emissions in most sectors, that means the Trading Scheme mostly just drives tree planting.
“Establishing and growing a pinus radiata forest delivers removals at relatively low cost ($25-$50 per tonne of CO2e), while many opportunities to reduce gross long-lived gas emissions cost upwards of $100 per tonne of CO2e,” the commission wrote.
There’s also an inverse problem for forestry in the next decade. By the mid-2030s, there will be so many forestry credits that the market will be swamped, with no demand for them. This could put foresters in serious financial trouble, particularly if they paid a lot to acquire land up front on the hopes of realising gains much later.
Attempts to address this outside of the Emissions Trading Scheme are unlikely to succeed, the commission said. The only viable option would be to accept that the Emissions Trading Scheme won’t drive gross emissions and instead achieve those through regulation and subsidies.
This could be even more expensive than relying on the Trading Scheme and would shoulder the burden of paying for it onto taxpayers rather than polluters.
While the commission tries not to provide specific policy advice, it does offer up a few examples of tweaks to the Emissions Trading Scheme worth investigating.
Those include limiting how many forestry units a polluter can surrender, as in California’s trading scheme. This would effectively separate out forestry units from other units, lowering the price for the former while raising the price for emitters overall.
Another option is to top up the carbon price paid by emitters to the level needed to incentivise gross cuts. The United Kingdom has done this since 2013 and the policy is credited with helping to cut coal use in generating power.
While any of these changes that raise the effective carbon price are likely to increase costs for households, disproportionately hitting the poorest, the commission said this wasn’t a reason to delay climate action.
It pointed to the Covid-19 wage subsidy and halving of public transport fares as evidence “that the Government can act fast to counter cost-of-living impacts”.
Moreover, it said, a $50 rise in the carbon price would increase low-income household costs by $3.30 a week. That’s nothing compared to the extra cash in pocket from increases to the main benefit ($109 per week since 2017) and minimum wage ($48 per week in 2022 and $60 per week this year, before tax).
“While these increases in main benefits and the minimum wage are addressing more cost pressures than just those from the change in Trading Scheme price, they illustrate how the impacts of the NZ Emissions Trading Scheme on low-income households could be managed through existing levers.”
That resulted in a recommendation to “make use of existing mechanisms to manage impacts of climate policies in the interim, rather than delaying climate action”.
Other recommendations
The Emissions Trading Scheme wasn’t the only policy that came in for scrutiny, though it received the most attention in page count.
The commission also weighed in on efforts to decarbonise in each sector, making a total of 19 recommendations targeted at the most urgent actions needed to meet the second budget.
This included criticism of the current state of funding for Māori to decarbonise. More direct investment is needed, the commission said, with money needed by both iwi and Te Ture Whenua entities that don’t always line up with iwi boundaries.
The Government’s Equitable Transitions Strategy should be expanded, the commission found, to include the impacts of climate change.
In agriculture, implementing an emissions pricing system under He Waka Eke Noa is “crucial”. Alongside that, the commission suggested streamlining approvals processes for new technologies to help achieve targets in the second budget period, while balancing the need to ensure food safety is preserved.
Cities, buildings and transport came in for an extended look.
The siloed processes for planning, consenting and building transport and housing projects are problematic, the commission said.
“This fragmentation does not lend itself to whole-of-system outcomes like emissions reduction […] the emissions reduction plan for the second budget period must implement an integrated planning system that builds urban areas upward and mixes uses while incrementally reducing climate risks.”
Transport infrastructure is underfunded, especially for walking, cycling and buses and trains, the commission added. This, alongside lengthy bureaucratic delays, is endangering the transition.
“The process to get delivery of infrastructure takes too long. Both Let’s Get Wellington Moving, which originated in 2016, and Auckland Light Rail, which originated in 2018, are yet to commence building public transit,” the commission said.
It recommended the Government “simplify planning and increase funding of integrated transport networks that optimise public and active transport. For major population centres, the Government should also complete cycleway networks by 2030 and take steps to complete rapid transport networks by 2035.”
The consenting system will also run out of capacity, with the number of green projects coming down the pipeline. Demand is projected to increase by 40 percent by 2050, leading to delays which threaten around a third of the emissions cuts needed to meet transport and energy targets.
By 2035, emissions from these sectors need to be 12 million tonnes below 2020 levels. Most of those reductions will come from projects that have yet to be consented.
Electricity demand is expected to rise 28 percent by 2035 and 68 percent by the middle of the century. Each year from 2025, the equivalent of two very large wind farms will need to be built to meet that demand.
Plus, some 40 percent of New Zealand’s current renewable generation needs to be reconsented during the second budget period.
Delays to building new generation could increase emissions with a 12-month delay in following the commission’s pathway for development leading to 1.8 million tonnes of additional emissions in the second budget period.
It could also have indirect effects, raising the price of electricity due to a higher reliance on fossil fuel generation and therefore reducing the uptake of electric cars and heating systems. That year-long delay would raise wholesale electricity prices by about 30 percent.
The commission recommended the Government “prioritise and accelerate renewable electricity generation build and ensure electricity distribution networks can support growth and variability of demand and supply”.
The grid is also crucial here, with the commission finding supply of electric vehicles wasn’t the largest barrier to uptake. Instead, the issue is charging infrastructure, which won’t get built if there isn’t a distribution network to power it.
“The other part of the infrastructure is the lines companies. If you want to bang three fast chargers in the forecourt of a petrol station, the constraint now is not the parking places to make available, it’s, ‘Will that substation support multiple fast chargers on that site?’” Carr said.
“The infrastructure isn’t just about the point you plug into, it’s about the lines company that delivers power to the plug.”
Eliminating those barriers to building new charging stations was another of the recommendations. EV uptake could also be bolstered if a date for phase-out of fossil fuel car imports was set, giving the sector and consumers certainty.
In energy, the commission was bearish on the future of green hydrogen in New Zealand, while noting the Government’s apparent affection for it.
A handful of large industrial processes could make use of it, but it would increase consumer costs if used to replace fossil gas in heating buildings.
“It is unnecessary to convert the existing fossil gas network over to hydrogen. For example, to convert all existing residential fossil gas users to green hydrogen would require around six large wind farms to produce the hydrogen. If instead their heating was provided by heat pumps, then only one of these wind farms would be required.”
If the hydrogen was instead exported, it could still have a negative impact on the country by using up tight electricity supply – unless hydrogen was only produced through generation over and above what would otherwise be built.
The commission also returned to an old bugbear – the fossil gas network. It offered a modified version of its previous draft recommendation to ban new connections to the gas network, saying now that this should only be done “where there are affordable and technically viable low-emissions alternatives”.
Realistically, however, this is still likely to apply to most residential consumers. The commission made clear it didn’t intend for the policy to apply to industrial consumers or barbecues or camping stoves.
“There is a need to exercise pragmatic judgment here; commercial cooking does not have a good alternative at the moment, or isolated properties or marae may need bottled gas for heating and cooking,” the commission wrote.
Nonetheless, “electric and induction technologies should be encouraged and incentivised pragmatically and ambitiously”.
Low-income households already connected to gas may need targeted financial support as the price of gas rises. The commission also said there was no case for continued expansion of the gas network, with too much uncertainty around biogas and plenty of certainty about increased consumer costs from fossil gas.
