The Government’s Emissions Reduction Plan is flush with incentives for low emissions transport, native tree planting and clean energy in industry but may struggle to meet its targets, Marc Daalder reports
Analysis: New Zealand’s first whole-of-economy plan to tackle climate change will transform society over the next 13 years, but is it enough?
The Emissions Reduction Plan (ERP) was released by Climate Change Minister James Shaw and Finance Minister Grant Robertson on Monday, responding to advice from the Climate Change Commission delivered to the Government in May 2021. Prime Minister Jacinda Ardern was unable to attend the release after she tested positive for Covid-19 on Saturday.
The 343-page document contains dozens of actions in every sector of the economy, from transport to industry to agriculture to construction. However, few of these have much detail appended to them.
The plan was accompanied by the announcement of $2.9 billion in funding from the Climate Emergency Response Fund (CERF), which is made up of Government revenues from auctions in the Emissions Trading Scheme.
"This investment will set the foundations for us to reduce emissions and take a meaningful first step forward to achieve our emissions budgets," Robertson said.
Cash for scrapped cars
The new cash includes $338 million for research into new technologies to reduce agricultural emissions, $652 million in subsidies to help industry and business decarbonise, nearly $100 million to incentivise native forests, $375 million for active and public transport to get people out of cars and $569 million for a vehicle scrapping scheme.
Dubbed the Clean Vehicle Upgrade, the scrap scheme will begin with a pilot of 2500 vehicles over the next two years at a cost of $16 million a year. Low- and middle-income families would be paid to turn in their fossil fuel vehicles and buy low emissions alternatives with the cash.
Climate Change Commission chair Rod Carr told Newsroom that the scrappage scheme would have to be carefully designed.
"The evidence overseas as I understand it is that scrappage schemes as implemented overseas have been relatively expensive ways of reducing emissions. But that depends entirely on how they're targeted and who gets the benefit and what the benefit is used for," he said. However, he said the Government did need to find a way to address dirty vehicles within New Zealand after it had limited their imports through an import ban or a vehicle emissions standard.
The commission will be charged with evaluating the feasibility and efficacy of the plan and with making sure that it is being implemented, Carr said. He declined to discuss too many specifics as commission officials were still reviewing it.
"We need a plan. This is a plan. That is a good step. Credit where credit's due, we've seen another piece of the institutional arrangements deliver the first of its kind," he said.
Robertson said the CERF still has $1.5 billion for future investments and it would be reviewed ahead of the next Budget to see if more funding was needed.
What's missing?
While the money announced on Monday goes some way towards funding the key measures in the Emissions Reduction Plan, there are many actions which remain unfunded. Some parts of the plan don’t require additional funding, others will be paid for from government agencies’ existing baseline budgets and the remainder will have to seek resourcing in future Budgets.
Much of the plan involved promises to investigate, research or review different actions. More than a dozen new strategies are in the works, including a national public transport strategy, a national energy strategy, a national walking plan, a national cycling and micro-mobility plan, a national EV-charging infrastructure strategy, a transport climate research plan, a gas transition plan, a hydrogen roadmap, an action plan for decarbonising the industrial sector, a New Zealand Energy Efficiency and Conservation Strategy and a forestry and wood processing industry transformation plan.
The plan didn’t commit to some of the most controversial policies floated by the Climate Change Commission:
- congestion charging,
- a ban on new fossil gas connections to homes from 2025 and
- a ban on the import of fossil fuel vehicles by 2035,
were all left to future Government decisions.
Cabinet will decide on whether to implement congestion charging later this year and legislation would then take two years to draft, pass and come into effect. The bans will be reviewed in future years as part of plans and strategies for the transport and gas sectors.
"It's much more about making a plan that New Zealanders buy into, they can see the place for themselves and it gives them a sense of economic security and opportunity," Robertson said.
Carr said that the bans weren't likely to affect emissions in the first budget period, out to 2025, and that they could be implemented later.
"I'm not going to sit and judge them on that, they didn't take all of our advice and therefore they didn't get what they needed," he said. "My preference is always to encourage, coach, guide and reward the positive behaviours that we want rather than to ban, punish and shame other behaviours."
Ministers were also tight-lipped on the future of the half-fare public transport scheme, which was launched in March in response to high fuel prices. No funding for an extension of the scheme was announced on Monday, but further investments from the CERF are expected to be made in Thursday's Budget.
"We said when we put in place the initial fuel excise duty reduction and public transport changes that we would review those as we go on and we are doing that," Robertson said.
Tiwai dilemma
It also remains unclear whether the plan will actually be able to achieve New Zealand’s emissions budgets, which put a sinking lid on emissions in five year periods out to 2035.
Shaw and Robertson both said they were confident the plan as presented would achieve the budgets. But the plan itself includes two scenarios – one in which policies have high impact in reducing emissions, one in which they only have a low impact. If policies aren’t as impactful as hoped, the emissions budgets will be overshot by millions of tonnes of greenhouse gases.
The lack of certainty around the future of the Tiwai Point aluminium smelter also has the potential to throw a wrench into the works. The climate commission’s work anticipated the smelter would close in 2024 as previously announced, freeing up nearly 600 megawatts of clean electricity to aid the country’s transition.
However, the smelter’s owners floated earlier this year the possibility that the smelter may remain open. This would require New Zealand to build huge amounts of additional renewable electricity generation in the next few years or to slow the pace of the transition.
Shaw and Energy Minister Megan Woods both said on Monday the Government’s projections weren’t reliant on Tiwai closing in 2024. But the plan appeared to disagree, saying the projections incorporated the 2024 closure. Without the closure, New Zealand would emit an extra 2.4 million tonnes of greenhouse gases between now and 2025, another 9 million tonnes between 2026 and 2030 and 3 million additional tonnes between 2031 and 2035.
If Tiwai remains open and some of the Government’s major policies don’t make as big a dent in emissions as expected, that could jeopardise the achievement of the budgets.
In a statement to Newsroom, Shaw insisted that the plan is based on Tiwai remaining open.
"The Emissions Reduction Plan makes an assumption that the Tiwai Point Aluminium Smelter remains open. Given the uncertainty around the smelter’s future and this ‘will they, won’t they’ scenario the region faces, it was just safer to make a plan to cut emissions on the basis that it would stay open," he said.
Transport policies
Transport is the biggest focus of the plan. It is New Zealand's fastest growing source of emissions and the one where all the solutions are already known and available: Get as many people out of cars as you can and electrify whatever's left.
The plan envisages a sea change in the transport sector. Gone are the days of building roads willy nilly - new investments will have to "demonstrate how they will contribute to emissions-reduction objectives and [the Government will] set a high threshold for approving new investments for any transport projects if they are inconsistent with emissions-reduction objectives".
Councils could also be empowered to convert roads more easily into bike lanes, bus lanes and walking spaces by the end of the year.
Nationally, the Government wants to reduce the total kilometres travelled by light vehicles by a fifth by 2035. But it will also set new targets for reducing light vehicle travel at the city level in Auckland, Hamilton, Tauranga, Wellington, Christchurch, Whangārei, Rotorua, New Plymouth, Napier, Hastings, Palmerston North, Nelson Tasman, Queenstown and Dunedin.
The Government will fund councils to decarbonise buses, requiring only electric buses to be purchased from 2025. As public transport demand increases, the plan would also see money go towards improving bus driver terms and conditions. The CERF will provide $61 million over the next four years for bus drivers.
Walking and cycling also get a boost, with hundreds of millions of dollars going towards active transport infrastructure. The plan includes a cryptic reference to supporting the uptake of e-bikes, but has no further detail. It also reveals that the Government has quietly renamed its Clean Car Discount to the Clean Vehicle Discount and intends to review this year whether it could expand to "other vehicle classes".
In addition to the scrappage scheme to help low-income households decarbonise their vehicles, the Government will trial from 2023 a social leasing scheme.
"We are also trialling a social leasing scheme that will support low-income families to lease a safe, low-emission vehicle from a community organisation," Shaw said.
Looking ahead, the plan says further measures to reduce emissions from private vehicles will be considered. They could be implemented from 2027 and would aim "to increase the fuel efficiency of the imported fleet and avoid high-emitting vehicles being dumped onto our market".
One guaranteed commitment is a maximum CO2 limit or penalties for imported vehicles, which could potentially evolve into a ban on the import of petrol vehicles.
Beyond road transport, the Government plans to set targets for decarbonising domestic aviation and maritime transport, including sustainable fuel requirements.
Energy and industry policies
Hundreds of millions of dollars of Government subsidies will help industry get off coal boilers and other fossil fuel power and heat sources. This is an expansion of the existing $69 million Govt Investment in Decarbonising Industry (GIDI) fund.
"The expanded programme is estimated to deliver projects that will make up around one sixth of 17 percent of our total emissions reductions required between 2022 and 2025, and around one third or 35 percent of our emissions reductions required between 2025 and 2030, so it is doing some heavy lifting for our climate goals," Woods said.
The larger fund will not only help big industrials decarbonise but will also target investment at a regional level and help businesses buy and install energy efficient equipment, including electric motors and heat pumps.
New coal boilers will be banned by the end of the year and existing low- and medium-temperature ones will be phased out by 2037. Climate advocates have previously criticised this date as being too late. It is the year Fonterra, a major coal user, had previously suggested.
Future-proofing the electricity system will be key to supporting electrified transport and industry, the plan said.
The Government will review whether it has the right regulatory tools to incentivise investment in renewable electricity generation. It will also look at the settings for offshore energy - essentially, offshore wind turbines - and update them by July 2024.
New fossil-powered baseload generation will be banned by 2024, the Government says, in one of the few hard bans in the plan. However, it's unclear whether any generators are actually looking to construct new fossil fuel baseload generation.
Other regulatory changes to increase renewable electricity include a Transpower pilot of Renewable Energy Zones. This involves building out grid capacity more in a region than is currently needed, in anticipation of future renewable development. The Government also hopes to make sure consumers with at-home solar panels will be able to sell power back to the grid and receive fair compensation for it.
Technology will be needed to smooth demand from electric vehicle charging, with overnight generation likely to do most of the heavy lifting.
A range of plans and strategies relating to the energy sector are mooted in the ERP. A gas transition plan will look at the future of the fossil gas industry, while a hydrogen roadmap offers a potential replacement for gas from wells.
Overall, the Government will set a target that 50 percent of energy used in New Zealand - which includes electricity but also petrol, diesel, coal, gas and oil - will come from renewable sources by 2035. The Government's previous target of a 100 percent renewable electricity system by 2030 has been downgraded to "aspirational". That was a Labour election commitment, but the climate commission advised last year that a renewable energy target would be more useful in reducing emissions than committing to fully renewable electricity.
New buildings will face more stringent energy efficiency standards under the Emissions Reduction Plan and existing buildings may face energy performance mandates as well. Already, government agencies are required to only lease buildings with high energy efficiency ratings.
Agriculture and forestry policies
The plan contains relatively few concrete proposals for agriculture. The existing pledges - that agricultural emissions will be priced by 2025 and that farms will have emissions reports in place by the end of this year and emissions reduction plans in place by 2025 - are still in effect.
The specifics of the pricing scheme will be decided after the He Waka Eke Noa partnership between the Government and the primary sector completes its work. The climate commission will then review those specifics.
Despite the lack of specific actions, nearly $340 million has been allocated to agricultural emissions research. A new Centre for Climate Action on Agriculture Emissions will seek to bridge the gap between existing agricultural emissions research and actual on-farm implementation. It will support new technologies to scale up and engage in applied research beginning in the middle of this year.
Further public-funded research into regenerative agriculture will also aim to add a pathway for emissions reductions on farms. And the country's largest farmer, state-owned Landcorp Farming, will serve as a model for new, low-emissions farming methods.
Food waste could be banned from landfills by 2030, under the plan. However, this would only happen if there are suitable alternatives to the landfill. The Government hopes most homes would receive kerbside food waste collection services by the same year. Methane released from whatever organic waste does end up at landfills could be captured under new regulations as well.
More money is also going to supporting a range of forestry initiatives. Native trees get a boost in particular, under the plan, in line with the commission's advice on creating a long-term native carbon sink.
Almost $100 million from the climate response fund will support the scale-up of native tree nurseries and native seed production. The Government will also update the Emissions Trading Scheme to better reflect the sequestration benefits of native trees, further incentivising their growth. Other work includes an investigation of "options to lower costs, address supply chain barriers, and improve the successful establishment of native forests".
Exotic forests also get a look-in under the plan. Specific short rotation exotics that could be used to suck up carbon and then be burned as biofuel - therefore leading to fewer emissions than fossil fuels harvested from deep underground - might be incentivised. Waste from harvested plantation forests could also be burned as biomass.
Later this year, the Government will consult on potential new requirements for fire management in exotic forests.
The framework
Many of the actions in the plan deal not with specific sectors but rather with the overarching framework for reducing emissions. Others seek to enable change across sectors.
One example is a proposal to update the New Zealand curriculum and establish a new Environment and Society unit in secondary schools. The Government sees clear communications as critical to the transition.
In a similar vein, a new Climate Information Centre could be created next year. It would provide information on how people can make low emissions choices and seek to "socialise the wide-scale behaviour changes needed for the transition". The Government also wants to launch an "investigation into ways of increasing public participation in climate policy and prioritising actions", responding to the commission's advice on greater public involvement in the transition.
Across the decarbonisation programme, the Government has pledged to prioritise nature-based solutions "in policy, planning design and decision-making over solutions that do not enhance nature. This will be for both carbon sequestration and climate change adaptation." Partly, this will be monitored through the inclusion of biodiversity impacts in reporting on the progress of the Emissions Reduction Plan.
New research into the value of ocean carbon could incentivise better ocean management practices and even allow carbon credits to be earned for that work.
A range of measures will also seek to ensure the Government's decisions take climate change into account. Already, as Newsroom reported in 2021, Budget bids are tested against a carbon price to ensure they still make sense when the social cost of carbon is accounted for.
In addition, the Government will review how its Climate Implications of Policy Assessments are going. The measure was introduced in 2019 and requires policies which might increase emissions by more than half a million tonnes to undergo specific climate modelling. That allows Cabinet to be aware of potential climate impacts when approving new projects.
Climate will also be embedded in new planning legislation, as Newsroom reported in April.
Climate research will also be supercharged, with a portfolio of research funds targeting specific initiatives or issues. The first of these will be a platform investigating embedded emissions in the building and construction sector.
Information about extra spending from the climate fund that wasn't related to the emissions plan was also released on Monday. This included a commitment of $9 million to investigate options for paying for offshore emissions reductions to help New Zealand meet its Paris target, which goes above and beyond the domestic emissions budgets.
Another $3.6 million was earmarked for a Government-managed voluntary carbon market. This would ensure claims of carbon neutrality from the private sector follow specific rules and provide a source of offsets for public sector agencies required to be carbon neutral by 2025. In April, Newsroom reported that a Government-run carbon market, involving carbon offsets generated by the planting of trees on Crown land, was in the works.
Alongside the Government's own accountability mechanisms, the Climate Change Commission is charged with regular monitoring of the Government's progress. The first of these reports is due in 2023.
