In the News
Climate Change Commission Advice on ETS and ERP
The Climate Change Commission (Commission) has recently issued draft advice regarding the Government's emission reduction plans. The advice highlights the Commission's concern that the Government's current emission reduction plans will be insufficient to meet New Zealand's 2026 to 2030 emissions budget, and ultimately New Zealand's goal to be carbon neutral by 2050. Consultation on the draft advice is currently open until 20 June 2023. The Commission plans to deliver final advice to the Minister of Climate Change by 31 December 2023.
The Commission's draft advice contains 19 urgent recommendations the Government should adopt to ensure its goals under the second emissions budget period are met. The Commission considers the greatest risks to the Government meeting its emission goals are critical gaps in the current plan, and existing actions in that plan which require strengthening.
The Commission has called for clarity from the Government on its desired outcomes, by committing to a level of gross emission reductions for the second and third emission budgets. Further, the Commission posits that it would be helpful if the Government's specific levels of emissions and carbon dioxide reductions are set out beyond the second and third emission budgets, to 2050.
The Commission has also proposed the Government reconsider and amend the Emissions Trading Scheme (ETS) to ensure that incentives support the desired outcomes (being transition to net zero long-lived gas emissions). The Commission is concerned that the comparatively low cost of using forests to capture carbon, combined with the current ETS structure, will result in short term extensive afforestation, and in the long term, the ETS incentives will not be sufficient for planting the forests needed to reach the country's net zero long-lived gas emissions by 2050. See our Insight article for more detail, here.
"Affordable Water Reforms" – update
In April, the Government announced changes to its Three Waters Reform, re-named Affordable Water Reform. These changes are the result of a "re-focus", with the priority being to improve the affordability of water services, as directed by Prime Minister Chris Hipkins in February.
There are a number of key changes introduced by the Affordable Water Reform, including:
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The number of water services entities (WSEs) will increase from four to ten, with new boundaries closely based on existing regional boundaries.
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The establishment date for WSEs (previously 1 July 2024) will now be staggered. WSEs will begin to be stood up from early 2025, with an operational deadline of 1 July 2026.
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Each territorial authority owner will be guaranteed representation on the WSE's Regional Representative Group (RRG).
The entities will still maintain balance sheet separation from councils, to enable the required investment in water services infrastructure, and be subject to economic regulation. Further, mana whenua and local authorities will continue to have 50/50 representation on the RRG.
While this increase in the number of WSEs will increase the cost of establishing the WSEs and reduce economies of scale efficiencies, the Government still expects the reforms to deliver savings of between $2,770-$5,400 annually to households by 2054. You can read our fulsome update on these reforms here.
Lobbying Reforms
Prime Minister Chris Hipkins recently announced several measures intended to increase transparency around lobbying in Parliament, following media coverage on the issue. The four changes include:
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requesting that the Speaker of the House remove swipe-card access to Parliament for business, non-government and union representatives;
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inviting third-party lobbyists to establish a voluntary code of conduct (the Prime Minister has offered Government and Ministry of Justice resources to support that process);
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including clear expectations for Ministers in the updated Cabinet Manual regarding their employment prospects after leaving office; and
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initiating a review by the Ministry of Justice into lobbying, including scoping policy options for broader reform in this area.
The updated Cabinet Manual, which covers expectations for Ministers' and public servants' conduct, was published on 20 April 2023. Guidance introduced in this latest edition specifically contemplates that Ministers may move from office to the lobbying industry. The Cabinet Manual now directs that (see [2.113]-[2.114]):
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Ministers must not use information gained while in office (including confidential, commercially sensitive or legally privileged information) in a way that benefits the personal interests of themselves or of their family, whānau or close associates; and
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while Ministers are entitled to be employed after leaving office, their conduct and decisions while in office should not be influenced by the prospect of future employment within a particular organisation or sector.
The Ministry of Justice's advice following its review into lobbying policy options is not expected until 2024. The Prime Minister has signalled that the review will draw on international best practice. It is anticipated that the review will consider reform options such as establishing a register of lobbyists and mandatory "cooling off" periods for lobbyists and parliamentary officials. See our article on this topic, here.
Ministerial Inquiry into Land Use
The Ministerial Inquiry into land uses associated with woody debris (including forestry slash) and sediment in the Tairāwhiti/Gisborne District and Wairoa District (Inquiry) was launched in February 2023. The Inquiry panel – made up of former minister and Tairāwhiti resident Hon Hekia Parata (Chair), former National Recovery Manager for the Department of Prime Minister and Cabinet Dave Brash (who replaced one of the original panel members, Bill Bayfield), and forestry engineer Matthew McCloy – is tasked with investigating past and current land use practices and their impact on communities, livestock, buildings, and the environment.
The scope of the Inquiry includes the impacts of storm damage and its causes, land use practices, and regulatory and policy settings, with a particular focus on the communities of Tairāwhiti and Wairoa. The Inquiry panel has received 313 submissions during the course of its consultation period which ended on 6 April 2023.
The Inquiry panel is due to deliver its report by 12 May 2023, following the approval of a 12-day extension to the previous deadline. It is expected that the Inquiry panel will recommend changes to existing practices and regulation at central and local government levels, including forestry practices, Resource Management Act plans, and national policy statements and standards.
National Directions and Renewable Energy
The Government has signalled that changes to various National Directions that relate to renewable electricity are necessary to expand New Zealand's renewable energy infrastructure. Environment Minister, David Parker, noted that such changes were required to enable New Zealand's climate change goals to be met, and that the changes were expected to be implemented by the end of the year, following consultation.
On 20 April 2023, the Ministry of Business, Innovation and Employment and the Ministry for the Environment issued a consultation document seeking feedback on the proposed changes, with submissions due by 1 June 2023 (available here). The proposed changes will amend the:
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National Policy Statement on Renewable Electricity Generation (NPS-REG);
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National Policy Statement on Electricity Transmission (NPS-ET); and
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National Environmental Standards for Electricity Transmission Activities (NES-ETA).
Further, a new National Environmental Standards for Renewable Electricity Generation will be developed.
The proposed changes are intended to:
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Recognise and provide for the national significance of renewable electricity generation.
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Enable renewable electricity generation activities in areas with significant environment value and other areas.
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Recognise and provide for Māori interests.
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Strengthen direction on existing wind and solar renewable electricity generation.
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Retain existing direction in relation to reconsenting existing hydro and investigating further options under the National Planning Framework.
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Enable small and community-scale generation.
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Provide for the importance of battery storage.
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Recognise and provide for the national significance of electricity transmission.
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Manage environmental effects of electricity transmission.
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Broaden the scope of the NPS-ET to apply to all high voltage electricity networks.
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Improve the workability and scope of the NES-ETA.
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Enable the upgrade and repowering of existing wind and solar generation.
- Develop new national standards for small and community scale onshore wind and solar PV generation projects.
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Provide nationally consistent rules for new large-scale wind and solar PV generation.
IRD's High Wealth Individual's Report
On 26 April 2023, the IRD published the findings of its High Wealth Individuals Research Project (HWI Project), which sought to determine the median effective tax rate (ETR) paid by New Zealand's wealthiest families, enabling comparisons against the general population.
The HWI Project's origins date back to 2020, when law reforms expanded the IRD's information gathering powers, enabling them to require high-wealth individuals to provide their earnings data.
The HWI Project sourced data from 311 high-wealth New Zealanders, and their direct household members. It calculated that the median ETR paid on these families' economic income from all sources – including salaries or wages, as well as capital gains from businesses, property and other investments – was 8.9%. The report stated that this figure is less than half of the average ETR paid by middle income New Zealanders, based on similar research carried out by the Treasury.
Revenue Minister, David Parker, stated that one of the main reasons for this discrepancy was that people on low to middle incomes tended to make most of their money through personal taxable income, which is taxed directly. In comparison, the HWI Project found that personal taxable income was only a "small part of the economic income of the wealthiest New Zealand families" and that, between 1 April 2015 and 31 March 2021, the researched families generated most of their economic income through increases in the value of businesses, property and financial portfolios they owned or controlled.
The IRD has emphasised that the purpose of its HWI Project was not to make any immediate policy recommendations, but to generate findings that could help the IRD to assess the progressivity and efficiency of the New Zealand tax system, enabling it to provide more robust advice on New Zealand tax policy in the future. The IRD's full report can be read here.