This article was first published in Water New Zealand. The May/June issue of Water is available to view here, with the article published on pages 68-69.
Three Waters reform provides an opportunity to achieve lasting benefits for the local government sector, our communities, and environment but do those benefits include climate change – in particular, do they include reducing greenhouse gas emissions?
With the climate crisis looming large and the planet set to exceed 1.5°C in warming above pre-industrial levels by 2050, water is predicted to be a main global risk. This is reflected in New Zealand's first National Risk Assessment identifying potable water as the number one climate change risk to this country.
To have safe, reliable and available drinking water, the Three Waters sector will need to respond to the risks of climate change. We will need more drinking water storage and better protection from contaminants that get worse in warmer temperatures and more stormwater capacity for extreme rainfall events. Mitigating higher inflow and infiltration from intense rain events, salt-water intrusion, reduced flow in drought conditions, and relocation of low-lying facilities will also be needed. These types of costs are on top of the estimated $120-$150 billion that is already required to upgrade three waters infrastructure.
It's a two-way street because the Three Waters sector is a net emitter of both capital and operational emissions, particularly when it comes to emissions from essential wastewater treatment processes, with some in the sector believing that reforms don't do enough to address greenhouse gas and emissions reductions goals. In late 2021, Gillian Blythe, Chief Executive of Water New Zealand, criticised Three Waters reform for not tackling climate change head on. Ms Blythe describes the Three Waters Reform as a "missed opportunity".
So, what are the tools and opportunities in the Three Waters reform package to reduce emissions? We consider this and look further afield to options to reduce future emissions.
Taumata Arowai's role and the proposed Water Services Entities
Three Waters reform is well progressed:
- Taumata Arowai (the new regulator) is up and running and the Water Services Act 2021 (establishing a framework to guide the performance of three waters infrastructure) was enacted in October 2021;
- An exposure draft of the legislation establishing the four new water services entities that will take over the responsibilities for Three Water services delivery in New Zealand, the Water Services Entities Bill, has been published and informally consulted on;
- Cabinet decisions relating to the water services entities (the operators that will own, operate, maintain and upgrade three waters infrastructure) have been agreed; and
- The working group of stakeholders recently reported back to Minister Mahuta on the governance and accountability mechanisms of the exposure draft of the Water Services Entities Bill.
Climate change isn't a central pillar to Taumata Arowai's role, the Water Services Act, or the exposure draft of the Water Services Entities Bill, which is unsurprising. The policy rationale for Three Waters reforms is the provision of safe and reliable Three Waters services at reasonable cost for all New Zealanders, following the 2016 incidents in Havelock North where contaminated drinking water led to several deaths and large-scale illness. High-quality services that prioritise human health and safety, while being able to afford this level of service in each city and district in the country are, by necessity, paramount.
However, as climate change risks are better understood it could play a role as part of Taumata Arowai's general regulatory duties to ensure:
- Three Waters infrastructure is safe;
- that network operators meet environmental performance measures, manage risk effectively and give effect to Te Mana o te Wai;
- required standards are set under Wastewater Environmental Performance Standards, Wastewater Risk Management Plans and Environmental Performance Measures and Targets for Networks (under sections 138, 139 and 145 of the Water Services Act).
Water services entities' objectives will include delivering water services in a sustainable and resilient manner that seeks to mitigate the effects of climate change and natural hazards (although this prioritises adaptation and doesn’t specifically recognise the need to reduce emissions). The Water Services Entities will therefore be required to address the effects or risks of climate change (especially natural hazards) on their own existing and future infrastructure. However, they'll need to look further afield for direction on reducing emissions. To date, there has been little guidance or support for the new entities to reduce emissions, which may create challenges down the track.
Other key opportunities and drivers for emissions reductions from Three Waters infrastructure
RMA system reform
There are increasing obligations due to bite under the Resource Management Act (RMA). The consenting process under the RMA will soon (at the end of November 2022) require the consideration of effects of greenhouse gas emissions. The Ministry for the Environment (MfE) has proposed national direction in the form of a combined national policy statement and national environmental standard governing greenhouse gas emissions from industrial heat activities. For everything else, MfE will be releasing non-binding guidance with the content of that guidance not yet known.
Three Waters infrastructure produces operational and capital carbon and the sector will need to be fully across the changes to the RMA and how they will affect future planning and consenting decisions. The upcoming changes can also be seen as an opportunity for infrastructure providers to "lock in" appropriate greenhouse gas emissions reductions.
There is a strong argument that only direct emissions of greenhouse gases should be regulated by the RMA and its proposed successor, the Natural and Built Environments Act (NBA). This would mean that embedded or infrastructure carbon need not be considered as part of the planning and consenting processes under our environmental legislation. This makes for a much clearer assessment of emissions-related activities and prevents applicants and decision-makers chasing emissions endlessly up and down supply chains.
In terms of direct emissions, we also consider the RMA (and future NBA) needs to recognise that some essential activities will inevitably produce emissions, for instance, wastewater treatment plants. Even using the best available technology, greenhouse gases continue to be a biproduct of treating wastewater to the standards required to protect human health and the receiving environments for wastewater discharges. A possible way forward is for applicants to show the best practicable option has been adopted when a discharge is being consented, taking into account viability and best available technology. We see this as essential as New Zealand's environmental legislation must not unduly compromise Water Services Entities' ability to provide safe and affordable infrastructure at the significant scale required.
We are expecting new opportunities to reduce emissions through the Building and Construction sector's Building for Climate Change programme. This programme proposes mandatory measuring and reporting requirements for whole-of-life embodied carbon emissions: from construction materials, the construction process, construction waste, and demolition waste.
From an operational point of view, the Three Waters sector itself is making significant steps forward with some existing operators, like Watercare, having made ambitious goals to reduce emissions already. These entities are working in concert with Water NZ, which has produced the industry-leading Navigating to Net Zero. This helpful guide is designed to facilitate carbon mitigation in the sector.
Risk of climate change litigation
Three Waters entities will need to remain mindful of the increase in climate change litigation in New Zealand coming off the back of significant victories overseas. Litigation has already been used to successfully challenge public decision-making here (the overturning of Thames-Coromandel District Council's decision not to sign a Local Government New Zealand Declaration on Climate Change) and to challenge private decision-making (although in Smith v Fonterra the Supreme Court found that the private company defendants did not owe a duty of care to Mr Smith and others in respect of greenhouse gas emissions).
Litigation through judicial review has also been used to discourage specific public projects including All Aboard Aotearoa filing a judicial review application against Waka Kotahi's Mill Road project in Auckland. The project was eventually abandoned.
The Climate Change Response Act
This Act includes a new permissive consideration for public decision-makers, which states they may (when making public decisions) take into account the 2050 emissions target, an emissions budget or an emissions reduction plan. This confers a broad discretion on public decision-makers to consider climate change in decision-making. We anticipate there will be substantial stakeholder and community expectations for the Water Services Entities to take into account in future investment decisions.
New Zealand's Emissions Trading Scheme (ETS) and emissions reporting requirements
Wastewater treatment facilities are exempt from the ETS, and there aren’t currently any proposals to bring plants within the ambit of the ETS.
Reporting requirements for wastewater entities have also changed over recent years and may be a way to encourage future reductions. The Zero Carbon Act introduced reporting requirements for lifeline utilities (including all Three Waters providers) on how those entities are adapting to climate change, but doesn’t include information on mitigation. Last year, Gillian Blythe of Water NZ stated:
"The Three Waters Reforms could provide an opportunity to embed the drivers and structure to drive real action. Mandatory climate-related disclosures are being seen by many as a catalyst for climate action in the finance industry. In the same way bringing transparency to water sector greenhouse gas emissions and climate risks lays the foundation for targets and processes to drive down emissions and adapt to change."
It is increasingly likely that tensions will continue to emerge between taking all steps to reduce emissions, technology to do this, safety considerations, balance statements, and above all the need for the Water Services Entities to deliver the transformational reform expected.
The reforms are first and foremost about public health and safety, and providing safe, high-quality services to everyone in New Zealand at a cost communities can afford. While the proposed regulatory environment enables and encourages water services entities and Taumata Arowai to respond to the risks of climate change, the regime does not explicitly provide direction on or encourage decarbonisation.
However, the Three Waters sector is responsible for significant emissions and, like all sectors, will need to take steps to reduce these. One of New Zealand's key climate risks is to drinking-water supply. The sector will need to look outside the primary governing legislation for direction on decarbonisation while delivering the reform's primary goal: high-quality, safe services at an affordable cost.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.