A discussion document setting out possible policy options for inclusion in New Zealand's Emissions Reduction Plan has now been released for public consultation.
Since June 2021, the Government has been considering the Climate Change Commission's final advice, Ināia tonu nei: a low emissions future for Aotearoa. The Government has generally accepted the Commission's recommendations on policies to reduce emissions. Concerningly, that still leaves New Zealand in a position where its total emissions exceed its emissions targets. The discussion document proposes various new policy options to close the gap between emissions and targets.
The Government has stressed that the discussion document is not the same as a draft Emissions Reduction Plan. Instead, it proposes various policy options (additional to the Commission's advice) that might be included in the Emissions Reductions Plan. The Plan is now due in May 2022, having been delayed from the former release date of 31 December 2021. The Government will need to work diligently over that time to produce a roadmap to show exactly how New Zealand's emissions will be reduced to meet its targets.
The approach taken by the Government shows its willingness to engage on these issues, and the Government has called for feedback from all quarters. This presents an important opportunity for organisations to tell the Government what settings and changes are required to reduce emissions meaningfully.
Key implications for various sectors
Some key policy proposals will apply across all sectors, including ensuring that cities are planned better – by integrating land use, urban development and transport planning and investment. As part of this, the Government has acknowledged the need to investigate opportunities to reduce emissions across all public and private infrastructure assets, including embodied emissions, operational emissions and infrastructure-enabled emissions. There is also significant emphasis on the importance of the Emissions Trading Scheme (although some of the proposals in the discussion document, like improving market governance and reviewing industrial allocations, are already in train). Surprisingly, no new finance policies have been proposed to help reduce emissions.
Below we set out the key implications of the discussion document on a variety of sectors.
Transport is the key focus on the discussion document. The Government has proposed four targets to reach by 2035:
- 20% reduction in vehicle kilometres travelled by cars and light vehicles by providing better travel options, particularly in our largest cities.
- 30% increase in zero-emissions vehicles of the light fleet.
- 25% reduction in emissions from freight transport.
- 15% reduction in the emissions intensity of transport fuel.
Reducing the number of cars on the road and the emissions from those cars will be achieved through a range of measures, including import restrictions, congestion charging, and national direction on cycling and walking. Planning urban areas better is also expected to play a major role in reducing emissions.
The freight sector is in line for further changes too, with an emphasis on rail, coastal shipping and heavy trucks. These measures will fold into a Freight and Supply Chain Strategy.
For aviation, the Government's proposal is in line with feedback from the sector on the Commission's draft advice, and the discussion document proposes:
- investigating the feasibility of sustainable aviation fuels;
- supporting the establishment of an industry-led advisory body on decarbonising aviation; and
- developing policy and regulatory settings to support the development of zero-emission aircraft.
The Government has supported the Commission's concept of an energy strategy, which will work together with a strategy on hydrogen and bioenergy. While these documents will undoubtedly be important in New Zealand's transition, they do tend to kick key actions down the road until those documents have been prepared. Consultation on the discussion document is an important opportunity for companies and organisations to provide input on the content of those strategies at their genesis.
The Government will also set targets for energy production. The discussion document includes the strongest indication to date that the Government may move away from the aspirational goal of 100% renewable electricity by 2030.
Industrial sectors and phasing out natural gas both continue to be clear targets for reduced emissions. Changes to rules under the Resource Management Act are expected to play a key role in that.
The Government's proposals for agriculture do not provide anything new compared with the Commission's advice. The key proposals are to reduce emissions through pricing (He Waka Eke Noa), effective advisory services to help farmers and growers manage emissions at an on-farm scale, and research and development (eg methane inhibitors and a methane vaccine).
The Government is also looking for ways in which it can encourage the uptake of on-farm mitigation practices ahead of implementing a pricing mechanism for agricultural emissions, and how the Government can reduce barriers to changing land use to lower emissions farming systems and products.
The discussion document states that at the current projected carbon prices, forestry will likely over-deliver on the sequestration needed to meet emissions reduction targets. The Government has proposed a workstream of analysing whether there is a real risk of too much afforestation in New Zealand caused by the price of carbon under the ETS leading to adverse effects on rural areas and disrupting existing land uses. The Government is specifically seeking feedback on this. The Government has not necessarily discouraged the estimated over-delivery by forestry, saying that it may be a low cost way to reduce emissions or be used to increase New Zealand's emission reduction ambitions.
The Government has indicated that reform of the Resource Management Act will provide an opportunity to look at the National Environmental Standard for Plantation Forestry to ensure those settings are correct to allow increased rates of afforestation.
The Government has not shed further light on how a long-term native forestry sink would become economically viable (that work is due in 2023). In our view, that remains a challenging prospect.
The Government has proposed yet further steps to promote both the circular- and bio-economy:
Establishing a fund and a strategy to support growth of the circular economy.
Reducing organic waste overall, and reducing organic waste disposal to landfill. Landfill gas capture remains extremely important. In addition, the Government has proposed working towards a future decision of potentially banning organic material going to municipal and non-municipal landfills by 2030.
Supporting energy from waste schemes (stopping short of fully supporting widespread electricity from waste, which is used overseas).
Fast-tracking a waste data and licensing system so that better data can be collected on our waste.
Building and construction
The Government has proposed a wide variety of mechanisms to reduce emissions in the building and construction sector. These include:
Behaviour and culture change, including through better informed consumers, consumer choice, and industry standards.
Providing a scheme of financial incentives for lower emission buildings.
Reducing fossil gas use in buildings, including by capping building emissions.
Giving owners and occupiers more flexibility to adopt low-emissions alternatives.
A mandatory energy performance standard for all public and commercial buildings (something that has existed in England, for example, for a number of years).
The Government has taken up the Commission's proposal to end expansion of the gas network and gas connections, and has sought feedback on when that final gas connection should be made. The discussion document also proposes ensuring that boilers and space heaters are transitioned off fossil fuels.
The Government will need to ensure it takes care to preserve its ability to continue to construct houses (at pace) despite these changes.
The Government has called for input from businesses, local government, iwi and communities from all over the country:
"We also want to make sure that the emissions reduction plan reflects the part we must all play in the transition to a low-emissions future. Government policy will be crucial, but so too are the plans and strategies you will develop to reduce emissions in your own organisations and communities. We want to hear what these plans are – and how we can support you so that together we build a better, cleaner future."
In particular, the Government wants feedback on the role different sectors can play in meeting the emissions budgets, and what those sectors need from the Government to support change. Consultation on the discussion document closes on 24 November 2021.
Please contact our experts to discuss the discussion document and how this may impact you and your organisation.