How New Zealand Can Reach Second-tier Emissions Budget

New Zealand’s Climate Change Commission released a draft advice on Wednesday, 26 April 2023, regarding how the country will meet its second emissions reduction target to achieve net zero by 2050 in line with the Paris Agreement.

The Commission says that New Zealand is relying too much on planting trees to offset its carbon emission and essentially passing the burden to the next generation to make the actual GHG emissions reductions.

The Government has set emissions budgets covering three five-year periods (2022–2025, 2026–2030, 2031–2035) in May 2022. The draft advice released on Wednesday will be the Commission’s second one of three pieces of advice.

An emissions budget is the total quantity of emissions that are allowed to be released during an emissions budget period and a part of the country’s contribution to limit global within 1.5°C– scientist believes this is a critical climate tipping point that, if surpassed, could lead to abrupt, irreversible, and dangerous impacts with serious implications for humanity.

For the first budget period from 2022-2025, the Government has an emissions budget of around 290 Mt CO2e. For the second five-year period of 2026 to 2030, it increases slightly to 305 Mt CO2e, and between 2031 to 2035, dipping by 35% to a budget of 240 Mt CO2e.

To ensure that New Zealand keeps moving towards its climate targets, the Climate Change Commission advises the Minister every five years on the direction of the Government’s emission reduction plan.

The nearly 200-page Climate Change Commission’s draft advice says that the Government’s plans to cut emissions are not enough to meet its target and warns that it can’t rely too much on planting trees to do the job, instead it calls for additional and concrete reductions from its gross emissions and excludes the benefits provided by trees.

Currently, the country’s targets are calculated in “net emissions,” which considers the carbon soaked up by planting trees and vegetation. Forests can burn or get damaged by storms, which in this case, could release the carbon stored up into the atmosphere. Therefore, it would be too risky to rely heavily on them for the country’s emissions reduction.

The advice also proposes that the Government revisit the New Zealand Emissions Trading Scheme (NZ ETS) incentives to ensure that it supports the transition to net-zero emission of long-lived gas emissions. It aimed at the ETS, claiming that it relies too heavily on forestry instead of focusing on reducing emissions at the source.

“NZ ETS is an important part of Government’s strategy to reduce emissions. Putting a price on emissions, which in turn raises the price of emissions-intensive activities and goods, encourages participants to make different choices and innovate to find low emissions alternatives. However, to be effective it needs to be calibrated to achieve the outcomes the Government is seeking. The NZ ETS is a tool, not a strategy in and of itself.”

The advice also calls for a more transparent approach to reporting emissions by committing to “gross emissions budgets” or actual emissions reductions, as opposed to net targets, which include offsets from domestic forestry (Neilson, 2023).

Climate Change Commission Chairman Dr Rod Carr said reporting and enforcing gross levels would give the public and businesses more clarity about what was required, as opposed to net emissions, which included forestry offsets (Neilson, 2023).

When the country passed its landmark bill, Climate Change Response (Zero Carbon) Amendment Act 2019, under its then Prime Minister Jacinda Ardern, also following the advice from the Climate Change Commission, it enshrined in law the country’s net-zero emissions target by 2050, including biogenic methane. It provided a framework for how the country of 5 million could adapt and prepare for climate change.

Now the country needs to pick up the pace and put in policies to achieve these legislated climate targets.

The report notes that a lack of clarity on the approach to achieve net zero long-lived gas emissions by 2050 and beyond is likely to create ongoing policy uncertainty and impact decision-making in the public and private sectors.

RNZ presents the report’s draft recommendations for the Government to reach the 2026-2030 emissions budget:

Part 1: Fundamentals

• Add gross emission reduction targets of at least 362 MtCO2e for the second emissions budget, and at least 322 MtCO2e for the third. As opposed to net emissions reductions, these figures do not include the benefit from forestry capture of greenhouse gases.
• This approach should also be applied for indicative targets out to 2050, and communicated to the public – along with, separately, expectations of forestry sequestration.
• Redesign the NZ Emissions Trading Scheme (ETS) to make it fit for purpose, including splitting out forestry. The Commission this month separately advised specific changes including reducing the number of units available, raising trigger prices for cost containment and auction reserves, and changing to a two-tier cost containment reserve.
• Work with iwi and Māori to accelerate reductions – including with a direct funding scheme for Māori land owners – and integrate matauranga Māori into local and central government policy processes, driven by Māori.
• Add adaptation to climate change (e.g. flood defences, managed retreat etc) into the Government’s Equitable Transitions Strategy, which aims to support lower-income households with the changes.
• Use policy levers like the Winter Energy Payment and welfare to support people to deal with the increased costs associated with climate action, rather than delaying climate action. This comes after the Government delayed action on ETS pricing controls, saying it would put pressure on households during the cost of living crisis.

Part 2: Create low-emission options

• No delays to bringing agriculture into emissions pricing schemes by 2025. This could mean either using the Government’s alternative plan based on the He Waka Eke Noa proposal put forward by industry and Government or including agriculture in the ETS.
• Build better services to help farmers reduce emissions, co-designed by industry and Māori.
• Integrate the land use planning and consents systems with transport planning, and incentivise building upwards in main centres, rather than sprawl. Carr says the Government’s proposed reforms to the Resource Management Act are expected to take a decade and would come too late to have the effect the second budget period would require.
• Incentivise emissions-efficient, resilient buildings.
• Ban new fossil fuel installations in buildings unless there is no other option. This includes commercial coal-fired boilers and gas-fired hot water heating in homes. The ban would not apply to existing setups. The Government has been considering options for setting a deadline on such a ban after a similar recommendation ahead of the previous ERP.
• Speed up renewable energy supply construction and expansion of networks to handle it.
• Expand the replacement of industrial fossil fuel-fired boilers and set up a framework for decarbonising other industry sectors and processes.
• Set forestry goals for emissions mitigation, and for adaptation.
• Simplify planning for integrated transport networks and boost funding. This includes completion of major cycleways by 2030 and setting up for the completion of rapid transport systems – like rail lines and bus lanes with separated right-of-way – by 2035.
• Remove or tackle barriers for scaling up EV charging infrastructure and provide incentives for zero-emissions commercial vehicles.
• Tidy up regulations and policy around gas capture at landfills, to improve measurement and efficiency.

The Climate Change Commissions will consult regarding the draft advice from 26 April to 20 June 2023 and deliver their final recommendation to the Minister of Climate Change by 31 December 2023.

Read the Climate Change Commission 2023 Draft advice to inform the strategic direction of the Government’s second emissions reduction plan April 2023