New Zealand’s Emissions Reduction Plan – take outs for business
On Monday 16 May, the government announced Aotearoa New Zealand’s very first Emissions Reduction Plan (ERP). This plan outlines the strategies, policies, and actions the government is taking to reach its first emissions budget and uphold its global commitments to limit warming to 1.5 degrees above pre-industrial levels. The ERP marks a significant milestone in Aotearoa New Zealand’s climate change response and has wide reaching impacts on every aspect of our society.
In this article Kelly Flatz, Sustainability Consultant at Oxygen Consulting and climate change policy postgraduate student, summarises the key information and opportunities the ERP presents for our clients and other Aotearoa New Zealand businesses.
The principles of Aotearoa New Zealand’s Emissions Reduction Plan:
1. Playing our part – contributing to the global effort to limit global warming to 1.5 degrees above pre-industrial levels.
2. Empowering Māori – building Crown-Māori relationships and capability to work together as equal partners on our climate response, and upholding Te Tiriti principles.
3. Equitable transition – ensuring the transition to a low-emissions economy works for everyone and is just, fair, and inclusive of all New Zealanders.
4. Working with nature – prioritising nature-based solutions and designing our climate response in a way that protects, enhances and restores nature where possible.
5. A productive, sustainable and inclusive economy – innovating the way we currently do business, seizing opportunities for new technology, and producing low-emissions products and solutions.
Key take outs for business
Government Investment Decarbonisation Industry (GIDI) fund expansion
Perhaps the most significant announcement for business was the action to accelerate the decarbonisation of Aotearoa New Zealand’s industries. To achieve our 2050 targets, industries will be required to use low-emissions energy efficiently. To assist industry in the decarbonisation of process heat, the ERP announces the continuation and expansion of the Government Investment Decarbonisation Industry (GIDI) fund and the business programmes of Energy Efficiency and Conservation Authority (EECA).
Funded through the Climate Emergency Response Fund, the government is investing $650 million over four years to expand the programme, a significant increase from the original $69 million fund that assisted in funding 53 medium-large projects in its first rounds.
This programme is expected to reduce 17% of the total emissions reductions required between 2022 and 2025, and 35% of the emissions reductions required between 2025 and 2030.
While the original programme only targeted medium-large energy projects, the expanded GIDI fund includes support for small-medium energy programmes. Applications are available to private-sector businesses that have committed to decarbonising their industrial processes but require additional investment. Recipients must use fossil fuels as the source of energy in their industrial processes and process heat and the project must be operational by the end of 2025 and be at least $300k in size.
The next round opens Thursday 9 June. More information can be found here.
Emissions Trading Scheme changes
The New Zealand Emissions Trading Scheme (ETS) remains one of Aotearoa New Zealand’s largest economic policy tools to reduce emissions and works by pricing and limiting emissions in the market. The ERP announces changes to the current ETS settings to align with the emissions budgets and indicates that agricultural emissions, which have previously not been included in the scheme, will be priced by 2025. The government is awaiting the final recommendations from He Waka Eke Noa (Primary Sector Climate Action Partnership) who are in the process of exploring pricing options to ensure agriculture pricing is effective in reducing emissions at the farm level.
The government is also considering additional changes to the ETS to support the delivery of a better mix of forest type and placement. Aotearoa New Zealand’s climate change response relies heavily on carbon sinks to reach its 2050 net-zero target including afforestation and is considering the following change to the ETS: restricting exotic forests from the permanent post-1989 forest category; and adjusting the application of accounting rules to land which is remote and/or marginal to harvest, to support production on this land. The government is also seeking to encourage native afforestation by investing in a review of the ETS yield tables to ensure better accuracy.
Investment in R&D of emissions reduction technologies
To support emissions reductions from the agriculture sector, the government has also announced that a new Centre for Climate Action on Agricultural Emissions will be established. Allocating $339 million, this will be a joint public-private venture and will focus on product development and commercialisation to drive research and development activity. The Centre aims to deliver the following: faster development, commercialisation, extension and uptake of emissions mitigation technologies; a strong system to support delivering mitigations over the long term; and strong leadership and alignment of biological emissions efforts.
Investment in food waste reduction
To reduce emissions from food waste, the government has announced the development of programmes to drive business practices that prevent food waste, including by encouraging businesses to engage in voluntary agreements to reduce food waste. The government has not outlined further details of these programmes, however they are expected to begin in 2023.
The government has also indicated further investment in the processing and recovery of food and garden waste, paper and cardboard recovery and recycling via a targeted resource recovery infrastructure fund. Requirements for businesses to separate food waste for collection is also being investigated and is currently in the consultation period.
Read the full Emissions Reduction Plan here.