Key takeaways from our first Emissions Reduction Plan

New Zealand’s first Emissions Reduction Plan outlines how New Zealand will achieve its target emissions reductions from now until the end of 2025. 

Following consultation with the public after the release of the Emission Reduction Plan discussion document last October, the Government released the final plan for the 2022 – 2025 period in May.

The plan outlines both high-level objectives and specific actions that the Government intends to pursue in order to put Aotearoa on track to meet our emissions reduction targets, being:

• Net zero greenhouse gas emissions (other than biogenic methane) annually by 2050;
• 10% less biogenic methane emissions than 2017 emissions levels by 1 January 2030; and
• 24% to 47% less biogenic methane emissions than 2017 levels by 1 January 2050.

The plan confirms that pursuing these targets will bring significant implications for the economy’s key sectors over the coming decades, with the transport and energy sectors being the key focuses in the short term.

Framework

Emissions Budgets

A key mechanism in our climate response is the use of “emissions budgets”. Each budget represents the total quantity of emissions that the country is allowed to release during a particular period. They are intended to act as “stepping stones” towards our 2050 targets.

With the exception of the first budget for 2022 – 2025, each budget will cover a five-year period. The Government has released the first three budgets as below:

All figures represent metric tonnes of carbon dioxide equivalent (MtCO₂e).

Emissions Reduction Plans

Prior to each budget period beginning, the Government is required to release a new emissions reduction plan. Each plan must detail the policies and strategies to be used to meet the targets of the next emission budget, and may also detail the those intended to be used in the two subsequent budget periods.

As the current plan is both the first of many and only applies to a shorter three-year period, it details many policies and strategies that are intended to be adopted in the second and third budget periods. This gives insight as to what direction we can expect Aotearoa to go across several key sectors between now and 2035.

Expected Implications on Key Sectors

Transport

Transport is one of the country’s largest sources of emissions, contributing approximately 17% of  our gross domestic emissions and 39% of total domestic CO² emissions.

The Government has the sector as one in which meaningful change can be effected relatively quickly. It has set the following targets it aims to be reach by 2035:

The Government is adopting a multi-pronged approach to lowering transport emissions, by:

• Implementing policies to reduce society’s reliance on private vehicles (such as through the increase in investment in public transport and the recent National Policy Statement change on Urban Development allowing for higher density living along key transport corridors);
• Increasing the proportion of low-emission vehicles in the private vehicle fleet that remains, and making such vehicles available to more people (through policies such as the existing Clean Car Discount scheme); and
• Reducing the emissions of fuels that power emitting vehicles, including freight vehicles such as aircraft, boats and trucks.

Energy and Industry

The energy and industry sectors currently account for approximately 27% of  our gross greenhouse gas emissions. Due to our high level of renewable generation already in Aotearoa (equating to over 40% of total primary energy supply and nearly 28% of final energy consumption), we are well placed to further decrease emissions in the sector.

The Government has a goal of increasing the proportion of energy consumption coming from renewable sources. It aims to do this by focussing on the following:

The key risk that needs to be mitigated in the further adoption of renewable electricity generation is how dry, calm and cloudy years will be dealt with, in which renewable energy sources are unable to fully perform. It is for this reason that the Government intends to investigate long-term electricity technology storage projects such as the proposed pumped-hydro project at Lake Onslow.

In recognition that electrification will not be a universal solution, the Government intends to invest in the research, development and adoption of non-electric substitutes that produce lower emissions, such as bioenergy and hydrogen solutions.

Forestry

This sector is key to our climate response due to the ability of forests to act as “carbon sinks” and absorb carbon dioxide. Given that Aotearoa has vast amounts of land suitable for afforestation, the planting of additional forests is a means through which carbon reduction can quickly be achieved in the short term.

To achieve this, the Government is focussing on the following:

While Aotearoa is relying significantly on the sequestration benefits of high afforestation, the benefit of large-scale forest plantation will eventually plateau, as the gains will be offset by the carbon losses caused by the eventual harvesting and natural decay of the forests. For this reason, the Government has noted that forestry cannot be overly relied upon to meet our targets at the expense of efforts in other sectors.

Agriculture

Agricultural emissions make up approximately 50% of our gross emission, meaning that reductions in the sector are required to achieve our targets, including a reduction in biogenic methane emissions by 24-47% by 2050.

Agriculture currently enjoys the benefit of being exempt from the Emissions Trading Scheme (ETS). The Government now intends to price agricultural emissions from 2025, but has afforded the sector the opportunity to propose its own pricing scheme, outside of the ETS. This is partly in recognition of the fact that many of the gases emitted by the sector are short-lived in the atmosphere.

The He Waka Eke Noa Partnership, a joint initiative between the sector, Māori and Government, was formed to develop this proposal. In late May, it delivered its proposal for a farm-level, split gas levy (meaning that emissions would be calculated on a farm specific basis, and short-lived and long-lived gases would be charged at different rates). The funds raised through the scheme would be re-invested into research and development for emissions mitigation technologies in the sector. See our website here for more information on the proposals for agricultural emissions.

Aside from emissions pricing, the Government is focussing on the following in the agricultural sector:

In the first budget period, the agricultural sector will largely be laying the foundations for greater emissions reductions in the second and third periods.

The initial focus on research, development and commercialisation presents an opportunity for us to lead global science on agricultural emissions reduction, which may open up some major first-to-market commercialisation opportunities globally.

Waste

While waste is responsible for just 4% of our total emissions, 94% of those emissions comprise biogenic methane – which has a significantly greater warming effect than carbon dioxide (of approximately 28%). This makes it an important sector to target reductions within.

Actions taken to mitigate waste emissions will also have wider beneficial effects on the other aims of the plan – such as supporting the shift to a more circular economy.

The government is aiming to reduce biogenic methane emissions in the waste sector by 40% by 2035 by focussing on the below:

The Government is again taking a multi-pronged approach in its waste strategy, by seeking to:

• reduce the amount of waste generated overall;
• reduce the amount of waste that is generated going to landfill, by diverting it to other uses; and
• capture the gas emitted by waste at landfills, minimising the emissions that enter the atmosphere.

Building and Construction

As at 2018, approximately 9% of our emissions were building-related, emitted by various sectors involved in the construction process. The Government is looking to adopt a “whole-of-life” approach to reduce these emissions by reducing both the operational emissions of buildings and their embodied emissions (emitted during construction and deconstruction).

The Government is looking to decrease building-related carbon emissions by focusing on the following:

In addition to construction-sector specific measures, the sector will see a decrease in related emissions through emissions reductions in other sectors (such as in transport, waste, and energy).

The Government will need to strike a careful balance in construction sector so as to avoid significant increases in the costs associated with construction in an already high cost housing market.

Conclusion

The emissions reduction plan provides the clearest view we’ve had yet of how our climate response will shape both the economy and society over the coming decades. This first emission budget period is just the start, with significant work needing to be done by the Government prior to the commencement of the second emissions budget period (which imposes far more ambitious targets).

Want to know more?

If you have any questions about the emissions reduction plan and its potential implications on you or your business, please contact Josh Williams, Tom Mohammed, or a member of our specialist carbon and climate change teams.

PDF version: here.