Summary of Zero Carbon Bill

10 Jun 19

Column written by Christchurch Partner David Goodman and Solicitor Reuben Adams-Cook, published in the June issue of the Ashburton Guardian Farming feature.

The Climate Change Response (Zero Carbon) Amendment Bill (Zero Carbon Bill) was released on May 8, 2019 after a longer than anticipated public consultation process which involved the consideration of more than 1500 submissions. The Zero Carbon Bill is scheduled to be passed into law in late 2019, at which time it will amend the Climate Change Response Act 2002. This new legislation will sit alongside the existing New Zealand Emissions Trading Scheme (NZETS) that was also established under the Climate Change Response Act 2002.

The overarching goal of the Zero Carbon Bill is to limit the global average temperature increase to 1.5°C above pre-industrial levels. In order to achieve this goal, the Zero Carbon Bill establishes the Climate Change Commission (Commission). The Commission will be an independent body that will report to the Minister for the Environment. Its primary purpose will be to provide independent and expert advice to the government on mitigating, monitoring, and adapting to the effects of climate change. It will also monitor and review the government’s progress towards its emission reduction goals,report on the effects of climate change, develop specific policy and monitor emissions levels.In addition, and importantly, the Zero Carbon Bill sets the following targets:

  • the reduction of greenhouse gas emissions (other than biogenic methane) to net zero by 2050;
  • the reduction of gross emissions of methane by 10 per cent by January 1, 2030 (in comparison to 2017 emission levels);
  • and the reduction of gross emissions of methane by 24-47 per cent by January 1, 2050 (in comparison to 2017 emission levels).

The targets will be enforced by the use of emissions budgets that will cover a five year period (apart from the first four year period).

The first tranche of emissions budgets will be set on December 31, 2021 and will take effect from the beginning of 2022. These emissions budgets will state the total emissions that will be permitted over the relevant budget period. The Ministry for the Environment website has details of New Zealand’s provisional carbon budget from 2021 to 2030.

The budget is provisionally set at 601 MtCO2 (million metric tonnes of CO2 equivalent), with actual gross emissions projected to be 804 MtCO2, which therefore gives a shortfall of 203 MtCO2 that is to be offset. Annual emissions are currently at approximately 80 million tonnes of CO2 equivalent. The spot price for a carbon credit is $25 (Carbon News – May 31, 2019). This therefore values the shortfall liability of 203 million tonnes of CO2 equivalent at approximately $5 billion dollars.The offset is likely to come from a mixture of domestic emissions reductions, carbon credits from forestry and by purchasing international emission reduction credits.

Given the likely targets and offsets required, there is a cost that has to be met by industry, although the Minister for the Environment has the power to allocate free credits to assist a new industry entering the NZETS, like it did for the fishing industry. The government is currently considering a report from the Interim Climate Change Commission (ICCC) that discusses whether the agricultural sector will be required to enter the NZETS and, if so, when this will occur.

It is interesting to note that the New Zealand First/Labour Coalition Agreement states that if the ICCC determines that the agricultural sector should be included in the NZETS, then all revenues from this source will be fed back to the agricultural sector to encourage agricultural innovation, amongst other things. It remains to be seen exactly how these changes may impact on the agricultural industry, however it is certain that further consideration and discussion is needed.

Full Farming feature available here.