2021 Draft Advice for Consultation
31 January 2021 Draft Advice for Consultation
Disclosure statement As anticipated by the appointment criteria, the Climate Change Commissioners come from varying fields such as adaptation, agriculture, economics, mātauranga and the Māori-Crown relationship. While a number of board members continue to hold roles within these fields, our advice is independent and evidence-based. You can read more about our board members on the Climate Change Commission website. The Commission regularly updates and publishes on its website a register of relevant board and staff member interests.
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31 January 2021 Draft Advice for Consultation
Letter from the Chair This report stands on the shoulders of many before us who have provided evidence and warnings about the impact of human created greenhouse gas emissions on our climate. It also recognises the people who have developed the tools we need to change our path. I want to acknowledge their work and express appreciation. Now is the time for Aotearoa to take further steps to align its actions with its targets to reduce emissions. As a country we should use only our fair share of the remaining global carbon budget – the greenhouse gases we can emit and still limit warming. If we act now, we can create a thriving, climateresilient and low emissions Aotearoa. After 12 months of considered analysis, the Climate Change Commission’s conclusion is that there are achievable, affordable and socially acceptable pathways for Aotearoa to take. Now we must decide where our ambition lies. For my part, I want to be able to say I did as much as I could as soon as I knew about the impact I am having on this world. Increasingly I am sharing this sentiment with my fellow New Zealanders. To achieve a cleaner, greener, healthier and more sustainable future, no emission reduction is too small – or too soon. All of us have a part to play and a contribution to make. This means we need to change how we get around, and rethink what we produce and how we produce it. We need to reconsider what we buy, what we do with what we have used, and how we can reuse more of what we have left over. The Commission recognises that what each of us can do depends on our circumstances. We will need to offer support to those most adversely impacted and who are also least able to absorb the impact of change. Our draft advice is about the direction of policy necessary to put Aotearoa on a pathway to quickly, significantly and permanently reduce greenhouse gas emissions. Our advice sets out how to achieve the targets we have already agreed to. We have drawn on the He Ara Waiora framework to help us understand wellbeing from a mātauranga Māori perspective. This has formed an anchor for our analysis. We are seeking feedback on our draft advice before it is finalised. There are matters of fact, assumptions and value judgments we invite you to review. We are committed to true consultation. We will consider all evidence we receive through consultation and are prepared to change any part of our work in light of this. It is reassuring to see central and local government, iwi/Māori, businesses, farmers and families taking action to understand and reduce emissions now. Every action makes a difference. The climate science is clear, the direction of climate policy is laid out and the time for accelerated climate action is now.
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31 January 2021 Draft Advice for Consultation
Introducing the Climate Change Commission
Climate Change Commissioners From left to right: Dr Judy Lawrence, Professor Nicola Shadbolt, Professor James Renwick, Ms Lisa Tumahai (Deputy Chairperson), Dr Rod Carr (Chairperson), Ms Catherine Leining, Dr Harry Clark.
Additional biographical information can be found on the Climate Change Commission website.
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31 January 2021 Draft Advice for Consultation
Contents Letter from the Chair ........................................................................................................ 3 Introducing the Climate Change Commission .................................................................... 4 Vision ............................................................................................................................... 9 Executive Summary: work must start now ...................................................................... 10 Chapter 1: We are seeking your feedback ....................................................................... 21 1.1 Our task ......................................................................................................................................... 21 1.2 Taking an inclusive approach ........................................................................................................ 22 1.3 Our draft advice and recommendations ....................................................................................... 23 1.4 Our analytical approach ................................................................................................................ 23 1.5 What is different about our analytical approach? ........................................................................ 25 1.6 Our engagement so far.................................................................................................................. 25 1.7 Our consultation questions ........................................................................................................... 26 1.8 Biogenic methane and NDC advice ............................................................................................... 26
Chapter 2: Our proposed emissions budgets advice......................................................... 27 2.1 Emissions in Aotearoa ................................................................................................................... 27 2.2 Accelerating action to reduce emissions....................................................................................... 29 2.3 Emissions budgets – stepping down emissions in Aotearoa ......................................................... 30 2.4 Contribution of different gases, and domestic emissions reductions and domestic removals .... 31 2.5 Limit on offshore mitigation and when it should be used to meet emissions budgets ................ 36 2.5.1 Borrowing ............................................................................................................................... 36 2.5.2 Offshore mitigation ................................................................................................................ 37 2.6 Enabling an enduring climate transition ....................................................................................... 38 2.6.1 Cross-party support for emissions budgets............................................................................ 38 2.6.2 Coordinate efforts to address climate change across government ....................................... 39 2.6.3 Genuine, active and enduring partnership with iwi/Māori.................................................... 40 2.6.4 Central and local government working in partnership .......................................................... 42 2.6.5 Ensuring inclusive and effective consultation, engagement and public participation........... 43
Chapter 3: The path to 2035............................................................................................ 45 3.1 Current policies do not put Aotearoa on the right track............................................................... 45 3.2 Our approach suggests a different, but important role for forestry............................................. 48 3.3 We need to avoid pushing the burden to future generations ...................................................... 48 3.4 International aviation and shipping .............................................................................................. 49 3.5 Scenarios to reach 2050 targets – understanding the changes required ..................................... 49 3.5.1 Key insights from our scenarios for long-lived gases ............................................................. 49 5
31 January 2021 Draft Advice for Consultation 3.5.2 Key insights from our scenarios for biogenic methane .......................................................... 52 3.6 Creating a path to 2035 ................................................................................................................. 54 3.7 Summary of our path .................................................................................................................... 54 3.8 What a path to 2035 looks like in each sector .............................................................................. 57 3.8.1 Transport ................................................................................................................................ 57 3.8.2 Buildings ................................................................................................................................. 59 3.8.3 Electricity ................................................................................................................................ 61 3.8.4 Natural gas use ....................................................................................................................... 63 3.8.5 Industry and heat ................................................................................................................... 64 3.8.6 Agriculture .............................................................................................................................. 65 3.8.7 Forestry................................................................................................................................... 67 3.8.8 Waste...................................................................................................................................... 68 3.8.9 F-gases .................................................................................................................................... 69
Chapter 4: Contributing to the global 1.5°C goal .............................................................. 71 4.1 The science of the different greenhouse gases............................................................................. 71 4.2 The global 1.5°C goal ..................................................................................................................... 73 4.3 Global 1.5°C pathways................................................................................................................... 74 4.4 Common but differentiated responsibilities and respective capabilities ..................................... 75 4.5 Assessing how our proposed emissions budgets contribute to the 1.5°C global goal.................. 76
Chapter 5: The impacts of emissions budgets on New Zealanders.................................... 79 5.1 Looking at the opportunities – and the challenges ....................................................................... 79 5.2 How Aotearoa creates a fair, equitable transition for people ...................................................... 80 5.3 How the transition could impact the cost of living and access to transport................................. 81 5.3.1 Electricity bills ......................................................................................................................... 81 5.3.2 Natural gas.............................................................................................................................. 84 5.3.3 Fuel costs and access to transport ......................................................................................... 84 5.4 How Aotearoa earns its way in the world ..................................................................................... 86 5.5 Business, industry and workers ..................................................................................................... 87 5.5.1 Food and fibre production ..................................................................................................... 88 5.5.2 Energy sector .......................................................................................................................... 90 5.5.3 Small business ........................................................................................................................ 92 5.5.4 Emissions leakage ................................................................................................................... 92 5.5.5 Making sure workers have opportunities .............................................................................. 93 5.6 Specific challenges to address for Māori-collectives and Māori in the workforce ....................... 97 5.6.1 Māori-collectives .................................................................................................................... 97 5.6.2 Māori in the workforce........................................................................................................... 97 5.7 Impacts of land use change on communities ................................................................................ 98 5.7.1 Exotic forestry......................................................................................................................... 98 5.8 Environmental impacts................................................................................................................ 100 5.9 Impact on government taxation and spending ........................................................................... 101 6
31 January 2021 Draft Advice for Consultation 5.10 Ensuring an inclusive, equitable and well-planned transition .................................................. 101
Chapter 6: Direction of policy in the Government’s emissions reduction plan ................ 104 6.1 Sector specific policies................................................................................................................. 105 6.1.1 Transport .............................................................................................................................. 105 6.1.2 Heat, industry and power ..................................................................................................... 111 6.1.3 Agriculture ............................................................................................................................ 118 6.1.4 Forestry................................................................................................................................. 121 6.1.5 Waste.................................................................................................................................... 124 6.2 Multisector strategy .................................................................................................................... 126 6.2.1 Integrate government policy making across climate change and other domains ............... 126 6.2.2 Support behaviour change ................................................................................................... 127 6.2.3 Require entities with large investments to disclose climate related risks ........................... 128 6.2.4 Factor target-consistent long-term abatement cost values into policy and investment analysis .......................................................................................................................................... 128 6.2.5 Building a Māori emissions profile ....................................................................................... 130 6.2.6 Strengthen market incentives to drive low emissions choices ............................................ 131
Chapter 7: Rules for measuring progress ....................................................................... 135 7.1 Greenhouse gas accounting for emissions reduction targets ..................................................... 135 7.2 Our role........................................................................................................................................ 135 7.3 Objective and principles to guide accounting choices ................................................................ 136 7.4 Production- or consumption-based greenhouse gas accounting ............................................... 136 7.5 Accounting for land emissions .................................................................................................... 137 7.5.1 A land-based approach, as used in the national Inventory .................................................. 138 7.5.2 A modified activity-based approach, as used in the NDC .................................................... 138 7.5.3 Assessment of the land emissions accounting frameworks................................................. 140 7.6 Detailed choices within the modified activity-based accounting framework ............................. 141 7.6.1 Forest management ............................................................................................................. 141 7.6.2 Harvested wood products (HWPs) ....................................................................................... 142 7.6.3 Carbon equivalent forests .................................................................................................... 142 7.6.4 Natural disturbances ............................................................................................................ 142 7.6.5 Other sources of land emissions and removals.................................................................... 142 7.7 Voluntary offsetting and carbon neutrality................................................................................. 143 7.8 Legislative requirements ............................................................................................................. 143
Chapter 8: The global 1.5°C goal and Nationally Determined Contribution for Aotearoa 146 8.1 Introduction................................................................................................................................. 146 8.2 Global pathways to 1.5°C ............................................................................................................ 146 8.3 What would on-track to 1.5°C look like in Aotearoa? ................................................................. 148 8.4 Developed countries have agreed to lead the way ..................................................................... 151 8.5 The first NDC for Aotearoa .......................................................................................................... 152 7
31 January 2021 Draft Advice for Consultation 8.6 Is the NDC compatible with Aotearoa contributing as a developed nation?.............................. 153 8.7 How might Aotearoa meet an NDC compatible with 1.5°C? ...................................................... 155 8.7.1 Domestic contribution.......................................................................................................... 155 8.7.2 Offshore mitigation .............................................................................................................. 156 8.7.3 How much international mitigation will be needed? ........................................................... 157 8.8 How might Government decide the level of the NDC? ............................................................... 158 8.9 Non-mitigation contributions ...................................................................................................... 159 8.10 Principles for setting an NDC ..................................................................................................... 159 8.11 The form of the NDC.................................................................................................................. 161 8.11.1 All-gas or split-gas format .................................................................................................. 161 8.11.2 Effect of moving to a split-gas NDC .................................................................................... 161 8.11.3 Metrics used to express the NDC ....................................................................................... 162 8.11.4 Alternative metrics ............................................................................................................. 164 8.12 Planning for meeting the NDC ................................................................................................... 164 8.12.1 Access to offshore mitigation under the Paris Agreement ................................................ 164 8.12.2 Accountability and reporting on the NDC .......................................................................... 165
Chapter 9: Eventual reductions in biogenic methane ..................................................... 167 9.1 What have we been asked to do? ............................................................................................... 167 9.2 Consideration 1: What global reductions of biogenic methane emissions might be required to limit warming to 1.5°C? ..................................................................................................................... 168 9.2.1 Global pathways compatible with limiting warming to 1.5°C .............................................. 170 9.3 Consideration 2: What reductions of biogenic methane could Aotearoa make to contribute to limiting warming to 1.5 degrees, recognising national circumstances? ........................................... 172 9.3.1 The sources of biogenic methane in Aotearoa..................................................................... 172 9.3.2 How much could biogenic methane emissions be reduced? ............................................... 174 9.3.3 Overall .................................................................................................................................. 175 9.3.4 Important national circumstances that relate to potential biogenic methane emissions reductions...................................................................................................................................... 175 9.4 Consideration 3: What social, economic and demographic changes may occur? ...................... 176 9.4.1 Population growth and food demand .................................................................................. 176 9.4.2 Demand for low emissions agricultural production ............................................................. 177 9.4.3 Other environmental challenges: ......................................................................................... 177 9.4.4 Overall .................................................................................................................................. 178 9.5 Findings........................................................................................................................................ 178 9.5.1 Where does this get us? ....................................................................................................... 179
Glossary of Te Reo Māori Terms.................................................................................... 181 Technical Glossary ........................................................................................................ 183 Appendix 1: What other studies of methane reductions for Aotearoa have been conducted?................................................................................................................... 187 8
31 January 2021 Draft Advice for Consultation
Vision The Climate Change Commission’s vision is of a thriving, climate-resilient and low emissions Aotearoa where our children thrive. This future for Aotearoa is equitable and inclusive, protects livelihoods and makes economic sense. It is also a future that is possible if we take opportunities to evolve and change. It is a country where people are respected stewards of the land. Where an innovative and resilient food and fibre sector succeeds in a low emissions world. Where abundant native bush stores carbon and is home to native birds and plants. Where our plantation forests support a flourishing bio economy, enabling low emissions construction, materials and energy. It is an Aotearoa where cities and towns are created around people and supported by low emissions transport that is accessible to everyone equally. Where strong local businesses produce low emissions, high-value products that are in demand locally and globally. Where employers are successful and can support themselves and their employees in the transition to climate-resilience. Where everyone lives in warm, healthy, low emitting homes. Where urban form encourages cycling and walking, alongside efficient, affordable and interconnected public transport networks. Hydro, wind, solar and geothermal energy power our country, and we are highly efficient and productive in resource use. Transport and industry are powered by electricity and other low emissions fuels. Energy is affordable and accessible. Communities can generate their own electricity using low emissions generation. In our vision of the future, Aotearoa has a circular economy and generates very little waste. The waste that we do generate is recovered, reused where possible, and otherwise used to generate energy. It is this vision of Aotearoa that is driving our work. To see it come to life we need strong and decisive action to address climate change. This advice presents the steps we need to take now to get there.
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31 January 2021 Draft Advice for Consultation
Executive Summary: work must start now In Aotearoa, the Government has committed to reaching net zero emissions of long-lived gases by 2050, and to reducing biogenic methane emissions by between 24-47% by 2050. The work that He Pou a Rangi, the Climate Change Commission, has carried out over the last year shows that meeting these targets is possible – and can lead to a thriving, climate-resilient and low emissions Aotearoa. Transformational and lasting change across society and the economy will be needed, but the Commission’s analysis shows the tools to start the work to reach our targets and address climate change in Aotearoa already exist. To meet the Commission's proposed emissions budgets, Aotearoa does not need to rely on future technologies. As new technologies develop, this will allow the country to reduce emissions even faster. However, the Government must pick up the pace. Aotearoa will not meet its targets without strong and decisive action now to drive low emissions technologies and behaviour change across all sectors. 2050 is not far away – particularly if you consider the life span of infrastructure, vehicles, buildings – and people. Aotearoa must focus on decarbonising and reducing emissions at the source. As a country we can no longer rely on forests to meet our climate change targets. Current government policies do not put Aotearoa on track to meet our recommended emissions budgets and the 2050 targets. In 2018, gross greenhouse gas emissions in Aotearoa were about 45.5 Mt CO2-e of long-lived gases, and 1.34 Mt CH4 (biogenic methane). Our analysis shows if policy stayed as it is now, Aotearoa would fall short of achieving the 2050 net zero long-lived gas target by 6.3 Mt CO2-e. Biogenic methane would reduce 12% below 2017 levels and fall short of the current target of 24-47%.
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31 January 2021 Draft Advice for Consultation
Figure ES1: Current government policies do not put Aotearoa on track to meet the Commission’s emissions budgets and the 2050 targets. This figure shows how our path to 2035 would reduce emissions of long-lived gases (top figure) and biogenic methane (bottom figure) The Emissions Trading Scheme (NZ ETS) alone won’t get us to where we need to be. Action is needed across all sectors of the economy. Priority areas for action include increasing the number of electric vehicles on our roads, increasing our total renewable energy, improving farm practices and planting more native trees to provide a longterm carbon sink. Care should be taken to make sure climate related policies do not further compound historic grievances for Māori. To give effect to the Treaty Partnership, central and local government need to acknowledge iwi/Māori rights to exercise rangatiratanga and kaitiakitanga in a joint plan to reduce emissions. The speed of this transition needs to be steady – fast enough to make a difference and build momentum but considered, with room to support people through the change. An equitable transition means making sure the benefits of climate action are shared across society, and that the costs of the climate transition do not fall unfairly on certain groups or people. To achieve this, we need to understand that all things are connected: the people, the land, the atmosphere, the oceans. This connectivity – material and non-material – is central to Te Ao Māori. It is also essential to understanding how to guide a transition that is fair and equitable for people and the environment. The transition must reduce emissions at pace while allowing the country to continue to grow, so that future generations inherit a thriving, climate-resilient and low emissions Aotearoa. 11
31 January 2021 Draft Advice for Consultation
Our first package of advice This advice provides Aotearoa with a comprehensive strategy for tackling climate change. It is also the starting point. It outlines the first in a series of steps that chart the course for reducing emissions. We asked ourselves a series of questions when developing this advice. They are: Is this ambitious enough? Is it fair and equitable? Is it technically and economically feasible? And, can it be achieved through policy? We have used a range of quantitative and qualitative tools, including economic models and analytical frameworks. Our analytical approach used the He Ara Waiora framework to understanding wellbeing from a mātauranga Māori perspective and form an anchor for our analysis. Our advice includes recommendations on the level of the first three emissions budgets. It also provides advice on strategic policy direction for meeting the emissions budgets, looking at what’s needed across different sectors. We recommend 17 critical actions the Government must take to reach its climate goals. Many recommendations include indicators the Commission will use to monitor the Government’s progress. In developing our advice, we focused on key sectors across the economy, identifying where the greatest opportunities to reduce emissions are, and working with experts and stakeholders to understand the barriers for change. Some key findings from these sectors include:
Land •
Agriculture has a large role to play in reducing emissions, and farming needs to become even more efficient. There have been improvements in the last few decades, but more can happen.
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Aotearoa has been an agricultural world leader over recent decades. We must adapt and improve our use of our land to keep this status. This means developing, adopting and using practices and technologies that lower emissions and address climate change.
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Forests have a role to play, but we can’t plant our way out of climate change.
What are we recommending? •
The Government needs a cohesive strategy that includes water, biodiversity and climate. There are multiple benefits to taking a holistic view of how we use and protect our land.
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There are changes farmers can make now to reduce emissions on their farms while maintaining, or even improving, productivity. This includes reducing animal numbers and better animal, pasture and feed management. Policy support is needed to make this happen.
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Our advice advocates for a long-term plan for targeted research and development of new technologies to reduce emissions from agriculture.
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Pine trees will still play an important role in getting to 2050 and could support a future bioeconomy, as bioenergy to replace fossil fuels and as timber for building.
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Existing forests, small blocks of trees, soils and wetlands can all store more carbon. Work is needed to better understand this potential and how to include this in accounting systems.
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Native forests can create a long-term carbon sink while providing a range of other benefits, like improving biodiversity and erosion control. Incentives are needed to get more native trees planted.
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31 January 2021 Draft Advice for Consultation
Agriculture What is the sector’s current emissions profile? In 2018, agriculture emissions made up about 90% of biogenic methane and 18% of long-lived gas emissions. This is 1.2 Mt CH4 and 8.3 Mt CO2-e, respectively. Where does this come from? Long-lived gases from agriculture are largely nitrous oxide, coming from animal urine and synthetic fertiliser use. Smaller amounts of carbon dioxide are emitted through other types of fertiliser. Biogenic methane emissions from agriculture are primarily from deer, sheep, beef and dairy cow burps. What does our path show for this sector? By 2035, our path shows that biogenic methane emissions from agriculture reduce to 0.97 Mt CH4, and long-lived gases reach 6.9 Mt CO2-e. This puts us on track to meeting our 2050 target.
Forestry What is the sector’s current emissions profile? In 2018, forests removed 9.5 Mt CO2 from the atmosphere. Our emissions would be 14% higher without this. Where does this come from? Forests remove carbon dioxide from the atmosphere as they grow and emit it when they burn or decompose after harvest or clearance. What does our path show for this sector? By 2035, our path shows that net forestry removals reach 14.5 Mt CO2. This puts us on track to meeting our 2050 target.
Waste •
Aotearoa needs to fundamentally change the way it deals with and thinks about waste. A transformation to this sector will not only reduce emissions but move us from a throw away culture to one that values our resources.
What are we recommending? •
Creating a circular, self-sustaining economy will reduce Aotearoa’s waste emissions and cut biogenic methane emissions. Strengthened product stewardship and a commitment to resource recovery and reuse must be part of this approach.
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Capturing methane from any remaining waste that makes it to landfill will further emissions reduction. 13
31 January 2021 Draft Advice for Consultation
Waste and F-Gases What is the sector’s current emissions profile? In 2018, waste emissions made up 10% of total biogenic methane. This is 0.14 Mt CH4. The sector also emitted 0.22 Mt CO2-e of long-lived gases. Emissions of hydrofluorocarbons (HFCs) were 1.8 Mt CO2-e. Where does this come from? Most waste emissions are from solid waste decomposing at landfill (90%), with smaller portions from wastewater treatment (9%) and burning and composting emissions (1%). F-gas emissions are largely from the leakage of HFCs used in refrigeration and air conditioning systems. What does our path show for this sector? By 2035, our path shows waste emissions reduce to 0.12 Mt of biogenic methane. HFC emissions reduce to 1.2 Mt CO2-e.
Transport •
Reducing transport emissions is crucial to meeting our climate targets. Action here will have an immediate and lasting impact. Aotearoa can cut almost all transport emissions by 2050. The technology already exists and is improving fast.
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In Aotearoa we need to change the way we build and plan our towns and cities and the way people and products move around. This includes making walking and cycling easier with good cycleways and footpaths. It means moving freight off the road and onto rail and shipping. It means reliable and affordable public and shared transport systems. And it means an electric or low emissions transport fleet.
What are we recommending? •
An integrated national transport network should be developed to reduce travel by private car. There needs to be much more walking, cycling and use of public and shared transport.
Transport What is the sector’s current emissions profile? In 2018, transport emissions made up 36.3% of total long-lived gases. This is 16.6 Mt CO2-e. Where does this come from? Most transport emissions are from fossil fuels used to power vehicles. For example, petrol and diesel used by cars, SUVs and trucks (91%), domestic flights (7%) and rail and coastal shipping (2%). What does our path show for this sector? By 2035, our path shows transport emissions reduce to 8.8 Mt CO2-e. This puts us on track to meet our 2050 target. 14
31 January 2021 Draft Advice for Consultation •
Electric vehicles are key and need to be widely adopted. We want to see the majority of the vehicles coming into New Zealand for everyday use electric by 2035. The government will need to provide support and incentives to make this happen.
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Use of low carbon fuels, such as biofuels and hydrogen, needs to increase, particularly in heavy trucks, trains, planes, and ships.
Heat, industry and power •
Aotearoa needs to decarbonise how we produce and use energy. We need to move towards a set of diverse and low emission energy sources by 2050.
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Aotearoa will need to maximise the use of electricity. This means generating and using more low emissions electricity for vehicles and for process heat. Building more renewable generation such as wind, solar and geothermal will be required.
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Reducing emissions from process heat is key. Other low emission energy sources, such as bioenergy, will be needed.
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Emissions must be reduced at pace while allowing the country to continue to grow. Planning ahead so that technologies, assets and infrastructure can be replaced with low emissions choices on as natural a cycle as possible will help business and industry keep pace with the transition.
What are we recommending? •
We need to almost eliminate fossil fuels. This means ending the use of coal.
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The homes, buildings and infrastructure we build now will still be here in 2050. We need to think about our choices with climate change in mind. That means using low emissions technologies and prioritising energy efficiency.
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In the long-term, we will need to reduce how much natural gas we use in homes and businesses.
Heat, Industry and Power What is the sector’s current emissions profile? In 2018, heat, industry and power emissions made up 41% of total long-lived gases. This is 18.8 Mt CO2-e. Where does this come from? Heat, industry and power emissions come from using fossil fuels, such as coal and gas, to generate electricity (22%); producing heat and chemical reactions to manufacture products (47%); fossil fuels used in our buildings and homes (7%); oil refining, oil and natural gas production and the operation of coal mines (12%); and the use of off-road vehicles and machinery (11%). What does our path show for this sector? By 2035, our path shows emissions from heat, industry and power reduce to 10.4 Mt CO2-e. This puts us on track to meet our 2050 target.
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31 January 2021 Draft Advice for Consultation
Emissions budgets We have proposed the first three emissions budgets for Aotearoa. These budgets set the maximum amount of greenhouse gases Aotearoa can emit over a five-year period and chart the course for stepping down emissions. We have looked at opportunities and barriers for reducing emissions across the whole economy. The budgets are based on how far and how fast our analysis tells us Aotearoa can go towards the 2050 targets. Our recommended budgets are consistent with putting Aotearoa on track to meeting the 2050 target under a wide range of future circumstances. The budgets are ambitious, but achievable. They represent a significant reduction on current levels of emissions, and step down considerably over time.
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31 January 2021 Draft Advice for Consultation
Figure ES1: Our proposed emissions budgets. The figure shows all gases combined as CO2 equivalent – grey is emissions of long-lived gases, orange is biogenic methane emissions.
Figure ES2: How our path would reduce emissions across all sectors by 2035. Note that long-lived gases from agriculture are mainly nitrous oxide and some carbon dioxide. Table ES1: Our proposed emissions budgets. All gases are combined as CO2 equivalent 2018 All gases, net (AR4) (Mt CO2e) Annual average (Mt CO2e/year) Average reductions on 2018 levels
69.2
Emissions budget 1 (2022 – 2025)
Emissions budget 2 (2026 – 2030)
Emissions budget 3 (2031 – 2035)
271
286
223
67.7
57.3
44.6
2%
17%
36%
Each budget must be met, as far as possible, through reducing and removing emissions here in Aotearoa. Gross emissions must be reduced to meet and sustain the country’s emissions targets, and to avoid pushing the burden to future generations. 17
31 January 2021 Draft Advice for Consultation Relying heavily on forestry before 2050 is likely to make maintaining net zero long-lived greenhouse gas emissions after 2050 difficult. It would delay action, lead to higher cumulative emissions and make the job ahead of us more difficult.
How to meet the emissions budgets – direction of the emissions reduction plan Meeting our proposed emissions budgets and 2050 targets requires transformational change across all sectors of the economy. Our analysis shows that reducing transport emissions is crucial to meeting our emissions budgets and reaching net zero by 2050 – this will have an immediate and lasting impact. This means changing the way we travel and move goods. New Zealanders should be able to walk and cycle more. Freight will need to come off the road and onto rail and shipping. To lower emissions we will need to change the way we plan and build our cities to make it faster and easier to get around. Having an integrated public and shared transport system both locally and across Aotearoa will encourage a shift in the way we live and travel. Our draft advice recommends action to drive change in all sectors, as described above. It also recommends changes that cut across sectors, to support behaviour change and make sure that climate change is factored into government decisions. Changes to the ETS are needed to make sure it drives low emissions choices. We also recommend measures to ensure policy decisions and investments made now do not lock Aotearoa into a high emissions path. What will this mean for New Zealanders? Aotearoa must have an equitable and fair transition to a low emissions economy and society with benefits widely shared. We have looked at the impacts which our budgets could have on the economy and society over the next 15 years. The overall costs of meeting the country’s targets and our proposed emissions budgets are likely to be less than 1% of projected GDP. This is significantly lower than what was estimated when the 2050 targets were set. While the overall costs are small relative to the size of the whole economy, they will not be evenly felt. The transition to a low emissions society will bring opportunities, benefits, challenges and costs. Any change needs to be well-signalled, equitable and inclusive to make sure that it maximises opportunities while minimising disruption and inequities. Different groups of society, regions and sectors will be affected in different ways, and impacts won’t always be evenly distributed. The Government will need to address this through careful policy design and targeted support. At the same time, government will need to recognise and encourage the cobenefits that come from climate action. This includes health improvements, quieter streets, cleaner water and increased biodiversity through more native forests. There will inevitably be changes to employment as Aotearoa moves to low emissions. The coal mining and oil and gas sectors, and the services that support them, will be impacted by the transition away from fossil fuels. This will particularly affect regions with lots of workers in these industries. While these industries are already declining, our proposed emissions budgets could speed this up and possibly result in 600-1,100 fewer jobs across both sectors by 2035.
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31 January 2021 Draft Advice for Consultation It is worth noting that many of these workers have important skills that will be valuable in other sectors and new industries. We expect employment will rise in in the circular economy, development of biofuels and hydrogen, and in deploying and supporting new technologies. A well-signalled transition will allow time to plan and support workers to retrain and redeploy into new areas of work. We recommend that the Government develop an Equitable Transitions Strategy to support an equitable, inclusive and well-planned climate transition. Government will need to work alongside people, and ensure they are including young people, regional Aotearoa, low-income communities, some Māori and Pasifika and people with disabilities to make sure they benefit from the opportunities and are not disproportionately impacted. Central and local government should support Māori communities to ensure they are appropriately resourced for the transition to a low emissions Aotearoa. Government will need to co-develop plans to make this happen and recognise people are the experts – our communities know what actions need to be taken to benefit or empower them. While some businesses will need to close there will be many opportunities for new industries, businesses and jobs. Our analysis suggests that our emissions budgets could result in job losses in the coal mining and oil and gas sectors. At the same time, taking action to meet the budgets is also likely to result in new jobs in other sectors and new industries, such as supporting and deploying new technologies. The make-up of the economy will change, and some workers will need to be supported to retrain or move to similar jobs in new industries.
Reductions in biogenic methane Current Aotearoa targets require biogenic methane emissions to reduce by 10% below 2017 levels by 2030 and between 24-47% by 2050. The Commission has been asked to provide advice on how much biogenic methane emissions may need to be reduced by in the future for Aotearoa to meet its international obligations. Our analysis shows that by 2100, Aotearoa could need to reduce methane emissions by 49-60% below 2017 levels. Our country’s world-leading agricultural sector has made big advances over the last 60 years, and improvements can and should continue. Our analysis for our emissions budgets shows Aotearoa can achieve methane reductions of 24% by 2050 without any technology developments, such as vaccines or inhibitors. It is likely these technologies will become available, and this would increase the speed and efficiency of reducing methane emissions.
Our Nationally Determined Contribution (NDC) The Commission was asked to determine if the first NDC for Aotearoa is compatible with contributing to global efforts to limit global warming to 1.5°C above pre-industrial levels. Our analysis has found that the Government’s commitment to reduce net emissions by an average of 30% from 2005 emissions levels over the 2021-2030 period is not compatible with global efforts.
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31 January 2021 Draft Advice for Consultation If Aotearoa is to play its part as a developed nation, the NDC would need to be strengthened to reflect emission reductions of much more than 35% below 2005 levels by 2030. The Commission’s proposed emissions budgets are already ambitious – but the NDC goes further. To achieve our NDC, Aotearoa will need some offshore mitigation. We are not using this to do less domestically – but to increase our contribution beyond what is possible at home.
Conclusion This document contains the Commission’s first draft advice to government, for input and consideration by the people of Aotearoa. The advice and recommendations contained in this report draw on robust evidence and expert analysis. It incorporates knowledge and wisdom from a wide range of people and organisations to ensure it is sound and reflects our diverse experiences. But this is draft advice. We are committed to true consultation and want to hear your feedback. We will consider all evidence we receive during consultation and are prepared to review and change any part of our work in light of this. We need to achieve a plan to address climate change that is effective, considered and ambitious – and Aotearoa won’t get there unless we work together.
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31 January 2021 Draft Advice for Consultation
Part A: Emissions budgets and emissions reduction plan advice Chapter 1: We are seeking your feedback This report contains the draft advice of He Pou a Rangi – the Climate Change Commission. It includes advice on the first three emissions budgets and the Government’s first emissions reduction plan. Together, these lay out the course for reducing emissions in Aotearoa and set the direction of policy that Aotearoa takes to get there. We are seeking your feedback on this draft advice before providing our final advice to the Government and public by 31 May 2021. By seeking your input, we are recognising that this advice will affect everyone that lives in Aotearoa. What we hear through consultation will shape the final advice that we provide to the Government. We will also share what we learn through consultation and provide our final advice publicly. This process will provide the foundation for the work needed across Aotearoa to achieve our climate goals. We consider that our draft advice makes a clear case for swift and decisive action on climate change.
1.1 Our task The Climate Change Commission is an independent Crown entity that was established in December 2019. We are tasked with providing independent, expert advice to the Government on reducing emissions, adapting to the impacts of climate change, and monitoring and reviewing the Government’s progress towards its emissions reductions and adaptation goals. All of our advice to government must be made publicly available. Our first task is to provide the Government with advice on: • •
the level of the first three five-yearly emissions budgets that will put Aotearoa on track to meeting its domestic 2030 and 2050 emissions targets the direction of policy that should be included in the Government’s first emissions reduction plan.
The Climate Change Response Act (2002) outlines six specific pieces of advice that we must provide to the Government. Table 1.1 outlines these six pieces and where they can be found in this draft report. This report is supported by a substantial body of evidence. More detail on the evidence, including references, is provided in the accompanying Evidence Report. This evidence includes results from modelling using data from Stats NZ Integrated Data Infrastructure. The full disclaimer for results based on data from Stats NZ is included in Chapter 12 of the Evidence Report.
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31 January 2021 Draft Advice for Consultation Table 1.1: The six pieces of advice we must provide and where they can be found in this report. Advice
Where you can find the draft advice in this report
The recommended quantity of emissions that will be permitted in each emissions budget period
Chapter 2: Our proposed emissions budgets advice
The proportions of an emissions budget that will be met by domestic emissions reductions and domestic removals, and the amount by which emissions of each greenhouse gas should be reduced to meet emissions budgets and targets
Chapter 2: Our proposed emissions budgets advice
The appropriate limit on offshore mitigation that may be used to meet an emissions budget, and an explanation of the circumstances that justify the use of offshore mitigation
Chapter 2: Our proposed emissions budgets advice
How the emissions budgets, and ultimately the 2050 target, may realistically be met, including by pricing and policy methods
Chapter 6: Direction of policy in the Government’s emissions reduction plan
The direction of the policy required in the emissions reduction plan for that emissions budget period
Chapter 6: Direction of policy in the Government’s emissions reduction plan
The rules that will apply for measuring progress towards meeting emissions budgets and the 2050 target
Chapter 7: Rules for measuring progress
We have also been asked by the Minister for Climate Change to provide advice on the eventual reductions needed in biogenic methane emissions, and on the country’s Nationally Determined Contribution. This advice has been provided in Part B of this report.
1.2 Taking an inclusive approach Addressing climate change requires transformational and fundamental change to the country’s economy and society. The actions Aotearoa takes to address climate change will touch on the lives of everyone that lives in Aotearoa. This means we must take an inclusive approach. Tikanga values can guide Aotearoa through a climate transition that is inclusive. The concept of tiakitanga – being a good guardian or steward – considers the wellbeing of both current and future generations of New Zealanders. The He Ara Waiora tikanga values are: •
manaakitanga – having a deep ethic of care towards people and the whenua (land), acknowledging their role in the ecosystem, and how they could be affected
•
tikanga – ensuring the right decision makers are involved in the right decision-making process
•
whanaungatanga – being mindful of the relationship between all things, our connections to each other and how we connect to our whenua
•
kotahitanga – working collaboratively and inclusively to access the best ideas and information while uplifting collective efforts. 22
31 January 2021 Draft Advice for Consultation The He Ara Waiora framework is described in more detail in Chapter 6 of the accompanying Evidence Report. Providing analysis and advice on the first three emissions budgets and the direction of the first emissions reduction plan represents a significant amount of work. However, it is in many ways just the beginning. We have an ongoing role to monitor the Government’s progress towards emissions budgets and targets. As part of this, we will closely monitor how all of government addresses our final recommendations and share our conclusions publicly.
1.3 Our draft advice and recommendations We have provided draft recommendations to government throughout this report. For many of these draft recommendations, we have also provided progress indicators that we would use to monitor the Government’s progress. The draft recommendations fall into four categories: 1. budget recommendations – these contain our draft recommendations on the levels at which to set the first three emissions budgets, the breakdown by gas, the proportion of domestic emissions reductions and removals and the limit on offshore mitigation for meeting emissions budgets 2. enabling recommendations – these recommendations are crucial for ensuring that processes are in place so that the actions to address climate change are enduring 3. policy recommendations – these recommendations inform the direction of policy needed in the Government’s emissions reduction plan. There are two sub-categories: a. time-critical necessary actions – these are the policy recommendations that we consider critical for being able to deliver on our proposed emissions budgets b. necessary actions – these are further policy actions that support the time-critical recommendations and will be important for meeting emissions budgets.
1.4 Our analytical approach In providing our draft advice, we have carried out analysis in the four major areas described below. These four areas cover the matters required to be considered in the Climate Change Response Act. In this analysis, we break down emissions into biogenic methane and all other greenhouse gases. This is to acknowledge the short-lived nature of biogenic methane compared to other greenhouse gases, as well as the split-gas targets contained in the Climate Change Response Act. For ease of presentation, we refer to all other greenhouse gases as long-lived gases, though note that this does include a small amount of non-biogenic methane and some short-lived fluorinated gases (F-gases). These four areas of analysis ensure that: 1.
Our proposed emissions budgets are technically and economically achievable. For the first step of our analysis, we carried out a detailed assessment of the opportunities to reduce and remove emissions in each sector. These opportunities include both technological 23
31 January 2021 Draft Advice for Consultation change and behaviour change. For each opportunity, we have assessed the potential emissions reductions, cost, timeframes, constraints, risks, uncertainties, barriers and co-benefits. Further, we have looked at the interactions across the economy, and considered economy-wide labour and capital constraints. We have modelled a range of scenarios looking at possible futures to 2050 and beyond. These helped us to understand the range of ways that Aotearoa could meet the 2050 targets and the critical actions that are necessary to achieve this. This factored in the changes we have seen from COVID-19, and interactions within sectors and across the economy – for example, increasing electricity demand from charging electric vehicles. Drawing on our scenarios, we focused on the path to 2035. We looked in more detail at the available options that could be deployed in the next 15 years and used this to test different levels of emissions budgets that could set Aotearoa up to meet the 2050 targets. We also tested our proposed emissions budgets to ensure that they could be achieved. For example, if a particular technology does not play out as we might expect, is it still possible to meet the emissions budgets? This analysis is outlined in chapter 3. 2.
Our proposed emissions budgets are ambitious, put Aotearoa on track to meeting targets and contribute to the global goal to limit warming to within 1.5 °C of pre-industrial levels. We have considered the global pathways that are consistent with limiting warming to within 1.5 °C, the contribution of the different greenhouse gases to those pathways, and the specific circumstances for Aotearoa. This analysis is outlined in chapter 4.
3.
Any potential negative impacts of our proposed emissions budgets can be sufficiently mitigated, and any co-benefits can be maximised. We have carried out analysis looking at the potential impacts of the path to 2050 and of our proposed emissions budget levels on the economy, different sectors, regions, communities, households, different socioeconomic groups, iwi/Māori and different generations. This analysis considers economic, social, cultural, environmental and ecological impacts. We have sought to take a broad system view so we understand what our advice means for people, environment, land and economy, now and into the future. This analysis is outlined in chapter 5.
4.
Our proposed emissions budgets and targets can be delivered through policy We have looked across all sectors and across the economy at the direction of policies needed to deliver our proposed emissions budgets. We have focused our advice on identifying the goals and key interventions that government climate change mitigation policies need to deliver, as well as mitigating impacts where necessary. This analysis is outlined in chapter 6. 24
31 January 2021 Draft Advice for Consultation Further details on the analytical approach are set out in the Introduction to the Evidence Report.
1.5 What is different about our analytical approach? We commissioned two economy-wide models that were designed specifically for informing us on the transition to a thriving, low emissions Aotearoa. These models allowed us to understand the scale of the transformation that could happen in Aotearoa. For the first time in Aotearoa, we have taken a comprehensive look at at the balance of emissions reductions from long-lived gases and biogenic methane, and the balance between gross emissions reductions and removals of carbon from the atmosphere. This approach has guided our conclusions around the relative importance of reducing gross emissions compared to offsetting them through carbon removals from forestry. Previous exercises carried out by others pre-dated the Climate Change Response (Zero Carbon) Amendment Act 2019, and so focused on reducing overall net emissions. Core to our approach is the need to make actual emissions reductions – that is gross emissions reductions – to prevent further warming of the atmosphere and meet the 2050 targets. There are risks associated with the permanence of forestry removals, especially as climate change makes forest fires, heavy winds, storms, droughts, pests and pathogens more likely. Gross emissions reductions must be achieved to meet and sustain the country’s emissions targets, and to avoid pushing the burden to future generations. Therefore, we take the approach of reducing gross emissions where it is feasible and leave carbon removals to offset the hard-to-abate sectors.
1.6 Our engagement so far We thank the people who have met with us for their time and expertise. The conversations we have had and the evidence that has been shared with us have been invaluable. Our discussions with interest groups and subject matter experts have helped to build our evidence base and shape how we have approached our analysis. They have also helped us understand the breadth of the task ahead of us and the ambition that exists within Aotearoa. Since the Commission was established, Commissioners and staff have held over 700 meetings, workshops and hui. We have met with different sectors, people, partners and organisations to introduce ourselves and our work, and to hear varied views on what needs to be considered in Aotearoa in responding to climate change. More information about the organisations we have met with is available on our website. We established four technical reference groups covering land, waste, transport, as well as heat, industry and power. These groups met on a regular basis, helping to build the evidence base and test our analysis. We also established an expert modelling group to test and advise us on our modelling approach. The Interim Climate Change Committee carried out a Call for Evidence in late 2019 and received input from 77 individuals and organisations. Submissions covered topics including land use, transport, buildings and urban design, waste, and heat, industry and power, and included information on opportunities to reduce emissions, the linkages and interactions between different sectors and the potential benefits or impacts of different actions that could be taken. Several submitters indicated that they had data and analyses that they were willing to share with the Interim Climate Change Committee and Commission. 25
31 January 2021 Draft Advice for Consultation We held seven workshops covering equitable transitions, behaviour change, equity in access to transport, rural impacts, urban form, bioeconomy and the circular economy. The insights from these workshops have grounded our analysis, particularly in helping us to understand how changes would impact different groups of society. To give effect to the Treaty principles of partnership, participation and protection, we took a multifaceted approach to engaging with iwi/Māori. This included carrying over the insights gathered by the Interim Climate Change Committee (to reduce engagement fatigue). In addition to the hui and technical reference groups, we also initiated interviews and high-level case studies with Māori thought leaders and technical experts as well as Māori-collectives (including representatives of marae, iwi, and Ahu Whenua Trusts). In developing our work we applied the He Ara Waiora framework (version 2.0) to ensure the insights we gathered from iwi/Māori were understood from a Te Ao Māori and mātauranga Māori perspective. We also undertook research to ensure insights were understood in their historic and contemporary context. Work done by the private sector and business community, including by the Aotearoa Circle, Business NZ Energy Council, Climate Leaders Coalition, Primary Sector Council and Sustainable Business Council, has been helpful in strengthening the evidence base and business case for transitioning to a thriving, climate-resilient and low emissions Aotearoa. A message that has clearly come through our engagement is that businesses require a stable, predictable policy environment in order to allow them to invest in ways that help deliver on the country’s 2050 climate targets.
1.7 Our consultation questions As a Commission we need to consider the perspectives of all New Zealanders. We know our work will mean changes for all of us. We are releasing our draft advice and recommendations to give people outside the Commission the opportunity to share their knowledge and tell us whether we are steering Aotearoa in the right direction. The Commission is required to consult publicly on our advice, recognising the importance of public input. There are some key components about which we are particularly interested to hear from you. These consultation questions are contained throughout this report. We are seeking your responses to these questions via our website.
1.8 Biogenic methane and NDC advice Beyond our emissions budgets and emissions reduction plan advice, we are also consulting on two additional pieces of draft advice. One looks at the eventual reductions Aotearoa might need to make to biogenic methane emissions. The second considers the compatibility of the country’s Nationally Determined Contribution (NDC) with contributing to the 1.5°C global goal under the Paris Agreement. These two additional pieces of draft advice are outlined in part B of this report.
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Chapter 2: Our proposed emissions budgets advice In passing the Climate Change Response (Zero Carbon) Amendment Act in 2019 – better known as the Zero Carbon Act – Parliament committed to long-term and enduring action on climate change and set emissions reductions targets for Aotearoa. These targets were developed with the goal of halting the contribution Aotearoa makes to climate change. The targets require Aotearoa to: •
reduce emissions of greenhouse gases, other than biogenic methane, to net zero by 2050 and beyond. This refers to emissions of carbon dioxide, nitrous oxide, F-gases and non-biogenic methane.
•
reduce biogenic methane emissions by at least 10% by 2030 and 24-47% by 2050 and beyond, compared to 2017 levels.
It is our assessment that current policy settings do not put Aotearoa on track to meet these targets. To do so, Aotearoa must accelerate action on climate change. This chapter sets out our draft advice on the first three emissions budgets, to set Aotearoa up to achieve these targets and fulfil other requirements of the Climate Change Response Act. It outlines a set of principles that we have used to guide our draft advice. Finally, it outlines our draft recommendations for ensuring that Aotearoa enables change that is enduring. Our policy recommendations can be found in chapter 6.
2.1 Emissions in Aotearoa In 2018, gross greenhouse gas emissions in Aotearoa were about 45.5 Mt CO2e of long-lived gases and 1.34 Mt CH4 of biogenic methane. These are the most recent numbers available. Agriculture is currently the largest source of biogenic methane, with the remainder from waste. Long-lived gas emissions are mainly from carbon dioxide, but also include nitrous oxide. We have also included F-gases in this category to align with the split-gas target in the Act, although some F-gases are short-lived. Transport, buildings, heat, industry and power, agriculture and waste all emit long-lived gases (Figure 2.1). Gross emissions have been relatively stable in recent years. However, emissions from domestic transport have continued to rise even as emissions from other sectors stabilised or decreased. Gross emissions are projected to decrease as a result of current government policy. However, this decrease would not be enough to meet the country’s 2030 and 2050 emissions reduction targets for biogenic methane and long-lived gases.
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Figure 2.1: The sources of gross long-lived greenhouse gases and biogenic methane in 2018 broken down by sectors. Note: building emissions relates to their energy use, but not construction. Emissions are presented differently to the New Zealand Greenhouse Gas Inventory, see Evidence Report for info. Source: New Zealand’s Greenhouse Gas Inventory.
Box 2.1: How we present emissions in this report Gross and net emissions We present both gross and net emissions in this report. Gross emissions includes emissions from all sectors, including from: • • • • •
transport buildings heat, industry and power agriculture waste and F-gases.
Net emissions refers to gross emissions combined with emissions and removals through land-use, land-use change and forestry. In Aotearoa, emissions are mainly removed by forests, which sequester carbon dioxide from the atmosphere as they grow. Split-gas approach Throughout this report we present biogenic methane emissions in units of megatonnes of methane (Mt CH4) to take account of the short-lived nature of the gas and for consistency with the split-gas target. Long-lived greenhouse gases, and our proposed all gases emissions budgets, are expressed in units of megatonnes of carbon dioxide equivalent (Mt CO2e).
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31 January 2021 Draft Advice for Consultation Comparing gases using Global Warming Potential over 100 years (GWP100) When presenting numbers in Mt CO2e, these numbers are based on the GWP100 metric values from the Intergovernmental Panel on Climate Change’s (IPCC) 4th Assessment Report of the IPCC (AR4). This aligns with the country’s most recent Greenhouse Gas Inventory. Emissions generated from 2021 onwards will be reported in the Inventory using more up-to-date GWP100 values from the IPCC’s 5th Assessment Report (AR5). When we provide our final advice, we will convert the proposed emissions budgets using the AR5 GWP100 values. We expect that the Government will set emissions budgets using the GWP100 metric from AR5 for consistency with the Inventory.
2.2 Accelerating action to reduce emissions We have developed a set of key principles to help guide our advice and the transition to a thriving, climate-resilient and low emissions Aotearoa. Our key principles are: •
Principle 1: Align with the 2050 targets. Aotearoa must adopt actions that set it on a path to meet the 2030 and 2050 emissions reduction targets, sustain those targets and set Aotearoa up for net negative emissions later, and contribute to the global effort to limit warming to 1.5°C. Meeting these targets requires a long-term view of investments and infrastructure developments. Assets and investments with long lifetimes will need to be transformed, and planning for and developing new low emissions infrastructure will take time. For these reasons, actions taken in the next five years will need to set Aotearoa up to deliver the deeper reductions required in subsequent emissions budgets and to meet and sustain the 2050 targets.
•
Principle 2: Focus on decarbonising the economy. Aotearoa should prioritise actions that reduce gross emissions within our borders, as well as removing emissions by sequestering carbon dioxide in forests. Aotearoa should focus on decarbonising its industries rather than reducing production in a way that could increase emissions offshore. Forest sequestration should not displace making gross emissions reductions. Relying heavily on forestry before 2050 is likely to make maintaining net zero long-lived greenhouse gas emissions after 2050 challenging. It would delay action, lead to higher cumulative emissions and put the burden of addressing gross emissions on to future generations. This would require significantly more land to be converted to forestry in the future.
•
Principle 3: Create options. There is much uncertainty in embarking on this decades-long transition. Uncertainty is not a reason for delay. There is value in creating options for meeting the targets and having the ability to adjust course as the transition proceeds. The decisions taken now should open up a wide range of future options and keep options open for as long as possible. This needs to be balanced with the need to take advantage of key windows of opportunity, where making significant investments in key technologies could ultimately make the transition to low emissions cheaper and faster.
•
Principle 4: Avoid unnecessary cost. The actions Aotearoa takes to meet emissions budgets and targets should avoid unnecessary costs. This means using measures with lower costs and planning ahead so that technologies, assets and infrastructure can be replaced with low emissions choices on as natural a cycle as possible. This will help to avoid scrapping assets before the end of their useful lives or being left with stranded assets. 29
31 January 2021 Draft Advice for Consultation •
Principle 5: Transition in an equitable and inclusive way. How Aotearoa responds to climate change should consider who will be most impacted, how those impacts can be mitigated and how existing inequities can be reduced. It should consider equity across different groups of society, regions and communities and generations. The climate transition should be well planned and signalled in advance to give communities, businesses and individuals time to innovate and adapt, build new markets and retrain. Aotearoa will need to build new markets, invest in peoples’ skills, and provide opportunities for environmentally and socially sustainable work. It should not penalise early movers.
•
Principle 6: Increase resilience to climate impacts. The actions Aotearoa takes to reduce emissions should avoid increasing the country’s overall exposure to climate risks such as drought, flooding, forest fires and storms. Where possible, actions should increase the country’s resilience to the impacts of climate change that are already being experienced and that will increase in the future.
•
Principle 7: Leverage co-benefits. The actions Aotearoa takes to meet emissions budgets and targets should consider the wider benefits, including benefits to health, broader wellbeing and the environment. Co-benefits can provide further reason to take particular actions where the initial emissions reductions may be modest or appear relatively costly.
Consultation question 1 Principles to guide our advice Do you support the principles we have used to guide our analysis? Is there anything we should change, and why?
2.3 Emissions budgets – stepping down emissions in Aotearoa Emissions budgets sit at the core of the transition to a thriving, climate-resilient and low emissions Aotearoa. They chart the course for Aotearoa to step down emissions to meet its emissions reduction targets. After the first three emissions budgets are set, further emissions budgets will be set ten years in advance of the start of the emissions budget period. Laying out a clear path of where emissions need to get to will help increase predictability for communities, businesses and investors. Under the Climate Change Response Act, we are required to consider: •
technologies and practice changes available now for reducing emissions in each sector, the technologies on the horizon and the costs and constraints of making these changes
•
ambition needed to contribute to the global goal of limiting warming to 1.5°C above preindustrial levels
•
potential impacts of meeting emissions budgets on the economy, society, culture, environment and ecology, including on different regions, communities and generations
•
how emissions budgets could be met and the direction of policy for achieving them.
The impact of COVID-19 on society and the economy has been factored into our emissions budgets. Under the Climate Change Response Act, we must provide the Minister for Climate Change with advice on the level of the first three emissions budgets. The first emissions budget covers the 4-year 30
31 January 2021 Draft Advice for Consultation period from 2022 – 2025, while the second and third budgets are both 5 years, covering 2026 – 2030 and 2031 – 2035. Our proposed emissions budgets are provided in Budget recommendation 1. We are required under the Act to provide emissions budgets that include all greenhouse gases expressed as a net quantity of carbon dioxide equivalent. In the next section, we also provide the breakdown by gas and for biogenic methane and long-lived gases. Providing the breakdown of biogenic methane and long-lived gases allows us to make important distinctions between the different greenhouse gases and to align with the country’s domestic emissions reduction targets. Long-lived greenhouse gases, and our proposed all gases emissions budgets, are expressed in units of Mt CO2e, based on the GWP100 metric from the IPCC’s AR4. Net emissions and removals by forestry are calculated using the modified activity-based approach (see chapter 7).
Budget recommendation 1 Emissions budget levels We recommend the Government set and meet the emissions budgets as outlined in the table below. The Government should adopt emissions budgets expressed using GWP100 values from the IPCC’s fifth assessment report (AR5) for consistency with international obligations relating to Inventory reporting.
2018 All gases, net (AR4) Annual average
69.2 Mt CO2e
Emissions budget 1 (2022 – 2025)
Emissions budget 2 (2026 – 2030)
Emissions budget 3 (2031 – 2035)
271 Mt CO2e
286 Mt CO2e
223 Mt CO2e
67.7 Mt CO2e/yr
57.3 Mt CO2e/yr
44.6 Mt CO2e/yr
Consultation question 2 Emissions budget levels Do you support budget recommendation 1? Is there anything we should change, and why?
2.4 Contribution of different gases, and domestic emissions reductions and domestic removals We have assessed the contribution of the different greenhouse gases and the proportions of domestic emissions reductions and domestic removals needed to meet the emissions budgets and targets. At the core of this assessment is the need to set Aotearoa up to meet the 2050 emissions reduction targets and sustain them beyond 2050. The split-gas nature of the 2050 target means that forestry removals cannot be used to offset biogenic methane emissions, and they must be reduced to those levels stipulated in the target. Gross biogenic 31
31 January 2021 Draft Advice for Consultation methane emissions need to be reduced by at least 10% below 2017 levels by 2030 and 24-47% below 2017 levels by 2050.
Budget recommendation 2 Break down of emissions budgets We recommend that the Government implement policies that will meet emissions budgets based on the balance of emissions and removals as outlined in the table below. Emission budget 1 (2022 – 2025)
Emission budget 2 (2026 – 2030)
Emission budget 3 (2031 – 2035)
271 Mt CO2e
286 Mt CO2e
223 Mt CO2e
67.7 Mt CO2e/yr
57.3 Mt CO2e/yr
44.6 Mt CO2e/yr
26 Mt CO2e
49 Mt CO2e
68 Mt CO2e
6.5 Mt CO2e/yr
9.8 Mt CO2e/yr
13.6 Mt CO2e/yr
Gross long-lived gases
174 Mt CO2e
190 Mt CO2e
153 Mt CO2e
Carbon dioxide
133.7 Mt CO2e
143.2 Mt CO2e
110.8 Mt CO2e
Nitrous oxide
29.4 Mt CO2e
35.3 Mt CO2e
33.1 Mt CO2e
F-gases
7.3 Mt CO2e
8.1 Mt CO2e
6.7 Mt CO2e
Non-biogenic methane
3.4 Mt CO2e
3.1 Mt CO2e
2.2 Mt CO2e
4.92 Mt CH4
5.83 Mt CH4
5.53 Mt CH4
Total net emissions budget Annual average REMOVALS Forestry carbon removals Annual average EMISSIONS – LONG-LIVED GASES
EMISSIONS – BIOGENIC METHANE Gross biogenic methane*
* Note that biogenic methane numbers are provided in megatonnes of methane (Mt CH4). Megatonnes of methane do not equate to megatonnes of carbon dioxide equivalent (Mt CO2e). As a result, the numbers in this table cannot be summed to give the total net emissions budget. However, the methane volume can be converted into a CO2e amount by multiplying by 25, the IPCC AR4 GWP100 value for methane.
Consultation question 3 Break down of emissions budget Do you support our proposed break down of emissions budgets between gross long-lived gases, biogenic methane and carbon removals from forestry? Is there anything we should change, and why?
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Budget recommendation 3 Reductions by greenhouse gas to meet the emissions budgets We recommend that the Government implement policies that deliver emissions reductions of each greenhouse gas as outlined in the table below. 2018
Emission budget 1 (2022 – 2025)
Emission budget 2 (2026 – 2030)
Emission budget 3 (2031 – 2035)
Total net emissions Annual average Reduction from 2018
69.2 Mt CO2e
67.7 Mt CO2e
57.3 Mt CO2e
44.6 Mt CO2e
1.5 Mt CO2e (2.1%)
11.9 Mt CO2e (17.2%)
24.6 Mt CO2e (35.5%)
Total gross emissions Annual average Reduction from 2018
78.6 Mt CO2e
74.2 Mt CO2e 4.4 Mt CO2e (5.6%)
67.1 Mt CO2e 11.5 Mt CO2e (14.7%)
58.2 Mt CO2e 20.4 Mt CO2e (25.9%)
Carbon dioxide (gross) Annual average Reduction from 2018
35.1 Mt CO2e
33.4 Mt CO2e 1.6 Mt CO2e (4.7%)
28.6 Mt CO2e 6.4 Mt CO2e (18.3%)
22.2 Mt CO2e 12.9 Mt CO2e (36.8%)
Nitrous oxide Annual average Reduction from 2018
7.7 Mt CO2e
7.3 Mt CO2e 0.4 Mt CO2e (4.9%)
7.1 Mt CO2e 0.7 Mt CO2e (8.6%)
6.6 Mt CO2e 1.1 Mt CO2e (14.2%)
F-gases Annual average Reduction from 2018
1.9 Mt CO2e
1.8 Mt CO2e 0.1 Mt CO2e (3.5%)
1.6 Mt CO2e 0.3 Mt CO2e (15.3%)
1.3 Mt CO2e 0.6 Mt CO2e (29.7%)
Non-biogenic methane Annual average Reduction from 2018
1.0 Mt CO2e
0.8 Mt CO2e 0.2 Mt CO2e (8.0%)
0.6 Mt CO2e 0.4 Mt CO2e (39.0%)
0.4 Mt CO2e 0.6 Mt CO2e (56.1%)
Biogenic methane Annual average Reduction from 2018*
1.32 Mt CH4
1.23 Mt CH4 0.09 Mt CH4 (6.5%)
1.17 Mt CH4 0.15 Mt CH4 (11.4%)
1.11 Mt CH4 0.21 Mt CH4 (15.9%)
Broken down by:
* Note that the percentage reduction is for the annual average over the budget period. The biogenic methane target for Aotearoa is a 10% reduction by 2030 compared to 2017 levels. Under our emissions budget path, Aotearoa would reduce biogenic methane emissions by 13.2% by 2030 relative to 2017. 33
31 January 2021 Draft Advice for Consultation Gross emissions of long-lived gases need to be reduced to the maximum extent possible to set Aotearoa up to meet and sustain the target of net zero by 2050. Our analysis in chapter 3 shows that, in many sectors, there is a clear path for reducing gross emissions of long-lived gases. This means setting a path that would achieve near complete decarbonisation of low and medium temperature heat used in industry, electricity generation, energy use in buildings and land transport. Relying too heavily on forestry removals to offset emissions carries risks. It would require ongoing conversion of land to continue offsetting emissions and put the burden of reducing gross emissions on future generations.
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Figure 2.2: These three figures show how our proposed emissions budgets would step Aotearoa towards its emissions reduction targets. The top figure shows long-lived gases, the middle figure shows biogenic methane, and the bottom figure shows all gases combined as CO2-equivalent. Source: Commission analysis. 35
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Figure 2.3: Emissions of long-lived gases (left) and biogenic methane (right) by sector at the end of each budget period in our path, compared to 2018. Source: Commission analysis.
2.5 Limit on offshore mitigation and when it should be used to meet emissions budgets The Climate Change Response Act requires the Minister to set emissions budgets for Aotearoa that can be met domestically. The use of offshore mitigation – buying emissions units or emissions reductions and removals from overseas – should only be used as a last resort for the purpose of meeting emissions budgets. As a result, our proposed emissions budgets are possible to achieve domestically. However, there is always uncertainty when projecting forward in time. There will be elements of the emissions reduction transition that do not play out quite as we expect, particularly when looking ahead ten years to the start of the third emissions budget. More discussion on the use of offshore mitigation for meeting the Nationally Determined Contribution can be found in Chapter 8.
2.5.1 Borrowing The Climate Change Response Act allows some domestic flexibility in how emissions budgets are met. Up to 1% of the volume from the next emissions budget can be borrowed to help meet the current emissions budget. Borrowing brings emissions forward in time and increases risks that subsequent budgets will be more difficult to meet. The Government’s emissions reduction plans must be set to meet the budget. Therefore, borrowing should only be used when the Government finds itself in a position where there is insufficient time in the budget period to adjust policies to ensure emissions are below the budget level. Many of the uncertainties in meeting emissions budgets can still be factored into our analysis. For example, we cannot be certain about how much electric vehicles will cost over time and what this will 36
31 January 2021 Draft Advice for Consultation do to demand. However, as we have factored these unknowns into our analysis, we consider this kind of uncertainty does not provide justification for using offshore mitigation to meet the country’s domestic emissions budgets. In planning how to meet emissions budgets, the Government must plan for these uncertainties and aim to overachieve the budgets.
2.5.2 Offshore mitigation There may also be exceptional circumstances – such as force majeure events – which are unpredictable, unpreventable, outside the control of the Government and which cause a large one-off increase in emissions. Examples include disasters such as earthquakes, a volcanic eruption, or a major fire that prevents transmission lines bringing electricity north and therefore requires fossil generation to be used. If such events occur, the timing and scale of the emissions increase may be so large that it cannot be made up for domestically. We consider that only these circumstances justify using offshore mitigation for the first three emissions budgets. Even if this happens, we should exhaust domestic options first, with offshore mitigation the last resort. As emissions reduce, however, it may become harder and more expensive to reduce emissions further. If there were consistent barriers in the known areas of uncertainty or if technologies were to repeatedly deliver fewer emissions reductions than expected, it could become more difficult to stay on track to meet the 2050 target. This is why we may revisit the possibility of offshore mitigation for later emissions budgets as Aotearoa approaches 2050. By their nature, the exceptional or force majeure circumstances that would justify using offshore mitigation are unforeseeable and unquantifiable. It is not possible to predict the scale of offshore mitigation that might be needed if they occur. Therefore, we recommend a limit on offshore mitigation of zero for the first three emissions budgets except in the case of force majeure events.
Budget recommendation 4 Limit on offshore mitigation for emissions budgets and circumstances justifying its use We recommend that, given that emissions budgets must be met as far as possible through domestic action, for the purposes of meeting emissions budgets: a. The limit on offshore mitigation should be zero for the first three emissions budgets. b. The only circumstances that at this stage would justify the use of offshore mitigation is as a last resort in exceptional circumstances beyond the Government’s control, such as force majeure events, where domestic measures cannot compensate for emissions impacts.
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Consultation question 4 Limit on offshore mitigation for emissions budgets and circumstances justifying its use Do you support budget recommendation 4? Is there anything we should change, and why?
2.6 Enabling an enduring climate transition Climate change is an intergenerational and cross-system issue. Taking actions to address it will require unprecedented coordination, an inclusive approach and a step change in climate policy in Aotearoa to drive emissions reductions. Many of the changes that will need to be made will take time to implement. It will, therefore, require Aotearoa to look forward not just to the next few years, but to 2050 and beyond. Taking a long-term view and sending signals early will help to provide communities, businesses and investors with the predictability that they need to plan. Climate change touches on the lives of everyone that lives in Aotearoa. This means all New Zealanders, businesses, industries, communities and regions will need to play their part in addressing it. Ensuring that the actions Aotearoa takes to reduce emissions are enduring will require an inclusive and transparent approach with all New Zealanders working together. This section contains five recommendations that will be crucial for ensuring that the climate transition is enduring.
2.6.1 Cross-party support for emissions budgets There will be ten elections between now and 2050. Abrupt changes of course as government changes would not give businesses and individuals the predictability they need to make decisions. It is critical that emissions budgets are non-partisan and set transparently to ensure enduring progress. While the Minister is already required under the Act to consult with other political parties on emissions budgets before they are notified, debating the budgets in parliament is important to ensure transparency and to ensure that cross-party deliberations are on the parliamentary record.
Enabling recommendation 1 Cross-party support for emissions budgets We recommend the Minister for Climate Change seek cross-party support on emissions budgets. We note that the Minister must consult representatives of political parties on emissions budgets before they are notified but, in addition to this, the Minister should also seek to ensure that the emissions budgets are debated in the House of Representatives so that the positions of each political party are on the parliamentary record.
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Consultation question 5 Cross-party support for emissions budget Do you support enabling recommendation 1? Is there anything we should change, and why?
2.6.2 Coordinate efforts to address climate change across government The Government is increasingly asking government agencies to work together to deliver on crosseconomy issues like climate change. There will need to be coordination across a number of government departments and agencies including the Ministry for the Environment, Treasury, Ministry for Primary Industries, Ministry of Business, Innovation and Employment, Ministry of Transport, Ministry of Health, Ministry of Housing and Urban Development, Waka Kotahi, Energy Efficiency and Conservation Authority, Ministry of Foreign Affairs and Trade, Te Puni Kōkiri, Department of Conservation, Ministry of Social Development, Inland Revenue, Department of Internal Affairs, Ministry of Education and the Tertiary Education Commission. The roles and expectations of each of these, and other agencies in addressing climate change will need to be clearly set out. The accountability mechanisms for delivery will also need to be defined. The Climate Change Response Act requires the Government to publish an emissions reduction plan outlining the policies and strategies it will put in place to meet the first emissions budget. The Act also allows the Government to include policies and strategies for meeting the second and third emissions budgets, but this is not a requirement. It will take time for government actions to take effect. Signalling longer term policy well in advance will support both public and private investment decisions in line with target outcomes. For this reason, it is crucial that the Government focuses not only on policy for delivering on the first emissions budget, but to look out to future emissions budgets to 2050 and beyond. There is currently no separate appropriation in the Crown accounts and annual budget for climate change. Rather climate change sits under the broader Vote Environment appropriation for the Ministry for the Environment. In addition, numerous levers for addressing climate change sit outside of the Ministry for the Environment and expenditure on climate change actions sits in many other government agencies. A separate appropriation for climate change is appropriate given the gravity of the issue and the scale of response required from government and the whole of society. Without a specific appropriation for climate change, it will be difficult to assure the Government and society that action across departments and agencies is synchronised in its delivery and to get the most effective and efficient outcome. Having all expenditure under one appropriation will increase the transparency of how this funding is being used and protect it from being re-directed to other areas. There is precedent in Aotearoa for integrated work programmes across government agencies, which could be used as a reference in establishing a dedicated cross-agency climate change work programme. An example is the Joint Venture for Family Violence and Sexual Violence. Integrating climate change initiatives across government would be strengthened by consolidating funding for these initiatives within a dedicated Vote Climate Change. 39
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Enabling recommendation 2 Coordinate efforts to address climate change across Government We recommend that the Government: a. In each emissions reduction plan, include policies and strategies for meeting both the next and future emissions budgets (as recommended but not required under the Climate Change Response Act). b. In each emissions reduction plan, nominate specific Ministers and agencies with accountability for implementing policies and strategies in line with emissions budgets. c. Assess and meet funding requirements for implementing each emissions reduction plan in line with emissions budgets. d. Establish Vote Climate Change as a specific multi-agency appropriation which consolidates existing and future government funding for core climate change mitigation and adaptation activities.
Progress indicators a. The Government to include in its first emissions reduction plan, due by 31 December 2021, policies and strategies that will set Aotearoa up to deliver the second and third emissions budgets and 2050 targets. b. The Government to include in its first emissions reduction plan, due by 31 December 2021, the Government agency and Minister that will be responsible for delivering on each of the policies adopted. c. The Government to establish, by no later than 31 March 2022, Vote Climate Change.
Consultation question 6 Coordinate efforts to address climate change across Government Do you support enabling recommendation 2? Is there anything we should change, and why?
2.6.3 Genuine, active and enduring partnership with iwi/Māori We heard through engagement that many cultural and commercial Māori-collectives operate in accordance with the tikanga values that are relevant to them. Within the He Ara Waiora framework (described in more detail in Chapter 6 of the Evidence Report), tikanga is considered as a “means” which, combined with the “ends”, can achieve waiora or wellbeing. This is consistent with how iwi/Māori described the way tikanga applies to decision-making on their whenua. We will continue to work with the He Ara Waiora framework to develop our understanding of wellbeing from a mātauranga Māori perspective. 40
31 January 2021 Draft Advice for Consultation Iwi/Māori we engaged with talked about intergenerational kaitiaki obligations to their whenua, inherited through their whakapapa relationship with the whenua. The Commission serves in more of a tiaki or a stewardship capacity. Acknowledging our respective roles and maximising our ability to work collaboratively in partnership is essential for the transition to a thriving, climate-resilient and low emissions Aotearoa. This can be achieved through a genuine partnership with iwi/Māori that emphasises rangatiratanga and prioritises a kaitiaki approach to resource management. In more recent times, engagement and advocacy within the Crown/Māori partnership have improved. However, further effort should be made to remove barriers and progress actions that give real effect to a genuine and enduring Treaty partnership.
Enabling recommendation 3 Genuine, active and enduring partnership with iwi/Māori We recommend that, in transitioning Aotearoa to a thriving, climate-resilient and low emissions future, central and local government take action to ensure genuine and enduring partnership with iwi/Māori that gives effect to: a. Tiakitanga and manaakitanga by acting as good stewards and demonstrating equitable and mana enhancing behaviour within the Treaty Partnership. This requires real acknowledgement of rangatiratanga and enables iwi/Māori to exercise their role as kaitiaki. b. Tikanga and kotahitanga by working in partnership with iwi/Māori, through the right decision-makers and following the right process, to ensure Māori communities can prepare for and transition to a climate-resilient, low emissions Aotearoa. This is premised on iwi/Māori aspirations for intergenerational wellbeing; aspirations that are shared by many New Zealanders. c. Whanaungatanga by enhancing relationships within whānau and communities and with the whenua (land) or taiao (environment).
Progress indicator The Government to have published, by 31 December 2022, a plan to partner with iwi/Māori and local government to implement emissions reducing pathways and actions that: o
Gives effect to the He Ara Waiora tikanga.
o
Includes pathways and actions (which could include regional outcomes and actions frameworks) to remove barriers to participation for iwi/Māori.
o
Enables iwi/Māori to exercise rangatiratanga and kaitiakitanga.
o
Promotes equal access to new information, technology, employment and enterprise opportunities.
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Consultation question 7 Genuine, active and enduring partnership with iwi/Māori Do you support enabling recommendation 3? Is there anything we should change, and why?
2.6.4 Central and local government working in partnership Local government plays an important role in facilitating the transition to a thriving, climate-resilient and low emissions Aotearoa. Councils make decisions on land use, urban form, road and transport services, provision of housing and the three waters (stormwater, wastewater and water supply), waste management, flood risk management and coastal management. These decisions affect how New Zealanders live, work and run businesses. We heard consistently in our engagement about the importance of coordination between central and local government. Delivering on emissions budgets and targets will require central and local government to work in partnership. Policy alignment and funding will be important for delivering low emissions outcomes. Alignment will be needed across the Local Government Act, the Building Act and Code, the Resource Management Act (RMA), national direction under the RMA, proposed RMA reforms and the infrastructure plan.
Enabling recommendation 4 Central and local government working in partnership We recommend that, in transitioning Aotearoa to a thriving, climate-resilient and low emissions future, central and local government work together to: a. Align legislation and policy to enable local government to make effective decisions for climate change mitigation and adaptation, including aligning the Local Government Act, the Building Act and Code, national direction under the RMA, the proposed RMA reforms, implementation of the freshwater management framework and the 30-year infrastructure plan. b. Implement funding and financing mechanisms to enable the emissions reduction plans to be implemented effectively and to address the distributional effects of policy change today and for future generations.
Progress indicators a. Government to have, by 30 June 2022, outlined its progress on developing the necessary partnerships between central and local government. b. Government to have published a work plan by 31 December 2022 outlining how alignment and funding will be addressed and the milestones for achieving this plan.
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Consultation question 8 Central and local government working in partnership Do you support enabling recommendation 4? Is there anything we should change, and why?
2.6.5 Ensuring inclusive and effective consultation, engagement and public participation Taking action on climate change inevitably involves making choices, judgements and trade-offs that touch on the lives of all New Zealanders. These include, for example, how we want our future landscapes to look and how much we want to pay to reduce emissions here or overseas. In making these decisions, it is helpful to understand a wide range of perspectives, not just of the highly engaged. Many representative groups have knowledge and capacity to engage with and influence government. They have the ability to access leaders and shape conversations. Their perspectives in the transition, and the actions they take to reduce emissions, will be crucial. However, a collective and coordinated response will require the views and perspectives of people from all parts of society. It is important that the voices of all New Zealanders have the opportunities and resources to input into judgements and decisions on how Aotearoa addresses climate change. Government needs to engage with audiences in ways that suit them, are culturally appropriate and ensure they can contribute. At the same time, there is a need to avoid over-consultation. This is already becoming an issue with the response to climate change as it increases in prominence. It is also a particular issue for iwi/Māori. The risk is that back-to-back consultation will lead to engagement and consultation fatigue. Aotearoa needs to ensure consultation is genuine collaboration or co-design between government and citizens rather than a tick box exercise. There are a number of tools that could be used to address these issues. In the past, the Government operated an online consultation hub for all policies relating to climate change to give stakeholders a clear view of upcoming and closed consultations. This provided a source of information for stakeholders, allowing them to plan, allocate time and develop a high-level view of a collaborative government. In our engagement, some stakeholders suggested that an ongoing public forum or citizens’ assembly for climate change should be established. A citizens’ assembly would allow the Government or Parliament to work with a randomly selected group of citizens, to inform them on climate change issues and to get their views on the direction Aotearoa should take to reduce emissions and address climate change. Public participation in discussion of how Aotearoa addresses climate change provides a different perspective from the evidence-based analysis that we put forward. Taking action on climate change inevitably involves making judgements and trade-offs. Citizens of Aotearoa should be intimately involved in making such judgements.
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Enabling recommendation 5 Establish processes for incorporating the views of all New Zealanders We recommend that central and local government develop new and more effective mechanisms to incorporate the views of all New Zealanders when determining how to prioritise climate actions and policies to meet emissions budgets over the next 30 years, to create more inclusive policy development. One possible mechanism is funding and establishing an ongoing public forum for climate change to bring forward the views and perspectives of all New Zealanders.
Progress indicator Government publishes a proposal, no later than 31 December 2022, on the mechanisms it will use to incorporate the views of all New Zealanders when determining how to prioritise climate actions and policies to meet emissions budgets over the next 30 years.
Consultation question 9 Establish processes for incorporating the views of all New Zealanders Do you support enabling recommendation 5? Is there anything we should change, and why?
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Chapter 3: The path to 2035 In this chapter, we describe how Aotearoa could meet our proposed emissions budgets. We have developed this by looking closely at the emissions reductions that are technically and economically achievable over each of the first three emissions budget periods. We have looked at both existing and emerging opportunities, technologies and behaviour or practice change. We bring these changes together in a bottom-up modelling framework that captures the key interactions across sectors and allows us to investigate different scenarios for the future. Emissions can be reduced through either adopting lower emissions technologies and practices, or through reducing production. Our approach has prioritised adopting lower-emission technologies and practices. We have only considered reducing production if there are no alternative ways to reduce emissions. We have also considered the impact of COVID-19 in producing our path. The assumptions we used in these scenarios are outlined in detail in chapter 8 of the Evidence Report. For each potential emissions reduction opportunity, we have researched: • • •
the potential scale of the emissions reductions it could deliver how it is applicable for Aotearoa the costs, key risks and uncertainties over time that could affect its uptake.
We explored different paths for meeting our proposed emissions budgets to ensure they are achievable and to ensure they would put Aotearoa on track to meet the 2030 and 2050 emissions reduction targets. At the same time, we considered the constraints that could prevent Aotearoa from a faster transition to ensure our proposed emissions budgets are as ambitious as possible. There is inherent uncertainty when assessing the potential for future emissions reductions. Some technologies could end up reducing in cost faster than we expect, while other technologies could be slower. To meet the emissions budgets we have proposed, Aotearoa needs to make decisions now that open up options in the future. This will provide some contingency in the case that options do not play out as expected.
3.1 Current policies do not put Aotearoa on the right track As a starting point for our analysis, we have looked at how emissions and activities could evolve assuming no changes to current government policy between now and 2050. We formalise this through our current policy reference case, which is a scenario that aligns with government agencies’ latest emissions projections as far as possible. Under current policies, long-lived gas emissions (Figure 3.1) and biogenic methane emissions (Figure 3.2) are both projected to fall. However, the level of emissions reductions would not be sufficient to meet the 2030 and 2050 emissions targets. Net long-lived gas emissions are projected to fall from 36.3 Mt CO2e in 2018 to 6.3 Mt CO2e by 2050 under current policy settings. These net emissions reductions come mostly from increased carbon removals, with 1.1 million hectares of new forest, mostly exotic, planted by 2050. This level of forest 45
31 January 2021 Draft Advice for Consultation planting is projected to occur in response to the price of units in the Emissions Trading Scheme (NZ ETS) staying constant at $35. Gross long-lived gas emissions also reduce, primarily through widespread adoption of electric vehicles expected after 2035 and the assumed closure of aluminium and methanol production during the 2020s. Other sources of long-lived gas emissions are largely unchanged. Biogenic methane emissions are projected to fall 7% below 2017 levels by 2030 compared with the target of 10%. By 2050, they are projected to fall 12% below 2017 levels compared with the target range of 24–47%. Emissions reductions occur through a combination of land use change from agriculture to forestry and other uses, reductions in dairy cow numbers partly due to freshwater policy and ongoing improvements in the emissions efficiency of agricultural production. We have tested a variation to the current policy reference case assuming a slightly higher NZ ETS unit price of $50. In this variation, new forest planting increases to around 1.3 million hectares by 2050, allowing net zero emissions to be reached with minimal further reductions in gross emissions. The results suggest that Aotearoa could meet the net zero target for long-lived gases with relatively little additional change. This variation to the current policy reference case demonstrates a likely path that focuses purely on net emissions reductions. This approach would fail to drive meaningful decarbonisation and instead use up land resources for the purpose of offsetting avoidable emissions. This is not sustainable and would leave the next generation with the task of reducing gross emissions at the same time as they will need to be adapting to escalating climate change impacts. As described below, our scenarios for meeting the 2050 target represent a profound shift away from this approach.
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Figure 3.1: Long-lived gas emissions to 2050 projected under current policies. Source: Commission analysis.
Figure 3.2: Biogenic methane emissions to 2050 projected under current policies. Source: Commission analysis.
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3.2 Our approach suggests a different, but important role for forestry Core to our advice is the need to reduce gross emissions to prevent the atmosphere warming further and meet the 2050 targets. There are risks associated with the permanence of carbon emissions removals using forestry, especially as climate change exacerbates forest fires, heavy winds, storms, droughts, pests and pathogens. We take the approach of reducing gross emissions where it is feasible and leave carbon removals to offset the hard-to-abate sectors. Our approach suggests a different, but important role for forestry in meeting the 2050 target than has been outlined in previous analyses by the Productivity Commission and Ministry for the Environment. New exotic plantation forests absorb carbon quickly, but much of this is released when these are harvested. To keep adding to the amount of carbon stored in forestry, new land will need to be converted to forestry. We consider that the role of exotic plantation forestry should be to support net emissions reductions prior to 2050. However, these should not be at the expense of progress to reduce gross emissions of long-lived gases in those sectors where there are already clear decarbonisation pathways. Exotic forestry will also play an important role in providing biomass feedstock for the bioeconomy, allowing biomass to be used as a replacement for fossil fuels. New permanent native forests absorb carbon more slowly but will continue to do so for centuries until they reach maturity. Because of this, we consider that carbon removals from new permanent native forests have a role to offset the remaining long-lived gas emissions in sectors with limited opportunities to reduce emissions from 2050. For instance, this could include offsetting nitrous oxide emissions from agriculture and residual industrial process emissions.
3.3 We need to avoid pushing the burden to future generations In analysing how we can meet the 2050 targets, we have designed pathways that avoid pushing the burden to future generations. We call this ‘locking in net zero’. This aligns with the requirement in the Climate Change Response Act to consider the impacts on future generations, and the need for Aotearoa to contribute to the global goal to limit warming to within 1.5°C of pre-industrial levels and reduce the cumulative emissions of long-lived gases as far as possible. Focusing on reducing gross long-lived gas emissions and seeking to ‘lock in net zero’ by 2050 requires two key transformations. •
Decarbonise the sources of long-lived gas emissions wherever this is feasible. This means setting a path that would achieve near-complete decarbonisation in a number of areas. This includes low and medium temperature heat used in industry, electricity generation, energy use in buildings and land transport. For each of these sectors there are already available technologies that can be widely used to reduce or completely avoid gross emissions.
•
Build a long-term carbon sink large enough to offset residual long-lived gas emissions without ongoing land use conversion. This means starting now to grow new native forests on relatively less productive land so that carbon removals can be used to offset the remaining long-lived gas emissions from 2050 onwards. Establishing new native forests on less productive land offers a way for Aotearoa to build up an enduring carbon sink while delivering wider benefits for erosion, soil health, water quality and biodiversity. 48
31 January 2021 Draft Advice for Consultation Achieving both of these key transformations will require strong, accelerated and sustained action to 2050. Strong action on decarbonisation allows time to build market capacity and to transition to low emissions technologies, as long-lived capital assets such as boilers and vehicles are naturally replaced. This helps to minimise costs and the impacts on businesses and New Zealanders. Strong action to scale up native forest planting or reversion is needed in order to plant a sufficient area by mid-century.
Consultation questions 10 & 11 Locking in net zero Do you support our approach to focus on decarbonising sources of long-lived gas emissions where possible? Is there anything we should change? Do you support our approach to focus on growing new native forests to create a long-lived source of carbon removals? Is there anything we should change, and why?
3.4 International aviation and shipping Emissions from international aviation and shipping are not currently part of the 2050 emissions reduction target in Aotearoa. We have heard from stakeholders that this is an important issue. As required by the legislation, we will review whether these should be included in the 2050 target in 2024. We have tested to make sure that our path could allow Aotearoa to meet the 2050 net zero long-lived gas emissions target including international aviation and shipping emissions in case a decision is made in future to include these in the 2050 target.
3.5 Scenarios to reach 2050 targets – understanding the changes required We have developed a range of scenarios to look at possible futures to 2050 and beyond to understand the changes that are possible and required. Our scenarios have been designed to look at how Aotearoa could meet the 2050 target if future conditions were more, or less, favourable. We present the main scenarios here: • •
Headwinds is our least optimistic scenario. It examines a future where there are more barriers to adopting both technology and behaviour changes in the future. Tailwinds is our most optimistic scenario. It examines a future where there are fewer barriers to technology and behaviour changes.
More information on these scenarios can be found in chapter 8 of the Evidence Report.
3.5.1 Key insights from our scenarios for long-lived gases Aotearoa could achieve net zero long-lived gases sometime in the 2040s through changes in technology and behaviour (Figure 3.3). Our Tailwinds scenario achieves this by 2040. Even in our Headwinds scenario net zero long-lived gases could still be achieved by 2048, with a greater reliance on carbon removals by forestry (Figure 3.4). Key insights into emissions reductions from our scenario analysis include: •
Wider electrification of energy use is an essential part of the transition and will require a major expansion of the electricity system. Wind, geothermal and solar power can meet the 49
31 January 2021 Draft Advice for Consultation expected growth in demand from electrifying transport and heat to 2050 while keeping electricity affordable. Despite this growth, the emissions from the generation of electricity can reduce considerably relative to today. •
Through switching to electric vehicles, road transport, including heavy vehicles, can be almost decarbonised by 2050. This requires a rapid increase in electric vehicle sales so that nearly all vehicles entering the country’s fleet are electric by 2035. The switch to electric vehicles is expected to deliver significant cost savings while also reducing air and noise pollution and replacing imported fuels with local renewable electricity.
•
Low and medium temperature heat in industry and buildings could be decarbonised by 2050 through a switch away from coal, diesel and gas to electricity and biomass. Our analysis indicates that these costs could range up to $250 per tonne CO2e reduced but would be less than this where heat pumps or biomass can be used.
•
Energy efficiency and behaviour changes that reduce energy demand will play an important role in many areas. These can help to cut emissions sooner and in hard-to-abate sectors. They can also contribute cost reductions and co-benefits.
•
Nitrous oxide emissions are difficult to reduce but will be addressed somewhat through supporting farmers to implement emissions reducing practices and by the development of technology such as inhibitors.
•
New native forests can be established on steeper, less productive land to provide an enduring source of carbon removals. With a sustained high rate of planting through to 2050, new native forests could provide a long-term carbon sink of more than 4 MtCO2 per year, helping to offset residual long-lived greenhouse gas emissions from hard-to-abate sources.
•
Exotic plantation forestry continues to have a role to play in removing carbon dioxide, particularly until other more enduring sources of carbon removals, such as native forestry, can scale up. The deep reductions in gross emissions in our scenarios means the 2050 target could be met with a significantly smaller area of new exotic forestry than would occur under current policy settings.
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Figure 3.3: The pathway for net long-lived greenhouse gas emissions in the Headwinds and Tailwinds scenarios, compared with under current policies. Source: Commission analysis.
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Figure 3.4: Long-lived gas emissions by sector in 2050 in the Headwinds and Tailwinds scenarios, compared with under current policies and with 2018 emissions. Source: Commission analysis.
3.5.2 Key insights from our scenarios for biogenic methane Our scenarios show that, depending on technology and behaviour change in the next 30 years, it is possible to meet both the less ambitious (24% reduction) and more ambitious (47% reduction) ends of the 2050 target range for biogenic methane. Under the Tailwinds scenario, major technology and behaviour changes mean biogenic methane could reduce 59% below 2017 levels by 2050. This scenario assumes that methane inhibitors, methane vaccines and low emissions breeding are developed and widely adopted. Under the Headwinds scenario, slower changes in technology and behaviour still allow biogenic methane to reduce to 25% below 2017 levels by 2050 (Figure 3.5). Insights from our scenario analysis for biogenic methane include: •
•
•
It is possible to meet the 2030 target and the less ambitious end of the 2050 target range through widespread adoption of existing farm management practices and a combination of waste reduction and diversion from landfills. Developing and widely adopting new technologies to reduce livestock methane emissions would enable Aotearoa to reach the more ambitious end of the of the 2050 methane target range. Increasing landfill gas capture would also contribute. Without new technologies, meeting the more ambitious end of the target range would likely require significantly lower agricultural production from livestock and more land use change.
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Figure 3.5: The pathway for biogenic methane emissions in the Headwinds and Tailwinds scenarios. Source: Commission analysis.
Figure 3.6: Biogenic methane emissions by sector in 2050 in the Headwinds and Tailwinds scenarios, compared with under current policies and with 2018 emissions. Source: Commission analysis.
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3.6 Creating a path to 2035 To arrive at our proposed emissions budgets, we have created a path to 2035. This was developed by looking at all the available options for reducing emissions, their possible deployment in the next 15 years and whether this would put Aotearoa on a path to meet the domestic 2030 and 2050 targets. There is uncertainty around how fast technology will develop and how behaviours could change in the next 15 years. We would like to see Aotearoa being ambitious in reducing emissions. However, it is not prudent to propose emissions budgets that could only be met if new technologies were developed and deployed. Doing so would undermine the purpose of emissions budgets to set a credible path for medium-term emissions reductions. The path that we illustrate below shows one way in which our proposed emissions budgets could be met. There are alternative paths that would also deliver our proposed emissions budgets. However, this path provides a balanced portfolio of actions across the economy that would set Aotearoa up to achieve and sustain its 2050 emissions targets. This is in line with our principle to create options and keep them open for as long as possible. Doing this allows actions in some areas to be increased if actions in other areas were slower than expected.
3.7 Summary of our path Table 3.1 below provides a summary of key actions in our path across the first three budget periods. In the following section we give a more detailed description of the changes that would happen within each sector. In relation to our long-term scenarios described in the previous section, our path would see reductions in long-lived gas emissions near the most ambitious end of the range (Figure 3.7). Net long-lived gas emissions would fall by 33% by 2030 and 64% by 2035 compared to 2018. Emissions reductions would mostly come from road transport and heat, industry and power, with gross carbon dioxide emissions roughly halving by 2035 (Figure 3.9). This path would set Aotearoa up to achieve net zero long-lived gas emissions in the early 2040s. If this was chosen, Aotearoa would be able to meet a net zero longlived greenhouse gas target by 2050 that includes its share of international aviation and shipping. For biogenic methane, our conservative approach to new technologies means that we have not assumed any adoption of a methane inhibitor or other methane reducing technologies that are not already available. Because of this, our path sees biogenic methane emissions towards the high end of the scenario range as all scenarios assumed some adoption of new technologies (Figure 3.8). Our path would push hard on driving changes to low emissions farm practices, alongside strong action to reduce methane emissions from landfills.
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31 January 2021 Draft Advice for Consultation Table 3.1: Key transitions along our path.
Waste and Fgases
Land
Heat, Industry and Power
Transport
Budget 1
Budget 2
Budget 3
Road transport
Accelerate EV uptake Improve average efficiency of new ICE vehicles
Phase out new light ICE vehicles Electrify medium and heavy trucks
Reducing travel demand
Encourage remote working for those who can Encourage switching to walking, cycling and public transport
Non-road transport
Electrification of rail
Buildings
No new gas heating systems installed after 2025 Improve thermal efficiency
Start phase out of gas in buildings
Electricity
Phase out fossil baseload generation
Expand renewable generation base Achieve ~95% renewable generation
Industrial process heat
Replace coal with biomass and electricity
Replace gas with biomass and electricity
Agriculture
Adopt low emissions practices on-farm
Encourage the adoption of new low methane technologies when available
Native Forests
Ramp up establishing new native forests
Establish 25,000 hectares per year
Exotic Forests
Average 25,000 hectares per year of new exotic plantation forests
Ramp down planting new exotic plantation forests for carbon storage
Waste
Divert organic waste from landfill Improve and extend landfill gas capture
Hydrofluorocarb ons (HFCs)
Reduce import of HFCs in second-hand products Increase end-of-life recovery
Biofuel blending Start electrification of ferries and costal shipping
Transmission and distribution grid upgrades Reduce geothermal emissions
Adopt low emissions breeding for sheep
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Figure 3.7: Long-lived gas emissions in our path to 2035 compared with our scenario range. Source: Commission analysis.
Figure 3.8: Biogenic methane emissions in our path to 2035 compared with our scenario range. Source: Commission analysis.
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Figure 3.9: Snapshots of emissions in 2025, 2030 and 2035 in our path, compared with 2018. Source: Commission analysis.
3.8 What a path to 2035 looks like in each sector This section outlines measures and actions within each sector that would deliver our proposed emissions budgets.
3.8.1 Transport Under our approach to meeting the 2050 targets, Aotearoa would need to almost completely decarbonise land transport. This means changing how most vehicles are powered, including heavy vehicles. Electric vehicles are currently more expensive to purchase than internal combustion engine vehicles but are cheaper to run. Their upfront costs are expected to fall further leading to significantly lower lifetime costs. In addition to saving emissions, they also improve local air quality and reduce noise pollution. For these reasons, our path sees ambitious adoption of light electric vehicles, including cars, vans and utes, with no further internal combustion engine light vehicles imported after 2032. This would mean more than half of all light vehicle travel would be in electric vehicles by 2035 and 40% of the light vehicle fleet would be electric vehicles by 2035 (Figure 3.10). In our path medium and heavy trucks are slower to electrify. This is because the current battery technology does not allow for the greater daily distances they need to travel. Of the trucks imported in 2030, 15% of medium trucks and 8% of heavy trucks would be electric. By 2035, these would increase to 84% and 69% respectively.
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Figure 3.10: Uptake of light electric vehicles in our path. Source: Commission analysis. To meet our proposed emissions budgets Aotearoa would need to phase out imports of light internal combustion engine vehicles sometime between 2030-2035. Achieving this phase out is ambitious, but achievable with strong supporting government action. This timeframe is consistent with the phase out dates being set by a growing number of countries. While electric vehicle supply grows, there would also need to be a focus on importing more efficient internal combustion engine vehicles, including increasing the share of conventional hybrids. Our path assumes the average efficiency of light internal combustion engine vehicles improves by 15% by 2035, or around 1% per year. In addition to changing the vehicles we drive, changes to how and how much New Zealanders travel play an important role in our path. We assume the average household travel distance per person can be reduced by around 7% by 2030, for example through more compact urban form and encouraging remote working. We also assume that the share of this distance travelled by walking, cycling and public transport can be increased by 25%, 95% and 120% respectively by 2030. Overall, this would see total household vehicle travel staying relatively flat despite a growing population (Figure 3.11).
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Figure 3.11: Household light vehicle travel in our path compared with under current policies. Source: Commission analysis. Emissions from freight can be reduced by switching some freight movements from road to rail and coastal shipping. Our path assumes 4% of freight tonne-kilometres can switch by 2030. Further reductions in freight emissions could be achieved by completing the electrification of the Auckland to Wellington railway line and electrifying the Hamilton to Tauranga railway line. There will continue to be a need for liquid fuels for some transport uses, such as off-road vehicles and equipment, aviation and shipping. Aotearoa should take action to scale up the manufacture of low emissions fuels like biofuels or hydrogen-derived synthetic fuels in the first three emissions budget periods. Our path assumes 70 million litres per year of low emissions fuels could be made by 2030 and 140 million litres per year by 2035. This equates to roughly 3% of total domestic liquid fuel demand in 2035, or 1.5% of total fuel demand including international transport, under our path.
3.8.2 Buildings Under our approach to meeting the 2050 targets, Aotearoa would need to improve the energy efficiency of buildings, alongside decarbonising the energy used for heating, hot water and cooking. Improving the energy efficiency of homes reduces emissions and can improve the occupants’ health, particularly for low-income households. Because homes in Aotearoa are typically underheated in winter, households may choose to heat their home more after improving energy efficiency, rather than reducing their energy use or emissions (see chapter 5). We assume that existing homes’ energy intensity improves by 6% by 2035. We assume newly built homes are 35% more energy efficient compared to today’s performance. It is already feasible to transition away from heating homes with coal and natural gas. Heat pumps already offer a lower cost way to heat homes than natural gas. For hot water, where feasible, electric 59
31 January 2021 Draft Advice for Consultation resistive hot water cylinders offer an alternative to natural gas systems with comparable costs. Heat pumps will offer a lower cost option to heat most new commercial and public buildings. For existing buildings, renovations offer an opportunity to replace fossil fuel heating systems, such as gas central heating, with lower emissions alternatives such as heat pumps or biomass. Commercial and public buildings offer large opportunities to improve energy efficiency through improved insulation and greater control of energy use. New commercial and public buildings can be built to higher standards, and existing buildings retrofitted to achieve these improvements. Our path assumes a 30% improvement in commercial and public buildings’ energy intensity is possible by 2035 compared to today’s performance. Commercial and public buildings can quickly transition away from coal to alternatives such as biomass which could use existing boilers. Our path assumes that by 2030 coal use in commercial and public buildings has been eliminated. The Government announcement in 2020 that all coal boilers in public sector buildings will be phased out is a step towards this. Fossil fuel heating systems will typically last for 20 years or longer. Our path looks to avoid new heating systems having to be scrapped before the end of their useful lives. This means that our path assumes all new space heating or hot water systems installed after 2025 in new buildings are either electric or biomass. For existing buildings, the phase out begins in 2030 (Figure 3.12). No further natural gas connections to the grid, or bottled LPG connections occur after 2025. This would allow time for a steady transition, to be on track for a complete transition away from using natural gas in buildings by 2050.
Figure 3.12: Energy use in buildings in our path. Source: Commission analysis.
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3.8.3 Electricity The use of low emissions electricity allows other sectors to reduce emissions. Electrifying light passenger vehicles will require significant expansion in electricity generation capacity. Demand for electricity will also increase as buildings and process heat switch away from fossil fuels. Increased demand will need to be accompanied by expanding transmission and distribution infrastructure. Our path requires rapid expansion of renewable wind and solar generation in the 2030s and beyond to meet increased electricity demand as electric vehicles are widely adopted (Figure 3.13 and Figure 3.14). However, in the short term, electricity generation companies may not commit to this expansion in capacity while there is uncertainty around the future of the New Zealand Aluminium Smelter at Tiwai Point. The New Zealand Aluminium Smelter is the single largest consumer of electricity. Over the last 5 years it used on average around 13% per year of the country’s electricity. During the course of the Commission preparing its advice the future of the Smelter was under review. If it leaves, this electricity would be available for other uses. In our path the Smelter closes gradually, coming to a full close in 2026. In January 2021 the New Zealand Aluminium Smelter reached a deal to extend its operations until 2024. Wind, solar and geothermal offer low cost and low emissions ways of generating electricity. Our path assumes renewable generation is built in the early 2020s. Then building further renewables pauses due the closure of the New Zealand Aluminium Smelter, resuming in the late 2020s. This is illustrated in Figure 3.13 and 3.14. Some geothermal fields have high emissions from their geothermal fluid, with an equivalent emissions intensity as gas generation. In our path these high emitting geothermal fields would close before 2030 reducing geothermal emissions by around 25% while only reducing generation by 6%.
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Figure 3.13: Electricity generation by fuel in our path. Source: Commission analysis.
Figure 3.14: Annual increase (positive) or decrease (negative) in electricity generation compared to the previous year. Source: Commission analysis. 62
31 January 2021 Draft Advice for Consultation There is also uncertainty around the solution to the dry year challenge – solutions for generating sufficient renewable electricity in years when hydro lake levels are low. Multiple options are being considered under the NZ Battery project that could offer a fossil fuel free solution to providing electricity in dry years where hydro lake levels are low. There are questions over the technical and economic feasibility and public support of the proposals. Gas generation provides flexibility to meet daily and seasonal peaks in demand and backs up renewable generation. While our path would see reductions in gas generation, some gas is still required to provide this flexibility until 2035 at least. In our path, coal fired generation at Huntly closes in the 2020s. The challenge is delivering a timely, reliable and affordable build out of the electricity system, while managing the opposing risks of under or over-investing in the system. Continuing to build new electricity generation and transmission infrastructure throughout the 2020s would avoid construction bottlenecks and potential delays to wider decarbonisation in the 2030s. Over-investment could result in sunk assets or increase the delivered cost of electricity and disincentivise electrification. Underinvestment could delay progress on wider decarbonisation efforts in transport, industry and buildings.
3.8.4 Natural gas use The total amount of natural gas used in Aotearoa needs to reduce in order to achieve the 2050 targets. Much of the natural gas currently used for process heat, heating and cooking in buildings, and electricity generation will need to convert to low emissions technologies. Natural gas currently plays a significant role in the electricity system by backing up renewable generation, particularly in dry years when hydro lake levels are low. Using gas in this way supports the reliability and affordability of the country’s electricity system. There are options to eliminate the use of natural gas for electricity generation. However, these are likely to be expensive for the size of the emissions reductions they deliver. In addition, the transition away from gas across the economy would need to occur without compromising the affordability and security of the electricity supply or increasing total emissions. There is a critical dependency between domestic gas supply and the company Methanex. Methanex produces methanol from natural gas and consumes around 40% of the total gas supply. Their demand incentivises natural gas producers to continue to invest to sustain production. Methanex has provided flexibility by reducing its demand when natural gas is constrained, benefitting all other gas users and reducing methanol production. Without continued exploration and development, the country’s natural gas fields are likely to reach the end of their economic life. This will reduce the amount of gas available for all users. In the medium term, it may become uneconomic for Methanex to continue operating in Aotearoa in its current form. A reduction in gas used by Methanex could have flow on cost and supply implications for other gas users including electricity generation and domestic users of gas. The impact on the electricity and gas system and the potential for large changes in supply and demand from industries exiting the market are discussed further in chapter 6 of this report. 63
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3.8.5 Industry and heat There are proven options for decarbonising low and medium temperature process heat. These include switching fuel use from coal and natural gas to biomass and electricity. There are also opportunities to improve energy efficiency. Some coal boilers in the the food processing sector are already being replaced with biomass or electricity. Our path assumes a steady, but reasonably rapid, rate of conversion to be on track to eliminate coal use for food processing by 2037 (Figure 3.15). This is roughly equivalent to converting one to two very large dairy processing plants away from coal each year or converting a larger number of smaller plants. Along with boiler conversion, our path assumes significant improvements in energy efficiency across the food processing sector.
Figure 3.15: Food processing energy use in our path. Source: Commission analysis. Where available, biomass from forestry and wood processing residues are a low cost fuel switching opportunity. There may be constraints on biomass supply in some regions where there is not significant forestry. In these regions, electric boilers will be needed, but at a significantly higher operational cost. Electrification of process heat will also require expansion of the electricity transmission and distribution grids. This will add to the total cost. In our path, fuel switching to biomass also occurs in some other energy-intensive industries such as pulp and paper production. Overall, our path takes advantage of the country’s currently under-used biomass resource, moving towards a more circular economy. Achieving this uptake will require the development of supply chains for gathering and processing biomass along with the establishment of local markets. 64
31 January 2021 Draft Advice for Consultation In our path, we assume all of the country’s heavy industries continue to produce at current levels, except aluminium and methanol production which are assumed to close in our reference case. High temperature process heat is more challenging to decarbonise and our path sees continued use of gas and coal in these sectors. While there is potential to further decarbonise a range of industrial processes through emerging technologies, we do not assume these are available for uptake before 2035.
3.8.6 Agriculture The two main agricultural greenhouse gases are biogenic methane and nitrous oxide. Biogenic methane has a different target to other gases, while nitrous oxide is included in the long-lived greenhouse gas target. The agriculture sector has focused in recent years on making productivity improvements that have also decreased their emissions intensity. The sector is addressing water quality issues through actions that can also reduce emissions. These efforts need to increase to reach the 2030 and 2050 emissions targets. There are changes that farmers can make now to reduce emissions on their farms, if given sufficient support. These can improve animal performance while reducing stock numbers, reducing the number of breeding animals required, and moving to lower input farm systems. The Biological Emissions Reference Group found that, when successfully implemented, these changes could be made while not significantly reducing production and while maintaining or even improving profitability. In setting our path and emissions budget levels, we have conservatively assumed that no new technologies to reduce methane emissions from agriculture are available before 2035. As a result, our path involves changes in farming practices that start pushing towards the limit of what we are confident can be delivered. Overall, our path would see dairy and sheep and beef animal numbers each reduced by around 15% from 2018 levels by 2030. This compares with an 8-10% reduction projected under current policies. In this, we have included transforming a small amount of dairy land into horticulture, at a rate of 2,000 hectares per year from 2025 (Figure 3.17). With these changes, the 2030 biogenic methane target could be met without relying on new technologies. If farmers can continue to achieve productivity improvements in line with historic trends, these outcomes could be achieved while maintaining total production at a similar level to today (Figure 3.16). Selective breeding for lower emissions sheep is a proven option which is in the early stages of commercial deployment. Our path assumes that this can be progressively adopted, reducing total biogenic methane emissions from sheep and beef farming by 1.5% by 2030 and 3% by 2035. No adoption has been assumed for the first budget period. Breeding for low emissions cattle is a future possibility but the research is in an earlier stage. We have not assumed any contribution from this by 2035. Methane inhibitors and vaccines are being researched. These could reduce the amount of methane that is released from cattle and sheep. While there has been progress on inhibitors, these are not yet commercially available. There is uncertainty around when inhibitors will be available, what their costs could be and how effectively they could reduce emissions. Therefore, as mentioned, our path has been set so that the budgets can be achieved without the use of either methane inhibitors or vaccines.
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31 January 2021 Draft Advice for Consultation However, if any of these technologies could be brought to market before 2035, they would provide additional options for meeting the emissions budgets. We will be reviewing progress on the developing these technologies and will consider changes to the emissions budgets if we believe they can be widely adopted in the future.
Figure 3.16: Changes in livestock numbers, production and emissions since 1990 and in our path for dairy farming (top) and sheep and beef farming (bottom). Source: Commission analysis. 66
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Figure 3.17: Land use for agriculture and forestry in our path Source: Commission analysis.
3.8.7 Forestry Our path would see a significant increase in new native forests established on less productive land. The Ministry for Primary Industries forecasts that there will be around 12,000 hectares of new native forests established in 2021. Our path would see this ramp up to 25,000 hectares per year from 2030 (Figure 3.18). In total, close to 300,000 hectares of new native forests would be established by 2035 (Figure 3.17 above). The rate that we can plant or revert native forest would likely be limited by nursery capacity, pest control and fencing. Estimates from recent studies suggest there is on the order of 1,150,000 to 1,400,000 hectares of marginal land that could be planted in forestry. As much of this land is steep and prone to erosion, we consider that it would be more suitable for permanent forests, particularly native forests. In our path, exotic afforestation would continue the trajectory expected under current policies up until 2030, averaging around 25,000 hectares per year. From 2030 onwards, the rate of afforestation for carbon removals would reduce. In total, around 380,000 hectares of new exotic forestry would be established by 2035. We have not assumed any change in the percentage of permanent exotic forest above Ministry for Primary Industries projections as this is not required to reach emissions targets. As well as planting new forests our path would reduce deforestation, which is still a considerable source of emissions in Aotearoa. Our path assumes that no further native deforestation occurs after 2025. 67
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Figure 3.18: Afforestation and deforestation by year in our path. Source: Commission analysis. Trees can help in the transition a low emissions Aotearoa in other ways. Bioenergy offers a low cost route for decarbonising some sectors, including process heat. Overall, there appears to be a large potential biomass supply from collecting and using waste from forestry and wood processing. However, the availability is likely to vary across the country due to regional mismatches in supply and demand of biomass, and the cost of transporting biomass. While the supply of biomass residues may appear to be abundant in some regions, trade-offs may also need to be made when deciding what parts of the economy to decarbonise using biomass first. Timber can displace emissions intensive materials such as steel and cement in buildings. This reduces embodied emissions and can lock up carbon for several decades.
3.8.8 Waste Reusing and recovering waste materials is a key part of a circular economy. Our path would see a reduction in the amount of waste generated and a focus on reducing the amount of organic waste, such as food, wood and paper, that go into landfills. Our path would see the total amount of organic waste going to landfills decrease by at least 23% from 2018 to 2030 (Figure 3.19). Waste emissions can also be reduced by increasing the amount of biogenic methane which is captured and destroyed from landfills, through either upgrading landfill gas capture systems, or diverting organic waste from sites without landfill gas capture to those with capture. In our path we assume minor improvements in landfill gas capture through increasing site coverage and efficiency reduce total methane emissions from waste by an additional 4% by 2030.
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Figure 3.19: Total organic waste sent to landfill in our path. Source: Commission analysis.
3.8.9 F-gases Fluorinated gases, including hydrofluorocarbons (HFCs), are greenhouse gases that are primarily used as refrigerants in fridges, freezers and air conditioning systems. Our path assumes emissions from HFCs reduce by at least 18% by 2030 and 33% by 2035 in line with the actions Aotearoa takes under the Kigali amendment to the Montreal Protocol. This can be achieved through reducing the import of HFCs in second-hand products, reducing equipment leakage and increasing end-of-life recovery of products that contain these gases.
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Box 3.1: Different ways to meet our emissions budgets We are required to advise on emissions budgets that are ambitious but achievable. We have tested to understand whether it would be possible to meet our recommended emissions budgets in different ways. Being able to meet the budgets in different ways gives us confidence that there is enough flexibility in how the proposed emissions budgets can be met. If we set the budgets so they are very easy to achieve, they would not have enough ambition to drive change. However, if we make them too hard, there is no flexibility if things do not turn out how we plan. We have tested whether our proposed emissions budgets could still be met through a slower uptake of electric vehicles and with less emissions reduction achieved through changes in farm management practices. In this case, the emissions budgets could be met through: • • • • •
further reducing travel or shifting to lower emissions type further land use change from livestock agriculture into horticulture and exotic forestry further reducing the amount of organic waste sent to landfill phasing out F-gas refrigerants faster an earlier switch away from gas use in the wood processing sector.
We have also tested whether our proposed emissions budgets could be met if people do not change behaviour as fast as we have anticipated. In this case, the emissions budgets could be met through: • • •
further accelerating uptake of electric vehicles so that by 2030 all new light vehicles entering the fleet are electric a methane inhibitor being widely adopted on dairy farms, reducing methane emissions from dairy cattle by around 5% in 2030 and 15% by 2035 further increases to landfill gas capture.
Consultation questions 12 Our path to meeting the budgets Do you support the overall path that we have proposed to meet the first three budgets? Is there anything we should change, and why?
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Chapter 4: Contributing to the global 1.5°C goal A key purpose of the Climate Change Response Act is for Aotearoa to contribute to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5°C above preindustrial levels. Under the Paris Agreement, Aotearoa has committed alongside other nations to: •
“Hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change”
•
“Increase the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production.”
Aotearoa has chosen to play its part in pursuing the more ambitious 1.5°C goal. This chapter lays out our assessment of whether our proposed emissions budgets and the path for achieving them is consistent with contributing to the global 1.5°C goal. This chapter also outlines the science of the different greenhouse gases and how the different nature of the gases impacts the extent to which each gas needs to be reduced.
4.1 The science of the different greenhouse gases The impact a greenhouse gas has on the climate depends on its ‘strength’ on a molecule-by-molecule basis and its concentration in the atmosphere. This impact can be expressed as the ‘radiative forcing’ of that gas – a measure of how much that gas is driving the changes in the global climate. Carbon dioxide is responsible for the majority of human-driven warming to date. Although it is not a relatively powerful greenhouse gas in itself, carbon dioxide is very long-lived. This means carbon dioxide released today can still be causing warming centuries or millennia into the future. Methane is the second most important greenhouse gas and is responsible for around a fifth of humandriven warming. Molecule for molecule, methane is much more powerful than carbon dioxide. However, methane is a short-lived greenhouse gas. It has an intense warming effect for the first few decades after it is emitted, but this effect dissipates as methane breaks down in the atmosphere. Figure 4.1 shows the relative warming of a tonne of methane compared to a tonne of carbon dioxide. This makes it important to factor in the different nature of methane’s warming impacts when considering global and domestic pathways for reducing emissions. In our path analysis, we have done this by applying a split-gas framework that avoids the use of metrics to compare methane with other gases or trade off effort across the different gases. Nitrous oxide is a powerful greenhouse gas and is relatively long-lived in the atmosphere. However, emissions of nitrous oxide are much lower than carbon dioxide or methane. As a result, it contributes less to human-driven warming – around 5% globally.
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31 January 2021 Draft Advice for Consultation The other greenhouse gases include small levels of F-gases such as hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. Some of these F-gases have very powerful warming effects. Continuing to emit long-lived gases, like carbon dioxide and nitrous oxide, results in these gases accumulating in the atmosphere. They are effectively being added faster than they are being removed. Therefore, a constant rate of carbon dioxide and nitrous oxide emissions year to year leads to increasing concentrations and more warming. As methane breaks down at a faster rate, a constant rate of emissions will stabilise within about 50 years. As methane does not accumulate as much, its emissions do not need to drop to zero to stop adding to global warming. Ultimately, long-term warming depends on how much: • • •
Carbon dioxide, nitrous dioxide and other long-lived greenhouse gases are in the atmosphere Methane is emitted each year Carbon dioxide is removed each year.
Figure 4.1: The warming effect of a tonne of methane and a tonne of carbon dioxide. Source: Interim Climate Change Committee. Figure 4.2 shows the contribution to warming of the country’s yearly emissions of carbon dioxide, methane and nitrous oxide. Methane emissions cause the most warming over the first few decades. However, as methane breaks down more quickly, the longer lasting warming from carbon dioxide dominates beyond that.
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Figure 4.2: The effect of the country’s yearly emissions of carbon dioxide, methane and nitrous oxide on warming. Note: This figure is based on 2016 emissions in Aotearoa. Source: Interim Climate Change Committee.
4.2 The global 1.5°C goal The central objective of the Paris Agreement is for countries to contribute to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.” So far, nearly all countries in the world have signed up to the Paris Agreement and put up targets to reduce their emissions. However, assessments of the current global effort show that the world is not on track to meet the Paris Agreement’s temperature goals. The 2020 United Nations Environment Programme Emissions Gap report warns that warming will increase to around 3°C this century based on current pledges. Reducing emissions takes a global effort – every country needs to do their part and contribute to ambitions under the Paris Agreement. More and more countries are strengthening their international climate change commitments, particularly in the lead up to the next international climate change conference in 2021. In the last 18 months, many of the world’s largest emitters have already stated they would move to more ambitious emissions targets: • • •
•
In September 2020, China announced it would reach net zero emissions before 2060 In October 2020, Japan and South Korea announced they were setting net zero domestic targets for 2050 In December 2020, the United Kingdom announced it would reduce emissions by at least 68% by 2030, compared to 1990 levels. This is an increase from its previous commitment under the EU of 55% by 2030 compared to 1990 levels. In January 2021 the United States of America rejoined the Paris Agreement and is expected to make a new emissions reduction commitment shortly.
In Aotearoa, Parliament has set out its intention to contribute to limiting warming to 1.5°C in the purpose of the Climate Change Response Act. 73
31 January 2021 Draft Advice for Consultation In the previous chapter, we have outlined the emission reductions that are technically and economically achievable for Aotearoa. Two additional factors must be considered to determine how Aotearoa should contribute to the global 1.5°C goal: • •
Global pathways that are compatible with limiting warming to 1.5°C The principle of common but differentiated responsibilities and respective capabilities
Understanding these elements requires a mixture of quantitative and qualitative analysis. However, in the end, the Government will need to consider what is equitable and make a judgement as to what contribution Aotearoa should make globally. The Commission takes a systems view of Aotearoa and its place internationally. The world needs not only a functioning atmosphere, but to eradicate poverty and safeguard food security. This must be considered in both the context of reducing emissions and adapting to more severe and costly impacts of climate change if the world does not act to reduce emissions. Careful consideration is required when considering trade-offs, where to concentrate efforts and how the impacts and consequences are spread across countries, people, place and time. Judgement needs to be framed from a perspective within Aotearoa, which includes a Te Ao Māori view. Efforts to reduce emissions must consider society, economy and environment, while giving consideration to the broader wellbeing of Aotearoa. Our judgements in these matters are guided by an overarching approach that draws on our tikanga concepts. These lead us towards our vision, guiding what good looks like. They have an emphasis on the kotahitanga aspect of this mahi – the need to work collaboratively and inclusively.
4.3 Global 1.5°C pathways The Intergovernmental Panel on Climate Change (IPCC) outlined a number of different global pathways that would limit warming to within 1.5°C of pre-industrial levels. These pathways are drawn from peer-reviewed modelling studies. They are not based solely on atmospheric science, but also the feasibility and costs of reducing emissions across sectors and gases and consider a range of socioeconomic scenarios. These global pathways all have differing rates of reduction for each greenhouse gas and rely on varying levels of emission removal technologies. For all these pathways, limiting warming to 1.5°C requires rapid emission cuts of all greenhouse gases between now and 2030. Slower reductions are then needed out to the end of the century. All these pathways have several other features in common: •
Net emissions of carbon dioxide and other greenhouse gases peak in the 2020s, then rapidly reduce through the 2030s and 2040s.
•
Emissions of methane reduce significantly through the next 20 years, but do not need to reach zero by 2050 or 2100, due to the short-lived nature of the gas.
•
Emissions of nitrous oxide peak in the 2020s and then reduce, but do not reduce to zero due to the difficulty eliminating nitrous oxide emissions from agriculture.
•
Gross emissions of long-lived greenhouse gases will be near zero by 2050. Most pathways have some remaining gross emissions in 2050 from hard-to-abate sectors. This includes things 74
31 January 2021 Draft Advice for Consultation like carbon dioxide from cement manufacturing. As a result, emission removals are required to ensure emissions reach and remain at net zero. Most 1.5°C pathways also require ongoing levels of carbon dioxide removals beyond keeping emissions to net zero to bring temperatures back to 1.5°C after a temporary overshoot. There are questions about whether the globe can still limit warming to 1.5°C. The longer countries wait to act, the harder it gets, and the more the world will need speculative emissions removal technologies. Later this year the IPCC will release its sixth assessment report which will provide the most up-to-date science on this.
4.4 Common but differentiated responsibilities and respective capabilities In line with the tikanga values of whanaungatanga and kotahitanga, we must be mindful of the interrelationship, our connections to each other, and work collaboratively and inclusively to address climate change. All countries need to act; through the United Nations Framework Convention on Climate Change and the Paris Agreement, nearly all countries have agreed they will do so. It is well acknowledged internationally that developed nations have a greater responsibility to take the lead in reducing emissions and support developing countries to transition. Developed countries have emitted more cumulative emissions than developing countries and for longer. They have benefited as a result. The principle of ‘common but differentiated responsibilities and respective capabilities’ was enshrined in the United Nations Framework Convention on Climate Change in 1992. It was reiterated and expanded in the Paris Agreement to reflect the national circumstances of all countries. In terms of Gross National Income per capita, Aotearoa ranks as a wealthy, highly developed country. The historic contribution Aotearoa made to warming came from a mix of carbon dioxide released when native forests were first cleared and ongoing emissions of carbon dioxide from fossil fuel use, methane and nitrous oxide. The vast majority of warming to date comes from historical forest clearance and land use change. Much of this occurred when humans first settled Aotearoa and before the industrial revolution (Figure 4.3). It has been estimated that Aotearoa has contributed just under 0.3% of the 1°C warming since preindustrial times.
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Figure 4.3: The contribution Aotearoa made to warming since 1840. Source: New Zealand Agricultural Greenhouse Gas Research Centre.
4.5 Assessing how our proposed emissions budgets contribute to the 1.5°C global goal The Climate Change Response Act requires emissions budgets be set with a view to contributing to the global goal to limit warming to within 1.5°C of pre-industrial levels. At the same time, emissions budgets must be ambitious but achievable and have a focus on domestic actions. To assess how our proposed emissions budgets would contribute to the 1.5°C global goal, we have looked at how emissions of the different gases would change compared to the IPCC’s modelling of global 1.5°C pathways (see Figure 4.4). The key features driving global reductions in emissions in the IPCC’s 1.5°C compatible scenarios are: • • • • •
Deep cuts in coal use between 2020 and 2030 (by about ~75% from 2010 levels) Reductions in gas use, except where it replaces coal use Oil use peaking between 2020 and 2025 and declining steadily thereafter Ongoing but more moderate reductions in livestock methane emissions Stabilisation or moderate reductions in nitrous oxide.
When comparing our path outlined in chapter 3 against the global 1.5°C pathways, we can make the following observations: • • • •
Our path focuses on large reductions of carbon dioxide emissions with as little reliance on emission removals by forestry as possible. Our path sees gross nitrous oxide emissions reducing by 16% by 2035 relative to 2017. Together, the reductions in carbon dioxide and nitrous oxide would put Aotearoa on track to meet net zero long-lived gases by 2050. Our path sees biogenic methane reduce by 17% by 2035 relative to 2017 levels, putting Aotearoa on track to meeting the biogenic methane target of reductions of at least 24%-47% 76
31 January 2021 Draft Advice for Consultation by 2050. If some of the more uncertain methane reducing technologies come to fruition, biogenic methane emissions could reduce further. Figure 4.4 shows that our path would achieve reductions in the use of coal, oil and gas that are consistent with the reductions seen in the IPCC’s global pathways. However, our path would fall short when comparing overall reductions in carbon dioxide emissions from energy and industrial processes. In part, this reflects the country’s different energy profile compared with the world as a whole. Globally, coal power generation accounts for a much larger share of emissions and it is here the sharpest early reductions occur in the IPCC pathways. It also likely reflects significant deployment of carbon capture and storage occurring in the IPCC pathways.
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Figure 4.4: How our path to 2035 aligns with the IPCC 1.5°C pathways. In these figures, the emissions over time are indexed to the emissions in 2010. Source: Commission analysis.
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Chapter 5: The impacts of emissions budgets on New Zealanders When we look at our proposed emission budgets and the policies to achieve them, we also need to consider how these impact the people of Aotearoa. To do this we need to understand that all things are connected: the people, the land, the atmosphere, the oceans. This connectivity – material and non-material – is central to Te Ao Māori, or the Māori world view. It is also essential to understanding how to guide a transition that is fair and equitable for people and the environment. The transition must reduce emissions with pace while allowing the country to continue to grow so that future generations inherit a thriving, climate-resilient and low emissions Aotearoa. This chapter considers the impacts of meeting our proposed emissions budgets and what actions can be taken to manage these impacts. It looks at households and communities, how Aotearoa earns its way in the world, businesses, industry and workers. It outlines impacts and mitigation for iwi/Māori, land use, the environment, and government taxation and spending.
5.1 Looking at the opportunities – and the challenges The transition to a thriving, climate-resilient and low emissions Aotearoa will bring a mix of opportunities, benefits, challenges and inevitable costs. Aotearoa has the opportunity to transition in a way that considers the broader wellbeing of people, the land, and the environment, both now and in the future. The transition needs to be both accelerated and predictable. Acting too hastily will result in abrupt and disruptive changes akin to the changes many New Zealanders experienced from the economic reforms in the 1980s. Delaying action carries the risk of a sharper and more disruptive transition later, locking in emissions intensive infrastructure that could become stranded and contribute to more severe climate change. The transition must reduce emissions with pace while allowing the country to continue to grow so that future generations inherit a thriving, climate-resilient and low emissions Aotearoa. A lack of global action to reduce emissions or taking an approach that solely focuses on adaptation will cause more severe climate change in every country. We have heard consistently through our engagement that working alongside people to maximise the benefits and reduce the negative impacts will be vital. Placing tikanga values at the forefront of the transition will ensure it is inclusive, equitable, and improves the wellbeing of everyone that lives here now – and in the future. In our work we have not attempted to sum up the positive and negative impacts of the transition. Instead, we have addressed each potential impact in turn, considering where impacts could compound on particular groups of society and how any negative impacts could be managed. This is summarised in the following sections. More detail can be found in chapters 11 – 15 of the Evidence Report.
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5.2 How Aotearoa creates a fair, equitable transition for people In line with our principles in chapter 2, creating a fair, equitable and inclusive transition means: •
Honouring the principles of Te Tiriti o Waitangi.
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Working collaboratively and inclusively when planning the transition and developing and implementing policy, in line with kotahitanga and tikanga.
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Ensuring the low emissions transition takes opportunities to reduce inequalities, builds strong communities, and meets the needs of current and future generations over time.
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Prioritising support to those most adversely impacted and least able to adjust.
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Sending clear and stable policy signals to provide predictability for communities and businesses, and allow time to plan and respond.
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Investing in people, their skills, and providing opportunities for transitioning to viable work that is environmentally and socially sustainable.
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Acting now to ensure a thriving, productive and climate-resilient economy.
Te Ao Māori recognises the need to consider the connectedness of all things including the past, present and future. In considering how our people would be impacted by the climate transition, we must consider where we have come from, as well as the wellbeing of current and future generations. Intergenerational equity is reflected in He Ara Waiora, part of the Government’s wellbeing framework, through the dimensions of wellbeing (‘ends’) and the tikanga (‘means’) both of which are essential to intergenerational wellbeing. This aligns closely with the concept of tiakitanga and encourages Aotearoa to carefully consider the pace of the transition. Climate change will disproportionately affect future generations. However, if Aotearoa transitions too quickly, this group will also bear the brunt of costs of disruptive change. Many of the actions Aotearoa could take to address climate change will have broader health co-benefits. New Zealanders will benefit from warmer drier homes, better air quality, and from more active local travel. This will reduce burden on the health system. These benefits will be immediate and add to the case for taking action to reduce emissions. Global action to reduce emissions would also reduce negative health impacts from a changing climate. The health system will see increased heat stress from warmer temperatures and temperature extremes and changing patterns of infectious disease. The health of more vulnerable groups of society will be hit the hardest. The transition to a low emissions society will bring a mix of opportunities, benefits, challenges and costs. Actions and approaches to reducing emissions should ensure the benefits of climate action are shared across society. It is important that certain individuals and sectors do not unfairly bear the costburden of the climate transition. Maintaining the principle of equity is important to make sure the policy response is enduring, and emissions reductions can be sustained.
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5.3 How the transition could impact the cost of living and access to transport Energy and petrol costs are key expenses for households. We analysed the potential impact of our proposed emissions budgets on household bills, and access to transport. We found that our proposed emissions budgets would not increase bills for most households. Most households would see a reduction in household bills, particularly if they switched to lower emissions heating and transport. However, not all households would benefit equally. Some low-income households, older people, people with disabilities, Māori and Pasifika households or households that live in remote areas could struggle to access lower emissions technologies. These are also the groups that would benefit the most from these lower emissions technologies. Targeted assistance will be needed to ensure these groups can access new technologies and are not disproportionately affected by the climate transition.
5.3.1 Electricity bills Our analysis suggests that overall household electricity bills for heating, cooking and lighting are unlikely to increase as a result of our proposed emissions budgets. However, exactly how they could change is highly uncertain. Household electricity bills depend on both electricity prices and household electricity demand. Electricity prices Future electricity prices are uncertain due to a range of factors, such as the weather, gas availability, future infrastructure requirements and pricing structures. Our modelling suggests that, by taking action to meet our proposed emissions budgets, wholesale electricity prices across the country would initially fall and then return to close to 2021 levels by 2035 (Figure 5.1). One of the reasons for the decrease in wholesale electricity price, is that we assume that the Tiwai Point Aluminium Smelter closes, deferring the need for investment in new generation. However, there are uncertainties around the timing of the Smelter’s closure and gas supply for electricity generation. Some of these factors have been discussed in chapter 3, and could cause different price outcomes from what has been modelled.
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Figure 5.1: In our modelling path, wholesale electricity prices in Aotearoa decrease and then return to close to 2021 levels by 2035. The shaded area shows the range between the maximum and minimum price for different regions. Source: Commission analysis. Household electricity prices are influenced by wholesale prices but also depend on several other factors. Based purely on taking actions to meet our proposed emissions budgets, household electricity prices may follow the same trends as wholesale prices. However, projecting future electricity prices is uncertain. For example, the Government is currently making changes to electricity pricing structures, such as transmission and distribution pricing, which may change how costs are allocated to consumers. Regional electricity prices Our emissions budgets are unlikely to change regional electricity prices beyond the level of regional variation that already exists. However, there are numerous factors outside of the factors included in our emissions budgets that make future electricity prices highly uncertain. Households electricity bills vary from region to region, and even within regions. Different areas already face varying electricity prices. This reflects the cost of not only generating electricity, but also of transmitting and distributing it. Communities further away from where electricity is generated often pay higher electricity prices. For example, electricity pricing surveys show that households in Kerikeri and the West Coast pay more for electricity than the national average. There can be as much as a 50% variation between regions. Average household electricity demand varies across Aotearoa and depends on climatic conditions, personal choice about heating levels for example, and whether the household uses gas, electricity or 82
31 January 2021 Draft Advice for Consultation wood to heat their homes. For example, the average household electricity consumption is twice as much in Queenstown as in Westport. Electricity bills Households bills not only depend on residential electricity prices, but also on demand. Households that are able to make energy efficiency improvements may be able to reduce demand or improve the level of comfort in their homes. Households should be able to reduce their household electricity bills by, for example, switching to heat pumps, or installing insulation or LED lightbulbs. Making energy efficiency improvements can also reduce energy use at peak times – in the mornings, evenings and in winter. Reducing demand at peak times helps the entire energy system as there is less need to upgrade electricity lines, avoiding potential additional costs for all households. This would require both the adoption of technologies for demand response, and innovative business and pricing models. Electricity pricing incentives, such as low cost night rates, combined with smart charging technology could be an effective way to address this issue. Household electricity bills could also increase if a household purchases an electric vehicle. However, if that electric vehicle is replacing a petrol car, then overall household energy bills could decrease. Assisting lower income households Lower income households, some Māori and Pasifika households, elderly and people with disabilities will benefit more from making energy efficiency improvements. These groups are more likely to live in older, poorly insulated homes, and would therefore benefit more from cost savings, or improved health from being able to use savings for additional heating. An evaluation of the Warm Up New Zealand programme found that the health benefits from insulating lower income households were substantial, resulting in savings in health costs of more than $800 a year on average. However, there were small benefits in terms of cost savings as households continued to heat their homes. How this can be managed? Assistance will be needed to help those on lower incomes with the upfront cost for energy efficiency improvements. The Government’s Warmer Kiwi Homes programme continues to provide funding to those on low incomes who own their own home to install insulation or more efficient heating. The Government has also introduced healthy home standards for rental homes that include standards for insulation and heating. Continued intervention will be needed to ensure that lower income households can access these benefits. The Government will need to assess whether the existing programmes are delivering at an appropriate pace and scale, and in particular consider whether these programmes have any impact more broadly on rental prices and affordability.
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5.3.2 Natural gas Households that use natural gas for heating and cooking are likely to see an increase in their natural gas bills as a result of our proposed emissions budgets. In 2035, the impact of our emissions budgets could increase the average household gas bill by up to $150 a year. This would affect homes with reticulated natural gas and liquified petroleum gas. However, natural gas prices are hard to predict as the gas industry is at the beginning of a transition partly because of climate policy. This introduces considerable uncertainty into future gas prices. The transition away from natural gas may mean that, over time, many households would benefit from replacing gas appliances. This could happen as households naturally need to replace appliances and heating systems, reducing the cost to households. How this can be managed? As part of the transition, the Government will need to pay particular attention to low income households who use natural gas, who may not have the money for the upfront conversion cost, or who may rent homes with natural gas appliances or heating. Landlords that own properties with natural gas may not have any incentive to replace them with lower emissions options and therefore low cost options, as they would not benefit from the savings in running cost. There may be some efficiencies and cost savings from replacing old gas heating systems with modern electric systems. Portable gas heaters are still used by some households in Aotearoa. They are used proportionately more in the North Island, particularly in Gisborne and Northland. These heaters tend to be used by lower income households due to the low upfront cost and the ease of budgeting for heating bills. However, they contribute to mouldy homes and cause health problems. Although the number of these heaters is decreasing, replacing them with more efficient low emissions options will take continued government support.
5.3.3 Fuel costs and access to transport Transport is crucial to our livelihoods, wellbeing and economy. It connects us to our families, allows us to participate in wider society, and ensures we can access work, education, healthcare, supermarkets, banks and local activities. The current system in Aotearoa tends to prioritise travel by car. This disadvantages those who do not have easy access to vehicles. This may include some of the country’s youth, older people, people with disabilities, Māori, Pasifika and low-income communities. Improving fuel efficiency, a shift to electric vehicles and more public transport, walking and cycling are all important parts of meeting our proposed emissions budgets. Our modelling indicates petrol and diesel prices could have increased by up to 30 cents per litre in 2035 as a result of our proposed emissions budgets. Travel costs, including the cost of petrol and vehicle maintenance, are expected to increase for an average household. However, there are a number of ways to offset this increase. It could be offset by households purchasing more fuel efficient cars, or reducing travel by around 10%. 84
31 January 2021 Draft Advice for Consultation Our path shows that, by 2035, 40% of the entire light passenger fleet would need to be electric. Households that replace an internal combustion engine vehicle with an electric one could be $1000 a year better off. This is because electric vehicles are likely to be cheaper to buy and will be cheaper to operate. Although electricity bills will increase, the total household energy bill will decrease for these households. The total energy costs for households with and without an electric vehicle are shown in Figure 5.2.
Figure 5.2: Total household energy cost in 2035 for a single car household. Source: Commission analysis. However, lower income and rental households may be less able to afford electric vehicle than wealthier households due to the upfront cost of electric vehicles. It may also be challenging for those who cannot charge an electric vehicle at home, for example people living in apartments. We have heard throughout our engagement that this challenge is particularly relevant for people with disabilities who often rely on a vehicle to get around, and for some Māori households who are disproportionately represented among those with low incomes. Access to transport is a particular issue for some Māori. Transport is hugely important for Māori to connect to their whānau, haukāinga, and tūrangawaewae. About a quarter of Māori in Aotearoa live in Auckland. However, many have whakapapa connections outside of Auckland and may need to travel long distances to participate in iwi, hapū, and whānau activities and events. Some Māori households are large or intergenerational and require larger vehicles. Transport, particularly utes, is also a key enabler for the haukāinga to collect resources and provide services to the marae. Some people and businesses have specific transport needs the transition will need to address. Farmers, contractors and others in rural communities need vehicles that can carry heavy loads or access rugged or remote locations. Single- or double-cab utes, farm bikes and quad bikes are an essential part of farming and rural landscapes. Cost-effective and low emissions solutions for these vehicles are available now, or will be in the next few years.
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31 January 2021 Draft Advice for Consultation How this can be managed? Targeted assistance will be needed to ensure an equitable transition. More public transport, walking and cycling will have a positive impact, particularly on those who live in cities and larger urban areas. Central and local government will need to provide more and better transport options to increase access to transport for people with disabilities or on low incomes. Currently public transport is not always a realistic option for people with disabilities and many therefore rely on cars. Good policy and planning will be needed to ensure that transport systems are integrated and accessible. The Government will also need to provide proactive, targeted support to help lower income households reap the benefits of electric vehicles and bring down costs. Policies that encourage a second-hand electric vehicle market, car sharing and leasing, and support to purchase an electric vehicle or electric bike could help. We have also heard through our engagement the importance of integrating transport into urban form. It will be important that central and local government factor this into their planning and decisionmaking.
5.4 How Aotearoa earns its way in the world How the economy grows as Aotearoa transitions to a climate-resilient, low emissions economy will depend on the pace with which Aotearoa acts, the costs to transition and the action from the rest of the world. With the technologies and practice changes available to Aotearoa, our modelling suggests that what Aotearoa produces and exports for the most part would not need to change significantly to meet our proposed emissions budgets. However, some sectors such as mining and natural gas would reduce significantly. The pace the world acts to reduce emissions will define how much climate change Aotearoa and other countries will need to adapt to. While there are estimates of the damages from more severe climate change, there is a growing body of research showing that these estimates significantly underestimate the true cost. This is because it is challenging to quantify many of the most serious consequences of climate change as they lie outside of human experience. However, researchers note that these risks provide a compelling reason for the world to work together to reduce emissions. International and domestic research also suggests there are significant benefits to reducing emissions in the more immediate term. Benefits to health, productivity and incomes all tip the balance further in favour of acting to reduce emissions. Our economic modelling indicates the economy would continue to grow under our proposed emissions budgets. Under current policy settings, GDP is projected to grow to $396 billion by 2035, and $512 billion by 2050. This does not include the climate impacts that would be more severe if Aotearoa and other countries did not act to reduce emissions. We have also heard consistently from the food and fibre sector that Aotearoa businesses will lose access to some international markets if we fail to take timely action to reduce emissions.
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31 January 2021 Draft Advice for Consultation Our modelling suggests that meeting the 2050 targets for biogenic methane and long-lived gases would result in GDP growing to about $508 billion by 2050. This the equivalent of taking another 6 to 7 months to get to the same level of GDP as under current policy settings. Looking out to 2035, our modelling suggests that reducing emissions to meet our proposed emissions budgets would cost Aotearoa no more than $190 million each year over emissions budget 1, $2.3 billion each year over emissions budget 2, and $4.3 billion each year over emissions budget 3. It is difficult to estimate the benefits of action with any accuracy as there is significant uncertainty in how the benefits will actually be realised. These findings are in line with international estimates, such as those by the United Kingdom Committee on Climate Change and European Commission (see Chapter 12 of the Evidence Report). Internationally, the cost of deploying technology to meet emissions reduction targets is decreasing faster than expected. As a result, countries like United Kingdom have re-assessed cost estimates of greenhouse gas emissions targets downwards over time. The economy will continue to experience external shocks over time. The COVID-19 pandemic is an example of this. While these can be difficult times, they also provide opportunities to bring forward investment that stimulates the economy and accelerate the climate transition. What will the overall impact be? Our modelling shows that Aotearoa can decarbonise the economy while continuing to grow GDP. The overall costs of meeting the country’s targets and our proposed emissions budgets are estimated at less than 1% of projected annual GDP. This is significantly lower than what was estimated when the 2050 targets were set (see Chapter 12 of the Evidence Report). International experience shows that estimated costs are often overstated because technologies improve faster than expected. While the overall costs are small relative to the size of the whole economy, they will not be evenly felt. Some sectors of society will experience greater impacts, both positive and negative. Government must put in place policies to support those most disadvantaged and those least able to adjust, and to ensure an equitable and inclusive transition. This is discussed elsewhere throughout this chapter. Taking the recommended actions now will avoid unnecessary costs. Aotearoa will need to make significant investments now, but these will pay dividends in the future. These investments can stimulate the economy and support the post-COVID-19 recovery. Some of these investments, such as investments in energy efficiency, can pay for themselves through savings in energy use.
5.5 Business, industry and workers Many businesses in Aotearoa are connected to the global economy and compete in international markets. We have heard from businesses that they want to transition, but they need strong stable and predictable policy to allow them to plan. If not managed well, climate policy could potentially increase costs and reduce their competitiveness. At the same time, there are risks to market access if businesses do not reduce emissions as international markets are increasingly seeking low emissions products. It will be important to monitor global markets and actions by competitors to understand the impacts. This is an important ongoing task for the Commission.
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31 January 2021 Draft Advice for Consultation Aotearoa has built up thriving industries that have provided New Zealanders with livelihoods and been significant contributors to our economy. Our country has benefited from working the land, with the food and fibre sector a major employer and providing 35% of the country’s exports. Mining, oil and gas, and other industries have been important for regional economic development, providing many with jobs. These industries were not built with the knowledge of their emissions, and helped Aotearoa thrive.
5.5.1 Food and fibre production As part of the climate transition, the food and fibre sector will need to reduce on-farm biogenic methane and nitrous oxide emissions, and carbon dioxide emissions from transport and processing plants. Farmer innovation and competing in markets against subsidised producers means that the country’s pasture-based agriculture has one of the lowest emissions footprints in the world. However, Aotearoa may lose market access as global markets increasingly seek lower emissions products such as low emissions alternative and synthetic proteins. There is good reason to believe that production in Aotearoa will be competitive in a low emissions future where meat and dairy products are still consumed. Farmers are already taking action to improve water quality. Many of these actions also reduce greenhouse gas emissions. This has also been identified and prioritised by government. Meeting our proposed emissions budgets through to 2035 could result in little change to the level of agricultural production as there are practices changes that can be made on-farm to reduce emissions without reducing production. However, the output of milk solids would increase slightly and meat output reduce slightly compared to what would happen under current policy settings (Figure 5.3). The impacts on production beyond 2035 would depend on the availability of new technologies such as a methane inhibitor or vaccine. How can this be managed? Farm businesses will need to adopt practice changes and take up new technology as it becomes available. Action could result in improved international market access. However, it may be challenging for the food and fibre sector to pass on any costs. Our path suggests that making these changes to reduce emissions on-farm will have little impact on how much food and fibre is produced in Aotearoa. Approximately 20,000 to 30,000 farm businesses in Aotearoa will need to reduce their biogenic methane and nitrous oxide emissions by making on-farm practice changes. Many farmers are already making these changes but will need to push these changes further. Making these changes will require skilled farm management and high-quality data. Advisory services will need to work closely with farm managers to achieve this. New technologies such as a methane inhibitor or vaccine would help to significantly reduce emissions from the sector without reducing production. These technologies are not yet available, and so research and development to help bring these technologies forward, and systems for deploying such technologies when they become available will benefit the sector and the economy (see chapter 6, time-critical necessary action 4).
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Figure 5.3: The changes in output of milk solids, meat and forestry that would occur in our path over the first three emissions budgets and out to 2050. Source: Commission analysis. 89
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5.5.2 Energy sector Energy is a vital part of New Zealanders’ day-to-day lives. As well as using energy at home and to power vehicles, it is also used to provide process heat to produce goods that are used here in Aotearoa and sold around the world. Meeting our proposed emissions budgets would require a transformation of the country’s energy system. Our path shows that annual electricity generation would need to increase by around 20% over 2018 levels by 2035 to meet industry and electric vehicles needs. Wind, solar and biomass would expand at a faster rate than expected under current policy settings to meet the country’s energy needs and replace coal and natural gas (Figure 5.4). The Government needs to ensure the electricity system can reliably generate enough supply as Aotearoa shifts away from fossil fuels and increase its dependency on electricity generation. Currently, natural gas and coal provide this security of supply, particularly at peak times and in dry years when hydro lake levels are low. Relying on electricity to meet much of the country’s transport, heating, cooking and industry needs carries risk in a nation exposed to natural hazards and other potential disruptions. In transport, Aotearoa currently relies on imported oil, exposing the country to oil price volatility. Moving to domestic sources of energy for transport could reduce oil imports. This would improve the country’s security of supply and provide opportunities for new businesses and jobs. In the long-term the country’s energy vulnerability could increase due to heavy reliance on electricity. How can this be managed? The Government needs to plan to manage the risk around affordability and security of supply as a result of moving to a low emissions energy system. It is currently investigating options for managing dry year risk under the NZ Battery project, including the proposed Lake Onslow pumped hydro scheme and alternative storage options. The aim is to provide a large amount of storage capacity to manage the risk of dry years where hydro lake levels are low. This project could displace the requirement for thermal generation and achieve an abrupt decarbonisation of the electricity sector. Any solution for managing the dry year risk could be expensive. Other actions to increase resilience of the electricity grid and the system include building new generation in the North Island, reinforcing the transmission infrastructure, deploying new technologies such as batteries, and diversifying into new fuels such as biofuels and hydrogen that boost energy security. All of this will need to be considered by the Government when it is developing a long-term national energy strategy. For more information, see chapter 6 and time-critical necessary action 3.
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Figure 5.4: The changes in demand for coal, natural gas and liquid fossil fuels (in PJ), and in geothermal, wind and solar generation (in TWh) that would occur in our path over the first three emissions budgets and out to 2050. Source: Commission analysis. 91
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5.5.3 Small business Businesses with fewer than 20 employees make up about 97% of Aotearoa businesses. They contribute about 30% of employment and over 25% of GDP. They play a crucial role in the economy, especially in supply chains and larger exporting businesses. Many have been particularly affected by the COVID-19 pandemic. Our emissions budgets and the transition to a low emissions economy will affect all small businesses in some way. Most of this would come via electricity, natural gas and transport prices. For most small businesses, the impact would likely be minor over the course of the first three emissions budgets. This is because our path suggests that wholesale electricity prices would decrease by about 30% by 2026 and then return to close to 2021 levels by 2035 (Figure 5.1), and commercial buildings would be 30% more energy efficient and vehicles 17% more fuel efficient by 2035. However, there are a number of small businesses that currently rely on natural gas. For example, restaurants, cafes and bars often use natural gas for cooking. These businesses will need to move away from natural gas to lower emissions solutions. Our path described in chapter 3 assumes that businesses would replace natural gas appliances at the end of their natural lifetime. Avoiding replacing these appliances early avoids significant additional cost. Most of the country’s 20,000 to 30,000 farm businesses are also small businesses. The changes needed across this sector are discussed in the food and fibre section above. How can this be managed? The ability for small businesses to respond, adapt and innovate will depend on information and support, skills and capability, access to capital, and how well the transition is signalled and planned. By signalling early the changes that are needed, the Government will give small businesses time to respond. This will allow them to replace assets such as vehicles or natural gas appliances with low emissions options on normal replacement cycles, reducing the cost to those businesses. The Government will also need to understand the barriers that small businesses face, and tailor policy to encourage behaviour change (chapter 6, necessary action on supporting behaviour change).
5.5.4 Emissions leakage Emissions leakage is a risk created by the uneven implementation of climate policies around the world. Emissions pricing or other policies aimed at reducing emissions may increase costs for emissions intensive businesses and cause them to lose market share to international competitors who do not face similar costs. If this causes production and investment to shift in a way that increases global emissions, it would be counter to the intended effect of the policy as Aotearoa would be exporting emissions rather than reducing them. In Aotearoa, emissions leakage risk is mitigated by providing potentially affected industrial activities with free allocation of NZUs. This substantially reduces the cost of the Emissions Trading Scheme (NZ ETS) for these businesses. It is also expected that when biogenic methane and nitrous oxide emissions are priced, agricultural activities will receive a high level of free allocation that is likely to protect 92
31 January 2021 Draft Advice for Consultation against emissions leakage. Chapter 12 of the Evidence Report goes into the issue of emissions leakage in more detail. How can this be managed? As noted above, current policy settings address emissions leakage risk connected with the NZ ETS. The Commission will be undertaking further analysis on emissions leakage in the coming years. In relation to agriculture, we will consider the risk of emissions leakage when providing advice on the level of assistance that should be provided to participants in the agricultural emissions pricing system. We expect to provide this advice in 2022. We will also advise on the phase out of industrial free allocation in the NZ ETS. If an ongoing and substantial risk of emissions leakage becomes evident, industrial free allocation phase out rates could be slowed down. The emissions associated with a slower phase out rate would then have to be compensated for by making further emissions reductions in other sectors. Policies other than emissions pricing can also contribute to emissions leakage risk. In our ongoing role in advising on policy direction and monitoring the emission reduction plan, we will look at the design of policies with a view to minimising emissions leakage risks.
5.5.5 Making sure workers have opportunities There will be inevitable changes to employment and jobs as Aotearoa moves towards a low emissions society. Some regions and communities of Aotearoa will be more affected by the climate transition than others. Some communities may see the closure of large businesses that provide significant employment for the community. This would have a big impact as major job losses at a local level can lead to entire communities being left vulnerable and dislocated. Some affected workers may have the mobility and means to acquire new jobs in other industries and regions. Others may not. Affected communities can end up ‘stranded’, where workers with particular skills and expertise are no longer in demand. Aotearoa has already seen the New Zealand Aluminium Smelter announce that it will close. Other emissions-intensive industries and large employers have also announced strategic reviews. There are many reasons for such industry closures besides climate change policy, with the Aluminium Smelter citing energy costs and a challenging aluminium outlook. Closure of these industries has an impact on those who work there. To help understand the impact on employment, we commissioned a new model called the Distributional Impacts Microsimulation for Employment (DIM-E). We ran four scenarios through this model. However, in this section we have focused on two of these scenarios – transition pathway 3 (TP3) and transition pathway 4 (TP4) – that are in line with our proposed emissions budgets and key assumptions. This model cannot tell us about the aggregate effect on jobs in Aotearoa, but provides insights on the flow of work across Aotearoa.
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31 January 2021 Draft Advice for Consultation The coal mining and oil and gas sectors, and the services that support them, will be impacted by the transition away from fossil fuels. This would particularly affect regions in Aotearoa that have fossil fuel extraction industries. Under current policy settings, our modelling indicates that Aotearoa would see about 600 net job losses from these fossil fuel sectors between 2022 and 2035. However, taking action to meet our proposed emissions budgets would result in 600-1100 more net job losses across the coal mining and oil and gas sectors by 2035 (Figure 5.5:). If Aotearoa reduced emissions at a faster rate in the first two emissions budget periods, job losses in these sectors would occur earlier. The jobs that are lost from the oil and gas sector are likely to be highly skilled and therefore high paying jobs. The individuals affected are likely to have skillsets that could be valuable in other sectors, including sectors emerging as part of the transition to a low emissions economy.
Figure 5.5: Simulation results of the average annual change in employment in the fossil fuel sectors in each emissions budget period under the current policy reference case (CPR) and transition pathways 3 and 4 (TP3 and TP4) that are in line with our proposed emissions budgets. Source: Commission analysis – DIM-E results. In some other sectors, our modelling indicates that there could be fewer job losses as a result of taking actions to meet our proposed emissions budgets. For example, our modelling suggests that, under current policy settings, there could be about 4,000 job losses in sheep, beef and grain farming by 2035. However, our modelling suggests that taking actions to meet our proposed emissions 94
31 January 2021 Draft Advice for Consultation budgets would result in 400-700 fewer job losses. This is largely because our proposed emissions budgets would result in less land use change from sheep and beef farming to forestry.
Figure 5.6: Simulation results of the average annual change in employment in the grain, sheep and beef cattle farming sectors in each emissions budget period under the current policy reference case (CPR) and transition pathways 3 and 4 (TP3 and TP4) that are in line with our proposed emissions budgets. Source: Commission analysis – DIM-E results. While our modelling is able to look at existing industries, there will also be new industries that arise as a result of the low emissions transition and from regional development that our modelling is not able to foresee. For example, there are opportunities to create new jobs associated with the circular economy, such as using wood waste for biofuels, and new industries, such as hydrogen. New jobs could also be generated in energy efficiency and home energy audits, advisory services for managing emissions on farm, and on deploying and supporting new technologies, for example. Generating jobs and taking advantage of these new opportunities will require investment and planning. To take advantage of these opportunities and support workers affected by the climate transition, Aotearoa will need the transition to be well-signalled to allow time to plan and localised transitions planning that is tailored by the community for the community. Many of the workers affected will have important skillsets that will be in demand in new low emissions industries. Workers will need to be supported to redeploy into these new areas of work and provided opportunities to retrain and build new skillsets.
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31 January 2021 Draft Advice for Consultation How can this be managed through localised transition planning? Throughout our engagement, we heard about the importance of transition planning that is created for the local community, by the local community. Historically, government has come with more centralised interventions on top of the work being done at a community level. Localised transition planning, where central government works alongside local iwi/Māori, businesses, workers, community groups and local government, will help ensure climate change policies are tailored to regional and local circumstances and address the needs and aspirations of different groups within the community. This kind of co-created and strategic transition planning is already underway in Taranaki. Transparent and inclusive processes, and active social dialogue regarding the transition, are key to achieving a transition that is accepted and enduring. Localised planning is also important for aligning central government, local government and business investment priorities. In some situations, businesses will only invest if they know that complementary investments are being made – for example to supporting infrastructure. How can this be managed through improving productivity, education, skills and innovation? The education, and science and innovation systems in Aotearoa are critical for ensuring low emissions economic growth. Ensuring that people have the skills to move into new jobs, and businesses have the skills and capability to innovate, adopt new technologies and commercialise new ideas is central to an equitable transition. This will ensure more inclusive economic growth, create higher paying jobs and improve living standards. The education system will need to ensure that New Zealanders are set up with the skills that are needed in the labour market. The system will need to focus not just on pre-employment training, but on lifelong learning. Young New Zealanders will need to be set up with the skillsets needed in the future, and workers that might be affected by business closures will need to be supported to upskill. The education system will also need to be more flexible, and address barriers that restrict all New Zealanders from participating in education and training – particularly for Māori. Setting workers up with skillsets needed by the labour market will allow them to pursue their interests, improve their employability and wages, allow them more autonomy in the workplace and enhance their overall wellbeing. For businesses, having employees with the skills and capability to innovate will encourage new ideas and technologies. This will help businesses realise opportunities from the transition and soften any potential competitiveness impacts. Aotearoa is known as a country of innovators and problem solvers. Being an early mover in researching new technologies and adopting existing technologies will benefit not just the climate, but the economy and wellbeing of New Zealanders. This is particularly true in sectors where Aotearoa is traditionally innovative, such as agriculture. 96
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5.6 Specific challenges to address for Māori-collectives and Māori in the workforce Regardless of the level at which emissions budgets are set, there are specific challenges for Māoricollectives and Māori in the workforce that the Government will need to address.
5.6.1 Māori-collectives The Māori economy represents $50 billion or more in assets and is growing. Iwi/Māori-collectives need flexibility to exercise their rangatiratanga and mana motuhake with regard to land use and emissions management. We heard through engagement that some Māori-collectives have received forested land through Treaty settlements. If these forests were established before 1990, they are encumbered with a deforestation liability. However, Māori-collectives may have alternative aspirations for the use of their culturally significant land such as papakainga development. Consideration should also be given to any policies that could disadvantage Māori-collectives operating in the agriculture sector. When agricultural emissions are priced, free allocation should be provided in a way that does not disadvantage operators who were already managing resources in alignment with their kaitiaki values. In addition, some Māori-collectives may not operate intensively due to insufficient resource or being precluded from exercising their decision-making functions as a result of historic arrangements, such as perpetual leases. These Māori-collectives should also not be disadvantaged. Any approach that uses grandparenting is likely to be problematic. These approaches have the potential to compound historic grievances, particularly for iwi with limited resource and where existing provisions are not sufficient. This could also add complexity for iwi where redress assets are returned through a range of settlement entities. Potentially this can limit the ability for iwi to exercise their rangatiratanga under the Treaty. Access to reliable information and quality advice is a key enabler to enhance participation for Māoricollectives and ensure equitable outcomes. Establishing a Māori emissions profile will improve the ability for iwi/Māori-collectives to manage and monitor emissions within their takiwā in the context of their broader social, cultural, economic and environmental objectives.
5.6.2 Māori in the workforce Māori individuals could experience greater changes. Our analysis suggests that 18-25% of those who gain jobs from the transition would be Māori, while 13-21% of those who lose jobs from the transition would be Māori. Māori in the workforce would see more job gains than job losses across all three emission budget periods. BERL has estimated that the current income gap for Māori is $2.6 billion per year, equating to $140 less income per person per week for the working age Māori population. Over half of the working Māori population are in lower skilled jobs, and almost half are in jobs that have a high risk of being replaced by automation. While our analysis does not allow us to distinguish the specific effects on Māori incomes, across the whole population the jobs gained are on average similar or lower paid than those jobs that are lost. The Crown–Māori Economic Development Strategy, He kai kei aku ringa, also has a goal of growing the future Māori workforce into higher-wage, higher-skilled jobs.
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31 January 2021 Draft Advice for Consultation How can this be managed? Research indicates that current education and training providers are not serving Māori well and have low levels of engagement from Māori. Māori who need to retrain or learn new skills as employment changes may be particularly impacted. Education and training developed by Māori for Māori will be important for reducing existing inequities and in ensuring an equitable transition. Care needs to be taken to ensure that actions needed to meet our proposed emissions budgets do not place disproportionate restrictions on iwi/Māori. Iwi/Māori need to be able to exercise their rangatiratanga and mana motuhake to make decisions on how to use or develop their land to meet their collective and culturally driven aspirations and needs. These barriers will need to be addressed to enable Māori to fully participate in climate action, and ensure that Māori-collectives, businesses and workers are not disadvantaged. Any additional costs arising from climate policy could result in additional barriers for the continued development of iwi/Māori landholdings and businesses.
5.7 Impacts of land use change on communities Increasing the amount of native and plantation forest – or afforestation – could play a role in helping achieve the country’s emissions budgets and emissions reduction targets. However, we have heard through our engagement about concerns that the speed and potential extent of afforestation could have negative impacts on rural communities and provincial centres that are reliant on the food and fibre industry for employment. This would include not only those working on the land, but also those involved in transporting and processing food and fibre products. We have factored this into our emissions budgets analysis. This is in line with our principle to focus on decarbonising the economy. There is a risk that forest sequestration could be used to offset emissions rather than making gross emissions reductions. This would make it difficult for Aotearoa to maintain net zero long-lived greenhouse gas emissions beyond 2050, in addition to the potential impacts on communities and the wider food and fibre sector. The impacts of any afforestation will depend on the scale, pace and species of trees that are grown, the purpose for which the trees are grown, the type of land that is afforested, and the land use that is displaced.
5.7.1 Exotic forestry Under current policy settings, the scale of afforestation that is expected to occur would in large part be driven by the emissions price in the Emissions Trading Scheme. Other financial incentives, such as the One Billion Trees programme, land and export prices, would also play their part. Current policy settings and sector infrastructure heavily favour the planting of exotic Pinus radiata over other species. Increasing emissions prices would also incentivise greater establishment of permanent exotic carbon forestry. We heard throughout our engagement about the concern that whole farms could be planted in exotic forests, either for production forestry or permanent carbon forestry. This could have impacts on rural communities and the wider food and fibre sector. 98
31 January 2021 Draft Advice for Consultation Analysis by PwC indicates that converting to production forest would probably generate more jobs across the value chain, while permanent carbon forestry would generate less (Table 5.1). Efforts to increase domestic timber demand by changing building policies could also stimulate the wood processing industry and increase the value chain employment of forestry. Wholesale or large conversions of sheep and beef farmland to forestry would impact communities and reduce employment in the immediate area as forestry-related work is likely to be more concentrated in larger rural towns, particularly those involved in processing. Table 5.1: The number of jobs generated across the value chain by production forestry, permanent carbon forestry, and sheep and beef farming. Source: PwC. Full time equivalent jobs per 1,000 hectares Production forestry
38
Permanent carbon forestry
1-2
Sheep and beef
17
Constraining this price incentive for afforestation through the Emissions Trading Scheme could help limit the overall scale of afforestation, including permanent exotic forests. However, it would not determine where this afforestation would occur, or remedy the relative disincentive for native species. Limiting where afforestation happens would likely require a regulatory approach, through the planning rules or alternative interventions, that place restrictions on land use change. Capacity building and extension services for landowners focused on integrating trees or forestry onto farms rather than wholesale land use change could limit the impacts of afforestation. This could be facilitated by developing carbon monitoring systems that allow for tracking and rewarding sequestration from smaller or dispersed areas of trees. How can this be managed by changing the focus to permanent, native forests? Changing the balance of incentives in exotic versus native afforestation would also alter the impact on rural communities, and the broader food and fibre sector. Native afforestation might generate fewer jobs than exotic forestry, particularly if it is not all planted and harvested, or if land is left to revert to natives. However, native afforestation could be suitable for areas of less productive land where exotic afforestation is inappropriate. It would therefore not come at the expense of other economic activity. Less productive land could be afforested with little impact on farming productivity or employment. Many sheep and beef farms have areas of land that are steep and susceptible to erosion. These areas could be particularly suitable for permanent forests. This would also include Crown owned land. Recent studies put the potential area at 1,150,000 to 1,400,000 hectares. The Biological Emissions 99
31 January 2021 Draft Advice for Consultation Reference Group estimated that approximately 6% of hill country sheep and beef farms could be afforested without negatively affecting production. This equates to approximately 250,000 hectares. Efforts could also be made to promote a native forestry industry. This could have particular relevance for iwi/Māori. Native afforestation could be incentivised by extending grant schemes such as One Billion Trees or by developing ecosystem services payment schemes that could reward the other environmental benefits of native forests. Policies for managing the scale of afforestation, whether it is exotic or natives, and where afforestation occurs is discussed further in chapter 6 and time-critical necessary action 5.
5.8 Environmental impacts Moving to low emissions technologies and changing land practices to meet our proposed emissions budgets would also bring broader environmental impacts. The move to electric vehicles, greater electricity use, and improved fuel efficiency would result in improvements to air quality, as well as the associated health benefits. Many technologies important in the transition to a low emissions economy – including wind turbines, solar panels, and batteries – require mineral and metal inputs. How these minerals and metals are sourced, recycled and disposed could have negative environmental impacts here and overseas. There could be opportunities for innovation in repurposing and recycling these materials. These technologies can have high embodied emissions due to the energy requirements to produce some of these inputs. Additionally, when these technologies reach the end of their life, it can be difficult to dispose of them as they are not easily recycled. Supply chains need careful management and Aotearoa needs to ensure it has access to the latest advances internationally to reduce these adverse environmental impacts. Building new small or large hydroelectric dams could help provide flexible capacity to meet peak electricity demand. Pumped hydro schemes would also provide capacity in dry years where hydro lake levels are low. Such schemes could have substantial landscape and ecological impacts. Flooding large areas of land for water storage could impact water flows downriver of the scheme. This could be to the detriment of nationally significant wetlands, archaeological sites, habitat for endemic bird and fish species, and in some cases endangered or threatened species. Hydro dams can also obstruct native freshwater fish from migrating up and down rivers. Our proposed emissions budgets could be met without the need for new hydroelectric or pumped hydro schemes. Practice changes – such as careful balancing of stocking rates, pasture management and supplementary feed – could reduce emissions on farms and bring co-benefits to water quality and soil health. The scope for practice change and associated co-benefits depends on the farm, the farm’s specific climate and soil conditions, the current management system, and the advice and skills that farm businesses could draw on. Afforestation could also improve biodiversity, water quality, soil health and reduce erosion, if the right type of tree is planted in the right place at the right time. While pine forests can increase biodiversity, including for rare native species, native forests in Aotearoa host hundreds of threatened species and thousands of species. Native vegetation spread across the country’s farms can also provide large 100
31 January 2021 Draft Advice for Consultation connected networks that can serve as stepping stones for birds that disperse tree seeds. Pest control, and fencing out grazing and browsing animals, would be important for both improving biodiversity and enhancing carbon stocks. Land use change from dairy to horticulture on flatter and more productive land could reduce biogenic emissions per hectare. However, it could also cause water quality to deteriorate due to the increased use of fertiliser, and consequential nitrogen and phosphorus losses. Nutrient losses would vary depending on the crop, the site, weather conditions, the soils’ physical and chemical properties, and how the land is managed. Increasing the area of horticulture could also increase water demand in Aotearoa. In light of the physical impacts of climate change, this increased need for water would need to be weighed up when considering converting to horticulture as a climate action. Reducing how much waste is generated and recovered means that landfills will take longer to fill up, potentially reducing the amount of landfills needed in the future. Increasing Landfill Gas Capture at legacy and non-municipal landfills could also lessen the negative impacts on air quality.
5.9 Impact on government taxation and spending The climate transition will also impact on taxation and spending. The Government will need to plan for this. For example, revenue from fuel excise duties and road user charges – that is ring fenced to be spent on land transport – will change over time, though is something that is routinely monitored by the Government. The same would occur for the Waste Levy, which is recycled back into waste minimisation projects, as the amount of waste reduces over time. Reducing oil and gas production in Aotearoa will also result in less tax revenue and will affect the balance of exports as less oil is exported. The Emissions Trading Scheme will generate income for the Government from selling emissions units. The income generated will depend on the volume of units sold, and the market price for units. The Government estimates this could equate to at least $3.1 billion over the next five years under current settings. The Government has options for how to spend these proceeds, including by recycling them back into climate change projects. Government spending on social assistance for workers and families, and for health could also be affected. The impact on this spending will depend on the transition strategy the Government puts in place, the pace of the transition, and how well the Government plans and signals the transition.
5.10 Ensuring an inclusive, equitable and well-planned transition The transition to a low emissions society will bring a mix of opportunities, benefits, challenges and costs. Actions and approaches to reduce emissions should ensure the benefits of climate action are shared across society. It is important that certain individuals and sectors do not unfairly bear the costburden of the climate transition. Not managed well, costs could disproportionately fall on those on lower incomes, some Māori and Pasifika, and people with disabilities. An equitable transition also supports the principles of tiakitanga and intergenerational equity. Managing challenges and impacts for an equitable climate transition requires considering the impacts on society today, but also the impacts on our mokopuna, and on their mokopuna. The need to care for 101
31 January 2021 Draft Advice for Consultation and be active stewards and custodians of our whenua and taonga for future generations must be central to our approach. Maintaining the principle of equity is important to make sure the policy response is enduring, and emissions reductions can be sustained. Certain regions and communities of Aotearoa will be more affected by the climate transition than others. Some may see the closure of large businesses that provide significant employment. In some places, entire communities, ways of life and local identities are built around large businesses that may face closure. Such closures can have a big impact beyond the people employed directly. If unemployment rises and consumer spending falls, there will be a flow on effect to other businesses and workers within the wider community. We have heard consistently through our engagement that localised transition planning will be needed where communities work together to tailor a transition plan to their particular needs and aspirations. We also heard that this localised transition planning will need to be proactive, inclusive and transparent, and co-developed through a bottom up approach that involves iwi/Māori, local government, local communities, businesses, civil society groups and other stakeholders. As Aotearoa transitions to a thriving, climate-resilient and low emissions Aotearoa, new skills, knowledge and capability will be needed in the workforce. Ensuring the workforce’s skills match what is required in the labour market is key to ensuring that businesses can innovate, adopt new technologies or commercialise new ideas. Flourishing businesses will create flow on benefits for workers and communities. Current approaches to skills and training will need to change to prepare the current and future workforce for rapid change. This includes changes to support workers through the transition, and to prepare displaced workers for the new job opportunities that will emerge with it. Increasing New Zealanders’ capacity to adapt, and ensuring that New Zealanders have transferrable skillsets that set them up for success will be crucial. Vocational education and training systems will need to be able to adapt quickly to changing skill demands. Barriers that restrict all New Zealanders from participating in education and training – including some Māori, Pasifika and low income groups – will also need to be addressed.
Time-critical necessary action 1 An equitable, inclusive and well-planned climate transition The transition to a low emissions society needs to be well-signalled, equitable, and inclusive in order to maximise the opportunities, minimise disruption and inequalities, and be enduring as a result. We recommend that in the first emissions budget period the Government develop an Equitable Transitions Strategy that is linked to the Government’s Economic Plan and outlines: •
How the Government will build the evidence base for assessing the distributional impacts of climate change policy decisions that align with tikanga values
•
A process for factoring distributional impacts into climate policy and designing social, economic and tax policy in a way that minimises or mitigates the negative impacts
•
Guidance for developing localised transition plans that are customised for and codeveloped with local government and affected communities.
•
How the Government will support affected workers to transition into new work 102
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Progress indicator Government to have, by 31 December 2023, drafted an Equitable Transitions Strategy linked to their Economic Plan.
Necessary action 1
An equitable, inclusive and well-planned climate transition We recommend that, in the first budget period the Government progress the following steps to meet emissions budgets: a. Identify communities and regions that may be particularly affected by climate change and the transition to a low emissions society, and initiating processes for localised transition planning in these areas. This would require the Government to work in partnership with local government and regional economic development agencies, iwi/Māori, local communities, businesses, civil society groups and stakeholders. b. Develop policies for creating a workforce with the skills needed for accelerating the low emissions transition, including: o
Assessing how the education system sets all New Zealanders up for the low emissions jobs of the future, with skillsets that enable workers to adapt and lifelong learning.
o
Upskilling and redeploying workers transitioning from high emissions sectors.
o
Developing skills and training into low emissions industries by Māori, for Māori.
c. Investigate the specific impacts of the climate transition on small businesses, and develop a plan for how to support them through the transition. d. Assess the Government’s current standards and funding programmes for insulation and efficient heating to determine whether they are delivering at an appropriate pace and scale, and how they could impact housing and energy affordability. The Government should give particular consideration to potential flow through costs to tenants, and to government owned housing stock. e. Improve the evidence base and approach for factoring in co-benefits into climate policy, planning and investment decisions, including to health, transport accessibility, the environment.
Consultation questions 13 An equitable, inclusive and well-planned climate transition Do you support the package of recommendations and actions we have proposed to increase the likelihood of an equitable, inclusive and well-planned climate transition? Is there anything we should change, and why? 103
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Chapter 6: Direction of policy in the Government’s emissions reduction plan The Government is required to develop an emissions reduction plan outlining how it will meet the emissions budgets. This needs to consider not only the actions needed to deliver the first emissions budget, but also the actions needed to set Aotearoa up to deliver on subsequent emissions budgets and the 2050 targets. It is important that policy directed at reducing emissions also focuses on creating an Aotearoa that is thriving and climate resilient. This chapter presents our advice on the policy direction needed in the emissions reduction plan. As the Government develops its approach it needs to make the scale of action required to meet emissions budgets clear, and signal policy changes well in advance to give some predictability about the speed and direction of travel. In preparing our advice on policy direction, we have taken a long-term perspective. We have considered how policies could support kotahitanga, manaakitanga, tikanga and whanaungatanga. As the Government develops its plan to reduce emissions, it also needs to consider how actions will align with these values. Partnership with iwi/Māori at every stage of the policy development process will be critical to support this. A comprehensive and mutually reinforcing package of policies will be needed to achieve the deep emissions reductions required. Such a package should include three different types of intervention to enable change: • • •
Emissions pricing and other market incentives to influence choices. Regulation, education and other action to address barriers. Investments in technology, infrastructure to spur innovation and system transformation.
Figure 6.1 summarises the overarching approach we have used to develop our advice on the policy direction needed.
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Figure 6.1: Elements of a comprehensive climate policy package. Our advice is focused on identifying the goals and key interventions that policies need to deliver. This advice is presented in line with the factors the Minister must consider when preparing the emissions reduction plan: • • •
sector specific policies a multisector strategy a strategy to mitigate the impacts of policies – our advice on this is covered in chapter 5.
6.1 Sector specific policies 6.1.1 Transport Enhance national transport network integration to increase walking, cycling, low emissions public and shared transport, and encourage less travel by private car Aotearoa currently has high rates of vehicle ownership and high rates of travel per person. Increasing the use of low emissions public transport, shared transport, and encouraging walking and cycling would reduce kilometres travelled by light vehicles. This requires communities around the country to have access to safe, convenient, well-integrated, affordable and accessible public or shared transport (including national public transport like trains and coaches), and extensive, high quality cycling and walking infrastructure. 105
31 January 2021 Draft Advice for Consultation Transport options that connect communities and make it easy for people to get where they need to go will be important. End-to-end integrated transport planning is vital to make the system accessible and facilitate the scale of mobility shift required. This includes “first and last kilometre” solutions, operations that are coordinated so services function well together, convenient payment and booking options, secure car parking near public transport, and mobility as a service. Decades of underinvestment in infrastructure and services for public transport, walking and cycling have often made these travel choices slower, less reliable and ultimately less attractive than travelling by private vehicle. Transport planning and funding is largely centered around private vehicle use. Of the approximately $4 billion spent on land transport in 2017, only around $600 million was spent on public transport and less than $100 million on walking and cycling. This may improve based on the strategic direction set out for transport in the new Government Policy Statement on Land Transport 2021 but there should be a large increase funding spent on public and active mobility, including for the national public transport network. One of the main ways to decrease reliance on driving is by designing compact communities with the necessary infrastructure to enable easy access to alternative types of transport. Ensuring this happens at the planning stage is more effective than retrofitting transport needs. There are significant co-benefits from increasing alternative types of transport. In particular, walking and cycling benefit health, and removing cars from the road improves air quality. These benefits are increased if clean public transport, such as electric buses are used.
Necessary action 2
Develop an integrated national transport network to reduce travel by private vehicles and increase walking, cycling, low emissions public and shared transport We recommend that, in the first budget period the Government progress the following steps to meet emissions budgets: a. Deliver specific and timebound targets to increase low emissions public and shared transport and walking and cycling, and supporting infrastructure through strengthening the direction of the Government Policy Statement on Land Transport. b. Significantly increase the share of central government funding available for these types of transport investment, and link funding with achieving our emissions budgets. c. Improve mobility outcomes through measures including supporting public transport uptake nationally and locally by reducing fares for targeted groups (such as for those under 25 years of age), and improving the quality and integration of services. d. Encourage Councils to implement first and last kilometre travel solutions in their transport networks, such as increased on-demand and shared vehicle and bike services, secure park and ride solutions at public transport, and encouraging micro-mobility options. e. Further government encouragement for working from home arrangements.
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31 January 2021 Draft Advice for Consultation Accelerate uptake of electric vehicles Light vehicles are a major source of emissions in Aotearoa and were responsible for almost 11 Mt CO2e emissions in 2018. Most vehicles run on petrol or diesel. Our analysis shows that electrifying light vehicles will play a crucial role in meeting later emissions budgets and the 2050 target. Electric vehicle (EV) ownership in Aotearoa is increasing but remains low. There are currently several supply and demand barriers to people choosing EVs, including higher up-front costs, lack of choice and supply volumes, and the country’s limited leverage for accessing future supplies of EVs. Range anxiety, charging network access and expected battery life also affect demand. An ambitious package of policies is needed to address these barriers. Fiscal incentives to lower the upfront costs of EVs will be an important part of this and should be introduced as a matter of urgency. Other measures will also be needed. Vehicles in Aotearoa produce more emissions and cost more to run over their lifetime than in other countries. Vehicles that enter the country today will be on the road until they are almost 20 years old on average. Conventional internal combustion engine (ICE) vehicles need to be rapidly phased out and replaced by EVs to put transport on track to meeting our proposed emissions budgets. If Aotearoa is to achieve a low emissions vehicle fleet by 2050, all light vehicles entering the country must be low emissions by 2035. Putting a restriction or ban on the import and manufacture of internal combustion engine vehicles should be made in the context of an equitable transition, with additional measures put in place, if necessary, to make EVs accessible to all New Zealanders. One important constraint will be the availability of EVs, particularly those that are second hand. The country’s vehicle market is small, remote, left-side driving, and heavily dependent on used vehicle imports from Japan. However, Japan is prioritising investing in hydrogen and conventional hybrids and has limited EV supply. EV charging infrastructure is relatively well developed in Aotearoa for the number of EVs currently on the road. However, it will need to keep pace with the projected rapid uptake of EVs to ensure wide coverage. More community charging stations will be needed to ensure access for people who cannot charge at home. Action is also needed to build infrastructure to support refurbishment, reuse, recycling and responsible disposal solutions for EV batteries. Lithium-ion EV batteries can be highly polluting and pose a fire risk if not disposed of properly. While EVs will make the biggest difference to the efficiency of the country’s fleet, plug-in hybrids and more efficient petrol and diesel cars can also contribute. Inefficient vehicles use more fuel and therefore have higher emissions. The lack of regulations or restrictions to influence the fuel efficiency of light vehicles entering the country has contributed to the inefficiency of the light vehicle fleet. Clear guidance from the Government on emissions standards is needed to prevent Aotearoa from becoming a dumping ground for inefficient vehicles. There are different international examples of how an intervention to increase the fuel efficiency of the vehicle fleet could be designed. Typically, suppliers would be required to meet an overall average fuel economy or emissions level, which would be weighted across all new vehicle sales in the country and would become more stringent over time. Suppliers would need to sell more efficient vehicles to meet 107
31 January 2021 Draft Advice for Consultation the efficiency target, or pay a penalty. They would be likely to lower the price of efficient vehicles to ensure they make sufficient sales. Accelerating access to EVs is an important issue to consider as part of an equitable transition. Leasing and car share schemes targeted at low income communities should be considered to help address barriers to access.
Time-critical necessary action 2 Accelerate light electric vehicle uptake Light electric vehicle uptake needs to be accelerated as fast as possible. To meet our proposed emissions budgets and be on track for 2050, at least 50% of all light vehicle (cars, SUVs, vans and utes) and motorbike imports should be electric by 2027 (both battery EV and plug-in hybrid EV). To achieve this, we recommend in the first budget period the Government: a. Place a time limit on light vehicles with internal combustion engines entering, being manufactured, or assembled in Aotearoa, other than in specified exceptional circumstances. The limit should be no later than 2035 and, if possible, as early as 2030. b. Introduce a package of measures to ensure there are enough EVs entering Aotearoa, and to reduce the upfront cost of purchasing light electric vehicles until such time as they are cost competitive with the equivalent ICE vehicle. c. Improve the efficiency of the light vehicle fleet and stop Aotearoa receiving inefficient vehicles by introducing an emissions target for light vehicles new to Aotearoa of 105 grams CO2 per kilometre by 2028. d. Develop a charging infrastructure plan for the rapid uptake of EVs to ensure greater coverage, multiple points of access and rapid charging, and continue to support the practical roll out of charging infrastructure.
Progress indicators a. Government to have consulted, no later than 30 June 2022, on preferred policy options for accelerating EV uptake (including a date for placing a time limit on the import of ICEs). b. Cabinet decisions on preferred policy options to be made, as soon as possible but no later than 31 December 2022, on accelerating EV uptake. c. Government to have implemented regulations on improving the fuel efficiency by 30 June 2022.
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Necessary action 3 Accelerate light electric vehicle uptake We recommend that, in the first budget period the Government make progress on the following: a. As part of a policy package introduce a fiscal incentive, such as a feebate or subsidy, to reduce the upfront cost of EVs until such time as there is price parity with ICEs. b. As part of an equitable transition, evaluate and support interventions such as leasing, hire and sharing schemes to remove barriers and address some of the upfront capital costs of EVs. c. Investigate ways to bulk procure and ensure the supply of EVs into Aotearoa and work with the private sector to do so. d. Evaluate how to use the tax system to incentivise EV uptake and discourage the purchase and continued operation of ICE vehicles. e. Work with the private sector to roll out EV battery refurbishment, collection and recycling systems to support sustainable electrification of light vehicle fleet. f.
Evaluate the role of other pricing mechanisms beyond the NZ ETS, such as road pricing, can play in supporting the change to a low emissions and equitable transport system.
g. In setting these policies the Government needs to mitigate impacts for low-income households and people with disabilities, regional and remote access, and with limited access to electricity. Increase the use of low carbon fuels for trains, ships, heavy trucks and planes Low carbon fuels to power vehicles offer an alternative to conventional fossil fuels such as petrol and diesel. This section is focused on three low carbon fuel options – electricity, green hydrogen and biofuels. Low carbon fuels will play an important role in reducing emissions from transport. Even if Aotearoa rapidly converts to EVs, biofuels or hydrogen are likely to be needed for ships, trains, aircraft and longdistance trucks. These heavy vehicles are more difficult to electrify, so the transition is likely to take longer. Our analysis shows that Aotearoa is likely to need 3% of domestic liquid fuels to be low carbon by 2035, which is approximately 140 million litres per year. Achieving this would require building about another seven plants with similar capacity to Z Energy’s existing Wiri plant – 20 million litres per year. Low carbon fuels are more expensive than fossil fuels, and Aotearoa does not currently have incentives or regulations in place to help them become more competitive, or to increase demand. Aotearoa also currently lacks facilities to produce biofuels and hydrogen, limiting their supply.
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31 January 2021 Draft Advice for Consultation Aviation is particularly challenging to decarbonise. There is currently no commercially viable sustainable aviation fuel supply in Aotearoa. In offshore ports where sustainable aviation fuel is being produced, its use has been supported by public funding and other policies. Aotearoa needs policies to address supply and demand, including measures like grants or tax credits to improve competitiveness with fossil fuels. Measures are also needed to create demand and help build a market for low carbon fuels in the long term. There is potential for decarbonising rail through further overhead electrification or through the use of battery-hybrid or low carbon fuel locomotives. Significant parts of the freight rail network have been facing a state of managed decline due to lack of long-term investment and inadequate planning and funding frameworks. The Draft New Zealand Rail Plan sets out a remedial investment programme and a new planning and funding framework to maintain freight rail but does not establish clear targets, or an investment strategy, to increase the share of rail. There is also potential to shift freight from road to coastal shipping.
Necessary action 4
Increase the use of low carbon fuels for trains, ships, heavy trucks and planes We recommend that, in the first budget period the Government take the following steps to support the use of low carbon fuels for heavy vehicles such as trucks, planes, ships, and off-road vehicles to meet emissions budgets: a. Set a target and introduce polices so that at least 140 million litres of low carbon liquid fuels are sold in Aotearoa by 31 December 2035. b. Introduce low carbon fuel standards or mandates to increase demand for low carbon fuels, with specific consideration given to aviation. c. Introduce incentives to establish low emissions fuel plants, such as biofuel sustainable aviation fuel, and make those fuels more competitive with traditional fossil fuels. d. Place further emphasis on decarbonising the rail system, and establish an investment strategy and clear targets to increase the share of rail and coastal shipping.
Consultation question 14 Transport Do you support the package of recommendations and actions for the transport sector? Is there anything we should change, and why?
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6.1.2 Heat, industry and power Decarbonise energy In 2018, the country’s energy supply was 40% renewable. The remaining 60% came from oil, natural gas and coal. This energy is used across the economy in transport, electricity, for heating and by industry. In 2018, the country’s energy use resulted in 32 Mt CO2e. The Government’s aspirational renewable electricity target is part of a bigger energy picture. To meet the 2050 target of net zero long-lived gases Aotearoa needs to transition away from fossil fuels and rely more heavily on renewable electricity and low emissions fuels like bioenergy and hydrogen, and improve energy efficiency. Setting a broader, system-wide target for renewable energy would signal the scale of emissions reductions required across the whole energy system and encourage investment without locking in a prescribed pathway. Developing a national energy strategy would help to ensure that the following aspects of the energy system in Aotearoa are considered in a coherent way: • • • • •
emissions reductions future energy developments infrastructure equitable industry transitions regional and national economic development planning
The objective of such a strategy would be to ensure a smooth and appropriately sequenced phase down of fossil fuels, and scale up of electricity generation and new low emissions fuels in the context of changing supply and demand requirements. Government can provide industry with greater certainty by clearly signalling the timing and direction of travel as the energy system decarbonises, so that industry is able to plan. There will be some nationally significant forks in the road as the energy system decarbonises, where choices will need to be made. For example, whether Aotearoa should keep its gas pipeline infrastructure long term as an option for low emissions gases, or whether a low emissions steel industry is critical for security of supply for the country’s construction industry. Also, whether the skills of those who work in the oil and gas sector should be actively retained in Aotearoa for new low emissions industries. The country’s current energy system is extensive, with a dedicated infrastructure and workforce behind it spread throughout the regions and the transition away from fossil fuels will need to be carefully managed in partnership with industry and communities (see time-critical necessary action 1 in chapter 5).
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Time-critical necessary action 3 Target 60% renewable energy no later than 2035 Setting a target for renewable energy enables the Government to signal the required emissions reductions across the full energy system. Within that context, the 100% renewable electricity target should be treated as aspirational and considered in the broader context of the energy system that includes electricity, process and building heat and transport. We recommend the Government: a. Develop a long-term national energy strategy that provides clear objectives and a predictable pathway away from fossil fuels and towards low emissions fuels, and the infrastructure to support delivery. b. Under the framework of the national energy strategy, set a renewable energy target to increase renewable energy to at least 60% by 31 December 2035.
Progress indicator •
The Government to have, by 30 June 2023, set a renewable energy target of at least 60% by 31 December 2035, set milestones for 2025 and 2030, and released an energy strategy to deliver this target.
Maximise the use of electricity as a low emissions fuel Aotearoa has one of the lowest emission electricity systems in the world. This low emissions electricity can be used to reduce emissions elsewhere through electrifying transport, process and space heating. To reduce the emissions of the electricity system itself, fossil-fuelled generation will need to be phased out and more renewable generation, like wind and solar, will need to be built. We anticipate a steep increase in demand for electricity as the number of EVs on the country’s roads grows. The industry will need to build more low emissions generation capacity rapidly to meet this. Big changes in demand or supply, like the Tiwai Point Aluminium Smelter closing, create uncertainty in the market that can result in generators delaying investment in new renewable generation. Barriers to rapid electrification will need to be systematically addressed. For consumers and industry to invest and convert to electrification, they need to have confidence that electricity will be available, affordable and reliable. The NZ Battery project will deliver advice on potential solutions to the challenge of dry year energy security. While a solution to this challenge could enable Aotearoa to reach 100% renewable electricity, it could cost taxpayers billions of dollars. As noted above, electricity is part of a broader energy transition. Alternative options for reducing emissions should be considered, as other actions may have a larger impact for the same cost. Arriving at 100% renewable electricity is the desired end point, but the timing and sequencing of the transition is important.
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31 January 2021 Draft Advice for Consultation Technology has the potential to change the way New Zealanders generate, store and consume electricity. It will affect how the market could work, and create greater potential for independent and distributed generation, micro-grids and demand response. Innovations like peer-to-peer trading are emerging, and these disruptions create opportunities for Māori-collectives, remote and rural communities and others. Innovations that enable consumers to participate in the market can help to reduce the amount of fossil-fuelled generation required to meet peak electricity demand and replace the need for diesel as back-up generation. The regulatory regime must continue to adapt and respond to innovations, to ensure it can deliver access to abundant, affordable, and reliable low emissions electricity. It must be able to deliver the services needed to underpin electrifying the vehicle fleet and industry. The capacity and capability of electricity distribution businesses will be an important consideration. The Electricity Price Review and others have called for more innovation to be led by these businesses.
Necessary action 5 Maximise the use of electricity as a low emissions fuel We recommend that, in the first budget period the Government take steps to ensure a low emissions, reliable and affordable electricity system to support electrifying transport and industry through progress on the following: a. Under the framework of a national energy strategy, set a date by which coal electricity generation assets must be retired. b. Under the framework of a national energy strategy, decide how to progress solutions to the dry year problem, when this should happen, and at what cost. c. Introduce measures, such as a disclosure regime, to reduce wholesale electricity market uncertainty over Emissions Budgets 1 and 2, to encourage investment in new renewable generation. d. Assess whether electricity distributors are equipped, resourced and incentivised to innovate and support the adoption on their networks of new technologies, platforms and business models, including the successful integration of EVs. e. Enable more independent generation and distributed generation, especially for remote rural and Māori communities, and ensure access to capital for this purpose. f.
Monitor and review to ensure electricity remains affordable and accessible, and measures are in place to keep system costs down, such as demand response management.
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31 January 2021 Draft Advice for Consultation Scale up provision of low emissions energy sources Producing low emission fuels is important in meeting the 2050 target. Government support will be needed to increase the amount of clean energy Aotearoa can produce during the first emissions budget. This will ensure the emissions reductions required in later emissions budgets can be met. Some activities, such as industrial processes that use high temperature heat, will be hard to electrify. Aotearoa will need a range of energy sources to support decarbonisation. Diverse energy sources will also be needed to maintain energy security. Bioenergy and hydrogen both hold promise, but Aotearoa needs to understand how best to make use of their potential. Our analysis indicates that these fuels have significant potential for reducing emissions in transport, process heat and industrial processes. However, more work is needed to support establishing supply chains and infrastructure and making them more cost competitive. To establish a bioeconomy, greater government coherence and coordination is needed. The Government needs to provide direction on the priority uses of bioenergy, to signal the optimal scale of a system, help overcome barriers, and to provide investment and procurement support.
Necessary action 6 Scale up provision of low emissions energy sources We recommend that, in the first budget period the Government make progress in scaling up the provision of new low emissions fuels by: a. Developing a plan for the bioeconomy alongside the new national energy strategy, across transport, buildings, energy, waste, land use and industry. b. Assessing the place that hydrogen has in the new national energy strategy.
Reduce emissions from process heat Reducing emissions from process heat will be critical for meeting the 2050 target. Improving energy efficiency, optimising processes and switching to cleaner energy sources like electricity and biomass are key opportunities. The rate at which emissions can be reduced will be limited by several factors. This includes the time required to convert plants and establish or expand fuel supply chains, as well as how long it takes to upgrade grid infrastructure and build new renewable electricity generation. Our emissions budgets require reduction in the use of coal in boilers of around 1.4 PJ per year. This is a substantial amount, roughly equivalent to the energy used by one very large dairy processing factory. Low and medium temperature process heat is generated predominantly from boilers and is used for food processing and pulp and paper production. The emissions associated with these activities were around 4 Mt CO2e in 2018. Boilers are enduring assets with life cycles of up to 40 years. To get on a low emissions pathway Aotearoa needs to take urgent action to avoid locking in new fossil fuel process heat assets, and focus on converting boilers to low emissions sources of energy. 114
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Necessary action 7 Reduce emissions from process heat We recommend that, in the first budget period the Government take steps to reduce carbon emissions from fossil fuelled boilers by: a. Urgently introducing regulation to ensure no new coal boilers are installed. b. Introducing measures to help reduce process heat emissions from boilers by 1.4 Mt CO2e over 2018 levels by 2030 and by 2 Mt CO2e by 2035. c. Increasing support for identifying and reporting on emissions reduction opportunities in industry, including energy efficiency, process optimisation, and fuel switching. d. Helping people to access capital to reduce barriers to the uptake of technology or infrastructure upgrades such as boiler conversions, energy efficiency technologies, and electricity network upgrades. Support innovation to eliminate emissions from industrial processes Aotearoa has several single company industries with industrial processes that are unique to this country. These industrial processes create emissions that can be challenging to abate. For example, making structural grade steel requires coal as part of the chemical process. Hard-to-abate industries are likely to still create significant emissions in 2050, but they provide products that are fundamental to the economy, like cement, steel and iron. Aotearoa has a choice as to whether it is critical to keep these industries and manufacturing plants based here. If Aotearoa keeps old, emitting plants it would be possible to use forestry to offset the associated emissions. It may be beneficial to investigate the potential of other options to remove emissions from hard to abate industries, such as carbon capture and storage (CCS) or bioenergy combined with CCS (BECCS). However, considerable research would be required as these technologies are still largely in a research and concept phase in Aotearoa. There is also the potential to transform industrial processes from the hard-to-abate sectors to achieve gross emissions reductions in line with climate change targets. The country’s heavy industrial manufacturing plants are relatively old and built to accommodate specific industrial processes. Entirely new industrial processes and technologies could potentially be adopted, or plants could be modernised between now and 2050, or retrofitted to make use of alternative fuels. Other choices are also available; for example, Aotearoa could import products from low emissions manufacturing plants overseas. Retrofitting industrial plants with new technologies or building new low emissions processes for the hard-to-abate sectors is expensive based on current cost estimates. Significant research, development and innovation is required. Technologies developed overseas may need to be adapted to work in the unique Aotearoa industry processes. A long-term strategy for hard-to-abate industries should be developed and closely linked to the country’s Economic Plans, national infrastructure developments and equitable transitions planning. If the Government decides these hard-to-abate industries are critical national infrastructure, it must 115
31 January 2021 Draft Advice for Consultation work collaboratively and inclusively to ensure that people working in these industries are upskilled appropriately.
Necessary action 8 Support innovation to reduce emissions from industrial processes We recommend that, in the first budget period the Government take steps to support innovation in hard-to-abate industrial processes, including by: a. Developing a long-term strategy for the future of hard-to-abate industries, including iron, steel making, cement and lime production and petrochemical production. This strategy should be developed alongside the national energy strategy, future Economic Plans and strategies for an equitable transition (see time-critical necessary actions 1 and 3). b. Based on the outcome of the strategy, investigating whether bespoke solutions requiring research and development specific to Aotearoa will be required. Efficiently use energy in buildings The most cost-effective way to reduce energy emissions is to reduce the amount of energy consumed. Energy efficiency generally improves at the rate of 1% per year, but this needs to increase. In particular, energy efficiency measures to lower peak electricity demand can have a large impact and reduce costs. Our analysis shows that the biggest opportunity to reduce emissions associated with operating buildings is by reducing fossil fuel use, especially gas. Continued improvements in the energy efficiency of existing buildings is also essential, particularly in large commercial buildings and public buildings. Some of the technology required to make homes or businesses more efficient can be costly, and this is often a barrier to adoption. For example, measures like installing insulation can significantly improve energy efficiency, but come with upfront purchase and installation costs. The complexity of the retail electricity market can also disincentivise consumers from making changes that could save them money and reduce emissions. Electricity is a more efficient and lower emissions source of energy for heating homes and businesses than gas. To get on a low emissions pathway Aotearoa needs to avoid locking in new gas assets. Portable LPG heaters are a relatively expensive and unhealthy way of heating homes. We recognise that people may not have an alternative or better choice, and to ensure an inclusive transition it is important that everyone can equally access affordable electricity to adequately heat their homes. The Government and industry should consider how they can ensure that everyone is able to participate in the move to a low emissions future.
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Necessary action 9 Increase energy efficiency in buildings We recommend that, in the first budget period the Government introduce measures to transform, transition and reduce energy use in buildings. Measures should include: a. Continuing to improve energy efficiency standards for all buildings, new and existing stock, through measures like improving insulation requirements. Expand assistance which targets low-income households. b. Introducing mandatory measures to improve the operational energy performance of commercial and public buildings. c. Setting a date by when no new natural gas connections are permitted, and where feasible, all new or replacement heating systems installed are electric or bioenergy. This should be no later than 2025 and earlier if possible. Transport, buildings and urban form Urban form influences emissions from waste, transport and energy. While there have been numerous studies on the impact urban form, density, mobility, land use and planning have on emissions, robust quantitative evidence and information remains limited. Further investigation is needed to develop an understanding of the connections between urban planning, design, infrastructure, and climate change mitigation and adaptation. This is important to inform the design of policy interventions to reduce emissions from cities and towns, transport networks and buildings. Achieving emissions reductions through changes to urban form takes a long time. Emissions from urban form are also influenced by many pieces of legislation, some of which are in the process of being amended – such as the Resource Management Act. The Government should ensure that the review of resource management legislation enables low emissions transport and building systems. The range of different emissions sources affected by urban form can make it difficult to ensure accountability and coordinated planning and investments, and to ensure decision making is focused on clear outcomes.
Necessary action 10 Reduce emissions from urban form We recommend that, in the first budget period the Government promote the evolution of urban form to enable low emissions transport and buildings through ongoing legislative reform: a. Develop a consistent approach to estimate the long-term emissions impacts of urban development decisions and continually improve the way emissions consequences are integrated into decision making on land use, transport and infrastructure investments. b. Ensure a coordinated approach to decision making is used across Government agencies and local councils to embed a strong relationship between urban planning, design, and transport so that communities are well designed, supported by integrated, accessible transport options, including safe cycleways between home, work and education. 117
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Consultation question 15 Heat, industry and power sectors Do you support the package of recommendations and actions for the heat, industry and power sectors? Is there anything we should change, and why?
6.1.3 Agriculture Reduce biogenic agricultural emissions through on-farm efficiency and technologies Changing on-farm management practices can reduce biological agricultural emissions, and will be enough to achieve the 2030 biogenic methane target. Changes include adjusting stocking rates, supplementary feed and nitrogen inputs for emissions efficiency, as well as breeding low emissions sheep into the national flock and using low nitrogen feeds. Many of these changes will be driven by freshwater policy, so farmers may already be taking actions to reduce their emissions. Policies need to be cohesive across environmental issues to ensure they achieve multiple outcomes. Achieving emissions reductions of the scale required will rely on highly skilled farm management and high-quality data to support decision making. The Biological Emissions Reference Group found these emissions reductions could be achieved without reducing profitability. Increasing technology use on farms will help to support efficiencies and reduce environmental impacts. Improved rural connectivity via broadband will make it easier to access the information and data farmers need to measure and monitor emissions and will support precision agriculture approaches. In addition to improving efficiency on farms now, the successful development of new technologies and practices would provide greater flexibility and allow Aotearoa to meet the more ambitious end of the 2050 biogenic methane target range without reducing agricultural production. Promising options currently being researched and developed include a methane inhibitor that would be compatible with the pastoral farming system and a methane vaccine. Government investment into research and development to reduce biological emission from agriculture is secured out to 2025, but there is no long-term plan beyond then. The country’s food safety system serves an important purpose and ensures products are safe and trusted internationally. However, it can take some time to get new mitigation technologies through the system, or even identify whether they need to go through the system. Streamlining the system would ensure that any effective new technologies and practices to reduce agricultural emissions can be implemented in a timely manner. As noted by the ICCC, pricing biological emissions from agriculture would help to incentivise on-farm efficiency improvements and technology uptake. Government is working with industry through the He Waka Eke Noa Partnership to develop a farm level pricing system. The partnership is also developing the information and support needed to manage farms in a low emissions way, including training, extension, and farm and forestry advisory services. It will be important that these tools can deliver emissions reductions consistent with emission budgets and targets, and that they endure beyond 2025. The Commission will review He Waka Eke Noa’s progress in 2022.
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31 January 2021 Draft Advice for Consultation Many other potential ways of reducing emissions from the food and fibre system have also been proposed. For example, there has been discussion about the use of genetic engineering, and practices to increase carbon sequestration and resilience (often under the banner of regenerative agriculture). Evidence of effectiveness within an Aotearoa context, and discussions about the acceptability of different approaches, is needed.
Time-critical necessary action 4
Reduce biogenic agricultural emissions through on-farm efficiency and technologies Currently available changes to management practices have the potential to meet the 2030 biogenic methane target. New technologies would provide greater flexibility and the ability to meet the more ambitious end of the 2050 biogenic methane target range without reducing output. We recommend that in the first budget period that the Government: a. Ensure that effective mechanisms are in place so that the plans, advisory and guidance tools developed by He Waka Eke Noa will endure beyond 2025 and can support achievement of the emissions budgets and targets. b. Drawing on the work of He Waka Eke Noa, decide in 2022 on a pricing mechanism for agricultural emissions as is required by legislation that is suited to the characteristics of the sector and capable of supporting achievement of the emissions budgets and targets. c. Ensure the Rural Broadband Initiative is resourced and prioritised to achieve its 2023 target, so that farmers have access to data and information to support decision making and the ability to practice precision agriculture. d. Review current arrangements and develop a long-term plan for targeted research and development of technologies (including evaluating the role of emerging technologies such as genetic engineering) and practices to reduce biogenic emissions from agriculture. e. Review and update processes and regulatory regimes to ensure that new emissions reducing technologies and practices can be rapidly deployed as and when they are developed.
Progress indicators a. Government to have, by 31 December 2022, developed a long-term plan for funding research and development to support reductions in biological emissions from agriculture. b. Government to have, by 31 December 2022, reviewed and amended processes and regulatory regimes for new emissions reducing technologies and practices.
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31 January 2021 Draft Advice for Consultation Create options for alternative farming systems and practices Diversifying land uses and switching some land that is currently in livestock agriculture to uses like horticulture or arable cropping could reduce emissions. Transforming to alternative farming systems is unlikely to play a large role in the first few emissions budgets as the land area converted is likely to be a small percentage of that currently in pastoral farming. However, work done in the next few years can unlock future options that could play a key role in future emissions budgets. There are currently some significant barriers to changing land use – such as market access, supply chains, and lack of experience, skills, support and infrastructure. Investment in new farming systems is higher risk if infrastructure like packhouses, transport and water storage do not already exist – and vice versa. Different land uses have opportunities, risks and implications that have not yet been fully explored and understood in the context of the low emissions transition. Land is an important resource with the potential to support many important outcomes across environmental, social, cultural and economic domains. Better data, information and tools would help decision makers at all levels – including landowners, local and central government – to make decisions across a range of outcomes. Water storage implications of different farming systems need to be considered in the context of broader water quantity and quality issues within Aotearoa. Implications for adaptation to climate change, and the implications for iwi/Māori (relating to use, ownership, access and cultural impacts) and broader Māori rights and interests as a Treaty Partner are also critical. Reform of resource management legislation, for example via a Strategic Planning Act, provides an opportunity to take a more holistic approach. Verification of the emissions footprint and broader sustainability of products can help to support market access. Focusing the Government’s international market access work on the country’s sustainable, low emissions food and fibre products could help overcome market access barriers and encourage landowners to move to lower emissions land uses.
Necessary action 11 Create options for alternative farming systems and practices We recommend that, in the first budget period the Government support alternative farming systems to reduce emissions by: a. Accelerating investment in high resolution, consistent, publicly available nationwide land and climate information, and decision-making tools and processes, to better inform local and national land use decisions. b. Supporting deployment of the systems and infrastructure needed for alternative farming systems and products. c. Prioritising initiatives to reduce barriers and enable international market access for proven low emissions food and fibre products.
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Consultation question 16 Agriculture Do you support the package of recommendations and actions for the agriculture sector? Is there anything we should change, and why?
6.1.4 Forestry Manage forests to provide a long-term carbon sink Forests will play an important role in meeting the country’s emissions budgets and targets. Our path for gross emissions requires at least 16,000 hectares of new native forests per year by 2025, and 25,000 hectares per year by 2030 until at least 2050. It also requires 25,000 hectares per year of exotic afforestation out to 2030, reducing down to no new exotic afforestation for carbon removals by 2050. This exotic afforestation would provide sufficient biomass feedstock for the bioeconomy. Further reliance on forestry as a carbon sink could divert action away from reducing gross emissions in other sectors, and make maintaining net zero emissions after 2050 challenging. However, new permanent native forests could provide an enduring carbon sink to help offset residual long-lived emissions over the long term. Native forests remove carbon at slower rates than exotic planted forests, but permanent native forests continue to remove carbon for hundreds of years. Native forests also offer other benefits, such as long-term erosion control, improved biodiversity and recreational benefits. There is an estimated 1.15 to 1.4 million hectares of erosion prone land, much of which would not be suitable for production forestry but could be suitable for converting to permanent forest. Manaaki Whenua estimate around 740,000 hectares of marginal land not suitable for commercial forests could naturally regenerate (i.e. without planting) if pests are managed. Some of this land is government owned. However, there are currently limited incentives for landowners to change less-productive farmland to permanent native forests – either through planting or by letting it revert. Establishing permanent native forests comes at a cost for landowners, including building and maintaining fences, planting, weed and pest control, and some land would be lost to grazing. Ongoing pest control is required to maintain the integrity of forests and the carbon stored in them. Production forests could play multiple roles in the transition to low emissions. This includes as a carbon sink in the short to medium term, by providing low emissions wood products to replace higher emissions alternatives (for example, in construction), and by substituting bioenergy for fossil fuel use. However, production forests only contribute towards meeting the country’s emissions budgets and targets up until they reach their long-term average stock – which is around 20 years for Pinus radiata. Production forests planted over the next decade will continue to contribute towards emissions budgets until about 2050, while forests planted beyond 2030 will contribute to removals in the longer term. Current NZ ETS settings may incentivise more large-scale pine plantations than is desired to meet 2050 targets and could lead to forestry displacing gross emissions reductions. Any option to limit planting exotic forests for carbon removals, including amendments to the NZ ETS, would need to be carefully explored and analysed, including working with people who may be affected by the changes, to 121
31 January 2021 Draft Advice for Consultation understand the implications and avoid unintended consequences. Concerns over the impact of whole farm or large-scale conversions to forests would likely need to be addressed by approaches outside of the NZ ETS, such as through land use rules under planning legislation. The additional carbon removed by small areas of permanent vegetation on farms is not currently recognised in target accounting, although it is in the national greenhouse gas inventory. Ongoing technology developments, however, may make it more possible to robustly estimate emissions from these areas in future. It is also important to enhance and maintain carbon stocks in existing forests, even though there are challenges with robustly estimating the impact on carbon stocks of forest management activities for this purpose. There are many other worthwhile reasons beyond climate change to plant forests. Decisions about incentives for forestry should be considered alongside other strategic outcomes for the country’s land including water, biodiversity, cultural, social and economic outcomes. This could be done through proposed changes to the country’s resource management legislation. Some iwi/Māori-collectives own large areas of land, and face challenges transitioning land use. The Crown needs to work in partnership with iwi/Māori-collectives to understand their aspirations for land use – particularly forestry. Unharvested pine forests or permanent exotic forests can sequester carbon rapidly but can create problems through the spread of wilding pines or when old trees die and fall over. Such forests may transition over the course of several centuries into permanent native forest if managed for that outcome. Forest management plans can lay out how this transition will be managed. Requiring forest managers to develop and implement such plans would help ensure successful transitions. These would need to include activities such as pest control, seed sources and thinning. More broadly, delivering this level of native afforestation will require the supporting industries and infrastructure. This includes native seedling nurseries, and the labour force for planting and pest control.
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Time-critical necessary action 5
Manage forests to provide a long-term carbon sink Production forests will play an important role in meeting the first three emissions budgets, and new permanent native forests will also balance emissions from hard-to-abate sectors in the long term. The Government should enable afforestation to provide a carbon sink over the longterm by: a. Implementing measures to incentivise establishing and maintaining at least 16,000 hectares of new permanent native forests per year by 2025, increasing to at least 25,000 hectares per year by 2030 and continued until at least 2050. b. Requiring an appropriate forest management plan for all forests over 50 hectares defined as permanent to monitor the forest’s permanence and limit exposure to risks such as climate change impacts, governance failure, and community impacts. c. Designing a package of policies that must include amendments to the NZ ETS and land use planning rules, to deliver the amount and type of afforestation needed over time to align with our advice on the proportion of emissions reductions and removals and addressing intergenerational equity.
Progress indicators a. Government to have put in place incentives, by 31 December 2022, to deliver the afforestation of new permanent native forests to help meet the emissions budgets. b. Government to have published, by 31 December 2022, a plan for the broader package of forestry policies, and to have implemented the policies by 31 December 2024 at the latest.
Necessary action 12 Manage forests to provide a long-term carbon sink We recommend that, in the first budget period the Government make progress in maintaining and increasing the amount carbon stored in forests by: a. Improving and enforcing measures to reduce deforestation of pre-1990 native forests. b. Encouraging storage of additional carbon and maintaining carbon stocks in pre-1990 forests through activities such as pest control, noting that these removals may be outside of current emissions accounting approaches. c. Evaluating approaches for storage of new and additional carbon through small blocks of trees and vegetation, noting that these removals may be outside of current emissions accounting approaches. 123
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Consultation question 17 Forestry Do you support the package of recommendations and actions for the forestry sector? Is there anything we should change, and why?
6.1.5 Waste Reduce emissions from waste Preventing waste at source is the most effective way to reduce emissions, followed by recovering, reusing and recycling waste before it gets to landfills. Most emissions from waste come from the decay of organic material, and organic waste that cannot be avoided or recovered should be disposed of in landfills that capture the emissions, and potentially generate electricity. These approaches lead to a more ‘circular’ economy with lower emissions beyond just the waste sector. The New Zealand Waste Strategy 2010 is due to be replaced, providing an opportunity to set ambitious waste reduction targets and supporting policy. A lack of collection and processing infrastructure means that opportunities to divert and recover waste are currently inconsistent and limited. The increase in the landfill levy in 2021 will help to reduce waste and lead to a substantial increase in the Waste Minimisation Fund, providing resources to support these activities. Product stewardship schemes are a mechanism to make producers and importers responsible for the environmental footprint of their products, including end of life disposal. These schemes ensure that manufacturers, importers and retailers provide options for consumer and communities to reuse, recycle or appropriately dispose of products when they are no longer needed. Six ‘priority products’ are covered under the New Zealand stewardship scheme, and this should be extended. There is currently a lack of quality data across the waste sector in Aotearoa. Better data collection will help identify mitigation opportunities and move Aotearoa to a more circular economy. Public education could also help reduce overall consumption, which would reduce both waste and manufacturing emissions.
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Necessary action 13 Reduce emissions from waste We recommend that, in the first budget period the Government take steps to support the reduction of waste at source, increase the circularity of resources in Aotearoa and reduce waste emissions by: a. Setting ambitious targets in the New Zealand Waste Strategy for waste reduction, resource recovery and landfill gas capture to reduce waste emissions in Aotearoa by at least 15% by 2035. b. Investing the waste levy revenue in reducing waste emissions through resource recovery, promotion of reuse and recycling, and research and development on waste reduction. c. Measuring and increasing the circularity of the economy by 2025. d. Extending product stewardship schemes to a wider range of products, prioritising products with high emissions potential. e. Legislating for and funding coordinated data collection across the waste industry before 31 December 2022.
Manage the transition from hydrofluorocarbons Refrigerants are essential chemicals that enable perishable food to be transported and stored, and the heating and cooling of interior spaces. Hydrofluorocarbons (HFCs) are the most common type of refrigerant used in Aotearoa. HFCs are potent synthetic greenhouse gases, which present in low atmospheric concentrations. HFCs are regulated under the Kigali Amendment to the Montreal Protocol with all the signatories (including Aotearoa) agreeing to reduce the use of HFCs by more than 80% over the next 30 years. In 2020, the Government declared refrigerants one of six priority products under the Waste Minimisation Act, which means a product stewardship scheme is required for imports of HFCs. The Government is reducing HFC imports in line with the Montreal Protocol, but there is currently no limit on the import of finished products that contain HFCs, such as air conditioning in vehicles. A lot of existing equipment in Aotearoa contains HFCs, so there will be a lag between taking action to phase down HFCs and achieving emissions reductions. Low emissions refrigerant alternatives exist, but a lot of existing equipment is not compatible with them. Many HFC emissions are due to leakage as a result of poor maintenance and improper disposal of equipment.
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Necessary action 14 Manage the transition from hydrofluorocarbons Consistent with the Kigali Amendment to the Montreal protocol, we recommend that, in the first budget period the Government supports reducing emissions of hydrofluorocarbons (HFCs) used as refrigerants by: a. Extending HFC import restrictions, where feasible, to include finished products and recycled bulk HFCs by 2025. b. Reducing leakage and improper disposal of HFCs through mandating good practice from business and technicians.
Consultation question 18 Waste Do you support the package of recommendations and actions for the waste sector? Is there anything we should change, and why?
6.2 Multisector strategy 6.2.1 Integrate government policy making across climate change and other domains Coherent policy is important to ensure that government sends clear and consistent signals to households, business and communities about the transition to low emissions, and the nature and speed of change required. The current siloed nature of Aotearoa government machinery presents a challenge. While the Ministry for the Environment holds the lead in terms of the overall architecture of climate policy, the policy levers for the different sectors sit with a range of other agencies. For these other agencies, climate change is not their core business and climate considerations are often crowded out by other priorities. Another challenge is the lack of ‘mainstreaming’ of climate change considerations across government policies and procedures. Measures such as tax levers and structures, procurement procedures, and cost benefit and regulatory impact analysis are all instruments that can be used to support climate outcomes, but this is not done systematically, which can undermine climate change goals. Consistent signalling across investments, policy statements, direction to officials and internal policies and directives is important to ensure that all regulatory and policy frameworks are aligned with low emissions objectives. Different agencies also give different weighting to various concerns in their decision making. To ensure that climate change goals are not undermined, it is important that climate change is considered in the development of all new policies, regulations and fiscal proposals. Some activities that take place across sectors, such as tourism, have a large impact on emissions, but opportunities for reducing emissions are often not well understood due to their cross-cutting nature. The responsible government agencies do not have climate change as part of their core business, and do not focus on low emissions objectives. 126
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Integrate Government policy making across climate change and other domains We recommend that, in the first budget period the Government make progress on integrating policy making across climate change and other domains by: a. Providing consistent signaling across investments, policy statements, direction to officials, internal policies and directives to ensure that all regulatory and policy frameworks are aligned with low emissions and climate resilience objectives. b. Investigating emissions reduction potentials and interdependencies amongst multisector activities, such as food production and distribution, tourism, construction and international education. c. Ensuring that central and local government considers climate change alongside other environmental, social, economic and cultural aspects by including requirements in new resource management legislation, such as the proposed Natural and Built Environments Act, the Strategic Planning Act and the Managed Retreat and Adaptation Act. d. Requiring government procurement policies to include climate change considerations, in order to leverage purchasing power to support low emissions products and practices, particularly with regard to third party funding and financing transactions. e. Facilitating opportunities for iwi/Māori to participate in ownership of infrastructure or involvement in projects that align with iwi/Māori aspirations and climate positive outcomes.
6.2.2 Support behaviour change Transitioning to a low emissions economy will require New Zealanders to change some aspects of their lives. People will need to change the type of car they choose to drive, the way they choose to travel, and the way they heat their homes. Many businesses will need to switch to new processes and ways of doing things. Many farmers will need to change how they manage their land. Technology is only part of the climate solution; the other part is creating the enabling environment for New Zealanders to make choices that support low emissions outcomes. Understanding how to encourage long-term and sustainable behaviour change will require an evaluation of current and past programmes in Aotearoa and internationally to determine what tools to use and why. Although there have been some effective behaviour change initiatives involving multiple agencies in other areas, such as for road safety, there has been no systematic effort in Aotearoa that focuses on changing behaviour for climate change outcomes. A specific focus on how behaviour change can support climate action, with the input from different communities and stakeholders, would ensure that policies are targeted and fit for purpose.
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Support behaviour change We recommend that, in the first budget period the Government embed behaviour change as a desired outcome in its climate change policies and programmes in order to enable New Zealanders to make choices that support low emissions outcomes.
6.2.3 Require entities with large investments to disclose climate related risks Climate change exposes the financial system to risk and instability. Without clear and transparent information about exposure to climate risk, firms, lenders, investors, insurers and other stakeholders may be left with unforeseen liabilities, or risky investments. Internationally, firms are increasingly being required to provide information on the extent of their climate risk exposure and to identify how those risks are being managed – known as climate related risk disclosure. Such disclosures generally include information about a firm’s exposure to transition risks such as ownership of emissions intensive assets, physical risks from climate impacts, as well as information about how the risks will be managed. The mandatory financial disclosures regime proposed by the Government is an important step in helping to ensure investors, insurers, consumers and others have the necessary information to make informed choices and avoid exposure to climate risks. The ongoing review of this regime will be important to ensure that it remains fit for purpose in the future, and as knowledge about the nature of climate risks evolves.
Necessary action 17 Require entities with large investments to disclose climate related risks We recommend that, in the first budget period the Government: a. Implement the proposed mandatory financial disclosures regime and explore the creation of a similar regime that covers public entities at the national and local level. b. Evaluate the potential benefits of mandatory disclosure by financial institutions of the emissions enabled by loans over a specified threshold.
6.2.4 Factor target-consistent long-term abatement cost values into policy and investment analysis The Government’s policy decisions and investments must not lock Aotearoa into a high emissions development pathway or increase exposure to the impacts of climate change. At the moment, there are insufficient safeguards in place to prevent this. Incorporating long-term abatement cost values consistent with climate change goals into the Government’s cost-benefit or cost-effectiveness analysis would have a powerful effect in helping to make sure policy and investment decisions are net zero compatible. This is sometimes termed a “shadow price” on emissions and is common practice internationally. The use of long-term abatement 128
31 January 2021 Draft Advice for Consultation cost values by local government and the private sector would also help to make sure other infrastructure and investments are future proof. Work has progressed on developing a consistent approach to incorporating long-term abatement cost values consistent with climate change goals into government decision making, but it is still not widely embedded within government processes. The Commission’s modelling has enabled a better understanding of the marginal abatement costs likely to be required in Aotearoa to meet the emissions budgets and 2050 target. Our analysis suggests that marginal abatement costs of around $140 per tonne of CO2e abated in 2030 and $250 in 2050 in real prices are likely to be needed, as outlined in chapter 3. This information should inform the values used for policy and investment appraisal in Aotearoa.
Time-critical necessary action 6 Align investments for climate outcomes To meet emissions budgets and achieve the 2050 target, it is important that policy decisions and investments made now do not lock Aotearoa into a high emissions development pathway. Safeguards and signals will be needed to prevent this, including a specific focus on ensuring long-lived assets such as infrastructure are net-zero compatible. To achieve this, we recommend in the first budget period the Government: a. Immediately start to factor target-consistent long-term abatement cost values into policy and investment analysis in central government. These values should be informed by the Commission’s analysis which suggests values of at least $140 per tonne by 2030 and $250 by 2050 in real prices. b. Encourage local government and the private sector to also use these values in policy and investment analysis. c. Ensure that economic stimulus to support post-COVID-19 recovery helps to bring forward the transformational investment that needs to happen anyway to reach our joint climate and economic goals. d. Investigate and develop a plan for potential incentives for businesses to retire emissions intensive assets early. e. Require the Infrastructure Commission to include climate change as part of its decisionand investment-making framework, including embedded emissions and climate resilience f.
Investigate and develop plans to mobilise private sector finance for low emissions and climate-resilient investments.
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Progress indicators a. Government to start, as soon as possible and by no later than 31 March 2022, factoring target-consistent long-term abatement cost values into policy and investment analysis. b. Government to publish, as soon as possible and by no later than 31 March 2022, how the COVID-19 economic stimulus is helping to accelerate the climate transition.
6.2.5 Building a Māori emissions profile Our advice has relied heavily on the economic, social, cultural and environmental evidence and data available. Some sectors have a wealth of evidence and data, for example transport. In others the evidence and data available is old and inconsistent, for example land-use classification data. Our advice is the first of its kind for Aotearoa, and we have discovered some gaps in the evidence and data needed to properly analyse the impacts and co-benefits of climate change policy that need to be addressed. A key gap relates to the Māori economy, which is an important aspect of Māori development and intergenerational sustainability and prosperity. The Māori asset base is estimated at $50 billion. Without a clear understanding of the current state of emissions from Māori-collectives or a Māori emissions profile, it will be hard to make sure that emissions budgets and efforts to reduce emissions are equitable. A Māori emissions profile would enable Māori-collectives to have oversight of and manage emissions collaboratively across their takiwā, which would better enable the balancing of traditional concepts and practices of rangatiratanga/mana motuhake, alongside contemporary cultural, social, and economic aspirations for iwi, hapū and whānau. An attempt at estimating a Māori emissions profile by iwi takiwā could be achieved by Crown agencies working collaboratively to build on existing data, such as Te Puni Kōkiri’s Toku Whenua platform, to include additional data such as forestry site coverage, stocking rates and iwi/tikawā boundaries. The Government could then support iwi/Māori to stand up their own platform to effectively measure and monitor emissions within their takiwā, and incorporate this information into planning and decision making. This would support iwi/Māori-collectives to control their own emissions, and to demonstrate leadership and impact in achieving climate positive goals. Any platform would need to ensure iwi/Māori-collectives maintain mana motuhake (control and autonomy) over their data and information.
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Building a Māori emissions profile We recommend that, in the first budget period the Government facilitate a programme and direct funding to support Māori-collectives (particularly at an iwi level) to capture and record their own emissions profile within their respective takiwā. This will give effect to rangatiratanga by enabling iwi/Māori-collectives to effectively manage and monitor their emissions and enhance intergenerational planning. 130
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6.2.6 Strengthen market incentives to drive low emissions choices Emissions pricing is a powerful tool, and an essential component of an effective policy package for reducing emissions. In Aotearoa, the main emissions pricing instrument is the New Zealand Emissions Trading Scheme (NZ ETS). The NZ ETS will need adjusting on an ongoing basis to keep it fit for purpose. Since 2016, a series of reforms have been undertaken. The NZ ETS now has much of the architecture it needs to be effective, but further improvements are needed, detailed below. Adjust ETS unit volumes and price control settings to align with budgets The Commission’s recommended emissions budgets differ from the provisional emissions budget that was used to inform NZ ETS unit supply and price control settings for 2021-2025. In 2021, these settings must be updated to cover the 2022-2026 period. They include the volume of units to be auctioned in the NZ ETS as well as the auction reserve and cost containment reserve trigger prices, which start at $20 and $50 respectively in 2021. The Commission’s modelling indicates that meeting the 2050 target will involve marginal abatement costs higher than these NZ ETS auction price control settings, at around $140 in 2030. In addition to this indicative upper value, our evidence suggests that in process heat, a sector where an emissions price can be expected to play an important role in driving decarbonisation, significant opportunities exist at costs from around $50 upwards. These costs should not be interpreted as a forecast of the NZ ETS market prices. The prices observed in the NZ ETS will depend on the mix of policies implemented to meet emissions budgets. The more that the Government chooses to complement the NZ ETS with other policies, the more likely it is that the NZU price in the NZ ETS can be lower while still achieving the same overall emissions reductions. Regardless of the policy combination chosen, the auction reserve and cost containment reserve price triggers in the NZ ETS need to be higher. The price corridor they signal should be sufficiently wide to allow price discovery by the market to occur and factor in inflation to prevent the price levels from eroding in real terms. The NZ ETS cost containment reserve trigger price should be set well above expected market prices. An initial step up in value, to mitigate risks that it will be triggered and add to the NZU stockpile, should be followed by annual increases to give a trajectory that allows for prices of at least $140 in 2030. The auction reserve price trigger should also step up, to a higher value closer to recent market prices, to ensure price continuity and to safeguard existing investments (we note the afforestation levels in our modelling are based on an assumed emissions price of $35). The annual increases after this can be more moderate than those to the cost containment reserve trigger price, to manage risks of creating unintended speculative opportunities. The unit volumes making up the NZ ETS cap, including the amount of units to be auctioned, will also need to be updated to reflect the first and second emissions budgets. Both unit volume and price control settings should continue to factor in the need to reduce the NZU stockpile. 131
31 January 2021 Draft Advice for Consultation The current framework for incentivising forests through the NZ ETS also does not align with our recommended focus on driving gross emissions reductions and a change in the balance of exotic versus native afforestation. Improve ETS market governance Good governance of the NZ ETS is important for the integrity and efficiency of market trading and to reduce the risks of misconduct. The Government has recognised that the regulatory framework governing conduct in the NZ ETS market is patchy and incomplete. It has established a work programme to address the lack of good governance and associated risks, which include insider trading, market manipulation, false or misleading advice to participants, potential lack of transparency and oversight of trades in the secondary market, money laundering, credit and counter-party risks and conflicts of interest. Other ETS-related issues There are a range of other NZ ETS-related issues that also need progressing, though these are not as critical as the two noted above. These include: •
Considering options for recycling some or all of the cash generated from NZ ETS unit auctions. For example, these proceeds could be invested in emissions reductions, assisting communities or local authorities with adapting to the impacts of climate change, equitable transitions or helping Aotearoa to meet its NDC.
•
Undertaking a first principles review of industrial allocation policy, considering the fundamental design of the current policy as well as overallocation risks, eligibility rules, updates to the Electricity Allocation Factor and allocative baselines.
•
Continuing to phase out industrial allocation.
•
Exploring alternative policy instruments that could address the risk of emissions leakage, such as product standards, consumption taxes and border carbon adjustments.
•
Providing more information to reduce uncertainty about adjustments to NZ ETS settings, to build confidence in the market and support informed decision making by market participants. In particular, it would be useful for the Government to clarify how it intends to manage NZ ETS unit volumes in light of the split-gas 2050 target and the planned inclusion of biogenic agricultural emissions in a separate pricing mechanism. One option the Government could consider would be to outline its approach to making adjustments over time in a published document or policy. This would help to reduce uncertainty about future unit supply and expectations of prices.
•
Clarifying the role and avenues for voluntary mitigation in Aotearoa. Some individuals and businesses wish to undertake voluntary action to contribute towards or beyond meeting the country’s emission reduction targets. Failure to leverage this desire for voluntary action in addition to government policy would be a missed opportunity to deliver further for climate benefits. This also needs to take into account the accounting issues connected with voluntary offsetting and carbon neutral claims, which are discussed further in chapter 7 on the rules for measuring progress.
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Time-critical necessary action 7 Driving low emissions choices through the NZ ETS The Emissions Trading Scheme (NZ ETS) needs to drive low emissions choices consistent with emissions reduction targets in Aotearoa, including a focus on gross emissions reductions. In the first budget period the Government should: a. In the next annual update to NZ ETS settings: i.
Align unit volumes with emissions budgets, taking into account the need to reduce the NZU stockpile.
ii.
Increase the cost containment reserve trigger price to $70 as soon as practical and then every year by at least 10% plus inflation.
iii.
To maintain continuity with recent prices, immediately increase the auction reserve trigger price to $30 as soon as practical, followed by annual increases of 5% plus inflation per year.
These changes are needed because maintaining current settings will lead to failure to meet emissions budgets. b. Amend the NZ ETS so that it contributes, as part of a package of policies (see timecritical necessary action 5), to delivering the amount of afforestation aligned with our advice on the proportion of emissions reductions and removals, consistent with budget recommendation 2. c. Establish a sound market governance regime for the NZ ETS as soon as possible to mitigate risks to market function, as some of these risks are potentially catastrophic for the scheme’s effectiveness. This work should be advanced through an interagency team including MBIE for its financial markets expertise.
Progress indicators a. Government ensure that, in the next annual update to the NZ ETS settings, unit volumes are aligned with emissions budgets and price control settings are increased. b. Government to develop proposals as soon as possible to establish a sound market governance regime for the NZ ETS, and to have legislated to address the most significant risks by no later than 30 June 2023.
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Continued ETS improvements We recommend that, in the first budget period the Government make progress on: a. Developing options and implementing a plan for recycling some or all of the proceeds from NZ ETS unit auctions into emissions reductions, adaptation, equitable transitions and meeting international climate change obligations. b. Undertaking a first principles review of industrial allocation policy. c. Continuing to phase out industrial allocation. d. Exploring alternative policy instruments that could address the risk of emissions leakage. e. Providing more information to reduce uncertainty about adjustments to NZ ETS settings, particularly how it intends to manage unit volumes in light of the split-gas 2050 target. f.
Clarifying the role and avenues for voluntary mitigation in Aotearoa.
Consultation question 19 Multisector strategy Do you support the package of recommendations and actions to create a multisector strategy? Is there anything we should change, and why?
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Chapter 7: Rules for measuring progress ‘Rules for measuring progress’ refers to the system of accounting for greenhouse gas emissions that will be used to track the progress Aotearoa makes towards emissions budgets and the 2050 target. In Aotearoa, various emissions accounting methods are already in use, for example to prepare the national Inventory, to track the Nationally Determined Contribution (NDC) and other targets, and to produce emissions accounts that align with economic statistics. Our task is to determine which of these existing methods are best suited for setting emissions budgets and delivering the 2050 target. In this chapter, we first outline our role and approach to thinking about accounting for emissions budgets and the 2050 target. We then discuss accounting choices related to: •
production- and consumption-based emissions estimates
•
accounting for land emissions. By ‘land emissions’, we mean emissions and removals from land sources and sinks such as forests, vegetation, soils, and wetlands. This does not include any direct agricultural emissions such as those from livestock or fertiliser
•
voluntary offsetting and carbon neutral claims.
7.1 Greenhouse gas accounting for emissions reduction targets The methods used to calculate and attribute the amount of greenhouse gases emitted or removed from the atmosphere over time are a critical component of effective climate policy. Robust and accurate emissions accounting is essential for: •
setting emissions reduction targets
•
monitoring and evaluating progress towards meeting targets
•
judging compliance at the end of a target period.
A key purpose of the emission reduction targets that countries set themselves is to drive actions to reduce human impacts on the climate. The accounting methods for these targets need to deliver useful data to inform emissions reduction efforts, and influence which reduction activities are prioritised. This link to policy and to driving behaviour change is why emissions accounting for targets may differ from the methods used for national greenhouse gas inventories.
7.2 Our role We must advise on the rules that should apply to measuring progress towards meeting emissions budgets and the 2050 target. Our recommended accounting rules have been used to develop the recommended emissions budgets. We will also use them to report on the Government’s progress towards emissions budgets, starting in 2024. This advice relates to the first three emission budgets, covering 2022-2035. In 2024, we will advise on the fourth emissions budget covering 2036-2040. At that time, we will have the opportunity to revise our recommendations on accounting for the second and third emissions budgets, if this is warranted by developments in knowledge or accounting methods.
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7.3 Objective and principles to guide accounting choices We have examined the accounting rules for emissions budgets from a first principles basis. To do this, we have set a high-level objective for emissions budget and 2050 target accounting: A robust, transparent accounting system that tracks genuine environmental gains while balancing completeness with practicality. We have also defined a set of principles underneath the high-level objective, to provide guidance on how to reach this goal. The principles help ensure we take a coherent approach to the range of issues covered by target accounting. Accounting for emissions budgets and the 2050 target should: i.
seek to cover all material human caused emissions sources and sinks;
ii.
be grounded in robust science and evidence;
iii.
send a clear signal for climate action;
iv.
be accurate and reduce uncertainty as far as practicable;
v.
be transparent, practical and acceptable; and
vi.
be consistent and maintain the integrity of the target.
Together, the objective and principles provide a framework to allow options and trade-offs to be understood and to inform decisions about accounting rules. For more information on the reasoning for and meaning of each principle, see the chapter 3 in the Evidence Report.
7.4 Production- or consumption-based greenhouse gas accounting One of the most fundamental choices in greenhouse gas accounting is whether to calculate emissions on a production or a consumption basis. Until now, production-based accounting has been the only option for tracking the country’s emissions. In 2020 consumption-based emissions estimates were produced by StatsNZ for the first time. We have assessed these two approaches using the objective and principles for accounting set out above. Our proposed advice is that production-based estimates are more suitable for accounting for emissions budgets and the 2050 target. The production approach records emissions at the point where human activity causes their release to the atmosphere. It attributes the emissions to the original producer of the emission, for example a manufacturing plant burning coal in a boiler. Production-based accounting is the standard method used by countries for setting and tracking emissions reduction targets, and it is used to compile our national Inventory. The consumption approach accounts for emissions ‘embodied’ in a good or service that result from the entire supply chain required to produce that good or service for final use. For example, in the case of vehicle transport, this approach would record all the emissions produced from making the 136
31 January 2021 Draft Advice for Consultation materials, such as the metals, and from the assembly of a car, as well as the emissions from fossil fuel combustion generated when the car is driven. Under the consumption approach, Aotearoa would not be responsible for the emissions embodied in the goods it exports but would be responsible for those embodied in imports. The consumption emissions estimates for Aotearoa are at an early stage of development and have significant downsides. These include: • Lower coverage of material sources and sinks. The consumption estimates exclude land emissions, due to the technical difficulty and lack of methods for attributing land emissions to industry sectors and final use. • Accuracy and uncertainty are negatively affected by assumptions made about emissions embedded in imports from other countries. For example, StatsNZ calculates the consumption estimates assuming imports have the same emissions content as outputs of the same industry in Aotearoa. • Lack of an internationally agreed standard for calculating and reporting consumption emissions. This would make it difficult to compare the country’s targets and progress in reducing emissions against those of other countries. • Using consumption-based emissions estimates for accounting would differ from the analysis used to set the 2050 target. This could undermine the integrity of the target. Consumption-based emissions are, however, a useful complement to the national Inventory. We look forward to StatsNZ’s efforts to continually improve and provide annual reports on consumption emissions. We intend to monitor them for insights into the wider impact Aotearoa has on global emissions, carbon-intensive supply chains and trade flows.
7.5 Accounting for land emissions We need to decide on a framework for land emissions accounting, given the significance of these emissions for Aotearoa. Given the role forests can play meeting our net zero target in 2050 and beyond, a fit-for-purpose accounting framework is key. There are two frameworks for land emissions accounting currently used in Aotearoa: 1. a ‘land-based’ approach that uses ‘stock change’ accounting for both pre-1990 and post-1989 forests. This is used in the country’s national Greenhouse Gas Inventory for UNFCCC reporting; or 2. a modified ‘activity-based’ approach that uses ‘averaging’ accounting for post-1989 forests. This is used in the country’s NDC. For the definition of a forest in greenhouse gas accounting in Aotearoa see chapter 3 of the Evidence Report. Smaller areas of trees not meeting the forest definition are mostly accounted for as biomass on grasslands or croplands.
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7.5.1 A land-based approach, as used in the national Inventory ‘Land-based’ accounting aims to cover all emissions and removals from soil, trees, plants, biomass, and wood products. Emissions and removals by forests are reported in a way that corresponds to tree growth, harvest and deforestation – known as stock change accounting. By trying to record emissions and removals when they occur, it gives a truer representation of ‘what the atmosphere sees’.
7.5.2 A modified activity-based approach, as used in the NDC This accounting approach uses a smaller subset of activities and land types than the land-based approach. It focuses on significant sources and sinks whose emissions can be most affected by changes to peoples’ behaviour now. It does this by filtering out the effects of past actions, such as regrowth of previously harvested native forests. This approach will be used for the country’s first NDC. The NDC will account for land areas and uses corresponding to the afforestation, reforestation, deforestation and forest management activities accounted for in the country’s 2020 target covering the second commitment period of the Kyoto Protocol, 2013-2020. It is not yet known if the NDC will include the land areas or uses related to the activities of cropland management, grazing land management, revegetation or wetland drainage and rewetting. The NDC will use ‘averaging’ to account for afforestation and reforestation of post-1989 forests. This approach smooths out the cyclical peaks and troughs in emissions due to harvesting of post-1989 exotic production forests. It does this by accounting for removals only up until the forests reach their long-term average carbon stock. This occurs around 21 years after planting for a production pine forest on a 28-year rotation. Averaging focuses on the long-term effect of these forests on carbon stocks.
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Box 7.1: Pre-1990 and Post-1989 forests The country’s activity-based target accounting has given rise to two broad classifications for forests: •
Post-1989 forests are those established after 31 December 1989.
•
Pre-1990 forests are those established before 1 January 1990.
These classifications are due to the 1990 base year Aotearoa agreed to in the Kyoto Protocol. Activities occurring from 1990 onwards are ‘additional’ rather than business-as-usual. In this approach, only emissions and removals due to additional human activities are counted. This means that emissions from deforestation are counted for all forests, but removals from afforestation and reforestation are only counted for post-1989 forests. Forest management aims to track the impact on emissions from changed management of pre-1990 forests. The 1990 base year has been devolved into policy through the NZ ETS. It contributes to a sense of unfairness among pre-1990 forest owners, including iwi/Māori. This is because there is a deforestation liability constraining land use change, but no reward for forest growth. This outcome results from the approach’s focus on behaviour change now, rather than penalising or rewarding past actions. With this approach, there is still some potential for flexibility and recognition of pre-1990 forests: •
Forest management in theory enables counting of increased carbon stocks due to improved management. However, this is difficult to do robustly and has not yet been devolved from target accounting into the country’s policies.
•
Both target accounting and NZ ETS rules allow avoidance of deforestation liabilities if an equivalent forest is planted elsewhere.
•
Emission reduction policies for forests should broadly match target accounting, so costs sit with emitters rather than taxpayers. However, there is scope for policies to differ from target accounting. These differences can be justified for reasons of practicality or by other policy goals, if the benefits of doing so outweigh the cost to the taxpayer. In this context, consideration could be given to: o
encouraging improved management of pre-1990 forests, even if enhanced carbon storage is not counted for targets, or
o
providing more flexibility for Māori-owned land to avoid locking in historical disadvantages.
Finally, averaging reduces the differences between the two forest types. Under averaging, post1989 forests that reach the long-term average carbon stock are treated similarly to pre-1990 forests, as further business-as-usual growth and harvesting are not accounted for. 139
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7.5.3 Assessment of the land emissions accounting frameworks Overall, we consider that the NDC’s modified activity-based framework for land emissions accounting, with a 1990 base year and ‘averaging’ for post-1989 forests, is a more suitable accounting approach for measuring progress towards emissions budgets and the 2050 target. We assessed the two options outlined previously against our accounting principles, with key differences discussed below. A full analysis is provided in the chapter 3 of the Evidence Report. Coverage of material emissions sources and sinks: The land-based approach’s main advantage is that it covers more sources and sinks than the modified activity-based NDC approach. The NDC currently only includes forest-related activities, although its scope could be expanded. Sending a clear signal for climate action: The land-based approach performs worse against this principle than the modified activity-based approach, primarily due to its use of stock-change accounting for forests. This results in significant fluctuations in net emissions due to harvest cycles. These are temporary and obscure underlying, more enduring trends, confusing policy and price signals about the action needed. These fluctuations also make it easier to reach net zero but difficult to maintain it after 2050. As shown in Figure 7.1, government projections indicate that after a peak in removals around 2050, harvesting would cause forestry emissions to increase. In the NDC’s modified activity-based accounting, averaging smooths out the fluctuations. This makes it clear that Aotearoa needs to plant new forests and reduce deforestation to contribute to longer-term emissions reductions. Consistent and maintains integrity of the target: Activity-based accounting is consistent with the analysis that informed the 2050 target. Using land-based accounting would reduce the effort to achieve the target, undermining the commitment made when it was set. Accuracy and reducing uncertainty: The land-based approach results in emissions estimates with higher overall uncertainty. Reasons for this include: having to combine carbon stock gains and losses, each with their own uncertainty, to determine net change; estimating uncertain factors related to the management of production forests such as harvest age and area; and including some land areas with highly uncertain emission factors such as wetlands. As an example, pre-1990 production forests introduced uncertainty of ±34.9% into the Inventory land emissions estimates in 2018. Netting off significant amounts of land emissions with high uncertainties against gross emissions with much lower uncertainties is problematic.
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Figure 7.1: Comparison of national forest net emissions using Greenhouse Gas Inventory (stock change) and NDC (averaging) accounting. Source: MPI October 2020 updated ‘with existing measures’ projection, $35 emissions price
7.6 Detailed choices within the modified activity-based accounting framework The Commission has assessed detailed elements of the NDC accounting approach to identify if it is fitfor-purpose for emissions budget accounting. This assessment is summarised below. The NDC accounting is not yet fully defined. It may not be confirmed until late 2024 when Aotearoa is due to submit its first Biennial Transparency Report under the Paris Agreement. This incomplete definition limits what we can consider for this first package of advice. It is not feasible to use some elements of the NDC accounting approach in accounting for emissions budgets as we do not currently have enough information on how they work, or they do not yet exist.
7.6.1 Forest management Forest management is the part of the NDC accounting system where the impact on carbon stocks of management practices affecting pre-1990 forests is counted. It is accounted for by estimating additional emissions and removals in pre-1990 forests above or below business-as-usual due to changes in forest management. It involves setting a reference level, based on a future projection of what would have happened with no change in management. Using counterfactual projections such as this has inherent accuracy and uncertainty challenges, with risks of both over- and under-estimation. The Government has not yet defined the reference level that will be used for the NDC. We have been unable to assess how risks will be managed and how the reference level lines up against our accounting principles. This means we cannot include forest management in emissions budget 141
31 January 2021 Draft Advice for Consultation accounting now. We will revisit this in 2024 to consider its inclusion in updated advice for the second and third emissions budgets. Despite this limitation, we value the management of pre-1990 forests to enhance carbon stocks and deliver other benefits such as biodiversity. We urge the Government to encourage better management of these forests (see chapter 6), even if the carbon impacts are not accounted for in emissions budgets.
7.6.2 Harvested wood products (HWPs) When a forest is harvested, much of the carbon is stored for a time in wood products, not released into the atmosphere immediately. HWPs is the part of the accounting system that captures this effect and the benefit of using timber in the built environment. HWPs for post-1989 forests are likely to be incorporated into averaging through adjusting the longterm average carbon stock. HWPs for pre-1990 forests are likely to be accounted for in the forest management reference level. As forest management cannot be included in emissions budget accounting now, there is no practical way to account for HWPs for pre-1990 forests in emissions budgets either.
7.6.3 Carbon equivalent forests This provision allows pre-1990 forests that meet specified conditions to be converted to another land use without being classified as deforestation, if a new forest that would reach an equivalent carbon stock is planted elsewhere. We have not identified material integrity risks with this provision.
7.6.4 Natural disturbances The country’s first NDC will include a ‘natural disturbances’ provision to manage risks of natural events radically affecting land emissions. The provision can be invoked after a natural disturbance, e.g. a volcanic eruption, to allow the emissions from the disturbance to be excluded from accounting. The provision is expected to follow the IPCC’s 2013 Revised Supplementary Methods and Good Practice Guidance Arising from the Kyoto Protocol, but the details of how it will work are not yet clear. The risks of adopting the provision for emissions budgets before knowing the rules can be managed, as we can control whether it is invoked through our annual monitoring reports.
7.6.5 Other sources of land emissions and removals The most significant sources of land emissions and removals not yet part of NDC accounting are emissions from organic soils, mostly drained wetlands, and removals from biomass on grasslands, mostly small lots of trees. In line with our principle that accounting should aim to cover all material human caused emissions sources and sinks, the Government should investigate the feasibility of including these land areas and uses in target accounting in future.
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7.7 Voluntary offsetting and carbon neutrality Voluntary offsetting refers to the purchase and cancellation of emissions units such as NZUs for the purpose of making ‘carbon neutral’ or ‘net zero’ claims. It aims to compensate for the emissions footprint associated with an organisation, product or service such as air travel. There are several requirements that are widely recognised as necessary to enable a credible carbon neutral claim. One is that voluntary offsetting should contribute to additional emission reductions or removals it. This requirement means that voluntary offsetting should deliver something extra on top of what would occur anyway due to business-as-usual activities, including those due to government policies like the NZ ETS. Another is the avoidance of double claiming, a type of double counting where more than one entity counts an emission reduction against an emissions reduction target. In Aotearoa the issues of additionality and double claiming are linked. It is not possible to guarantee that an emissions reduction or removal is additional, unless it is not double claimed against the country’s emissions reduction targets. In practice, this means that to deliver additional mitigation in any sector whose emissions are in scope for target accounting, both an NZU must be cancelled and an adjustment made to the accounting for targets, emissions budgets and the NDC. This requirement is due to the NZ ETS, which is managed in way that takes account of emissions from the whole economy, including from agriculture and forests that are not covered by the NZ ETS. If over time the country’s total net emissions recorded in the Inventory are lower than what is needed to meet our emissions reduction targets, more units will be added to the NZ ETS cap via the annual cap updates. This adjustment is to keep Aotearoa on track to achieve its targets, rather than to overachieve them, to avoid imposing more cost than necessary on the economy and New Zealanders. If NZUs were cancelled for voluntary offsetting without removing the same volume from the target, it would simply make it appear that the NZ ETS is driving more reductions than necessary to meet the target. The NZ ETS cap would then be adjusted upwards, permitting more emissions elsewhere in the economy, negating the impact of the voluntary mitigation. The Government is considering what guidance to provide about voluntary offsetting from 2021 as Aotearoa moves to Paris Agreement accounting practices. It has not yet made any decisions about whether to allow adjustments against targets when NZUs are cancelled for the purpose of voluntary offsetting. Nor has it decided whether carbon neutral claims can be made when an NZU is cancelled. The Government should explore options for enabling voluntary mitigation and clarify the types of claims that can be made about it in Aotearoa. This should aim to encourage the private sector’s desire for voluntary action for the benefit of the climate. We consider that, given the way the NZ ETS currently operates, if there is no adjustment against targets when an NZU is cancelled, it is not legitimate to claim that any additional emission reduction or removal has occurred. This is in line with our objective and principles for accounting that relate to transparency, consistency and tracking genuine environmental gains.
7.8 Legislative requirements The Climate Change Response Act sets out the framework for the system of emissions budgets to set the path to the 2050 target, including some of the parameters for accounting. These include the scope 143
31 January 2021 Draft Advice for Consultation of emissions budgets, which excludes emissions from international aviation and international shipping and from Tokelau, and that emissions budgets be expressed as a net quantity of carbon dioxide equivalent, calculated in accordance with international climate change obligations. We have examined these accounting issues on their merits, in keeping with our independent role. We do not consider that any changes to legislation are warranted at this stage, given the high bar for recommending legislative change. A more detailed explanation of these issues is provided in chapter 3 in the Evidence Report.
Budget recommendation 5 The rules for measuring progress towards emissions budgets and the 2050 target We recommend the following package of rules for measuring progress: a. To use the production-based approach from the national Greenhouse Gas Inventory as the basis for accounting for emissions budgets and the 2050 target. b. To use a modified activity-based framework for land emissions accounting, with a 1990 base year and ‘averaging’ for post-1989 forests, substantially aligning emissions budget accounting with the approach used for accounting for the first NDC. c. Within the modified activity-based land emissions accounting framework, to: i.
Include the land areas and uses corresponding to afforestation, reforestation, and deforestation, as confirmed for the first NDC.
ii.
Exclude forest management, the activity relating to the impact of management practices on pre-1990 forest carbon stocks, despite its inclusion in NDC accounting because the forest management reference level has not yet been set for the period through to 2030 and we have been unable to assess how it manages accuracy and uncertainty risks. Improved management of pre-1990 forests nevertheless remains important and should be encouraged through policy.
iii.
Include harvested wood products (HWPs) from post-1989 forests, but not HWPs from pre-1990 forests because they are accounted for as part of forest management which is excluded from emissions budget accounting.
iv.
Include a natural disturbances provision, aligned with the first NDC and the 2013 IPCC Kyoto Protocol Supplement. The Commission will judge whether to invoke the provision in its reports that monitor progress each year and at the end of an emissions budget period.
v.
Encourage the Government to develop methods for tracking emissions and removals by sources and sinks not yet included in the country’s domestic or international target accounting, such as organic soils and biomass (including small lots of trees and regenerating vegetation), with a view to allowing them to be included in future target accounting.
d. From 2021, if the Government allows voluntary offsetting for carbon neutral claims to take place in Aotearoa through cancelling NZUs, adjustments corresponding to the amount of NZUs cancelled must be made to the relevant emissions budget, or to the inventory, to avoid the emissions reductions claimed from being negated by increases to the NZ ETS cap. 144
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Consultation question 20 Rules for measuring progress Do you agree with Budget recommendation 5? Is there anything we should change, any why?
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Part B: The Nationally Determined Contribution for Aotearoa, and potential further biogenic methane reductions Chapter 8: The global 1.5°C goal and Nationally Determined Contribution for Aotearoa 8.1 Introduction Under the Paris Agreement, Nationally Determined Contributions (NDCs) are countries’ contributions to the global effort to reduce emissions to limit the impacts of climate change. In its first NDC, Aotearoa committed to reduce net greenhouse gas emissions to 30% below 2005 levels by 2030. This means Aotearoa can emit no more than 585 Mt CO2e from 2021-2030. Under section 5K of the Climate Change Response Act 2002 (the Act), the Minister of Climate Change asked the Commission to provide a report on the country’s first NDC under the Paris Agreement, that includes: 1. advice on whether the NDC is compatible with contributing to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5°C above pre-industrial levels 2. recommendations on any changes to the NDC required to ensure it is compatible with global efforts under the Paris Agreement to limit the global average temperature increase to 1.5°C above pre-industrial levels. The full text of the request and the terms of reference can be found on our website at: https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/reviewing-newzealands-nationally-determined-contribution-and-biogenic-methane/ This chapter responds to that request. In this chapter, we cover the global emissions reductions modelled for the world to keep warming below 1.5°C, describe what those emissions reductions would mean for the country’s contribution and reconsider the NDC as a result. In addition, this chapter also discusses potential changes to the form of the NDC and some issues around how the Government should plan to meet it.
8.2 Global pathways to 1.5°C The world has already warmed 1.0°C above pre-industrial levels and, without action to reduce emissions, average warming is expected to exceed 1.5°C around 2040.
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Figure 8.1: Observed and modelled global temperature change 1960-2100 Source: IPCC Special Report on 1.5°C Summary for Policymakers, Figure SPM.1 The Intergovernmental Panel on Climate Change (IPCC) has outlined different global pathways of greenhouse emissions that would limit warming to within 1.5°C of pre-industrial levels. These pathways all have differing rates of reduction for each greenhouse gas. The IPCC pathways share some common underlying features. However, they differ in whether they always stay within the 1.5°C goal. Some allow the temperature to exceed 1.5°C before cooling down again later in the century. This is termed ‘overshoot’ by climate scientists. The pathways with little or no overshoot are the most likely to deliver the best overall social, economic and environmental outcomes. Higher levels of overshoot are associated with more significant climate impacts and adaptation needs. Pathways with higher overshoot also rely on high levels of emissions removal technologies such as carbon capture and storage that may not be feasible. We have therefore chosen to only consider pathways with no or limited overshoot. Following these pathways is not a guarantee of limiting warming to 1.5°C. The IPCC selected these pathways as the ones that have a 50-66% chance to limit warming to 1.5°C. This point is explained further in the following section. For all these pathways, limiting warming to 1.5°C requires rapid emission reductions of all greenhouse gases between now and 2030. They then need somewhat slower reductions out to the end of the century. All these pathways have several other features in common: • •
•
Emissions of carbon dioxide and other greenhouse gases are modelled to peak in the 2020s and then rapidly reduce through the 2030s and 2040s. Nitrous oxide emissions are modelled to have relatively smaller reductions. This reflects fewer options to reduce this gas, as the majority of nitrous oxide emissions come from food production and ongoing emissions are unavoidable as part of feeding the world’s population. Emissions of methane are modelled to reduce significantly through the next 20 years, but do not reach zero by 2050 or 2100, reflecting the short-lived nature of the gas. 147
31 January 2021 Draft Advice for Consultation •
Gross emissions of long-lived greenhouse gases reduce to be near zero by 2050. Most pathways have some remaining gross emissions in 2050 from hard to abate sectors, for example carbon dioxide from cement manufacturing. As a result, carbon dioxide removals are required to ensure net emissions reach and remain at net zero.
Most 1.5°C global scenarios also require ongoing levels of carbon dioxide removals beyond keeping emissions to net zero to bring temperatures back to 1.5°C after a temporary overshoot.
Table 81 below shows the modelled global reductions for carbon dioxide emissions, as well as agricultural methane and nitrous oxide emissions in 2030, 2050 and 2100. These modelled reductions are averages of the reductions needed by the whole world to keep global warming within the 1.5°C target with no or limited overshoot. We have used the interquartile range as it excludes more extreme model results that are less likely to be feasible. Note that ‘biogenic methane’ used to specify 2030 and 2050 methane targets for Aotearoa differs from ‘agricultural methane’ as modelled by the IPCC. Biogenic methane also includes emissions from the waste sector. Table 8.1: Reductions in greenhouse gas emissions in IPCC model pathways with no or limited overshoot (interquartile range) Percentage change relative to 2010 2030
2050
2100
Net carbon dioxide emissions
-40 to -58%
-94 to -107%
-121 to -136%
Agricultural methane emissions
-11 to -30%
-24 to -47%
-37 to -60%
Agricultural nitrous oxide emissions
+3% to -21%
+1% to -26%
-6 to -39%
Source: IPCC, Special Report on 1.5ᵒC, Summary for Policymakers, Table SPM.3b. IPCC model results. There are questions about whether the globe can still limit warming to 1.5°C. The longer countries wait to act, the harder it gets and the more the world depends on possibly infeasible levels of carbon dioxide removed from the atmosphere. Next year, the IPCC will release its sixth assessment report that will provide the most up-to-date science on this.
8.3 What would on-track to 1.5°C look like in Aotearoa? The IPCC modelled emission trajectories for the world for different gases that would be consistent with limiting warming to 1.5°C. Here we apply the modelled global emissions reductions by gas to Aotearoa to envisage potential NDCs that would be compatible with a 1.5°C pathway. The first NDC is to cut emissions by 30% by 2030 compared to 2005 levels. This uses an approach where Aotearoa takes responsibility for emissions over the whole period 2021-2030.
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31 January 2021 Draft Advice for Consultation There is an internationally agreed approach to convert from targets in a future year to contributions over a period of years. This is calculated by plotting a straight line from the previous target to the future target and then adding up all the emissions under the line. The actual emissions direction does not have to be a straight line so long as the country’s total emissions over the entire period are less than the allowed level as illustrated in Figure 8.2 below.
Figure 8.2: Illustration of conversion of the country’s existing 2030 target to an NDC amount Note: Our 2030 target is to reduce emissions to 30% below 2005 levels. Here it is presented as a reduction against 1990 levels for easier comparison to the 2020 target that preceded it.
The IPCC’s modelling showed that different reductions of different gases are compatible with optimal paths to 1.5°C. In model pathways on track to limit warming to the 1.5°C, carbon dioxide emissions reduced by around 40-58% below 2010 levels by 2030. Emissions of methane and nitrous oxide reduced by less – around 20% for agricultural methane, and 10% for agricultural nitrous oxide. This reflects both the different warming effects of different gases, and differences in the costs to mitigate them. The emissions profile of Aotearoa is different to that of most of other developed countries, as a much higher proportion of the emissions come from agriculture, particularly biogenic methane. In part this also reflects that the electricity sector is mostly decarbonised already. This means that a high ambition emission reduction trajectory will look different for Aotearoa than for other developed countries. To acknowledge the differences in the country’s emissions profile, and the different warming effect of different gases, we have assessed 1.5°C compatible trajectories using a split-gas approach. To do this we have developed separate emission trajectories for Aotearoa for carbon dioxide, methane and nitrous oxide, based on the IPCC modelled reductions. We have then aggregated these into a total amount of allowed emissions over the NDC period to compare with the first NDC. We have applied this approach using both the IPCC’s upper quartile of modelled reductions, and lower quartile of modelled reductions.
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31 January 2021 Draft Advice for Consultation Applying the modelled reductions in Table 8.1 to the country’s emissions profile using this approach, emissions over 2021-2030 would be 524-604 Mt CO2e if it followed the IPCC range. This would comprise: • • •
190-224 Mt carbon dioxide 10.8-12.2 Mt methane 171-201 kt nitrous oxide.
Table 8.2: Equivalent NDCs for Aotearoa applying the upper and lower quartile of reductions modelled by the IPCC Allowed emissions in NDC period (Mt CO2e)
Equivalent 2030 target level
Lower quartile IPCC reductions (higher emissions)
604
25%
Midpoint reductions
564
35%
Upper quartile IPCC reductions (lower emissions)
524
44%
(% reduction on 2005)
There is a detailed explanation of this approach and the calculations made in Chapter 10: Requests under s5K relating to the NDC and biogenic methane - supporting evidence of the Evidence Report. The range in the IPCC scenarios represents the uncertainty in how fast emission of different greenhouse gases need to be reduced to limit warming. This uncertainty arises because it is not possible to predict exactly how things like global population or wealth might change and how much different mitigations might cost. There is also uncertainty in exactly how the global climate will respond to future emissions – for example, how aerosol emissions affect temperature outcomes, and how sensitive temperature responses are to increases in carbon dioxide. As a result, the warming outcomes of the different scenarios are expressed as probabilities that they would limit warming to 1.5°C. In its special report, the IPCC only considered emission reduction scenarios that had a 50-66% chance of limiting warming to 1.5°C by the end of the century. Expressed the other way, if the emissions reductions in the scenarios were achieved, there is still a 34-50% chance that warming will exceed 1.5°C. We can exclude some of the more extreme or unlikely scenario assumptions by looking at the interquartile range, that is, the middle 50% of values. This approach gives a more conservative but more likely estimate of the emission reductions that are needed. Smaller allowed budgets (closer to the upper quartile range of the IPCC modelled emissions reductions) are associated with scenarios that have greater gross emission reductions and are less likely to overshoot the 1.5°C goal. Conversely, larger allowed budgets (closer to the lower quartile range of the IPCC modelled emissions reductions) have smaller gross emission reductions and are more likely to overshoot the 1.5°C goal and rely on greater levels of carbon dioxide removals in the latter part of the century to bring temperatures back down. 150
31 January 2021 Draft Advice for Consultation When expressed in terms of NDC allowed emissions, the lower quartile is 524 Mt CO2e, and the upper quartile is 604 Mt CO2e. The first NDC works out as an emissions budget of 585 Mt CO2e. This budget is equivalent to the 63rd percentile, putting it towards the higher end of allowed emissions that are compatible with limiting warming to 1.5°C. While all the scenarios in the interquartile range have been assessed as having a 50-66% chance of limiting warming to 1.5°C, the scenarios that focus on earlier gross emission reductions have less reliance on large scale carbon dioxide removals. The scale of carbon dioxide removals required by some of the scenarios that focus on smaller or later gross emissions reductions may not be achievable and can have a range of negative impacts on people, communities and economies. The IPCC has noted that relying on large scale carbon dioxide removals represents a major risk that the world will not be able to limit warming to 1.5°C. These levels of allowed emissions of the different greenhouse gases represent the range of emission reductions modelled for the world as a whole to keep warming to 1.5°C, applied directly to the specific emissions profile for Aotearoa. However, they do not account for any considerations of how effort is shared between countries. This is considered in the following section. Box 8.1: Gross-net accounting The NDC uses a gross-net accounting approach. This is where the target is expressed relative to gross emissions (excluding forestry) in a base year but emissions and removals by forests planted or deforested since the base year are counted in meeting the target. This is a legitimate internationally agreed approach that accounts for differences in timing of emissions and removals from forestry compared to other sectors. For most emitting sectors, the underlying activity and the emissions occur in the same year. However, for forestry, emissions and removals occur decades after the initial decision to plant. Aotearoa has 1.2 Mha of land that was in plantation forest in the base year (1990). The repeated growth and harvesting of this forest means that the country’s net emissions will cyclically go up and down over decades, even if there was no change in the country’s other emissions or activities. If the target for Aotearoa was measured against net emissions in the base year, and accounted for the emissions and removals from all forests (net/net accounting) the long-term ebb and flow of growth and harvesting would make the country’s climate action look unjustifiably good or bad depending on the point in the harvest cycle used for comparison. We provide more detail on this accounting approach in Chapter 3: How to measure progress in the Evidence Report.
8.4 Developed countries have agreed to lead the way Climate change is a global problem and no country is immune from its effects. Greenhouse emissions from every country affects all countries. All countries will need to act and, through the Framework Convention on Climate Change and the Paris agreement, nearly all countries have agreed they will do so. In terms of Gross National Income per capita, Aotearoa ranks as a wealthy, highly developed country (Figure 8.3).
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Figure 8.3: Richest 40 countries in 2019 by real Gross National Income per capita Source: World Bank Data Developed countries have emitted more cumulative emissions than developing countries, for longer and have benefited as a result. Consequently, developed countries have agreed to lead the way in reducing emissions and to support developing countries to reduce their own. This principle was enshrined in the United Nations Framework Convention on Climate Change in 1992 and reiterated in the Paris Agreement. Both agreements acknowledge that countries have common but differentiated responsibilities and respective capabilities to mitigate emissions. This principle implies that in reaching any given temperature target, developed countries – such as Aotearoa – will need to reduce emissions proportionally faster and further than the average pace required of all countries. If we are to contribute to a global effort towards limiting warming to 1.5°C, it is not sufficient for the emissions reductions to be compatible with an approach that expects the same proportional reductions from all countries. Along with other developed nations, Aotearoa has a responsibility to take the lead in reducing emissions and to support developing countries to transition and has already agreed it will do so.
8.5 The first NDC for Aotearoa In its first NDC under the Paris Agreement, Aotearoa committed to reducing all greenhouse gas emissions to 30% below 2005 levels by 2030. Aotearoa has taken an emission budget approach to its NDC. This means that the target is converted into an emissions trajectory and the total emissions this equates to is calculated. The country then commits to limiting net emissions to no more than that amount over the whole period. Applying this approach Aotearoa can emit no more than 585 Mt of CO2e from 2021-2030. This is based on the latest greenhouse gas inventory estimates of emissions. Previous estimates of the allowed emissions were higher – 601 Mt CO2e reflecting the Government’s best estimate of past emissions when it was made in 2017. 152
31 January 2021 Draft Advice for Consultation As better information becomes available, the government updates past estimates of emissions every year. This means the allowed emissions over the NDC period changes over time as emissions estimates improve. The level of allowed emissions under the NDC will be finalised in 2023/24 once the emissions estimate for the 2020 year has been reviewed. The target in the NDC itself is to keep the country’s net emissions to 30% below what total emissions were in 2005, using an emissions budget approach. In assessing the compatibility of the NDC with the 1.5°C goal therefore, we have used our assessment of the emissions budget associated with this target which is 585 Mt. Chapter 10: Requests under s5K relating to the NDC and biogenic methane supporting evidence of the Evidence Report describes how this calculation was made.
8.6 Is the NDC compatible with Aotearoa contributing as a developed nation? The global emission reductions necessary to limit warming to 1.5°C likely lie within the interquartile range modelled by the IPCC. The first NDC for Aotearoa is just inside the range of possible NDCs compatible with limiting warming – but sits at the lower end of modelled emissions reductions. As stated earlier, these lower levels of reductions are more likely to overshoot the 1.5°C goal and rely on uncertain carbon dioxide removals in the latter part of the century to bring temperatures back down. This means it is likely that the current contribution is aligned with an approach – that if adopted by all nations – carries major risks in the ability to limit global warming to 1.5°C. To be compatible with a developed country’s contribution, the NDC would need to reflect deeper emission reductions than what is required of the world as a whole. Our advice is that it should reflect emissions much less than that equivalent to the middle of the IPCC interquartile range, which would mean allowed emissions of less than 564 Mt CO2e, or reductions of much more than 35% below 2005 levels by 2030. How much stronger than that level the NDC should be set at is a question for elected decision-makers.
NDC recommendation 1 Compatibility of the NDC with contributing to a global effort towards keeping warming to 1.5°C We advise that the first NDC is not compatible with Aotearoa making a contribution to global efforts under the Paris Agreement to limit warming to 1.5°C above pre-industrial levels.
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NDC recommendation 2 Changes to the NDC to make it compatible with contributing to a global effort towards keeping warming to 1.5°C a. We recommend that to make the NDC more likely to be compatible with contributing to global efforts under the Paris Agreement to limit warming to 1.5°C above pre-industrial levels, the contribution Aotearoa makes over the NDC period should reflect a reduction to net emissions of much more than 35% below 2005 gross levels by 2030, with the likelihood of compatibility increasing as the NDC is strengthened further. b. How much the NDC is strengthened beyond 35% should reflect the tolerance for climate and reputational risk and economic impact, and principles for effort sharing, which require political decisions.
Consultation question 21 Nationally Determined Contribution (NDC) Do you support our assessment of the country’s NDC? Do you support our NDC recommendation?
Box 8.2: Why the NDC is different Our recommendation is that the NDC would need to be strengthened to reflect a reduction of much more than 35% below 2005 levels by 2030 to be compatible with contributing to the 1.5ᵒC goal. This could still be less than some other developed countries’ NDCs. This is because the emissions profile in Aotearoa is different to that of other developed countries. For most developed countries, carbon dioxide comprises the large majority of their emissions, and the IPCC modelling shows that large reductions in carbon dioxide would need to be made by 2030 to be on track to limit warming to 1.5ᵒC. In comparison, a larger part of emissions in Aotearoa are not from carbon dioxide, with nearly half of total emissions comprised of biological emissions from the agriculture sector. The IPCC modelled that these gases also need to be reduced but not as deeply or as quickly as carbon dioxide. Because these gases are a larger proportion of total emissions, the reductions in greenhouse gases in line with the IPCC modelling is smaller overall than an equivalent target for other countries. By taking a split gas approach in applying the IPCC’s modelling, we have accounted for the differences in the emissions profile in Aotearoa.
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8.7 How might Aotearoa meet an NDC compatible with 1.5°C? The reductions in net emissions to meet the NDC will come from a combination of domestic action within Aotearoa and offshore mitigation to support other countries to reduce emissions. Here we describe the balance between domestic and offshore mitigation in meeting the NDC and its implications for increasing the level of the NDC.
8.7.1 Domestic contribution The Act states emissions budgets must be ambitious but achievable and that the Minister must meet emissions budgets as far as possible through domestic actions. The Act limits offshore mitigation being used in budgets to situations where there has been a major change in circumstances, not accounted for when the budgets were set, that makes it impossible to meet the budgets domestically. As a consequence, offshore mitigation cannot be used to replace domestic mitigation – Aotearoa must do as much as possible within its own borders first. The emission budgets under the Act that we recommend, described in Chapter 2: Our proposed emissions budgets and emissions reduction plan advice, would limit net emissions in Aotearoa to 557 Mt CO2e over the periods 2022-2025 and 2026-2030 together. When forecast emissions for 2021 are included, emissions over the NDC period would be 628 Mt CO2e if our proposed emissions budgets are adopted. The evidence and analysis we have collated is that these budget levels represent ambitious but achievable levels of emission reductions on current levels that will put Aotearoa on track to meeting the 2050 targets – while balancing the requirements under the Act. More detail on how these budgets have been arrived at is provided in Chapter 2: Our proposed emissions budgets advice. However, the 628 Mt CO2e allowed emissions over 2021-2030 under our domestic emissions budget is higher than the level of the first NDC. This means that some offshore mitigation will be needed to bridge the gap to ensure the NDC is met. The emission budgets are set at a higher level than the NDC because they must be able to be met entirely domestically. If too stringent budgets are set early on, Aotearoa risks losing production in areas where a technological solution could be applied if more time was available to implement it. For example, in food processing, before a coal boiler can be replaced with a biomass boiler, a supplier must be found and design work to integrate it into the existing process must be done. If time is not allowed for these solutions to be implemented, some businesses will simply have to shut down. This could lead to potentially more severe social and economic impacts on communities, people and businesses than would be necessary to achieve the same amount of emission reductions given more time. Another consideration is around the likelihood of achieving the emission budgets. Our modelling shows that it is possible that emissions could potentially be reduced by a greater amount than the budgets we propose. However, this requires technological developments that are not yet proven – particularly technologies to reduce biogenic methane. Whether these technologies will be proven and able to be deployed is highly uncertain. Consequently, setting emissions budgets at a more stringent level relying on these technologies introduces significant risks that the budget will not be able to be met domestically. If they are developed and proven in time, Aotearoa can meet a greater proportion of its NDC domestically and will be in a better position to set a more stringent second NDC. 155
31 January 2021 Draft Advice for Consultation In advising on emission budgets we have looked further than 2030, out to 2050 and beyond. The first two emission budgets represent our estimate of what is achievable within Aotearoa up to 2030. It will be possible to reduce emissions much further after 2030, but only if the government takes decisive policy action early in the first and second budget periods. Greater levels of emissions reductions become possible as government, businesses and communities build momentum in the move away from fossil-fuels.
8.7.2 Offshore mitigation Offshore mitigation is where one country pays for emission reductions in another country and counts those reductions towards its own emissions reduction target. Offshore mitigation representing real, verifiable and additional emission reductions is a valid contribution to addressing climate change. The benefit to the atmosphere of an emission reduction is the same, regardless where it happens. Unlike emissions budgets under the Act, our NDC deliberately includes a contribution from international mitigation. Contributing this way means that in addition to doing as much as possible domestically, Aotearoa would help other countries to avoid locking in high emissions and to develop more sustainably. The Paris Agreement recognises that international cooperation through market mechanisms can serve the goals of increasing ambition and of promoting sustainable development and environmental integrity. This is consistent with the value of whanaungatanga – the interconnectedness of the climate and global system, and tikanga – doing the right thing in the right way. This is why the NDC is set at a more stringent level than emissions budgets set under the Act. The NDC represents the total mitigation contribution to the world beyond just what we can do at home as illustrated in Figure 8.4.
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31 January 2021 Draft Advice for Consultation Figure 8.43: Illustration of the role of international mitigation in NDC compared to emissions budgets
8.7.3 How much international mitigation will be needed? The gap between the first NDC and our recommended emissions budgets for domestic action is 43 Mt CO2e. This will need to be met by purchasing mitigation from overseas. Our modelling suggests that if a methane inhibitor or vaccine can be developed and deployed by the mid-2020s, this gap could be significantly reduced. This means that if the government was to increase the NDC to make it compatible with the 1.5°C goal, this would primarily increase the quantity of mitigation that needs to be purchased from overseas. Table 8.3 shows the level of the NDC and the likely quantity of offshore mitigation needed for the first NDC and an NDC based on the middle or upper end of the IPCC 1.5°C pathways. If Aotearoa were to take responsibility for past emissions or set the NDC based on the relative wealth of the country, the resulting NDC would show much deeper cuts to emissions. Table 8.3: The amount of offshore mitigation that would need to be purchased under different NDC levels Level (Mt CO2e)
Implied offshore mitigation (Mt CO2e)
2017 estimate of the first NDC
601
27
Latest estimate of the first NDC
585
43
Middle of the IPCC
564
64
524
104
NDC approach
interquartile range Upper end of the IPCC interquartile range The total cost of offshore mitigation used to meet an NDC will depend on the level of the NDC, how much of the NDC is met with domestic emission reductions and removals, and the price of offshore mitigation. It is currently uncertain how much offshore mitigation will cost. Its cost will depend on which country or countries the government partners with, the types of mitigation available there. Once the Government has formalised a partnership for offshore mitigation with another country it will have to decide how the mitigation will be paid for. Offshore mitigation could be paid for by the Government, by emitters or a combination of the two. The overall economic impact of expenditure on offshore mitigation will be greater than the purchase price, due to multiplier effects. Were an equivalent amount to be spent within Aotearoa, it would have a knock-on effect stimulating spending in downstream industries. With offshore mitigation these knock-on effects occur overseas, and so we do not get these benefits. However, we gain the benefit of cheaper emission reductions, and greater availability of mitigation options while the country builds momentum in decarbonising at home. 157
31 January 2021 Draft Advice for Consultation It is uncertain both how much mitigation will cost and what multiplier would be appropriate to account for the terms of trade effects. This means there is a wide range of possible economic costs to offshore mitigation. If Aotearoa was to change the NDC to reflect the middle of the IPCC range, then the range of economic costs of this component are described in Table 8.4 below. Table 8.4: Possible economic costs of offshore mitigation used to meet an enhanced NDC Price ($/tonne) Multiplier for terms of trade
$30
$50
$100
No multiplier
$1.9b
$3.2b
$6.4b
1.8 multiplier
$3.5b
$5.8b
$11.5b
Note: Estimates of the possible multiplier to account for terms of trade effects vary. Here we have used 1.8 based on work done by Infometrics to assess the impact of possible NDCs in 2015 – A general equilibrium analysis of options for New Zealand’s post-2020 climate change contribution.
8.8 How might Government decide the level of the NDC? The middle of the IPCC range, representing the average reductions required of the world to keep warming to 1.5°C, would be an NDC of no more than 564 Mt CO2e, equivalent to a reduction of 35% on 2005 levels by 2030. How much deeper than this level the NDC should be set depends on a range of factors that are outside the Commission’s remit and capability. This is because the first NDC will reflect a deeper level of emission reductions than we believe is practical to achieve domestically. The decision on the level of the NDC therefore does not reflect trade-offs about how we transition the economy, but decisions about the level of economic effort the country is willing to make over and above the domestic transition, in service of a global effort to mitigate climate change. Decisions on the level of offshore mitigation purchased will need to balance a wider range of factors including judgements about • • • • •
the expectations of other countries and their governments the economic impacts of extending the NDC tolerance for climate risks the relative importance of funding greater levels of climate change action against other domestic or international priorities the Government’s approach to equity between countries.
We consider that these judgements, and the decision on the level of international commitment, should be made by the elected government of the day. However, it is also important that future governments uphold the NDC, and so cross-party support for any changes to the NDC should be sought. We can however describe some principles the government can use to guide its analysis of deciding the level of the first NDC and some limitations in their application. 158
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8.9 Non-mitigation contributions NDCs represent countries’ mitigation commitments – how much each will contribute to the collective effort to peak global emissions and rapidly reduce them thereafter. Other measures that can also support climate change efforts include wider elements such as climate finance to support developing countries to adapt to the effects of climate change and to mitigate their own emissions. Non-mitigation measures cannot replace mitigation, but can be included as supplementary commitments inside or outside NDCs to demonstrate a commitment to equity. As the terms of reference for the review of the NDC were in reference to limiting warming to 1.5°C, we have not included non-mitigation commitments in our analysis. However, including an additional nonmitigation contribution in the country’s first NDC is one option the government could consider.
8.10 Principles for setting an NDC Aotearoa cannot ensure that warming is kept to 1.5°C on its own. It will take a global effort to do so. In seeking to make its NDC compatible with such a global effort, the government must either implicitly or explicitly make assumptions about how its NDC relates to the effort of other countries. There are different approaches to sharing the global effort between countries and they each imply different levels of NDC for Aotearoa. This section discusses some of the key principles and approaches used to estimate suitable contributions from different countries. The IPCC described the main set of effort sharing approaches in the Fifth Assessment Report. There are three main principles and different approaches to effort sharing balance these principles differently.
•
•
Equality: This principle focuses on equal access to the atmosphere. What emissions budget remains is shared between all people equally. There are a range of approaches: o Equal proportional emissions cuts – all countries reduce emissions at the same rate. o Equal per capita emissions – emissions per capita converge to, or immediately reach, the same level for all countries. Responsibility: This principle focuses on countries taking responsibility for their historic emissions. Countries that have emitted more historically have to take deeper and faster cuts. 159
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Capability/need: This principle focuses on a country’s level of economic development. Higher levels of economic development imply a higher capability to reduce emissions. Lower levels of economic development imply a greater need for further development and a greater use of the world emissions budget. Consequently, richer countries are tasked with reducing deeper and faster, while less developed countries take more time before needing to cut emissions in order to develop economically.
In addition to the main principles, there are approaches that combine the different elements. The two most relevant are: •
•
Equal cumulative per capita emissions: emissions need to be reduced so that cumulative emissions per capita reach the same level. This allows countries with a high population and low historic emissions further time to develop. This approach combines elements of equality and historical responsibility. Responsibility/capability/need: a range of studies have explicitly used responsibility and capability as the basis for distributing emissions reductions. The approach taken will depend on the relative weighting given to responsibility vs capability.
Each of these approaches relies on assessing a global emissions budget that is compatible with the temperature goal and dividing it between countries, in ways that reflect equity considerations. However, careful judgements need to be made about how different gases are treated in these approaches. In particular, care must be taken to consider how short-lived gases are treated in approaches that are based on calculating cumulative emissions. Various organisations and researchers have analysed targets and NDCs specific to Aotearoa under different effort sharing approaches including Climate Analytics and the New Climate Institute (Climate Action Tracker) and du Pont et al (Paris Equity Check). These analyses generally exclude forestry emissions/sequestration and so are not directly comparable with an NDC that includes forest sequestration but are illustrative of the depth of reductions required if these equity approaches are applied. Oxfam New Zealand (A Fair Target for 2030 for Aotearoa, 2020) provides a useful overview of the different equity approaches that can be applied and what they would mean for the NDC specifically and have noted the methodological issues that need to be managed in each case. In general, applying these equity approaches implies that Aotearoa should make significantly deeper reductions than the global average. For approaches under the equality principle, the scale of reductions needed depends heavily on what is being held equal – the allowed budget per person, or the proportionate level of reductions. Holding the proportionate reductions equal across countries is not an equitable approach and is not compatible with the international commitments Aotearoa has, as it ignores differences in national circumstances and instead requires the same proportionate reductions of developed and developing countries alike. Emissions trajectories based on the country’s relative economic capacity generally lead to deeper reductions by 2030 than the IPCC range before reaching net zero all-gases between 2040 and 2050. Emissions trajectories that account for historic responsibility follow a similar path towards net zero in the 2040s but continue to reduce emissions after net zero to address past contributions to climate change. 160
31 January 2021 Draft Advice for Consultation If the government applies any of these approaches to determine its contribution, it should be clear about the methods it uses to do so.
8.11 The form of the NDC 8.11.1 All-gas or split-gas format The Act sets Aotearoa a split-gas domestic target for 2050. This raises a question about whether the NDC should also be expressed in a split-gas format or continue to be expressed as an all-gases target. In considering this question, it is important to keep in mind that the NDC serves a different purpose to the domestic 2050 target and that, in addition to domestic emission reductions, the NDC also includes an international contribution through funding offshore mitigation. There are a range of options for the form of the NDC, between a fully all-gas or fully split-gas format: 1. Fully all-gas: maintain an all-gas headline target, with no specific reference to the domestic split gas contribution either in the headline target or elsewhere in the NDC 2. All-gas with acknowledgement of the split-gas domestic target: maintain an all-gas headline target but mention the domestic split gas contribution elsewhere in the NDC. This could involve either a general reference in the NDC’s supporting information or specifying in detail the 2030 methane sub-target and gas-by-gas breakdown of emissions budgets one and two. 3. All-gas with the split-gas domestic target incorporated into the headline target: the split-gas domestic target would be brought up into the headline target statement, with the NDC also expressed in all-gas terms overall. The international contribution would remain all-gas. This could be worded in a similar way to the following: “Aotearoa commits to reduce domestic biogenic methane emissions to 10% below 2017 levels by 2030, reduce domestic emissions of other gases by 42% on 2005 levels by 2030 and cooperate on international mitigation outcomes to reduce emissions overall to 30% below 2005 levels by 2030”. 4. Fully split-gas: An overall split-gas headline target, applying to both the domestic and international contributions by Aotearoa e.g. “Aotearoa commits to reduce biogenic emissions biogenic methane to 10% below 2017 levels by 2030 and all other gases to 42% below 2005 levels by 2030”.
8.11.2 Effect of moving to a split-gas NDC To answer the question about the appropriate form for the NDC, we need to think about what Aotearoa might want to achieve with the way the NDC is presented. Unlike the domestic 2050 target, the NDC is adopted under an international agreement, so it plays an important role in communicating Aotearoa’s level of effort to the rest of the world. Possible objectives in choosing between an all gases or a split-gas form of NDC could include: a) Ensuring the NDC is delivered in line with 1.5°C pathways, in terms of both international and domestic contributions, including the contribution of biogenic methane emission reductions b) Influencing the international community’s expectations in order to gain more legitimacy for split-gas targets that recognise the different warming impacts of biogenic methane c) Meeting current international expectations about the nature of developed country NDCs. 161
31 January 2021 Draft Advice for Consultation Possible objective (a) most directly relates to the Commission’s task, advising on the NDC’s compatibility with the 1.5°C goal. Any form of the NDC can be made compatible with a 1.5°C trajectory – it is the level and timing of emission reductions that is most relevant to compatibility rather than the form of the target. It is not necessary for the NDC to be expressed in a split-gas format to be compatible with limiting global warming to 1.5°C. Moreover, the contribution of domestic emission reductions to meeting the NDC, including the amount of domestic biogenic methane reductions, is not set by the form of the NDC. Rather, it is determined by the domestic 2030 and 2050 emission reduction targets and emissions budgets set under domestic legislation. The other two possible objectives bring in wider issues related to foreign policy and the effectiveness of the Paris Agreement. Expressing the NDC in a split-gas format could have the benefit of highlighting to other countries the possibility of splitting biogenic methane from other gases, in recognition of its different warming impacts. The flipside of this is that a split-gas NDC would be unlikely to meet current international expectations that a developed country’s NDC should be an all-sector, all-gas absolute emission reduction target. Anything other than this is likely to be perceived as stepping back from responsibility and ambition. It could prompt a high degree of criticism from other countries and civil society groups. It is also important to be aware that under the Paris Agreement, NDCs can only be revised to enhance ambition and each successive NDC must show progression on the previous contribution. This process of ratcheting up is informed by 5-yearly global stocktakes of collective progress towards achieving the purpose of the Agreement and its long-term goal. The first global stocktake is scheduled for 2023. In this way, once an element is included in an NDC it becomes part of an international process where collective pressure is brought to bear to push countries for more action. This is part of the Paris Agreement’s strength and why participation as a relatively small emitter is worthwhile – we play a role in building the momentum to encourage other larger countries to act. An important implication of expressing the NDC in a split-gas format would be that it would bring domestic emission reduction targets, including the 2030 target for biogenic methane, into this collective ratcheting up process. In general, the implications of the nature and content of the NDC Aotearoa puts forward need to be very carefully considered given how this could limit flexibility in future. Which of these objectives should be pursued and how is a matter for the country’s strategy for pursuing its national interests in international climate change negotiations. For example, if Aotearoa wants to influence the international community to recognise the different warming impacts of biogenic methane, there may be a range of ways to do that and submitting a split-gas NDC may not be the best approach.
8.11.3 Metrics used to express the NDC Metrics are used when different greenhouse gases need to be compared or aggregated together. The country’s submission to the UNFCCC on its first NDC outlines that it “applies 100-year Global Warming Potentials (GWPs) from the IPCC 4th assessment report”. In describing the alternate NDCs based on IPCC modelling, the Commission has also used GWPs from the Fourth Assessment Report for consistency of comparison. If the Government revises the NDC, 162
31 January 2021 Draft Advice for Consultation there is a strong rationale as part of that update to move to applying the 100-year GWPs (GWP100) from the IPCC’s Fifth Assessment Report. This is because for emissions in years from 2021 onwards, Aotearoa’s GHG Inventory reports must be prepared using that the GWP100 values from the IPCC’s Fifth Assessment Report, in accordance with guidance adopted under the Paris Agreement (Decision 18/CMA.1). Progress towards meeting the NDC will be tracked using the GHG Inventory. If the NDC and the GHG Inventory are calculated using different GWP100 values, two sets of emissions estimates will need to be calculated and reported in the Inventory. This is likely to create confusion about which set of estimates are relevant for which purpose, as well as an unnecessary administrative burden. Moving to use of GWP100 values from the Fifth Assessment Report is also consistent with the Paris Agreement Decision about presenting and accounting for NDCs (Decision 4/CMA.1). This stipulates that the methods and metrics agreed for Inventory reporting are also to be used for NDCs. This guidance only compulsorily applies for second NDCs onwards, although Parties can elect to also apply it in respect of their first NDC. Moving to the use of GWP100 values from the Fifth Assessment Report will have some impact on the overall ambition of the NDC, as it is calculated on an all-gas basis against emissions in a base year. The updates to GWP100 values in the Fifth Assessment Report will change the relative contribution of each greenhouse gas to the CO2e amount of allowed emissions determined by a given percentage reduction against the base year. This effect should be factored into the Government’s consideration of any changes it might make to the NDC.
Enabling NDC recommendation 1 Form of the NDC a. We recommend that the government in making its decisions should continue to define the NDC on the basis of all greenhouse gases using the most recent IPCC global warming potentials adopted by the Parties to the UNFCCC. If the government updates the NDC, it should adjust it to use the GWP100 values from the IPCC’s Fifth Assessment Report. b. We recommend that the government in making its decisions should continue to contribute to further global mitigation beyond the NDC through the provision of climate finance to developing countries and active participation in mitigation mechanisms for international aviation and shipping.
Consultation question 22 Form of the NDC Do you support our recommendations on the form of the NDC? 163
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8.11.4 Alternative metrics Different metrics are good at addressing different questions – there is no one ‘correct’ metric that is useful for all purposes. This is because each metric makes assumptions and judgements about what is important in order to simplify the physical differences between gases down to a quantitative relationship. Three of the most prominent metrics discussed are Global Warming Potential (GWP), Global Temperature Potential (GTP) and Global Warming Potential Star (GWP*). GWP requires that a timeframe be set and will compare the relative total effect on radiative forcing between gases over that period – commonly 100 years is used. However, GWP excludes any considerations of the relative effects after that period. GWP values with shorter time horizons therefore put a greater emphasis on warming from short-lived gases as they exclude the effects of long-lived greenhouse gases that continue to have a warming effect beyond its time horizon. GWP also only includes the aggregate effect over the period and does not consider the temperature trajectory. This makes it less useful in analysis of pathways to a specified temperature goal. GTP looks at the temperature effect of a pulse of gases at a defined point in the future. It ignores any effects of warming before its stated time horizon. It puts a strong emphasis on long-lived gases for a long time horizon, shifting over time to a strong emphasis on short-lived gases as the date of the temperature goal approaches. Consequently, it is not consistent through time. GWP* compares the warming effect of a sustained rate of emitting a short-lived greenhouse gas emissions such as methane against a cumulative total of carbon dioxide emissions. It is useful for setting and comparing long-term national emission targets where cumulative emissions of long-lived gases and emission rates of short-lived gases can be traded-off between one another. However, it is less useful in national policy or in making trade-offs with short-term targets. This is because the metric compares against a rate of emissions sustained in perpetuity. Landowners making decisions about increasing or decreasing their production, and consequently their methane emissions, do not make their decisions in perpetuity, but will adjust their activity according to the economic circumstances at the time. This will make the comparison in emissions inaccurate as soon as behaviour changes. We discuss different metrics further in the Evidence Report Chapter 1: The Science of Climate Change.
8.12 Planning for meeting the NDC 8.12.1 Access to offshore mitigation under the Paris Agreement To deliver on either the existing or a strengthened NDC, the Government will need to actively pursue the development of international emissions markets with strong environmental integrity so that it can access offshore mitigation. The landscape for international emissions markets has substantially changed from when Aotearoa last participated in these markets prior to 2015. Currently there is no centralised UN-overseen market that Aotearoa can easily access, although negotiations are continuing in this area. In the meantime, it is incumbent on individual countries to negotiate market arrangements with each other. Some countries are already making progress – Switzerland, in particular, has already signed agreements to cooperate on reducing emissions with two partner countries.
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31 January 2021 Draft Advice for Consultation The Government has signalled it will hold itself to high standards of environmental integrity in the offshore mitigation it applies to the NDC. It is of critical importance that the Government follows through on this intent. The need for offshore mitigation to meet the NDC also raises the question of how the purchasing will be paid for and managed. The purchasing could be undertaken by the government or by emitters and will depend in part on how Aotearoa secures access to international emissions markets. Either way, it should be managed so that does not undermine the NZ ETS price signal which needs to remain at a level that helps drive the domestic action needed for low emissions transition.
8.12.2 Accountability and reporting on the NDC The credibility of the NDC relies on the Government showing its intent to achieve both the domestic and international emissions reductions to meet it. Emissions budgets and the emissions reduction plan will fulfil the former, but it is not yet clear how the Government will deliver on the latter. This raises concerns that the Government may fail to adequately plan for obtaining offshore mitigation, adding to regulatory uncertainty and increasing the risk that a potentially large amount of offshore mitigation will need to be purchased towards the end rather than spread across the entire target period. This in turn increases the chance that the NDC may not be achieved. The Government should develop a plan for how it will access and purchase offshore mitigation and take steps to implement it. This will demonstrate a credible commitment to meeting the NDC both domestically and to the international community. It would not be responsible to wait for others to develop the markets for us, or to leave this until the late 2020s – this work needs to start now. Internationally, Aotearoa will be held to account for the NDC through its reporting under the Paris Agreement. Governments must communicate progress towards meeting NDCs every two years, including actual and projected emissions and policies together with their effects. Aotearoa’s first biennial transparency report for this purpose must be submitted by 31 December 2024 and will provide increased transparency over plans for meeting the NDC. Biennial transparency reports are unlikely, however, to cover some information that is of interest domestically as they are prepared for an international audience. For example, they are unlikely to include how meeting the NDC, including through purchasing of offshore mitigation, may impact on public finances. The NDC is also not within scope of the Commission’s annual monitoring reports, as these are about the 2050 target and emissions budgets. There appears to be a domestic reporting gap. Given that the Government intends to require a range of businesses to disclose climate change risks in their financial reports, it is not unreasonable to expect the Government to do the same. We therefore consider that the Government should hold itself accountable for meeting the NDC through regular transparent reporting, including the disclosure of any fiscal risks that may arise from the purchasing offshore mitigation and its strategy for managing those risks.
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Enabling NDC recommendation 2 Reporting on and meeting the NDC a. The government in making its decisions should continue to enable the NDC to be met through a combination of domestic emission reductions, domestic removals, and use of international carbon markets. b. The government should report annually on how it plans to meet the NDC, including the balance of planned domestic emission reductions, removals and offshore purchasing. c. The government should clearly communicate its strategy for purchasing offshore mitigation to meet the NDC and how it will manage any fiscal risks in doing so.
Consultation question 23 Reporting on and meeting the NDC Do you support our recommendations on reporting on and meeting the NDC? Is there anything we should change, and why?
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Chapter 9: Eventual reductions in biogenic methane 9.1 What have we been asked to do? Under section 5K of the Climate Change Response Act 2002 (the Act), the Minister of Climate Change asked the Commission to provide a report assessing biogenic methane emissions in Aotearoa. Specifically, the Minister has asked the Commission to provide: “advice on the potential reductions in biogenic methane emissions which might eventually be required by New Zealand as part of a global effort under the Paris Agreement to limit the global average temperature increase to 1.5o Celsius above preindustrial levels. In providing this advice the Commission must: a. leave aside considerations on the current target range for biogenic methane specified in section 5(Q)(1)(b) of the CCRA; b. consider the available scientific evidence on the global biogenic methane emissions reductions likely to be required to limit global average temperature increase to 1.5o Celsius above pre-industrial levels; c. consider New Zealand’s potential contribution to global efforts to limit biogenic methane emissions, reflecting its national circumstances; and d. consider a range of potential scenarios for economic, social and demographic changes which might occur in New Zealand and globally until 2100.” The full text of the request and the terms of reference can be found on our website at https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/reviewing-newzealands-nationally-determined-contribution-and-biogenic-methane/ We have interpreted part (a) to mean the Commission should not provide advice on the target range for biogenic methane emissions set for 2050. This is consistent with section 5T of the Act that sets out the limited circumstances when the Commission can review targets. As there has not been a significant change in circumstances that would justify changing the 2050 target since it was set, the Commission would be unable to recommend a change to the 2050 target. We have structured the analysis in this chapter around the considerations (b) to (d) above, drawing findings under each. Understanding these elements requires a mixture of quantitative and qualitative analysis. There are no exact numbers that can come out of a formula. Judgements are required regarding trade-offs, where to prioritise efforts and how the impacts and consequences of acting on climate change are distributed within Aotearoa across people, place and time. Judgement is also needed to consider opportunities and trade-offs between Aotearoa and the rest of the world. This brings in concepts of equity and fairness. To complement our analysis, we also provide a summary of previous analyses that have looked at potential reductions in methane for Aotearoa in Appendix 1. In this chapter we talk about methane, biogenic methane and agricultural methane. Distinguishing between these three terms is important. Methane refers to all forms of methane emitted, including 167
31 January 2021 Draft Advice for Consultation methane from agriculture, waste and fossil fuel extraction. Biogenic methane refers to methane from agriculture and waste. Agricultural methane refers solely to methane from agriculture. While the request from the Minister requires us to consider the eventual reductions in biogenic methane, analysis that we have drawn on, including by the Intergovernmental Panel on Climate Change (IPCC), refers to agricultural methane. Although these are slightly different, in Aotearoa agricultural methane makes up 88% of biogenic methane. So, for the purposes of our analysis we have applied analysis for agricultural methane as a proxy for biogenic methane. The IPCC does not separately identify biogenic methane from waste.
9.2 Consideration 1: What global reductions of biogenic methane emissions might be required to limit warming to 1.5°C? Our first consideration is of the scientific evidence and analysis regarding what global reductions in biogenic methane are likely to be required to limit warming to 1.5°C. This analysis is based on the IPCC special report on 1.5°C. The long-term reduction in global biogenic methane emissions needed to limit global warming to 1.5°C depends on a number of factors. All the greenhouse gases have different warming properties. Three key factors affect the contribution of different gases to global warming: how much is emitted, how long it stays in the atmosphere and the strength of its warming effect while its in the atmosphere. Table 9.1 summarises these for carbon dioxide, methane and nitrous oxide – the three most important greenhouse gases in terms of their contribution to global warming. For further details, see Chapter 1: The science of climate change in the Evidence Report.
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31 January 2021 Draft Advice for Consultation Table 9.1: Properties of carbon dioxide, methane, and nitrous oxide
Quantity of emissions
Duration in the atmosphere
Strength of warming effect
Carbon dioxide
Comprises the majority of global emissions (~80%) Largely from fossil fuel combustion. Also from deforestation. Increasing by more than 1% per year over the last decade.
Long-lived gas that can last for centuries or milennia in the atmosphere.
Relatively small impact on per-molecule basis, but large effect with accumulation in the atmosphere over time. Responsible for the majority of humandriven warming.
Methane
Accounts for the second largest share of global emissions (~20%).
Short-lived greenhouse gas. Breaks down in the atmosphere after around 12 years.
Powerful warming effect on a permolecule basis. Responsbile for about one-fifth of all humandriven warming.
Mostly from fossil fuel extraction, distribution and combustion.
Some longer-term indirect warming effects through climate-carbon cycle feedbacks that endure after atmospheric decay.
Biogenic methane largely stems from ruminant agriculture, rice cultivation and organic waste decomposition. Nitrous oxide
Relatively small quantity of emissions (<5%). Mainly from industrial processes, agricultural soils, manure management and wastewater.
Long-lived gas with warming dynamics similar to carbon dioxide over decadal to centennial timeframes.
Powerful warming effect on a permolecule basis. Accumulates in the atmosphere over time.
The combination of these factors - the quantity of emissions, their duration in the atmosphere and the warming effect of the gas – all interact with each other to produce any given temperature. This means the reductions in biogenic methane required to meet the 1.5 oC temperature goal are dependent on the levels of other greenhouse gas emissions and emissions removals. The global reductions in biogenic methane required to stay below 1.5 oC will depend on the level of carbon dioxide and nitrous oxide emissions over the next century. Therefore, it is not currently possible to know for certain what reductions in biogenic methane will be required. However, it is 169
31 January 2021 Draft Advice for Consultation possible to identify the ranges of reductions of the different gases that mean it is likely warming will be limited to 1.5 oC above pre-industrial levels.
9.2.1 Global pathways compatible with limiting warming to 1.5°C The IPCC has produced a large number of possible emissions reduction scenarios that limit warming to 1.5 oC. Each scenario has been designed to reach the temperature goal in the lowest-cost way possible. They use current understanding of the relative costs of reducing emissions using known technologies. They do not include any direct emissions reduction technologies applying to biogenic methane. The scenarios contain a range of assumptions about economic growth, technology developments and lifestyles. The IPCC modelling found 1.5°C compatible scenarios under a broad range of possible futures, with different economic and demographic developments. All of the 1.5oC compatible scenarios are assume global population and food demand will increase over the course of the century, although some of the scenarios expect both population and food demand to drop by 2100. Despite their common underlying features, the IPCC scenarios do differ in whether they always stay within the 1.5°C goal, with some scenarios allowing the temperature to overshoot 1.5°C before cooling down again later in the century. The scenarios with little or no overshoot have been estimated to be the most likely to deliver the best overall social, economic and environmental outcomes. Higher levels of overshoot are associated with higher cumulative emissions and greater climate impacts and adaptation needs. Scenarios with higher overshoot also rely on high levels of emissions removal technologies such as carbon capture and storage that may not be feasible. We have therefore chosen to only consider scenarios with no or limited overshoot. Each of these different scenarios results in different rates of emissions reductions for each greenhouse gas. The interquartile range of emissions reductions ranges for carbon dioxide, agricultural methane and nitrous oxide in these scenarios are summarised below in Table 9. We have used the interquartile range as it excludes more extreme model results that are less likely to be feasible. The emission reductions here are associated with scenarios with a 50-66% probability of limiting warming to 1.5ᵒC. Scenarios closer to the lower quartile range have greater methane reductions and are less likely to overshoot the 1.5°C goal. Conversely, scenarios closer to the upper quartile range have smaller methane reductions and are more likely to overshoot the 1.5°C goal and rely on carbon dioxide removals in the latter part of the century to bring temperatures back down. The IPCC has noted that relying on large scale carbon dioxide removals represents a major risk that the world will not be able to limit warming to 1.5°C.
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31 January 2021 Draft Advice for Consultation Table 9.2: Change in greenhouse gas emissions in IPCC model scenarios with no or limited overshoot. Percentage change relative to 2010 2030
2050
2100
Net carbon dioxide emissions
-40 to -58%
-94 to -107%
-121 to -136%
Agricultural methane emissions
-11 to -30%
-24 to -47%
-37 to -60%
Agricultural nitrous oxide emissions
+3% to -21%
+1% to -26%
-6 to -39%
Note: in some of the scenarios, nitrous oxide stays the same or increases out to 2050. This reflects the lack of mitigation options that exist for this gas, and the fact that some nitrous oxide emissions are an inevitable byproduct of agricultural practices.
The scenarios that had the greatest chance of limiting warming to 1.5°C, all required rapid emissions reductions of greenhouse gases between now and 2030 and then slower reductions out to the end of the century. All these scenarios have several other features in common: • • • •
Net emissions of carbon dioxide and other greenhouse gases peak in the 2020s and then rapidly reduce through the 2030s and 2040s. Emissions of methane reduce significantly through the next 20 years, but do not need to reach zero by 2050 or 2100, due to the short-lived nature of the gas. Emissions of nitrous oxide peak in the 2020s and then reduce, but do not reduce to zero due to the difficulty of eliminating nitrous oxide emissions from agriculture. Emissions of long-lived greenhouse gases will be near zero by 2050. Most pathways have some remaining gross emissions in 2050 from hard-to-abate sectors. This includes things like carbon dioxide from cement manufacturing. As a result, emissions removals are required to ensure emissions reach and remain at net zero.
Overall, the IPCC scenarios show that the at least a 37% reduction in agricultural methane is required to have a 50-66% chance of limiting warming to 1.5oC by 2100. Simply maintaining the current level of warming from methane is not enough, as it would require the world to reach net zero carbon dioxde by 2030 to keep warming below 1.5oC. We consider this to be infeasible and consequentially that the global warming contribution from methane must be reduced if the 1.5oC temperture goal is to be achieved. The reductions in methane modelled by the IPCC were against 2010 levels. The current biogenic methane targets for Aotearoa are set against 2017 emission levels. As the country’s biogenic methane emissions in 2010 and 2017 differed by less than 1%, the percentage reduction is the same when presented against either year. From here we present reductions in biogenic methane against 2017 levels for ease of comparison with the existing targets.
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9.3 Consideration 2: What reductions of biogenic methane could Aotearoa make to contribute to limiting warming to 1.5 degrees, recognising national circumstances? Our second consideration is of the potential contribution Aotearoa could make to reducing biogenic methane emissions, in light of national circumstances. We analyse the sources of biogenic methane emissions, the opportunities for Aotearoa to reduce biogenic methane emissions and key aspects of national circumstances that affect these.
9.3.1 The sources of biogenic methane in Aotearoa In 2018, gross emissions of biogenic methane were about 1.34 Mt CH4 in Aotearoa. Agriculture is the largest source of biogenic methane at around 88%, with the remainder from waste.
Figure 9.1: Aotearoa biogenic methane emissions by sector 2018 Agriculture Aotearoa has a well-developed agricultural sector that makes up a much larger part of the economy than in many other developed nations. Around 9.7 million hectares of the 26.8 million hectares in total in Aotearoa are used for pastoral agriculture. The main agricultural products by volume are meat, dairy products and wool, with the vast majority being exported. Figure 9.2 shows the breakdown of historic biogenic methane emissions from agriculture and those projected under current policies 172
31 January 2021 Draft Advice for Consultation (termed the Current Policy Reference case). Dairy, sheep and beef farming account for the majority of these emissions, although the former has increased historically while the latter has decreased. For more information of these trends and the Current Policy Reference case see Chapter 7: Where are we currently heading? in the Evidence Report.
Figure 9.2: Historic and Current Policy Reference case biogenic methane emissions from agriculture
Waste Aotearoa has a high per capita waste production and resulting methane emissions compared to many other developed countries. Figure 9.3:3 shows the historic biogenic methane emissions from waste and those projected under current policies. The main sources of these emissions are landfills, some of which use landfill gas capture (LFG) technology and farm fills. For more information on these trends and the Current Policy Reference case see Chapter 7: Where are we currently heading? in the Evidence Report.
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Figure 9.3: Historic and Current Policy Reference case biogenic methane emissions from waste
9.3.2 How much could biogenic methane emissions be reduced? As part of our analysis, we have identified a number of opportunities to reduce biogenic methane emissions from agriculture and waste. Agriculture Biogenic methane emissions from agriculture are largely a function of the amount of feed an animal eats. Reducing methane from agriculture therefore relies largely on changes to farm management practices that reduce total feed being produced and consumed. Adjusting stocking rates, supplementary feed and other inputs can improve emissions-efficiency on-farm. Changing land use to lower emissions activities such as horticulture, could also reduce methane emissions. New technologies also offer potential for reducing methane emissions. Selective breeding of sheep to be low emitting is already possible. This could have a significant impact over time if these traits are bred through the national flock. Research into the potential for breeding low emissions cattle is ongoing. Other promising emission reducing options currently being researched and developed include a methane inhibitor that would be compatible with the country’s pastoral farming system and a methane vaccine that could supress methane production. If Aotearoa were to pioneer the development of these methane technologies, we would also be able to make significant contributions to global emissions reductions through helping disseminate them internationally.
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31 January 2021 Draft Advice for Consultation Waste We have identified three broad opportunities for reducing biogenic methane emissions from waste. These are: •
reducing total waste generation by improving resource efficiency and supporting consumers to reduce household waste
•
increasing the amount of waste we divert from landfills by, for example, turning what would have gone to landfill as 'food waste' into compost
•
ensuring that landfills that receive organic waste have high efficiency landfill gas capture systems, that capture the majority of the methane being produced.
These opportunities are discussed in more detail in Chapter 4d: Reducing emissions – opportunities and challenges across sectors – Waste of the Evidence report.
9.3.3 Overall Our analysis to inform emissions budgets indicates that it is possible to reduce total biogenic methane emissions by between 12-26% below 2017 levels by 2030 and 25-59% below 2017 levels by 2050 through reducing biogenic methane emissions from both agricultural and waste. The lower ends of these reductions (12% by 2030 and 25% by 2050) can be achieved using currently available practices and technologies. The development of new technologies such as a methane inhibitor would provide greater flexibility and unlock the upper range of reductions. Reaching the higher range of biogenic methane reductions (26% by 2030 and 59% by 2050) without new technology would likely require reduced agricultural production from livestock and land use change. For more details on our scenarios and projected emissions reduction pathways see Chapter 3: The path to 2035. After 2050, there is a high level of uncertainty around what opportunities to reduce methane may become available and how effective they will be. This makes it difficult to estimate what levels of reductions are likely to be achievable.
9.3.4 Important national circumstances that relate to potential biogenic methane emissions reductions There are several important national circumstances that should be taken into account when considering biogenic methane emissions reductions in Aotearoa. Firstly, there are obligations to uphold the principles of partnership, protection,and participation under the Te Triti o Waitangi. As discussed in Chapter 5: The impacts of emissions budgets on New Zealanders, Māori-collectives hold approximately $13 billion in assets in the primary industries with potential for further development. Any targets and supporting policies should avoid compounding historical disadvantages. Secondly, Aotearoa has a responsibility as a developed country to take a leading role in reducing greenhouse gas emissions under the UNFCCC and principles of “common but differentiated responsibilities”. This responsibility is discussed further in Chapter 8: The global 1.5°C goal and Nationally Determined Contribution for Aotearoa. The responsibility means that Aotearoa must do more than the global average in terms of reducing emissions to meet fixed temperature targets. It is 175
31 January 2021 Draft Advice for Consultation based on a range of factors including historical responsibility for greenhouse gas emissions and present capacity to reduce them. Thirdly, Aotearoa is one of the most greenhouse gas efficient producers of red meat and dairy products in the world. The climate, topography, rainfall patterns and soil types make much of the country suited to pastoral farming. Combined with access to international markets and the need to compete with subsidised international producers, this has helped drive improvements in efficiency across Aotearoa’s pastoral production systems. In a low emissions future where red meat and dairy products continue to be consumed there is good reason to believe that production in Aotearoa would still be globally competitive. Internationally, Aotearoa leverages its expertise in efficient agricultural production to support emissions reductions and sustainable development in other countries. The Government’s role in founding and funding the Global Research Alliance on Agricultural Greenhouse Gases is a key example of this. Its ability to credibly lead such initiatives is enabled and underpinned by the country’s innovative ecosystem of farmers, researchers and agriculture experts. The value of these international contributions should also be considered in assessing biogenic methane emissions reductions. Fourthly, the large role played by agriculture in the economy of Aotearoa should also be considered when considering reductions in biogenic methane. Reductions in biogenic methane that come at significant cost to agricultural industries could have negative social and economic consequences as discussed in Chapter 5: The impacts of emissions budgets on New Zealanders. At the same time, the long-term viability of these industries may require reductions in biogenic methane to maintain access to international markets and to meet evolving domestic and international consumer preferences. This is discussed more in the next section of this chapter. On balance, we consider that the country’s national circumstances do not provide sufficient reason to reduce biogenic methane emissions by less than other developed countries in contributing to the global 1.5 °C goal.
9.4 Consideration 3: What social, economic and demographic changes may occur? Our third consideration is of the the key social, economic and demographic factors and changes that may occur until 2100 – both within Aotearoa and globally – that could affect the contribution Aotearoa makes to biogenic methane emissions reductions. This section steps through some of the key trends that we have incorporated into our analysis.
9.4.1 Population growth and food demand The world population is expected to continue to increase over the century, reaching more than 9 billion people by 2050. The growth in the global population is expected to slow over the century, although by how much is uncertain. Estimates used in the IPCC 1.5°C report suggest the global human population is expected to increase to between 9-11 billion by the end of the century. This growing population will need to be fed. As the majority of meat and dairy produced in Aotearoa is exported, changes in global demand for these products could have important consequences for biogenic methane emissions. A number of estimates exist for changes in food demand, which include both an increase in total amount and changes in the type food required. The Food and Agriculture Organization of the United 176
31 January 2021 Draft Advice for Consultation Nations (FAO), estimated the need to double global food production by 2050 to meet the expected demand of around 9.7 billion people, although this need is not evenly distributed around the world. The FAO also predicts increasing demand for animal products, fruit and vegetables and more processed foods, due to a combination of increasing wealth and greater urbanisation. The majority of global population growth and increased food demand is expected to occur in regions that are not currently major export destinations for Aotearoa, such as sub-Saharan Africa and South Asia. Most of the dairy and meat exports are currently targeted at middle-class and premium consumers in China, Europe, and North America. In addition to global population growth, incomes in many developing countries are expected to rise and bring with it an expanded global middle-class. There is a clear relationship between increasing incomes and consumption of meat and dairy products. In a future where meat and dairy products remain in high demand, there is good reason to expect Aotearoa can continue providing these to the world if Aotearoa can maintain and strengthen its position as one of the lowest emissions producers.
9.4.2 Demand for low emissions agricultural production Both globally and domestically, there are growing concerns about the environmental impact of food – including for greenhouse gases. In response, a number of agricultural accreditation and sustainability schemes have been established, such as Toitū Envirocare’s farm carbon certification programme. A number of producers in Aotearoa have already signed up to such schemes. The rapid development of alternative protein industries has built on consumer preferences for environmentally sustainable products. These include plant-based protein products and synthetic meats grown in laboratories, many of which have lower emissions, water and land use footprints than conventional animal agriculture products. The rapid expansion of these industries, which often promote themselves as more sustainable alternatives to animal agriculture, could compete with agricultural exports. Overall, the impact of growing alternative protein markets remains uncertain but appears to push in the direction of reducing methane emissions from agriculture, either through reduced demand and production or through the need reduce emissions per unit of product to help maintain a niche market. Rising consumer expectations could favour producers in Aotearoa if consumers place a premium on lower emissions varieties of the products they already consume. Red meat and dairy products from Aotearoa are already some of the least emissions intensive in the world. But, shifts in preferences for low emissions products could negatively impact exports if preferences move away from these products entirely. A Gallup poll showed almost 1 in 4 Americans reduced their meat consumption in 2019, with environmental concerns being the second ranked reason after health. These trends are likely to be stronger in Europe and North America than in emerging markets in Asia and Africa.
9.4.3 Other environmental challenges: Other environmental challenges are related to waste and agriculture in Aotearoa. These include freshwater quality, soil health, biodiversity loss and soil erosion. The growing pressure of these challenges combined with efforts to address them may have important consequences for efforts to reduce methane emissions. 177
31 January 2021 Draft Advice for Consultation Freshwater quality has been a particular focus of attention over the last few decades as large areas of sheep/beef and plantation forestry were converted to dairy. Although rates of nitrogen and phosphorus and pathogen loss into waterways varies with land management, rates of nutrient loss into waterways are generally higher from dairy operations than from sheep and beef farming and forestry. In some parts of the country where there have been large scale land conversions, such as Canterbury, Southland and the central North Island, indicators of water quality and ecological health have significantly declined. Declining freshwater quality is a threat to many native species, this is also exacerbated by the clearance and conversion of native habitats – such as forests, wetlands and natural grasslands – often into pasture. Waste management is also associated with other environmental challenges. While modern, engineered landfills mitigate some of the environmental impacts associated with their construction and management, they have wider ecological effects which may lead to landscape changes, loss of habitats and displacement of fauna. Waste leaching, particularly from older landfills, can also contaminate nearby soils and aquifers. Changes in the way land and waste are managed could also have impacts on biogenic methane emissions. For example, limitations on land use change to dairy to protect water quality are likely to limit additional methane emissions, while initiatives that promote diversion of waste from landfills or the retirement of erosion prone land from pastural farming may result in reduced methane emissions.
9.4.4 Overall Overall we assess that there are good reasons for Aotearoa to expect to reduce biogenic methane emissions by at least the global average as part of contributing to the global 1.5°C goal. The country’s relatively efficient food production and a growing global population suggests that Aotearoa might be expected to take a smaller than average reduction in biogenic methane. However other factors, such as increasing awareness of the environmental impact of animal based products, and local environmental challenges, would suggest that Aotearoa could make a greater than average reduction in biogenic methane.
9.5 Findings In summary, we make the following findings in relation to each of the considerations requested by the Minister. Consider the available scientific evidence on the global biogenic methane emissions reductions likely to be required to limit global average temperature increase to 1.5 oC above pre-industrial levels The global reductions in biogenic methane required to stay below 1.5 oC would depend on the level of carbon dioxide and nitrous oxide emissions over the next century. Therefore, it is not currently possible to know for certain what reductions in biogenic methane will be required. However, it is possible to identify the ranges of reductions of the different gases that mean it is likely warming would be limited to 1.5 oC above pre-industrial levels. Overall, the IPCC pathways show that the at least a 37% reduction in agricultural methane is required to limit warming to 1.5oC by 2100. Simply maintainig the current level of warming from methane is not 178
31 January 2021 Draft Advice for Consultation enough, as it would require the world to reach net zero carbon dioxide by 2030 to keep warming below 1.5oC. We consider this to be infeasible and consequentally that the global warming contribution from methane must be reduced if the 1.5oC temperture goal is to be achieved. Consider New Zealand’s potential contribution to global efforts to limit biogenic methane emissions, reflecting its national circumstances Our scenario analysis indicates that it is possible to reduce total biogenic methane emissions by between 12-26% below 2017 levels by 2030 and 25-59% below 2017 levels by 2050 through reducing biogenic methane emissions from both agricultural and waste. The lower ends of these reductions (12% by 2030 and 25% by 2050) can be achieved using currently available practices and technologies. The development of new technologies such as a methane inhibitor would provide greater flexibility and unlock the upper of range reductions. Reaching the higher range of biogenic methane reductions (26% by 2030 and 59% by 2050) without new technology would likely require reduced agricultural production from livestock and land use change. For more details on our scenarios and projected emissions reduction pathways see Chapter 3: The path to 2035. On balance, we consider that national circumstances do not provide sufficient reason for Aotearoa to reduce its biogenic methane emissions by less than other developed countries in contributing to the global 1.5°C goal. Consider New Zealand’s potential contribution to global efforts to limit biogenic methane emissions, reflecting its national circumstances and local and global economic, social, and demographic trends The country’s relatively efficient food production and a growing global population suggests Aotearoa might be expected to take a smaller than average reduction in biogenic methane. However other factors, such as increasing awareness of the environmental impact of animal based products and local environmental challenges, would suggest that Aotearoa could make a greater than average reduction in biogenic methane. Overall we assess that there are good reasons for Aotearoa to expect to reduce biogenic methane emissions by at least the global average as part of contributing to the global 1.5°C goal.
9.5.1 Where does this get us? Our assessment of the IPCC scenarios has identified the range of global reductions in biogenic methane that are compatible with limiting warming to 1.5°C. These are represented by the interquartile range of modelled pathways. The pathways in the top half of this range are the ones with greater reductions in methane and less reliance on unproven carbon removal methods. They have also been estimated to be the most likely to deliver the best overall social, economic and environmental outcomes. Fundamentally, it is our judgement that there is no reason to anticipate that Aotearoa would be expected to contribute less that then middle of the IPCC range for reductions of biogenic methane.
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Biogenic methane recommendation 1 Reductions in biogenic methane that might be required of Aotearoa in the future as part of a global effort to limit warming to 1.5ᵒC We advise that the reductions in emissions of biogenic methane that Aotearoa may eventually need to make as part of a global effort to limit temperature increase to 1.5ᵒC could be between 49% and 60% below 2017 levels by 2100. Our analysis suggests that the successful development of a methane vaccine or inhibitor suitable for pastoral systems would help reduce the country’s methane emissions by more than 50%. There is a role for agricultural products from Aotearoa in a low emissions future, both for the nutrition it can provide and the valuable natural products such as wool. However, to create and maintain the market for those products, Aotearoa needs to be able to demonstrate their genuine climate, environmental, social and cultural credentials.
Consultation question 24 Biogenic methane Do you support our assessment of the possible required reductions in biogenic methane emissions?
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Glossary of Te Reo Māori Terms Te reo Māori
English translation
Hapū
Kinship group, comprised of whānau who share a common ancestry.
Haukāinga
Home people, people from the pā.
iwi
Extended kinship group, often referring to a large group of people descended from a common ancestor and associated with a distinct territory. Also means bone.
Kaitiaki (verb)
Guardian/steward. Tangata whenua, whānau, hapū, iwi exercising responsibilities of kaitiakitanga inherited through whakapapa Māori.
Kaitiakitanga (noun)
Guardianship/stewardship, tangata whenua, whānau, hapū, iwi holding this responsibility.
Kawa
Custom/protocol the foundational principle underlying tikanga (values/principles), ritenga (behaviours/enactments) and āhuatanga (attributes, traits, characteristics).
Kotahitanga
Unity, inclusive and collective action.
Manaakitanga
Care, respect, hospitality. Enhancing the mana of others.
Mana Motuhake
Prestige, power, authority. Power, influence. The spiritual power and authority to enhance and restore tapu.
Mana whenua
Territorial/occupation rights over land and associated resources.
Mātauranga Māori
Māori knowledge systems.
Papakāinga
Home, village, residence, in contemporary terms refers to housing, or housing development constructed on the concept of the kāinga/pā.
Rangatira
Chief, leader, representative/s with authority.
Rangatiratanga
Chieftainship, right to exercise authority.
Taiao/Te Ao Tūroa
Natural world.
Tangata whenua
People of the land.
Taonga
Items of value; includes resources/access to resources. In Te Ao Māori taonga incorporates a range of social, economic and cultural aspects such as te reo (Māori language), wāhi tapu (sacred sites), waterways, 181
31 January 2021 Draft Advice for Consultation Te reo Māori
English translation fishing grounds, mountains and place names. Children and future generations may also be regarded as taonga.
Taonga tuku iho
Heirloom/cultural property handed down.
Tiaki (verb)
Guardian/steward. To safeguard/protect.
Tiakitanga (noun)
Guardianship, caring of, protection.
Tikanga
Customary system of values.
Tino rangatiratanga
Sovereignty.
Tūrangawaewae
Place of standing, place of belonging.
Utu
Reciprocity.
Waiora
Wellbeing.
Wairua
Eternal essence of being, source energy, spirit.
Wairuatanga
Spirituality.
Wānanga
Centre for knowledge development/deep learning/Māori tertiary institution.
Whakapapa
Genealogy, to layer.
Whānau
Family/extended family unit.
Whānaungatanga
Kinship, sense of family connection- a relationship through shared experiences and working together which provides people with a sense of belonging. It develops as a result of kinship rights and obligations, which also serve to strengthen each member of the kin group.
Whenua
Land. Also means placenta.
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Technical Glossary 2050 target
The target set out in the Climate Change Response Act for Aotearoa to: •
reduce emissions of greenhouse gases, other than biogenic methane, to net zero by 2050 and beyond. This relates to emissions of carbon dioxide, nitrous oxide, non-biogenic methane and F-gases (hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride).
•
reduce biogenic methane emissions by at least 10% by 2030 and 24-47% by 2050 and beyond, compared to 2017 levels.
Adaptation
Actions that can help people or natural systems adjust to the actual or expected impacts of climate change. Actions can be incremental and temporary in their effect or transformational by changing systems and their functions, depending on the scale and pace of change and what is at stake.
Biogenic methane
Methane emissions resulting from biological processes in the agriculture and waste sectors.
Biomass
Material originating from living organisms. Some forms of biomass in the environment store significant amounts of carbon. Solid biomass such as wood chips, wood pellets and briquettes can be used as fuel in residential, commercial and industrial situations.
Climate Change Response Act 2002
The Act that provides a legal framework to enable Aotearoa to meet its international obligations under the United Nations framework Convention on Climate Change and the Kyoto Protocol. The Act also provides for the implementation of the New Zealand Emissions Trading Scheme (NZ ETS) and the synthetic greenhouse gas levy.
Climate resilience
Climate resilience is the ability to anticipate, prepare for, and respond to the impacts of changing climate, including those that we know about and can anticipate and those that occur as extreme events. This includes planning now for sea level rise and more frequent flooding. It is also about being ready to respond to extreme events like forest fires or extreme floods, and to trends in precipitation and temperature that emerge over time like droughts.
CO2e
Carbon dioxide equivalent. This is a way to describe different greenhouse gases on a common scale that relates the warming effect of emissions of a gas to that of carbon dioxide. It is calculated by multiplying the quantity of a greenhouse gas by the relevant global warming potential.
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31 January 2021 Draft Advice for Consultation Deforestation
The conversion of forest land to another use such as grazing. In greenhouse gas emissions accounting and policy relevant to Aotearoa, deforestation is defined as clearing forest and not replanting within four years. It does not include harvesting where a forest replanted.
Dry year
In Aotearoa, hydro lakes only hold enough water for a few weeks of winter energy demand if inflows (rain and snow melt) are very low. When inflows are low for long periods of time, hydro generation is reduced and the system relies on other forms of generation such as natural gas and coal. These periods of time are often colloquially referred to as ‘dry years’.
Embodied emissions
The sum of emissions involved in making a product, sometimes termed the “carbon footprint”.
Emissions
Greenhouse gases released into the atmosphere. The Climate Change Response Act 2002 covers the following greenhouse gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride.
Emissions budget
The cumulative amount of greenhouse gases that can be emitted over a certain period. In the Climate Change Response Act 2002, emissions budgets are the total amount of all greenhouse gases (expressed as a net amount of carbon dioxide equivalent) that can be released over a five-year period (or four years in the case of 2022-2025).
Emissions leakage
Emissions leakage would occur if efforts to reduce emissions in one location caused an increase in emissions somewhere else so that global emissions overall do not reduce. Emissions leakage risk is created by the uneven implementation of climate policies around the world.
Emissions reduction plan
A plan setting out the policies and strategies for meeting an emissions budget, as required by the Climate Change Response Act 2002.
Exotic plantation forests
Intentionally planted forests consisting of non-native species, such as pine.
F-gases
Fluorinated gases, such as hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.
Free allocation
The distribution of emissions units without cost to specific businesses by the government.
Global Warming Potential (GWP)
A factor relating the warming effect of a tonne of emissions of a particular greenhouse gas to those of a tonne of carbon dioxide emissions. 184
31 January 2021 Draft Advice for Consultation Greenhouse gases
Atmospheric gases that trap heat and contribute to climate change. The gases covered by the Climate Change Response Act 2002 are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
Gross emissions
Gross emissions include total greenhouse gas emissions from agriculture, energy, industrial processes and product use (IPPU) and waste. Greenhouse gas emissions and removals from land use, land use change and forestry (LULUCF) are excluded.
Kyoto Protocol
An international treaty under the UNFCCC that deals with emissions limitation or reduction commitments for ratifying developed (Annex 1) countries.
Long-lived gases
Greenhouse gases that have a long lifetime in the atmosphere, i.e. they persist in the atmosphere for without breaking down for multi-decadal, centennial or millennial timeframes. For ease of presentation, this report refers to all greenhouse gases other than biogenic methane collectively as long-lived gases, although this includes small amount of other short-lived gas emissions (non-biogenic methane and certain fluorinated gases).
Methane inhibitors and vaccines
Chemical compounds that reduce the production of methane in animals’ rumen (stomachs). They typically do this by targeting enzymes that play a key role in the generation of methane.
Mitigation
Human actions to reduce emissions by sources or enhance removals by sinks of greenhouse gases. Examples of reducing emissions by sources include walking instead of driving or replacing a coal boiler with a renewable electric powered one. Examples of enhancing removals by sinks include growing new trees to absorb carbon, or industrial carbon capture and storage activities.
Mt
Megatonnes (million tonnes)
Nationally determined contribution (NDC)
Each country that is party to the Paris Agreement must define its contribution to achieving the long-term temperature goal set out in the Paris Agreement. The first NDC adopted by Aotearoa is a target to reduce greenhouse gas emissions by 30% below 2005 levels by 2030.
Net emissions
Net emissions differ from gross emissions in that they also include emissions from the land use, land use change and forestry (LULUCF) sector as well as removals of carbon dioxide from the atmosphere, for example due to the growth of trees. 185
31 January 2021 Draft Advice for Consultation NZ ETS
New Zealand Emissions Trading Scheme.
Organic waste
Waste containing organic matter that decays to create methane emissions.
Paris Agreement
An international treaty under the UNFCCC to address climate change after 2020.
Post-1989 forests
New forest established after 31 December 1989 on land that was not forest at that date.
Pre-1990 forests
Forest or shrub land established before 1 January 1990.
UNFCCC
United Nations Framework Convention on Climate Change. This is the major foundation global treaty focused on climate change that was signed in 1992 at the Earth Summit in Rio de Janeiro.
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31 January 2021 Draft Advice for Consultation
Appendix 1: What other studies of methane reductions for Aotearoa have been conducted? Over recent years there have been a series of estimates of the implications of different reductions of the country’s biogenic methane. Two studies have looked at what reductions and by when, may be needed to make sure Aotearoa adds no additional warming from the gas. In 2018, the Parliamentary Commissioner for the Environment estimated the warming from methane under two different situations. The analysis showed that if emissions of methane were held constant at 2016 levels, this would lead to an additional 10-20% of warming by 2050 and another 25-40% by 2100. This was primarily the result of inertia in the climate system that continues to respond to the longer lasting warming effects from past methane emissions. Given these persistent warming effects, the reduction of methane that would be required to achieve no additional warming given current levels of emissions was calculated to be at least 10-22% below 2016 levels by 2050 and 20-27% by 2100. The range reflected differences in global action, from action sufficient to keep temperatures well below 2 oC, to global action that would lead to between 2 and 3 oC of warming. The lower end of this estimate is based on an assumption that the world does less to reduce methane, while the upper end of the range is based on the assumption that the rest of the world does more to reduce methane. As part of a submission on the Zero Carbon Bill in 2018, Allen et al. also analysed what reductions in biogenic methane could ensure Aotearoa contributed no further warming from this gas. They applied the GWP* metric in their analysis, which is designed to specifically account for the temperature effects of methane emissions over time. Using this approach, an estimated reduction in biogenic methane of 0.4% per year would prevent any further warming, which equated to a total reduction of about 10% by 2050. This estimated level of reduction was fairly consistent whatever reductions in biogenic methane other countries made. As it was not the purpose of the submission, the authors did not offer any specific reductions in methane that would be compatible with limiting warming to 1.5 degrees. In 2019, a third study looked to answer that question by asking what warming would Aotearoa contribute if the targets in the Climate Change Response Act were met? The study modelled the warming caused by reaching net-zero long-lived gases by 2050, along with the effect of reaching either the 24% and 47% reduction in methane. The study concluded: “Reducing fossil carbon dioxide and nitrous oxide emissions to net zero by 2050 would result in additional warming from those gases combined above current levels until that time. After 2050, their contribution to warming would stabilise and decline very slowly if emissions remain constant after 2050 levels. However, if biogenic methane emissions remain at current levels, New Zealand’s overall contribution to climate change would still continue to increase well beyond 2050.”
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31 January 2021 Draft Advice for Consultation Figure A.1 from Reisinger and Leahy (2019) shows that if biogenic methane emissions were reduced by 10% below 2017 levels by 2030 and by 24% by 2050, this would result in some additional warming from all emissions until approximately 2050. If emissions of all gases then continue at the same level after 2050, Aotearoa’s contribution to global warming would remain at approximately the same level for the second half of the 21st century.
Figure A.1: Combined contribution to global average temperature change from Aotearoa’s gross emissions of carbon dioxide, nitrous oxide, and biogenic methane. (Source: Reisinger and Leahy, NZAGRC 2019)
If biogenic methane were reduced by 47% below 2017 levels by 2050, this would see the total warming caused by Aotearoa peak around 2040 and decline thereafter. If emissions of all gases then continue unchanged, Aotearoa’s contribution to global warming by the end of the 21st century would be slightly below the warming caused today.
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Introduction This report accompanies the Commission’s draft advice report. This report sets out the detailed evidence that we have drawn upon to support the development of our recommendations and advice. By presenting this evidence, we hope to support and facilitate informed feedback and responses to our draft advice report and consultation questions, before providing our final advice to the Government and public.
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Contents Introduction ............................................................................................................................................ 1 1.
Our task ............................................................................................................................... 3
2.
Stages of analysis ................................................................................................................. 4 2.1 Tools that have informed our analysis.......................................................................................... 5 2.1.1 Analytical Framework ............................................................................................................ 5 2.1.2 Modelling to support our advice............................................................................................ 7 2.1.3 Emissions value and the NZ ETS ............................................................................................. 9 2.1.4 Cost-effectiveness analysis .................................................................................................... 9
3.
What comes next................................................................................................................ 10
4.
References ......................................................................................................................... 12
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This report accompanies the Commission’s draft advice report. This report sets out the detailed evidence that we have drawn upon to support the development of our recommendations and advice. By presenting this evidence, we hope to support and facilitate informed feedback and responses to our draft advice report and consultation questions, before providing our final advice to the Government and public.
1. Our task Our first task as a Commission is to provide the Government with advice on the first three five-year emissions budgets that will put Aotearoa on track to meeting its domestic 2030 and 2050 emissions targets, and on the direction of policy for the Government’s first emissions reduction plan. The Climate Change Response Act outlines specific pieces of advice that the Commission must provide to the Government. As outlined in Sections 5ZA and 5ZH of the Act, these are: •
The recommended quantity of emissions that will be permitted in each emissions budget period;
•
The proportions of an emissions budget that will be met by domestic emissions reductions and domestic removals, and the amount by which emissions of each greenhouse gas should be reduced to meet emissions budgets and targets;
•
The appropriate limit on offshore mitigation that may be used to meet an emissions budget, and an explanation of the circumstances that justify the use of offshore mitigation;
•
How the emissions budgets, and ultimately the 2050 target, may realistically be met, including by pricing and policy methods;
•
The direction of the policy required in the emissions reduction plan for that emissions budget period; and
•
The rules that will apply for measuring progress towards meeting emissions budgets and the 2050 target.
The Minister for Climate Change has also asked the Commission to provide advice on the eventual level of reduction needed for biogenic methane, and on the Government’s Nationally Determined Contribution (NDC). The analysis that underpins these different pieces of advice is inter-related. For example, advice on the direction of policy required in the emissions reduction plan needs to draw on analysis for emissions budgets – including barriers to technology uptake or behaviour change. Likewise, analysis on pathways that are compatible with the 1.5°C global effort, and the science and international context that informs that analysis, will also inform the Commission’s advice on biogenic methane, emissions budgets and the NDC.1
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Under the CCRA, emissions budgets must be set “with a view to meeting the 2050 target and contributing to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5° Celsius above pre-industrial levels” (Climate Change Response Act 2002, Section 5W.)
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2. Stages of analysis In developing our advice, the Commission has progressed through different stages of analysis, which are summarised in Figure 1 below. Our approach draws on experience from within Aotearoa and the rest of the world in developing low-emissions transition pathways and advising on emissions budgets, while paying particular attention to the Aotearoa context and the broad range of elements that we are required to consider in our advice. It shares many common features with how others have approached similar analytical tasks, such as the Productivity Commission, the UK Committee on Climate advice on carbon budgets, and the European Commission’s analysis of decarbonisation pathways for the EU. Figure 1: Stages of analysis for developing the Commission’s advice
Actions that reduce emissions. The first stage of our analysis was to gather evidence on current and anticipated actions to reduce emissions. Actions include adopting new technologies, as well as changes to behaviour and practices. We reviewed the available evidence on mitigation options for each sector, to understand whether these actions are suitable for Aotearoa, what their mitigation potential might be, their likely costs, risks and uncertainties, and what their co-benefits might be. Long-term scenarios. We then used this evidence to develop a set of long-term scenarios showing how technology and behaviour could change over the next 30 years. This allowed us to understand how Aotearoa could meet the 2050 targets under a range of possible futures. Pathways to 2035. We used the insights from the long-term scenarios to look in more detail at the possible pathways to 2035. We modelled a range of scenarios looking at possible futures, and these pathways have helped us to examine different possible levels of emissions budgets, and to test whether these are achievable and ambitious.
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Impacts of pathways. Based on the pathways, we have examined the impacts of possible budgets to understand their likely costs and benefits, and to test if these are manageable. This analysis has considered economic, social, cultural and environmental impacts. Policies. We also looked at whether policy can be implemented to deliver the actions that are assumed under the pathways. This included looking across all sectors and across the economy at the policies that would be needed to deliver emissions budgets. After testing and iteration, we refined the emissions budgets to ensure that it is feasible to implement policies to achieve them, and to mitigate any substantial negative impacts from the proposed budgets. This analytical process has allowed us to recommend the level of emissions budgets and the direction of policy for the first emissions reduction plan.
2.1 Tools that have informed our analysis In developing our analysis and preparing our draft advice we have had to balance a number of considerations and make some judgements. As we have progressed through the stages of analysis described above, we have used a range of quantitative and qualitative tools, including economic models and analytical frameworks, to support the development of our advice.
2.1.1 Analytical Framework To guide our work, we developed an analytical framework that captures the broad range of factors that we must consider under the Climate Change Response Act, and as a Treaty partner – see Figure 2. Consideration of the elements contained in this framework has guided key judgments we have had to make while developing our advice. Figure 2: Our analytical framework
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Lens. The first layer of this framework makes explicit the lens though which we are approaching our work. The Commission needs to consider the perspectives of all New Zealanders. We are a Crown entity, and as Treaty Partners we need to consider the perspectives of Māori. This requires us to understand a te ao Māori or Māori world view and incorporate this perspective into our approach. Values. The next layer of the framework sets out how we have gone about performing our functions. The advice we provide must consider the wellbeing of the people and the systems involved in, and affected by, our recommentations. In identifying these values we have drawn from tikanga Māori values, as we think these values resonnate with all New Zealanders. Our values are: •
Manaakitanga – approaching our work with a deep ethic of care towards the people and systems involved.
•
Tikanga – ensuring the right decision makers are involved, and the right decision making process is implemented.
•
Whanaungatanga – being mindful of the relationship between all things, our connections to each other and how we connect to our whenua.
•
Kotahitanga – taking an inclusive approach and working collaboratively with other agencies/organisations, to have access to the best information, and to do the best work we can, collectively.
System. The Climate Change Response Act requires us to think broadly about potential impacts of our advice across the whole system. This layer of the framework identifies the components of the system that our analysis needs to consider: •
Ecology/environment. Recognising the inherent relationality within our natural environment and ecological systems. Being attentive to the potential effects that a change to one part of the system may have on other parts of the system.
•
Individuals/households. Recognising that individuals and households form the base unit of our social and economic constructs, and understanding the potential impacts of recommended changes on them. Giving consideration to the structures that support and enable the wellbeing of individuals and whānau, including connectivity, health, jobs, skills and income.
•
Social/cultural/business. Recognising the importance of social and cultural constructs. Identifying and understanding the potential impacts and effects of changes for iwi and hapū, business, industry, sectors, supply-chains and others.
•
Economy. Recognising the contribution of our economy to wellbeing, as well as understanding and identifying the potential impacts and effects of changes to the way we conduct economic activity.
Dimensions. The final layer of our framework identifies key dimensions, to ensure that our analysis considers the different impacts and effects of our work across: •
People. For example, how will changes impact different social demographics? How will changes impact current and future generations?
•
Place. For example, what would this mean for regions? What would this mean in the global context?
•
Time. For example, what will this mean now? what will it mean for future generations? 6
We have used this analytical framework to guide our analysis and the develoment of our advice. It provides a foundational premise to ensure we are thinking broadly from the outset.
2.1.2 Modelling to support our advice Models are useful tools that can provide clarity about the drivers of a system, and what can affect those drivers and alter outcomes. Models also require us to make explicit our assumptions and to consider the interactions between different parts of the system. As we have moved through the stages of analysis for developing our advice, we have used models to help us understand the potential paths for emissions under different circumstances and the implications of these potential paths. All models are necessarily a simplification of a more complex system and are not intended to represent all aspects in detail. Therefore, it is not possible or appropriate to solely rely on models to guide our advice. Modelling is therefore an important part of our analysis, but it is only one component. We have complemented our modelling with other quantitative and qualitative analysis to help us reach our recommendations. We have commissioned and developed two models to support our analysis: Energy and Emissions in New Zealand model, and the Climate Policy Analysis model, which has a distributional Impacts Microsimulation sub-model. Energy and Emissions in New Zealand (ENZ) model ENZ is a bottom-up sectoral model that covers all the main emitting sectors of the Aotearoa economy – energy, industry, transport, land use, agriculture, forestry, product use and waste. This model was built by Concept Consulting and is being further developed in conjunction with the Commission. ENZ has been used to give us a sense of the emissions reductions that are feasible in each sector by factoring in specific technologies and mitigation options. The model also captures the major interactions between different sectors. For example, if there is an increase in forestry, this will flow through into an increase in the amount of biomass available for heat or biofuels. Other key interactions include; agricultural production and food processing energy demand, transport electrification and electricity demand. ENZ is highly adaptable and modular, with the ability to provide relatively detailed representation of activities and technologies. As with many economic models, there are limitations as to how well ENZ can simulate private decision-making. The model is more likely to reflect real-world behaviour where decisions are made by companies using rigorous analysis informed by a project’s expected costs and benefits – for example, companies deciding to build new electricity generation assets. Even in these cases, however, factors such as business priorities and capital constraints may cause observed outcomes to differ from model results. For some decisions and sectors, there may be significant non-monetary considerations and other factors that cannot be directly represented in the model. For instance, in the land sector there is inherent uncertainty in many factors that drive outcomes, significant non-price factors driving
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farmer decisions,2 variations in farm circumstance, non-linearities in the economics of outcomes, and lack of data in many areas. In the realm of energy efficiency, it is well-established that there are significant cost-saving opportunities not taken up due to various barriers and in some cases market failures.3 A further issue is that real-world decisions are based on expectations about the future and may often consider a range of possible outcomes (e.g. changes in fuel prices). Within ENZ, however, decisions are optimising to a particular set of assumptions with perfect foresight. This is particularly relevant in situations where there is high sensitivity to future changes in cost factors, for example. This highlights the need for robust exploration of the effects of uncertainty, and to avoid placing too much emphasis on any single model. Climate Policy Analysis (C-PLAN) model The C-PLAN model has been developed by Motu Economic and Public Policy Research, and Vivid Economics. The model has two parts – the base model and a sub-model for distributional impacts analysis. The C-PLAN base model is a global Computable General Equilibrium (CGE) model that takes data on the interactions and relationships between various economic actors (firms, workers, households, government, overseas markets),4 and introduces a shock to understand how that shock impacts the structure of the economy. This includes the impact on GDP, different sectors, employment, gross valued added, energy prices, sectoral export and import prices and quantities, and emissions prices. A CGE model is usually built on the assumptions that actors are economically rational, that firms are profit maximising, that consumers are utility maximising, that there is a market for all goods and services, and that these markets are in equilibrium, and that firms are earning zero pure profit. The Distributional Impacts Microsimulation (DIM) sub-model uses the economy-wide outputs from C-PLAN base model and combines them with granular data from Stats NZ5 to explore the effects on employment for each sector, different regions, for Māori, Pacific and other ethnic groups, and for different age groups. C-PLAN will provide an overall estimate of the impact of different pathways and emissions budgets on GDP and consider how this flows through into the wider economy, including the sectoral composition and the balance of payments. Unlike the ENZ model, C-PLAN does not contain detailed representations of the major emitting sectors, and can only model a limited range of the specific mitigation options and technologies available for reducing emissions in those sectors. As a result, C-PLAN cannot derive estimates of the direct resource costs on these sectors and is likely to overestimate the total costs.
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(Cortés-Acosta et al., 2019; Journeaux et al., 2016) (Ministry of Business, Innovation and Employment & Energy Efficiency and Conservation Authority, 2017) 4 The data used is from Statistics New Zealand input-output tables and the Global Trade Analysis Project database, which represent the economy in 2014. 5 The DIM model will draw on data from Stats NZ’s Integrated Data Infrastructure (IDI) and Longitudinal Business Database (LBD). These are large micro datasets including data about people, households, businesses, workers. 3
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C-PLAN can also provide us with analysis on the international implications of different pathways, including the implications for imports and exports, and potential changes in New Zealand’s competitiveness. We have used the C-PLAN model to understand the overall change on the economy from the proposed emissions budgets, the expansion and contraction of sectors, and (using the DIM) how this might affect employment across different sectors, regions, demographic groups and socioeconomic groups.
2.1.3 Emissions value and the NZ ETS In our models, some choices are determined within the model through reference to the abatement cost of a particular action, while others are imposed externally through assumption. Where abatement costs are used, the model simulates changes in some sectors by reference to the marginal abatement cost of certain actions, where actions are taken if their abatement cost is less than a chosen emissions value imposed on the model. These emissions values provide an estimate of the cost required in each year of reducing the last tonne of emissions. Many actions will have very low, or even negative, costs of abatement. The emissions values we have modelled should not be interpreted as a forecast of NZ ETS market prices. The prices observed in the NZ ETS will depend on the mix of policies implemented to meet emissions budgets. The more that the Government chooses to complement the NZ ETS with other policies, the more likely it is that the NZU price in the NZ ETS can be lower, while still achieving the same overall emissions reductions.
2.1.4 Cost-effectiveness analysis Cost-effectiveness analysis has been widely used in climate change policy to help determine the actions that should be taken to meet an emissions reduction target. It has often been used to find the lowest-cost way to achieve a given emissions reduction target. This type of analysis commonly involves estimating the cost per tonne (or marginal abatement costs) of different actions that could reduce emissions, and using this to prioritise those with the lowest cost. While we acknowledge the merits of this approach and its strong theoretical basis, we have avoided relying solely on cost-effectiveness in recommending the level of emissions budgets. There are a number of principled and practical considerations for this approach: •
Different warming impacts of different gases/removals: There are different warming impacts from reducing long lived greenhouse gases, carbon removals by forestry, and reductions in biogenic methane emissions. The split-gas nature of the 2050 target requires that we think beyond a simple CO2 equivalent calculation, which therefore limits the usefulness of using a cost per tonne calculation to prioritise which actions to undertake.
•
Need to reach sustained net zero emissions: The Climate Change Response Act requires that Aotearoa achieve net zero emissions of long-lived gases by 2050, and then sustain this from then on. Under this target, a cost-effectiveness approach is less useful. Such a target implies that eventually all emissions will have to be reduced or offset through permanent removals. Therefore, while a cost effectiveness calculation can help prioritise which actions to take first, its use for guiding advice on reaching the 2050 target is limited.
•
Failure to appropriately incorporate co-benefits or external costs: Many actions to reduce emissions create co-benefits and/or external costs. These are often ignored when 9
calculating the cost per tonne of emissions. In addition, co-benefits and external costs are often dependent on local circumstances, which make it difficult to accurately incorporate them into a cost-effectiveness calculation. •
Failure to capture dynamics: It may be appropriate to undertake some actions with higher marginal cost in the short term if there is an expectation that, in doing so, future costs could be reduced. For instance, early adoption of a technology could encourage greater innovation that reduces costs later. Also, simple application of a cost-per tonne metric could encourage actions that increase later costs by creating a path dependency. For instance, encouraging the use of natural gas in the short term to reduce emissions may create lock-in and increase costs later if it is expensive to develop an alternative to natural gas.
For these reasons, we have used the cost per tonne as a guide to help us understand where actions should be prioritised, but have complemented this with other evidence and analysis where appropriate.
3. What comes next This report contains a large amount of information, which we have drawn upon to support the development of our recommendations and advice. The report is structured as follows: Part One: Our place in the world. This section focuses on the context within which the Aotearoa approach to climate change is being developed. Chapter 1 explores the science of climate change and sets out why urgent action is needed. Chapter 2 looks at how our targets compare with those of other countries. Chapter 3 outlines the system for monitoring greenhouse gas emissions over time, to understand whether Aotearoa is on track to achieve emissions budgets and targets. Part Two: Our current path. This section examines the opportunities and challenges for reducing emissions across different sectors, and where Aotearoa is currently heading. Chapter 4 looks at opportunities and challenges for reducing emissions in heat, industry and power; transport, buildings and urban form; agriculture; and waste. Chapter 5 examines opportunities for removing carbon from the atmosphere, through forestry and carbon capture and storage. Chapter 6 presents a basis for our analysis of opportunities and challenges for iwi/Māori. Chapter 7 explores what future emissions in Aotearoa could look like if we keep progressing with no new policies or regulations. Part Three: How can we reach our climate goals? This section looks at possible futures for Aotearoa, and potential paths forward. Chapter 8 outlines four different scenarios, based on our modelling and analysis, to help us to see what the future could look like in Aotearoa. Chapter 9 draws on the insights from those scenarios to advise on an ambitious and achievable path forward for meeting the 2050 target. Chapter 10 presents analysis on the eventual level of reduction needed for biogenic methane, and on the Aotearoa NDC. Part Four: What this means for New Zealanders. This section looks at how Aotearoa could transition to low emissions in a way that considers the wellbeing of people, the land, and the environment. Chapter 11 provides an introduction, looking at where impacts of the low-emissions transition could be compounded and how they could be managed. Chapter 12 examines potential impacts on the economy, including on businesses and workers. Chapter 13 looks at what impacts the transition may have on households and communities, including on household bills. Chapter 14 focuses on the environmental impacts of reducing emissions, including on biodiversity, water quality and air quality. 10
Chapter 15 looks at the link between mitigation and adaptation, and how some actions to reduce emissions may impact on the ability to adapt to the physical impacts of climate change. Part Five: How to make this happen. This section focuses on the direction of policy needed to meet emissions budgets and targets, drawing on the material in the proceeding sections. Chapter 16 outlines the approach we have taken to developing our advice on policy direction, including our policy framework. Chapter 17 presents our analysis on policy direction needed in different sectors of the economy, policies that cut across sectors, and measures to address the impacts of mitigation policies.
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4. References Cortés-Acosta, S., Fleming, D. A., Henry, L., Lou, E., Owen, S., & Small, B. (2019). Identifying barriers to adoption of “no-cost” greenhouse gas mitigation practices in pastoral systems (Motu Working Paper 19-10). Motu Economic and Public Policy Research. https://www.motu.nz/our-expertise/environment-and-resources/agriculturaleconomics/no-cost-barriers/identifying-barriers-to-adoption-of-no-cost-greenhouse-gasmitigation-practices-in-pastoral-systems/
Journeaux, P., van Reenen, E., Pike, S., Manjala, T., Miller, D., & Austin, G. (2016). Literature Review and Analysis of Farmer decision making with regard to Climate Change and Biological Gas Emissions [A report prepared for the Biological Emissions Reference Group by AgFirst]. AgFirst. https://www.agfirst.co.nz/wp-content/uploads/2018/12/Farm-Behaviour-GHGLiterature-Review-Final-Dec-2018.pdf
Ministry of Business, Innovation and Employment, & Energy Efficiency and Conservation Authority. (2017). Unlocking our energy productivity and renewable potential: New Zealand Energy Efficiency and Conservation Strategy 2017- 2022. https://www.mbie.govt.nz/assets/346278aab2/nzeecs-2017-2022.pdf
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Chapter 1: The science of climate change Climate change is already happening, and past emissions have locked in further change. By signing up to the Paris Agreement, the world has committed to take action on climate change. Nations are responsible for determining how they will contribute to global efforts to limit warming to well below 2°C and pursue efforts to limit it to 1.5˚C above pre-industrial levels and reduce the risks and impacts of climate change. Aotearoa has set itself the goal in the Climate Change Response Act of contributing to efforts to limit temperature increases to 1.5˚C above pre-industrial levels. This chapter explores the science on climate change and sets out why urgent action is needed, looking at what effect our current behaviour has and what is at stake. It examines the forces affecting the global temperature, the role of different greenhouse gases and the possible emissions reduction pathways to meeting the 1.5˚C limit.
1 1 February 2021 Draft Supporting Evidence for Consultation
Contents Chapter 1: .................................................................................................................................... 1 The science of climate change ...................................................................................................... 1 1.1 Introduction ........................................................................................................................... 3 1.1.1 We are seeing the effects of climate change now...................................................................... 4 1.1.2 Looking ahead ............................................................................................................................ 7 1.1.3 The world has committed to limit climate change .................................................................... 7 1.2 The main greenhouse gases and global 1.5°C pathways ........................................................... 8 1.2.1 The three main greenhouse gases – carbon dioxide, methane and nitrous oxide ................... 9 1.2.2 Effects of long-lived and short-lived greenhouse gas emissions on climate ........................... 12 1.2.3 What reductions are required to limit warming to 1.5°C? ...................................................... 12 1.2.4 What is ‘overshoot’ in the IPCC models? ................................................................................. 15 1.2.5 1.5°C compatible pathways: the reductions in greenhouse gases needed to limit warming . 16 1.2.6 Trading reductions and removals within the 1.5°C compatible pathways .............................. 17 1.2.7 When are the reductions in methane needed and why? ........................................................ 21 1.3 How different are the pathways that limit warming to 1.5°C to those that limit warming to well below 2°C? ................................................................................................................................. 23 1.4 References ........................................................................................................................... 25
2 1 February 2021 Draft Supporting Evidence for Consultation
Climate change is already happening, and past emissions have locked in further change. By signing up to the Paris Agreement, the world has committed to take action on climate change. Nations are responsible for determining how they will contribute to global efforts to limit warming to well below 2°C and pursue efforts to limit it to 1.5˚C above pre-industrial levels and reduce the risks and impacts of climate change. Aotearoa has set itself the goal in the Climate Change Response Act of contributing to efforts to limit temperature increases to 1.5˚C above pre-industrial levels. This chapter explores the science on climate change and sets out why urgent action is needed, looking at what effect our current behaviour has and what is at stake. It examines the forces affecting the global temperature, the role of different greenhouse gases and the possible emissions reduction pathways to meeting the 1.5˚C limit.
1.1 Introduction Scientists have understood the role of greenhouse gases in global climate systems for more than 160 years.1 The sun’s energy warms the earth and it is the ability of greenhouse gases to trap this warmth that makes life on earth possible. Without them, the average temperature of the earth would be around -18°C.2 Forty years after the greenhouse effect was discovered, scientists recognised the role that human activities could have in changing the global climate. In 1896, Swedish chemist Svante Arrhenius surmised burning coal to power the Industrial Revolution would heat the Earth, although he thought it would take hundreds or thousands of years for this to happen.3
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Eunice Foote discovered the absorption of thermal radiation by carbon dioxide and water vapour in 1856. In 1859, John Tyndall discovered that carbon dioxide and methane were strong absorbers of infrared radiation, and thus were able to trap heat radiating from the earth’s surface. (Jackson, 2020) 2 (Lang, 2010) 3 (Arrhenius, 1896)
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Box 1.1: Identifying the human fingerprint in global warming Research combining observations of the factors that can affect global temperature has identified how much of the observed warming is due to natural variation, and how much is driven by human emissions of greenhouse gases. Natural factors include things like changes in solar activity, volcanic eruptions, and changes in ozone and aerosols like sulphur.4 Human activities include burning of fossil fuels, methane and nitrous oxide emissions from agriculture, and carbon dioxide released from burning forests and land-use change. If natural drivers of climate change were the only forces at play, the world’s climate should be stable or cooling. Instead, human activities are driving significant increases in global air and ocean temperatures and related changes to the planet (Figure 1.1).
Figure 1.1: Human forces affecting global temperature 5
1.1.1 We are seeing the effects of climate change now Those early predictions of human-driven climate change have since been borne out. Human activities are estimated to have warmed the planet by approximately 1°C since the start of the Industrial Revolution.6 More than half this warming has occurred since 1980. If the observed rate of warming were to continue, the world would reach 1.5°C of warming around 2040.7 This human-driven warming is already affecting the planet. The IPCC 5th Assessment Report (IPCCAR5) concluded that: 'Recent climate changes have had widespread impacts on human and natural systems on all continents and across the oceans'. Attributable impacts included an impact of climate change on
4
An aerosol is a particle that is small enough to be suspended in the air. For example, dust, smoke, fog and mist. They can be natural, like water droplets in fog or dust, or human-caused, like smoke from household fires or sulphur dioxide from burning oil. Around 90% of all aerosols come from natural sources. (Voiland, 2010) 5 (NASA Earth Observatory, 2010) 6 (IPCC, 2018b) 7 (IPCC, 2018b)
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crop yields, shrinking glaciers and changing rainfall patterns affecting water availability and changing geographic ranges of species on land and ocean8’. Closer to home, we are already seeing the impacts of warming in Aotearoa. Average temperatures, and temperature extremes, are increasing significantly in many parts of the country, while winters are getting warmer and drier. Average sea level has increased by nearly 30cm since records began over 100 years ago, and the rate of sea-level rise is accelerating. At the same time, we are observing a range of physical and environmental impacts from these changes - coastal erosion rates are increasing, coastal flood frequency is increasing, growing seasons are changing and environments are becoming uninhabitable for some of our native species.9 These changes are also having impacts on people and the economy. A recent study conservatively estimated that the contribution of climate change to floods and droughts cost Aotearoa $840 million in insurance claims and economic losses over the 10 years to 2017.10 Local Government New Zealand has estimated that approximately $5 billion of roading, water infrastructure, buildings and other assets would be exposed under 1 metre of sea level rise.11 Box 1.2: Iwi/Māori are also observing many changes in the environment that affect customary practices and values. The numbers and distributions of taonga species are changing. Species are turning up at times and in places where they have not before. For example, mullet in Northland can now be caught year-round, something that never happened in the past.12 Kingfish – a species unknown to early Ngāi Tahu – is being caught in increasing numbers along the east coast of the South Island, Te Waipounamu. Traditional tohu (environmental indicators) are also changing. The flowering of pōhutukawa has traditionally been a sign that kina were ready for harvest. However, changes in sea temperatures have altered the reproductive period of kina,13 meaning that kina are no longer ready for harvesting when pōhutukawa traditionally bloom in summer (Figure 1.2). The physical impacts of climate change are also affecting special places such as marae and urupā (burial grounds). In particular, coastal sites are at increasing risk of flooding from sea-level rise, and erosion.14 For example, rising seas led to a 700-year-old urupā at Ōkūrei Point in Maketū collapsing onto the beach below.15 In other areas, urupā at risk from flooding have already had to be relocated. All in all, climate change is having and will have significant and wide-ranging impacts on iwi/Māori. As the latest state of the environment report on atmosphere and climate notes: “Climate change can contribute to degradation in the mauri (life force) of ecosystems and taonga species, and jeopardise the mātauranga associated with them. When a taonga species is lost, the
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(Committee on Climate Change, 2019, p. 57) (Ministry for the Environment & Statistics NZ, 2020) 10 (Frame et al., 2018) 11 (Simonson & Hall, 2019) 12 (Te Hiku o te Ika Development Trust, 2018) cited in (Ministry for the Environment & Statistics NZ, 2020, p. 53) 13 (Ministry for the Environment & Stats NZ, 2019) 14 (Colliar & Blackett, 2018) 15 (Neilson, 2019) 9
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whakapapa (lineage or ties) between iwi, hapū, whenua (land), and taonga is severed. The ability of tangata whenua to act as kaitiaki (guardians) over the taonga, and to engage in mahinga kai practices within their rohe (region) can also be degraded” 16 “[…]Climate change is likely to affect marae and customary harvesting grounds, and cause major shifts in how whānau practice manaakitanga. Coastal marae may become inaccessible due to increased flooding. A loss of taonga species would mean whānau were no longer able to provide local delicacies to manuhiri. A combination of these situations could see some whānau unable to manaaki on their marae as they have for generations. The inability to gather kaimoana also has economic consequences because this practice has always supplemented low incomes and diet.”17
Figure 1.2: Climate change and Māori-collective wellbeing18
16
(Ministry for the Environment & Statistics NZ, 2020, p. 54) (Patuharakeke Te Iwi Trust Board Inc., 2014) cited in (Ministry for the Environment & Statistics NZ, 2020, p. 55) 18 (Ministry for the Environment & Statistics NZ, 2020, p. 56) 17
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1.1.2 Looking ahead Climate risks will be significantly lower in years to come if warming is limited to 1.5°C rather than 2°C. In a 2°C world, sea levels are projected to rise further, there would be more species’ loss, and almost all the world’s coral reefs would be destroyed. Hundreds of millions more people would be exposed to climate-related risks, including risks to health, water supply, food security and economic growth.19
1.1.3 The world has committed to limit climate change Under the Paris Agreement, most of the world has agreed to take action to limit climate change. Recognising the risks of uncontrolled warming, nations have signed up to efforts to: “Hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change” “Increase the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production.” 20 Under the Paris Agreement, individual nations have the right to determine what specific actions they will take as part of their contribution to global efforts. They can undertake both domestic and international actions that reflect where there are opportunities to reduce emissions, and that also recognise their own specific culture, society, economy and environment. However, the Agreement also requires ‘highest possible ambition’ contributions from all parties,21 with developed countries taking the lead.22 Aotearoa has recently set out how it will act to reduce its own emissions. Under the Climate Change Response Act, the government is required to contribute to efforts to limit warming to 1.5°C above pre-industrial levels. The Act establishes a domestic emissions reduction target for greenhouse gases for 2050. This target is to reduce biogenic methane emissions to 10% below 2017 levels by 2030 and 24-47% below 2017 levels by 2050, and reduce all other greenhouse gas emissions to net zero by 2050. The Act also established the Climate Change Commission, whose role is to provide advice to the government on the reductions in emissions over time that would ensure Aotearoa meets those targets, in the form of five-yearly emissions budgets. Critical for the Commission in providing this advice is an understanding of the size and rate of reductions in different greenhouse gases and any other actions, that may be required to limit warming to 1.5°C degrees above pre-industrial levels. In providing its advice, the Commission needs to consider what other countries are doing to tackle their emissions and to scope the opportunities and potential impacts for Aotearoa in reducing our 19
(IPCC, 2018a) Paris Agreement, Article 2 (United Nations, 2015). 21 Paris Agreement, Article 4.3 (United Nations, 2015). 22 Paris Agreement, Article 4.4, 9.3 (United Nations, 2015). 20
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emissions. The Commission is required to understand potential impacts for iwi/Māori. There is also an opportunity to learn from tangata whenua and how indigenous kaitiaki models can inform emissions reductions. Through an additional request from the Minister, the Commission has also been tasked with considering the long-term reductions in our biological methane emissions that would be that compatible with limiting warming to 1.5°C. The Commission is also required to consider whether our international commitments, in the form of our Nationally Determined Contribution, is compatible with this goal. Our advice on these two questions is provided in the Commission’s Advice report, chapters 8 and 9. The remainder of this chapter sets out the scientific basis of the challenge we face to limit warming to 1.5°C. It sets out the properties of the main greenhouse gases – carbon dioxide, methane and nitrous oxide. It then sets out the effects they have individually and collectively on the climate and the implications for strategies to reduce emissions and warming.
1.2 The main greenhouse gases and global 1.5°C pathways The following section outlines the scientific understanding of emission pathways compatible with limiting warming to 1.5°C above pre-industrial levels. The section draws primarily on the Intergovernmental Panel on Climate Change’s (IPCC) Special Report on limiting warming to 1.5°C as well as other more recent papers and reviews.23 Box 1.3: The Intergovernmental Panel on Climate Change The Intergovernmental Panel on Climate Change (IPCC) was established by the United Nations as its body for assessing the science related to climate change. It was established in 1988 with the purpose of providing “policymakers with regular scientific assessments on climate change, its implications and potential future risks, as well as to put forward adaptation and mitigation options.”24 The IPCC draws on the peer-reviewed research and expertise of the world’s climate scientists and identifies the state of knowledge about climate change and its impacts, as well as identifying where more research is needed. Its reports are extensively reviewed throughout their production to ensure objectivity and transparency. The main reports the IPCC produces are Assessment Reports, which provide extensive assesments of the state of knowledge. The fifth IPCC Assessment Report was produced in 2014, with the sixth due in 2022. The IPCC also produces special reports that go into more detail on specific issues. In 2018, it produced a report on the advantages, opportunities and challenges of limiting warming to 1.5°C above pre-industrial levels.25 The conclusions of this report have been instrumental in many nations setting goals of limiting warming to 1.5°C, including here in Aotearoa.
23
(Forster et al., 2021; IPCC, 2018a) (IPCC, 2020) 25 (IPCC, 2018a) 24
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In 2019, the IPCC also produced a special report on climate change and land. This report addressed greenhouse gas emissions and removals in land-based ecosystems, land use and management in relation to climate change mitigation and adaptation, as well as desertification, land degradation and food security.26 The Commission has drawn heavily on these and other IPCC reports in producing its advice. Over time we will update and reassess any relevant conclusions as new IPCC reports are produced. This section and the rest of the report is focused on the gases that are emitted as a result of human activities and are responsible for driving changes in the earth’s climate system. As well as being the gases that are driving increases in temperature, sea levels, rainfall patterns and extreme weather. They are also the gases that we are able to do something about. The section first outlines the fundamental properties and impacts of the different greenhouse gases humans emit, before presenting the high-level results on global pathways compatible with the 1.5°C goal. The section then specifically examines the different effects of cuts to short- and long-lived greenhouse gases and the potential role of carbon dioxide removals from the atmosphere.
1.2.1 The three main greenhouse gases – carbon dioxide, methane and nitrous oxide
Natural
Human caused
The impact that a greenhouse gas has on the climate depends on 1) its ‘power’ on a molecule-bymolecule basis and 2) its concentration in the atmosphere. This impact can be expressed as the ‘radiative forcing’ of that gas – a measure of how much that gas is driving the changes in temperature and climate (Figure 1.3).
Figure 1.3: Estimates of radiative forcing of different greenhouse gases and other agents between 1750 and 201127.
26 27
(IPCC, 2019) (IPCC, 2014a, p. 697, Figure 8.15)
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Carbon dioxide is the most important greenhouse gas produced by human activities. Although it is not a particularly powerful greenhouse gas in itself, carbon dioxide is very long-lived, meaning that carbon dioxide released today can still be causing warming centuries or millennia into the future. It is the greenhouse gas the world is emitting the most of – more than 40 billion tonnes in 2018,28 and emissions have been increasing at around 1% per year over the last decade.29 Carbon dioxide is also the greenhouse gas that has the highest concentration in the atmosphere (Figure 1.4). The rates of addition of carbon dioxide to the atmosphere from human activities are 100 times faster than from natural sources like volcanoes.30 Of the human sources of carbon dioxide, burning coal is the most significant globally, followed by gas and then oil.31 Overall, carbon dioxide is responsible for the majority of human-driven warming to date.32
Figure 1.4: Observed changes in atmospheric greenhouse gas concentrations. Atmospheric concentrations of carbon dioxide (CO2, green), methane (CH4, orange) and nitrous oxide (N2O, red). Data from ice cores (symbols) and direct atmospheric measurements (lines) are overlaid33.
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A Gigatonne is a billion tonnes, or 1,000,000,000. To give an idea of scale, a Gigatonne is equivalent to the volume of 3 million Boeing 747’s, or 20,000 Titanics. 29 (Ministry for the Environment & Statistics NZ, 2020) 30 (Parliamentary Commissioner for the Environment, 2019, p. 48) 31 Based on 2018 figures, coal makes up 40% of total human carbon dioxide emissions, oil makes up 34% and gas makes up 20%. The bulk of the remainder comes from cement production and flaring of natural gas. (Ritchie & Roser, 2020) 32 (IPCC, 2014a, p. 678, Table 8.2) 33 (IPCC, 2014b, p. 44, Figure 1.3)
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Methane is the second most important greenhouse gas and is responsible for around a fifth of human-driven warming. Molecule for molecule, methane is much powerful than carbon dioxide.34 However, methane is a short-lived greenhouse gas. It has an intense warming effect for the first few decades after it is emitted, but this effect dissipates as the methane breaks down in the atmosphere (Figure 1.5). However, a small proportion of methane-induced warming will linger much longer due to the inertia of the climate system and indirect feedback effects.3536
Figure 1.5: Top: Tonne for tonne, methane causes more warming than carbon dioxide over at least 200 years. Bottom: Aotearoa emits different quantities of different greenhouse gases, which affects the warming they cause and how quickly the warming dissipates from the atmosphere.37 Due to the ‘power’ of the different gases and the time they stay in the atmosphere, emitting the same amount of each gas would have very different impacts on the climate. Over approximately 200 years, one tonne of methane would cause more warming than one tonne of carbon dioxide.
34
(IPCC, 2014a, pp. 731–738, Appendix 8.A) While each emission of methane has a relatively short-lived impact on air temperatures, most of the warming it causes is taken up by the oceans. Indeed, Ocean warming accounted for more than 90% of the energy accumulated in the climate system between 1971 and 2010. (IPCC, 2014b) 36 (Reisinger, 2018) 37 Figure is based on 2016 emissions in Aotearoa. (Interim Climate Change Committee, 2019, p. 25, Figure 3.4) 35
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Nitrous oxide is a powerful greenhouse gas38 and is relatively long-lived in the atmosphere. As a result, it has similar warming dynamics to carbon dioxide over decadal-to-centennial timeframes. However, emissions of nitrous oxide are much lower than carbon dioxide or methane and as a result it contributes less to human-driven warming - at around 5%.
1.2.2 Effects of long-lived and short-lived greenhouse gas emissions on climate Long-lived gases accumulate in the atmosphere – they are effectively being added faster than they are being removed.39 Therefore, a constant rate of emissions leads to increasing concentrations and more warming. Short-lived gases do not last as long in the atmosphere, so a constant rate of emissions would eventually lead to a constant concentration. This in turn leads to a constant level of warming, although this effect can take time to stabilise. For example, a constant rate of methane emissions would take more than a century to stabilise the concentration of methane and increase the warming effect by about a third.40 The different lifetimes and effects of long- and short-lived gases means different actions are required to reduce their effect on the climate. Emissions of long-lived gases need to drop to zero to stop warming. In comparison, any reduction in the rate of emissions of short-lived gases will lead to less warming. The more that they are reduced, the greater the reduction in the warming. Reducing emissions of short-lived gases can have immediate impacts on the amount of warming that occurs but, to ultimately stop warming, it is the emissions of long-lived gases – and of carbon dioxide in particular – that need to reduce to zero.
1.2.3 What reductions are required to limit warming to 1.5°C? The IPCC Special Report on Global Warming of 1.5°C outlines the science on what global pathways are consistent with limiting warming to 1.5°C. In considering the pathways that are consistent with limiting warming to 1.5°C, the report draws on peer-reviewed modelling studies that are not based solely on atmospheric science, but also consider the feasibility and costs of reducing emissions across sectors and gases, using a range of socio-economic scenarios. The IPCC report shows that limiting warming to 1.5°C will require rapid emission cuts of greenhouse gases between now and 2030, then slower reductions until the end of the century. The 1.5°C 38
(IPCC, 2014a, pp. 731–738, Appendix 8.A)
39
Scientists talk about the ‘lifetime’ of a greenhouse gas in the atmosphere. The lifetime estimate is made up of how long an individual molecule stays in the atmosphere, which is known as the turnover time, and the time it takes for the atmospheric concentration to return to around 37% of its initial value following a one-off emission – known as the perturbation time. For carbon dioxide, the turnover time for an individual molecule can be as short as days or weeks. For example, carbon dioxide that is stored in a leaf may be quickly released back into the atmosphere once it decays, whereas another molecule may be stored in the wood of a tree for decades before it is released. However, carbon is only permanently removed from the atmosphere very slowly – through processes like ending up buried in marine sediments when sea creatures die. As a result, the perturbation lifetime of carbon dioxide in the atmosphere is centuries to millennia. 40 (Reisinger, 2018)
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compatible pathways show different pathways and reduction levels for the main greenhouse gases, which reflects their different warming properties and impacts. However, the compatible pathways have several features in common: o o
o
Emissions of carbon dioxide and other greenhouse gases need to peak in the 2020s then rapidly reduce through the 2030s and 2040s. Gross emissions of long-lived greenhouse gases need to be near-zero by 2050. Most of the pathways have some remaining gross emissions in 2050 from hard-to-abate sectors: for example, carbon dioxide produced from cement manufacturing and nitrous oxide from agriculture. As a result, emission removals are required in the pathways to ensure net emissions reach zero. Emissions of short-lived gases such as methane need to reduce significantly through the next 20 years, but not necessarily to zero by 2050 or 2100.
Box 1.4: IPCC pathways, Representative Concentration Pathways and other key assumptions The IPCC pathways for future warming contain a range of assumptions about economic growth, technology developments and lifestyles. The IPCC modelling found 1.5°C compatible pathways that covered a broad range of possible future developments across economic and demographic changes. 41
The IPCC developed four archetype scenarios to illustrate the breadth of possible 1.5°C trajectories the world could take. The four scenarios are: S1 – A pathway based on sustainable development and a global focus on technology and behaviour change S2 – A pathway with moderate assumptions about technology and population growth S5 – A fossil-fuel intensive scenario, with a high reliance on carbon capture and storage and significant overshoot of the 1.5°C threshold LED – Low energy demand. A scenario with a stronger focus on energy efficiency. Figure 1.6 illustrates the range of assumptions in these scenarios in population growth, world gross domestic product, global energy demand and global food demand. All 1.5°C scenarios are included in light blue; all other scenarios are included in grey; the four illustrative scenarios are highlighted in dark blue.
41
The IPCC also found that some features of global pathways are strong impediments to reaching the 1.5 °C goal (IPCC, 2018a, p. 95). Keeping to 1.5°C was particularly difficult in global development pathways that included: o o o
a lack of global cooperation high global inequality high population growth, or rapidly growing resource-intensive consumption (section 2.3.1.1 (IPCC, 2018a, pp. 109–110))
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Figure 1.6: Range of assumptions and drivers in scenarios modelled by the IPCC42. Figure 1.7 illustrates that keeping warming to 1.5°C is not dependent on a particular technology, or any single future pathway for global development. There is a range of possible futures where the 1.5°C goal is achieved. The modelled pathways that were the most difficult to keep warming to 1.5°C were those with significant fossil-fuel development (SSP5), low global cooperation (SSP3) or high global inequality (SSP4). The middle-of-the-road assumptions (SSP2) with limited global cooperation, some technological progress and medium population growth, were still compatible with keeping to 1.5°C43. A key conclusion from the scenarios that are compatible with limiting warming to 1.5°C is that they all assume global population and food demand will increase over the course of the century, although
42 43
(IPCC, 2018a, p. 111, Figure 2.4) Four out of six models found 1.5°C compatible pathways in the SSP2 scenario.
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some of the scenarios expect both population and food demand to drop by 2100.
Figure 1.7: Global 1.5°C emission pathways used by the IPCC44
1.2.4 What is ‘overshoot’ in the IPCC models? Most of the scenarios that the IPCC modelled overshoot 1.5°C warming to some extent before returning back to 1.5°C in the second half of the 21st century. To bring warming back down, they require removing carbon dioxide from the atmosphere – for example, by sequestering carbon dioxide in permanent forests or using carbon capture and storage – or deeper reductions in methane and other short-lived gases. The IPCC classified different modelled pathways based on how much they would overshoot 1.5°C (Table 1.1) and concluded that pathways with little or no overshoot were the most likely to limit warming to 1.5°C. These pathways were also assessed as the ones most likely to lead to the best overall social, economic and environmental outcomes. 45 Pathways with higher overshoot allow more gradual reductions in gross emissions, however they rely on deploying large scale emissions removal technologies after 2050. For example, the pathways that assume slower reductions in fossil fuel use require carbon dioxide sequestration to scale up to around a third of current global CO2 emissions levels by 2050.
44 45
(IPCC, 2018b, p. 13, Figure SPM.3a) (IPCC, 2018a)
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Table 1.1: The IPCC classified the 1.5°C pathways based on how much they would overshoot 1.5°C46 Level of overshoot No overshoot Limited overshoot
Higher overshoot
Description Pathways limiting peak warming to below 1.5°C during the entire 21st century with at least 50% likelihood. Pathways limiting median warming to below 1.5°C in 2100 and with a 50–67% probability of temporarily overshooting that level earlier, generally implying peak warming of less than 1.6°C. Pathways limiting median warming to below 1.5°C in 2100 and with a greater than 67% probability of temporarily overshooting that level earlier, generally implying peak warming of 1.6-1.9°C.
There are significant risks that the scale of emission removal technologies required in these high overshoot pathways may not be feasible. To date, none of these technologies have been trialled or used at scale. In many of the pathways the required levels of deployment exceed recent literature assessments of the potential for their deployment by the middle of the century.47 Afforestation and reforestation are also unlikely to provide the scale of emissions reductions required to bring temperatures back down in high-overshoot pathways. This is because reforesting removes carbon that was originally emitted from deforesting in earlier decades (or centuries). While afforestation can be thought of as capturing the emissions associated with the deforestation, it does not undo the emissions associated with fossil fuel combustion and cannot alone be relied upon to ensure net zero targets are met. The higher overshoot pathways are also associated with higher levels of climate change impacts due to the higher warming experienced throughout the 21st century. Higher overshoot pathways would mean that future generations would have to deal with more severe climate impacts and adaptation challenges at the same time as needing to deliver large scale emissions reduction technologies to compensate for delayed action from the present generation. Based on the above analysis, we have excluded pathways with higher overshoot from our analysis of 1.5°C compatible pathways – both for the globe and for Aotearoa.
1.2.5 1.5°C compatible pathways: the reductions in greenhouse gases needed to limit warming From here on, we refer to pathways that are compatible with limiting warming to 1.5°C with no or limited overshoot as ‘1.5°C compatible pathways.’ Within the IPCC 1.5°C compatible pathways there are a wide range of assumptions that feed into the models. Some of these are less likely than others. For example, some of the pathways assume slower reductions in gross emissions which are then offset by removals in the order of 7 to 13 Gt carbon dioxide each year.
46
Table 2.1, (IPCC, 2018a, p. 100)
47
(IPCC, 2018b, p. 17)
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Removals of emissions on this scale rely on technologies like carbon capture and storage (CCS) that are very expensive or are not yet widely in use. For example, CCS has been deployed at only a small scale globally. In 2020 there were 59 facilities operational with a capacity of 127 Mt carbon dioxide per year.48 Bioenergy with carbon capture and storage (BECCS) is only a small subset of wider CCS deployment. According to the global CCS institute, as of 2019, five facilities globally were using BECCS, capturing a total of 1.5 Mt carbon dioxide per year.49 Other pathways assume unrealistically optimistic emission reductions in the near term – reaching net zero carbon dioxide globally as early as 2036. Excluding the most unrealistic pathways gives the following reductions in net carbon dioxide, and methane and nitrous oxide from agriculture in 2030 and 2050 (Table 1.2).50 Table 1.2: Reductions in greenhouse gas emissions in IPCC model pathways with no or limited overshoot (interquartile range) Greenhouse gas emissions
Percentage change relative to 2010 2030
2050
Net carbon dioxide emissions
-40 to -58%
-94 to -107%
Agricultural methane emissions
-11 to -30%
-24 to -47%51
Agricultural nitrous oxide emissions
+3% to -21%
+1% to -26%
Box 1.5: New analysis since the IPCC 1.5°C report was released Since the Fifth Assessment Report and the Special Report on 1.5°C there have been several comparisons and assessments of the range of available climate models.52 One factor that has improved in the models over time is how they model the sensitivity of the climate to the greenhouse gases. The updated evidence on the sensitivity of the climate has narrowed the range of possible response to future greenhouse gas emissions.53 As this revised uncertainty in the Earth’s climate sensitivity largely affects the tails of the distribution, the central estimates of projected warming remain similar to those shown in the Fifth Assessment Report and the Special Report on 1.5°C.54 This gives us greater confidence that the emissions pathways presented in the Special Report on 1.5°C provide a sound basis for describing the actions needed at a global level to limit warming to 1.5°C.
1.2.6 Trading off reductions and removals within the 1.5°C compatible pathways
48
(Global CCS Institute, 2020) (Consoli, 2019) 50 To exclude the most unrealistic pathways in our analysis, we have used the interquartile range of the IPCC pathways scenarios. 51 This range provided the basis for the 2050 methane target in the Climate Change Response Act of 24-47% below 2017 levels. Methane emissions in Aotearoa changed by less than 0.5% between 2010 and 2017, so a later base year was used for easier comparison. 52 Including the sixth climate model intercomparison exercise. 53 (Sherwood et al., 2020) 54 (Forster et al., 2021) 49
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These pathways give the ranges of reductions for each gas that have been modelled to limit warming to 1.5°C. They all require significant and rapid reductions in carbon dioxide and methane. Within them, there are different combinations of reductions of the gases and emissions removals that can potentially lead to the same warming outcomes. However, different combinations of actions can have different implications on longer-term temperatures and impacts, and on the costs people face. In the IPCC pathways, the level of cuts to methane emissions modelled in the long-term to be compatible with the 1.5°C goal depends on two inter-related relationships: 1. the speed of reaching net zero for long-lived greenhouse gases, and 2. the extent to which we can rely on removal technologies.
First, there is a relationship between the rate of methane emissions globally in the period before peak warming and the modelled cumulative long-lived greenhouse gas emissions from now (2020) until the peak temperature is reached. The more long-lived greenhouse gases are reduced, the relatively smaller reductions in methane are needed (Figure 1.8).
Figure 1.8: Stylised trajectories that illustrate the trade-off between global trajectories for methane emissions caused by humans (fossil and biogenic sources) and long-lived GHG emissions using the framework of Cain et al. (2019). Trajectories are constructed to keep expected peak warming to approximately 1.75°C above pre-industrial levels.55. Second, reductions in the rate of methane emissions have an equivalent effect on warming to net removals of carbon dioxide, by immediately reducing the warming contribution of methane. In the long-term, greater reductions in the rate of methane emissions reduce the world’s dependence on carbon dioxide removal.56 Conversely, the more carbon dioxide removal that can be deployed, the fewer methane reductions are required for the same temperature outcome. However, there are also consequences for the climate from the temperature pathway up to and after the peak temperature, which is affected by the relative trade-offs between methane reductions and net removals of carbon dioxide. This is discussed in the next section. Therefore, for a given temperature goal in the medium-long-term – out to 2050 and beyond – the three factors can be balanced between each other with more emissions of one kind requiring greater reductions of another (Figure 1.9):
55 56
(Forster et al., 2021) (Forster et al., 2021; Parliamentary Commissioner for the Environment, 2018)
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Figure 1.9: Interaction between the fixed temperature goal and various options Box 1.6: What are metrics and how are they useful? Greenhouse gas emissions metrics are used to quantify the contributions to climate change of emissions of different gases. They can be thought of as exchange rates that allow different gases, which have different heat trapping properties and lifetimes in the atmosphere, to be compared using a common scale. Metrics commonly relate the climate effects of emissions to those of carbon dioxide (CO2). A formula or weighting factor is used to convert mass units (e.g. tonnes) of non-CO2 gas emissions into CO2 equivalent emissions (CO2e). This aims to equate the non-CO2 gas emissions to an amount of carbon dioxide that would generate the same amount of warming. Metrics are used in a range of contexts where there is a need to aggregate, compare or evaluate emissions of multiple greenhouse gases. For example, they are used in: 1. Reporting, to express aggregate emissions of various gases, such as in national greenhouse gas inventories or in ‘carbon footprints’ of products (lifecycle assessment). 2. Mitigation policy, to make decisions about the effort and cost warranted to reduce or avoid the emission of a quantity of one gas as compared to another gas at a given time. 3. Evaluating pathways, to consider trajectories across different gases to reach climate policy objectives, such as emission reduction targets or the 1.5°C temperature goal. To date, the most well-known metrics used in climate policy and related literature are the Global Warming Potential (GWP) and the Global Temperature change Potential (GTP). Recently, a new metric called GWP* has been developed. GWP compares gases based on the amount of carbon dioxide that would have produced the same warming effect (‘radiative forcing’) over the same period as the gas being emitted. GTP compares gases based on the actual warming they cause at a specific single future point in time. Both GWP and GTP values depend on specific time horizons (i.e. how far into the future the climate effects of each gas are considered). GWP* is a new variation on GWP. It compares a sustained change in the rate of short-lived gas emissions with a one-off emission of carbon dioxide, rather than GWP’s and GTP’s comparison of the climatic effects of one-off emissions of both types of gases. Different metrics are suited to different purposes
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There is wide agreement across scientists that the appropriate choice of metric cannot be determined by science alone but depends on broader policy contexts and goals and underlying value judgements. 57 Different metrics have different strengths and weaknesses and there is no one ‘correct’ metric that is useful for all purposes. This can be illustrated by considering the GWP with a time horizon of 100 years (GWP100, the metric adopted for reporting aggregate emissions under international agreements) with GWP*. When GWP100 is used to look at mitigation scenarios over long timeframes, it does not provide robust estimates of actual temperature outcomes.58 It does not give good information for making decisions about trade-offs between reducing methane emissions vis-à-vis carbon dioxide emissions when considering trajectories for, or compliance with, temperature targets such as the 1.5oC goal in the Climate Change Response Act. GWP* was developed to provide a better representation of the warming impacts of methane relative to those of carbon dioxide.59 In particular it better reflects the fact that a gas like methane has a short lifetime in the atmosphere and captures the effects of increases or decreases to the rate of methane emissions on temperature outcomes relative to that of carbon dioxide . Although understanding of GWP* is still developing, it appears to be more suitable than GWP100 for analysing global emissions reduction pathways to limit temperature increases. However, GWP* is less useful in other accounting, reporting and domestic policy applications, because: •
When applied to individual emitters rather than global emissions, its use would inherently benefit those who start with higher emissions, i.e. it would have a grandparenting effect.
•
It treats changes in the flow of methane emissions as permanent, whereas methane emissions fluctuate from year-to-year, even if there is a long-term trend.
The first issue arises because GWP* estimates only the further effect on the climate from a sustained change in methane emissions, relative to past emissions at a point in time. This leads to results that do not reflect the total warming contribution from different emitters. For example, two emitters with constant, ongoing emissions of 1 tonne and 100 tonnes of methane respectively would both be assessed as having a CO2e warming effect of zero under GWP*, even though the contribution to warming of the second is 100 times that of the former. This raises questions of equity and fairness. If GWP* were used in domestic policy or to determine emission reduction targets on a country-by-country basis, it would entitle those with higher methane emissions initially to keep emitting more than those starting from a lower point. GWP* also has a built-in assumption that that changes in methane emissions are sustained in perpetuity. This means it places a hundred-fold higher value on any change in methane emissions than GWP100 does on annual methane emissions. This does not accurately reflect how emitters behave. Farmers changing their production and consequently their methane emissions, do not necessarily make these decisions in perpetuity. Rather, they may adjust their activity due to temporary factors such as market prices or drought. Changes to methane emissions that are relatively small under GWP100 are much larger under GWP*. This could cause targets to be missed despite a long-term reducing trend and may not send steady policy signals. For example, if a dairy farmer added one cow to their herd in a given year and that cow emitted 100 kg of methane, this would be the equivalent of emitting 250 tCO2
57
(Hollis et al., 2016; IPCC, 2009; Levasseur et al., 2016; Tanaka et al., 2013)
58
(Allen et al., 2016) 59 (Allen et al., 2016)
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in that year under GWP*, rather than 2.5 tonnes under GWP100. If these emissions were priced, this would incur a one-off liability of $8,750, assuming an emissions price of $35/tonne. GWP100 provides a more stable way of accounting and reporting greenhouse gases and is the metric required for emissions budgets under the Climate Change Response Act. Its use for this purpose is not inaccurate as this does not involve assessing warming impacts. In Aotearoa, the split-gas 2050 target already reflects the different warming effects of biogenic methane. Finally, use of metrics is not always necessary. In the Commission’s mitigation pathway analysis, we have applied a split-gas framework that avoids the use of metrics to compare methane with other gases or trade off emissions reduction efforts across the different gases.
1.2.7 When are the reductions in methane needed and why? The above section shows there are trade-offs that can be made between reductions in methane and removals of emissions that can lead to the same temperature goal. However, it is also important to consider whether methane is acted on sooner or later. Emissions of methane in the short-term are important because they affect the temperature trajectory in reaching the long-term goal. Whether a given level of reductions in methane emissions occurs sooner (2020-2040) or later (2040-2060) will affect the level of warming the world experiences and the chance of significant overshoot. Reducing methane emissions earlier rather than later in the century leads to a higher likelihood that temperatures will not overshoot the 1.5°C threshold. Figure 1.10 illustrates two generalised scenarios for a given level of cuts to methane in the long-term. The trajectory of cuts to long-lived greenhouse gases are the same in both scenarios, as are the long-term cuts to methane emissions. Consequently, the final temperature is also the same in both scenarios. However, in one scenario the cuts to methane emissions happen earlier, which leads to temperatures remaining below the final temperature threshold rather than overshooting and then returning to it.
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Figure 1.10: the impact of early versus later action on reducing methane emissions. The same level of reduction in methane would ultimately lead to the same temperature outcome. However, earlier cuts lead to less cumulative warming and reduce the chance of overshooting the goal and the negative impacts associated with higher temperatures. As a result, in modelled pathways compatible with limiting warming to 1.5°C, much of the cuts to biogenic methane occur between 2020 and 2030, with slower reductions between 2030 and 2050 and much more limited reductions after 2050 (as illustrated in Figure 1.10). The timing of cuts to methane required to be compatible with the 1.5°C global goal depends on our view of overshoot and how much we value avoiding warming in the near-medium term in addition to reducing warming in the long-term. It also depends on how much we wish to rely on removals to meet our goals and for what purpose we want to use those removals. Acting earlier on methane has advantages in that it: • Leaves more time to reduce gross emissions of hard-to-abate long-lived greenhouse gases. • Reduces risks of impacts from higher temperatures, including irreversible changes such as species’ extinctions or catastrophic damage from more extreme weather events and faster and higher sea level rises. • Leaves more of the emission removal opportunities available to be used to get long-lived gases to net zero.
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1.3 How different are the pathways that limit warming to 1.5°C to those that limit warming to well below 2°C? Our domestic emissions reduction goal raises an important question about the level of effort that is required to reduce emissions. Aotearoa has set a different goal for its domestic actions compared to what may be required under the wording of the Paris Agreement – Aotearoa has set a domestic target of limiting warming to 1.5°C. The Paris Agreement sets the goal of limiting temperature increases to well below 2°C while pursuing efforts to limit the temperature increase to 1.5°C. How material is the difference of a few tenths of a degree between our domestic and international obligations? Analysis of the 1.5°C compatible pathways compared to pathways that limit warming to well below 2°C shows some key similarities (Figure 1.11). Both sets of pathways require very similar reductions in gross emissions, particularly of carbon dioxide. The rates that global temperatures change out to the peak temperature are also broadly the same (Figure 1.12). Under both temperature goals, carbon dioxide needs to rapidly reduce over the next two decades and reach very low levels by 2050. The main difference is in the amount of carbon dioxide removals required in the different pathways. More emissions removal is needed in the 1.5°C compatible pathways to limit warming to the temperature target, often by bringing the temperature back down to 1.5 degrees after it has overshot the target.
Figure 1.11: Reductions in CO2 required in pathways compatible with less than 2°C (orange) and 1.5°C (blue)60
60
(Peters, 2020a) using data from (Huppmann et al., 2019)
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Figure 1.12: Peak temperatures in less than 2°C (orange) and 1.5°C compatible with limited overshoot (blue). 1.5°C compatible pathways reach the same temperatures before dropping back down.61
61
(Peters, 2020b) using data from (Huppmann et al., 2019)
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1.4 References Allen, M. R., Fuglestvedt, J. S., Shine, K. P., Reisinger, A., Pierrehumbert, R. T., & Forster, P. M. (2016). New use of global warming potentials to compare cumulative and short-lived climate pollutants. Nature Climate Change, 6(8), 773–776. https://doi.org/10.1038/nclimate2998 Arrhenius, S. (1896). On the influence of Carbonic Acid in the Air upon the Temperature of the Ground. London, Edinburgh, and Dublin Philosophical Magazine and Journal of Science (Fifth Series), 41, 237–275. Cain, M., Lynch, J., Allen, M. R., Fuglestvedt, J. S., Frame, D. J., & Macey, A. H. (2019). Improved calculation of warming-equivalent emissions for short-lived climate pollutants. Npj Climate and Atmospheric Science, 2(1), 29. https://doi.org/10.1038/s41612-019-0086-4 Colliar, J., & Blackett, P. (2018). Tangoio Climate Change Adaptation Decision Model: A process for exploring adaptive pathways for Tangaio Marae (Prepared for Maungaharuru-Tangitū Trust and Deep South National Science Challenge NIWA Client Report: 2018242HN). New Zealand: National Institute of Water and Atmospheric Research Ltd (NIWA). Committee on Climate Change. (2019). Net Zero: The UK’s contribution to stopping global warming (p. 275). Committee on Climate Change. https://www.theccc.org.uk/wpcontent/uploads/2019/05/Net-Zero-The-UKs-contribution-to-stopping-global-warming.pdf Consoli, C. (2019). Bioenergy and Carbon Capture and Storage. Global CCS Institute. https://www.globalccsinstitute.com/wp-content/uploads/2019/03/BECCSPerspective_FINAL_18-March.pdf Forster, P. M., Millar, R., & Fuglestvedt, J. (2021). Climate science considerations of global mitigation pathways and implications for New Zealand mitigation pathways [Report to the Climate Change Commission]. Frame, D., Rosier, S., Carey-Smith, T., Harrington, L., Dean, S., & Noy, I. (2018). Estimating financial costs of climate change in New Zealand, an estimate of climate change-related weather event costs. New Zealand Climate Change Research Institute, National Institute of Water and Atmospheric Research (NIWA). https://www.treasury.govt.nz/sites/default/files/201808/LSF-estimating-financial-cost-of-climate-change-in-nz.pdf Global CCS Institute. (2020). Carbon capture and storage pipeline grows by 10 large-scale facilities globally. https://www.globalccsinstitute.com/news-media/press-room/mediareleases/carbon-capture-and-storage-pipeline-grows-by-10-large-scale-facilities-globally/ Hollis, M., de Klein, C., Frame, D., Harvey, M., Manning, M., Reisinger, A., Kerr, S., & Robinson, A. (2016). Cows, Sheep and Science: A Scientific Perspective on Biological Emissions from 25 1 February 2021 Draft Supporting Evidence for Consultation
Agriculture. (Motu Working Paper 16-17; p. 48). Motu Economic and Public Policy Research. http://motu-www.motu.org.nz/wpapers/16_17.pdf Huppmann, D., Kriegler, E., Krey, V., Riahi, K., Rogelj, J., Calvin, K., Humpenoeder, F., Popp, A., Rose, S. K., Weyant, J., Bauer, N., Bertram, C., Bosetti, V., Doelman, J., Drouet, L., Emmerling, J., Frank, S., Fujimori, S., Gernaat, D., … Zhang, R. (2019). IAMC 1.5°C Scenario Explorer and Data hosted by IIASA (release 2.0) [Data set]. Zenodo. https://doi.org/10.5281/ZENODO.3363345 Interim Climate Change Committee. (2019). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ IPCC. (2009). IPCC Expert Meeting on the Science of Alternative Metrics: Meeting Report (p. 82). https://www.ipcc.ch/site/assets/uploads/2018/05/expert-meeting-metrics-oslo.pdf IPCC. (2014a). Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (T. Stocker, D. Qin, G.-K. Plattner, M. Tignor, S. Allen, J. Boschung, A. Nauels, Y. Xia, & P. Midgley, Eds.). Cambridge University Press. https://www.ipcc.ch/site/assets/uploads/2018/02/WG1AR5_all_final.pdf IPCC. (2014b). Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (p. 151) [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC. https://www.ipcc.ch/site/assets/uploads/2018/05/SYR_AR5_FINAL_full_wcover.pdf IPCC. (2018a). Global Warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. IPCC. https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf IPCC. (2018b). Summary for Policymakers. In Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. [MassonDelmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. MoufoumaOkia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. In Press. IPCC.
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https://www.ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_SPM_version_report_LR.pd f IPCC. (2019). Climate Change and Land: An IPCC special report on climate change, desertification, land degradataion, sustainable land management, food security, and greenhouse gas flluxes in terrestrial ecosystems (In Press, p. 896) [P.R. Shukla, J. Skea, E. Calvo Buendia, V. MassonDelmotte, H.-O. Pörtner, D. C. Roberts, P. Zhai, R. Slade, S. Connors, R. van Diemen, M. Ferrat, E. Haughey, S. Luz, S. Neogi, M. Pathak, J. Petzold, J. Portugal Pereira, P. Vyas, E. Huntley, K. Kissick, M. Belkacemi, J. Malley, (eds)]. https://www.ipcc.ch/site/assets/uploads/sites/4/2020/08/200730-IPCCJ7230-SRCCLComplete-BOOK-HRES.pdf IPCC. (2020). IPCC — Intergovernmental Panel on Climate Change. https://www.ipcc.ch/ Jackson, R. (2020). Eunice Foote, John Tyndall and a question of priority. Notes and Records: The Royal Society Journal of the History of Science, 74(1), 105–118. https://doi.org/10.1098/rsnr.2018.0066 Lang, K. R. (2010). Global Warming. NASA Cosmos. https://ase.tufts.edu/cosmos/view_chapter.asp?id=21&page=1 Levasseur, A., Cavalett, O., Fuglestvedt, J. S., Gasser, T., Johansson, D. J. A., Jorgensen, S. V., Raugei, M., Reisinger, A., Schivley, G., Stromman, A., Tanaka, K., & Cherubini, F. (2016). Enhancing life cycle impact assessment from climate science: Review of recent findings and recommendations for application to LCA. Ecological Indicators, 71, 163–174. https://doi.org/10.1016/j.ecolind.2016.06.049 Ministry for the Environment & Statistics NZ. (2020). New Zealand’s Environmental Reporting Series: Our Atmosphere and Climate 2020 (p. 79). Ministry for the Environment, StatsNZ. https://www.mfe.govt.nz/sites/default/files/media/Environmental%20reporting/ouratmosphere-and-climate-2020.pdf Ministry for the Environment, & Stats NZ. (2019). New Zealand’s Environmental Reporting Series: Our Marine Environment 2019. Ministry for the Environment, StatsNZ. https://www.mfe.govt.nz/sites/default/files/media/Environmental%20reporting/ourmarine-environment-2019.pdf NASA Earth Observatory. (2010). Climate Q&A - If Earth has warmed and cooled throughout history, what makes scientists think that humans are causing global warming now? NASA Earth Observatory. https://earthobservatory.nasa.gov/blogs/climateqa/if-earth-has-warmed-andcooled-throughout-history-what-makes-scientists-think-that-humans-are-causing-globalwarming-now/
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Neilson, M. (2019). Māori burial grounds under threat from rising seas increasing storm events. NZ Herald. https://www.nzherald.co.nz/nz/maori-burial-grounds-under-threat-from-rising-seasincreasing-storm-events/5XCN72RZH6OKH7CX2BOWDSUF7I/ Parliamentary Commissioner for the Environment. (2018). A note on New Zealand’s methane emissions from livestock. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/publications/a-note-on-new-zealand-s-methane-emissionsfrom-livestock# Parliamentary Commissioner for the Environment. (2019). Farms, forests and fossil fuels: The next great landscape transformation? Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/196523/report-farms-forests-and-fossil-fuels.pdf Patuharakeke Te Iwi Trust Board Inc. (2014). Patuharakeke Hapū Environmental Management Plan 2014. Peters, G. (2020a). CO2 emissions for temperature peak [Twitter]. https://twitter.com/Peters_Glen/status/1321370242195533825/photo/1 Peters, G. (2020b). Temperature profile for peak 1.65-1.75°C [Twitter]. https://twitter.com/Peters_Glen/status/1321370237581905921/photo/1 Reisinger, A. (2018). The contributions of methane emissions from New Zealand livestock to global warming (p. 44). Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/196482/contribution-of-methane-emissions-fromnz-livestock-to-global-warming.pdf Ritchie, H., & Roser, M. (2020). CO2 emissions by fuel. Our World in Data. https://ourworldindata.org/emissions-by-fuel Sherwood, S. C., Webb, M. J., Annan, J. D., Armour, K. C., Forster, P. M., Hargreaves, J. C., Hegerl, G., Klein, S. A., Marvel, K. D., Rohling, E. J., Watanabe, M., Andrews, T., Braconnot, P., Bretherton, C. S., Foster, G. L., Hausfather, Z., Heydt, A. S. von der, Knutti, R., Mauritsen, T., … Zelinka, M. D. (2020). An Assessment of Earth’s Climate Sensitivity Using Multiple Lines of Evidence. Reviews of Geophysics, 58(4), e2019RG000678. https://doi.org/10.1029/2019RG000678 Simonson, T., & Hall, G. (2019). Vulnerable: The quantum of local government infrastructure exposed to sea level rise. LGNZ. https://www.lgnz.co.nz/vulnerable-the-quantum-of-localgovernment-infrastructure-exposed-to-sea-level-rise Tanaka, K., Johansson, D. J. A., O’Neill, B. C., & Fuglestvedt, J. S. (2013). Emission metrics under the 2°C climate stabilization target. Climate Change, 117(4), 933–941. https://doi.org/DOI 10.1007/s10584-013-0693-8
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Te Hiku o te Ika Development Trust. (2018). Te Hiku O Te Ika Climate Change Project. Project Summary Report for the Deep South National Science Challenge. The Deep South National Science Challenge. United Nations. (2015). Paris Agreement. https://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agr eement.pdf Voiland, A. (2010). Aerosols: Tiny particles, Big impact. NASA. https://earthobservatory.nasa.gov/features/Aerosols
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Chapter 2: What are other countries doing? Although countries worldwide have signed up to the Paris Agreement, current global efforts are not going far enough to bring about the emissions reductions needed. Reducing global emissions needs to be a collaborative effort and, encouragingly, we are seeing an increasing number of countries committing to net-zero targets. This chapter looks at how our targets compare with those of other countries, looking at the world’s biggest emitters and our key trading partners, and how our past emissions trends compare to other developed countries.
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Contents Chapter 2: What are other countries doing? ........................................................................................ 1 2.1 International action.......................................................................................................................... 3 2.1.1 Current worldwide action is insufficient to meet the goals of the Paris Agreement ................ 3 2.1.2 Major economies are strengthening their commitments ......................................................... 4 2.1.3 Commitments on climate action from sub-national and non-state actors are accelerating..... 5 2.1.4 What targets are other countries taking?.................................................................................. 6 2.1.5 How does Aotearoa compare? .................................................................................................. 9 2.2 References ...................................................................................................................................... 10
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Although countries worldwide have signed up to the Paris Agreement, current global efforts are not going far enough to bring about the emissions reductions needed. Reducing global emissions needs to be a collaborative effort and, encouragingly, we are seeing an increasing number of countries committing to net-zero targets. This chapter looks at how our targets compare with those of other countries, looking at the world’s biggest emitters and our key trading partners, and how our past emissions trends compare to other developed countries.
2.1 International action 2.1.1 Current worldwide action is insufficient to meet the goals of the Paris Agreement The current pledges by countries puts the world on track for around 3ᵒC of warming.1 But countries have been implementing policies to reduce emissions and ramping up future commitments. Projected emissions in 2030 and beyond are now significantly lower than they were projected to be in 2010 (black line), as illustrated in the United Nations Environment Programme (UNEP) graph (Figure 2.1). Current policies (blue line) would see global emissions continue to increase to 2030, while existing unconditional Nationally Determined Contributions (NDCs) (orange line) would see emissions stay constant at around 2020 levels over the decade to 2030.2 If countries were able to implement their conditional NDCs (red line), emissions would fall slowly over the 2020s but not fast enough to be consistent with 1.5ᵒC or 2ᵒC goals (green and blue lines respectively). Box 2.1: Comparing action between countries It is often difficult to draw comparisons between countries’ emissions targets. Headline target numbers may not be like for like, due to differences in coverage, differences in the base year or target year, and historic emissions trends. Even adjusting for these factors, countries’ national circumstances will be different so similar levels of emission reductions may not represent directly comparable levels of effort. Lastly, targets represent statements about countries’ ambitions for the future, but these are not always matched by actions. As a result, a high-level comparison of targets can indicate the collective direction of movement, but an overreliance on direct comparisons of targets between countries should be avoided.
1
(Rogelj et al., 2016) Nationally Determined Contributions are the international commitments made by countries under the Paris Agreement. (United Nations, 2015) 2
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Figure 2.1: Global GHG emissions under different policy futures to 20303
2.1.2 Major economies are strengthening their commitments An increasing number of countries are committing to net-zero targets4 in pursuit of the more stringent action required to keep warming to 1.5 ᵒC. Box 2.2: ‘Net zero’ A “net zero commitment” can mean different things. Some countries use it to mean that their net emissions of all greenhouse gases would be zero – i.e. all remaining emissions are offset. Others refer to a “net zero carbon commitment” where all remaining carbon dioxide emissions are offset. Non-carbon dioxide emissions may be reduced in this approach but would be not be offset. Offsets can include land-based sequestration, other carbon dioxide removal measures such as bioenergy with carbon capture and storage, or in some cases offshore mitigation. Our country’s commitment is to reduce biogenic methane by 24-47% by 2050 and to reduce all other gases to net zero. Aotearoa includes forest sequestration in meeting its net zero commitment, but not offshore mitigation.
3 4
(UNEP, 2020, Figure E5.5) Noting that some of these net-zero commitments differ in coverage and scope.
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In the last 18 months, several large emitting countries have moved significantly on GHG emissions: o o o
In September 2020, China announced it would reach net zero emissions before 2060 In October 2020, the European Union (EU) Parliament voted to increase the EU’s 2030 target from 40% to 60% below 1990 levels In October 2020, Japan and South Korea announced they were setting net-zero national targets for 2050
As of September 2020, 23 countries have put in place net zero targets for 2050, or sooner. Several large economies (China, Japan, Canada, South Korea) have also announced net zero targets and are in the process of adopting them. Countries that have adopted or announced net zero targets now account for approximately 30% of global gross domestic product (GDP). Another 100 countries, representing a further 18% of global GDP, are considering net zero targets.5 The United Kingdom passed its net zero target into law in 2019. The EU has also adopted a net zero target for 2050 and is putting it into law. Figure 2.2 below shows the countries that have announced net-zero commitments since the beginning of 2019.
Figure 2.2: Timeline of net-zero commitment announcements over 2019 and 20206
2.1.3 Commitments on climate action from sub-national and non-state actors are accelerating Since late 2019, the number of net-zero pledges from cities, regions and companies across the world has roughly doubled. Since October 2020, net-zero targets have been set across economies, companies or sectors, covering at least 826 cities, 103 regions and 1,565 companies. In total, these pledges represent over 880 million residents, 24.9 million employees and approximately 20% of global greenhouse gas emissions.7 Many city councils, such as Auckland8 and Wellington9, have announced net zero targets by 2050, and Dunedin has committed to net zero by 203010.
5
(Energy & Climate Intelligence Unit, 2019) Dates shown for the UK and Aotearoa are when net zero targets were legislated rather than announced. Individual EU member states’ net zero commitments have not been shown to avoid double counting. 7 (NewClimate Institute & DataDriven EnviroLab, 2020) 8 (Auckland Council, 2020) 9 (Wellington City Council, 2019) 10 (Dunedin City Council, 2020) 6
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The finance sector recognises climate change as an issue and a growing number of institutional investors are using their influence to drive better climate outcomes. In 2015, the G20 established the Task Force on Climate-related Financial Disclosures to review the ways in which the financial sector can better account for climate risks11. The Task Force released its recommendations in 2017 to help companies account for climate change when planning for the future. Financial institutions are moving away from emission intensive investments, which are increasingly seen as risky given various governments’ commitments to reducing emissions. For example, by November 2020, three of the four Australian banks had committed to phasing out funding of new thermal coal projects by 2030. They had also committed to exit existing funding commitments for coal projects by 2035.12 In January 2020, the world’s largest fund manager, Blackrock, joined the Climate Action 100+ -a group of investors committed to ensuring the world’s largest emitting companies take necessary action on climate change.13
2.1.4 What targets are other countries taking? Many developed countries’ have set their emission targets with reference to the Fifth Assessment Report. This outlines the level of emissions cuts necessary to limit warming to 2 ᵒC14 and keep warming well below 2 ᵒC – one of the stated goals of the Paris agreement. In comparing our effort to that of other countries, we have used several lenses. We compare ourselves to the world’s biggest emitters and to our biggest trade partners.
The biggest emitters Action from the world’s biggest emitters is mixed. China and the EU have made strong commitments. The United States of America formally withdrew from the Paris Agreement on 5 November 2020. However, under President Joe Biden, the United States re-joined the agreement15 and his policy platform includes a commitment to net zero emissions by 2050.16 Russia’s NDC would see its emissions increase between now and 2030. India’s NDC is to improve its emissions intensity but allow total emissions to grow between now and 2030.
Table 2.1 describes the NDCs and long-term targets of Aotearoa and the world’s biggest emitting countries.
11
(Task Force on Climate-Related Financial Disclosures, 2020) (Bloomberg, 2020) 13 (Climate Action 100+, 2020) 14 The IPCC’s modelling for the Fifth Assessment Report found that in 2 ᵒC pathways OECD countries reduced emissions by 80-95% by 2050 relative to 2010 levels (IPCC, 2014, Figure 6.29). 15 (Newburger, 2021) 16 (Joe Biden, 2020) 12
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Table 2.1: Emission targets from Aotearoa and the world’s top five emitting countries Country
China
Share of world emissions17 27%
NDC18
Long-term target
Net zero emissions by 206019
USA
14%
Peak carbon dioxide emissions and reduce emissions intensity by 6065% below 2005 levels by 2030 None
EU
10%
-40% below 1990 levels by 2030
Net zero by 205020
India
7%
None
Russia
5%
Emissions intensity per unit GDP 33-35% below 2005 levels by 203021 -25-30% below 1990 levels by 203022 -30% below 2005 levels by 2030
24-47% reduction in biogenic methane and net zero all other gases by 2050
Aotearoa
0.17%
None
None
Our trade partners Several of our top five trade partners are reducing emissions by similar levels to our NDC – and some by less (Table 2.2). Australia and Japan’s NDCs are broadly similar to ours. Germany’s NDC is stronger than ours – a 55% emissions cut against 1990 levels reflecting its past actions to reduce emissions. The USA does not have an NDC in force currently. If President Biden reinstates the USA’s original NDC, it would be somewhat stronger than our NDC – reaching similar levels of emission reductions, but five years earlier. China’s NDC is to peak its carbon dioxide emissions before 2030.
17
(World Resources Institute, 2020) (UNFCCC, 2020b) 19 (H.E. Xi Jinping, 2020) 20 (European Commission, 2016) 21 This equates to emissions 146-161% above 2010 levels in absolute terms, once expected economic growth is accounted for. 22 Equivalent to an 18-25% increase on emissions against 2010 levels. 18
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Table 2.2: Emission targets from Aotearoa and our top five trade partners Country
China
Share of two-way trade23 20%
NDC
Long-term target
Peak carbon dioxide emissions and reduce emissions intensity by 6065% below 2005 levels by 2030 -26-28% below 2005 levels by 2030 by 2030
Net zero emissions by 2060
Australia
17%
None
USA
11%
None24
None
Japan
5%
-26% below 2013 levels by 2030
Net zero by 2050
Germany
4%
-55% below 1990 levels by 2030
Net zero by 205025
Aotearoa
N/A
-30% below 2005 levels by 2030
24-47% reduction in biogenic methane and net zero all other gases by 2050
Box 2.3: Split gas targets The Climate Change Response Act sets Aotearoa a split-gas domestic target for 2050. This raises a question about whether the NDC should also be expressed in a split-gas format or continue to be expressed as an all-gases target. Under the Paris Agreement all member countries are required to maintain an NDC. Developed countries’ NDCs are expected to be economy-wide targets. Article 4.4 of the Paris Agreement states that “Developed country Parties should continue taking the lead by undertaking economy-wide absolute emission reduction targets.”26 All developed countries’ NDC targets are all-gas emissions targets and do not separate specific sub-sectors or gases. Some countries have sector-specific sub-targets as part of their domestic plan to meet the NDC, while keeping the NDC all-gas. For example, Ireland consulted in 2019 on targets for agriculture emissions of 5-15% below 2017 levels by 203027. However, its NDC remains on an all-gas basis as part of the European Union’s joint NDC. Similarly, France’s strategy to meet its NDC breaks its overall target down into specific subbudgets for different sectors and gases including agricultural methane. France’s domestic emission budgets for agricultural methane require reductions of 20% below 2015 levels between 2029 and 2033 – more stringent than our target to reduce 10% of biogenic methane by 2030 enacted in the Climate Change Response Act28.
23
(Stats NZ, 2019) The USA’s original NDC before withdrawing from the Paris agreement was to reduce emissions 26-28% below 2005 levels by 2025. 25 (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, 2016) 26 Article 4.4, Paris Agreement (United Nations, 2015) 27 (Department of Agriculture, Food and the Marine, Government of Ireland, 2019) 28 (Ministère de la Transition écologique, 2018) 24
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2.1.5 How does Aotearoa compare? The Nationally Determined Contribution (NDC) Our country’s first NDC is to reduce emissions by 30% on 2005 levels by 2030, equivalent to an 11% cut on 1990 levels. Our first NDC generally falls in the middle of the range of those of the biggest emitters and of our biggest trade partners. In these groups, some countries have stronger NDCs than us and some have weaker NDCs.
Past action on emissions Our carbon dioxide emissions per capita are higher than the global average. Aotearoa has made less progress reducing carbon dioxide emissions compared to many other developed countries. Since 1990, our carbon dioxide emissions have reduced by 5.2%. These reductions are slower than 32 out of 43 other Annex 1 countries29. Since 1990 Aotearoa has consistently been in the top 25% of developed countries for the lowest electricity emissions per person. However, between 1990 and 2018, the average emissions intensity of electricity from Annex 1 countries nearly halved and the gap between Aotearoa and other developed countries is no longer as great. In other sectors, our emissions intensity is not as good as the rest of the world. Our transport emissions per capita were high in 1990 and have remained high; at 3.4 tCO2 per person in 2018, our transport emissions per capita are higher than all but 4 of 43 Annex 1 countries. Globally, the emissions intensity of transport increased substantially between 1990 and 2018, but our transport emissions rose more than other developed countries. Overall, Aotearoa is no longer ahead of comparable countries in carbon dioxide emissions upper capita as high transport emissions have more than offset low electricity emissions. If our high level of renewable electricity still put us ahead of the world it would be reflected in carbon dioxide emissions per capita. In 1990, Aotearoa was ranked 16th out of 43 Annex 1 countries for lowest carbon dioxide emissions per capita. In 2018, we had fallen to 25th out of 43, just below average.30 Aotearoa is one of only a few developed countries to have increased its emissions from agriculture since 1990, alongside only Canada, Cyprus, Ireland, Spain and the USA. While our emissions from agriculture increased by 17% between 1990 and 2018, the emissions intensity of agricultural production in Aotearoa has improved significantly over that time. Emissions per unit of food produced are 20-30% lower now than in 1990 in the dairy, sheep and beef sectors.31
29
Annex 1 countries are defined as the industrialised countries that were members of the OECD in 1992 and countries with economies in transition including the Russia, the Baltic States and several Central and Eastern European States. (UNFCCC, 2020c) 30 (The World Bank, 2020; UNFCCC, 2020a) 31 (Interim Climate Change Committee, 2019)
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2.2 References Auckland Council. (2020). Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan. Auckland Council. https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-bylaws/our-plansstrategies/Pages/te-taruke-a-tawhiri-ACP.aspx Bloomberg. (2020). Coal Financing Squeezed in Australia as ANZ Plans Exit. https://www.bloomberg.com/news/articles/2020-10-28/coal-financing-squeezed-inaustralia-as-anz-announces-exit-plan Climate Action 100+. (2020). BlackRock joins Climate Action 100+ to ensure largest corporate emitters act on climate crisis. Climate Action 100+. https://www.climateaction100.org/news/blackrock-joins-climate-action-100-to-ensurelargest-corporate-emitters-act-on-climate-crisis/ Department of Agriculture, Food and the Marine, Government of Ireland. (2019). Public consultation on “Ag-Climatise”, a National Climate & Air Roadmap for the Agriculture Sector to 2030 and Beyond. https://www.gov.ie/en/consultation/b65e3-public-consultation-on-ag-climatise-anational-climate-air-roadmap-for-the-agriculture-sector-to-2030-and-beyond/ Dunedin City Council. (2020). Carbon emission reduction. https://www.dunedin.govt.nz/council/council-projects/waste-futures/carbon-emissionreduction Energy & Climate Intelligence Unit. (2019). Net zero: The scorecard. Energy & Climate Intelligence Unit. https://eciu.net/analysis/briefings/net-zero/net-zero-the-scorecard European Commission. (2016). 2050 long-term strategy [Text]. Climate Action - European Commission. https://ec.europa.eu/clima/policies/strategies/2050_en Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. (2016). Climate Action Plan 2050 – Germany’s long-term low greenhouse gas emission development strategy. Bundesministerium Für Umwelt, Naturschutz Und Nukleare Sicherheit.
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https://www.bmu.de/en/topics/climate-energy/climate/national-climatepolicy/greenhouse-gas-neutral-germany-2050/ H.E. Xi Jinping. (2020). Statement by H.E. Xi Jinping President of the People’s Republic of China at the General Debate of the 75th Session of The United Nations General Assembly, 20 September 2020. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1817098.shtml Interim Climate Change Committee. (2019). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ IPCC. (2014). Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (p. 151) [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC. https://www.ipcc.ch/site/assets/uploads/2018/05/SYR_AR5_FINAL_full_wcover.pdf Joe Biden. (2020). The Biden Plan for a Clean Energy Revolution and Environmental Justice. Joe Biden for President: Official Campaign Website. https://joebiden.com/climate-plan/ Ministère de la Transition écologique. (2018). National Low Carbon Strategy Project. https://www.ecologie.gouv.fr/sites/default/files/Projet%20SNBC%20EN.pdf Newburger, E. (2021, January 20). President Joe Biden rejoins the Paris climate accord in first move to tackle global warming. CNBC. https://www.cnbc.com/2021/01/20/biden-inauguration-usrejoins-paris-climate-accord.html NewClimate Institute, & DataDriven EnviroLab. (2020). Navigating the nuances of net-zero targets (p. 74). NewClimate Institute & DataDriven EnviroLab. https://newclimate.org/wpcontent/uploads/2020/10/NewClimate_NetZeroReport_October2020.pdf Rogelj, J., den Elzen, M., Höhne, N., Fransen, T., Fekete, H., Winkler, H., Schaeffer, R., Sha, F., Riahi, K., & Meinshausen, M. (2016). Paris Agreement climate proposals need a boost to keep warming well below 2 °C. Nature, 534(7609), 631–639. https://doi.org/10.1038/nature18307 11 1 February 2021 Draft Supporting Evidence for Consultation
Stats NZ. (2019). Goods and services trade by country: Year ended June 2019. https://www.stats.govt.nz/information-releases/goods-and-services-trade-by-country-yearended-june-2019 Task Force on Climate-Related Financial Disclosures. (2020). Task Force on Climate-Related Financial Disclosures. Task Force on Climate-Related Financial Disclosures. https://www.fsbtcfd.org/about/ The World Bank. (2020). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators UNEP. (2020). Emissions Gap Report 2020. UNEP - UN Environment Programme. http://www.unep.org/emissions-gap-report-2020 UNFCCC. (2020a). Greenhouse Gas Inventory Data—GHG Profiles—Annex I. https://di.unfccc.int/ghg_profile_annex1 UNFCCC. (2020b). NDC Registry. https://www4.unfccc.int/sites/NDCStaging/Pages/All.aspx UNFCCC. (2020c). Parties & Observers United Framework Convention on Climate Change. https://unfccc.int/parties-observers United Nations. (2015). Paris Agreement. https://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agr eement.pdf Wellington City Council. (2019). Te Atakura First to Zero. Wellington’s blueprint for a Zero Carbon Capital (No. J008785). Wellington City Council. https://www.zerocarboncapital.nz/assets/Modules/DocumentGrid/J008785-Zero-CarbonPlan-final-WEB.PDF World Resources Institute. (2020). Climate Analysis Indicators Tool (CAIT) Climate Data Explorer. http://cait.wri.org/
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Chapter 3: How to measure progress ‘Rules for measuring progress’ refers to the system for monitoring greenhouse gas emissions over time to understand whether Aotearoa is on track to achieve emissions budgets and the 2050 target. This chapter outlines the Commission’s role, the objectives and principles used to guide its advice on accounting choices and analysis of a range of accounting matters relevant for emissions budgets. These issues include production versus consumption-based accounting, land emissions accounting, voluntary offsetting and carbon neutrality, and detailed legislative requirements related to the scope and presentation of emissions budgets.
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Contents Chapter 3: How to measure progress ........................................................................................... 1 3.1 Introduction ........................................................................................................................... 3 3.1.1 Greenhouse gas accounting for emissions reduction targets ................................................... 3 3.1.2 The Commission’s role ............................................................................................................... 3 3.1.3 The Commission’s approach ...................................................................................................... 3 3.2 Objective and principles to guide accounting choices .............................................................. 4 3.3 Production- or consumption-based accounting ....................................................................... 6 3.3.1 Options ....................................................................................................................................... 7 3.3.2 Analysis .................................................................................................................................... 10 3.4 Accounting for land emissions .............................................................................................. 13 3.4.1 Background .............................................................................................................................. 13 3.4.2 Choice of accounting framework ............................................................................................. 15 3.5 Analysis................................................................................................................................ 20 3.5.1 Detailed choices about land emissions accounting ................................................................. 23 3.5.2 Other sources of land emissions and removals ....................................................................... 25 3.6 Voluntary offsetting and carbon neutrality............................................................................ 26 3.7 Legislative requirements....................................................................................................... 28 3.7.1 Scope of emissions budgets ..................................................................................................... 29 3.7.2 The nature and presentation of emissions budgets ................................................................ 29 3.7.3 GWP100 values .......................................................................................................................... 30 Appendix 1: Kyoto Protocol activity definitions .......................................................................... 34 3.8 References ........................................................................................................................... 32
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‘Rules for measuring progress’ refers to the system for monitoring greenhouse gas emissions over time to understand whether Aotearoa is on track to achieve emissions budgets and the 2050 target. This chapter outlines the Commission’s role, the objectives and principles used to guide its advice on accounting choices and analysis of a range of accounting matters relevant for emissions budgets. These issues include production versus consumption-based accounting, land emissions accounting, voluntary offsetting and carbon neutrality, and detailed legislative requirements related to the scope and presentation of emissions budgets.
3.1 Introduction 3.1.1 Greenhouse gas accounting for emissions reduction targets The methods used to calculate and attribute the amount of greenhouse gases emitted or removed from the atmosphere over time are a critical component of effective climate policy. Robust and accurate emissions accounting is essential for: •
setting emission reduction targets,
•
monitoring and evaluating progress towards meeting targets, and
•
judging compliance at the end of a target period.
A key purpose of the emissions reduction targets countries set themselves is to drive actions to reduce human impacts on the climate. The accounting methods used for these targets need to deliver useful data to inform emissions reduction efforts and influence which reduction activities are prioritised. This link to policy and driving behaviour change is why emissions accounting for targets may differ from national greenhouse gas (GHG) inventories. An appropriate accounting approach would encourage better choices about reducing emissions and avoid wasting resources on misdirected efforts.
3.1.2 The Commission’s role The Climate Change Response Act 2002 requires the Commission to advise on “the rules that will apply to measuring progress towards meeting emissions budgets and the 2050 target” (section 5ZA(1)(b)). These rules, for consistency, need to be incorporated into the analysis for emissions budgets. The Commission must also apply the rules when monitoring and reporting on progress towards emissions budgets and the 2050 target (section 5ZJ), with the first monitoring report due in 2024. The Commission’s first package of advice relates to the first three emission budgets, covering the 2022-2035 period. In 2024, we will advise on the fourth emissions budget (covering 2036-2040). At that time, there will be an opportunity to revise this advice for the second and third emissions budgets, if this is justified by developments in knowledge or accounting methods.
3.1.3 The Commission’s approach The Government already undertakes various efforts to track Aotearoa’s emissions. These include:
1 February 2021 Draft Supporting Evidence for Consultation 3
•
The National Greenhouse Gas Inventory (the GHG Inventory), the official annual estimate of GHG emissions and removals which have occurred in Aotearoa since 1990. This is produced each year as part of obligations under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. It draws on guidance from the Intergovernmental Panel on Climate Change (IPCC) about GHG accounting best practice, adapted for Aotearoa’s circumstances.
•
The Nationally Determined Contribution (NDC) target accounting rules, which have evolved from those used to account for targets under the Kyoto Protocol, adapted to reflect our country’s national circumstances. NDC target accounting uses Inventory gross emissions estimates but accounts for land emissions differently.1
•
The GHG emissions accounts compiled using the United Nations System of EnvironmentalEconomic Accounting (SEEA) framework, which enable emissions data to be compared to economic statistics. Two sets of national estimates are prepared: o
production-based emissions by industry and household
o
consumption-based emissions.
These approaches each have their own purpose. They are suited for meeting different demands and each puts a specific lens on the nature of our emissions and the factors driving them. Within these approaches, there are also choices about detailed accounting methods or assumptions that can be made. The Commission does not have the technical capacity or resources to produce its own emissions estimates, so its advice on emissions budgets accounting must draw on these existing approaches. The task therefore is to determine which existing approach and methods are best suited to help emission budgets and the 2050 target fulfil their role in providing a foundation for stable, predictable policies and driving the actions needed to reduce our impact on the climate. The 2050 target and emissions budgets have been established through domestic law. This differs from the country’s other emissions reduction targets, which are adopted under international agreements and must follow international accounting rules or guidance. This gives more flexibility to include or exclude certain elements of accounting, although broad alignment with existing approaches would have benefits for consistency, credibility and reduced administrative burden.
3.2 Objective and principles to guide accounting choices We considered it important to examine the accounting rules for emissions budgets on a first principles basis. To do this, we set a high-level objective for the overall goal of the system.
1
By ‘land emissions’, we refer to emissions and removals from land sources and sinks such as forests, vegetation, soils and wetlands. In the national GHG Inventory this sector is referred to as land use, land use change and forestry (LULUCF). It does not include any direct agricultural emissions such as those from livestock or fertiliser.
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The Commission’s high-level objective for accounting: A robust, transparent accounting system which tracks genuine environmental gains while balancing completeness with practicality.
We have also defined a set of principles underneath the high-level objective, to provide guidance on how to reach that goal. The principles help to ensure we take a coherent approach to the varied range of issues covered by target accounting. The Commission’s principles for accounting: Accounting for emissions budgets and the 2050 target should: i.
seek to cover all material human caused emissions sources and sinks
ii.
be grounded in robust science and evidence
iii.
send a clear signal for climate action
iv.
be accurate and reduce uncertainty as far as practicable
v.
be transparent, practical and acceptable and
vi.
be consistent and maintain the integrity of the target.
Together, the objective and principles provide a framework to allow options and trade-offs to be understood and to inform decisions about accounting rules. We expand briefly below what each principle means. Seek to cover all material human caused emissions sources and sinks Accounting should strive for completeness – aiming for full coverage of sources, sinks and gases across all geographic areas. This parallels Paris Agreement expectations. This needs to be balanced by materiality – IPCC guidance recognises that it is acceptable to prioritise more significant emissions sources and sinks. Be grounded in robust science and evidence Accounting should reflect the current state of scientific knowledge, drawing on IPCC assessments and guidance. It should be informed by and use evidence and methods appropriate to Aotearoa. New methods and recalculations which improve emissions estimates should be encouraged. These should, however, be subject to independent expert peer review with governance arrangements to oversee approval of the changes. Send a clear signal for climate action A key purpose of emissions budgets and the 2050 target is to drive the policies and actions needed in Aotearoa to transition to a low emissions economy and contribute to limiting climate change. Accounting for these targets should therefore focus on distinguishing the lasting changes in 1 February 2021 Draft Supporting Evidence for Consultation 5
emissions resulting from human actions, rather than capturing variations or changes which cannot be influenced by changing human behaviour now or into the future. Be accurate and reduce uncertainty as far as practicable Accounting approaches should be accurate and reduce uncertainty as far as practicable. This would help emissions budgets fulfil the goal of providing greater predictability. Some accounting methods rely on counterfactual projections (i.e. measuring emissions or removals against a baseline projected into the future). These methods involve significant accuracy and uncertainty challenges and should be avoided where possible. If they must be used, there should be careful consideration of how to minimise risks of over or underestimation to avoid windfall gains or unpredictable fluctuations. Be transparent, practical and acceptable Transparency involves clearly explaining and documenting assumptions and methods, ideally so nonexperts can understand how progress is tracking. Accounting should also be practical, considering compatibility with existing accounting methods and the resources needed for implementation. Acceptability relates to international perceptions and comparability with other countries. Using recognised methodologies and formats, including IPCC guidelines, can help with this. International GHG accounting practices or obligations are not static, however – they evolve over time as knowledge and experience grows. Aotearoa can influence this process and shape the international rules, rather than just being a rule taker. This means we should not shy away from using new accounting methods where there is a strong case for doing so, even if this conflicts with established practices. Be consistent and maintain the integrity of the target Consistency means coherence over time and avoiding inconsistencies such as double counting. Accounting methods and coverage can evolve as techniques and data improve, but the same methods and data sets should be used across a time series, with updates applied across all years. This should be done, however, in a way which does not weaken the effect of the targets. In other words, accounting changes should not be used to avoid the level of effort committed to when the 2050 target or emissions budgets were adopted. This means that if major changes to accounting occur, it may be necessary to review the 2050 target.
3.3 Production- or consumption-based accounting One of the most fundamental choices in GHG accounting is whether to calculate emissions on a production or a consumption basis. The production approach records emissions at the point at which emissions pass from human activity to the environment and can be based on either a territorial or residence approach. It attributes the emissions to the original source (which may be the producing unit or process) of the emission. For example, a manufacturing plant burning coal in a boiler (a ‘supply side’ approach). Production-based accounting using the territorial approach is the standard method used by 1 February 2021 Draft Supporting Evidence for Consultation 6
countries for setting and tracking emissions reduction targets. It is the approach used for compiling the national GHG Inventory in Aotearoa. The consumption approach accounts for emissions ‘embedded’ in goods or services which result from the entire supply chain required to produce that good or service. This includes consideration of emissions embodied in imports and exports and attributes the emissions to the end consumer of the product or activity (a ‘demand-side’ approach). It can provide different insights about a country’s impact on global emissions than the production approach, for example about whether efforts to reduce emissions domestically are leading to imports of goods with high embodied emissions (also known as emissions leakage). For example, in the case of vehicle transport, the consumption approach would record all the emissions produced from making the materials (e.g. metals) and from the assembly of a car as well as the emissions from fossil fuel combustion produced when the car is driven. Under the consumption approach, Aotearoa would not be responsible for the emissions embodied in the goods it exports but would be responsible for those embodied in imports.
3.3.1 Options There are currently two types of national production-based emissions estimates produced by the Government and, in 2020, consumption-based emissions estimates were produced by Stats NZ for the first time.2 A brief description of each option is provided below. 1.
The National Greenhouse Gas Inventory (the GHG Inventory) is compiled by the Ministry for the Environment (MfE) using IPCC guidelines for the purposes of UNFCCC reporting. It uses the production approach and the ‘territory’ accounting principle, which means it includes emissions taking place within the geographic area over which a country has jurisdiction. Hence the territory principle allocates the emissions to the territory where the activity takes place.
2.
Greenhouse gases by industry and households (the emissions account (production)) is a set of production-based emissions statistics produced by Stats NZ. It is compiled under the United Nations System of Environmental-Economic Accounting (SEEA) framework, which uses the ‘residency’ principle. This aligns the calculation of emissions with economic production by attributing emissions to the resident economic unit, including activity by that unit which takes place overseas, at the point of emissions. Emissions from non-residents operating on domestic territory (e.g. tourists’ use of private vehicles) are excluded. In Aotearoa, this emissions account is underpinned by estimates from the GHG Inventory, with the GHG Inventory’s industry data allocated and converted to specific classes of industry that align with economic statistics such as gross domestic product (GDP).
3.
2
Consumption-based emissions (the emissions account (consumption)) are prepared by Stats NZ as an extension of the SEEA framework. They build on the estimates calculated for the emissions account (production) and therefore also use the residency principle. These
(Stats NZ, 2020c)
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estimates are currently classed as provisional, due to the assumptions required at this point in its development and the absence of internationally agreed standards and methods. The main choice to consider for emissions budgets is between the GHG Inventory and the consumption-based emissions account. We have, however, included the production-based emissions account (GHGs by industry and households) in the analysis for completeness and because it helps to show how the consumption estimates are derived from the GHG Inventory. Table 3.1 compares key features of these three types of emissions estimates, and Box 1 gives a summary of the consumption emissions estimates for Aotearoa for 2017. Table 3.1: Features of each approach to calculating emissions3 Production-based approaches
3
Consumption-based approaches
GHG Inventory
Emissions accounts (production)
Emissions accounts (consumption)
Purpose
Provides official estimates used in international targets and reporting
Enhancing comparability of emissions data to economic statistics (e.g. relating emissions to measures such as GDP can illustrate emissions intensity and decoupling). International comparisons.
Accounting for final use, and role of trade in emissions. Carbon footprinting.
Accounting principle
Territory
Residency
Residency
Classification Source/sink categories
Industries and households
Final use categories
Recording of flows
Gross and net
Gross
Gross
Framework
Standalone (UNFCCC and IPCC)
Part of broader suite of environmental-economic accounts that aligns to the System of National Accounts
Extension to environmental-economic accounts
Adapted from (Stats NZ, 2020b).
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Box 3.1: Consumption-based GHG emissions estimates prepared by Stats NZ In 2020, Stats NZ released consumption-based emissions estimates for the period 2007-2017. These show that Aotearoa is a net exporter of embodied emissions, as its total consumptionbased emissions were less than its production-based emissions over the period. Tables 3.2 and 3.3 below provide a gas-by-gas breakdown comparing the emissions accounts (consumption) to the production emissions estimated in both the GHG Inventory and the emissions accounts (production) for the 2017 year. The consumption emissions estimates are more readily comparable to the emissions account (production) than to the GHG Inventory, due to scope differences. Residency adjustments result in about 2 Mt of additional carbon dioxide emissions recorded in the SEEA production and consumption accounts as compared to the GHG Inventory. The other differences in the figures show that export emissions were mainly from agricultural products, which have a high proportion of embodied methane and nitrous oxide. Imports to Aotearoa were mostly manufactured goods, which explains the higher amounts of carbon dioxide and non-biogenic methane in the emissions account (consumption) as compared to the emissions account (production). Several simplifying assumptions were used in the calculation of the consumption-based emissions estimates. For example, a significant assumption is that imports have the same emissions content as outputs of the same industry in Aotearoa. Table 3.2: Biogenic methane emissions in Aotearoa in 2017, Mt of methane
Biogenic methane
Emissions accounts (consumption) 4
Emissions accounts (production)
GHG Inventory
0.54 Mt CH4
1.33 Mt CH4
1.33 Mt CH4
Table 3.3: Gross emissions of long-lived gases in Aotearoa in 2017, Mt of CO2e Emissions accounts (consumption) 5
Emissions accounts (production)
GHG Inventory
Carbon dioxide
40.49 Mt CO2e
38.50 Mt CO2e
36.15 Mt CO2e
Nitrous oxide
2.67 Mt CO2e
7.52 Mt CO2e
7.50 Mt CO2e
Non-biogenic methane
1.77 Mt CO2e
1.00 Mt CO2e
1.00 Mt CO2e
Fluorinated gases
1.49 Mt CO2e
1.73 Mt CO2e
1.73 Mt CO2e
46.42 Mt CO2e
48.75 Mt CO2e
46.38 Mt CO2e
Total
This first release of consumption-based emissions is provisional. Revisions to the time series are expected as the methodologies are improved over time.
4
This is sourced from customised data prepared by Stats NZ, which are licensed by Stats NZ for re-use under the Creative Commons Attribution 4.0 International licence (Stats NZ, 2020a). 5 Ibid.
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3.3.2 Analysis Table 3.4 summarises our assessment of how well the options meet the proposed accounting principles.
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Table 3.4: Production and consumption emissions options assessed in detail against the Commission’s principles for emissions budget accounting Principles Coverage of material sources and sinks
GHG Inventory, MfE (Production-based) ✓✓ Covers emissions sources and sinks on our country’s territory Includes both gross and net emissions (i.e. includes emissions and removals from land) Includes emissions embodied in exports, excludes emissions embodied in imports
Signal for climate action
Accurate and reduces uncertainty
Transparent, practical and acceptable
Emissions accounts (consumption), Stats NZ
Covers emissions produced due to activities by residents, located both on our territory and overseas, excludes nonresidents Gross emissions only, excludes land emissions Includes emissions embodied in exports, excludes emissions embodied in imports ✓
Includes emissions generated across the supply chain of products consumed by residents of Aotearoa Gross emissions only, excludes land emissions Excludes emissions embodied in exports, includes emissions embodied in imports
Based on IPCC guidance, with a governance system aimed at maintaining confidence in the methods and data used. Subject to international peer review
Underpinned by national GHG Inventory data.
Underpinned by national GHG Inventory data.
✓
✓
✓
Leads to a greater focus on reducing emissions through the source process for the emissions or removals.
Leads to a greater focus on the economic units (businesses and households) producing the emissions and on geographic regions when regionalised.
Leads to a focus on reducing emission through consumption choices and can provide insight into potential emissions leakage.
✓✓ Uncertainties are quantified but vary sector by sector.
✓
Subject to the same uncertainties as in the Inventory, plus additional uncertainties from the assumptions made to convert industry data to specific classes of industry
Accuracy significantly reduced due to method used to calculate emissions embodied in imports.
✓ Uses internationally recognised UN System of EnvironmentalEconomic Accounting (SEEA) framework
✓ Robust science and evidence
Emissions accounts (production), Stats NZ
Low uncertainty in the trend of emissions estimates. ✓✓ Uses internationally recognised IPCC / UNFCCC framework. Allows comparison with targets and reporting under international climate change agreements, both of other countries and with our previous targets
Not comparable with other countries’ targets, but emissions reporting could be compared with other SEEA emissions accounts.
✓
No internationally recognised standard approach, although some guidance and tools exist. First estimates released in 2020, considered provisional. Not easily comparable with other countries’ emissions estimates or targets.
Allows direct comparisons between environmental and economic information. Consistent and keeps integrity of target
✓✓ Consistent over time.
✓
Consistent over time.
Consistent over time.
Consistent with analysis undertaken to inform setting of 2050 target.
Somewhat inconsistent with analysis used to inform setting of 2050 target.
Significantly inconsistent with analysis used to inform setting of 2050 target – likely to require revision to the target to ensure the same level of effort is maintained.
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Key: ✓✓ Meets the principle well
✓ Meets the principle adequately, and/or may do so well only in one important dimension
Does not adequately meet the principle
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3.4 Accounting for land emissions In this document, the term ‘land emissions’ is used to refer to emissions and removals6 from land sources such as forests, cropland and grassland (including vegetation), soils and wetlands.7 It does not include any direct agricultural emissions such as those from livestock or fertiliser. Land emissions, particularly emissions and removals by forests, require attention because their special characteristics mean that they are sensitive to the accounting approach applied to them. They also play a large role in the emissions profile of Aotearoa. In the 2018 GHG Inventory, net removals by forests were equal to around one third of our gross GHG emissions (measured in CO2e) and two thirds of gross carbon dioxide emissions.8 Two steps are needed for developing advice on how to account for land emissions in emissions budgets and the 2050 target 1) A choice needs to be made between the two broad frameworks for land emissions accounting used by the Government: the GHG Inventory approach or the NDC target accounting approach. 2) Dependent on the outcome of step 1, there are several secondary choices required about the detailed methods of accounting for specific land categories or activities. Before outlining and analysing the options for land emissions accounting, it is useful to be aware of the special characteristics of the sector.
3.4.1 Background The land sector has attributes which make it different from other emitting sectors, for example: •
it is currently the only sector which removes carbon dioxide from the atmosphere
•
the difficulty of distinguishing between human caused and natural effects on emissions and removals
•
higher measurement uncertainties
•
the potential non-permanence of carbon dioxide removals and
•
variability in the timing of emissions and removals.
6
‘Emissions removals’ refers to the removal of carbon dioxide from the atmosphere. ‘Removals’ is often used as shorthand, and ‘forestry removals’ is sometimes used to refer specifically to forests sequestering carbon. 7 In the national GHG Inventory, this sector is referred to as land use, land use change and forestry (LULUCF). The IPCC generally refers to it as forestry and other land uses (FOLU). We use ‘land emissions’ as an umbrella term to encompass these emissions and removals. 8 For accounting purposes, a forest is defined as a minimum area of 1 hectare with a width of at least 30m, tree crown cover of at least 30%, and a minimum height of 5 metres at maturity in situ. In our country’s GHG Inventory, smaller areas of trees that might be considered a forest in everyday terms but do not meet the forest definition are largely accounted for as vegetation or woody biomass on grasslands or croplands.
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These characteristics pose challenges for monitoring progress towards emissions budgets and the 2050 target, with key issues discussed in more detail below. Accounting methods for land emissions can help to manage these issues to some extent. Emissions and removals by forests are subject to both natural and human caused cycles, which creates challenges for monitoring progress towards meeting emission reduction targets. An area of planted forest will remove carbon dioxide while the trees are growing, then release some of the carbon dioxide following harvest. It will begin to remove carbon dioxide again if re-planted. If a forest is not harvested, the rate of removals would diminish as it reaches full maturity. In Aotearoa, the rapid growth, short rotations and clear-fell management regime of exotic planted forests mean these cycles are pronounced. The uneven age profile of the planted forest estate means that the total emissions and removals can vary through time as the rate of harvest changes. Depending on how emissions and removals are accounted for, this could cause a net-emissions target to be met one year but then missed later due to a cyclical flux. Forest emissions are also much more uncertain than those from fossil fuel combustion. These uncertainties arise from: •
measuring both carbon stock gains and losses, each with an associated uncertainty that increases when determining net changes (the difference between gains and losses)
•
measurement uncertainty in the area of forests
•
the science of calculating carbon sequestration in forests
•
the difficulty of distinguishing the impact of additional human activity which aims to boost sequestration
•
estimating the time span over which carbon is released back into the atmosphere from harvested wood
•
estimating factors related to the management of planted forests, such as harvest area, harvest age profile and the forest age profile and
•
inconsistency between official forestry statistics from different sources.
These relatively higher uncertainties mean caution is required when equating an estimated unit of carbon dioxide removed by forests with one emitted through fossil fuel combustion, both now and in the future. This is exacerbated by other, difficult-to-accurately-account-for effects of forests on warming through, for example, monoterpenes9 and albedo10. Furthermore, carbon stored in standing forests is not guaranteed to be permanent. Events such as fires, storms and pest infestations (such as pine beetle) are just some of the ways that carbon stored in forests can be released into the atmosphere. Many of these are also likely to be exacerbated by climate change.
9
Monoterpenes are groups of compounds released by forests that interact with greenhouse gases such as methane in a complex manner. 10 Albedo refers to the phenomenon of lighter coloured surfaces reflecting more incoming solar radiation back into space.
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3.4.2 Choice of accounting framework At the high level, a choice needs to be made between the two broad frameworks for land emissions accounting used in Aotearoa. Both approaches have merits and will be used for their respective existing purposes regardless of what we advise for accounting for emissions budgets and the 2050 target.
Options Option 1: A land-based approach using ‘stock change’ accounting, as used in the GHG Inventory As part of its obligations under the UNFCCC, Aotearoa annually reports its GHG emissions through the GHG Inventory. This uses a ‘land-based’ accounting approach that attempts to cover all emissions and removals from all land use categories, including soil, trees, plants, biomass and wood products. It aims for completeness – reporting on all emissions and removals from each land type without any exclusions or limitations as to what causes them. The GHG Inventory reports land emissions using a ‘stock change’ approach that estimates emissions and removals as they happen, including the effects of historical activities such as the regrowth of previously harvested natural forests and the cyclical peaks and troughs caused by the growth and harvest of exotic production forests. By attempting to include all emissions and removals in the year which they occur, this approach in theory gives the truest representation of ‘what the atmosphere sees’. Option 2: A modified activity-based approach with ‘averaging’, as used in our first NDC Aotearoa has communicated the high-level approach it will take to accounting for its first Nationally Determined Contribution (NDC) in a submission to the UNFCCC.11 It will follow a modified version of the ‘activity-based’ approach for land emissions introduced under the Kyoto Protocol. This focuses on the impact of additional, human caused activities conducted after the 1990 base year with grossnet accounting (see Box 3.3). While not all the NDC accounting details have been finalised, the broad structure has been set. Table 3.5 summarises what is currently known about the NDC accounting methods in relation to the land categories used in the Kyoto Protocol approach. Further details about the elements that are not yet confirmed are provided in later sections of this chapter. Table 3.5: Summary of NDC land emissions accounting Kyoto Protocol activity-based land categories
Confirmed as included in NDC accounting?
Afforestation
Yes
Reforestation
Yes
11
Detailed accounting rules not yet determined Approach to accounting for harvested wood products (HWP) Details of the natural disturbance provision
(Ministry for the Environment, 2020c)
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Kyoto Protocol activity-based land categories
Confirmed as included in NDC accounting?
Detailed accounting rules not yet determined Detailed treatment of post-1989 forests that have reached their long-term average carbon stock.
Deforestation
Yes
N/A
Forest Management
Yes
Reference level has not yet been developed
Cropland Management
Not confirmed
N/A
Grazing Land Management
Not confirmed
Revegetation
Not confirmed
Wetland Drainage and Rewetting
Not confirmed
The NDC accounting will continue with land areas and uses accounted for towards our 2020 target12 through the ‘afforestation’, ‘reforestation’, ‘deforestation’ and ‘forest management’ activities. These activities focus attention on actions occurring on subsets of land types used in UNFCCC reporting, as described below:13 •
Afforestation and reforestation include the emissions and removals of forests (re)established after 31 December 1989 (post-1989 forests).
•
Deforestation involves harvesting or otherwise removing forest and converting it to a different land use. These emissions are counted for both pre-1990 and post-1989 forests.
•
Forest management refers to practices affecting the use and stewardship of existing forests. It is accounted for by estimating the emissions and removals in pre-1990 forests which occur above or below business-as-usual as captured in a forest ‘reference level’.
Box 3.2: Pre-1990 and Post-1989 forests Our activity-based target accounting has given rise to two broad classifications for forests: •
Post-1989 forests are those established after 31 December 1989.
•
Pre-1990 forests are those established before 1 January 1990.
12
Our 2020 target was adopted under the UNFCCC, but uses Kyoto Protocol accounting rules and corresponds to the second commitment period of the Kyoto Protocol (2013-2020). 13 For the full, formal definitions of all Kyoto Protocol land activities see Appendix 1 of this chapter.
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This is due to the 1990 base year that Aotearoa agreed to in the Kyoto Protocol. This deems activities occurring from 1990 onwards as ‘additional’ rather than business-as-usual. Aotearoa has a large area of pre-1990 forests – approximately 1.2M hectares (ha) which is planted forest (predominantly exotic species, with 90% being radiata pine) and 7.7M ha which is natural forest (mostly tall native forests and areas of regenerating native trees). While pre-1990 forests have continued to sequester carbon after 1990 and into the present, these business-as-usual removals are not considered additional because the original forest establishment activity took place before 1990. These carbon dioxide removals are not counted towards targets when an activity-based accounting approach is used.
A key feature of the NDC accounting that distinguishes it from our previous Kyoto Protocol approach is that it will use ‘averaging’ to account for emissions and removals from afforestation and reforestation. Averaging means that removals from post-1989 forests will only be accounted for up until the forests reach their long-term average carbon stock, taking into account all carbon pools and activities.14 Emissions and removals from further growth, harvesting and replanting will not be accounted for in the same way,15 although deforestation emissions will still be accounted for in full using stock change accounting. Averaging thereby focuses on the long-term effect of a forest on carbon stocks. This contrasts with the stock-change approach used in our national Inventory reporting and accounting for previous emission reduction targets, which results in significant fluctuations in net emissions due to harvest cycles. Averaging smooths the long-term net emissions trajectory of exotic production forests by factoring out the ‘saw-tooth’ peaks and troughs associated with these forests. Once a post-1989 forest has reached its long-term average it is expected to be transferred to a forest management category, where future additional emissions or removals will be accounting against a reference level. The details of this are yet to be finalised. Figure 3.1 shows this difference in the context of emissions removals for an individual production forest.16 Figure 3.2 shows the implications for this on national projected baseline emissions and removals from forests.
14
This is predicted to occur around 21-22 years after planting for a production pine forest on a 28-year rotation. The first NDC states that once a forest has passed its long-term average carbon stock, it will move to the forest management category where it will be accounted for under a business-as-usual reference level, just like pre-1990 forests. (Government of New Zealand, 2020) 16 Numbers for display purposes only. 15
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Figure 3.1: Forestry removals accounting under stock change and averaging for a production forest (excluding harvested wood products). Numbers for purposes of showing pattern only.
2050 10.0
Mt CO2
-10.0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059 2062 2065 2068 2071 2074 2077 2080
0.0
-20.0 -30.0 -40.0 -50.0 -60.0
GHG Inventory accounting
NDC accounting
Figure 3.2: Comparison of national net forest emissions using GHG Inventory (stock change) and NDC accounting (averaging from 2021 onwards17) approaches 18
17
Emissions reduction targets for the 2008-2012 and 2013-2020 periods in Aotearoa (corresponding to the first and second commitment periods of the Kyoto Protocol) used the stock change approach for post-1989 forests. 18 $35 emissions price in real terms from 2021 (Ministry for the Environment, Unpublished).
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Averaging may not smooth out all fluctuations in land emissions, however. The age class structure of our production forests, largely a result of the planting boom in the 1990s, means that average harvest age would likely fluctuate in the decades to come as forest owners try to manage the wood supply. Some forests within a forest age class may be harvested later than they normally would to avoid an uneconomic supply glut. Fluctuations in harvesting age will mean the long-term average carbon stock used to calculate emissions and removals under averaging will also fluctuate. Fluctuations in the long-term average carbon stock may lead to further emissions or removals being retrospectively attributed to post-1989 forests that have passed the average. The size of this effect is difficult to predict but it would increase as the area of post-1989 forests that reach their average age increases. It is possible that how this is dealt with could cause significant uncertainty about our overall trajectory towards the 2050 target. As mentioned, the details of how post-1989 forests that have reached the long-term average will be accounted for are not fully confirmed. This is an issue that may require further attention in the future if an accounting approach using averaging is used for emissions budgets and 2050 target accounting. Box 3.3: Gross-net and net-net accounting for emission reduction targets ‘Gross-net accounting’ has been a feature of this country’s target accounting so far. This is where the target is expressed relative to gross emissions in a base year, but emissions and removals by forests planted or deforested since the base year are counted towards meeting the target. Gross-net accounting arises from Kyoto Protocol accounting rules. These require that a gross-net approach be taken if a country’s land emissions were a net sink in the target base year (1990, in our case). The gross-net approach is sometimes interpreted as lacking integrity and allowing Aotearoa to count emissions in an inconsistent way, not taking into account total net emissions at the starting point. It has been suggested that it would be more robust to use net-net accounting, where net emissions in each year of a target period are compared to net emissions in the base year. Net-net accounting can be problematic for countries like Aotearoa whose net emissions are strongly influenced by a large area of production forests. Our forests have an uneven age class due to high planting rates over certain historic periods, causing large fluctuations in forest emissions over time (as illustrated in Figure 3.2 above). This means that changes in net emissions between any two years can give a distorted view of the underlying long-term changes in forestry emissions. For example, if a country were at a harvesting peak or trough in the base year, net-net accounting would give an unjustified gain or loss. Gross-net accounting therefore avoids the counting of gains or losses that are largely arbitrary effects due to the base year chosen. It also helps to track progress in relation to factors that can reasonably be influenced by human interventions now to reduce emissions or safeguard forest sinks, rather than the legacy effects of past decisions. If viewed over the long-term, production forests deliver no additional carbon sequestration benefits after the first rotation, as the carbon sequestered as they grow is emitted after they are harvested. Factoring out the emissions and removals from pre-1990 forests for accounting purposes therefore presents a more accurate picture of our efforts to reduce net emissions so 1 February 2021 Draft Supporting Evidence for Consultation 19
long as the land remains used for forestry on an ongoing basis. Accounting for all deforestation emissions ensures emissions for these forests are accounted for if the land ever changes away from forestry. Aotearoa’s NDC will use averaging to account for emissions and removals by post-1989 forests from 2021. This makes the distinction between gross-net or net-net accounting less of an issue. Averaging factors out fluctuations in net emission by forests to an even greater extent than the Kyoto Protocol accounting used for previous targets. With averaging, the progress tracked is driven primarily by the areas of new forest planted and the amount of deforestation. If this accounting method were extended over Aotearoa’s forest emissions and removals back through time, gross and net emissions at the start of 1990 would be the same.
3.4.3 Analysis Table 3.6 overleaf summarises the analysis against the Commission’s principles.
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Table 3.6: Assessment of the two land emissions accounting frameworks against the Commission’s principles for emissions budget accounting Principles
Land-based (GHG Inventory, using stock change accounting for post-1989 forests)
✓✓ Covers all human caused sources and sinks. Coverage of material Also includes non-human caused sources and sinks such as standing stocks of tall natural sources and sinks forest.
Modified activity-based (NDC accounting with averaging accounting for post-1989 forests) ✓ Selecting ‘activities’ or a limited set of land areas often involves the exclusion of some human caused sources and sinks, but these are usually those that are difficult to measure or small in magnitude. Can be extended to include more activities or land areas over time.
Robust science and evidence
Signal for climate action
✓✓
✓✓
Based on detailed IPCC guidance and subject to international peer-review through UNFCCC processes.
Based on IPCC guidance.
Extensive expertise already exists in Aotearoa for compiling and reporting data.
Extensive expertise already exists in NZ for compiling and reporting data for the most significant activities.
✓
Inclusion of all sources and sinks without a base year creates noise by mixing the legacy effects of historic activities with the additional impact of new actions.
Accounting for activities after the 1990 base year reduces much of the noise from harvest and replant cycles of forests planted before the base year. Although the 1990 base year is arbitrary, it is now widely embedded and brings focus to the additional impact of new actions and the need for behaviour change now.
Stock change approach introduces large emissions fluctuations due to plantation forest harvest cycles that obscure progress towards targets and reduce incentives for sustained action.
Averaging partially reduces the remaining fluctuations caused by harvest cycles and is being implemented into the NZ ETS where it is considered to give a better incentive to landowners or managers making decisions about planting new forests. Changes in the harvest age may create emissions fluctuations in a growing area of post-1989 forests that have surpassed the long-term average. This could interfere with policy and price signals to reduce emissions.
✓ Accurate and reduces While accurate methods are used to account for what is included, some of the sources and uncertainty sinks have particularly high uncertainties that increase the overall uncertainty of land emissions estimates. ✓✓ Transparent, practical and acceptable
✓✓ Focusing on the most significant activities and their long-term effects on emissions reduces the need for uncertain data inputs such as harvest age profile. Some of the more uncertain sources and sinks are generally excluded.
✓✓
Practical as already in use by government and is widely accepted as an international common Practical as already in use by government and is widely accepted as an international common practice through UNFCCC reporting. practice through the Kyoto Protocol. Significant detail on the process exists for purposes of transparency, although it is technical and not readily understood by the public.
Significant detail on the process exists for purposes of transparency, although it is technical and not readily understood by the public.
Consistent and keeps The inclusion of significant net emissions removals over and above what was considered in integrity of target the analysis underpinning the 2050 target would reduce the level of effort required.
✓✓ This was the basis for the analysis underpinning the 2050 target analysis so a comparable level of effort would be maintained.
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3.4.4 Detailed choices about land emissions accounting If the NDC accounting framework is selected for emissions budgets and the 2050 target, there are several secondary decisions which must be made about exactly what should be included. Aligning emissions budget accounting with NDC accounting would reduce complexity and administrative burden. However, the NDC accounting is not yet fully defined and may not be confirmed until late 2024.19 This limits what we can consider for this first package of advice. It is not feasible to use some elements of the NDC in accounting for emissions budgets, as accounting methods for Aotearoa do not exist yet, or there is not enough information available on how they work. See Table 3.5 for a summary of what is currently known about the accounting for the country’s first NDC. The accounting approaches selected now will be fixed for the first emissions budget, but there will be an opportunity to revisit these choices in 2024 for the second and third emissions budgets.
Forest management Forest management is the part of the NDC accounting system where the impact on carbon stocks of management practices affecting pre-1990 forests is counted. It can, theoretically, be used to recognise the effect of human interventions, such as pest control, that increase carbon stocks in pre1990 forests. But in practice this is difficult to implement given the measurement and monitoring systems that are used to estimate national-scale land emissions. Forest management is accounted for by estimating additional emissions and removals in pre-1990 forests which occur above or below business-as-usual due to changes in forest management. It relies on projecting into the future what would have happened to emissions with no change in management, then assessing actual emissions against this modelled baseline emissions trajectory. The counter-factual emissions projection is called a reference level. It inherently poses accuracy and uncertainty challenges with risks of both over and under-estimation. Developing a forest management reference level is complex. Accurately projecting harvesting rates is particularly challenging. This is largely due to the skewed age profile of the country’s forests driving variable harvest rates, as well as the inconsistency of different forestry statistics. This creates the risk of generating significant credits or debits that are not the result of genuine management practice changes affecting long term emissions trajectories. It could also potentially be used to strategically generate removal credits that do not reflect genuine additional removals. The challenges in robustly accounting for forest management can be illustrated by experience with it in our current 2020 emissions reduction target (covering the 2013-2020 period). The latest GHG Inventory shows that from 2013-2018, forest management removals beyond the ‘business-as-usual’ reference level already amount to 43.9Mt CO2e. This appears to have been caused by lower harvesting rates of pre-1990 planted forest than what was projected when the reference level was set.
19
This is when Aotearoa is due to submit its first Biennial Transparency Report under the Paris Agreement.
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The impact of this issue with respect to meeting the 2020 target has been limited, because due to Kyoto Protocol rules, the maximum amount of forest management removals Aotearoa can count towards its 2020 target is 18.4 Mt CO2e (2.3 Mt CO2e per year) above the reference level.20 However, no such limit is likely to apply to forest management for the first NDC. This uncertainty in forest management emissions estimates relates mainly to pre-1990 exotic planted forests. The 7.7 Mha of mostly native pre-1990 natural forests are are generally not harvested. The challenge with these forests is that the effects of human interventions on carbon stocks cannot be accurately attributed with current monitoring techniques. Many of the effects, such as those from pest control, would take place on a decadal to centennial timescale. Distinguishing the size of the potential effect from natural variation in the existing carbon sink is difficult.21 Detailed research could help overcome these barriers, but with present methods thousands of forest monitoring plots would be required (at significant cost) to provide accurate enough information for accounting purposes. This means that, in effect, no change in carbon stocks from changed management of pre-1990 native forests is recorded in forest management.
Harvested wood products (HWPs) When a forest is harvested, much of the carbon remains stored in the form of different wood products instead of being immediately released into the atmosphere. While almost all of the carbon returns to the atmosphere eventually, the time span over which this occurs varies with the longevity of the product. Including HWPs in emissions accounting helps capture this effect and recognises the benefit of using timber in the built environment. The NDC accounting will include HWPs but the exact details have not been confirmed. We understand, however, that: •
HWPs from pre-1990 forests are likely to be accounted for through their incorporation into the forest management reference level, as was done for the country’s 2020 target
•
HWPs from post-1989 forests are likely to be factored in through the calculation of the longterm average carbon stock used in averaging, rather than as a separate category of carbon removals as was done for the 2020 target.
Including HWPs in accounting for emissions budgets and the 2050 target would be consistent with the principle of seeking to cover material sources and sinks, although HWP emissions estimates come with significant uncertainties. Accounting for HWPs through incorporation in the long-term average also has the effect of accounting for their impact on emissions removals in advance of when they actually occur. It takes approximately five rotations for the long-term average carbon stock in HWPs to reach equilibrium.
20
Kyoto Protocol rules restricted the maximum amount of forest management removals that could be accounted during a commitment period to 3.5% of the base year gross emissions. 21 (Carswell et al., 2015)
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Carbon equivalent forests The carbon equivalent forest provision allows pre-1990 planted forests that meet specified conditions to be harvested and converted to another land use without being classified as deforestation. The provision requires that a new forest that will reach an equivalent carbon stock be established elsewhere. It provides flexibility to avoid locking-in sub-optimal land use while preventing a decrease in the overall area of forest land. We have not identified any material integrity risks with this provision.
Natural disturbances This country’s NDC accounting will include a ‘natural disturbances’ provision to help manage the risks of extreme natural events which could radically affect land emissions and removals. Under this provision, a baseline level of emissions from selected natural disturbances, which have to date been wildfires, pests and diseases, extreme weather events (e.g. storms) and geological disturbances (e.g. volcanoes), is estimated. If such a natural disturbance occurs that has a major impact on emissions, the provision can be activated. This would allow Aotearoa to choose to not account for the emissions above the baseline caused by one of these natural disturbances over a certain area. If this provision is used, Aotearoa would not be able to account for further removals for the land area affected during the remaining accounting period. The provision therefore balances the risk of force majeure events preventing achievement of emissions budgets, without giving a ‘free pass’ that allows Aotearoa to avoid the downsides or risks of using removals by forests to meet budgets and targets. This is a continuation of a provision used in our previous international targets. The provision has not been invoked in any of the accounting for these targets to date. The detailed rules for how this provision will work for NDC accounting have not yet been defined. It is expected to be based on the 2013 IPCC Kyoto Protocol Supplement guidance,22 which outlines criteria for how such natural disturbances provisions can operate and be used. If the natural disturbances provision were included in emissions budgets accounting and an event occurred that might warrant its use, a decision-making process would be needed to assess whether and how it could be invoked. This limits the risk around including this in budget accounting before the rules are known. The Commission could affect whether it is invoked through its role in monitoring progress towards emissions budgets and the 2050 target
3.4.5 Other sources of land emissions and removals The most significant sources of land emissions and removals not yet part of NDC accounting are emissions from organic soils (mostly drained wetlands) and removals from vegetation biomass (mostly improved pasture and small lots of trees) on grasslands. In line with the Commission’s principle that accounting should aim to cover all material human caused emissions sources and sinks, these are areas the Government could investigate for target accounting in future.
22
(IPCC, 2014)
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Figure 3.3: Net emissions from grassland and cropland that are not included in target accounting Source: Ministry for the Environment analysis
3.6 Voluntary offsetting and carbon neutrality ‘Voluntary offsetting’ refers to the practice by entities (often companies but also individuals) purchasing and cancelling emissions units voluntarily, in addition to any legal obligation to purchase and surrender units imposed by government policy. The intent is to compensate for the emissions footprint associated with their activities and make a ‘carbon neutral’ or ‘net zero’ claim. Such claims may be made in respect of an organisation, a product or a service (such as air travel). There are several characteristics that have been, to date, widely recognised in the voluntary carbon market as being important for enabling a credible carbon neutral claim. Common requirements include that a unit used for offsetting must be associated with GHG reductions or removals which are: •
real, measurable and verified 1 February 2021 Draft Supporting Evidence for Consultation 26
•
permanent
•
additional (i.e. the reduction or removal is not something that would have occurred anyway under business-as-usual, including due to policies already in place)
•
not double counted or claimed
•
not a cause of emissions increasing elsewhere or of other environmental or social harms.
For the purposes of advice on accounting, there are two key issues: additionality and double claiming. In the Aotearoa context, these two issues are linked. Additionality refers to the idea that voluntary offsetting should deliver extra emissions reductions or removals on top of what would occur anyway due to business-as-usual activities, including due to government policies like the NZ ETS. Double claiming is a type of double counting23 where more than one entity counts an emission reduction against emission reduction goals. It leads to a misleading picture of progress in reducing emissions. For example, if two companies laid claim to the same 100 tonnes of reductions, together a total of 200 tonnes would be claimed, but the actual reduction would only be 100 tonnes. The claims are not a true representation of what has really happened. As concern about climate change has grown, people and firms in Aotearoa have become increasingly interested in voluntary offsetting. A range of units, including units sourced from voluntary market projects undertaken overseas, can be obtained for this purpose. Some people and businesses want to use units from Aotearoa out of a desire to support local environmental protection efforts and communities. This leads them to look to cancelling New Zealand Units (NZUs), the main NZ ETS compliance unit, as a way to offset emissions. For cancelling NZUs to deliver additional emissions reductions, the units not only must represent real, permanent and additional removals, but an adjustment must also be made against the accounting for the country’s emission reduction targets, equal to the amount of NZUs cancelled. The need for an adjustment against national targets is due to the NZETS, which is managed in a way that takes account of emissions from the whole economy. If a target accounting adjustment does not happen, increases to the NZ ETS cap would negate any reductions from voluntary offsetting by allowing others to emit more. This results in double claiming and means the requirement for additionality is not fulfilled. Internationally, there is an unresolved debate about whether avoiding double claiming against national targets is necessary when companies or individuals make carbon neutral claims. In Aotearoa, however, the way the NZ ETS currently operates causes additionality to be inherently linked to avoiding double claiming. This differs from the situation in other countries and means that the reasons put forward internationally to justify double claiming are not applicable to Aotearoa.
23
Other types of double counting include double issuance (separate programs issuing units for the same project/emission reduction) and double use (the same unit being used more than once).
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Why preventing double claiming is necessary to underpin carbon neutral claims in Aotearoa is illustrated in Figure 3.4 below.
Figure 3.4: Illustration of the effect of voluntary offsetting on NZ ETS and emissions budget caps Source: Commission analysis Until now, an avenue enabling voluntary offsetting for carbon neutral claims has existed in Aotearoa, but this will no longer be available after 2021.24 This is because Aotearoa is moving to the Paris Agreement approach to accounting for its targets via its Inventory rather than units. The Government is considering what guidance to provide about voluntary offsetting for the future. It has not yet made any decisions about whether to allow adjustments against our first NDC when NZUs are cancelled, or about whether carbon neutral claims can be made when NZUs are cancelled.
3.7 Legislative requirements The Act sets out the framework for the system of emissions budgets to chart the pathway towards the 2050 target. It also specifies details about how aspects of this system must operate, including some parameters for accounting for emissions budgets and the 2050 target. As part of developing advice on accounting for emissions budgets and the 2050 target, in keeping with our independent role, we have also examined these elements of accounting. The key issues are described below.
24
This involves cancelling NZUs generated by the Permanent Forests Sinks Initiative (PFSI) with the cancellation of an Assigned Amount Unit (AAU) in the Crown’s accounts at the same time. AAUs are a type of unit used for national target accounting under the Kyoto Protocol, which the government uses for accounting for the country’s 2020 emission reduction target. Further information can be found in (Ministry for the Environment, 2020a).
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3.7.1 Scope of emissions budgets The way the 2050 target and emissions budget are defined in the Act means that they apply to the emissions from the agriculture, energy, industrial processes and product use, and waste sectors as well as to land emissions and removals, as reported in the GHG Inventory.25 This excludes emissions from international shipping and aviation. These emissions are a significant part of our emissions footprint and there is potential to influence them using domestic policy. Although they are currently not in scope for emissions budgets, they have been included our pathways analysis contained in Chapter 9: What path could we take? of the Evidence Report in anticipation that they may be included in future. This is because the Commission is scheduled to review the inclusion of these emissions in 2024. Emissions budgets also exclude the emissions of Tokelau. While Tokelau’s emissions are included in the GHG Inventory, they are reported separately from the sectors listed above. This is because, as noted in the latest GHG Inventory, “Tokelau requested New Zealand’s inventory team to maintain visibility of the data from Tokelau in the CRF26, so that Tokelau officials could use them for other reporting and policy purposes. Reporting Tokelau as a different inventory sector provides this visibility.”27 Tokelau is developing its own response to climate change. It has made climate change a national development priority and has defined an integrated climate strategy for the period to 2030. The strategy identifies climate-resilient investment pathways relating to emissions reductions, adaptation and human development.28 It is also seeking to develop a climate contribution to include as part of the first NDC issued by Aotearoa. Tokelau’s emissions are very small at 3.62 kt CO2e in 2018, equating to approximately 0.005% of our gross emissions.29
3.7.2 The nature and presentation of emissions budgets The Act specifies that each emissions budget must include all greenhouse gases and be expressed as a net quantity of carbon dioxide equivalent (CO2e). Biogenic methane is therefore included in an overall emissions budget. This is despite the split-gas 2050 target, with 2030 and 2050 sub-targets for biogenic methane emissions separated off from the net zero sub-target for other gases. The Act does require the Commission to provide a breakdown of each greenhouse gas within an emissions budget, showing the reductions of each necessary for meeting the emissions budget. This mixed approach preserves some flexibility in complying with emissions budgets. As an example, if at the end of an emissions budget, the amount of methane emissions were above where it should be according to the gas-by-gas breakdown, this could be made up for by reductions in other gases and the emissions budget could still be met. This flexibility on the pathway to 2050 is limited, as the 2030 biogenic methane sub-target must still be treated as a strict compliance obligation.
25
See section 5Q (Target for 2050) as well as the definitions of ‘gross emissions’, ‘biogenic methane’ and ‘net accounting emissions’ in section 4 (Interpretation) of the (Climate Change Response Act 2002 (as at 01 December 2020), 2020) 26 CRF: Common Reporting Format – the detailed tables of activity and emissions data submitted as part of the GHG Inventory. 27 (Ministry for the Environment, 2020b, p. 397) 28 (Lefale et al., 2017) 29 (Ministry for the Environment, 2020b, p. 8)
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There is a similar issue related to emissions reductions and removals. There is no separate target or emissions budget for reductions in gross long-lived gas emissions, only an overall net zero target and net emissions budgets. The Commission is required, however, to advise on the proportions of an emissions budget that will be met by domestic emissions reductions and domestic removals.
3.7.3 GWP100 values As emissions budgets must be expressed as a carbon dioxide equivalent amount, GHG metrics are needed to convert quantities of each greenhouse gas into the overall amount. The Act requires that the GWP100 metric be used for this calculation, in line with international climate change obligations.30 There is ambiguity, however, about which specific GWP100 values are mandated by international obligations. Parties to the Paris Agreement have agreed to use GWP100 values from the IPCC’s Fifth Assessment Report (AR5) for Inventory reporting from 2021 onwards.31 For some gases, the AR5 lists two GWP100 values, both with and without climate-carbon feedbacks. AR5 provided more than one GWP100 value for these gases to reflect science that was emerging at the time of its preparation (2013) about climate-carbon feedbacks. Climate-carbon feedbacks refer to effects whereby the warming caused by GHG emissions can further impact atmospheric GHG concentrations, in turn causing more warming. AR5 also for the first time provided two GWP100 values for methane – one for biogenic methane and one for fossil methane. The fossil methane value is higher, to reflect that oxidation of fossil methane adds additional carbon dioxide to the atmosphere and so has a greater warming impact. It is not clear from the Parties’ Decision which specific AR5 values should apply. This will only be clarified when the Common Reporting Format tables, standardised data tables used for GHG Inventory submissions, are finalised. This is unlikely to occur before the meeting of parties to the UNFCCC in November 2021. This means we need to make a call about which values to use. This involves making a judgement about which GWP100 values Paris Agreement Parties are most likely to adopt for GHG Inventory reporting purposes, rather than judging which values are most scientifically robust. This is because of the Act’s requirement that the metric used be in accordance with international obligations. Table 3.7 below displays the GWP100 values from the Fourth Assessment Report (AR4) and from AR5, for the most important non-CO2 greenhouse gases, methane and nitrous oxide. It also shows the GWP100 values for HFC-134a, a common refrigerant gas, to illustrate that fluorinated gases would also be affected by updates to the GWP100 values (although they make up only 2% of this country’s overall emissions).
30
See section 5Y(1) and definitions in section 4 (Interpretation) of the (Climate Change Response Act 2002 (as at 01 December 2020), 2020) 31 Decision 18/CMA.1 Modalities, procedures and guidelines for the transparency framework for action and support referred to in Article 13 of the Paris Agreement (UNFCCC, 2019)
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Table 3.7: GWP100 values from the IPCC’s AR4 and AR5, for significant non-CO2 GHGs32 GWP100 values GHG
Methane Fossil methane Nitrous oxide HFC-134a
AR4, currently used in the GHG Inventory, no climate-carbon feedbacks
AR5, no climate-carbon feedbacks
AR5, with climatecarbon feedbacks
25
28
34
-
30
-
298
265
298
1,430
1,300
1550
33
AR5 GWP100 values with or without climate-carbon feedbacks It seems reasonable to expect that Parties to the Paris Agreement will adopt the GWP100 values from AR5 which were based on the more robust science, as per the state of knowledge at that time.34 When AR5 was prepared in 2013, the quantification of the climate-carbon feedbacks for the noncarbon dioxide gases relied on a limited evidence base as understanding of these feedbacks was then at an early stage. The GWP100 values not incorporating climate-carbon feedbacks can therefore be regarded as more robust values from AR5 than those with climate-carbon feedbacks included. AR5 GWP100 values for methane In AR5, for the first time in an IPCC assessment report, a GWP100 value for fossil methane was provided and this could also be used in emissions budgets accounting. However, the amount of fossil methane in this country’s emissions is very small. Furthermore, if the fossil methane value were used in accounting, it would only apply to a sub-set of these emissions. This is because some fossil methane emissions arise from fuel combustion, where the carbon content of the fuel is already accounted for elsewhere. We have calculated that using the fossil methane GWP100 value would only change the total of our non-biogenic methane emissions (i.e. the emissions to which net zero part of the 2050 target applies) by a very small amount - 63 kt CO2e or 0.14% of gross emissions excluding biogenic methane.35
32
Note that AR4 values are currently used for Inventory reporting, but AR5 metrics are mandated from 2021. While the AR5 does not specifically list the GWP100 value for fossil methane with climate-carbon feedbacks, other information provided in the report indicates that the value would be 36 (i.e. inclusion of carbon dioxide from methane oxidation increases GWP100 values for methane by 2). 34 The IPCC’s Sixth Assessment Report (AR6) is in preparation and will also include updated GWP 100 values. We understand AR6 is likely to contain only GWP100 values with climate-carbon feedbacks, based on improved evidence that has become available since AR5 was published. It is likely to be some years, however, before AR6 GWP100 values are adopted for Inventory reporting purposes under the UNFCCC and Paris Agreement. 35 Based on emissions in the GHG Inventory for the 2018 year. 33
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3.8 References Carswell, F., Holdaway, R., Mason, N., Richardson, S., Burrows, L., Allen, R., & Peltzer, D. (2015). Wild Animal Control for Emissions Management (WACEM) research synthesis (Prepared for the Department of Conservation No. DOC4424). Manaaki Whenua Landcare Research. https://www.doc.govt.nz/globalassets/documents/conservation/threats-andimpacts/animal-pests/wild-animal-control-emissions-management.pdf Climate Change Response Act 2002 (as at 01 December 2020), Public Act 2002 No 40, Public Act Contents – New Zealand Legislation, Date of assent 18 November 2002, Commencement see section 2 (2020). http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM158584.html#LMS282029 Government of New Zealand. (2020). New Zealand Submission under the Paris Agreement New Zealand’s Nationally Determined Contribution. https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/New%20Zealand%20First/N ew%20Zealand%20first%20NDC.pdf IPCC. (2014). 2013 revised supplementary methods and good practice guidance arising from the Kyoto Protocol (T. Hiraishi, T. Krug, K. Tanabe, N. Srivastava, BaasansurenJ., M. Fukuda, & T. G. Troxler, Eds.). IPCC. http://www.ipccnggip.iges.or.jp/public/kpsg/pdf/KP_Supplement_Entire_Report.pdf Lefale, P. F., Faiva, P., & Anderson, C. L. (2017). Living with Change (LivC): An Integrated National Strategy for Enhancing the Resilience of Tokelau to Climate Change and Related Hazards, 2017-2030. Government of Tokelau and LeA International Consultants, Ltd. https://www.tokelau.org.nz/site/tokelau/files/ClimateChange/LivCStrategy_web-2.pdf Ministry for the Environment. (Unpublished). 2020 greenhouse gas emissions projections update. Ministry for the Environment. (2020a). Guidance for voluntary carbon offsetting—Updated and extended until 31 December 2021. Ministry for the Environment. https://www.mfe.govt.nz/publications/climate-change/guidance-voluntary-carbonoffsetting-updated-and-extended Ministry for the Environment. (2020b). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealandsgreenhouse-gas-inventory-1990-2018-vol-1.pdf
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Ministry for the Environment. (2020c). New Zealand’s Nationally Determined Contribution. Ministry for the Environment. https://www.mfe.govt.nz/climate-change/why-climate-changematters/global-response/paris-agreement/new-zealand%E2%80%99s-nationally Stats NZ. (2020a). Greenhouse gas emissions—Biogenic and non-biogenic methane. Production, imports, exports, and consumption of greenhouse gas emissions (provisional). This work is based on/includes customised Stats NZ’s data which are licensed by Stats NZ for re-use under the Creative Commons Attribution 4.0 International licence. Stats NZ. (2020b, August 27). Approaches to measuring New Zealand’s greenhouse gas emissions. https://www.stats.govt.nz/methods/approaches-to-measuring-new-zealands-greenhousegas-emissions Stats NZ. (2020c, August 27). Greenhouse gas emissions (consumption-based): Year ended 2017. https://www.stats.govt.nz/information-releases/greenhouse-gas-emissions-consumptionbased-year-ended-2017 UNFCCC. (2006). Report of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its 1st session, held at Montreal from 28 November to 10 December 2005: Addendum (FCCC/KP/CMP/2005/8/Add.3). United Nations. http://digitallibrary.un.org/record/574378/files/FCCC_KP_CMP_2005_8_Add-3-AR.pdf UNFCCC. (2012). Report of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its 7th session, held in Durban from 28 November to 11 December 2011: Addendum (FCCC/KP/CMP/2011/10/Add.1). United Nations. https://digitallibrary.un.org/record/726168/files/FCCC_KP_CMP_2011_10_Add-1-EN.pdf UNFCCC. (2019). Report of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement on the third part of its first session, held in Katowice from 2 to 15 December 2018. Addendum 2 (Advance Version FCCC/PA/CMA/2018/3/Add.2). United Nations. https://unfccc.int/documents/193408
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Appendix 1: Kyoto Protocol activity definitions36 Afforestation is the direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources. Reforestation is the direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land. For the first commitment period, reforestation activities will be limited to reforestation occurring on those lands which did not contain forest on 31 December 1989. Deforestation is the direct human-induced conversion of forested land to non-forested land. Revegetation is a direct human-induced activity to increase carbon stocks on sites through the establishment of vegetation that covers a minimum area of 0.05 hectares and does not meet the definitions of afforestation and reforestation contained here. Forest management is a system of practices for stewardship and use of forest land aimed at fulfilling relevant ecological (including biological diversity), economic and social functions of the forest in a sustainable manner. Cropland management is the system of practices on land on which agricultural crops are grown and on land that is set aside or temporarily not being used for crop production. Grazing land management is the system of practices on land used for livestock production aimed at manipulating the amount and type of vegetation and livestock produced. Wetland drainage and rewetting is a system of practices for draining and rewetting on land with organic soil which covers a minimum area of one hectare. The activity applies to all lands which have been drained since 1990 and to all lands which have been rewetted since 1990 and which are not accounted for under any other activity as defined in this annex, where drainage is the direct humaninduced lowering of the soil water table and rewetting is the direct human-induced partial or total reversal of drainage Table 3.8 shows how these activities map onto the ‘land-based’ categories used in the GHG Inventory. Table 3.8: Activity-based target accounting activities mapped onto GHG Inventory land categories Activities
GHG Inventory land categories
Afforestation Land converted to forest land Reforestation Deforestation
36
Forest land converted to other land uses
‘Wetland drainage and rewetting’ defined in (UNFCCC, 2012, p. 13). All other activities defined in (UNFCCC, 2006, p. 5)
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Forest Management
Forest remaining Forest
Cropland Management
Croplands
Grazing Land Management Grasslands Revegetation Wetland Drainage and Rewetting
Wetlands
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Chapter 4: Reducing emissions opportunities and challenges across sectors Transitioning to a thriving, climate-resilient and low emissions Aotearoa will create a number of opportunities and challenges across all sectors and communities. This means our analysis has considered a wide range of factors, including existing technology and anticipated technological developments, the costs and benefits of adopting new technology and the impacts on households, employment and regions. This chapter explores the technologies and practices that could be deployed and outlines what the options and limitations might be across the heat, industry and power; transport, buildings and urban form; agriculture; and waste sectors.
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Contents Chapter 4: Reducing emissions – opportunities and challenges across sectors .................................. 1 4.1 Introduction ...................................................................................................................................... 3 4.2 What does this chapter cover? ......................................................................................................... 3 4.3 How were emissions reduction opportunities and challenges assessed? ........................................ 4 4.4 How was uncertainty dealt with? ..................................................................................................... 6 4.5 Where did we get information from? ............................................................................................... 7 4.6 What comes next? ............................................................................................................................ 7
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Transitioning to a thriving, climate-resilient and low emissions Aotearoa will create a number of opportunities and challenges across all sectors and communities. This means our analysis has considered a wide range of factors, including existing technology and anticipated technological developments, the costs and benefits of adopting new technology and the impacts on households, employment and regions. This chapter explores the technologies and practices that could be deployed and outlines what the options and limitations might be across the heat, industry and power; transport, buildings and urban form; agriculture; and waste sectors.
4.1 Introduction The transition to a thriving climate-resilient and low emissions Aotearoa would mean adopting new practices and technologies across the country: in transport and buildings, in industry and manufacturing, in the land sector and in the waste sector. New behaviours and thinking are also required to speed up this transition. Globally, technologies and practices to reduce emissions exist for every sector - although these are in differing states of development and deployment. New technologies and opportunities to reduce emissions would also emerge in the coming years. Many of these current and emerging emission reduction opportunities offer multiple co-benefits such as improved health outcomes, new job opportunities and reduced local environmental impacts. However, these opportunities to reduce emissions also have the potential to have negative impacts, which must be considered. They may be too expensive for people to afford, or may consistently fall on some groups in society, including iwi/Māori and Pacific Peoples, meaning the transition is not an equitable one. There are also uncertainties around the emissions reduction potential, reliability and costs of a number of emerging technologies, making it hard to determine which technologies present the greatest opportunities and the fewest challenges. This means any emissions reduction practice or technology needs to be carefully assessed before it is included in emissions reduction plans and budgets.
4.2 What does this chapter cover? When analysing the potential emissions reductions opportunities, the Climate Change Response Act 2002 (the Act) requires consideration of a wide range of factors. This includes existing technology and anticipated technological developments and the costs and benefits of early adoption of these in Aotearoa. It requires the consideration of a range of impacts, including on households, employment and different regions. The Act also requires the Commission to specifically consider the impacts of emissions reduction on future generations and for iwi and Māori. The Commission’s overarching analytical framework (see Introduction chapter) sets out our approach to weaving these different components together. We specifically consider the impacts of mitigation options and how these may be managed in later chapters. This chapter summarises evidence on the technologies and practices that could be deployed across the different sectors and outlines what the options and limitations might be in Aotearoa. It first sets
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out the factors the Commission is required to consider under the Act and then outlines the framework/approach we used to assess the opportunities. We have grouped our analysis into: a. heat, industry and power b. transport, buildings and urban form c. agriculture d. waste. Chapter 5: Removing carbon from our atmosphere discusses removal of carbon and Chapter 6: Perspectives from Tangata Whenua: Considering impacts of emissions reductions and removals for iwi/Māori discusses Te Ao Māori perspectives and potential impacts of reducing emissions for iwi and Māori in accordance with what we heard through engagement. New behaviours required for the transition to a thriving climate-resilient and low emissions Aotearoa have not been specifically considered in this chapter, although often behaviour change may be required in order for a particular technology to take off. Enablers and policies will often be required to ensure emissions reduction opportunities described below are realised. These are discussed in Chapter 17: The direction of policy for Aotearoa.
4.3 How were emissions reduction opportunities and challenges assessed? For each emissions reduction opportunity, we considered a range of different factors that affect the role it could play in helping to reduce Aotearoa’s emissions. These factors are set out in the figure below. Is it developed and available?
Technical reduction potential?
What does it cost and will that change? Emissions reduction potential
Interaction with other options?
Tikanga, mātauranga Māori, and Māori economic development?
Figure 4.1: Framework for assessing emissions reduction potential
Key features of the framework include: What is the technical reduction potential? – The starting point is knowing how much potential the reduction opportunity actually has. Can it make a significant reduction in emissions if it is used, or would the difference be minor? For example, driving an electric vehicle, taking public transport or
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walking a couple of kilometres to work would produce fewer emissions than driving there in a petrol or diesel vehicle. Is it deployed and available? – Not all opportunities are available in or relevant to Aotearoa. For example, companies in Europe are piloting the use of hydrogen to make steel, however Aotearoa has a unique steelmaking process and international technologies may not apply in their current form. For new and emerging opportunities, they may not yet be developed to the point that they are commercially available and it may be unclear how long that would take. New technologies generally go through a three-stage process from the initial concept and research phase, to development and testing, to deployment into the market (see Box 4.1). What does it cost and would that change? – For opportunities to be taken up, they need to be affordable both at time of purchase and over the life of the investment. Often the cost of an opportunity will decrease over time, as economies of scale kick in and improvements are made to design and manufacturing. There are several examples of the costs of technologies decreasing and often faster than predicted - for example electric vehicle batteries, offshore wind and photovoltaic cells. When considering costs, it is also important to recognise individuals may think about the upfront cost, rather than the lifetime cost of owning or using the asset. EVs are an example of this, where the up-front cost is higher than a comparable petrol or diesel car, but the lifetime running costs and total carbon dioxide emissions are lower. Interaction with other options – Practices and technologies will interact and interconnect once they are deployed in a sector. In many circumstances, options could be substitutes for each other, so not all the emissions reduction opportunities can be added up to give the overall potential for reducing emissions. For example, the emissions reductions from transitioning most of the light vehicle fleet to EVs cannot be realised if more people are using public or active transport instead. One important point to note is that this means estimates of emissions potential presented in this chapter cannot be added up to give an overall estimate for the country. Tikanga, mātauranga Māori and Māori economic development – Practices and technologies that enable emissions reduction opportunities should consider relevant aspects of tikanga and mātauranga Māori (noting there would be variations between iwi and hapū across the motu). Establishing relationships with local iwi and hapū to build an understanding of local tikanga and mātauranga would help minimise intergenerational risks of unintended and undesirable consequences that may be associated with new technologies and practices. Consideration should also be given to the developing Māori economy and how trade-offs associated with changes in technology and practice would be assessed for Māori-collectives that have been historically disadvantaged (noting there is also huge potential for favourable outcomes).
Box 4.1: The stages of technology development Aotearoa has a track record in ingenuity. The development and widespread use of emissions reduction technologies follows three general phases. Concept and research phase: An idea or concept has been identified and the basic principles have been studied. A proof-of concept model is constructed and validated.
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Analysis and development: Multiple component pieces are tested in a laboratory environment and field trials or demonstration projects have taken place in a relevant environment. Market launch and deployment: The technology is demonstrated in a relevant operational environment and is commercially available for development. Depending on factors such as economics or behaviour patterns, policies might be required for the technology to be applied widely and for exports.
4.4 How was uncertainty dealt with? When considering the potential emissions reduction an opportunity might provide, it is important to factor in the uncertainty that could affect its effectiveness in Aotearoa. Uncertainty in costs, future industry trends, uptake and availability of technology and the overall acceptability of the option were considered. These affect the effectiveness of technologies in Aotearoa. There is higher confidence in technologies and practices when: • • • •
there is consistency in estimates of emissions reductions and costs from multiple sources the information is from reliable and credible sources (trusted by others, peer reviewed) the information is directly applicable to the situation (i.e. Aotearoa-specific source or an international source directly relevant to the Aotearoa context) the technology is more developed and there is more tested information about its operation.1
In conducting our analysis, we assessed our level of confidence in the quantitative evidence we gathered using a high/medium/low scale (see Table 4.1). These assessments informed the conclusions we reached about each technology or practice, given uncertainties about potential emissions reductions timeframes, likelihood of successful implementation and barriers faced by companies and individuals. Table 4.1: The criteria used to assess level of confidence in the evidence Confidence level High
Medium
Justification High confidence levels because: • There is consistency in evidence from multiple sources. • The information is from reliable and credible sources (trusted by others, peer reviewed). • The information is directly applicable to the situation (i.e. Aotearoaspecific source or an international source directly relevant to the Aotearoa context). • The technology is mature and there is more information about it. Moderate confidence levels because: • There is some variability in evidence from different sources. • Some of the information is less credible (e.g. has had limited independent review, or information supplied by stakeholders).
1
We can have less confidence when there are few sources of the information, the traceability and reliability of information is difficult to ascertain, or the information is not applicable to the situation in Aotearoa and difficult to estimate.
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Confidence level
Low
Justification • The information is not directly applicable to the situation in Aotearoa but may be enough to estimate the situation. • The technology and information on it are still developing. Limited confidence levels because: • There are few sources of the information. • The traceability and reliability of information is difficult to ascertain. • The information is not applicable to the situation in Aotearoa and difficult to estimate. • The technologies are more speculative or less developed.
4.5 Where did we get information from? We gathered information and evidence through engagement with stakeholders and Treaty partners, as well as Aotearoa research and international sources. We also received information from the public and met with sector experts. This included Call for Evidence submissions, stakeholder meetings and establishment of a number of Technical Reference Groups to help gather information and test our developing analysis. As a result, the Commission has built a credible evidence base on the potential range of current and future actions to reduce emissions.
4.6 What comes next? The following sections of the chapter focus on the different sectors of the economy that we have assessed. For each sector, we set out the key context – where emissions come from in the sector and how they have been changing. We then present the key opportunities to reduce emissions from the sector, as well as outlining the main challenges that could affect whether those opportunities can be realised. Detailed analysis of what impacts could arise from the different emission reduction options and how those impacts could be avoided or managed is contained in later chapters.
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Chapter 4a: Reducing emissions – opportunities and challenges across sectors Heat, industry and power Energy is a necessity in the modern world as a critical input into every good and service in our economy. Energy used in Aotearoa comes from a range of sources including bioenergy, petroleum, coal, natural gas, wind, solar, hydro and geothermal energy. Some of these energy sources can in turn be used to produce other forms of energy like hydrogen or electricity. Different forms of energy production and use have different emissions associated with them. Different forms of energy, such as heat and electricity, enable industries to produce goods and materials. Industrial activities are many and varied, industries all use energy, and some have process emissions as well. This section outlines the opportunities and some of the key challenges for reducing emissions in heat, industry and power.
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Contents Chapter 4a: Reducing emissions – opportunities and challenges across sectors Heat, industry and power ............................................................................................................ 1 4a.1 Introduction ......................................................................................................................... 3 4a.2 Process heat ......................................................................................................................... 3 4a.2.1 Options for reducing emissions ............................................................................................... 4 4a.3 Industrial processing and production .................................................................................. 10 4a.3.1 Options for reducing emissions ............................................................................................. 12 4a.4 The electricity system ......................................................................................................... 15 4a.4.1 Options for reducing emissions ............................................................................................. 17 4a.5 Fossil fuel production ......................................................................................................... 25 4a.5.1 Options for reducing emissions ............................................................................................. 25 4a.6 References ......................................................................................................................... 28
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Energy is a necessity in the modern world as a critical input into every good and service in our economy. Energy used in Aotearoa comes from a range of sources including bioenergy, petroleum, coal, natural gas, wind, solar, hydro and geothermal energy. Some of these energy sources can in turn be used to produce other forms of energy like hydrogen or electricity. Different forms of energy production and use have different emissions associated with them. Different forms of energy, such as heat and electricity, enable industries to produce goods and materials. Industrial activities are many and varied, industries all use energy, and some have process emissions as well. This section outlines the opportunities and some of the key challenges for reducing emissions in heat, industry and power.
4a.1 Introduction Viable opportunities to reduce energy emissions (carbon dioxide (CO2)) and adopt low emissions energy sources and technologies in Aotearoa exist now. However, businesses, households and communities face a number of challenges that hinder the uptake of these and other viable emission reduction opportunities. This section outlines opportunities and challenges for reducing emissions for: • • • •
Process heat Industrial processing and production Electricity system Fossil fuel production.
Transport emissions contribute the largest portion of emissions from energy use in Aotearoa. Opportunities and challenges for changing energy use are outlined in the following sections and reducing emissions from transport, as well as those from buildings are outlined in Chapter 4b: Reducing emissions – opportunities and challenges across sectors: Transport, Buildings and Urban Form.
4a.2 Process heat Process heat refers to the thermal energy (heat) used to manufacture products in industry. Manufacturing has an important role in our economy. It creates and supports employment1, is a significant regional employer, adds value to our primary industries, earns export revenue and increases our resilience to international supply chain shocks while reducing the emissions associated with the transport of goods from overseas. It represents roughly 6 Mt CO2 or nearly 8% of gross emissions in Aotearoa. Applications range from heating hot houses to grow capsicums, to milk pasteurisation and drying, to making steel. The largest users of process heat in Aotearoa are the food manufacturing and wood, pulp and paper manufacturing sectors. Process heat emissions have steadily increased since 1990, predominantly due to an expansion in food processing. In recent years however, emissions from process heat have remained relatively steady due to a slowdown, and in some cases a decline, in production from industrial sectors.
1
Manufacturing employs around 11% of the labour force
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Process heat is supplied from a diverse range of fuel sources including, coal, gas, biomass, direct geothermal heat and electricity. Often a combination of fuels, for example electricity, gas and biomass, are used at a single industrial site.
4a.2.1 Options for reducing emissions This section outlines the opportunities and challenges related to options for decarbonising process heat. Most potential emission reduction opportunities come from low and medium temperature applications which accounted for 4 Mt CO2 in 2018. High-temperature process heat applications such as making steel, cement and methanol account for about 2 Mt CO2 of process heat emissions but have limited direct measures to reduce emissions (discussed below in Industrial processing and production). Overall, the evidence summarised below shows continued efforts to improve energy efficiency are important to reduce emissions in the short-term. Biomass and electricity can be used to decarbonise our low and medium temperature process heat manufacturing equipment (plant), over the next 20 years. However, barriers to this include the cost difference between fossil fuels and low emission alternatives, long-term fuel availability and the cost of plant conversion. Opportunities to increase the use of low emissions fuels exist. At current carbon prices, the operating costs of low emissions fuels are generally considered more expensive than fossil fuels. The associated costs can vary widely from site to site, even within a single sector, but for some sites low emissions options are cost-competitive with fossil fuels. The key factors which affect the choice of fuel and the delivered cost of energy (heat) are the specific process and temperature requirements, site location and availability of fuel (including transport costs and access to and capacity of distribution and transmission lines) and the relative fuel costs. The upfront capital cost of low emissions process heat equipment, while substantial, is often competitive with or cheaper than fossil fuel fired assets. However, the cost of refurbishing and extending the life of an existing fossil fuel asset is often cheaper and easier than replacing it with a low emission alternative. Additionally, under current business models, there may be limited opportunities during a given period for a company to undertake conversions outside regular maintenance and refurbishment cycles. Retrofitting an existing plant can increase the cost of emissions reductions due to constraints on space, plant shut down times, process redesign and other factors. However, there are significant viable emissions reduction opportunities for existing plants. Generally, a new build plant offers the most cost-effective opportunities for optimising energy efficiency and utilising low emission fuels and production processes. It also ensures that full cycle emissions reduction opportunities can be assessed and implemented. Globally, the decarbonisation of process heat is supported by natural gas as an option to displace coal. However, uncertainty regarding medium to long-term gas supply has largely resulted in process heat decarbonisation options centring around fuel switching to biomass and electrification. Additionally, there is no reticulated gas network in the South Island where much of the industrial coal use occurs. As the lowest emission intensity fossil fuel, the extent to which Aotearoa moves away from or towards gas depends on the availability of gas, stringency of climate change policies and carbon pricing.
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Table 4a.1: Opportunities and challenges to reducing process heat emissions Option Energy efficiency
Opportunities and challenges Energy efficiency improvements are often considered as the lowest cost, first step in reducing process heat emissions. These measures collectively reduce the amount of heat required, and emissions for, the same output from a coal or natural gas fuelled boiler, oven, burner or kiln. Efficiency can be improved through plant maintenance, optimising operations, heat recovery and high efficiency electric heating technologies. Reducing energy demand in industrial processes via energy efficiency measures can also enable future fuel switching opportunities (for example, coal to biomass, or coal to electricity) by lowering the operating cost of low emission fuels. Opportunities to improve energy efficiency in industrial process heat have been broadly assessed and quantified.2 The Process Heat in New Zealand study3 suggests an annual emissions reduction potential of 0.8 Mt CO2 or a cumulative reduction potential of 30% in the food manufacturing sector, and 0.05 Mt CO2 or 10% in the wood, pulp and paper manufacturing sector. Much of this opportunity is at low or negative emissions reduction cost but can range up to $300 per tCO2 depending on the sector and application. For applications where a boiler is used to produce hot water (low temperature requirements), industrial heat pumps can offer a more efficient alternative. The coefficient of performance, which is the ratio of output energy (heat) to input energy, can be as high as 3-5 for electric applications4, in comparison to 0.5 for a coal or gas boiler.5 For modern mechanical vapour recompression (MVR) technologies, the coefficient of performance can be as high as 50.6 This means certain electric technologies are far more efficient at producing heat than the combustion of fossil fuels. To date practical applications7 are limited to temperatures of less than 100°C. The cost of these heat pumps are falling as units are produced at scale, as new technologies are commercialised and as installation practices become standardised. As many energy efficiency technologies increase the use of electricity and reduce the use of fossil fuels, some of the barriers applicable to electrification (discussed below) can also apply to some energy efficiency technologies. While many energy efficiency measures are commercially ready, cost-effective and widely applicable across sectors, opportunities have largely not been enacted due to practical constraints, competing investment priorities and a multitude of other barriers. These barriers have been explored in more detail, including consultation,
2
(Atkins, 2019) (Ministry of Business, Innovation and Employment, 2019b) 4 (Energy Efficiency and Conservation Authority, 2019b) 5 (Transpower, 2019) 6 (Energy Efficiency and Conservation Authority, 2019a) 7 Only a handful of high temperature industrial heat pumps (90 - 180°C) have been deployed globally as pilot projects. The technology is at the research and development stage. 3
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Opportunities and challenges by the Ministry of Business, Innovation and Employment and the Energy Efficiency and Conservation Authority.8 A key barrier can be the requirement for rapid payback periods on capital investments within companies. This can limit the number of projects that receive Board approval to proceed. Additionally, energy efficiency projects may not be substantial enough for banks to lend to so financing and accessing capital may be difficult. There is also a limited pool of expertise in Aotearoa with the specific knowledge and skills to identify energy efficiency opportunities and undertake the appropriate analysis to support the business case for investments. This is particularly the case when considered alongside other emissions reduction opportunities such as fuel switching. The limited pool of expertise can act as a constraint on the rate of plant conversions. See also section on the Electricity System
Electrification
Fossil fuelled boiler systems contributed 3.5 Mt CO2 in 2018. There is an opportunity to reduce fossil fuel use in boiler systems through increasing the use of electricity for heating and increasing the use of biomass (see below). Solutions for the electrification of some applications of high temperature process heat are emerging internationally. Electric boilers and other electric heating technologies are technologies currently used for process heat in the food manufacturing and wood, pulp and paper manufacturing sectors. Electrification is expected to be driven by falling costs and improved performance of technologies such as industrial heat pumps for lower temperature heat applications and electrode boilers for medium heat applications. Economic solutions for electrifying low and medium temperature process heat are available today, at costs ranging from $100 to $250 per tCO2. The capital cost of electric heating systems, such as electrode boilers, is generally more affordable than fossil fuel or biomass systems. However, the cost per gigajoule (GJ) of delivered electricity can be about three to five times more expensive than coal and gas at current carbon prices. Therefore, electrification of process heat can be a relatively expensive emissions reduction option, particularly when the cost is compared to the continued operation of existing equipment. For some applications however, this increased operational cost can be negated by the improved efficiency of electrical conversions, meaning less energy (fuel) is required to produce the same heat output.9 The rate of electrification in industry would be limited by the time required to convert plants, upgrade transmission and distribution infrastructure and potentially build new renewable generation.
8
(Ministry of Business, Innovation and Employment, 2019b) The cost of converting to electric heating technologies will be influenced by whether the existing plant is configured around steam driven or hot water driven processing. Steam processes require higher temperatures than water heating, this is generally more expensive to meet with electric technologies. 9
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Opportunities and challenges One of the key barriers to electrifying process heat, where significant onsite electrical upgrades are required, is the cost and time associated with distribution and/or transmission grid connections. For large industrial users, connection costs can make up a larger proportion of a project’s cost than the equipment itself. In addition, it can take significantly longer, from planning and consenting to construction, to complete a new transmission line or interconnection upgrade than it does to develop and build a new processing plant. See also section on 4a.4 The electricity system in this chapter
Biomass
Biomass10 is already used extensively in the wood, pulp and paper manufacturing sector as on-site waste material and processing by-product is readily available. In these applications, woody biomass provides more energy for process heat than coal and natural gas combined.11 Other industrial sectors, such as food, cement, lime and glass manufacturing use the fuel more opportunistically and generally at manufacturing sites near forestry or wood processing operations. Biomass can be expected to play a significant role in decarbonising process heat. Costs can be comparable to coal and natural gas where biomass is easily available, with emissions reduction costs ranging from $0 to $100 per tCO2. While biomass could supply high temperature process heat (>300oC), the fuel is most suitable for applications which require medium temperature process heat (100 to 300°C) due to size of plants and fuel availability limitations. Biomass can be blended with, or substituted for, coal in some existing boilers, furnaces and kilns. Although this may require changes to fuel handling systems and particulate (air quality) management, this presents a lower cost route than complete replacement of combustion systems and allows industrial users to begin decarbonisation with existing assets.12 Dedicated biomass boilers would achieve greater efficiency of combustion for a wide range of biomass fuel types. Transportation distance and effort of recovery determine the extent to which biomass can be economically used for process heat. Regional mismatches in supply and demand coupled with differences in cost to transport biomass between regions can result in areas with oversupply and areas of scarcity.13 Wide regional variation means that not all the potential biomass supply can be used. In addition, while the supply of woody biomass residues may appear to be abundant in some regions, economic trade-offs would need to be made when deciding whether to utilise such residues for process heat. There are alternative uses of these residues, such as nutrient recycling for plantation forest (in lieu of the use of fertiliser) or as liquid biofuel for hard to abate transport emissions. Trade-offs would also need to be made around the economics of residue recovery and the potential benefits of using residues for process heat and other purposes.
10
Woody biomass is considered carbon neutral as the carbon dioxide released during combustion is equivalent to the amount absorbed by the tree during growth. If the wood originates in sustainable forestry, then this is a renewable energy source. 11 (Energy Efficiency and Conservation Authority & Ministry of Business, Innovation and Employment, 2018) 12 Industry engagement 13 (Hall & Alcaraz, 2017)
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Opportunities and challenges For example, there may be opportunities to recover forestry slash in regions like the East Coast where forestry waste from nearby operations is deposited on beaches14 but it may not be economically feasible to do so. Uncertainty regarding long-term biomass supply is an acknowledged issue and can impede decision-making and investment in process heat conversions.15 The lack of robust and recent long-term data coupled with changes in forestry and wood processing market conditions such as log and lumber prices, fumigation requirements, transport costs and exchange rates could hamper biomass cost and availability.16 In addition, there may only be a small pool of consultants who have in-depth knowledge about wood fuel supply options in Aotearoa and their knowledge is not widely shared. A significant increase in the use of biomass would also be contingent on the development of robust supply chains and long-run supply certainty.
Biogas
Biogas in the form of methane currently represents a relatively small proportion (3.3 PJ) of our total energy use. It is primarily used for electricity generation and supplying heat. Potential for increased biogas production and use is constrained by national waste recovery and processing infrastructure, requirements to upgrade and purify the biogas to meet specifications for use and injection into the existing natural gas distribution infrastructure and the low population density in Aotearoa.
Direct geothermal heat
See also Chapter 4d – Reducing emissions: options and challenges across sectors, Waste Direct geothermal heat use is currently located near sources within the North Island’s Taupo Volcanic Zone for use in wood, pulp and paper manufacturing and food manufacturing sectors. It can provide a low cost and low emissions heat source for low and medium temperature processes. Direct heat from geothermal sources is unlikely to play a significant role in displacing existing coal and gas use in industry; however, it does provide a low emissions option for new industrial sites in certain regions. The New Zealand Geothermal Association (NZGA) has developed the Geoheat Strategy17 and a complementary action plan which seeks to increase the use of direct heat in industry. The strategy outlines the approach to diversify the direct use of geothermal heat to create new businesses, decrease the use of fossil fuels in industry, support regional economic and social development and carve out a role for Aotearoa to promote the use of direct heat and associated technologies internationally.
14
Internal Climate Change Commission document (2020 interview with representative from Puketawai Marae, Tolaga Bay) 15 (Ministry of Business, Innovation and Employment, 2020c) 16 (Ministry for Primary Industries, 2016) 17 (New Zealand Geothermal Association, 2017)
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Opportunities and challenges Key challenges include the ability to source a sufficient load to justify the economics of drilling and operating of a well18 and limited locations with access to geothermal resources. Proximity to primary commodities, labour, transport and market are key considerations that often take precedence over the specific type or emissions intensity of an energy source. The costs of scoping, drilling and operating a geothermal well are significant. Because of this it is unlikely new direct geothermal heat opportunities would be developed in isolation. When considered alongside new geothermal electricity generation projects however the cost and risk of exploring and utilising the resource can be significantly reduced. Direct heat use is likely to use only a small proportion of the energy in a geothermal well in comparison to electricity generation. When it is used as part of an industry cluster such as the Kawerau Industrial Complex, it can be a cost-effective and low emission heat source. Industry clusters tend to develop organically, but once established may benefit from a more organised approach to their ongoing growth and development.19 See also section on 4a.4 The electricity system in this chapter
Hydrogen as a fuel
Hydrogen gas could be combusted to produce heat for buildings and industrial applications in much the same way that natural gas is used. To be considered a low emission fuel, hydrogen needs to be produced from renewable electricity (green hydrogen) or produced from fossil fuels but with carbon emissions captured and stored (blue hydrogen). A blend of approximately 20% (by volume) of hydrogen with natural gas may be compatible with existing gas equipment and infrastructure. Because of the lower energy density of the blended fuel, this equates to a 7% reduction in emissions intensity.20 This may provide an affordable option for hydrogen to enter the system by leveraging the existing gas network infrastructure and reducing production volumes. However, this could also prolong natural gas production and use. A complete fuel switch to hydrogen may require replacement of distribution and storage infrastructure and process heat equipment. In principle, hydrogen could displace all fossil fuels used for industrial and building heating. However, hydrogen heating is highly unlikely to be a lower cost decarbonisation choice than direct electrification due to inherent inefficiencies in its production from electricity and then combustion for heat. Conversion losses can be upwards of 70%. Hydrogen production costs and transport and infrastructure requirements are unlikely to fall to the level where it is an economical fuel for heating applications in the next 15 years.21 Beyond this, hydrogen could potentially be used for displacing or supplementing natural gas in some hard to abate sectors with high temperature requirements such as cement, lime and glass manufacturing.22 Hydrogen heating in
18
(Lawless Geo-consulting, 2020) (Hall et al., 2015) 20 (Committee on Climate Change, 2018); Industry engagement 21 (Concept Consulting, 2019) 22 (BloombergNEF, 2020) 19
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Opportunities and challenges these applications is still at the research stage but has the potential to be used towards 2050.23 An important consideration for hydrogen production is water consumption. Producing hydrogen through water electrolysis or fossil fuel reformation requires large amounts of high purity water. For example, to produce 1kg of hydrogen, nine times the amount of fresh water is necessary (nine litres).24 This echoes a key challenge raised by submitters to MBIE’s Vision for Hydrogen Green Paper. It was recognised there may be concern regarding Crown-Māori relations and kaitiakitanga.25 See also section on 4a.3 Industrial processing and production in this chapter
4a.3 Industrial processing and production Our heavy industries produce iron and steel, aluminium, cement and lime, methanol and urea for use across the economy and for export. In these industries, fossil fuels are combusted to both generate process heat and to drive chemical reactions. Fossil fuels also act as reactants in these chemical reactions that are intrinsic in the conversion of raw materials into a product. As such, these tightly integrated emitting activities (process heat and chemical reactions26) and their potential emissions reduction opportunities need to be considered together. Emissions from these activities accounted for roughly 3 Mt CO2e in 2018. Figure 4a.1 below illustrates the direct emissions from fuel combustion for energy (process heat) and industrial processes (chemical reactions) and the indirect emissions based on the sectors’ electricity demand and fossil fuel consumption. Indirect emissions from emitting activities associated with the production and supply of electricity, oil and gas are allocated based on the sectors’ demand for these commodities.
23
(Concept Consulting, 2019) (Pflugmann & De Blasio, 2020) 25 (Ministry of Business, Innovation and Employment, 2019a) 26 Referred to as Industrial Processes and Product Use (IPPU) emissions in the New Zealand Greenhouse Gas Inventory and the United Nations Framework Convention on Climate Change. 24
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Figure 4a.1: Direct and indirect emissions from heavy industries in Aotearoa (2018) Source: Commission analysis The heavy industrial sector in Aotearoa is characterised by a small number of large manufacturing sites. For example, there is just one aluminium smelter and one integrated iron and steel mill in this country. This means that changes in production activity of a single firm can have a significant impact on overall emissions from the sector. It may also have significant impacts on adjacent sectors such as the electricity system and oil and gas sector. Our heavy industries are producing at or near peak capacity, based on the size of the plant. As such, there is limited opportunity for production or emissions growth. Fuel resource availability and price, particularly natural gas, also directly impacts industrial production activity and emissions. Total emissions from heavy industry have remained largely unchanged since 1990 except for petrochemical production. Emissions from petrochemical production have increased 129% since 1990.27 Notably, methanol production and resulting emissions fluctuate in line with natural gas production in the Taranaki region. The sector is also characterised by their significant contribution to regional gross domestic product, employment and economic development. In certain areas, like the Bay of Plenty or Northland, industries were developed to take advantage of local natural resources and communities were formed around the industry. Heavy industrial activity also supports activity in other sectors, for example, through the production and distribution of ammonia-urea based fertiliser for use in agriculture and cement and steel for the construction sector. Domestic production of these commodities provides security of supply and potentially greater control over product quality. The current challenges faced by a number of our country’s industrial firms can be partially attributed to the widespread economic impacts of COVID-19. Supply chain disruptions and changes in demand from lockdowns around the world has led to changes in production activity, global inventory oversupply and decreases in commodity prices. Over the course of a year, a number of industrial 27
(Ministry for the Environment, 2020a)
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firms across Aotearoa have undertaken or announced strategic reviews to restructure their operations and improve profitability in the face of changing market conditions. Changes in economic activity and employment from COVID-19 may be exacerbated by the uncertainty and potential employment and regional economic impacts of these strategic reviews. Box 4a.1: Emissions leakage Emissions leakage refers to the situation where there is an increase in emissions globally as a result of production moving from one country to another country with lower environmental standards. While closure of domestic industries would reduce domestic emissions, the global impact is less certain due to potential emissions leakage. How likely emissions leakage is to occur depends on whether closure creates a global shortage in the commodity and if so, where production is likely to shift to. Another important consideration is how emissions-intensive domestic production in Aotearoa compares with international production. Many of the emissions-intensive products manufactured in Aotearoa compete with internationally produced products. These products are classified as ‘emissions intensive and trade exposed’ for the purposes of the NZ ETS and receive a free allocation of units. This mitigates the cost the NZ ETS imposes on the production of these goods allowing them to compete on the international market.
4a.3.1 Options for reducing emissions This section outlines the opportunities and challenges related to reducing emissions from our heavy industries. The most likely significant emissions reductions would result from the closure of industrial sites, such as the signalled exit of the Tiwai Point aluminium smelter. The loss of domestic production would result in an increase in imports and the associated embodied emissions. It would also impact the ability for Aotearoa to process recovered waste materials such as scrap steel and aluminium. Evidence summarised below shows there is potential to reduce emissions through the increased use of alternative, low emissions construction materials to displace use of higher emissions materials. For example, where feasible and applicable, using structural engineered wood products in place of steel, or displacing Ordinary Portland Cement with low carbon concrete. Reducing process heat emissions in heavy industry can be achieved by improving energy efficiency and greater use of low emissions fuels, including biomass, electricity and hydrogen-natural gas blends (see section on Process heat above). At present, there are technical constraints on the degree to which fuel switching in heavy industry can be adopted due to high-temperature requirements, the need for chemical reactants and the tightly integrated nature of these activities. Longer term, there is potential to decarbonise a range of industrial processes through a range of emerging low emission technologies, particularly hydrogen. However, the economics of hydrogen production remain a barrier to more widespread use particularly when compared to costs of incumbent fossil fuels. Additionally, our country’s heavy industrial manufacturing plants are relatively old and built to certain specifications with integrated processes and equipment. As such, the capital investment 12 1 February 2021 Draft Supporting Evidence for Consultation
required to fully transition an industrial process to a different feedstock can be prohibitive and on par with the establishment of a new plant. The small domestic market and high relative input costs may not support new at-scale industrial plant investment in Aotearoa. Table 4a.2: Opportunities and challenges for reducing industrial processing and production emissions Option Waste Recovery
Opportunities and challenges Aluminium and steel can be recycled indefinitely without product degradation. Aluminium is also the most cost-effective material to recycle and steel is the most recycled material in the world. Recycling avoids the direct greenhouse gas emissions associated with primary aluminium production and up to 95% of the energy-related emissions.28 29 Emissions reduction potential is influenced by the amount, quality, composition and type of scrap being recycled. Domestic steel and aluminium production are technically limited in how much of scrap metal can be incorporated into the production process and by the quality of available scrap metal. As such, the emissions reduction opportunity is limited, and benefit may be more weighted towards other environmental outcomes such as less waste going to landfills. Waste recovery is a critical component to reducing emissions from waste and increasing the circularity of our economy. In Aotearoa it is partially impeded by the limitations of domestic materials processing infrastructure and challenges around collection and transport of materials across a long country with a dispersed population. It may be difficult to reach the economies of scale required to make recycling of certain materials cost-effective.
Reducing demand for emissions intensive materials
Use of supplementary materials
28 29
See also Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form; and Chapter 4d: Reducing emissions – opportunities and challenges across sectors, Waste. Reducing demand for products made through an emissions intensive process may reduce overall emissions. Demand can be reduced through changes in construction practices and methods. However, reducing domestic demand for a product may not reduce the production activity levels of domestic plant, particularly for export-oriented industries. It may not be economically or technically feasible to decrease production. Additionally, reduced domestic demand may result in increased export of the material which would support continued economic activity and potentially help to reduce emissions in the importing country. See also Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form; and Chapter 4d: Reducing emissions – opportunities and challenges across sectors, Waste. Cement is primarily composed of clinker which is produced by heating calcium carbonate and other minerals in a kiln to drive a calcination reaction. Clinker is a granular substance which acts as a binder in cement products. Concrete is made from cement.
(The International Aluminium Institute, 2018) (Energy Transitions Commission, 2020)
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Opportunities and challenges Significant amounts of carbon dioxide are released from the fossil fuel combusted for heat (energy) to make the clinker and from the calcination reaction (chemical process). In 2018, process emissions from cement and lime manufacturing were 0.5 Mt CO2. The emissions intensity of cement production can be improved by reducing the proportion of clinker in the product by blending it at higher fractions with supplementary cementitious materials (SCM). Ordinary Portland Cement is the industry preference in Aotearoa and has a SCM substitution of about 2%.30 Shifting to use of blended cements with the global average substitution of 35%31 would improve the emissions intensity of domestically manufactured cement. SCM includes blast furnace slag from steel mills, fly ash from coal power plants, or natural pozzolans from volcanic ash or pumicite from the North Island’s Central Plateau. There may be natural variation in these materials, as such, its use may be constrained by the need to source SCM with consistent properties and the need to process the material from its raw state prior to use which would incur additional costs. Increased competition for these materials globally would also influence availability and cost, potentially constraining their use in Aotearoa. There are also challenges with the distribution and transport of natural pozzolans to our country’s cement manufacturing facility. Given the different types of SCM which may be used, the emissions reduction cost ranges from $0 to $100 per tCO2 depending on where the material is sourced from. Uptake of SCMs has been limited by perceptions of risk, preference towards familiar technologies and materials and limitations within the Building Code’s product standards and specifications. Deeper exploration of mātauranga relating to the sustainability, ethics and applications of resource extraction can support regional development and community resilience if SCM is sourced from the North Island’s Central Plateau. For example, the oyster reserves in the Kaipara harbour used to be a rich source of calcium carbonate for cement manufacture. In recent times, the oyster reserves are used more for customary management practices.32
Hydrogen as a feedstock or reductant
See also Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form. Petrochemical (methanol and urea) production and steelmaking are domestic industries which are technically compatible with hydrogen-based production.33 34 In 2018, petrochemical production and steelmaking accounted for 3.2 Mt CO235 of our gross emissions. Hydrogen is an intermediate chemical in the standard production process for petrochemicals. Petrochemicals are currently produced in an emission intensive
30
(thinkstep, 2019) (IEA, 2018) 32 (Te Uri O Hau Settlement Trust, 2011) 33 (BloombergNEF, 2019c) 34 (BloombergNEF, 2019b) 35 (Ministry for the Environment, 2020a) 31
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Opportunities and challenges process utilising natural gas as a fuel and feedstock. A green hydrogen supply would eliminate this stage of the process and decarbonise petrochemical production. For urea production, this change in feedstock cost is equivalent to an emission reduction cost of $250 per tCO2. For methanol production, a change in feedstock is equivalent to an emissions reduction cost of approximately $500 per tCO2. Additional costs are incurred compared to current urea production because a source of pure carbon dioxide is needed, the hydrogenation process requires more process heat than the current syngas (natural gas) route, so is less energy efficient, and three hydrogen molecules are required to make methanol via hydrogenation versus two via the syngas route. Co-location near the Kapuni Gas Treatment Plant could provide a source of pure carbon dioxide to be used in conjunction with green hydrogen. Hydrogen as a reductant in steelmaking is not yet commercially viable although it has been technically proven overseas in pilot and demonstration scale projects. Global outlooks suggest large scale zero carbon steel production could be economic and be deployed beyond 2030.36 In Aotearoa however, domestic steelmaking utilises iron sand as the source of ore and operates a globally unique process using this available resource. Because of this, a transformation to hydrogen steelmaking might require a unique conversion to that being developed internationally and as such could incur significant additional costs. The cost of hydrogen is a key determinant in the economics of these emissions reduction opportunities. As hydrogen use in industry is still largely in the research and development stage, there are considerable uncertainties in the cost of future production. Large scale hydrogen production would be required to completely displace natural gas in heavy industries across Aotearoa and this would require significant new large scale, low cost renewable electricity generation, low cost transmission to production sites and declining costs in key technologies such as electrolysers. It would also require the development of a robust supply chain. See also sections on 4a.2 Process heat– Hydrogen as a fuel and 4a.4 The electricity system.
4a.4 The electricity system In 2018, electricity generation in Aotearoa accounted for about 4.3 Mt CO2e. Our country’s electricity system has a high proportion of renewable electricity generation – 84% renewable in 2018. Historically, electricity generation emissions have come mainly from two fossil fuel resources; coal and natural gas.37,38 This is shown in Figure 4a.2 below, which also illustrates the rising proportion of geothermal emissions since the late 2000s.
36
(McKinsey & Company, 2020) (Interim Climate Change Committee, 2019) 38 (Ministry of Business, Innovation and Employment, 2020a) 37
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Figure 4a.2 Electricity emissions by fuel in Aotearoa, 1990 – 2018 Source: Commission analysis Box 4a.2: Electricity in Aotearoa The wholesale electricity market works as a 'spot' market, where power supply and demand are matched instantaneously. Matching supply and demand instantaneously has implications for the type of generation that can be used at any point and time. Different electricity generation technologies have different capabilities. Fossil fuels, geothermal and hydro can all supply baseload generation, that is, they can produce electricity at a constant rate at any time, given the availability of resources (i.e. water and natural gas reserves). Wind and solar, on the other hand, are referred to as intermittent sources of generation. This means they can only generate at certain times, when the wind is blowing and the sun is shining. Fossil fuel and hydro generation can provide flexibility in the electricity system by being able to quickly ramp up or down generation to match demand. This is often referred to as peaking generation. Electricity demand changes depending on the time of day, with daily demand peaks in the morning and evening. This means that electricity generation, distribution and transmission infrastructure must be built to meet peak capacity, otherwise there is a risk of brownouts or blackouts when demand peaks. Managing peak demand in Aotearoa is usually done with flexible fossil fuel generation or releasing more water from hydro dams (subject to hydro inflows). Demand also varies with the season and is generally higher in winter than in summer.39,40 Our country’s hydro lakes contribute around 60% of our total electricity supply. However hydro lakes only hold enough generation (storage) for a few weeks of winter electricity demand if inflows (rain and snow melt) are very low. When inflows are low for long periods of time, hydro generation is reduced and the electricity system relies more heavily on fossil fuel generation to meet electricity demand. This issue is often referred to as ‘dry year risk’. Managing daily peaks and seasonal variations in low hydro inflow years, are two of the key challenges in the electricity system as more renewable generation enters the electricity system to meet future demand and displace fossil fuel generation. 39 40
(Interim Climate Change Committee, 2019) (Stevenson et al., 2018)
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Electricity emissions tend to be higher in years when hydro inflows are low (dry year) and more fossil fuels are used to meet the shortfall in generation. Geothermal energy also contributes to overall electricity emissions, but average emissions per kilowatt-hour are about a quarter that of natural gas, with substantial variation from field to field. Fossil fuel generation is also often used to meet daily demand peaks. Total electricity emissions peaked in 2005 and have been mostly declining since due to increased geothermal and wind generation displacing fossil fuel generation. Electricity demand is expected to grow significantly as transport and industrial sectors electrify and as the population and the economy grow. In order to displace fossil fuels and achieve emission reductions, new renewable (or geothermal) generation will be required to meet this growing demand.
4a.4.1 Options for reducing emissions This section outlines the opportunities and challenges related to options for decarbonising electricity generation. Overall, the evidence summarised below shows that large-scale wind and geothermal power projects become increasingly affordable to build and would comprise an increasing proportion of total generation towards 2035 and 2050. Utility scale solar photovoltaic (PV) is expected to become increasingly cost-competitive in Aotearoa beyond 2035. New renewable (including geothermal) generation would be needed to meet the anticipated increase in demand from electrification of transport and process heat and to displace thermal power plants at their end of life. However, the signalled exit of the Tiwai Point aluminium smelter, which uses about 13% of our country’s electricity,41 has created a large degree of uncertainty in the generation market in the short-term. The impact of a Tiwai exit on the electricity system would likely depend on whether surplus power from Manapouri is distributed around the existing energy system (for example, displacing fossil fuels used in electricity generation or process heat) or is used by a single or multiple new entrants with a large demand for power. The reduction of emissions from electricity generation would likely be achieved through a combination of the opportunities canvased below, which includes increasing the supply of low emissions electricity generation and improving energy efficiency and demand side management. Complete decarbonisation of the electricity sector would depend on the degree to which the electricity system can manage the issue of dry year risk and daily demand peaks, without using fossil fuel generation. Any dry year solution is likely to be a relatively high cost emissions reduction option that needs to balance cost, timing, emissions reduction potential and wider impacts across the economy over time. Table 4a.3: Opportunities and challenges to reduce electricity generation emissions Options Wind and solar
41 42
Opportunities and challenges Wind and solar supplied over 7.7 petajoules (PJ)42 or 5% of electricity generation in 2018 across Aotearoa. Wind and solar are expected to comprise an increasingly greater proportion of our generation mix towards 2050 to meet increased electricity demand from the electrification of industry and transport and to gradually displace fossil fuel generation assets. Considerable and sustained improvements in the price-performance of wind and solar
(Ministry of Business, Innovation and Employment, 2020a) To date, this is almost entirely wind.
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Options
Opportunities and challenges technologies means they are increasingly cost-competitive against new fossil fuel generation. Wind generation is now cheaper than new baseload thermal generation. The annual rate of decline for the cost of utility scale solar PV has been on average 10% over the last five years and is expected continue to decline annually at about 3% out to 2030 as global demand increases and drives incremental technological improvements.43 Wind turbine costs have declined on a continuous downward trend over the last ten years, falling between 44% and 64% since their peak between 2007-2010. Additionally, Aotearoa benefits from competition in the Australian and Chinese markets resulting in lower total project costs compared to the global average.44 The considerable cost reductions projected for these technologies mean that solar and wind technologies are expected to play a significant role in displacing fossil fuel generation. As the proportion of intermittent generation from wind and solar in the electricity system increases managing the volatility of output and morning and evening peaks will become a more significant challenge. Dispersing wind farms around the country and taking into account potential changes in future prevailing wind patterns can manage some of this. There is a broad range of additional options to address this challenge including utilising demand response technologies, increasing short term storage or using existing hydro generation when possible. These options are discussed later in this table.
Geothermal
Geothermal power plants supplied 27PJ or 17% of electricity generation in 2018. Geothermal offers a cost-competitive investment option for large-scale development45 of new baseload generation. Emissions from geothermal power generation grew from 0.3 Mt CO2e in 1990 to 0.7 Mt CO2e in 2018 due to the expansion of geothermal generation in Aotearoa. Fugitive emissions46 (mostly carbon dioxide and methane) are associated with geothermal development. These emissions are relatively small in comparison to fossil fuel generation if they are effectively managed. The emission intensity of installed generation has been observed to decrease overtime which reflects the degassing of geothermal fields. The emissions intensity also varies by field location and operation of the generating station. As the electricity system becomes increasingly renewable, emissions from geothermal power generation are what remain. Improved generation technologies, higher efficiency plants, improved management of geothermal emissions through higher rates of reinjection or capture and storage can reduce the emissions intensity of new geothermal generation assets.47 For example, an
43
(BloombergNEF, 2019a; IRENA, 2018; Lazard, 2019) (Roaring40s Wind Power, 2020c) 45 (Lawless Geo-consulting, 2020) 46 Fugitive emissions are emissions of gases or vapours from pressurized equipment due to leaks and other unintended or irregular releases of gases, mostly from industrial activities. 47 (Interim Climate Change Committee, 2019) 44
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Options
Opportunities and challenges emissions price of $40/t CO2e could be sufficient for one geothermal operator to consider capturing their emissions.48 When considering the potential development of geothermal, it is also important to consider iwi/Māori have long asserted tino rangatiratanga, or the unqualified exercise of chieftainship over lands and property, which includes the ability to control the use and management of resources. This has implications for geothermal generation as well as hydro, as geothermal fluids are treated in the same manner as freshwater from a legal perspective. Many of today’s geothermal plants have been developed in partnership with iwi/Māori and there is opportunity for this to continue.49
Hydropower
In 2018, hydro generation supplied 94PJ of electricity generation in Aotearoa.50 It supplies about 60% of the country’s electricity generation on average annually. The majority of the hydro power stations are located in the South Island and a significant amount of electricity is sent north via the high-voltage transmission grid each year. Hydropower provides flexibility in our electricity system by being able to provide both baseload and peaking generation. However, hydro lakes in Aotearoa are low in water storage volume in comparison to international hydro-dams meaning careful management of water levels is necessary. The number of large-scale hydro plants has not changed for nearly 30 years. In that time, the technology associated with hydro generation has changed little. As such, there are limited opportunities to improve or enhance existing plants to increase output. For example, altering Resource Management Act consent conditions to reduce minimum flows downstream could increase power output of some of our country’s hydro-generation assets. However, this could have additional ecological and environmental impacts. Iwi/Māori and others consider that existing consents and planning regimes give preference to hydro at the expense of ecological or cultural values.51 There is also acknowledgement by the Government that some of the key freshwater bodies used for hydro generation are in poor and degraded states.52 Consequently, pressure is mounting on hydro-generation to ‘give back’ some water by, for example, increasing minimum flows downstream of the dam. Iwi/Māori rights and interests in freshwater (including geothermal fluids) raise a distinctly different set of questions, with uncertain implications for existing hydro. Despite acknowledgement by the Crown that iwi/ Māori have legitimate rights and interests in water, the Crown asserts that no one (including iwi/Māori) owns or can own water. This remains a point of contention with many iwi/Māori and the Waitangi Tribunal.53
48
Ibid Ibid 50 (Roaring40s Wind Power, 2020b) 51 (Interim Climate Change Committee, 2019; Whetu Consultancy Group, 2019) 52 (Ministry for the Environment, 2020b) 53 (Interim Climate Change Committee, 2019; Te Rūnanga o Ngāi Tahu, 2020) 49
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Options
Opportunities and challenges It is unlikely new significant hydro plants are developed in the future in Aotearoa, apart from a potential pumped hydro scheme to expand storage volumes (discussed below). The low cost of developing new wind, geothermal and solar, the increased awareness of the impacts on biodiversity of hydroschemes and the higher value and competition for freshwater than there was 30 years ago means that the number of potential opportunities for new large-scale hydro generation in Aotearoa are limited.54 Small scale hydro generation schemes are still possible however these face regulatory uncertainty and often strong local opposition due to other environmental impacts.
Energy efficiency
Improving energy efficiency in buildings and industrial plants could reduce emissions from our electricity system by reducing peak demand and how frequently fossil fuel generation is needed. Reducing electricity demand via energy efficiency can be viewed as an alternative to building new generation to meet growing demand. For example, Transpower’s analysis estimates a reduction in electrical intensity of our gross domestic product by 1.7% per year to balance the growth in energy demand as a result of a growing economy.55 Typically, OECD56 countries have seen population and economic growth increasingly decoupled from electricity consumption growth due to energy efficiency gains. Countries with large energy efficiency gains were often supported by regulatory and market interventions such as Energy Efficiency Obligations, Energy Efficiency Resource Standards, funding/financing programmes, or market mechanisms that compensate users for the full verified value of capacity savings. Emissions reductions could be achieved through the deployment of readily available energy efficient technologies; LED lighting, heat pumps for water and space heating, better insulation, energy saving fridges and other appliances and electric motors. Energy efficiency measures can be deployed quickly and often at a lower cost than building new generation to meet growing demand.57 Energy efficiency is often a low or negative emissions reduction cost but can cost upwards of $200 per tCO2 depending on the application. One of the key barriers to energy efficiency investment at the scale needed to defer electricity generation is that many thousands of individual consumers or businesses need to make investment decisions. This may be difficult to achieve compared to a single company deciding to build a new generating station but presents a significant opportunity across Aotearoa.
Demand response,
See also section on 4a.2 Process heat and Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form. Better use of demand response, small-scale storage technologies and demand management practices have the potential to shift demand from morning and
54
(Roaring40s Wind Power, 2020a) (Transpower, 2020) 56 (IEA, 2020) 57 (Energy Efficiency and Conservation Authority, 2019c) 55
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Options batteries and demand management
Opportunities and challenges evening peaks to other times when demand is lower. This could reduce emissions from the electricity system and help to reduce the average cost of electricity. It may also defer costly upgrades to transmission and distribution lines, reducing upwards pressure on delivered electricity prices. Demand response enables or encourages electricity consumers to reduce their electricity demand for a period of time (often during peaks) in exchange for payment, or to avoid high electricity prices. A common example of a demand response enabled technology is hot water cylinders, though many more common technologies could also utilise demand response such as batteries, EVs, fridges, household appliances and a wide range of industrial technologies. Key enablers of demand response include, but are not limited to, smart metering and access to data, real-time pricing and smart devices. For example, if enabled by retailers, apps connected to smart meter data can allow consumers to monitor and manage their power use to show where energy savings can be made. This increased consumer engagement with the electricity system is a recognised future trend in the electricity system. Adding storage to the electricity system makes renewable generation more useful by providing a back-up for times when the renewable resource is insufficient (daily peaks). Transpower estimates that peak demand could increase from 7.3 GW in 2020 to 8.9 GW by 2035 and 10 GW by 2050.58 Batteries can be large ‘grid-scale’ installations or distributed units in buildings and electric vehicles (EVs). Batteries can help to smooth peaks and troughs in demand. A battery charged over the course of the day using renewable generation can be rapidly discharged to meet a short period of peak demand which would otherwise be provided by a fossil fuelled power station. For example, Transpower estimates that by 2035, about 1.2GW of battery storage capacity could be deployed to support periods of peak demand. Using demand response and storage technologies together can play an important role in system security and reliability by potentially increasing system flexibility. It can also reduce emissions by reducing the need for fossil fuelled peaking generation. Emissions reduction cost of demand response technologies varies by technology, scale and application. Managing peak demand in a renewable electricity system may also require changes in electricity consumer behaviour (demand management). It is important that the electricity market can deliver clear and timely price signals to energy users to encourage changes to electricity demand. For example, as the uptake of electric vehicles increases it will be important that electric vehicle charging does not exacerbate daily morning and evening peaks. Electricity pricing incentives, such as low cost night rates (11pm to 5am), combined with smart charging technology may be an effective way to address this issue.
58
(Transpower, 2020)
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Options
Opportunities and challenges See also sections on 4a.2 Process heat and Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form.
Distributed generation
Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels. About 95% of distributed generation is from renewable sources such as wind, geothermal and hydro, and ‘behind the meter’ generation such as rooftop solar. These forms of decentralised generation play a role in reducing the amount of electricity that would otherwise have to be transmitted by the grid. This is particularly valuable when it can offset periods of peak demand, and potentially emissions and high electricity prices, and when the grid is limited in some way (for example if a line fails during a storm). The amount of distributed generation in the system is expected to increase as the cost of solar PV and wind generation decreases and more households and communities look for energy sovereignty. Community involvement in distributed generation may have social benefits, such as enhanced cohesion, acceptance of development (when there is control over where the generation is located) and self-sufficiency through self-supply. It can also adapt and affect consumer behaviour and energy use. For example, iwi/Māori through local marae schemes and rural communities may actively transition to distributed generation for a variety of reasons, including ownership, cost and resilience (particularly if they are in remote areas) and a desire to reduce their emissions. In Aotearoa, it can be challenging for owners or would-be investors in distributed generation to access the electricity market. Owners of distributed generation can either sell any generation not used on site to a retailer through a contract or sell it into the market and ‘take’ the wholesale price. It can be difficult to secure the long-term contracts. A liquid hedge market would be important in facilitating this.
Addressing dry year risk
Hydro lakes contribute around 60% of our total electricity supply. However hydro lakes only hold enough generation (storage) for a few weeks of peak winter electricity demand if inflows (rain and snow melt) are or have been very low. When inflows are low for long periods of time, hydro generation is reduced and the electricity system relies more heavily on fossil fuel generation to meet electricity demand to reduce the risk of an electricity shortage. As fossil fuels are retired from the system managing dry year risk would be more critical; without a dry year solution there may be a need to retain some gas generation and gas storage in the system. As hydro generation is sensitive to the hydrological effects of climate change, options to address the dry year risk must also consider future changes in hydro generation potential of different schemes across the national grid. For example, recent research by the National Institute for Water and Atmospheric Research (NIWA) projects that higher winter precipitation in major hydropower basins is
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Options
Opportunities and challenges expected to boost national generation. Hydro generation dry season is also expected to shift from winter peaking to summer peaking.59 There are multiple options that could be deployed to address the issue of dry year risk. This was examined alongside moving towards 100% renewable electricity in the Interim Climate Change Committee’s (ICCC) Accelerated Electrification report. The results of the ICCC’s modelling show that, instead of pursuing 100% renewable electricity by 2035, more emissions savings could be achieved through accelerated electrification of transport and process heat. However, while using natural gas in the electricity system may be an effective mechanism to minimise emissions and achieve security of supply until 2035, eventually all fossil fuel generation would need to be eliminated and the dry year issue addressed to contribute to efforts to limit the global average temperature increase to 1.5oC above pre-industrial levels. Options60 to address dry year risk that the ICCC examined included, overbuilding renewables, using biomass or hydrogen for generation, long-term battery storage, indicative large-scale demand interruption and pumped hydro storage. The estimated marginal emission reduction costs of these options varied from $250 to $89,000 per tCO2, with the most cost-effective option being a pumped hydro scheme. Further detailed analysis would be required to determine the actual cost and benefit of any dry year option. The Lake Onslow pumped hydro scheme is being investigated61 along with alternative storage options that could provide a large amount of storage capacity to provide short-term peaking and management of dry year risk. Pumped hydro schemes are a way of storing and using water independent of inflows. This project could displace the requirement for thermal generation and achieve an abrupt decarbonisation of the electricity sector. The construction cost for the project has been estimated at $4 billion.62
Transmission network
Electrification of transport and industrial energy use will see Aotearoa become increasingly dependent on electricity. This concentration of risk enhances the need for the electricity system to be reliable and resilient. Transmission infrastructure is critical in maintaining this. As we decarbonise the economy the national grid would need to rapidly expand its capacity. This expansion would be driven by the expected ramp up in the electrification of transport and process heat and the building of new renewable electricity generation. According to Transpower, by 2035, we may require 40 new grid connected generation projects, 30 connections to accommodate increased electricity demand, 10-15 new transmission interconnections and other network investments needed to enable energy to reach consumers.63
59
(Collins et al., 2020) Options were assessed against the alternative of continuing to use natural gas to solve the dry year problem. 61 (Ministry of Business, Innovation and Employment, 2020b) 62 MBIE’s early estimated capital costs of a project like Lake Onslow 63 (Transpower, 2020) 60
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Options
Opportunities and challenges Additionally, there are long lead times for major new and upgraded transmission assets relative to lead times for new generation or demand. Issues with cost allocation and risk associated with new transmission lines may slow or hold up the deployment and uptake of renewable electricity generation, risking delays in decarbonisation. There are also coordination challenges where investments involve multiple parties. The challenge is to deliver a timely, reliable and affordable build out of the national grid and to manage the opposing risks of under or over-investing in the national grid. Overinvestment in the national grid could increase the delivered cost of electricity disincentivising electrification, while underinvestment in the national grid could slow progress on decarbonisation efforts. To ensure security of supply transmission and distribution networks need to be built to meet peak demand. Moving forward, having materially lower peak demand growth than energy demand growth would help successfully deliver energy security and affordability alongside decarbonisation. Improving energy efficiency, demand response and management, and successfully integrating distributed energy resources into the electricity system will be important for achieving this.
Distribution networks
See also section on 4a.2 Process heat in this chapter Aotearoa has 29 different regional electricity distribution businesses that take electricity from the national grid to distribute to local communities, households and businesses. Like transmission, distribution networks need to be built to meet peak demand and need to manage a balance between over and underinvesting in their assets. Distributors face challenges to their capacity and capability to evolve networks to cope with the effects of emerging technologies, including electric vehicles and household solar and batteries. Technology changes will require distributors to be more proactive, better understand their networks and to adapt to meet the needs of existing and new customers. Changing technology provides new opportunities, such as demand response, but also creates increased risk if the wrong technology investment decisions are made or pricing incentives are put in place. Sufficient adaptability and flexibility in the regulatory environment are also necessary if networks are to respond to changing technologies and consumer patterns. For example, as the uptake of EVs increases in Aotearoa, it will be important that EV charging does not overload local network capacity or exacerbate daily morning and evening peaks. Investments in distribution assets are subject to regulation by the Commerce Commission that is designed to ensure that they have incentives to invest and meet customers’ quality demands but are also limited in their ability to earn excessive profits. 17 distributors are under this price-quality regulation, the other 12 are consumer-owned and exempt from the regulation as the
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Opportunities and challenges Government considers that their consumers have enough input into how the business is run. All 29 are subject to its information disclosure rules.64 Having materially lower peak demand growth than energy demand growth as we decarbonise our economy would help deliver energy security and affordability alongside decarbonisation. Much of the peak demand challenge could be managed at the distribution level. Innovation in the electricity sector, including greater demand response and smart charging, more transparent and stronger pricing signals and demand management practices may help in managing peak demand growth. See also section on 4a.2 Process heat and Chapter 4b: Reducing emissions – opportunities and challenges across sectors: Transport, Buildings and Urban Form.
4a.5 Fossil fuel production Fossil fuel production emissions, as opposed to emissions from the use of the fuels itself, result from a diverse range of activities including oil refining, oil and natural gas production and the operation of coal mines. In 2018 gross emissions from these activities totalled 2.3 Mt CO2e. Aotearoa is a net oil importer; we predominantly import crude oil that is then processed at the Marsden Point refinery for use. The refinery produces petrol, diesel, jet fuel, marine fuel and bitumen from crude oil largely imported from the Middle East and South East Asia. At production capacity, the refinery supplies 70% of domestic demand for refined oil products.65 The refinery’s owners have recently signalled a downscaling in production volumes and potential future operational changes.66 Direct emissions from refining activities totalled 1 Mt CO2 in 2018 and are largely from the combustion of crude oil sourced waste streams (refinery gas, fuel oil and asphalt) supplemented by natural gas for process heat and hydrogen manufacture to refine crude oil into finished transport fuels. The remaining emissions are largely classified as fugitive and include: • • •
leaked methane from mines and oil production, leaked methane from natural gas production and reticulation network and vented and flared carbon dioxide during extraction and processing of natural gas and oil.
4a.5.1 Options for reducing emissions The most significant changes in emissions would likely result from a decrease in fossil fuel production activity. The refinery’s decision to downscale production volumes will have an immediate impact on emissions from this sector, and the long-term viability of the refinery’s remaining operations is still uncertain. Longer term, the refinery’s operations and business models may change, but maintaining the refinery’s infrastructure and skilled workforce could be critical to maintaining flexibility for our 64
(Commerce Commission, 2018) (Refining New Zealand, 2020a) 66 (Refining New Zealand, 2020b) 65
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energy system in the future. For example, it could be used to produce different or complementary products like liquid biofuels and green hydrogen. Retaining the refinery’s infrastructure could also provide long-term energy security by providing a means to diversify the energy supply mix. Impacts on direct emissions from our country’s coal and oil and gas extraction sector are more uncertain as this largely depends on international demand. However, there are emissions reduction opportunities that can be realised from current production activities. In 2018, Aotearoa exported 98PJ or 68% of domestically extracted coal and oil resources.67 Additionally, iwi/Māori groups with large coal reserves68 may be impacted by changes in domestic and international coal demand. If a significant amount of process heat electrification or biomass conversion takes place, the emissions from natural gas production may decrease as a result of reduced production. There are options to directly reduce emissions from fossil fuel production which are outlined below, however investment in options may be limited by uncertainty in the oil and gas sector as a result of Government’s 2018 decision to restrict new offshore oil and gas exploration. Table 4a.4: Opportunities and challenges to reducing fossil fuel production emissions Options Prevention
Opportunities and challenges Fugitive methane emissions in gas production can be reduced or eliminated through operational and engineering activities. Process engineering improvements can be made to the plant to reduce emissions during production. Flared emissions can be reduced with better operating practises, while leaks could be reduced in gas transmission and distribution pipelines through improved design, surveying and inspection.69 An estimation of the total emissions reduction potential requires additional analysis.
Re-injection or capture and storage
In 2018, emissions from natural gas venting were approximately 0.3 Mt CO2e. These are assumed to stem partly from the Kapuni gas field and Kapuni Gas Treatment Plant. The Kapuni gas field contains about 44% carbon dioxide which needs to be stripped out prior to use. While some of the carbon dioxide is used, the remainder is vented into the atmosphere. It may be possible to re-inject this carbon dioxide back into this reservoir or into a nearby reservoir. This source of pure carbon dioxide could also be used in petrochemical production in combination with green hydrogen to reduce emissions from the sector. Reinjection technologies and practices are mature and deployable emissions reduction opportunities in Aotearoa.
Efficiency
See also Chapter 5: Removing Carbon from our Atmosphere Efficiency in natural gas production can be achieved through monitoring energy consumption and the more efficient use of existing plant equipment, reducing the need for fuel gas. Other emissions reduction opportunities
67
(Ministry of Business, Innovation and Employment, 2020d) (Begg et al., 2014) 69 (Element Energy & Imperial College London, 2019) 68
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Opportunities and challenges include replacement of existing motors and heaters with more efficient equipment, pipe insulation and improved waste heat recovery.70 Replacing compressor stations across natural gas distribution and transmission infrastructure with more efficient and/or electric equipment could achieve small reductions in emissions. Reducing or eliminating use of fuel gas for processing through electrification of equipment, such as diesel and gas compressors, fossil fuel boilers and drilling rigs.71 An estimation of the total emissions reduction potential across the entire compressor fleet and oil and gas processing stations requires additional analysis. The refinery has previously invested $12 million in programmes and projects to improve the energy efficiency of processing units and utilities, optimising steam use, heat exchanger cleaning and maintenance, improving turbine efficiency, monitoring energy consumption and the phased introduction of LED lighting. An estimation of the total remaining emissions reduction potential requires additional analysis. See also sections on 4a.4 The electricity system and 4a.3 Industrial processing and production in this chapter.
70 71
Industry engagement Industry engagement
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4a.6 References Atkins, D. M. (2019). Options to Reduce New Zealand’s Process Heat Emissions. University of Waikato. https://www.eeca.govt.nz/assets/EECA-Resources/Research-papersguides/Options-to-Reduce-New-Zealands-Process-Heat-Emissions.pdf Begg, J., Edbrooke, S., Rawlinson, Z., & Faulkner, R. (2014). Geology, Natural Resources and Hazards of the Maniapoto Rohe (No. 2014/172; GNS Science Consultancy Report, p. 35). GNS Science. http://www.maniapoto.iwi.nz/wp-content/uploads/2016/04/9.-GNS-report.pdf BloombergNEF. (2019a). New Energy Outlook 2019. Bloomberg Financial, Bloomberg NEF. https://about.bnef.com/new-energy-outlook-2019/ BloombergNEF. (2019b). Hydrogen: Making Green Ammonia and Fertilisers (p. 12). BloombergNEF. (2019c). Hydrogen: The Economics of Low-carbon Methanol (p. 16). BloombergNEF. (2020). Hydrogen Economy Outlook: Key Messages (p. 14). Bloomberg Financial, Bloomberg NEF. https://assets.bbhub.io/professional/sites/24/BNEF-Hydrogen-EconomyOutlook-Key-Messages-30-Mar-2020.pdf Collins, D. B. G., Henderson, R. D., & Fischer, L. S. (2020). Shifts in hydropower generation under climate change in relation to growing electricity demand. Submitted to the Energy Journal, 21. Commerce Commission. (2018). Electricity distribution informiation disclosure determination 2012 (p. 182). Commerce Commission. https://comcom.govt.nz/__data/assets/pdf_file/0025/78703/Electricity-distributioninformation-disclosure-determination-2012-consolidated-3-April-2018.pdf Committee on Climate Change. (2018). Hydrogen in a low-carbon economy (p. 128). https://www.theccc.org.uk/wp-content/uploads/2018/11/Hydrogen-in-a-low-carboneconomy.pdf Concept Consulting. (2019). Hydrogen in New Zealand Report 2 – Analysis. https://www.concept.co.nz/uploads/1/2/8/3/128396759/h2_report2_analysis_v4.pdf
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Element Energy, & Imperial College London. (2019). Assessment of options to reduce emissions from fossil fuel production and fugitive emissions. https://www.theccc.org.uk/publication/assessment-of-options-to-reduce-emissions-fromfossil-fuel-production-and-fugitive-emissions/ Energy Efficiency and Conservation Authority. (2019a). MVR (Mechanical Vapour Recompression) Systems for Evaporation, Distillation and Drying: Technical Information Document 2019. https://genless.govt.nz/assets/Business-Resources/Mechanical-vapour-recompression-forevaporation-distillation-drying.pdf Energy Efficiency and Conservation Authority. (2019b). Technical Information Document: High temperature heat pumps for low carbon process heating. https://genless.govt.nz/assets/Business-Resources/High-temperature-heat-pumps-for-lowcarbon-process-heating.pdf Energy Efficiency and Conservation Authority. (2019c). Energy Efficiency First: The Electricity Story— Overview Report. https://www.eeca.govt.nz/assets/EECA-Resources/Research-papersguides/EECA-Energy-Efficiency-First-Overview.pdf Energy Efficiency and Conservation Authority, & Ministry of Business, Innovation and Employment. (2018). Wood processing—Process heat and greenhouse gas emissions Factsheet. https://www.mbie.govt.nz/assets/8d136c7944/wood-processing-factsheet.pdf Energy Transitions Commission. (2020). Making mission possible: Delivering a net-zero economy. Energy Transitions Commission. https://www.energy-transitions.org/wpcontent/uploads/2020/09/Making-Mission-Possible-Full-Report.pdf Hall, P., & Alcaraz, S. (2017). New Zealand solid fuels market analysis (p. 32). Scion. Hall, P., Alcaraz, S., & Hock, B. (2015). Assessment of wood processing options for Gisborne: Wood energy industrial symbiosis project (Wood Energy Industrial Symbiosis Project: Aim 3 Resource Convergence Opportunities). https://scion.contentdm.oclc.org/digital/collection/p20044coll6/id/424/ IEA. (2018). Technology Roadmap: Low-Carbon Transition in the Cement Industry – Analysis. https://www.iea.org/reports/technology-roadmap-low-carbon-transition-in-the-cementindustry
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IEA. (2020, December). Energy efficiency indicators: Overview. Statistics report—December 2020. IEA. https://www.iea.org/topics/tracking-clean-energy-progress Interim Climate Change Committee. (2019). Accelerated electrification: Evidence, analysis and recommendations (p. 117). https://www.iccc.mfe.govt.nz/assets/PDF_Library/daed426432/FINAL-ICCC-Electricityreport.pdf IRENA. (2018). Renewable Power Generation Costs in 2017 (p. 160). /publications/2018/Jan/Renewable-power-generation-costs-in-2017 Lawless Geo-consulting. (2020). Future Geothermal Generation Stack (p. 59) [Prepared for Ministry of Business, Innovation and Employment]. Lawless Geo-consulting. https://www.mbie.govt.nz/assets/future-geothermal-generation-stack.pdf Lazard. (2019). Lazard’s Levelized Cost of Energy Analysis—Version 13.0 (p. 20). https://www.lazard.com/media/451086/lazards-levelized-cost-of-energy-version-130-vf.pdf McKinsey & Company. (2020, June). Decarbonization challenge for steel. https://www.mckinsey.com/industries/metals-and-mining/our-insights/decarbonizationchallenge-for-steel# Ministry for Primary Industries. (2016). Wood Availability Forecasts ‒ New Zealand 2014-2050 (p. 71). https://www.mpi.govt.nz/dmsdocument/14221-Wood-Availability-Forecasts-NewZealand-2014-2050 Ministry for the Environment. (2020a). New Zealand’s Greenhouse Gas Inventory 1990-2018. https://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gasinventory-1990-2018 Ministry for the Environment. (2020b). Our freshwater 2020. Ministry for the Environment. https://www.mfe.govt.nz/publications/environmental-reporting/our-freshwater-2020 Ministry of Business, Innovation and Employment. (2019a). A Vision for Hydrogen in New Zealand: Green Paper. https://www.mbie.govt.nz/dmsdocument/6798-a-vision-for-hydrogen-in-newzealand-green-paper
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Ministry of Business, Innovation and Employment. (2019b). Process Heat in New Zealand. https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/lowemissions-economy/process-heat-in-new-zealand/ Ministry of Business, Innovation and Employment. (2020a). Energy in New Zealand 2020 (p. 76). https://www.mbie.govt.nz/dmsdocument/11679-energy-in-new-zealand-2020 Ministry of Business, Innovation and Employment. (2020b). NZ Battery. https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/lowemissions-economy/nz-battery/ Ministry of Business, Innovation and Employment. (2020c). Summary of submissions: Accelerating Renewable Energy and Energy Efficiency. https://www.mbie.govt.nz/dmsdocument/12132accelerating-renewable-energy-and-energy-efficiency-summary-of-submissions Ministry of Business, Innovation and Employment. (2020d, August). Energy balances. https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energystatistics-and-modelling/energy-statistics/energy-balances/ New Zealand Geothermal Association. (2017). Geoheat Strategy for Aotearoa NZ. New Zealand Geothermal Association. https://nzgeothermal.org.nz/app/uploads/2017/06/Geoheat_Strategy_20172030__Web_Res_.pdf Pflugmann, F., & De Blasio, N. (2020). Geopolitical and Market Implications of Renewable Hydrogen (p. 62). Harvard Belfer Center. https://www.belfercenter.org/sites/default/files/files/publication/Geopolitical%20and%20 Market%20Implications%20of%20Renewable%20Hydrogen.pdf Refining New Zealand. (2020a). Refining New Zealand: Annual report 2019. Refining New Zealand. https://www.refiningnz.com/wp-content/uploads/2020/03/Refining-NZ-Annual-Report2019.pdf Refining New Zealand. (2020b, June). Refining NZ: Strategic Review Announcement. https://www.refiningnz.com/wp-content/uploads/2020/10/NZR-Strategic-Review-UpdateNZX-announcement-.pdf
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Roaring40s Wind Power. (2020a). Embedded Hydro Generation Opportunities in New Zealand (p. 28) [Prepared for Ministry of Business, Innovation and Employment]. Roaring 40s Wind Power. https://www.mbie.govt.nz/assets/embedded-hydro-generation-opportunities-in-newzealand.pdf Roaring40s Wind Power. (2020b). Hydro generation stack update for large-scale plant (p. 26) [Prepared for Ministry of Business, Innovation and Employment]. Roaring 40s Wind Power. https://www.mbie.govt.nz/assets/hydro-generation-stack-update-for-large-scale-plant.pdf Roaring40s Wind Power. (2020c). Wind Generation Stack Update. https://www.mbie.govt.nz/assets/wind-generation-stack-update.pdf Stevenson, T., Batstone, D. S., Reeve, D., Poynton, M., & Comendant, C. (2018). Transitioning to zero net emissions by 2050: Moving to a very low-emissions electricity system in New Zealand (p. 141). Sapere Research Group. Te Rūnanga o Ngāi Tahu. (2020). Ngāi Tahu Rangatiratanga over Freshwater. https://ngaitahu.iwi.nz/environment/ngai-tahu-rangatiratanga-over-freshwater/ Te Uri O Hau Settlement Trust. (2011). Te Uri o Hau Kaitiakitanga O Te Taiao: Environmental management plan. Landcase Research. https://www.landcareresearch.co.nz/uploads/public/Discover-OurResearch/Environment/Sustainable-societypolicy/VMO/Te_Uri_o_Hau_Environmental_management_plan.pdf The International Aluminium Institute. (2018). Aluminium Recycling – Sustainability. https://recycling.world-aluminium.org/review/sustainability/ thinkstep. (2019). Under construction: Hidden emissions and untapped potential of buildings for New Zealand’s 2050 zero carbon goal (p. 55). New Zealand Green Building Council (NZGBC). https://www.nzgbc.org.nz/Attachment?Action=Download&Attachment_id=2453 Transpower. (2019). Taking the climate heat out of process heat. https://www.transpower.co.nz/sites/default/files/publications/resources/TP%20Process%2 0Heat%20Report%20FINAL%20-%2016July%2719.pdf
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Transpower. (2020). Whakamana i Te Mauri Hiko: Empowering our Energy Future. https://www.transpower.co.nz/sites/default/files/publications/resources/TP%20Whakaman a%20i%20Te%20Mauri%20Hiko.pdf Whetu Consultancy Group. (2019). Integrating Māori Perspectives: An analysis of the impacts and opportunities for Māori of options proposed by the Interim Climate Change Committee (p. 137). https://www.iccc.mfe.govt.nz/assets/PDF_Library/b7b6ac127b/FINAL-WhetuIntegrating-Maori-Perspectives-An-analysis-of-the-impacts-and-opportunities-for-Maori-ofoptions-proposed-by-the.pdf
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Chapter 4b: Reducing emissions opportunities and challenges across sectors Transport, buildings and urban form Emissions from transport, buildings and urban form currently contribute to total emissions from Aotearoa in a range of ways. Transport has been the most rapidly growing source of emissions for Aotearoa, with road transport emissions accounting for 90% of all transport emissions. Low-density residential developments are associated with higher emissions, while the way buildings are built and operated determines the emissions they produce. This section outlines the opportunities and some of the key challenges for reducing emissions in transport, urban form and buildings.
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Contents Chapter 4b: Reducing emissions – opportunities and challenges across sectors: Transport, buildings and urban form....................................................................................................................................... 1 4b.1 Transport......................................................................................................................................... 3 4b.1.1 Focus on Auckland ................................................................................................................... 7 4b.1.2 Options for reducing emissions ............................................................................................... 7 4b.2 Urban form.................................................................................................................................... 23 4b.3 Buildings ........................................................................................................................................ 24 4b.3.1 Options for reducing emissions ............................................................................................. 25 4b.3 References .................................................................................................................................... 30
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Emissions from transport, buildings and urban form currently contribute to total emissions from Aotearoa in a range of ways. Transport has been the most rapidly growing source of emissions for Aotearoa, with road transport emissions accounting for 90% of all transport emissions. Low-density residential developments are associated with higher emissions, while the way buildings are built and operated determines the emissions they produce. This section outlines the opportunities and some of the key challenges for reducing emissions in transport, urban form and buildings.
Transport, Buildings and Urban Form This section outlines the opportunities and some of the key challenges for reducing emissions in: • • •
Transport Urban form Buildings
4b.1 Transport Transport emissions have been a major and growing contributor to our total greenhouse gas emissions. Between 1990 and 2018, domestic transport emissions have increased by 90%. Transport currently contributes about 37% of long-lived gases.1 Transport has been the most rapidly increasing source of emissions. Out of the 35.1 megatonnes (Mt) of gross carbon dioxide (CO2) emissions Aotearoa produced in 2018, approximately 16 Mt were from transport, and an additional approximately 2 Mt were from off-road vehicles and equipment used in agriculture, forestry, fishing and construction, such as tractors, fishing boats, and earthmovers. Off road vehicles and equipment are covered in this chapter as the options to reduce their emissions are similar to transport (such as electrification or use of low carbon fuels), however their emissions are categorised in Heat, Industry and Power. Road transport is the main source of emissions from transport. Cars, utes, vans and SUVs are the predominant cause of these emissions, though emissions from trucks have doubled in the last 20 years. Table 4b.1 shows how the Commission categories different types of vehicles in our report. Table 4b.1: Types of vehicles categorised in the Commission’s 2021 report
1
Internal Combustion Engine Vehicle
includes conventional hybrids, such as the Toyota Prius. This is because even though conventional hybrid vehicles use batteries and electric motors to help propel the vehicle, the electricity is entirely produced on-board the vehicle by a generator driven by an internal combustion engine.
Electric Vehicle
An electric vehicle is a vehicle fully or partially powered by electricity from an external source. Battery electric vehicles are powered by batteries charged only from an external electricity source. Plug-in hybrid vehicles are powered by batteries charged either from an external electricity source or from electricity produced on-board the vehicle by a generator driven by an internal combustion engine.
All gases excluding biogenic methane.
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Light Vehicle
Medium Truck
Heavy Truck
This is a vehicle with a fully-loaded weight less than 3,500 kilograms (see ‘Vehicle Type Categorisation’ under https://www.transport.govt.nz/statistics-andinsights/fleet-statistics/sheet/2018-annual-fleet-statistics). Light vehicles include light passenger vehicles, (most cars and SUVs) and light commercial vehicles, (most vans and utes). The distinction between light passenger vehicles and light commercial vehicles is based on the body type of the vehicle, not the use of the vehicle. Many light commercial vehicles are used as household vehicles. As used here, a medium truck has a fully loaded weight greater than or equal to 3,500 kilograms, but less than 30,000 kilograms. This category includes ‘straight trucks’, typically used for local deliveries, and some tractor-trailer ‘big rigs’. As used here, a heavy truck has a fully loaded weight greater than or equal to 30,000kg. These are typically tractor-trailer ‘big rigs’. The Commission’s analysis draws the line between medium and heavy trucks at 30,000kg, since trucks over 30,000kg are approaching legal size and weight limits. This means that batterypowered versions may have to sacrifice payload for batteries. The economics of electrifying heavy trucks are therefore less attractive than they are for medium trucks.
Figure 4b.1: Transport Emissions by Type in Aotearoa 2 Figure 4b.1 above illustrates the dominance of road transport emissions – about 90% of all transport emissions. This has increased substantially since 1990. There are approximately 4.2 million vehicles
2
(Ministry for the Environment, 2020a)
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in Aotearoa. This is projected to rise to 5.2 million vehicles by 2042/43.3 About 75% of this total is made of household vehicles.4 In 2018, light passenger vehicles (cars and SUVs) accounted for about 53% of emissions from road transport, while light commercial vehicles (vans and utes) accounted for about 18%. Much of the growth in light vehicle emissions has come from light commercial vehicles, which have increased 84% between 2000 and 2018. Motorcycles and scooters contribute only about 0.3% of road transport emissions. Figure 4b.2 below shows the split of emissions by type of vehicle.5
Figure 4b.2: Road Transport Emissions by Type of Vehicle in Aotearoa (Mt CO2) Source: Commission analysis. Heavy vehicles—medium and large trucks as well as buses--are also a significant source of emissions. The heavier fleet accounts for only about 7% of annual travel but contributes about 28% of emissions from road transport. Truck emissions have been growing very rapidly, having increased 80% between 2000 and 2018.6 Domestic aviation emissions make up 7% of transport emissions and have been relatively static since 1990.7 This is partly due to the introduction of larger and more fuel-efficient aircraft, and partly due to the increasingly sophisticated technological systems that airlines use to reduce the number of empty seats meaning the same number of passengers can be carried on fewer flights. It is anticipated that COVID-19 will have resulted in reductions of about 45% of aviation emissions in 2020, but Air New Zealand has predicted that air travel demand will return to 70% of its pre-COVID rate by August 2022.8
3
(Ministry of Transport, 2019) (Ministry of Transport, 2019) 5 (Climate Change Commission ENZ Model results, 2020) 6 (Climate Change Commission ENZ Model results, 2020) 7 (Ministry for the Environment, 2020c) 8 (Reuters, 2020) 4
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Rail and domestic shipping emissions together make up about 2% of transport emissions.9 Their low total emissions are partly because they account for a relatively small share of the freight that moves around Aotearoa,10 and partly because, on a per tonne/kilometre basis, they emit less than trucks.11 International aviation and shipping emissions are not included in this data, although they have historically been a significant and growing portion of global emissions. Transport was largely responsible for the increase in our country’s overall emissions over the last 30 years. The growing population – up 42% between 1990 and 2018 and 25% of that increase since 2001 – is a key contributor to increased transport emissions in Aotearoa. Emissions growth from transport has also been driven by economic activity; a growing population consuming more products, increased exports and increased travel for business. Road freight tonnekilometres increased 40% between 2001 and 2018.12 Rates of vehicle ownership have also increased. There were 2.7 million vehicles in Aotearoa in 2001, by 2018 there were 4.3 million and the fleet size increased faster than the population over the same period. In addition, Aotearoa has a predominance of used imports and slow fleet turn over. The average vehicle is driven until it’s about 19 years old and this average is gradually increasing.13 There has been a modest increase in vehicle distance travelled per person for all vehicles: from about 9,400km per person in 2001 to about 10,000km per person in 2018.14 One consequence of our heavy dependence on private vehicles is traffic congestion. Aucklanders’ travel time increased by 31% due to traffic congestion according to the TomTom Traffic Index.15 Extra fuel use and increased emissions often come with congestion. The engine size of vehicles is also increasing. The share of the light vehicle fleet with engines of 2,000 cc or more increased from 35% in December 2001 to 46% in December 2018.16 In 2019, 8 of the top 10 best-selling new vehicles in Aotearoa were utes or SUVs.17 While 85% of our population live in urban areas, Aotearoa is a sparsely populated country. A household’s transport choices often depend on where in the country they live, their proximity to economic and social activities and the services available. Some communities have a high dependence on vehicles for transport. For many rural communities public transport is often not practical and private transport is relied on, including for to access public transport. Other groups, for example low income households and people with disabilities or limited mobility, children and older people often also have limited transport options. Public transport could be insufficient and low emissions cars too expensive. Policies which increase vehicle costs or driving costs may fall disproportionately on low income households, who may also not be able to afford fast
9
(Ministry for the Environment, 2020c) In 2017/18 the total amount of freight moved by domestic shipping was around 13.4% of total freight tonne/km, or 1.6% on a tonnage basis. For rail it was around 11.5% of total freight tonne/km, or 5.6% on a tonnage basis. Ministry of Transport, 2020a. 11 (Wang, 2019) 12 (Ministry of Transport, 2020a) 13 (Ministry of Transport, 2019a) 14 (Ministry of Transport, 2019a, 2019) 15 (TomTom, 2020) 16 (Ministry of Transport, 2018a) 17 (Automobile Association, 2020) 10
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broadband, also limiting virtual access allowing remote working or learning. Complimentary policies will be required to mitigate this inequality.
4b.1.1 Focus on Auckland In 2018, road transport emissions in Aotearoa were around 15 Mt of carbon dioxide. 18 Auckland accounted for 27% of those.19 The Auckland City Council’s Climate Plan has set a goal to reduce net emissions by 50% by 2030,20 and to zero emissions by 2050. 21 To achieve a net emission reduction of 50% by 2030, a 64% reduction in transport emissions would be required. Achieving these goals would require fundamental shifts in how Aucklanders travel, how that travel is powered, how often they travel and how freight is transported. The plan to achieve these goals includes: • • • •
increased uptake of public transport an increase in cycling and walking increases in remote working, and increased numbers of electric vehicles or other low emission vehicles on the roads.
All of these options are discussed in more depth below. However, Auckland’s population is expected to increase by another one million people by 2050, so achieving this plan will be very challenging, 22 unless specific policies are targeted at achieving outcomes such as higher density near transport hubs to decouple population growth from transport emissions.
4b.1.2 Options for reducing emissions Many options exist to reduce transport emissions. We have prioritised the options with the largest potential and ensured the analysis covered all types of transport. This section outlines the opportunities and challenges related to each option. All estimated emissions reduction potential has come from external sources of evidence, rather than from our modelling. Overall, the evidence summarised here shows the technologies exist to decarbonise all types of transport, although some options are at very early stages and many options face barriers. Immediate savings are possible through behavioural change – that is finding ways for people to reduce their travel or switching to active travel and public or shared transport. Multiple lines of evidence show that over the next 15 years, the largest opportunity to reduce emissions comes from the electrification of the light vehicle fleet. Multiple options exist to decarbonise freight on a 10 to 20year horizon, including electrification. Where electrification is more difficult, for example with heavy freight or aviation, low carbon fuels such as biofuel or hydrogen, can play an important role.
18
(Ministry for the Environment, 2020c) (Auckland Council, 2020) 20 Against a 2016 base line 21 (Auckland Council, 2020) 22 (Ministry of Transport, 2019) 19
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Electric vehicles are an important piece of the puzzle, but that does not take away how important it is to reduce emissions from other areas of transport and to give New Zealanders choices to reduce transport emissions. Our transport system is dominated by private vehicles. Reducing the number of cars on the road and developing a more accessible transport system is an effective way to reduce emissions that has many co-benefits. A successful outcome would be that transport emissions are reduced by cities and towns that are designed for liveability and ease of getting around. Active transport, such as walking or cycling are simple ways to reduce emissions. Where walking, cycling or working from home is not possible, public or shared transport are an attractive choice. A very important part of the move to a zero emissions transport system is to enable policies that work together well. However, urban form and planning is a long term and evolving process and public transport systems take time to build up. Behaviour change also takes time. People will continue to rely on private transport until public transport services and infrastructure is provided so people find public transport, walking and cycling convenient, safe and enjoyable. There are also areas where using public transport is not practical and ultimately some people want and need to use their own cars. We see electric vehicles as an important part of the solution but they are not to be seen as a ‘silver bullet’. It is important to address the real or perceived inequality associated with electric vehicles. Policies that support the transition to a low emissions future should operate by reducing social inequities rather than exacerbating them. Additional benefits of improved air quality and ongoing savings from the lower fuel and maintenance costs that electric vehicles provide can benefit low income households most. One Māori community on the East Cape23has implemented shared mobility. Long established ways of sharing are underpinned by cultural principles such as manaakitanga (having a deep ethic of care for people that might be impacted), Mana Tauutuutu (community belonging and cohesion) and whanaungatanga (a relationship through shared experiences and working together which provides people with a sense of belonging). Shared mobility allows for social, cultural and economic benefits to the collective as well as environmental benefits. Internationally there are many examples of schemes which provide substantial support for electric transport such as providing financial support to scrap old fossil fuelled cars, depending on income level and either provide funding for replacement low emissions vehicles, or public transport or car sharing services. Financial assistance to purchase an electric vehicle is just one way to assist people with limited resources. For example, electric vehicle sharing schemes could be targeted to address public transport gaps for low income earners, allowing them to get to their jobs. Increased support for rural charging stations will also be needed. These options are discussed more fully in the Impacts and Policy Direction of Emissions Reduction Plan sections. Table 4b.2: Opportunities and challenges for reducing transport emissions Option Reducing travel
23
Opportunities and challenges Using transport less, or not at all – such as use of technology to work from home and attend appointments – can reduce emissions at little cost. About 0.5 Mt per
(Haerewa, 2018)
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year could be saved in commuter emissions if an additional 10% of people worked from home one day a week.24 Around 13% of total current transport emissions are from people travelling to and from work. Although not an experience we would want to see repeated, restrictions on travel during the COVID-19 pandemic demonstrated on a broad scale the potential of working from home and video conferencing to reduce travel.25,26 Normally, whether it is possible for someone to avoid travel to and from work would depend on their occupation, access to a digital connection and suitability of their home environment. We estimate that about 10% more people would be able and willing to work from home.27,28 The digital technology to support increased levels of working from home is welldeveloped but is not universally accessible in remote and rural regions. The potential is also limited for some occupations, such as services, construction and manufacturing where workers need to be on site. Land use changes over the longer term so that people live closer to places they need to go, will contribute to travel reduction. Transport type shift to walking, cycling, public transport
Shifting to active and shared travel types has the potential to reduce carbon dioxide emissions from transport, particularly in urban areas. Active travel has no carbon dioxide emissions (or close to zero for electric scooters and e-bikes). Shared travel, including public transport, typically has significantly lower carbon dioxide emissions per passenger km compared with single occupancy vehicles. Challenges for increasing public transport use and active travel include the design of our cities, underinvestment in public transport and walking and cycling and incentives encouraging travel by car. The Auckland Climate Plan has indicative targets for cycling to achieve 7% travel share by 2030 and 9% travel share of kilometres travelled by 2050 in Auckland. At a national level, public health researchers have recommended a target of 15% of all trips by bicycle by 2050.29
24
We have not attempted an assessment of the emissions reduction potential of increased online shopping, although it is likely to offer some net reduction in emissions. 25 The impact of COVID-19 saw a significant decrease in the number of people commuting to work in Aotearoa, dropping from 58% of people pre-COVID to only 15% under level 1. This would have included people working from home and people no longer able to work during this period. 26 (Ministry of Transport, 2020b) 27 An estimated 30% of workers in Aotearoa are in roles allowing them to work from home. However, around half of these people are already doing so at least part time, and some people who have jobs allowing them to work from home still may not be able to, if, for example, if there are young children or flatmates in the house. We estimate that around 10% more people could be able and willing to work from. 28 Climate Change Commission ENZ Model 2020 results based primarily on data from Ministry of Transport, Transport Outlook: Future State Vehicle Fleet Emissions Model 29 (Mandic et al., 2019)
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Some Aotearoa researchers have recommended a target to double the proportion of trips by walking to 25% of all trips by 2050.30 This would be about the same as the current proportion of trips by walking in Wellington, which is 24.5% of trips and 3.3% of travel by distance. 31 If we assume that the current travel type share in Wellington is achievable in other urban areas of Aotearoa, a walking share of 3.3% of distance travelled is plausible. Low population density also means rural communities have a high dependence on vehicles for transport. It is likely that for many rural communities public transport is not practical. Electrifying or improving the fuel efficiency of private vehicles may be the best options for rural areas. Cycling, micro-mobility, walking and car sharing could have a big role in smaller cities and towns, where distances are usually short. Additionally, as outlined in Part 4: What this could mean for New Zealanders, there are increasing examples of mobility as a service in smaller towns, as opposed to conventional public transport. First and last kilometre transport solutions32 are also increasingly emerging making it easier to access public transport. Conventional vehicle improvements
Improving the efficiency of the conventional vehicle fleet could save 0.26 Mt CO₂ per year. The efficiency of new and used conventional vehicles has improved in recent years, despite vehicles tending to increase in both engine and overall size.33 However, the light vehicle fleet is emissions-intensive compared to most developed countries and evidence indicates that our performance is getting worse.34 There are two key reasons for this: •
•
Although efficiency is generally improving within vehicle weight classes as manufacturers introduce fuel-saving technologies, New Zealanders are increasing choosing to purchase larger, heavier vehicles. Manufacturers choose to provide less efficient model variants into the Aotearoa vehicle market than to markets where vehicle fuel efficiency standards apply.35
If Aotearoa were to match the average fuel efficiency of new vehicles today in other jurisdictions (without any further technology improvements from today’s internal combustion engine vehicles), this could see around a 33% reduction in CO2 emissions over the life of the vehicle.
30
(Ibid) (Ministry of Transport, 2019a) 32 The ‘first and last-kilometre’ is a term that describes the beginning and end of an individual’s public transport journey. Usually, after traveling on public transport, we need to walk, or take a second type of travel to reach our final destination. This gap from public transit to destination is seen as counterintuitive to establishing a truly connected city. 33 (Ministry of Transport, 2018b) 34 (Automobile Association, 2020a) 35 (New Zealand Productivity Commission, 2018, p. 356) 31
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More efficient conventional vehicles may cost more upfront but deliver significant fuel savings. The additional capital cost of a vehicle emitting 110 gCO2/km, over one emitting 180 gCO2/km in 2021, is estimated to be an average of $750 per vehicle. In 2025 this additional vehicle cost is estimated to be $1,580 per vehicle. However, the fuel savings are estimated to average $6,800 per vehicle over the vehicle lifetime.36 Efficiency can be improved by: • improvements in internal combustion engine vehicles (for example through engine stop functions when the vehicle is stationary, less friction in the engine and better engine management, low resistance tyres, improved aerodynamics) • moving to hybrid vehicles – including hybrid drive trains and stop start technology. It is possible that the fuel efficiency of internal combustion engine vehicles internationally may not improve further than it has done over the last few decades. Several major automotive manufacturers including Volkswagen Group37 and Daimler38 have announced they will no longer be undertaking research and development activities and developing new light vehicle models based on internal combustion engine vehicles, with Nissan39 and Mitsubishi40 stopping research and development for diesel engines. The focus of research and development has instead shifted to electric vehicles.
Electrification of light vehicles cars, SUVs, utes and vans
However, Aotearoa has the potential to reduce the average emissions of new internal combustion engine vehicle entrants to its fleet to match those of other countries. Hybrid vehicles have the potential to improve fuel efficiency by between 40 and 50% compared to a non-hybrid equivalent and new models are increasingly entering the market. Toyota have announced they expect to have hybrid Hiluxes available by the end of 2021,41 and Nissan have “all but guaranteed” the next Navara ute will have hybrid options.42 Light vehicles (cars, SUVs, utes and vans) emitted about 10.6 Mt CO2 in 2018. EECA43 has estimated that battery electric vehicles could achieve a roughly 80% reduction in CO2 emissions per km when in use in Aotearoa. Since most of the emissions of battery electric vehicles are from electricity generation, this figure could be improved as the Aotearoa electricity grid is further decarbonised. The main challenge currently is the upfront cost of purchasing an electric vehicle, which is more expensive than the internal combustion engine equivalents. For example, the cheapest new electric vehicles on the market in Aotearoa cost around $50,000. Owning an electric vehicle today is challenging for those living
36
(Ministry of Transport, 2019a) (Reuters, 2018) 38 (Electrek, 2019) 39 (Nikkei Asia, 2018) 40 (The News Wheel, 2019) 41 (Cars Guide, 2019) 42 (Stuff, 2020) 43 (Energy Efficiency and Conservation Authority, 2015) 37
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in areas of high social deprivation and those on a lower incomes. Lower socioeconomic groups may not prioritise such a purchase.44 For people for whom access to electric vehicles will be challenging, good access to public transport is particularly important. New Zealanders living in areas rated high on the deprivation index would benefit from investment to improved public transport, particularly in areas such as West and South Auckland. The cost of reducing emissions with electric vehicles is shrinking rapidly as the cost of them declines. Our projections suggest that EVs will drop below the cost of conventional vehicles on a lifetime cost of ownership basis by 2024 for new light passenger vehicles (cars and SUVs) and by 2025 for new light commercial vehicles (vans and utes).45 Further, the upfront purchase price of new battery electric vehicles is expected to drop below those of conventional vehicles by 2029 for light passenger vehicles and by 2032 for light commercial vehicles. The main reason for the declining cost of battery electric vehicles is the expected decline in battery costs. Although currently more expensive to purchase, electric vehicles offer considerable savings in both energy and maintenance costs compared to conventional vehicles. Based on a typical delivered electricity price of $0.25/kWh and typical car/SUV fuel efficiencies, a battery electric vehicle has a fuel cost roughly equivalent to buying $0.54/litre petrol.46 Depending on annual distance driven, some new electric vehicles are cost effective on a total cost of ownership basis today.47 The range of electric vehicles has also been a constraint.48 However, with improvements in battery technology, this concern is rapidly diminishing. The first electric vehicles had ranges of around 100km on a full charge. In comparision, new electric vehicles on the market today have ranges of over 400km on a full charge. Currently there is a lack of choice of electric vehicles in Aotearoa, particularly for utes and SUVs – which New Zealanders often favour over smaller vehicles, although choices are expanding. Aotearoa accounts for a very small proportion of global sales and electric vehicle models available in other countries are not offered here. Some models are offered at a significant price premium over the same model in other countries.49
44
(Haerewa, 2018) Climate Change Commission ENZ Model results 46 Our model assumes battery electric vehicles require 16.2 kWh/100 km while petrol vehicles require 7.52 litres/100 km, so (16.2 kWh/100 km) / (7.52 litres/100 km) * $0.25/kWh = $0.54/litre. 47 Using EECA’s TCO tool you can see how some new electric vehicles doing 35-40,000 km per year are cheaper on a TCO basis than equivalent petrol vehicles (Gen Less, 2020) 48 (Stevenson et al., 2018) 49 (New Zealand Productivity Commission, 2018) 45
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There is also a lack of supply volume from second-hand markets. Most of the electric vehicles brought into the Aotearoa fleet are used cars, predominantly from Japan and Aotearoa increasingly competes with other countries for low emission used Japanese vehicles. Second hand electric vehicles are older technology and may have smaller battery range than newer models. The batteries in second hand electric vehicles may also have already degraded to some degree. Electric vehicles require charging infrastructure and network up-grades or new power lines may also be needed, especially for high capacity rapid chargers. These costs are relatively small and most drivers will use a mix of home chargers and public charging stations. Overall the impact on the electricity system is likely to be modest. The Interim Climate Change Committee estimated that converting half of the vehicle fleet, including heavy vehicles, to electricity would increase electricity demand by 10%.50 However, the coordination of electric vehicle charging times is a potential challenge for some local lines’ networks. There is the risk that people coming home and plugging their electric vehicles in after work at the same time may lead to greater evening peak demand, putting local lines under pressure and pushing up network costs.51 Conversely, pricing encouraging overnight charging could potentially improve network utilisation, reducing overall network costs and improve the economics of wind generation, as well as further reduce costs for electric vehicle owners. Many low- and middle-income households and those in rental housing or apartments, may find it much harder to access and use electric vehicles compared to those owning their own homes. If there is no suitable three pin plug access (or wall charger) at a rental property, there is little benefit for the landlord to put one in and no security for the renter to make it worthwhile installing one at their own cost. This is particularly relevant for households who are disproportionately represented in low income and rental housing. Similarly, many apartment buildings have not been designed with electric vehicles in mind and therefore there is inadequate charging infrastructure. Through Māori-collectives, iwi/Māori and hapū there is an opportunity for collaboration to create a network of electric vehicle charging stations throughout Aotearoa that would encourage tourist and tourism operators in the regions, although the cost could be a barrier.52 There is potential for Government and Māori to partner to utilise Marae as rural and regional charging stations. In times of emergency Marae are often well positioned to support local communities. The potential of charging stations will need to be negotiated with each Marae Trust.
50
(Interim Climate Change Committee, 2019) (Energy News, 2020) 52 Evidence Report, Chapter 6: Māori sector 51
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There are unexplored opportunities for the electrification of taxis and light vans, which are high mileage vehicles and can therefore deliver high rates of emissions reductions. These may require additional public charging infrastructure in city centres to encourage transition. For example, dedicated electric vehicle charging infrastructure for electric vehicle taxis is being rolled out in London.53
Electrification of trucks and buses
There are also challenges of relying on electrification. Prioritising electric vehicle uptake continues to encourage car dependency and contributes to demand for low density development. Trucks and buses accounted for approximately 4 Mt of emissions in 2018 and there is significant potential for electrification. The actual emissions reduction for both trucks and buses will depend on the rate at which older diesel vehicles are replaced with battery electric vehicles or retrofitted to battery electric operation. There are challenges associated with battery electric heavy trucks due to the size, weight and cost of the batteries and time required to recharge them. These challenges are less of an issue for medium trucks typically used for local deliveries and other short-haul duties with lighter loads. Given this, the Commission estimates that emissions reduction potential of between 2 and 2.5 Mt each year. The economics of electrification for medium trucks are be similar to light vehicles, perhaps better, due to their higher utilisation. As battery technology continues to improve, further reducing battery costs and charging times, the challenges would be increasingly be limited to only the heaviest of trucks (greater than 30t gross vehicle mass) in long-haul service. These trucks typically operate near their legal load or size limits, and may need to reduce payload to accommodate batteries, making the economics of electrification less attractive. Cost projections suggest that by around the early 2020s, new medium battery electric trucks would be cheaper on a lifetime total cost basis than diesel trucks. By about 2030 even new heavy trucks would typically be cheaper on a lifetime total cost of ownership basis than diesel trucks.54 Battery electric buses are already beginning to roll out in Aotearoa. There are over 30 electric buses currently in service, with another 50 entering the fleet over the next year.55, 56, 57, 58 New battery electric buses are expected to have a lifetime total cost of ownership lower than diesel buses by the late 2020s.
53
(LEVC, UK, 2018) Climate Change Commission, ENZ model 55 (Auckland Transport, 2018) 56 (Bay of Plenty Regional Council, 2019) 57 (Greater Wellington Regional Council, 2019) 58 (Environment Canterbury Regional Council, 2018) 54
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Carbon dioxide emissions from public transport buses were estimated at approximately 0.12 Mt in 2017/18.59 Lifecycle analysis undertaken for Auckland Transport estimated that battery electric buses deliver 72% fewer greenhouse gas emissions compared to conventional buses.60 Electrifying public transport buses has significant co-benefits in urban areas because diesel fuelled public transport contributes significantly to air quality problems where many people are exposed to this pollution. Biofuels for trucks and buses
Biofuels offer the opportunity to reduce emissions in our current heavy vehicle fleet or for transport options that are hard to electrify. Biofuels can be blended with conventional petrol and diesel or be a 100% substitute, potentially reducing all emissions. The emissions reductions that can be achieved with the use of biofuels are highly specific to the feedstock, how its grown/recovered (for example whether irrigation is needed, whether it is a waste or by-product), how it is transported and processed, how much carbon dioxide is associated with the energy used in these stages and any impacts on land use changes to grow feedstocks. The “carbon intensity” (the combination of the things listed above) varies from 20% to 80%. In reality the emissions reduction potential in trucks and buses is likely to be split between electrification, biofuels and hydrogen. There are limitations with regards to biofuels, such as limits on the current engine technology to accept high biofuel blends, and the available supply of bioenergy and competing uses in the energy sector. The potential emissions reductions from biofuel are therefore likely to be in the range of between 20 and 50%. There are three main types of liquid biofuels used in the transport sector as a partial or full substitute for fossil fuels: • Conventional or “first generation” biofuels made with well-established technologies from a limited range of wastes and crops: biodiesel made from animal fats and vegetable oils, which is typically blended with diesel fuel; and ethanol from sugars and starches, which is typically blended with petrol. • “Second generation” biofuels made from non-conventional, but potentially more widely available feedstocks: ethanol from cellulose found in wood and grasses; and biodiesel from algae. First- and secondgeneration biofuels can be used in vehicles that are designed to handle them and may be suitable for use in many other vehicles when blended with fossil fuel. • Synthetic renewable fuels include synthetic jet fuel, diesel, and petrol made using advanced processing techniques from a variety of feedstocks including wood, other crops and waste. Unlike the first- and second-
59 60
(Waka Kotahi (NZ Transport Agency), 2020) (Auckland Transport, 2018)
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generation biofuels, these fuels are chemically identical to their fossil fuel equivalents. They are, therefore, often referred to as ‘drop-in’ fuels, since they can be freely used in any conventional vehicle. The cost of first- and second-generation biofuels can vary greatly depending on the feedstock used, however are generally more expensive than fossil fuel. The cheapest feedstocks, such as various waste products, tend to be available in limited quantities. Biofuels are internationally traded, much like petroleum products, so their price will fluctuate with supply and demand shifts in other parts of the world. There is potential for biofuels to be an export product as well as a domestic emission reduction Since synthetic renewable fuels are a chemically identical substitute for fossil fuels in any vehicle, they provide a solution that could work for types of transport that will be difficult to electrify or otherwise reduce in the foreseeable future. The synthetic renewable fuels tend to be expensive, with estimates of their wholesale, pre-tax cost in 2030 at about $1.20 per litre.61 This compares to about $0.70 per litre for fossil fuel at US$50 per barrel, which would work out to a cost of emissions reduction of over $400/tonne CO2e. For the consumer and the supplier, the additional cost of biofuels acts as a disincentive for increased use. For the producer, the profitability of making biofuel depends primarily on the price difference between the international price of biofuel feedstocks and the international oil price. Introducing biofuels at a commercial scale would require all parts of the value chain, from feedstock production to blending and distribution, to act in a coordinated way, and be profitable at each stage. Increasing domestic production of biofuels (either conventional or advanced) would require large quantities of feedstock and increased commercial scale production facilities. Work is ongoing across government to confirm what feedstocks are feasible and where they could be grown to achieve this without displacing food production.62 A 2018 Scion report, ‘New Zealand Biofuels Roadmap Summary Report’, concluded that credible large-scale biofuel production and use routes exist for Aotearoa based on sustainably produced feedstocks. The report also concluded that biofuels could provide transport fuel independence for Aotearoa. However, it found that the market alone would not bring about a biofueled future for Aotearoa. Unlike many countries, such as in Europe or the UK, Aotearoa does not have any specific policies requiring or supporting the use of biofuels. An emissions price under the Emissions Trading Scheme would need to be very high since the current emissions price is a small component of fuel prices (compared to the total costs of importing and distributing fuel and the total taxes on fuel). The 61 62
(Concept Consulting, 2020) (Ministry of Transport, 2020a)
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Productivity Commission has suggested that even with a significant increase to the emissions price, additional measures would be needed to achieve large emissions reductions from transport. This is because transport fuel is a relatively inelastic product, which means that changes in price have little influence on demand.63 Hydrogen trucks and buses
Hydrogen can be used to power a wide range of vehicles and may be particularly valuable for areas of transport that would be hard to electrify, such as large, long distance trucks and inter-city buses. Green hydrogen used in trucks and buses, in particular, is an emerging solution. Trucks over 30 tonnes gross vehicle mass, which are the ones that are typically close to legal weight or size limits, accounted for approximately 1.4 Mt CO2e of the roughly 3.7 Mt CO2e of medium and large truck emissions in 2018. These are the vehicles that could be replaced by hydrogen trucks (or other alternatives such as shifting more freight to rail, biodiesel, a battery-swapping system, or more advanced battery technology). We have focused on green hydrogen because Aotearoa has the potential for a long-term green hydrogen economy through its abundance of renewable energy, water, infrastructure potential, and highly skilled workforce.64 Blue hydrogen could be used in the transition to a zero carbon economy. However, its reliance on carbon intensive gas supplies and carbon capture and storage (CCS) technology mean it may not be an appropriate long-term solution for climate change action in Aotearoa. Māori have indicated they would like opportunities, build capacity, and develop people through education.65 One Māori business is leading the charge when it comes to hydrogen energy in Aotearoa.66 In a world-first with Japan, the Aotearoa government in cooperation with the government of Japan in October aims to foster the development of hydrogen technology between the two countries. Tuaropaki Trust in conjunction with Obayashi Corporation of Japan is contributing to a global quest to remove a reliance upon fossil fuels and creating a lower carbon economy. In fuel cell electric vehicles, hydrogen is stored in fuel tanks under pressure. Hydrogen is converted to electricity in the fuel cell, then the electricity is used to drive an electric motor. Due to the conversion losses involved in making hydrogen from electricity, and then converting the hydrogen back to electricity on the vehicle, nearly three times the amount of energy is required to power a truck with green hydrogen compared to a battery electric truck. Therefore, batteries are usually more efficient at powering vehicles except in cases where the use of batteries is not practical. The most likely road vehicles
63
(New Zealand Productivity Commission, 2018) (Venture Taranaki, 2018) 65 (Ministry for the Environment, 2007) 66 (Tuaropaki Trust, 2017) 64
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where use of batteries may not be practical are generally trucks that travel longdistances with heavy loads, or off-road machinery or vehicles, which would be difficult to power with existing battery technology. The limitations of battery trucks are especially critical for trucks that are so large that they are near the legal weight or size limits, which means any additional batteries carried would reduce the amount of payload the truck can carry. The supply of green hydrogen is current limited, though Aotearoa has abundant renewable electricity available to make it. Work is underway across the private sector to build hydrogen plants and develop a refuelling network.67 Green hydrogen would need to become more cost competitive with both fossil fuels and battery electric vehicles. Costs are uncertain, but recent analysis suggests the marginal cost of emissions reduction of green hydrogen in 2030 as $425 per tonne CO2-e. For comparison, the marginal cost of emissions reduction of other heavy truck emissions reduction options were estimated as $109tCO2-e for battery electric trucks68 and $190 tCO2-e for drop-in biofuels.69,70
Aviation
Adopting hydrogen at scale would require innovation along the value chain, scaling technologies, significantly reducing costs, deploying enabling infrastructure and defining appropriate national and international policies and market structures.71 Domestic air travel makes up approximately 1.1 Mt of transport emissions in 2018. Early actions to help reducing emissions in air travel includes improvement on airspace operations and infrastructure efficiency with collaborations between airlines, airports and air traffic management.72 These initiatives have the potential to achieve up to 10% improvement in fuel efficiency.73 Low emissions options for air travel are emerging, with some adoption possible in the next 10 years, but widespread deployment likely to be at least 15 years away. Small electric aircraft are currently in experimental operation, but the limiting factors preventing more widescale electrification of the sector are the weight and energy storage capacity of the batteries. Electric aircraft are, therefore, likely to be limited to short-haul flights for the foreseeable future. Regional air services operated by battery electric aircraft are anticipated to be operating by 2030. Such services would be able to cover routes up to 650 km,
67
(Ministry of Transport, 2020a) Assuming that battery electric trucks: 50% top-up charge during the day, for trucks that charge fully overnight the abatement cost is -$40 per tonne CO2-e 69 Assuming delivered costs of logs to biorefinery = NZ$80 per tonne. Resulting cost of fuel = $30.4/GJ. 70 (Ministry for the Environment, 2020b) 71 (Pflugmann & De Blasio, 2020) 72 (Kharina, Rutherford, Zeinali, 2016) 73 (ICAO State Action Plan for CO2 Emissions Reduction - Germany, 2018) 68
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which would allow some commercial domestic flights to be electrified. By 2040, electric aircraft could to be able to service routes up to 1,200 km. This would allow a greater amount of domestic aviation to be electric.74 Sounds Air, a small regional airline focused on short flights across the Cook Strait, recently signed a letter of intent to purchase electric aircraft with the Swedish company Heart Aerospace. Heart is aiming to manufacture 19-seat aircraft for commercial flights in 2026.75 For long haul flights (both domestic and international) sustainable aviation fuel (SAF) is likely to provide the biggest opportunity to reduce emissions, or e-Fuel. Sustainable aviation fuels use feedstocks such as agricultural residues, woody biomass, municipal waste and waste gases that can be continually and repeatedly resourced in a manner by avoiding depletion of natural resources.76 The process for producing SAF is also likely to produce sustainable biofuel to be used in the wider transport system. Electrofuels, or e-fuels, are liquid fuels which could be made from hydrogen and captured carbon dioxide. They can be used in can be used in internal combustion engine vehicles and are another possibility in the future. The use of sustainable aviation fuels is currently minimal. Currently, there is no commercially viable SAF supply in Aotearoa. In offshore ports where SAF is being produced, it has been supported to market by public funding and policy.77 However, business initiatives have begun in Aotearoa. Air New Zealand, Z Energy, Refining NZ, SCION and Auckland International Airport have set up a joint initiative to investigate how they could transition aviation fuel into domestically produced biofuels.78 There may also be a reduction in business travel as a result of increased use of digital meetings, however the extent of this is currently unknown. Shipping
In 2018, emissions from coastal shipping contributes to 230 kt CO2e. Domestic shipping moved about 13% of the total freight tonne per kilometre.79 A study by Waka Kotahi on comparative costs, fuel consumption and carbon emissions for freight transporting shows both shipping and rail were lower carbon dioxide emissions than road transport.80 This suggests there is the potential to further reduce emissions by shifting freight from roads to shipping.
74
(Daswani, Armitage, Boscarol, et al, 2019) The airline's board chair and director, Rhyan Wardman, states that the electric planes will not cost a lot more than the usual ones for the airline. They have a 400 nautical mile range, and take only about 20-40 minutes to recharge (RNZ, 2020). 76 (Air Transport Action Group, 2020) 77 (Smit & Stevenson, 2020) 78 (Sustainability Report, 2019) 79 (Ministry of Transport, 2014) 80 (Cenek, Kean, Kvatch, Jamieson, 2012) 75
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The primary options to reduce emissions from coastal shipping itself are: • Manage the performance of existing vessels • Improve the fuel efficiency of new vessels entering the fleet • Switch from bunker fuel to lower carbon emission fuels, such as biofuels, ammonia, hybrid or battery electricity. According to the International Energy Agency (IEA), ship efficiency, in terms of energy tonne/km, has been improving globally at around 1.6% per year over the period between 2000 and 2017.81 This improvement can be used as a proxy for global improvement in coastal shipping. In Aotearoa, where there are currently only 12 vessels providing a domestic shipping service, and the entire fleet typically sees a single vessel replacement only every few years, the rate of improvement will be uneven. In addition, there have been some recent additions to the domestic fleet which have had poorer than global average emissions ratings. Two replacement vessels to be used for the Interislander’s Cook Strait service are currently being sought. Kiwirail has stated the vessels will have “the latest propulsion systems, and able to run on battery power at times. KiwiRail is also future proofing the design so new fuel sources can be adopted as they become available.” 82 The new vessels are expected to be in service from 2024 and 2025 and will replace the three existing ferries and will be able to carry three times as many rail wagons and almost double the number of trucks. Aotearoa has recently announced it will sign up to the International Maritime Organisation MARPOL Annex VI from late 2021, which could lead to several positive benefits including reducing carbon dioxide emissions and improving air quality around ports and harbours.83 Aotearoa does not have a large dry-dock facility so the opportunity for retrofit technologies on coastal ships, including relatively simple GHG emission reduction activities such as hull cleaning and application of hull coatings, requires vessels to make a voyage to suitable facilities in Singapore or Sydney. There is additional expense, vessel downtime and emissions from fuel consumption for the international voyage.84 Rail
Rail accounted for 0.12 Mt of transport emissions in 2018. Large parts of our rail network already run on electricity via overhead wires. Electrification of additional freight lines, in combination with battery electric or green hydrogen trains on other lines today would eliminate direct CO₂ emissions from rail and
81
(International Energy Agency, 2020) (KiwiRail, 2020) 83 (Ministry of Transport, 2019b) 84 (New Zealand Shipping Federation, 2020) 82
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reduce emissions by 0.1 Mt CO₂. A shift of freight from road to rail could provide further emissions reduction potential. The majority of the North Island Main Trunk (NIMT), between Te Rapa (north of Hamilton) and Palmerston North is already electrified (412 km).85 The main trunk lines on the North Island could be fully electrified by filling the remaining non-electrified gaps between Auckland and Wellington, as well as electrifying the East Coast Main Trunk (ECMT) between Mount Maunganui (Bay of Plenty) and Hamilton. Kiwirail estimates a cost of $2.5 million per km to electrify track.86 87 Due to the cost involved, railway electrification can generally only be justified on high volume routes.88 For non-electrified lines, battery electric locomotives could be an option in our second and third Budget periods as this is at the early deployment and demonstration technology stage. One hundred percent battery-electric road locomotive prototypes are being developed that work with conventional diesel locomotives to make a battery-electric hybrid consist. (Consist refers to when two or more locomotives are coupled together.)89 The Ministry for the Environment Marginal Abatement Cost Curve (MACC) analysis estimated that battery electric locomotives, with batteries sized to enable recharging overnight, are likely to have a negative carbon cost by 2030 (i.e. they would cost less than diesel) based on a battery cost of US$140/kWh. In addition to the potential for emissions reduction, there are wider benefits to rail electrification. These include improved freight logistics (eliminating the need to swap between diesel and electric locomotives), reduced fuel costs, higher speeds, and better acceleration. Shift freight from road to rail and coastal shipping
Shifting freight from roads and onto rail or coastal shipping could provide further emission reductions. In 2019, approximately 16% of the total amount of freight moved around Aotearoa was hauled by rail, and accounts for about 21% of freight shifted between regions.90 Every tonne of freight moved by rail produces around 70% less carbon dioxide emissions compared with current long-haul trucks, although the exact emissions reduction potential and costs will vary. However, there are also some challenges, including that a lot of freight in Aotearoa moves over short distances, and not all locations have access to rail/coastal shipping. Many sectors are driven by “just-in-time”, or “delivery on
85
The North Island Main Trunk is the main railway line in the North Island connecting Wellington and Auckland and is 682 kilometres long. 86 (The Treasury, 2016) 87 (International Energy Agency, 2019) 88 In addition to the potential for emissions reduction, there are wider benefits to rail electrification. These include improved freight logistics (eliminating the need to swap between diesel and electric locomotives), reduced fuel costs, higher speeds, and better acceleration. 89 (BNSF, 2019) 90 (Ministry of Transport, 2014)
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demand” business models, so goods need to be delivered quickly and very reliably (such as perishable goods). These models limit the ability to shift travel type as they prioritise timeliness and reliability over other objectives and are most likely to be carried by electric trucks in the future. The additional handling and cost of shifting freight from trucks to rail can be also prohibitive where distances are short. Rail and coastal shipping would need to offer freight operators more reliable services than road to make a significant impact on road freight volumes. Use of low carbon fuels for off-road vehicles and heavy machinery
Gross emissions from the combustion of fossil fuel for the agricultural, mining and construction sectors who typically use diesel fuel for trucks, diggers, tractors, loaders, and other heavy vehicles used for earthworks, off-road transport and transportation totalled about 2 Mt in 2018.91 Electrification will generally be an applicable low emission alternative for this activity however there may be some particular use for which it is not suited, and low carbon fuels may be more appropriate. Available electric versions of off-road vehicles are considerably more expensive that internal combustion engine versions currently. Vehicle production costs need to fall considerably in order to be cost competitive to produce and own. However, energy and maintenance costs may mean that electrified options can compete on a total cost of ownership basis. Farmers, contractors and others in rural communities need vehicles that can carry heavy loads or access rugged or remote locations, such as a single or double-cab ute. Farm bikes and quad bikes are also an essential part of farming and rural landscapes. For these needs, there are costeffective solutions available now, or will be in the next few years. Ford have scheduled fully electric versions of their F-150 pick-up and Transit van by 2022,90 and fully electric utes from other manufacturers are expected to be available in the Aotearoa within the decade. Similarly, there are electric 2and 4-wheeled motorbikes available in Aotearoa now, including the locally designed and manufactured UBCO farm bike. The mining, construction and agriculture sectors encompass a broad range of activities and currently there is generally not a commercially available vehicle alternative. However, there are niche examples of electrified heavy trucks which are already in use internationally92. Electric mining trucks have further advantages in underground mining operations as they reduce the requirement for energy for ventilation.
91 92
(Ministry for the Environment, 2020c) (Boilden Aitik, 2020)
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4b.2 Urban form Transport emissions and urban form are closely inter-linked. In particular, low-density residential development – urban sprawl – is associated with higher transport emissions. Cities with a low average population density are more spread out and their economic hubs (employment, education facilities, residences, shopping centres) are located farther from each other. The resulting longer travel distances make walking and cycling less attractive, and the follow-on less concentrated travel demand is difficult to serve with convenient public transport. Hence, transport demand in such cities is likely to be met by privately-owned passenger cars. This results in relatively high per capita vehicle kilometres and emissions. Around 85% of New Zealanders live in urban areas with populations greater than 50,000.93 As a result, much of the country’s transport emissions occur within these urban areas. Cities can ‘grow up’ or ‘grow out’. Historically, cities in Aotearoa have had a tendency to grow out, resulting in growth at the urban boundary rather than the urban centre.94 The result has been sprawling caroriented cities in the style typical of Australia or North America, rather than the more compact transit-, cycling-, and pedestrian-oriented cities typical of Europe and many parts of Asia. Outward growth can also have other effects, such as the loss of agricultural land, and push up the price of food.95 Shifting toward more compact urban design could therefore, be a key long-term goal of urban planning. According to a report by the Intergovernmental Panel on Climate Change (IPCC)96: “Urban planning that decreases the need for carbon-intensive transportation in the long term – such as compact, pedestrianised cities and towns – plays an important role in limiting future emissions. Such planning, coupled with policies that encourage improve fuel efficiency; zero emission vehicles; and model shifts toward walking, cycling, public transport, and shorter commute distances, is key to decarbonisation.” As the quotation highlights, higher density is not the only aspect of urban planning that influences emissions. Density needs to be coupled with quality infrastructure for walking, cycling, and public transport, as well as street designs that make walking and cycling safe and pleasant. There are numerous studies examining the emissions reduction potential from compact urban planning and design. For example, the Productivity Commission notes that higher density urban centres can reduce vehicle kilometres travelled per capita by between 5 and 12%.97 A study by the Stockholm Environment Institute highlights that urban planning for compact urban form can reduce emissions by 5% by 2030 and 6% by 2050.98 However, the potential to achieve emissions from land use change is slow, buildings typically last between 50-100 years and infrastructure lasts for at least 100 years. Therefore, we need to ensure a stronger and more deliberate relationship between urban planning, design and transport immediately. Ensuring this happens at planning stage is more effective than retrofitting transport needs. Evidence from both the New Zealand Census and Household Travel Survey demonstrates that residents of higher density, centrally located areas have significantly lower emissions from transport 93
(New Zealand Productivity Commission, 2018, p. 493) (Productivity Commission, 2017, p. 80) 95 (Deloitte, 2018) 96 (IPCC, 2018) 97 (New Zealand Productivity Commission, 2018, p. 493) 98 (Stockholm Environment Institute, 2014) 94
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than residents of lower density, less central areas. Census data shows that residents of higher density areas have lower car ownership rates, have shorter commutes (in research examining Wellington), and are less likely to commute via car. New Zealand Household Travel Survey data also shows that residents of denser areas have lower overall vehicle kilometres, and thus lower carbon dioxide emissions.99 Reducing emissions is just one of the reasons Aotearoa could be moving toward the compact urban design principles outlined here. A report by the Public Health Advisory Committee of the Ministry of Health pointed out that: “If designed appropriately, urban form and transport can increase physical activity, improve air quality, reduce road traffic injuries, increase social cohesion, and achieve maximum health benefits from services and facilities. Urban form can also help create a sense of place. This is important for the health and wellbeing of all populations living in urban areas, especially Maori”.100 Many parts of Tāmaki Makaurau and other major urban centres, where largely lower socioeconomic groups live, have been under invested in for decades in terms of transport amenity. To prioritise investment into public transport in areas of high social deprivation would benefit low emission economy targets. Prioritising areas such as South Auckland and West Auckland would reduce carbon and be beneficial for social and health purposes. In short, a shift toward compact urban design can offer both lower emissions and a higher quality of life.
4b.3 Buildings Buildings are associated with two different sources of emissions: 1) on-site combustion of fossil fuels and electricity use to operate the building101 and 2) the emissions associated with the materials and energy involved in construction. Emissions from the on-site combustion of fossil fuels accounted for 1.5 Mt CO2, or 2% of our gross emissions in 2018.102 These emissions stem primarily from fossil fuel use to heat spaces, provide hot water and to cook. In non-residential buildings, such as hospitals, cleaning and sterilising equipment are additional uses of energy. Buildings range in size and purpose, including single detached homes to warehouses to high-rise commercial towers to health care facilities. Direct emissions associated with on-site fossil fuel use from buildings are linked to the total number of buildings in Aotearoa. The number of buildings in Aotearoa has been slowly increasing as our population size grows and economic activity increases. However, these direct emissions have remained stable over time due to increasing energy efficiency, an increasingly renewable electricity system, increased consumer awareness, and higher building standards.
99
(Chapman & Dodge, 2016) (Public Health Advisory Committee, 2010) 101 Lighting is powered from electricity which contributes to indirect electricity emissions rather than direct onsite fuel combustion emissions. Electricity emissions are not attributed to buildings in the inventory. The Commission’s analysis addresses electricity emissions at the point of generation rather than at the end user. 102 When indirect electricity generation emissions are attributed to buildings based on energy demand and energy end use data from the Ministry of Business, Innovation and Employment (MBIE), this increases to 5%. 100
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Buildings are also significant electricity users and at times influence the amount of fossil fuel generation in the electricity system. For example, residential buildings are often a driver of periods of peak demand (cold winter nights) and this peak is often met by coal or gas generation.
Figure 4b.3: Emissions from on-site fossil fuel use in buildings, 1990-2018103
There are also emissions associated with the production of construction materials, construction and renovation, and demolition over the lifecycle of a building. The emissions associated with building materials are partially accounted for under Chapter 4a: Reducing emissions – opportunities and challenges across sectors: Heat, Industry and power, for example, in the manufacture of steel, cement and wood products. Industrial production activity and related emissions from the manufacture of materials is influenced by domestic and international demand for them in the construction sector. Note that the construction sector encompasses other infrastructure such as roads and bridges and is not exclusive to buildings. While emissions from operational energy use in buildings account for a relatively small proportion of gross emissions, they are long-lived assets so the type of fuel we use and when we use it are important factors when considering emissions from buildings. For example, many of the residential buildings that exist today will exist in 2035 and 2050. Consideration of materials and functionality during building design can contribute to emissions reduction as well as other benefits such as building warmth, safety and occupant well-being.
4b.3.1 Options for reducing emissions This section outlines the opportunities and challenges related to options for emissions reduction in buildings. Overall, the evidence summarised below shows that continued efforts to improve energy efficiency are important to reduce emissions while providing co-benefits related to occupant health and well-being. While energy efficiency measures are commercially mature and widely available, further opportunities exist and have not been adopted for a myriad of reasons.
103
(Climate Change Commission ENZ Model results, 2020)
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The greatest opportunity for emissions reduction across our building inventory is fuel switching from coal or natural gas boiler systems to low emissions alternatives like biomass and electricity. Deterring investment in fossil fuel fired assets and new connections to the natural gas grid during new build design are important opportunities to prevent emissions lock-in from long-lived assets. In existing buildings, stronger government direction and support along with strengthened requirements under the Building Code would be needed to transition away from fossil fuels for space and water heating, and to improve the thermal envelope. Emissions reduction opportunities related to improved energy efficiency and a transition away from fossil fuel heating can potentially also support iwi/Māori aspirations for affordable, warm and dry housing. This would have health co-benefits including reduced time away from school due to illness and lower heating costs. These health co-benefits could be realized across Aotearoa. Some whānau are collaborating in papakāinga housing developments104 which can serve as a model for community housing. For example, some papakāinga designs incorporate communal kitchen and washing facilities and are built using local natural materials. This can reduce the energy and emissions associated with the manufacture and transport of building materials to site. Whare uku105 are a cement, earth and fibre mix that might be an emissions reduction opportunity for buildings. Whare uku utilise mostly locally available materials. These materials provide additional benefits related to building insulation, durability, ease of construction, and cost-effectiveness. It draws on traditional iwi/Māori knowledge, with similarities to maioro (fortifications) in pā construction. In addition to consumer choices regarding energy and technology use, the construction sector has a role to play during the design and construction of a building. Designing resilient, high-performance buildings and choosing materials that are lower emissions and/or produced with waste minimisation principles can help reduce emissions over the life of the building. This can be supported through ongoing and planned improvements to the Building Code and New Zealand Standards.106 As our country’s population continues to grow, the choices around how buildings are designed, built, and used, and where they are located, will influence overall emissions. Table 4b.3: Opportunities and challenges for reducing building emissions Option Materials & construction
Opportunities and Challenges Embodied carbon accounts for greenhouse gas emissions that are generated throughout the supply chain of a material, generally from raw material extraction to demolition (cradle to grave). Reducing demand for emissions intensive construction materials can be achieved through design choices, selecting lower carbon dioxide alternatives or optimising material manufacturing. For example, precision design and manufacturing to optimise steel framing can add strength where required and remove material or thin it out where additional strength is not required. Precision manufacturing and prefabricated building components may help
104
(Te Puni Kōkiri, 2017) (Morgan, 2012) 106 MBIE has a significant programme of work to reform the buildings and regulatory system and building and construction sector, and ensuring all buildings are safe, healthy and durable. 105
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reduce emissions and waste over the lifecycle of a building through improved resource efficiency. In some cases, using wood-based products could remove CO₂ from the atmosphere and store it for the life of the building. Negative embodied carbon means that carbon dioxide sequestered during the growth of trees for building materials may be greater than the emissions produced during their manufacture. For example, the embodied carbon for structural steel columns and beams is 2.85 kg CO2e per kg compared to -1kg CO2e per kg for glued laminated or cross laminated timber from sustainably managed forests.107 As such, increasing the use of wood products in the built environment108 can reduce emissions and provide long-term storage of carbon dioxide. Green construction capital cost estimates vary widely. One of the barriers to the adoption of better design choices and lower emissions materials is industry perception of a cost premium on the construction of high-performance, sustainable buildings built beyond the minimum Building Code requirements. There are also perceptions of risk towards using new materials and practices, individual preferences towards familiar technologies and materials, and limitations in the Building Code. Strengthening the Building Code and raising the minimum requirements is a critical opportunity to ensuring that buildings are resilient and durable to withstand current and future climatic conditions. However, there can be mismatches between those baring the cost of low emissions technologies, materials and practices and those accruing the benefits. These costs may be passed on to building occupants or buyers which may impact affordability. For residential buildings, one study estimates additional capital costs ranging from less than 2% to nearly 20% for building beyond the minimum requirements under the Building Code, depending on the energy efficiency achieved and location. However, savings during the operation of the building usually offset the additional capital costs, resulting in net benefits for the occupants over time. 109,110 The difference in construction costs also depends on whether the materials are produced domestically or imported, location, and whether the building was part of a volume build or a bespoke project. Costs will also be influenced by the extent to which prefabricated or modular components are used. Given the range of applications, it is difficult to determine the cost and emissions reduction potential of transitioning towards a more resource and materials efficient building stock.
107
(BRANZ, 2020) The substitution of materials, for example, structural engineered wood products in place of steel, and resulting operational performance would be dependent on building design and use. The extent to which materials can be substituted would in part be determined by compliance with the Building Code and New Zealand Standards. 109 (Bealing, 2020) 110 (Sense Partners, 2018) 108
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See also Chapter 4a: Reducing emissions – options and challenges across sectors: Heat, industry and power; Chapter 4d: Reducing emissions – options and challenges across sectors: Waste; and Chapter 5: Removing carbon from our atmosphere (Forestry section). Operating (onsite use of fossil fuels and electricity use)
Emissions from fossil fuels used for heating of commercial and public buildings totalled 0.7 Mt CO2 in 2018 of which 60% was from boiler systems.111 In residential buildings, emissions from the combustion of gas for space and water heating was approximately 0.7 Mt CO2112. Emissions from on-site fossil fuel use can be reduced through increased energy efficiency and fuel switching. For example, switching a building’s coal or natural gas heating system to biomass or electricity. The high energy efficiency that electric heat pumps provide, when properly sized and installed, is ideally suited for space heating applications where temperature requirements do not typically exceed 25oC. The energy efficiency of a heat pump will also be influenced by location, for example, whether the building is located in Christchurch or Hastings. Replacing a centralised boiler system with heat pumps can also enable separate buildings within a complex, such as a hospital, to operate individually and adjust heat outputs in response to seasonal variations, building occupancy, and changes in daily use. However, heat pump systems may not be compatible with some existing heat distribution systems in large buildings and retrofitting could increase project costs. Other options include heat recovery systems and improvements to the thermal envelope.113 Improvements to the thermal envelope includes optimising insulation and window glazing, achieving passive heating and cooling, natural ventilation, and updating the building’s thermal control systems. Because buildings have a long operational life, efficiency gains can achieve significant long-term energy and emissions savings. There are significant remaining opportunities for energy efficiency and fuel switching in public buildings. These buildings include schools, health care facilities and other public sector buildings, many of which use coal fired boiler systems. In 2018, public buildings used approximately 0.3 petajoules (PJ) of coal, diesel or fuel oil in boiler systems to provide space and water heating.114 A $200 million Clean Powered Public Service Fund is supporting the transition of public buildings to low emissions alternatives. As of October 2020, 26 schools, seven hospitals, and four universities have been allocated a total of $60 million to replace coal boilers, increase energy efficiency and improve the building
111
(Energy Efficiency and Conservation Authority, 2020) (Energy Efficiency and Conservation Authority, 2020) 113 A building’s thermal envelope include the walls, windows, ceiling/roof and floor of a building. They are the critical components that separate the interior environment from the exterior environment, retain heat, and prevent the ingress of air, water, and moisture. 114 (Energy Efficiency and Conservation Authority, 2020) 112
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thermal envelope.115,116 Recent Government commitment to a carbon neutral public service by 2025117 is anticipated to accelerate action and will include, among other things, the phase out of all coal boilers, conversion of the government fleet to electric vehicles, and implementation of an energy efficiency building standard. Additionally, there are over 60,000 state homes in Aotearoa that will benefit from an announced $500 million investment in upgrades and renewals. Improvements will include full insulation of the homes with wall, ceiling and floor insulation, double glazing, improved airtightness, ventilation and new heating to ensure a healthy indoor living environment.118 A further 600,000 households who rent are expected to benefit from thermal envelope and energy efficiency improvements though the Healthy Homes Standard. While measures to reduce energy demand and emissions are commercially mature and widely available, further opportunities remain that have not been adopted. Tradespeople, property managers and building occupants can lack the capacity or expertise to obtain, understand and analyse the information and options available for their respective circumstances. For example, building developers or property managers may not be incentivised to reduce energy demand because they bear the costs of implementing technologies, but the tenant receives the benefits of lower energy costs and improved building comfort and safety. Additionally, the capital cost of the technology is often prioritised over its whole-of-life costs. The requirement for rapid payback periods on the upfront capital cost limits uptake of energy efficient technologies. Conversely, cost-benefit analysis and calculation of payback periods are not always undertaken. The emissions reduction cost of energy efficiency and fuel switching measures in buildings is highly variable. Costs would depend on the building’s condition or age, layout, infrastructure (metering and cabling), and size of the equipment required. The rate of transition and transformation of energy use in buildings would also be dependent on availability of skilled expertise to undertake the work, alignment with natural capital replacement cycles to minimize risk of stranded assets, and availability and ability of low emissions technologies to meet the technical requirements of heating and cooling, particularly in high-rise commercial buildings. See also Chapter 4a: Reducing emissions – opportunities and challenges across sectors: Heat, industry and power (Electricity System section)
115
(New Zealand Government, 2020b) (New Zealand Government, 2020c) 117 (New Zealand Government, 2020d) 118 (New Zealand Government, 2020a) 116
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4b.3 References Air Transport Action Group. (2020). Way Point 2050: Balancing growth in connectivity with a comprehensive global air transport response to the climate emergency. Air Transport Action Group. https://www.aviationbenefits.org/media/167187/w2050_full.pdf Auckland Council. (2020). Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan. Auckland Council. https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-bylaws/our-plansstrategies/Pages/te-taruke-a-tawhiri-ACP.aspx Auckland Transport. (2018). Auckland’s Low Emission Bus Roadmap. https://at.govt.nz/media/1980070/low-emissions-bus-roadmap-dec-2018.pdf Automobile Association. (2020a). Real world vehicle fuel consumption. https://www.aa.co.nz/about/aa-research-foundation/programmes/real-world-fuelconsumption/ Automobile Association. (2020b). Top 10 NZ new vehicles sold in 2019. Motoring Blog. https://www.aa.co.nz/cars/motoring-blog/top-10-nz-new-vehicles-sold-in-2019/ Bay of Plenty Regional Council. (2019). Electric buses hit streets of Tauranga. https://www.boprc.govt.nz/your-council/news/news-and-media-releases/media-releases2019/october-2019/electric-buses-hit-streets-of-tauranga Bealing, M. (2020). Building Beyond Minimum Requirements: A literature review (External Report NZIER ER48 [2020]). BRANZ. https://d39d3mj7qio96p.cloudfront.net/media/documents/ER48_Building_Beyond_the_Mi nimum_Requirements-_Literature_Review_LR10997_QnEGO3u.pdf BNSF. (2019). BNSF leads the charge on testing battery-electric locomotive. https://www.bnsf.com/news-media/railtalk/service/battery-electric-locomotive.html Boilden Aitik. (2020). The world’s most efficient open-pit copper mine. https://www.boliden.com/operations/mines/boliden-aitik BRANZ. (2020). BRANZ CO₂NSTRUCT Database. BRANZ CO₂NSTRUCT. https://www.branz.co.nz/shop/catalogue/branz-co2nstruct_774/
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Cars Guide. (2019). New Toyota HiLux 2020: Everything you need to know about refreshed Ford Ranger rival. https://www.carsguide.com.au/car-news/new-toyota-hilux-2020-everythingyou-need-to-know-about-refreshed-ford-ranger-rival-74831 Cenek, Kean, Kvatch, Jamieson. (2012). Freight transport efficiency: A comparative study of coastal shipping, rail and road modes (New Zealand Transport Agency research report 497). New Zealand Transport Agency. https://www.nzta.govt.nz/assets/resources/research/reports/497/docs/497.pdf Chapman, R., & Dodge, N. (2016). Urban intensification and policies to reduce GHG emissions: An analysis of the Productivity Commission’s argument. http://sustainablecities.org.nz/wpcontent/uploads/Chapman-Dodge-3Oct16-submission-to-PC-on-urban-form-andemissions.pdf Concept Consulting. (2020). Assessment of the relative economics of “electro” and “bio” pathways to creating synthetic transport fuels. unpublished. Daswani, Armitage, Boscarol, et al. (2019). Electric Aircraft: Flightpath of the future of air travel. Citi Global Perspective & Solutions. https://www.citivelocity.com/citigps/electric-aircraft/ Deloitte. (2018). New Zealand’s Food Story: The Pukekohe Hub. Prepared for Horticulture New Zealand. https://www2.deloitte.com/content/dam/Deloitte/nz/Documents/Economics/horticulturenz-report-final.pdf Electrek. (2019). Daimler stops developing internal combustion engines to focus on electric cars. https://electrek.co/2019/09/19/daimler-stops-developing-internal-combustion-engines-tofocus-on-electric-cars/ Energy Efficiency and Conservation Authority. (2015). Life Cycle Assessment of Electric Vehicles. https://www.eeca.govt.nz/assets/EECA-Resources/Research-papers-guides/ev-lca-finalreport-nov-2015.pdf Energy Efficiency and Conservation Authority. (2020). Energy end use database 2017-2019. Te Tari Tiaki Pūngao - Energy Efficiency & Conservation Authority. https://tools.eeca.govt.nz/energy-end-use-database/
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Energy News. (2020). EV growth could trigger network issues. https://www.energynews.co.nz/newsstory/electric-vehicles/58223/ev-growth-could-trigger-network-issues Environment Canterbury Regional Council. (2018). Regional Land Transport Plan 2015-2025. https://www.ecan.govt.nz/your-region/plans-strategies-and-bylaws/canterbury-transportplans/ Gen Less. (2020). Vehicle total cost of ownership tool. https://tools.genless.govt.nz/businesses/vehicle-total-cost-of-ownership-tool/ Greater Wellington Regional Council. (2019). Region’s emissions growing, monitoring report shows. http://www.gw.govt.nz/region-s-emissions-growing-monitoring-report-shows/ Haerewa, N. (2018). Shared mobility in a Maori community. University of Otago. Health Research Council of New Zealand. (2017). New Zealand Index of Multiple Deprivation. http://www.imd.ac.nz/NZIMD_Single_animation_w_logos/atlas.html ICAO State Action Plan for CO2 Emissions Reduction—Germany. (2018). Federal Ministry of Transport and Digital Infrastructure. https://www.icao.int/environmentalprotection/Lists/States_Action_Plans/Attachments/33/ICAO%20State%20Action%20Plan%2 0for%20Emissions%20Reduction%20-%20Germany%202018.pdf Interim Climate Change Committee. (2019). Accelerated electrification: Evidence, analysis and recommendations (p. 117). https://www.iccc.mfe.govt.nz/assets/PDF_Library/daed426432/FINAL-ICCC-Electricityreport.pdf International Energy Agency. (2019). The Future of Rail: Opportunities for energy and the environment. https://webstore.iea.org/download/direct/2434?fileName=The_Future_of_Rail.pdf International Energy Agency. (2020). International Shipping: Tracking report. https://www.iea.org/reports/international-shipping IPCC. (2018). Summary for urban policy makers: What the IPCC special report on global warming 1.5 degree means for cities. https://www.ipcc.ch/site/assets/uploads/sites/2/2018/12/SPM-forcities.pdf
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Kharina, Rutherford, Zeinali. (2016). Cost assessment of near and mid-term technologies to improve new aircraft fuel efficiency. The International Council on Clean Transportation. https://theicct.org/sites/default/files/publications/ICCT%20aircraft%20fuel%20efficiency%2 0cost%20assessment_final_09272016.pdf KiwiRail. (2020). Next step for new generation Interislander ferries. https://www.kiwirail.co.nz/media/next-step-for-new-generation-interislander-ferries/ LEVC, UK. (2018). The electric taxi. LEVC. https://www.theelectrictaxi.co.uk/discovery-zone-2/faqs2/charging/ Mandic, S., Jackson, A., Lieswyn, J., Mindell, J., García Bengoechea, E., Spence, J. C., Wooliscroft, B., Wade-Brown, C., Coppell, K., Hinckson, E., & University of Otago. (2019). Turning the tide: From cars to active transport. https://www.otago.ac.nz/active-living/otago710135.pdf Ministry for the Environment. (2007). Consultation with Māori on climate change: Hui report (p. 135). Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/consultation-maori-hui-report-nov07.pdf Ministry for the Environment. (2020a). About New Zealand’s Greenhouse Gas Inventory. Ministry for the Environment. https://www.mfe.govt.nz/climate-change/state-of-our-atmosphere-andclimate/new-zealands-greenhouse-gas-inventory/about-new Ministry for the Environment. (2020b). Marginal abatement cost curves analysis for New Zealand: Potential greenhouse gas mitigation options and their costs (p. 102). Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/marginalabatement-cost-curves-analysis_0.pdf Ministry for the Environment. (2020c). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealandsgreenhouse-gas-inventory-1990-2018-vol-1.pdf Ministry of Transport. (2014). National Freight Demand Study. https://www.transport.govt.nz//assets/Uploads/Report/National-Freight-Demand-StudyMar-2014.pdf
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Ministry of Transport. (2018a). New Zealand Vehicle Fleet Annual Spreadsheet. https://www.transport.govt.nz/documents-and-publications/SearchForm Ministry of Transport. (2018b). Vehicle Fuel Efficiency Standard Preliminary Cost-Benefit Analysis. https://www.transport.govt.nz//assets/Uploads/Report/VehicleFuelEfficiency.pdf Ministry of Transport. (2019a). Moving the light vehicle fleet to low-emissions: Discussion paper on a Clean Car Standard and Clean Car Discount. https://www.transport.govt.nz//assets/Uploads/Discussion/LEV-consultation-documentfinal.pdf Ministry of Transport. (2019). Transport outlook: Future state model results. Ministry of Transport. https://www.transport.govt.nz/statistics-and-insights/transport-outlook/sheet/updatedfuture-state-model-results Ministry of Transport. (2019b). MARPOL Annex Vi Treaty. https://www.transport.govt.nz/area-ofinterest/maritime-transport/marpol/ Ministry of Transport. (2020a). 2020 Green freight strategic working paper. https://www.transport.govt.nz/assets/Uploads/Paper/Green-Freight-Strategic-WorkingPaper_FINAL-May-2020.pdf Ministry of Transport. (2020b). COVID-19 Transport sector key indicators. https://www.transport.govt.nz//assets/Uploads/Report/COVID-19-Transport-IndicatorsDashboard-21-Sept-20.pdf Morgan, D. K. (2012). Whare Uku: Sustainable fibre housing. http://mediacentre.maramatanga.ac.nz/content/whare-uku-sustainable-fibre-housing New Zealand Government. (2020a). Boost to upgrade state housing to be warmer, drier, healthier homes. The Beehive. http://www.beehive.govt.nz/release/boost-upgrade-state-housing-bewarmer-drier-healthier-homes New Zealand Government. (2020c). Clean energy upgrade for more public buildings. Clean Energy Upgrade for More Public Buildings. https://www.beehive.govt.nz/release/clean-energyupgrade-more-public-buildings
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New Zealand Government. (2020b). Flicking the switch on a clean powered public service. Flicking the Switch on a Clean Powered Public Service. https://www.beehive.govt.nz/release/flicking-switch-clean-powered-public-service New Zealand Government. (2020d). Public sector to be carbon neutral by 2025. The Beehive. http://www.beehive.govt.nz/release/public-sector-be-carbon-neutral-2025 New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf New Zealand Shipping Federation. (2020). Advice to all political parties formulating their election policies on...the economy, infrastructure, transport and ...ships. http://nzsf.org.nz/news/advice-to-all-political-parties-formulating-their-election-policies-onthe-economy-infrastructure-transport-andships Nikkei Asia. (2018). Nissan to halt development of new diesel engines. https://asia.nikkei.com/Business/Companies/Nissan-to-halt-development-of-new-dieselengines Pflugmann, F., & De Blasio, N. (2020). Geopolitical and Market Implications of Renewable Hydrogen (p. 62). Harvard Belfer Center. https://www.belfercenter.org/sites/default/files/files/publication/Geopolitical%20and%20 Market%20Implications%20of%20Renewable%20Hydrogen.pdf Productivity Commission. (2017). Better urban planning. https://www.productivity.govt.nz/assets/Documents/0a784a22e2/Final-report.pdf Public Health Advisory Committee. (2010). Healthy places, healthy lives: Urban environment and wellbeing. A report to the Minister of Health. healthy places, healthy lives: urban environments and well-being Reuters. (2018). Volkswagen says last generation of combustion engines to be launched in 2026. https://www.reuters.com/article/us-volkswagen-emissions-combustion/volkswagen-sayslast-generation-of-combustion-engines-to-be-launched-in-2026-idUSKBN1O32O6
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Reuters. (2020). Survive, Revive, Thrive: Air New Zealand’s 800-day runway to healthy profits. https://www.reuters.com/article/us-air-new-zealand-outlook/survive-revive-thrive-air-newzealands-800-day-runway-to-healthy-profits-idUSKBN23E0TY RNZ. (2020). Sounds Air aims to offer first regional zero-emission flights. RNZ. https://www.rnz.co.nz/news/business/427098/sounds-air-aims-to-offer-first-regional-zeroemission-flights Sense Partners. (2018). Codebreakers: Constructing KiwiBuild homes to a standard above the New Zealand Building Code (p. 20). New Zealand Green Building Council. https://www.nzgbc.org.nz/Attachment?Action=Download&Attachment_id=1621 Smit, J., & Stevenson, T. (2020). Briefing to incoming Government Ministers on climate action priorities (p. 42). Sustainable Business Council, Climate Leaders Coalition. https://www.sbc.org.nz/resources/reports/sbc-reports/Briefing-on-Climate-ActionPriorities-3pm-Release-Version.pdf Stevenson, T., Batstone, D. S., Reeve, D., Poynton, M., & Comendant, C. (2018). Transitioning to zero net emissions by 2050: Moving to a very low-emissions electricity system in New Zealand (p. 141). Sapere Research Group. Stockholm Environment Institute. (2014). Advancing climate ambition: How city-scale actions can contribute to global climate goals. https://www.sei.org/publications/advancing-climateambition-how-city-scale-actions-can-contribute-to-global-climate-goals/ Stuff. (2020). Nissan Navara “all but guaranteed” to electrify. https://www.stuff.co.nz/motoring/121926616/nissan-navara-all-but-guaranteed-to-electrify Sustainability Report. (2019). Air New Zealand. https://p-airnz.com/cms/assets/PDFs/2019sustainability-report-v7.pdf Te Puni Kōkiri. (2017). A Guide to Papakāinga Housing. https://www.tpk.govt.nz/en/a-matoumohiotanga/housing/a-guide-to-papakainga-housing/ The News Wheel. (2019). Mitshibishi is stopping development of diesel engines. https://thenewswheel.com/mitsubishi-stopping-diesel-engine-development/ The Treasury. (2016). Information released under the Offical Information Act request (No. 2010441). https://treasury.govt.nz/sites/default/files/2017-11/oia-20160441.pdf 36 1 February 2021 Draft Supporting Evidence for Consultation
TomTom. (2020). Auckland traffic—Congestion level. https://www.tomtom.com/en_gb/trafficindex/auckland-traffic#statistics Tuaropaki Trust. (2017). Hydrogen Energy. http://www.tuaropaki.com/our-business/hydrogenenergy/ Venture Taranaki. (2018). H2 Taranaki Roadmap. http://about.taranaki.info/Tapuae-Roa/H2.aspx Waka Kotahi (NZ Transport Agency). (2020). Data and Tools. https://www.nzta.govt.nz/planningand-investment/learning-and-resources/transport-data/data-and-tools/ Wang, H. (2019). Real-world fuel economy of heavy trucks. http://www.knowledgehub.transport.govt.nz//assets/TKH-Uploads/TKC-2019/Real-worldfuel-economy-of-heavy-trucks.pdf
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Chapter 4c: Reducing emissions – opportunities and challenges across sectors Agriculture Agriculture contributes significantly to the Aotearoa economy, communities and culture. Farming livestock makes up the majority of agricultural emissions, with smaller contributions from horticulture and cropping. Agriculture emits the majority of biogenic methane emissions in Aotearoa and also makes a significant contribution to long-lived gas emissions. This chapter explores the sources of livestock emissions and opportunities for reducing emissions, including farm management and new technologies, along with the opportunities and challenges for each option. Emissions from farm vehicles and machinery are covered in the transport and heat, industry and power chapters.
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Contents Chapter 4c: Reducing emissions – opportunities and challenges across sectors: Agriculture ............ 1 4c.1 Agricultural emissions ..................................................................................................................... 3 4c.1.1 Options for reducing emissions................................................................................................ 6 4c.2 References ..................................................................................................................................... 19
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Agriculture contributes significantly to the Aotearoa economy, communities and culture. Farming livestock makes up the majority of agricultural emissions, with smaller contributions from horticulture and cropping. Agriculture emits the majority of biogenic methane emissions in Aotearoa and also makes a significant contribution to long-lived gas emissions. This chapter explores the sources of livestock emissions and opportunities for reducing emissions, including farm management and new technologies, along with the opportunities and challenges for each option. Emissions from farm vehicles and machinery are covered in the transport and heat, industry and power chapters.
4c.1 Agricultural emissions Agriculture makes a significant contribution to the Aotearoa economy, and has helped to shape our landscapes, communities and culture for generations. The ways land is used also impacts greenhouse gas emissions. Agricultural emissions in Aotearoa come from livestock farms, horticulture operations and arable cropping (Figure 4c.1). Farming of ruminant livestock makes up the majority of agricultural emissions and leads to the release of methane (CH4) and nitrous oxide (N2O). Aotearoa farms have changed significantly over time, as has their overall contribution to climate change. Aotearoa has a total land area of 26.8 million hectares. Almost 40%, about ten million hectares, is used for pastoral agriculture – predominantly dairy, sheep and beef farms. A relatively small area of land is used for horticulture and arable cropping – about 270,000 hectares or 1%. In Aotearoa, most emissions (90%) from the agriculture sector come from livestock farming, and the methane and nitrous oxide emitted are the result of complex biological processes. Agriculture emits 88% of biogenic methane and 18% of gross emissions of long-lived greenhouse gases. 1 Emissions from removing trees and changing to a different land use (deforestation) is covered in Chapter 5: Removing carbon from our atmosphere.
1
Ministry for the Environment (2020)
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100% 90%
Dairy
80%
Sheep
70%
Beef
60% Deer
50% 40%
Fertiliser
30%
Lime
20% Minor livestock 10% Crops
0% Biogenic Methane
Long-lived gases
Figure 4c.1: The breakdown of Aotearoa agricultural emissions in 2018. 2 The profile of agricultural emissions in Aotearoa has changed since 1990. Since the 1980s, many sheep and beef farms have converted all or portions of their land to dairy farming, forestry, or have retired the land. This is reflected in animal populations and emissions,3 see Chapter 7: Where are we currently heading? Emissions of both agricultural methane and nitrous oxide in Aotearoa have increased by about 17% since 1990.4 Yet, large improvements in productivity mean that the sector’s emissions intensity – greenhouse gases produced per unit of product – has fallen by about 20% over the same period.5 This gain in emissions efficiency has come about through a range of productivity improvements and farmer innovation. Selective breeding has resulted in more productive animals with the potential to grow faster, produce more milk and have more offspring. Improved pasture and feed management, improved animal health and more effective use of fertiliser have also enabled farmers to improve efficiency. Without these changes, current emissions would have been 40% higher.2
2
(Ministry for the Environment, 2020) (Ministry for the Environment, 2020) 4 (Ministry for the Environment, 2020) 5 (Interim Climate Change Committee, 2019) 3
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Improvements in productivity are expected to continue for some time, though at a declining rate.6 This means there will likely be ongoing improvements in average emissions intensity on farms for some time, even without the introduction and uptake of additional emissions reduction options. There are new farming techniques that could incrementally (and perhaps cumulatively) accelerate the increase in efficiencies and reduce overall emissions.7 There are also promising technologies under development which, if successfully brought to market, could lead to substantial emissions reductions.8 Practices and technologies that lead to further reductions in biological emissions are likely to have co-benefits for other environmental outcomes, such as supporting biodiversity and continued improvements to water quality.9 They also likely align with, and support, the wellbeing dimensions and the tikanga outlined in He Ara Waiora (HAW) framework as they apply to the realms of Te Taiao and the Ira Tangata - refer to Chapter 6: Perspectives from Tangata Whenua for further explanation of HAW framework.
Box 4c.1: Sources of livestock emissions10 Cattle, sheep and other ruminant livestock produce methane as part of their digestive process. Billions of microbes inside the rumen break down grass and other feed through a process of fermentation. Some of these microbes produce methane, which the animals then burp out.11 Methane emissions are largely a function of the amount of feed an animal eats. Each additional kilogram of pasture consumed adds about the same amount of methane emissions.12 This methane (termed ‘enteric methane’) makes up 95% of agricultural methane with almost all the remaining 5% from the microbial breakdown of manure. Nitrous oxide emissions are largely a function of the amount of nitrogen added to the land through urine, dung and fertiliser. The nitrogen deposited on the ground is broken down by microbes in the soil. Some of the nitrogen is taken up by plants, some is converted into nitrate, and a small amount is converted into nitrous oxide and emitted into the atmosphere. Because excess nitrogen is excreted in urine, nitrous oxide emissions are directly related to the amount of nitrogen animals consume. The quantity of nitrous oxide that is released also depends on other factors such as soil and weather conditions.13 Nitrous oxide is also generated from nitrogen in synthetic fertiliser through the same process noted above. This makes up 25% of direct agricultural nitrous oxide emissions.
6
Emissions intensity declined at a rate of about 1% per annum between 1990 and 2012, but the rate is expected to reduce over subsequent periods – to 0.3-0.6% between 2015 and 2030, and 0.3-0.5% between 2030 and 2050 (Reisinger & Clark, 2016) 7 (Reisinger et al., 2017) 8 (NZAGRC, 2020) 9 (Primary Sector Council, 2020) 10 (Ministry for the Environment, 2020) 11 These methane producing microbes are called methanogens, and the methane produced via this process is knows as ‘enteric methane.’ 12 At about 21 grams of methane for each kilogram of pasture consumed. 13 For example, if soil is heavily compacted it is harder for plants to take up nitrogen, and the microbes that produce nitrous oxide thrive in waterlogged conditions.
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There are also small amounts of carbon dioxide emissions from agriculture arising from the application of lime and urea. Changes in land use (and sometimes management) can also impact on soil carbon. On-farm emissions and removals of carbon dioxide from the use of fossil fuels, planting, harvesting and deforestation are included in Chapter 4a: Reducing emissions – opportunities and challenges across sectors: Heat, industry and power, Chapter 4b: Reducing emissions – opportunities and challenges across sectors: Transport, buildings and urban form, and Chapter 5: Removing carbon from our atmosphere of our draft supporting evidence for consultation.
Figure 4c.2: Sources and sinks of greenhouse gas emissions on a farm.14
4c.1.1 Options for reducing emissions Agricultural emissions can be reduced through either adjusting on-farm management or the use of emissions reduction technologies.15,16 Reducing agricultural emissions on-farm using farm management such as reducing stocking rates, reducing total feed being produced or purchased and then consumed by animals, as well as reducing nitrogen being deposited onto land. The Biological Emissions Reference Group (BERG) estimated that changing practice on farms with existing technologies could reduce emissions by up to 10%.17 There are a range of new technologies under development or working towards commercialisation and licencing that have the potential to reduce on-farm emissions. These technologies are likely to include a mix of vaccines, inhibitors, novel feeds, breeding and methane capture. There can be limits on the effectiveness of these technologies, due to the relevance of the approach to Aotearoa farming systems and rates of adoption. Collectively these could reduce emissions by up to 30%.18 However, not all of these technologies are additive. For example, a methane inhibitor and a methane vaccine would likely target the same methane producing microbes.
14
(Interim Climate Change Committee, 2019) See https://www.pggrc.co.nz/ and www.agmatters.nz 16 (Hamill & Stephenson, 2020) 17 (BERG, 2018) 18 (BERG, 2018) 15
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The Government has developed an Agritech Industry Transformation Plan to accelerate the growth of agricultural technology in Aotearoa to make the sector more productive, sustainable and inclusive as part of a low emissions economy.19 Agritech refers to technological changes that aim to improve value such as improving yield, efficiency or sustainability. The plan has identified the barriers to the growth of agricultural technology, which include shortage of capital to invest and connectivity within the sector. The plan has a number of actions to respond to the barriers identified, alongside progressing a number of priority agricultural technology projects. The package of actions described here is targeted at emissions from pastoral agriculture. Emissions reduction options in horticulture and arable farming have not been discussed in detail, as they are a small proportion of agricultural emissions. Options to reduce emissions in horticulture and arable farming largely relate to reducing nitrogen oxide released from fertiliser, including through more efficient application, timing of application and reducing overall fertiliser use. Assuming these options do become available to farmers in the future, BERG estimated that taken as a package combining all emissions reduction options, and assuming varied rates of adoption by farmers, overall biological emissions could potentially be reduced by between 10% and 21% by 2030, and by 22% and 48% in 2050 from baseline projections at the time the report was prepared.20 Emissions reductions beyond those achievable with management change could be achieved with land use change and/or significant reductions in livestock numbers. Where these are pursued by landowners, they are likely to have a significant impact on sources of revenue generated by that land. Whether such changes happen would depend on a range of factors, including other management options, targets set and associated policies, and the feasibility or desirability of such changes. The potential emissions reductions and impacts of different combinations or levels of action are considered in Chapter 8: What our future could look like. Many actions taken to reduce emissions will also reduce impacts on water quality, and vice versa. This is because both nitrous oxide emissions and leaching of nitrogen into waterways are caused by nitrogen being deposited on soils. The Freshwater regulations recently implemented will also contribute to reductions in greenhouse gas emissions.21 Whenua Māori faces particular challenges. Treaty of Waitangi settlements have left many Māori with steeper, less versatile land that is often underdeveloped. In addition, many Whenua Māori have reduced the intensity of their production in line with a Te Ao Māori view. Any legislation that ‘benchmarks’ in environmental performance based on intensity of the current use lowers the flexibility of less intensively used land. Governance arrangements for Māori trusts (e.g. established under Te Ture Whenua Act 1993) are often complex, with several people required to make decisions for parcels of land. Exploring alternative land use and land use diversification was a common theme in our discussions with Ahu Whenua Trusts. As kaitiaki of the whenua, we learnt that Opepe regularly makes trade-offs between culturally appropriate practice, industry best practice, governance responsibilities, owners’ aspirations and the commercial realities of managing a farm and a forest (both of which were imposed through historic government policy). While transition away from dairy is within the
19
(Ministry of Business, Innovation & Employment, 2020) Ibid. 21 (Djanibekov & Wiercinski, 2020) 20
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aspirations of the trustees, land conversion could be asking to wind back years of significant investment that poses a risk to the owners. Achieving diversification within the farming system was discussed as a financial and environmental risk management strategy in our discussions with Ahu Whenua. In discussions with Opepe Farm Trust, we learnt that Opepe view that the time for large scale expansive pastoral agriculture had passed and that a mixed land use approach to farming was the future.22 Box 4c.2: Why is there concern over methane, but no recognition of the carbon sequestered by grass?23 During our work, we have been asked why the methane emitted by ruminant livestock is counted, but not the carbon dioxide removed by grasses as they grow. The carbon removed by grass is ingested by the animal, and then ultimately returned to the atmosphere either rapidly (through respiration and urine or dung) or over a few years (as products and carcasses eventually decay). However, some of that carbon is converted to methane in the animal’s rumen and expelled to the atmosphere before it eventually decays back to carbon dioxide after 12-20 years. While the methane is in the atmosphere, it has a warming effect far greater than if the same amount of carbon dioxide were emitted – 84 times greater if the warming over 20 years is considered, or 25 times greater if the warming over 100 years is considered. So, while this is effectively a carbon neutral cycle, the presence of methane in the cycle means there is a net warming effect above what would have happened if the animal had not eaten the grass. The agricultural sector, Government, and Māori Primary Sector Climate Action Partnership published guidance on managing greenhouse gas emissions within farm planning in December 2020.24
On-Farm Management changes The actions described below can potentially reduce both methane and nitrous oxide – though some will impact one gas more than the other. Table 4c.1: Opportunities and challenges of on-farm management changes for reducing agricultural emissions Options Adjusting stocking rates and feed
Opportunities and challenges Two closely linked elements play an important role in the overall emissions efficiency and profile of an individual farm: stocking rates and how feed is managed. These elements of farm management interact with each other, so changes to one would have implications for emissions in other parts of the farm system. Stocking rate refers to the number of animals being grazed per hectare. Adjusting stocking rates can help to optimise herd productivity and reduce emissions. A herd with fewer cows that maintains the same production (through higher production per cow) would require less feed overall. This can lead to lower methane and nitrous oxide
22
Engagement with Opepe Farm Trust (Ag Matters, 2020) 24 (He Waka Eke Noa, 2020) 23
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Options
Opportunities and challenges emissions. Stocking rates can be adjusted by improving livestock reproductive performance or removing unproductive animals. The BERG found that reducing stocking rates, and improving productivity per animal could reduce emissions by up to 10% for dairy farms, and between 2% and 5% for sheep and beef farms. This could also lead to increased profitability, depending on the improvements in productivity. This finding was consistent across different farm systems and was the case even when pasture quality was assumed to decline slightly due to lower fertiliser use. Because such a system required fewer inputs, BERG also found the economic benefits of reduced stocking rates were greater when milk solid payouts were lower.25 Farmers generally manage feed to optimise the productivity of their herd. Most livestock in Aotearoa graze on pasture, and skilled management is required to manage pasture growth and optimise its nutritional value. Many farms also use supplementary feed to deal with gaps in pasture growth, and/or to boost production. There is a direct link between feed consumed by livestock and the emissions they produce, as discussed in Box 4c.1 on sources of livestock emissions. Some types of feed can help to reduce nitrous oxide emissions by reducing the amount of nitrogen eaten and excreted onto pasture. Feed that is more easily digested and requires less fermentation in the rumen can also lead to lower methane emissions and increase animal efficiency. The amount of nitrogen added to the farm system in the form of feed and fertiliser, as part of feed management, will affect how much nitrous oxide is emitted from soil. A system that has fewer animals but maintains the same production requires less feed and thus less nitrogen fertiliser or imported feed inputs, which would reduce N2O emissions. Precision farming approaches, such as the use of sensors or targeted application mechanisms, may enable further reductions in fertiliser use without compromising pasture growth. Care must also be taken to not reduce one set of emissions at the expense of another. Forage rape for example, has been shown to reduce methane emissions26, but can lead to an increase in nitrous oxide emissions.27 Using supplementary feed can help to boost production, but methane emissions would increase if an animal consumes more feed overall. The additional cost of using supplementary feed would also eventually be greater than the marginal revenue received from the additional production it supports.
25
(Reisinger et al., 2017, p. 36) (Sun et al., 2015, 2016) 27 (AgMatters, 2020b; Carlson et al., 2016) 26
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Options
Opportunities and challenges Careful balancing of stocking rates, pasture and fertiliser management and supplementary feed can lead to a farm system where production, profit and emissions are optimised. Farms are complex biological systems and the mix of animals, plants, soils and feed mean that each farm has its own unique emissions profile. Changing one element of the farm system will have impacts on other parts of the system, and on emissions. For example, changing what an animal is fed will affect how much meat or milk it produces, how much methane it emits, as well as how much nitrogen is deposited on soils. What an optimal system looks like will vary considerably between farms, and the total emissions reductions a given farm can achieve will depend on how that farm is managed overall. For example, dropping stocking rates too far can make it difficult to manage pasture quality and weed growth for a given area of grazed land. There is a lot of information available for farmers; however, it can be difficult for farmers to identify or take up relevant information. This information is often focussed on a specific farm management issue and is not tailored around farm-wide actions that could reduce emissions. This could be addressed through avenues such as access to trusted sources, sharing information across farming communities and independent farm advisors. Better rural connectivity would help farmers access new ideas and information, and to share what they learn. It is also a critical component of precision agriculture, which requires data to be both collected on farm and shared with central servers. Much of the existing research in this area, including the research drawn on here, is focused on driving emissions improvements within Aotearoa existing farm systems. As a result, the research has considered actions farmers could take that would reduce emissions without significant decreases in production or profitability.
Low nitrogen feed
The type of feed livestock eat can affect how much nitrogen is excreted and thus the nitrous oxide emitted from agricultural soils. As noted above, most of Aotearoa livestock feed on pasture, and this pasture has a relatively high nitrogen content. This means that grazing livestock generally consume more nitrogen than they need, and the excess ends up in the livestock’s urine and dung. Some pasture species, such as plantain, can reduce total nitrogen excretion in urine. Pasture can also be supplemented with lower nitrogen feed, such as fodder beet.8 Research is also underway to develop a genetically modified type of ryegrass with lower nitrogen 10 1 February 2021 Draft Supporting Evidence for Consultation
Options
Opportunities and challenges than the current pasture – this will be discussed further in the following section. Some farmers could reduce emissions by using low nitrogen supplementary feed – for example, replacing use of Palm Kernel Expeller/Extract (PKE) with lower-nitrogen maize silage.28 The use of PKE has been controversial in the public domain in Aotearoa in recent years. Use of palm products in supply chains have been linked to increases in emissions from deforestation overseas (in regions such as South East Asia).29 The overall impact of using low nitrogen feed on emissions levels will depend on other aspects of farm management.30 Increasing the proportion of these feeds in animals’ diets may reduce emissions, but likely only where these feeds are used as substitutes, rather than increasing overall feed demand. There are limits to the amount some feeds can be used. For example, feeding fodder beet above certain levels can be toxic for animals. Implementation time for low nitrogen feeds is relatively short, as new crops can be grown in a matter of months.
Once a day milking
Switching from a twice a day milking system to once a day milking can result in lower methane and nitrous oxide emissions, but could maintain profitability if reduced labour costs balance a reduction in total milk production.31 The extent to which this is the case is uncertain, and will vary widely depending on breed, farm management, farm layout and farmer skill. If cows are only milked once a day, they require less feed to support milk production, which would lead to a drop in methane emissions. On some farms supplementary feed would be reduced to match lower production, which could lead to less nitrogen excreted onto soils and lower nitrous oxide emissions. Because fewer inputs (feed and labour) would be required, profitability would likely be maintained despite lower overall production. The BERG estimated that once a day milking could potentially lead to a 6-7% drop in emissions, without affecting profitability. Yet they note that there is limited experience with this approach in Aotearoa, so there is a high degree of uncertainty around the potential emissions reductions from this approach.32 There may also be a ‘rebound’ effect as farmers seek to regain the lost production and use unutilised feed by increasing stock numbers.
28
(Bryant et al., 2020) This controversy persists even though efforts have been made to source sustainable PKE. 30 For example, whether supplementary feed is used in addition to pasture to support higher stocking rates. 31 (BERG, 2018) 32 (BERG, 2018) 29
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Options Further integration of the dairy and beef industry
Opportunities and challenges Using calves from the dairy industry for beef production reduces the need for beef breeding cows. The reduction in beef breeding cows implies less food is consumed, and therefore there are fewer greenhouse gas emissions (see Figure 4c.2 on sources of emissions).33 However, it is unlikely that the feed not consumed by beef breeding cows would be left to go to waste. A farm manager could use this feed for other animals and keep total emissions levels about the same, similar to the rebound effect described in once a day milking.
Creating a diversified landscape
Different land uses, both within a farm and across farms, have different footprints. One action farmers could take to reduce emissions would be to switch some of their land away from livestock farming to lower emission uses. Many farmers have already done this by planting areas of pasture into crops, allowing native bush to regenerate on pockets of less productive land within their farms and riparian planting along waterways. Planting forests and woody vegetation, or supporting regeneration of native bush offers considerable carbon benefits and will be discussed in the next chapter, Chapter 5: Removing carbon from our atmosphere. Beyond forestry, horticulture land use could offer much higher profitability while producing considerably lower biological greenhouse gas emissions per hectare.34 Estimates suggest that more than 1.5 million hectares of land currently in livestock farming could be (in principle) suitable for horticulture or arable cropping.35 However, significant change in land use has not happened despite horticulture already being more profitable per-hectare than dairy or livestock farming, which indicates there are some barriers to shifting land use in this way. Some of the barriers identified are: • Labour constraints particularly around horticulture are well documented.36 • Capital requirements and high existing debt can make it difficult to invest to build the scale and infrastructure to support a higher production37 – confidence is needed by both the landowner and their bank. • Gaining access to new markets is a slow process, linked to the negotiation of international agreements38 and addressing non-
33
(van Selm et al., 2021) The BERG estimates that that biological emissions from dairy are about 12 tCO2e per hectare, and between 3.5-2.1 tCO2e for sheep and beef. They estimate that biological emissions from horticulture range from 0.17 -1 tCO2e per hectare. 35 (Reisinger et al., 2017, p. 8). For example, apples, kiwifruit, grapes, vegetables and pulses. 36 (NZIER, 2019) 37 Productive kiwifruit orchards sell for about NZ$350,000/ha for Green and NZ$500,000/ha for Zespri Gold, severely limiting new entrants to the industry (Cradock-Henry, 2017). 38 (Horticulture New Zealand, 2019) 34
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Options
Opportunities and challenges tariffs barriers (e.g. government-to-government negotiations, biosecurity regulations).39 • Fragmented pockets of land suitable for horticulture and arable may not be sufficiently large for standalone enterprises. • Limited supply chains and market saturation, particularly for expansion into new areas and/or crops. • Cultural barriers – some landowners identify themselves as livestock farmers and prefer the lifestyle. • Access to water is becoming more difficult with tightening restrictions and few new large-scale projects. Currently horticulture accounts for less than 3% of Aotearoa biological emissions from agriculture, but this may increase if more land goes into horticulture. The careful use of fertiliser and irrigation will be important to minimise biological emissions from these land uses, as well as efforts to minimise the use of energy and fossil fuels for production and processing of horticultural products. As with pastoral farming, precision agriculture and on-farm decision support tools could assist with this, but rural connectivity may hinder their uptake.
Soils
Studies suggest there is potential for some soils to increase the quantity of carbon they store, even though Aotearoa generally has naturally high soil carbon stocks.40 Some farm practices (for example the use of deeper-rooted pasture plants, inversion tillage or no-till pasture renewal) have been advocated by stakeholders as ways to increase how much carbon is stored in the soil. However, there is currently no robust evidence of their long-term effectiveness in Aotearoa. Soil carbon can also be lost quickly during periods of drought or from soil erosion events (such as slips). 41 It is not completely clear whether Aotearoa is increasing or decreasing in soil carbon stock overall. There is ongoing research to determine changes in soil carbon and how management practices, such as those outlined in the regenerative approach below, affect this. It may take decades of data to establish reliable links between management practices and soil carbon levels.42,43 Other areas of current focus for soil carbon research linked to practices include irrigated land use, and full inversion tillage for pasture systems as part of long-term pasture renewal (e.g. once every ~30 years). More information on soil carbon can be found in Chapter 5: Removing carbon from our atmosphere.
39
(Westpac, 2016) (McNally et al., 2017) 41 (Schipper et al., 2017) 42 (NZAGRC, 2019b) 43 (Smith et al., 2020) 40
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Options Regenerative agriculture
Opportunities and challenges Regenerative agriculture involves techniques that focus on improving the quality and health of the whole ecosystem, including soils.44 Practices and principles that have been referred to as regenerative agricultural practices include no-till techniques, use of organic fertiliser, increasing diversity of plant species, cover cropping, and minimal use of herbicides, pesticides and synthetic fertilisers. These kinds of practices have been applied in other countries to increase the carbon stored in soil, protect the soil from erosion, minimise soil disturbance and reduce nutrient loss. Many farmers in Aotearoa have started applying some of these practices. Research on the efficacy of regenerative agriculture in Aotearoa are ongoing and there are no robust estimates of the potential emissions reductions. Some farmers have told us that the reduction in input costs, market premium and increased ecosystem services derived from using more regenerative practices has increased their profitability and resilience.45
Technological changes Some technologies target both methane and nitrous oxide, while others reduce one specific gas. The technologies are at various states of readiness, with some on the market (e.g. urease inhibitors), some expected to be on the market in the next few years (e.g. nitrous oxide inhibitors) and others still being developed in laboratories (e.g. methane vaccines). The use of any compounds of veterinary medicines to help manage plants and animals is controlled by the Agricultural Compounds and Veterinary Medicines (ACVM) Act 1997. This plays an important role in making products from Aotearoa are safe and trusted in international markets. The use of inhibitors could pose risks to trade, food safety and animal and plant health. We have heard from stakeholders that it is not clear whether inhibitors are covered by the ACVM, and that it could be a long process for approving them under the ACVM if they are.46
44
There are no formal definitions of regenerative agriculture. For an overview of the latest definitions see: (Newton et al., 2020) and a summary of principles: (White, 2020). 45 (Maan, 2020) 46 (Ministry for Primary Industries, 2020)
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Table 4c.2: Opportunities and challenges of technological changes for reducing agricultural emissions Options Breeding for low emissions animals
Opportunities and challenges Just as livestock can be bred for favourable traits like improved meat or milk production, selective breeding of animals to be low emitting is attracting increasing attention as an emissions reduction option. Targeted breeding of livestock to emit less methane per kilogram of feed consumed has been an active area of research in Aotearoa for many years. Research has identified a large variation in the amount of methane different sheep (with the same diet) emit. This low methane trait has been shown to be heritable. It is starting to be introduced into the national flock,47 and could filter through the sheep population in a couple of decades as the national flock turns over. Low methane sheep have been monitored for growth, reproduction and performance, and they appear to be outperforming high methane sheep on commercial breeding values.48 The sheep are now being trialled by breeders with effort focused on how this low methane trait can be added into the sheep breeding index. Research into the potential for breeding low emission cows is less advanced. Some studies have confirmed that their methane yield also varies significantly and the New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC) is working to identify genetic traits for low emitting cattle, and the potential impacts on animal production. If the low methane trait is shown to be heritable in cattle, it could be incorporated into the dairy cattle population relatively easily as most dairy cattle in Aotearoa are bred from a small number of bulls. It would likely take at least 10-15 years to introduce this approach to the national herd, as the research is in early stages, and the turnover rate for an average dairy herd is around 8-10 years.
Plant breeding/modification
New research has focused on new types of low emission feed. Scientists at AgResearch have developed a type of genetically modified ryegrass with the potential to reduce emissions of both methane and nitrous oxide. Initial modelling suggested the grass may lead to a 15% reduction in methane emissions per kilogram of feed consumed, and a 10% reduction in nitrous oxide emissions.49 In theory, a low emission ryegrass could have the technical potential to replace current dominant ryegrass species used as pasture in Aotearoa. However, the product is still in its early stages and its efficacy is far from certain. Furthermore, regulatory and public acceptability barriers exist to its deployment in Aotearoa.
47
(Rural News Group, 2020) (NZAGRC, 2019a) 49 (Reisinger et al., 2018) 48
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Options
Methane inhibitors
Opportunities and challenges Views on gene editing (GE) in Te Ao Māori deserve further exploration. The level of uptake of GE ryegrass is hard to predict. Methane inhibitors are chemical compounds that, when fed to livestock, reduce emissions by targeting the methane-producing microbes (methanogens) within the rumen. An inhibitor can reduce the emissions methanogens produce either by killing them, or by depriving them of the hydrogen they need to produce methane. A single dose of a methane inhibitor would not permanently reduce methane production. For it to be effective, the inhibitor would need to be inside the rumen while feed is being digested. For this reason, it would need to be administered frequently (for example, mixed in with feed or water).50 Mixing an inhibitor into animal feed is not well suited to Aotearoa pastoral system. An alternative approach could be to deliver it by inserting a bolus or tablet that would slowly dissolve inside the rumen – though this would take time and effort to administer and would require a compound that is effective at low concentrations. There are already methane inhibitors that are close to market. The product 3-nitrooxypropanol (3NOP, manufactured by the Dutchowned company DSM) is well advanced, and likely to be available to European producers in the next few years.51 Several long-term tests have shown 3NOP to be effective at reducing methane emissions by around 30%, but it has been developed to work in feedlot-type systems where the compound is mixed into every mouthful of feed the animals consume. DSM are working with partners in Aotearoa to develop a slow release or pasture-based delivery system that would be better suited to Aotearoa pastoral system, and which could also be on the market in the next few years, subject to the progress on regulations governing the use of inhibitors in Aotearoa.52,53
Methane vaccine
Some readily available compounds, such as bromoform, have also been proven to act as a methane inhibitor. However, they have not been widely used as they are suspected carcinogens and ozone-depleting substances. Some seaweeds contain bromoform, and research is currently underway to see if feeding cows or sheep seaweed could effectively and safely reduce methane emissions.54 The goal of a methane vaccine is to trigger an animal’s immune response to generate antibodies that supress the activity of methanogens. These
50
(NZAGRC & PGfRc, 2017) (DSM, 2019) 52 (AgMatters, 2020a) 53 The availability is likely to be impacted by the work of the Ministry for Primary Industries, which is considering options for managing the regulatory oversight of inhibitors to make sure the primary sector can safely and effectively use inhibitors, see (Ministry for Primary Industries, 2020) 54 (CSIRO, 2018) 51
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Options
Opportunities and challenges antibodies would be produced in the animal’s blood and saliva, and continually delivered into the rumen through the saliva.55 Because a vaccine would trigger the production of antibodies, one dose of a vaccine would, in theory, supress methane production over a prolonged period. Research suggests that once developed, a methane vaccine could be effective globally, and it is particularly well-suited to Aotearoa pasturebased farming system as it would only need to be administered periodically. Research to develop a methane vaccine is still in relatively early stages. Researchers have had some success in laboratory trials, but to date the process has not been proven to work in animals.56 The BERG report assumes that a successful methane vaccine could achieve a similar level of reduction to a methane inhibitor – reducing methane emitted per animal by around 30%. Without a working prototype, the methane reduction potential of this approach remains speculative. Researchers estimate that any vaccine is still a long way off and it is almost certain that a vaccine, if it can be developed, would not be available before 2030.
Nitrification inhibitor
Nitrification inhibitors are chemical compounds that slow down the rate at which microbes in the soil convert nitrogen into nitrous oxide.57 Inhibitors can be spread onto pasture or incorporated into nitrogen fertilisers. Although nitrification inhibitors already exist, they are treated here as a future emissions reduction option because the use of these nitrification inhibitors have been discontinued. The nitrification inhibitor dicyandiamide (DCD) was used in Aotearoa for a number of years, until it was withdrawn from use in 2012 after traces of the compound were found in milk. Although it is considered harmless in trace amounts, there is currently no international food safety standard for DCD, which means a default limit of zero applies. It could be available for use again once food standard regulatory processes are complete, which could be within the coming years.58 Urease inhibitors are coated onto fertiliser and supress the microbial processes that break down the urea in the fertiliser which lead to nitrate and nitrous oxide. Urease inhibitors can also increase the effectiveness of fertilisers and they already make up a substantial proportion of market sales.59 Based on experience with DCD, the effectiveness of nitrification inhibitors varies widely, affected by factors like temperature, soil moisture and the
55
(Reisinger et al., 2018) (NZAGRC, 2019a) 57 (Ruser & Schulz, 2015) 58 (Reisinger et al., 2018, p. 34) 59 Ravensdown – personal communications. 56
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Options
Opportunities and challenges timing of fertiliser application. A series of studies around the country showed that the effectiveness of DCD on individual urine patches ranged from 18% to 82%, with an annual effectiveness of about 40%.60 As its application would be limited to accessible land, only a proportion of farmers might use an inhibitor. Research is underway into novel inhibitors that are more effective than DCD, lower cost, and present minimal risk of residues. There are also regulatory barriers to using some of these approaches. Most inhibitors are regulated under the Hazardous Substances and New Organisms (HSNO) Act 1996, which protects the environment and the health and safety of people and communities by preventing or managing the adverse effects of hazardous substances and new organisms. However, HSNO does not manage risks such as trade risks from residues, as occurred with DCD.61
60 61
(Parliamentary Commissioner for the Environment, 2016) (Ministry for Primary Industries, 2020)
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4c.2 References Ag Matters. (2020). Reduce methane emissions. Ag Matters. https://www.agmatters.nz/goals/reduce-methane-emissions/ AgMatters. (2020, May 13). Future actions. Ag Matters. https://www.agmatters.nz/actions/futureactions/ BERG. (2018). Report of the Biological Emissions Reference Group (BERG) (p. 56). Beef + Lamb, Federated Farmers, Fonterra, Dairy NZ, Deer Industry New Zealand, Horticulture New Zealand, Ministry for the Environment, Fertilizer Association, Ministry for Primary Industries. https://www.mpi.govt.nz/funding-rural-support/environment-and-naturalresources/biological-emissions-reference-group/ Bryant, R. H., Snow, V. O., Shorten, P. R., & Welten, B. G. (2020). Can alternative forages substantially reduce N leaching? Findings from a review and associated modelling. New Zealand Journal of Agricultural Research, 63(1), 3–28. https://doi.org/10.1080/00288233.2019.1680395 Cradock-Henry, N. A. (2017). New Zealand kiwifruit growers’ vulnerability to climate and other stressors. Regional Environmental Change, 17(1), 245–259. https://doi.org/10.1007/s10113016-1000-9 CSIRO. (2018). Asparagopsis feedlot feeding trial. Meat & Livestock Australia Limited. https://www.mla.com.au/contentassets/120dea2a6b504401baeedfd303794361/b.flt.0394_ final_report.pdf DSM. (2019). Taking action on climate change, together. https://www.dsm.com/content/dam/dsm/corporate/en_US/documents/summaryscientific-papers-3nop-booklet.pdf Hamill, B., & Stephenson, J. (2020). Reducing GHGs on farms: A summary of options for reducing greenhouse gas emissions on New Zealand livestock farms. Centre for Sustainability, University of Otago. https://ourarchive.otago.ac.nz/handle/10523/9953 Horticulture New Zealand. (2019). Submission on action on agriculture. MfE. https://www.mfe.govt.nz/sites/default/files/media/Consultations/Attachments%20for%200 3028%20Horticulture%20NZ.pdf Interim Climate Change Committee. (2019). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ Jones, J., & Camps, M. (2019). Estimating the environmental impact and economic cost of biochar [Comment to MPI]. Massey University.
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Maan, P. (2020, October 11). Inter-Generative Farming. Southern Pastures. https://southernpastures.co.nz/inter-generative-farming/ McNally, S. R., Beare, M. H., Curtin, D., Meenken, E. D., Kelliher, F. M., Calvelo Pereira, R., Shen, Q., & Baldock, J. (2017). Soil carbon sequestration potential of permanent pasture and continuous cropping soils in New Zealand. Global Change Biology, 23(11), 4544–4555. https://doi.org/10.1111/gcb.13720 Ministry for Primary Industries. (2020). The regulation of inhibitors used in agriculture (p. 19) [MPI Discussion Paper No: 2020/01]. Ministry for Primary Industries. https://www.mpi.govt.nz/dmsdocument/39671-the-regulation-of-inhibitors-used-inagriculture Ministry for the Environment. (2020). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealandsgreenhouse-gas-inventory-1990-2018-vol-1.pdf Ministry of Business, Innovation & Employment. (2020). Agritech Industry Transformation Plan. https://www.mbie.govt.nz/dmsdocument/11572-growing-innovative-industries-in-newzealand-agritech-industry-transformation-plan-july-2020-pdf NZAGRC. (2019a). Annual report 2019. NZAGRC. https://www.nzagrc.org.nz/user/file/2040/NZAGRC%202019%20Annual%20Report_FINAL% 20For%20website.pdf NZAGRC. (2019b). New Zealand Agricultural Greenhouse Gas Research Centre—Soil Carbon. https://www.nzagrc.org.nz/soil-carbon.html NZAGRC. (2020). NZAGRC Science Plan 2019-2025. NZAGRC. https://www.nzagrc.org.nz/strategicdocuments.html NZAGRC & PGfRc. (2017). Reducing New Zealand’s Agricultural Greenhouse Gases: Methane Inhibitors. https://www.pggrc.co.nz/files/1501479614891.pdf NZIER. (2019). Horticulture labour supply and demand 2019 update. [NZIER report to Horticulture NZ, Summerfruit NZ, NZ Kiwifruit Growers, NZ Apples and Pears and NZ Wine, June 2019]. NZIER. Parliamentary Commissioner for the Environment. (2016). Climate change and agriculture: Understanding the biological greenhouse gases. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/1678/climate-change-and-agricultureweb.pdf
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Primary Sector Council. (2020). Fit for a Better World. Primary Sector Council. https://fitforabetterworld.org.nz/assets/Uploads/PSC-Report_11June2020-WEB.pdf Reisinger, A., & Clark, H. (2016). Modelling agriculture’s contribution to New Zealand’s contribution to the post-2020 agreement. MPI. Reisinger, A., Clark, H., Abercrombie, R., Aspin, M., Harris, M., Ettema, P., Hoggard, A., Newman, M., & Sneath, G. (2018). Future options to reduce biological GHG emissions on-farm: Critical assumptions and national-scale impact [Report to the Biological Emissions Reference Group]. https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potentialfinal Reisinger, A., Clark, H., Journeaux, P., Clark, D., & Lambert, G. (2017). On-farm options to reduce agricultural GHG emissions in New Zealand [Report to the Biological Emissions Reference Group]. New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC). https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potential-final Rural News Group. (2020, November 3). Low methane sheep a reality. https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/low-methane-sheep-areality Ruser, R., & Schulz, R. (2015). The effect of nitrification inhibitors on the nitrous oxide (N 2 O) release from agricultural soils-a review. Journal of Plant Nutrition and Soil Science, 178(2), 171–188. https://doi.org/10.1002/jpln.201400251 Schipper, L. A., Mudge, P. L., Kirschbaum, M. U. F., Hedley, C. B., Golubiewski, N. E., Smaill, S. J., & Kelliher, F. M. (2017). A review of soil carbon change in New Zealand’s grazed grasslands. New Zealand Journal of Agricultural Research, 60(2), 93–118. https://doi.org/10.1080/00288233.2017.1284134 Smith, P., Soussana, J.-F., Angers, D., Schipper, L., Chenu, C., Rasse, D. P., Batjes, N. H., Egmond, F. van, McNeill, S., Kuhnert, M., Arias‐Navarro, C., Olesen, J. E., Chirinda, N., Fornara, D., Wollenberg, E., Álvaro‐Fuentes, J., Sanz‐Cobena, A., & Klumpp, K. (2020). How to measure, report and verify soil carbon change to realize the potential of soil carbon sequestration for atmospheric greenhouse gas removal. Global Change Biology, 26(1), 219–241. https://doi.org/10.1111/gcb.14815 van Selm, B., de Boer, I. J. M., Ledgard, S. F., & van Middelaar, C. E. (2021). Reducing greenhouse gas emissions of New Zealand beef through better integration of dairy and beef production. Agricultural Systems, 186, 102936. https://doi.org/10.1016/j.agsy.2020.102936 Westpac. (2016). Industry insights: Horticulture. Westpac Institutional Bank.
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Chapter 4d: Reducing emissions – opportunities and challenges across sectors Waste The majority of waste emissions are from biogenic methane, with smaller amounts of carbon dioxide and nitrous oxide also being generated from composting, incineration and wastewater treatment. There are practices and technologies available to reduce the amount of waste and associated emissions. While only emissions at the final destination point of waste are considered in the Greenhouse Gas Inventory, there are also potential emissions reduction opportunities in other sectors that may result in tackling waste. This chapter explores the sources of emissions from the waste sector and opportunities to reduce them – including avoiding waste, waste recovery, lower-emission landfills and low global warming potential (GWP) refrigerants. Refrigerants are covered in this chapter as resource recovery mechanisms such as product stewardship apply to both waste and refrigerants.
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Contents Chapter 4d: Reducing emissions – opportunities and challenges across sectors ............................. 1 4d.1 Introduction ......................................................................................................................... 3 4d.2 Options for reducing emissions ............................................................................................. 7 4d.3 References ......................................................................................................................... 15
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The majority of waste emissions are from biogenic methane, with smaller amounts of carbon dioxide and nitrous oxide also being generated from composting, incineration and wastewater treatment. There are practices and technologies available to reduce the amount of waste and associated emissions. While only emissions at the final destination point of waste are considered in the Greenhouse Gas Inventory, there are also potential emissions reduction opportunities in other sectors that may result in tackling waste. This chapter explores the sources of emissions from the waste sector and opportunities to reduce them – including avoiding waste, waste recovery, lower-emission landfills and low global warming potential (GWP) refrigerants. Refrigerants are covered in this chapter as resource recovery mechanisms such as product stewardship apply to both waste and refrigerants.
4d.1 Introduction New Zealanders create many forms of waste in their day to day lives. There are emissions associated with the creation, handling, processing and storage of this waste, particularly biogenic methane emissions from organic waste. There are a range of practices and technologies that can reduce the amounts of waste and associated emissions. Our primary focus is on emissions from the management of organic waste. For the purpose of this discussion, we view all waste with a decayable organic content (DOC) value as ‘organic’ – including waste with very low DOC such as construction and demolition waste. Greenhouse gases are emitted throughout the lifecycle of organic and inorganic resources until they turn to waste. These emissions can happen at a range of stages in a product/material lifecycle, for example when: produced on farm, extracted from nature, manufactured, sold, used or transported, and ultimately, when disposed of to a landfill. Opportunities to reduce non-disposal emissions may be accounted for in the other sectors; for example, reducing emissions from the collection and movement of waste are accounted for in the transport sector. However, in the context of our discussion ‘waste emissions’ are only from the emissions at disposal – usually from organic waste decaying at landfill. Nonetheless, we know that moving from a linear economy (on a ‘take-make-use-throw’ setting) to a more circular economy (where resources are repeatedly used), would result in less emissions from waste disposal, and from extraction, production, consumption and transport processes.1 Most waste disposal emissions are biogenic methane (92% of all waste emissions, expressed in CO2e), with the remainder being small amounts of carbon dioxide (2.5%) and nitrous oxide (5.5%), which are generated from composting, incineration, and wastewater treatment. Overall, biogenic methane from waste makes up around 10% of total biogenic methane emissions with agriculture making up the other 90% in Aotearoa.2 Our analysis is largely focused on how to reduce biogenic methane emissions from organic solid waste disposal because these make up most (81%) of the biogenic methane emissions from waste.
1 2
(Ramboll et al., 2020) Modified from the national Greenhouse Gas Inventory (Ministry for the Environment, 2020b).
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Table 4d.1: Waste disposal points and emissions from decay Waste sites
Municipal with LFG capture Municipal without LFG capture Non-municipal Farm fills3
Waste volumes (thousand tonnes) 2018 3,557
Emissions (Mt CH4) 2018 0.0279
153
0.0278
5,517 551
0.042 0.0236
Municipal sites with landfill gas capture (LFG) (see Box 4d.1) accounted for most of the volume from households. These are class 1 landfills servicing urban centres which receive a mixture of household and commercial waste. Municipal sites without landfill gas capture are a mixture of legacy sites which are now closed and a handful of active municipal landfills. These sites are not required to capture landfill gas as the tonnage of organic waste and/or total capacity of waste they receive falls below the legislative requirement. Municipal landfills receive high volumes of food, paper and wood waste. Box 4d.1: Landfill gas capture Landfill gas capture systems typically comprise of vertical and/or horizontal extraction wells connected to a pipe network designed to extract biogenic methane gas from landfills. The instantaneous collection efficiency of a LFG capture system is the percentage of landfill gas collected when compared against the predicted generation rate. It is not only a function of the effectiveness of the collection system, but also considers factors such as the original landfilling methods, depth of waste, leachate saturation levels and cap permeability. Different landfills have different gas capture efficiencies, with newer landfills tending to have higher rates of gas capture due to more efficient design. There is also a ‘lifetime’ capture efficiency or a ‘temporally weighted collection efficiency’ which considers gas collection over a lifetime.4 Approximately 87% of biogenic methane gas captured is used for energy generation with the other 13% being flared (landfill gas burnt which converts it to a small amount of CO2 emissions.5) Non-municipal sites are class 2-5 landfills which receive commercial and industrial waste. The most common waste types across the aggregate category of municipal landfills were construction and demolition, garden and wood waste. However, we do know that there are differences in the different landfill classes with some such as class 2 Landfills accepting more waste with organic content and class 5 Landfills (Cleanfills) theoretically accepting no organic waste. With farms in Aotearoa having no access to a doorstop waste collection system, farmers are responsible for managing their own waste. We estimate that around half is burnt and half is stored with the buried amounts producing biogenic methane emissions and the burnt waste producing smaller volumes (in CO2e terms) of carbon dioxide, nitrous oxide and methane emissions. Garden, paper and wood waste are the most common categories from farm sites. Neither farm sites nor non-municipal
3
Farms send about half of their waste to be burnt, which produces roughly 0.152 Mt CO2e of emissions meaning that the total volume of waste produced at farms is around 1,102 kt. 4 (Barlaz et al., 2012) 5 (Ministry for the Environment, 2020b)
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landfills are required to capture landfill gas as the volumes of organic waste they receive does not meet the threshold required under current regulations. Box 4d.2: Wastewater treatment emissions Wastewater treatment contributes around 10% of waste emissions from their operational emissions with the sludge they produce that get sent to landfill being accounted for in landfill emissions. However, we have not focused on this as the opportunity to reduce emissions is small. From analysis of evidence and discussions with stakeholders, we have identified some opportunities to reduce emissions from wastewater treatment. These include increasing water conservation,6 better sludge management, and capturing fugitive emissions.7 However, due to the poor data on wastewater treatment plants and the complexities of measuring baseline emissions and any reductions, it is difficult to quantify the emissions reduction potential of various options. We agree with the Productivity Commission’s conclusion about the need to establish “an agreed measurement approach and to assess… costs of its use in any relevant scheme.”8 With better data, we anticipate being able to do more analysis on this area. Refrigerants are substances essential to the functioning of air conditioning, refrigeration, and freezing technologies. They absorb heat quickly, so are critical to heating and cooling cycles in these systems and appliances. The energy efficiency of many refrigerant-containing products like heat pumps means their use in increasing, as they provide both cost savings and environmental benefits. Refrigerants (mostly hydrofluorocarbons – HFCs) are typically emitted during the lifetime of their product (e.g. air conditioners, fridges), or once that product is disposed of (if not disposed of correctly). While their volumes in Aotearoa are not large, they are often potent, long-lived greenhouse gases (see Box 4d.3), with global warming potential hundreds of times that of carbon dioxide. Preventing these emissions could have a measurable impact on our country’s overall emissions profile. While refrigerants are not part of New Zealand’s Waste Greenhouse Gas Inventory (refrigerant emissions are captured under Industrial Processes and Product Uses), they are in this section as the options to reduce refrigerant emissions are similar to those necessary to reduce waste emissions. Box 4d.3: What about refrigerants? Refrigerants are chemicals used commonly across the economy in refrigeration and air conditioning equipment. Applications include refrigeration systems in homes, supermarkets, cool stores and industrial factories, and air conditioning in cars and office buildings. Hydrofluorocarbons (HFCs) are the most commonly used refrigerants, and replaced chlorofluorocarbons (CFCs) after the ozone depleting properties of CFCs were identified. Roughly 500 tonnes are consumed annually in Aotearoa to charge new and service existing equipment. Additionally, about 400 tonnes are imported in vehicles and other finished products – for example in car air conditioning units. There is a large ‘bank’ of approximately 7,000 tonnes of refrigerants in existing equipment in Aotearoa.9 Many refrigerants are extremely potent greenhouse gases 6
(Environment Agency, 2009) (Global Methane Initiative, 2013) 8 (New Zealand Productivity Commission, 2018, p. 472) 9 (Ministry for the Environment, 2018) 7
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Although we use relatively low volumes of refrigerants, they have very high global warming potential (GWP). The most common refrigerant in Aotearoa, HFC-134a, has a GWP of 1,400 – this means one kilogram of HFC-134a has the same global warming impact of 1.4 t CO2. Another common refrigerant, HFC-404A, has a GWP of 3,900. We have been increasing our use of refrigeration and air conditioning equipment. The substances used in this equipment are potent greenhouse gases which can escape over time. Increased economic activity, a growing population, and increased demand for and movement of perishable goods has increased our use of refrigerants over time. Prior to 1996, chlorofluorocarbons were the chemicals typically utilised as refrigerants. However, these were recognised to be destructive to the ozone layer and their use was prohibited under the Montreal Protocol and Ozone Layer Protection Act (1996). CFCs have been largely eliminated from use globally and were chiefly displaced by HFCs, which do not destroy ozone. Emissions from the leakage of HFC refrigerants from refrigeration and air conditioning equipment grew from zero in 1990 to about 1.7 Mt CO2e in 2018, because of the displacement of CFCs by HFCs. As a result, HFC refrigerants are a significant source of emissions growth. In 2019, New Zealand ratified the Kigali Amendment to the Montreal Protocol, an international agreement to phase down global usage of HFCs. However, modelling carried out for the Ministry for the Environment shows that there is a gap between the emissions reductions that will be achieved under our Kigali Amendment phase down of bulk HFCs, and our obligation to reach net zero emissions by 2050. We are keen to understand the potential opportunities offered by increasing resource efficiency and moving to a circular economy in Aotearoa. We know that recovering and reusing inorganic material such as aluminium and glass will typically produce less emissions than those involved in producing new materials. Many of these emissions reductions are in non-waste sectors, such as building, manufacturing and transport. We also know that transitioning to a circular economy can generate substantial economic benefits.10 However, more research and data is needed to quantify the extent to which a circular approach may reduce emissions. The analysis here is tempered by an acknowledgement of the general unreliability and absence of waste data in Aotearoa. Where possible we have filled gaps in official data (which rely on projection, assumptions and expert opinion) with additional research and analysis. Box 4d.4: Te Ao Māori and Waste Based on input from interviews with Technical Reference Group members and insights from iwi/Māori it is evident that a holistic approach to waste creation and management is essential if we are to achieve intergenerational solutions for reducing emissions from the waste sector. Throughout our evidence gathering and advice, we have drawn on the framework He Ara Waiora – A Pathway towards Wellbeing (version 2)11 to inform our understanding of a Te Ao Māori perspective on wellbeing, sourced in mātauranga Māori. He Ara Waiora underpins our analysis regarding impacts for iwi/Māori and provides appropriate framing to assess impacts of emissions reductions and increased removals for iwi and Māori. 10
(Auckland Tourism, Events and Economic Development & Sustainable Business Network Circular Economy Accelerator, 2018) 11 (McMeeking et al., 2019)
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He Ara Waiora provides a high-level interpretation of how Māori view the world holistically, which is consistent with the perspectives we heard through engagement with Māori with respect to waste creation and management. As an example, we heard that Māori traditionally lived within a circular loop waste system, which returned all toenga (remains/leftovers) back to Papatūānuku, without detriment to the whenua, awa (waterways), or moana (ocean). Appropriate mechanisms to manage this system are preserved in tikanga e.g., human organic matter was not mixed with toenga kai and other compostable materials.12 Drawing on He Ara Waiora, with a wairua and taiao centric approach to wellbeing, encourages us to consider mātauranga Māori and tikanga in a transition to a circular economy systems as one option to lower emissions in the waste sector.
4d.2 Options for reducing emissions As a country, Aotearoa is comparatively wasteful with municipal waste generation being among the highest per capita in the OECD.13 We generated approximately 14.3 million tonnes of waste in 2018, of which 10.3 million tonnes was sent to landfill. Around half of this waste has an organic portion which can decay at landfill.14 The remainder of the waste is recovered (see definition below). Our recycling (excluding incineration) rate of 28% is relatively low, compared to Australia’s 62%15 or the European Union’s recycling rate of 47%.16
Figure 4d.1: Waste sector and potential interventions Even though we cannot fully quantify the emissions associated with the manufacturing, importation and transport of much of the waste we generate, we have assessed the opportunities and challenges for reducing waste emissions across the following categories. These opportunities are a mixture of
12
(Auckland Council, 2017) (OECD, 2018) 14 Assumption from Eunomia figure of 28% recovery rate holds steady. 15 (Department of the Environment and Energy (AU) & Blue Environment Pty Ltd., 2018) 16 (European Environment Agency, 2019) 13
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practices and technologies and are aligned with the waste hierarchy17 as well as international practise18: 1) Avoiding waste: avoiding the generation of waste at source 2) Waste recovery: recovering waste through reuse, recycling and recovery
Reduction
3) Landfill gas capture: improving the efficiency of landfill gas collection systems and increasing the proportion of waste going to landfills that capture that gas
Reduction: decreasing waste generation through redesign and avoiding waste
Re-use: Further using of products in their existing form for their original purpose or a similar purpose
Recovery
Recovery: Extraction of materials or energy from waste for further use or reprocessing
Maximum conservation of resources
Recycling – reprocessing waste materials to produce new products
Disposal
Treatment: subjecting waste to a process to lessen adverse impacts on the environment
17 18
Disposal: Final landfill site
(Waste Minimisation Act, 2008) (Bogner et al., 2007) and (Fischedick et al., 2014, pp. 785–792)
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Figure 4d.2: The Waste Hierarchy19 The waste hierarchy is an internationally recognised evaluation tool which shows the preferred pathways to maximize resource recovery through the different stages of waste management.20
Comparing our waste statistics to other countries shows there are opportunities to reuse much of the waste generated and reduce emissions across the economy including those directly generated from waste itself. Waste to energy has been a frequently debated topic in the waste sector. It covers a range of actions including burning captured biogenic methane to generate electricity, anaerobic digestion, and incineration. Small scale waste to energy plants and anaerobic digestors appear to be more viable than large scale waste to energy incineration, which has uncertain economic and environmental viability. Large-scale waste incineration would also generate additional carbon emissions as inert waste made from fossil fuels such as plastics are incinerated. This section has indicative costs based on Commission analysis of work done by different stakeholders. The actual costs are included in the modelling of the current policy reference cases and scenarios and will be included in the documentation of the modelling. However, there is an overall lack of quality data in the waste sector in Aotearoa. An increase in quality data collection would significantly help to identify and realise emissions reduction opportunities. Table 4d.2: Opportunities for reducing emissions Option Avoiding Waste
Opportunities and challenges Preventing waste from being created in the first place provides a big potential opportunity to reduce emissions. There are two key ways to make less waste: 1) Production processes can be improved to generate less waste. For example, houses can be built in a way that minimises the number of timber offcuts that are produced and/or goods can be designed to create less waste, for example through reducing the packaging. 2) Changes in consumption patterns can reduce production of waste and waste emissions. There are a range of options which can lead to changes in consumption patterns, for example, helping consumers buy more durable products. Potentially, almost all waste sources and their emissions could be avoided or eliminated. However, this goal is unlikely to be achieved in the near-term given our country’s systems and infrastructure that support widespread behaviour change are underdeveloped. It is difficult to quantify the exact size and cost of the opportunity of avoidance as it is reliant on significant behaviour change and widespread changes to product design and production systems. Because many of our goods are manufactured overseas, Aotearoa has little direct control over how much waste these goods can potentially generate.
19 20
(Eunomia et al., 2017) (Department for Environment, Food and Rural Affairs (UK), 2011)
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Option
Opportunities and challenges Nevertheless, international examples suggest the potential here is great. For example, over the decade from 2006 to 2016, Ireland reduced its waste generation by nearly 50% primarily due to European Union’s directives such as those to prevent food waste and promote resource efficiency. 21 9F
It is also important to note there is a lag between action and emissions reductions because it takes time for organic waste already landfilled to decay. Even if no new waste was generated from 2020, waste emissions would fall 50% by 2035 and 75% by 2050. 22 10F
Work has not been done to assess the full range of opportunities and costs for waste reduction in Aotearoa. However, in many circumstances, reducing waste also increases efficiencies and would be low or no cost. For example, banning junk mail could reduce the paper waste stream by up to 30%, and also reduce costs for businesses.23 Businesses and industries need to be supported and upskilled to help them understand the cost of their inputs and waste, and how to reduce it. Reducing waste going to landfills provides wider benefits. Landfills have disruptive effects on environmental quality and poorly managed landfills can contaminate surrounding land and waterways. Many current and old landfills are close to rivers and the coast and will be increasingly at risk as climate change raises sea levels and increases the frequency of storms and floods. 24 The flooding of the Fox River on the West Coast in 2019 destroyed an old landfill, spreading an estimated 135 tonnes of rubbish over more than 60 kilometres of river and coastline. 25 In terms of cultural impacts, some old landfills are located on land taken from Māori but returned through Settlement or other means. Māori-collectives responsible for managing the land are actively seeking to understand how to restore their whenua. 2F
11F
Waste Recovery
Recovering organic material away from landfills to other uses can reduce direct waste emissions and could also reduce emissions in other sectors and increase overall efficiency of resource use.26 Organic waste can generally be reused, composted/recycled, or converted to energy. Reuse and recycling of materials such as paper and wood could be increased, from the re-use of wood waste in new builds to the reprocessing of paper waste to cardboard.
21
(Eurostat, 2020) (Ministry for the Environment, Unpublisheda) 23 (Ministry for the Environment, Unpublishedb) 24 (New Zealand Government, 2019a) 25 (Westland District Council, 2019) 26 (Ramboll et al., 2020) 22
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Option
Opportunities and challenges Composting food and garden waste converts organic waste into fertiliser in a process that gives off greenhouse gas emissions such as nitrous oxide, biogenic methane and carbon dioxide. Home composting of food scraps has been a familiar ritual for generations of New Zealanders and there is increasing commercial-scale composting of waste from commercial and industrial sites. For example, the Living Earth facility in Christchurch composts 50-100,000 tonnes of food and garden waste each year,27 directly reducing biogenic methane emissions. 28 2F
The resulting compost can be used in the agricultural sector, potentially displacing synthetic fertilisers and sequestering soil carbon29. However, there are no robust figures on the potential of this to reduce emissions across the agricultural sector in Aotearoa. The Productivity Commission cited waste to energy as ‘one key avenue’ for a low emissions economy.30 The Ministry for the Environment has also published a guide for waste to energy which emphasises that projects must move up the waste hierarchy.31 The approach includes a range of options: • Wood waste can be burnt for heating or as fuel in industrial boilers, as is planned for Christchurch Hospital 32 and already implemented in a high temperature incinerator for treated wood at Golden Bay Cement.33 • Organic (and inert) waste can also be incinerated in large-scale plants to generate electricity. However, the process is expensive to develop and requires a large and high calorific waste stream to run. On current volumes, only Auckland is large enough to support what would be considered a large waste to energy plant by international standards.34 Additionally, burning inorganic materials such as plastics could further increase emissions over landfill disposal and incentivise that waste is sent to incinerators, which would decrease reuse and recycling, and result in more fossil fuel emissions.35 • Biogenic methane from anaerobic digesters can also be used to generate biogas, a key renewable energy source. In this context, these refer to dedicated plant which help induce the biological process whereby microorganisms break down biodegradable material in an oxygen-free environment to generate bioenergy sources.36 A large15F
27
(Living Earth, 2020) The exact amount of emission reductions is challenging to estimate, as it depends on whether the food waste would have otherwise gone to landfill with high biogenic methane capture rates or unmanaged landfill with no gas capture. 29 (NSW Government: Environment, Climate Change and Water & The Organic Force, 2011) 30 (Ministry for the Environment, 2020a) 31 (Ministry for the Environment, 2020c) 32 (New Zealand Government, 2019b) 33 (BERL, 2019, pp. 38–39) 34 (BERL, 2019, p. 31) 35 (Hoffart, 2019) 36 (Science Direct, 2020) 28
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Option
Opportunities and challenges scale plant is currently being built in Reporoa to process a range of feedstock’s including Auckland’s food waste.37 Small-scale anaerobic digestors are also in used across Aotearoa, such as wastewater treatment plants.38 • Biogenic methane captured from landfills can also be captured to generate electricity. However, this is generally considered to sit within the ‘disposal’ tier of the waste hierarchy as opposed to the ‘recovery’ tier. Redvale, the country’s largest municipal landfill, generates enough energy to power 14,000 homes. 39 18F
H
While diverting organic waste from landfills can reduce biogenic methane emissions, the total emissions involved in diverting waste from landfill needs to be considered. For example, recovering and transporting large waste volumes for processing using diesel trucks may generate more emissions than it saves.40 Decarbonisation of this part of the transport fleet would resolve this issue. F
If all organic waste was recovered from landfills, waste emissions could reduce by nearly 50% by 2035 and up to 75% by 2050 in Aotearoa. This depends on the mix of recovery options as composting, waste to energy, and anaerobic digestion will have their own emissions factors.41 However, the resource recovery sector would need to be scaled up, new bioenergy facilities constructed and behavioural changes embedded in society. End uses for the diverted waste (such as composting or as recycled product) would also need to be developed. Our analysis suggests between 5% and 60% (depending on waste type) of the organic waste stream could be recovered by 2030 and 6095% of the organic waste stream could be recovered by 2050.42 Ministry for the Environment analysis shows that the marginal cost of abatement might range from a cost saving of $34 to a cost of $618 per tonne of CO2e.43 Increasing resource recovery rates through landfill diversion would also generate employment opportunities. The Ministry for the Environment has estimated that up to five times as many jobs could be created in recycling as disposal. 44 Any organic waste which is not emissions or resource efficient to recover could be sent to landfills which have efficient biogenic methane capture systems. While many municipal landfills already have high-efficiency gas capture 20F
Modern, low emissions landfills 37
(Auckland Council, 2020) (Boušková & Thiele, 2018) 39 (Office of the Prime Minister’s Chief Science Advisor, 2019) 40 (Waste Management NZ Ltd, 2018) 41 The delay in emissions reductions is because it takes time for existing organic matter in landfills to decompose. 42 Analysis of options, discussions with stakeholders. 43 Costs based on MfE MACC work. For that exercise, mitigation costs were calculated as dollars per tonne of abatement in CO2e. 44 (Ministry for the Environment, 2019) 38
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Option
Opportunities and challenges systems, some landfills do not have capture systems at all. These include municipal landfills which receive low volumes of waste and legacy landfills, as well as non-municipal and farm fills. Currently, over 75% of solid waste sector emissions are from disposal sites have no requirement to capture landfill gas.45 The efficiency of the capture systems is important. Increasing the average efficiency of existing gas capture systems could reduce overall emissions. Ensuring all landfills which accept organic waste have efficient systems installed would also reduce emissions. Installing landfill gas capture systems at all farm fills is likely to be prohibitively expensive and impractical with many thousands of farm sites across the country. However, farms and rural communities could have access to drop-off points for waste, which will help reduce emissions Closed or legacy landfills continue to produce biogenic methane, as the organic waste in them breaks down. 46 Fitting gas capture systems to these sites could further reduce emissions from the baseline, although this may be challenging, expensive and have a limited effect as these systems will have lower capture efficiency. Even without capture systems, biogenic methane emissions will reduce over time as the organic waste decays, eventually reaching zero as all the waste decays. However, this process may take decades depending on a number of factors including the waste composition of the legacy landfill. 5F
The potential for emissions reduction for modern, low emission landfills is less when waste reduction and waste recovery is higher as there is simply less waste which means less waste emissions from landfills to reduce. Analysis by our team informed by data from Ministry for the Environment has estimated the cost of abatement for different landfill gas options might range from around $20 - $450 per tonne of CO2e. 47 The large variance in abatement cost is due to the different potential assumptions around operational lifespan, gas capture efficiency, electricity prices and running costs. 6F
Landfill gas capture systems can also reduce local air pollution and provide other co-benefits such as renewable energy generation. Low global warming potential (GWP) refrigerants
Hydrofluorocarbons are subject to the Emissions Trading Scheme, via the synthetic greenhouse gas levy. As NZ ETS prices rise, so will the price of importing goods containing refrigerants. 2020 is the first year of phasedown of hydrofluorocarbons (HFCs) in Aotearoa under the Kigali Amendment to the Montreal Protocol. The phasedown of
45
(New Zealand Productivity Commission, 2018) It has been estimated that closed landfills will continue to emit 73 kt biogenic methane in 2035 and 31 kt biogenic methane in 2050. (Ministry for the Environment, Unpublisheda) 47 Costs based on MFE Guidelines on Landfill Gas Accounting (Ministry for the Environment, 2004, pp. 13–20) and confirmed with stakeholders 46
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Option
Opportunities and challenges HFCs imported in bulk (i.e. for insertion into equipment in Aotearoa) would reduce our use of HFCs imported in bulk by 81% in 2036 from the average consumption over 2011-2015. HFCs ‘pre-charged’ into products overseas (like heat pumps) are not included in our Kigali Amendment phasedown, as they were anticipated to reduce in line with other countries’ phasedowns, and are subject to the synthetic greenhouse gas levy. The Ministry for the Environment is examining possible further interventions at different stages of the refrigerant lifecycle48, including: Incentivising or requiring usage of alternatives. Alternative refrigerants with low global warming potential such as ammonia and hydrofluoroolefins (HFOs) and HFC blends can be used in place of HFCs. HFO-HFC blends offer intermediate emissions reductions and can be used in existing equipment, however other blends are not compatible and require new equipment. Prohibition on import of high-global warming potential HFCs. Internationally, import prohibitions reflect the availability of more environmentally friendly technology options, and are designed to prevent import of high-GWP refrigerants when less-warming alternatives are available. A rapid phase out of powerful refrigerants could mean there is insufficient refrigerant to service the existing fleet of equipment which may result in ‘stranded assets.’ There may also be an increased safety burden and cost of housing a flammable and toxic substance on site. This is particularly relevant for organisations with medium sized systems who have enough charge for fire to be a serious risk but because of their scale do not have the systems and processes to manage it. Regulated Product Stewardship. Refrigerants were declared a priority product under the Waste Minimisation Act in 2020. This means the introduction of a refrigerant stewardship scheme could significantly increase our ability to destroy HFCs that would otherwise be emitted to the atmosphere at the end of a product’s life, by addressing leakage and poor end of life disposal practises also reduces emissions. Currently, a voluntary program is in place in Aotearoa, but the overall recovery rate is low. Regulated product stewardship will assess a range of policy options to reduce refrigerant emissions by addressing improper disposal and installation practices, and bringing equipment leakage to attention. Integrating refrigerant management across building and infrastructure policy. Encouraging use of carbon footprint and benchmarking tools such as carboNZERO and CEMARs, and GREENSTAR. Government procurement activities could require selection of low emissions refrigerants.
48
(Verum Group, 2020)
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4d.3 References Auckland Council. (2017). Auckland Waste Management and Minimisation Plan 2018. Auckland Council. (2020). Breaking New Ground on Zero Waste. Our Auckland. https://ourauckland.aucklandcouncil.govt.nz/articles/news/2020/08/breaking-new-ground-on-zerowaste/ Auckland Tourism, Events and Economic Development, & Sustainable Business Network Circular Economy Accelerator. (2018). Circular Economy: A new dynamic for Auckland Businesses [Auckland Economic Insight Series]. Auckland Tourism, Events and Economic Development and Sustainable Business Network Circular Economy Accelerator. https://www.aucklandnz.com/sites/build_auckland/files/media-library/documents/ATEEDeconomic-insight-paper-Circular-economy-final.pdf Barlaz, M. A., Chanton, J. P., & Green, R. B. (2012). Controls on Landfill Gas Collection Efficiency: Instantaneous and Lifetime Performance. Journal of the Air & Waste Management Association, 29(12), 1399–1404. https://doi.org/10.3155/1047-3289.59.12.1399 BERL. (2019). Waste to energy: The incineration option. BERL. https://berl.co.nz/sites/default/files/2020-07/BERL%20Report%20WtE%20final%20July.pdf Bogner, J., Abdelrafie Ahmed, M., Diaz, C., Faaij, A., Gao, Q., Hashimoto, S., Hashimoto, S., Mareckova, Pipatti, R., & Zhang, T. (2007). Waste Management. In Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds)] (pp. 585–618). Cambridge University Press. https://www.ipcc.ch/site/assets/uploads/2018/02/ar4-wg3-chapter101.pdf Boušková, A., & Thiele, J. (2018). Assessment of potential for energy generation from expanding industrial wastewater treatment facilities (Bioenergy Association of New Zealand Energy from expanding WWT facilities, Project No: 4162). BPO. https://www.bioenergy.org.nz/documents/resource/Reports/Industrial-Waste-Treatment_rev1.pdf Department for Environment, Food and Rural Affairs (UK). (2011). Guidance on applying the Waste Hierarchy. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file /69403/pb13530-waste-hierarchy-guidance.pdf Department of the Environment and Energy (AU), B. E., & Blue Environment Pty Ltd. (2018). National Waste Report 2018. Department of the Environment and Energy, Blue Environment Pty Ltd. https://www.environment.gov.au/system/files/resources/7381c1de-31d0-429b-912c91a6dbc83af7/files/national-waste-report-2018.pdf Environment Agency. (2009). Evidence: A Low Carbon Water Industry in 2050 (SC070010/R3; p. 41). Environment Agency (UK). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file /291635/scho1209brob-e-e.pdf Eunomia, Chowdhury, T., Elliott, T., Elliott, L., & Hogg, D. (2017). The New Zealand Waste Disposal Levy: Potential Impacts of Adjustments to the Current Levy Rate and Structure. [Final Report].
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Eunomia. https://www.eunomia.co.uk/reports-tools/the-new-zealand-waste-disposal-levypotential-impacts-of-adjustments-to-the-current-levy-rate-and-structure/ European Environment Agency. (2019). Indicator Assessment: Waste Recycling. https://www.eea.europa.eu/data-and-maps/indicators/waste-recycling-1/assessment-1 Eurostat. (2020). Generation of waste by waste category, hazardousness and NACE Rev. 2 activity. https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=env_wasgen&lang=en Fischedick, M., Roy, J., Abdel-Aziz, A., Acquaye, A., Allwood, J. M., Ceron, J. P., Geng, Y., Kheshgi, H., Lanza, A., Perczyk, D., Price, L., Santalla, E., Sheinbaum, C., & Tanaka, K. (2014). Industry. In In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. PichsMadruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)] (pp. 739– 810). Cambridge University Press. https://www.ipcc.ch/report/ar5/wg3/ Global Methane Initiative. (2013). Municipal Wastewater Methane: Reducing Emissions, Advancing Recovery and Use Opportunities. Global Methane Initiative. https://www.globalmethane.org/documents/ww_fs_eng.pdf Hoffart, M. (2019). What’s wrong with burning rubbish? Waste to energy incineration. LG NZ Local Government Magazine. https://localgovernmentmag.co.nz/waste-to-energy-incineration/ Living Earth. (2020). Living Earth: Our Story. https://www.livingearth.co.nz/our-story McMeeking, S., Kahi, H., & Kururangi, G. (2019). He Ara Waiora: Background paper on the development and content of He Ara Waiora. The Treasury. https://ir.canterbury.ac.nz/bitstream/handle/10092/17576/FNL%20%20He%20Ara%20Waiora%20B ackground%20Paper.pdf?sequence=2&isAllowed=y Ministry for the Environment. (Unpublisheda). Ministry for the Environment Waste Models. Ministry for the Environment. (Unpublishedb). National Resource Recovery Fibre Long List Options. Ministry for the Environment. (2004). Landfill Full Cost Accounting Guide for New Zealand. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Waste/Landfill%20Full%20Cost%20Accounting% 20Guide.pdf Ministry for the Environment. (2018). Hydroflourocarbon Consumption in New Zealand [Prepared by Expert Group]. Ministry for the Environment. https://www.mfe.govt.nz/publications/climatechange/hydrofluorocarbon-consumption-new-zealand Ministry for the Environment. (2019). Reducing waste: A more effective landfill levy—Consultation document. Ministry for the Environment. https://www.mfe.govt.nz/publications/waste/reducingwaste-more-effective-landfill-levy-consultation-document Ministry for the Environment. (2020a). Marginal abatement cost curves analysis for New Zealand: Potential greenhouse gas mitigation options and their costs (p. 102). Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/marginal-abatement-costcurves-analysis_0.pdf
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Ministry for the Environment. (2020b). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealands-greenhousegas-inventory-1990-2018-vol-1.pdf Ministry for the Environment. (2020c). Waste to Energy Guide for New Zealand. Ministry for the Environment. https://www.mfe.govt.nz/publications/waste/waste-energy-guide-new-zealand New Zealand Government. (2019a). Minister announces multi-agency response to identify risks from legacy landfills. https://www.beehive.govt.nz/release/minister-announces-multi-agency-responseidentify-risks-legacy-landfills New Zealand Government. (2019b). Renewable energy for Christchurch hospital. https://www.beehive.govt.nz/release/renewable-energy-christchurch-hospital Waste Minimisation Act, (2008) (testimony of New Zealand Parliament). http://www.legislation.govt.nz/act/public/2008/0089/latest/DLM999802.html New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/ProductivityCommission_Low-emissions-economy_Final-Report_FINAL_2.pdf NSW Government: Environment, Climate Change and Water, & The Organic Force. (2011). The benefits of using compost for mitigating climate change. https://www.epa.nsw.gov.au//media/epa/corporate-site/resources/waste/110171-compost-climatechange.pdf?la=en&hash=7ADC0B32600A8EE49E72187E4A027FA1C809AEAE OECD. (2018). Municipal Waste Generation in the OECD. https://data.oecd.org/waste/municipalwaste.htm Office of the Prime Minister’s Chief Science Advisor. (2019). Modern landfill: A waste-to-energy innovation. https://www.pmcsa.ac.nz/2019/11/05/modern-landfill-a-waste-to-energy-innovation/ Ramboll, Fraunhofer ISI, & Ecological Institute. (2020). The Decarbonisation Benefits of Sectoral Circular Economy Actions: Quantification methodology for, and analysis of, the decarbonisation benefits of sectoral circular economy action (Final Report Framework Service Contract EEA/ACC/18/001/LOT 1). European Environment Agency. https://ramboll.com//media/files/rm/rapporter/methodology-and-analysis-of-decarbonization-benefits-of-sectoralcircular-economy-actions-17032020-f.pdf?la=en Science Direct. (2020). Anaerobic Digesters. https://www.sciencedirect.com/topics/agricultural-andbiological-sciences/anaerobic-digesters Verum Group. (2020). Projections of HFC stocks and emissions to 2050 in relation to key factors influencing HFC consumption [Prepared for Ministry for the Environment]. Verum Group. Waste Management NZ Ltd. (2018). Submission of Waste Management NZ Limited to the NZ Productivity Commission on Low-Emissions Economy. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Submission-Documents/633e4c513a/DR-332-WasteManagement-New-Zealand.pdf Westland District Council. (2019). Fox Landfill Clean-Up. https://www.westlanddc.govt.nz/foxlandfill-clean 1 February 2021 Draft Supporting Evidence for Consultation
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Chapter 5: Removing carbon from our atmosphere Getting to net zero emissions of long-lived gases for Aotearoa will require removals of carbon dioxide from the atmosphere. This could mean planting more trees or using carbon capture and storage. Whichever measure we decide to take, we must explore options for removing carbon from our atmosphere and the steps we need to take to get there. This chapter outlines those options in detail, discussing opportunities and challenges and quantifying them when possible.
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Contents Chapter 5: Removing carbon from our atmosphere ............................................................................. 1 5.1 Introduction ...................................................................................................................................... 3 5.1.1 Increasing biological uptake....................................................................................................... 3 5.1.2 Engineering direct capture from the atmosphere ..................................................................... 3 5.1.3 Increasing inorganic reactions with rocks .................................................................................. 4 5.1.4 Future options............................................................................................................................ 4 5.2 Forests ............................................................................................................................................... 5 5.2.1 Context ....................................................................................................................................... 5 5.2.2 Options for increasing forest carbon dioxide removals from the atmosphere ......................... 6 5.2.3 Limits to removals from forests and risk of reversal ............................................................... 17 5.2.4 Land available for forestry ....................................................................................................... 18 5.3 Carbon capture and storage ........................................................................................................... 20 5.3.1 Options for increasing carbon removals through emissions capture ...................................... 20 5.4 References ...................................................................................................................................... 25
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Getting to net zero emissions of long-lived gases for Aotearoa will require removals of carbon dioxide from the atmosphere. This could mean planting more trees or using carbon capture and storage. Whichever measure we decide to take, we must explore options for removing carbon from our atmosphere and the steps we need to take to get there. This chapter outlines those options in detail, discussing opportunities and challenges and quantifying them when possible.
5.1 Introduction Achieving net zero emissions of long-lived greenhouse gases and limiting global warming will require the removal of carbon dioxide (CO2) from the atmosphere. This is because, even with a focus on gross reductions in emissions, there could still be residual emissions stemming from hard to abate sectors such as carbon dioxide from cement manufacturing and nitrous oxide from agriculture. There are three broad approaches which could be used for the removal of carbon dioxide from the atmosphere: 1. increasing biological uptake (e.g. through plants, soils and oceans) 2. engineering direct capture from the atmosphere 3. increasing inorganic reactions with rocks.
5.1.1 Increasing biological uptake Increased biological uptake and storage on land is the most well-known and used option for emissions removals. Forests store large amounts of carbon in the trees themselves and in the soil of the forest floor. They can be a source of carbon neutral energy when processed into biofuels for use to generate process heat, electricity or motive power. In Aotearoa, the establishment of new and management of existing forests is currently the lowest cost emissions removal option. There are challenges to the use of forests for removing carbon dioxide in Aotearoa, including competition for land, social and community acceptance and, as the Parliamentary Commissioner for the Environment has warned, risks of unintended carbon release as the result of extreme events such as fire, flood or pest infestations, particularly as the physical impacts of climate change intensify.1
5.1.2 Engineering direct capture from the atmosphere Carbon capture and storage (CCS) is the process of direct capture of emissions from the atmosphere (for example, from fuel combustion or large-scale industrial processing activities) followed by permanent storage in a reservoir. The steps involved in CCS include emissions capture, purification and compression, transport and injection and storage. The application of CCS combines a number of processes and technologies – many of which are mature and used in oil and gas production activities. Others are in various stages of technological readiness. The readiness of CCS is at a markedly different stage compared with forestry.
1
(Parliamentary Commissioner for the Environment, 2019)
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Traditionally, depleted or producing oil and gas reservoirs are used for long-term storage in CCS as they are known not to leak – having held methane and carbon dioxide for millennia. CCS may also be limited by social and community acceptance, uncertainty around potential although unlikely induced seismicity, land and resource requirements and sensitivities around the inappropriate use of land (a taonga) by placing waste material into Papatūānuku.2 However, this may not be an issue if it involves reinjecting the fields own gas. Bioenergy with carbon capture and storage (BECCS) combines the two emissions removal options by integrating biological capture with various capture and storage methods. BECCS is an alternative option to both forestry and conventional CCS. Emissions are sequestered from the atmosphere through forest and non-forest vegetation. Once mature enough for the intended use, forests or nonforest vegetation are harvested and the biomass is burned for energy. Carbon dioxide emissions from the biomass combustion are captured, compressed and stored using conventional CCS technology. BECCS carries many of the same risks as both forestry and CCS.
5.1.3 Increasing inorganic reactions with rocks Carbon removal through increased inorganic reactions with rocks includes enhanced terrestrial weathering and mineral carbonation. These processes accelerate the natural break down of silicate rocks to carbonate minerals. When these rocks break down, a chemical reaction takes place with carbon dioxide in the atmosphere (enhanced terrestrial weathering) or from a separately supplied source, for example, from a captured industrial emissions stream (mineral carbonation). However, these processes are not accounted for in national or international carbon accounting frameworks and are not considered in our emissions budgets or first round of advice.
5.1.4 Future options There may be future options for ocean process to remove carbon dioxide from the atmosphere, also known as ‘blue carbon’.3 Seaweed can rapidly sequester carbon and store it indefinitely if it sinks to the deep ocean.4 Mangroves and seagrasses are also effective at removing carbon dioxide and also provide adaptation benefits. However, robust measurement and accounting frameworks are required to include this option in emissions budgets. This has not been considered in this first round of advice. The extent to which Aotearoa relies on carbon dioxide removals to meet net emission targets is dependent on the scale of emissions reductions in other sectors. A strong reliance on offsetting emissions through carbon dioxide removals could divert action and investment away from reducing gross emissions in other sectors – such as energy, industry and transport.
2
(Jaram, 2009). “Blue carbon” involves both the organic matter captured by marine organisms, and how marine ecosystems could be managed to reduce greenhouse gas emissions (Lovelock & Duarte, 2019). Increased carbon dioxide in the atmosphere results in an increase in marine dissolved inorganic carbon which benefits plant productivity increasing carbon stocks but leads to loss of seagrass biodiversity, decreasing carbon stocks. (Macreadie et al., 2019) 4 (Lovelock & Duarte, 2019) 3
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5.2 Forests This section describes the potential for forests in Aotearoa to remove carbon dioxide. The intent is to provide an indication of the scale and feasibility of different options for increasing carbon dioxide removals by forests.5 In forests, carbon dioxide removals can be enhanced by: 1. increasing the amount of land in forest – by planting new forests, or letting native forests regenerate on previously cleared land, 2. avoiding deforestation, and 3. increasing the amount of long-term carbon stored by existing forests and their products. This section describes the different sequestration rates of different types of forest, the amount of land available for new forests and opportunities to increase sequestration through avoiding deforestation. It also addresses increasing the amount of carbon stored in each hectare of forest and increasing the conversion rate to long-life wood products. The section identifies potential challenges involved with forestry as an emissions reduction option, including the uncertainty of relying on carbon dioxide removals, including from the physical impacts of climate change. This section does not discuss issues such as accounting, biofuels, policies and how forest sequestration would be used alongside emissions reductions in budgets and targets. These are discussed in other parts of this report.
5.2.1 Context Aotearoa was once almost entirely covered in forests, with just the mountain tops and low-lying wetlands free from tree cover.6 This began to change following the arrival of the first people on the shores of Aotearoa more than 700 years ago, as some forest began to be cut and burned to make way for tracks, settlements and crops. With the arrival of the first European settlers, large amounts of land began to be cleared for timber, settlements and to create grassland. Land clearing accelerated as agriculture grew, with large areas of native forest burned to make way for pasture. There is now around 10 million hectares of forest in Aotearoa, spread across public and private land. The 7.8 million hectares of natural forest in Aotearoa are made up of about 6.5 million hectares of
5
Emissions removals by forests refers to the net effect of carbon released from deforestation and carbon sequestered from forest growth. 6 Prior to the arrival of humans, about 80% of Aotearoa was covered in forests. (Ministry for the Environment, 2019)
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mature native forest and much of the rest is land that was once cleared, but where native forest is regenerating. 7 Mature natural tall forest store around 920 tCO2 per hectare.89 The 2.1 million hectares of plantation forest is 90% Pinus radiata which is harvested at 25 to 30 years of age. Around 1.4 million hectares of these forests were first established prior 1990 (pre-1990 forests) and the remaining 0.7 million hectares were established after 1989 (post-1989 forests). Carbon accumulates in forests as the trees grow. Post-harvest, the carbon is then stored in wood products and is released back into the atmosphere depending on the product mix. The life of the carbon post-harvest is determined by the wood product and the time it takes to decay. Radiata pine forests harvested at 28 years, then replanted, could store an average around 517 tCO2 (not including harvested wood products (HWP)) to 752 tCO2 (including HWP) per hectare.10 For the storage of carbon dioxide to be retained at this average level, the cycle of planting and harvesting would need to continue indefinitely.
Non forest vegetation Small areas of trees and vegetation on other land, such a riparian planting along waterways or shelterbelts on farms, also remove carbon dioxide and store carbon, but to a much lesser degree. This is partly due to the small areas planted and partly because they are generally smaller tree species which cannot store large amounts of carbon. In these areas trees and vegetation provide other important ecosystem services however, such as enhancing water quality and biodiversity, recreation and biodiversity conservation. Although they do provide benefits, these small areas of vegetation often do not contribute to the overall ‘net’ emissions of Aotearoa in the same way as forests. This is for several reasons, such as the ability to reliably count small areas of planting, as well as track their harvesting and/or deforestation. There are different ways of accounting for carbon losses and gains within forests, depending on the purpose. These include international accounting for our targets, and domestic accounting in the Emissions Trading Scheme. Chapter 3: How to measure progress? gives more information on accounting approaches.
5.2.2 Options for increasing forest carbon dioxide removals from the atmosphere A range of options exist to increase the carbon dioxide that forests can remove from the atmosphere. These include: • • •
new native and exotic plantation forests, new permanent native and exotic forests, avoiding deforestation,
7
Under UNFCCC reporting guidelines, self-sown exotic trees such as wilding conifers and grey willows established before 1 January 1990 are classified as natural forests in the Land Use and Carbon Analysis System (LUCAS). 8 (Paul et al., Unpublished). 9 A mature native forest will, on average, neither gain nor lose carbon. (Holdaway et al., 2014) 10 (Wakelin, Paul, et al., 2020)
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• •
increasing carbon stocks in natural and planted forests, and increasing the proportion of long-lived wood products.
The various options have different rates of carbon removal and storage, and also vary in their costs, co-benefits, and interactions with other removal options. They also have quite different impacts on local communities and differ in their social and cultural acceptability. Policies have provided incentives for planting exotic forests and to a lesser extent, for native afforestation.11 While there is currently a higher focus on natives planting and restoration, there is also limited knowledge on the cash flow, carbon benefits and co-benefits of non-pine forests, along with limited processing infrastructure and markets. Table 5.1 outlines the key opportunities and challenges associated with carbon dioxide removals by forests, forest products, and soils, although more detailed considerations of the impacts and policy implications are contained in later chapters. Table 5.1: Options for increasing carbon removals through forests, forest products and soil Option Exotic plantation forests
Opportunities and challenges Plantation forests are established forests with an intention to harvest at some stage. In Aotearoa most exotic commercial forests are radiata pine – almost all of which is in a clear-fell regime. This type of forests has well established markets for their products, provide employment and ensures Aotearoa has a sustainable supply of wood products, now and in the future. Exotic forests also provide increased biodiversity compared to pasture.12 These forests can sequester carbon quickly. One hectare of radiata pine could sequester carbon at an average rate of about 34 tCO2 each year, over 30 years – although the rate of growth is much slower in the first five years.13 Once the trees are harvested, the carbon stored in the finished product decays over time and is ultimately released back into the atmosphere. The rate of release depends on what the harvested wood is used for (see Carbon storage in forest products below). If trees are replanted, the growth cycle begins again. If this cycle is repeated indefinitely, an area of land in plantation forest may be thought of as a long-term carbon sink. The long-term average carbon stock of about 600 tCO2 per hectare is reached after around 20 years for a forest that is on a 28-year rotation. 14
11
(Ministry for the Environment, 2020a) (Borkin & Parsons, 2010; E. G. Brockerhoff et al., 2001; Stephen M. Pawson et al., 2008; Steve M. Pawson et al., 2010) 13 Data from (Ministry for Primary Industries, Unpublished) 14 For the storage of carbon dioxide to be retained at this average level, the cycle of planting and harvesting would need to continue indefinitely. 12
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Option
Opportunities and challenges Planting and ongoing management costs range from $1,200 to $7,000 per hectare (usually on the lower end)15. Including silviculture and harvesting costs, a landowner may earn, for example, a return equivalent to approximately $400 per hectare per year in the East Coast16 (excluding carbon revenue). However, the overall revenue depends heavily on factors such as log price, site access and distance to port or processor. Aotearoa also has well-established markets and processing infrastructure for pine trees. Other exotic species are also planted in commercial forests, either as a monoculture or as a mixed species forest, such as douglas fir, redwoods, macrocarpa or eucalypts. Some of these species such as eucalypts grow faster than pine but sequester carbon at a lower rate.17 Yet, there are potential benefits to diversifying commercially planted tree species, including increasing the sector’s resilience to fire, pests and pathogens,18 as well as to volatile international markets. Owners of some existing commercial forest and some iwi/Māori-collectives, have expressed an interest in converting exotic forests to native species following harvest, while others are actively managing their exotic forests.19 There are also other management practices for exotic forest: •
•
•
Selective harvesting / Continuous cover forest in which trees are harvested individually or in small groups, providing a more even cash flow. This approach requires individual tree inventories and skilled staff. It has been applied in Canterbury and is widely practiced in some European countries and in tropical forests. Short rotation coppicing. Regrowth of trees from stumps means that replanting is not required, which reduces a major cost. The carbon removal value depends on the density of planting and frequency of harvest. Pilots using willow in Aotearoa show potential for producing biomass for energy generation or chemical production. Short rotation forestry involves planting a site then felling trees of typically 10 to 20 cm diameter after between eight and 20 years. This approach is not widely practiced in Aotearoa. The trees are usually used for biomass for energy generation or chemical production.
15
Based on data for the ENZ model, establishment costs vary with region and quintile for structural regime; 28 years, 833 initial stocking, thinning to waste to 500 stems at age 7. Includes new land planting, not regeneration at thinning and moderate walk hindrance. Weed control costs are included but fencing costs are highly variable and site specific so are not included (Peter Hall, Scion, Pers. Comms). 16
Figures based on East Coast case study, structural regime, assuming log price of $115 per m3, costings and volume assumptions from (Pizzirani et al., 2019) and discount rate of 6%. 17 This is because eucalypts would have a lower diameter at breast height. 18 Because different species and sites are more or less susceptible to these threats. 19 For example (Lake Taupō Forest Trust, 2020; Te Runanganui o Ngati Porou, 2018)
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Option
Opportunities and challenges Wilding control is part of all exotic plantation forest management activities, to prevent the expansion of wilding conifers and other species.20 Wilding conifers are established tree weeds that can have negative economic and ecological impacts. Wildings are currently spread over 1.8 million hectares in Aotearoa, with the potential to expand to 20% of the country by 2035.21 Estimations of the carbon sequestered by wilding conifers are ongoing.22 A large-scale change from livestock farming to plantation forestry triggered by carbon price and other incentives would represent an economic transformation which would inevitably affect some communities in terms of the local workforce and culture. 23 This is explored further in Chapter 16: Overall implications.
Native plantation forests
Some plantation forests consist of native species. There is limited information on native plantation carbon dioxide removal rates, which vary with the species planted. The NZ ETS lookup tables have one value covering native forests, which indicate 323 tCO2 is removed after 50 years.24 When the planted forest area is larger than 100 ha and registered for ETS, forest managers are required to do field measurements so that the actual tree growth is registered. Under certain circumstances using species such as Kauri, native plantation forests remove carbon dioxide at greater rates.25 instead of values from the look-up value26. Growth and harvest rotations for native species are considerably longer than for pine trees that could resulting in lower environmental pressure. As with exotic plantation forests, the harvest and planting cycle would need to be continued indefinitely or a continuous cover management approach used for the forest to be considered a permanent carbon sink. It is likely that timber harvested from native plantations would go into long-lived products that would store carbon for a long time. Extreme versions of this is timber in whare tipuna (meeting houses), some of which has been there for centuries.
20
Wilding conifers include douglas fir, pines, birch, cedar, cypress, larch and redwoods. Pinus contorta (lodgpole) is the most invasive. 21 (Ministry for Primary Industries, 2020c) 22 Thomas Paul, Scion, Pers. Comms. 23 (New Zealand Productivity Commission, 2019) 24 (Ministry for Primary Industries, 2017) 25 For example, measurements of a stand of 69-year-old Kauri in Taranaki show that it sequesters about 19 tonnes of CO2 per hectare each year, on average. The stand is estimated to store about 1,300 tCO22 per hectare. (Tane’s Tree Trust, 2014, p. 5) 26 (Te Uru Rākau, 2018b)
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Option
Opportunities and challenges The longer rotations also mean there is a long delay before earning timber income. Profits vary substantially, depending on factors such as location, species, carbon income and other potential income streams (e.g. from honey, ecotourism, medicines). Native plantation forests are more expensive to establish compared to pines because of the cost of seedlings and management required to ensure survival rates. Costs vary widely depending on factors such as site and desired density. Active planting establishment costs are around $6,600 per hectare.27 If local seed sources are available and the climate and site fertility are favourable, the forest may naturally grow (or revert).28 There is an up-front cost of around $1,100 per hectare for fencing29 and ongoing annual costs of around $500 per hectare for pest and weed control. There would also be infrastructure costs such as roading and periodic thinning and/or pruning. There are not currently well-developed markets and processing capacity for native timbers in Aotearoa. In addition, native forests face additional regulations with respect to sustainable forest management.
Permanent exotic forests
Some exotic forests are established with no intention of harvest.30 While it is difficult to anticipate owners’ future actions, Scion estimates that around 6% of the exotic forest trees might not be harvested. Such forests can remove about 2,800 tCO2 per hectare over 100 years. However, unmanaged pine forests are likely to ‘fall over’ and degrade after about 100 years. Over time the carbon stored would be released back into the atmosphere.31 In theory, if these forests are actively managed, some exotic species could act as a nurse crop and accelerate the establishment of native forests.32 This process could take between 100 and 300 years, depending on factors such as climate, pest control, forest management, soils and seed sources. The oldest pine forests in Aotearoa are around 100 years old. This approach could achieve quick and early carbon removals together with the long-term ecological benefits of native forest.
27
(Bergen & Gea, 2007; Pizzirani et al., 2019) For example, tōtara regeneration in Northland (Tōtara Industry Pilot, 2019) 29 Based on estimates from conservation covenants (Scrimgeour et al., 2017), similar to the national of average of $8/m; estimates vary with slope and region. (MPI, 2017) 30 (NZ Carbon Farming, 2019) 31 (Brockerhoff et al., 2003) 32 (Brockerhoff et al., 2003) 28
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Option Permanent native forests
Opportunities and challenges Establishing permanent native forests can store carbon over a long period of time and can be done either through reversion or active planting. Native trees grow and sequester carbon dioxide relatively slowly and provide greater biodiversity benefits. Most of Aotearoa was once covered in native forest. Some of the land that was cleared to make way for agriculture is now ‘marginal’ farmland. In places where there is an existing seed source and adequate microclimate and soil conditions, marginal farmland would slowly begin to revert back to native forest if it were fenced to exclude livestock. Species like mānuka and kānuka are usually the first to thrive in these settings. They are followed by other species like rimu after a few decades.33 Active planting of trees can accelerate this process, particularly where there is a close seed source. There is some emerging evidence of native forests able to regenerate under pine canopy gaps so pines could have a role in native forest restoration.34 Access to native seedlings, for plantation or for permanent forests, is a constraint to scaling up native forests. A recent survey of native tree nurseries notes their production capacity; there can be a lead time of 2-4 years for accessing native seedlings and it requires planning and cooperation across Government, industry and the public.35 Permanent native forests continue to sequester carbon for hundreds of years, eventually reaching a steady state of around 920 tCO2 per hectare. These forests also offer other benefits, such as improving biodiversity, providing a habitat for birds and other native species, as well as cultural, recreational and spiritual benefits.36 In Te Ao Māori, there are cultural benefits associated with a native forest which include mahi toi (artistic pursuits). For example, Whakairo (carving), tukutuku (meeting house panels), raranga (weaving), rongoa (medicine), kaitiakitanga (preservation of species), toi rakau (making traditional weapons) and associated skills and practices whakatuu raakau (weapon skill). On some leased land that has been returned to Māori (e.g. Ngati Tuwharetoa ki Kawerau) Māori are planting native forests for cultural reasons. There are some Iwi and Hapū managing their native forests,37 as well as small tourism businesses which use buried Kauri highlighting the value (commercial and traditional) in working with native timbers.,38
33
(Wotton & McAlpine, 2014) (Forbes et al., 2015, 2019, 2020) 35 (New Zealand Plant Producers Incorporated (NZPPI), 2019) 36 (Department of Conservation, 2020) 37 (Ngati Hine Forestry Trust, 2019) 38 (Ka-Uri Unearthed, 2019) 34
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Option
Opportunities and challenges Mature native trees and shrubs are particularly vulnerable to introduced pests, especially browsing mammals like possums, deer and goats. The presence of these animals can affect the composition of the forest, rates of regeneration and carbon sequestration.39 Predators like rats, stoats and cats can also affect populations of native birds, bats, lizards and insects. They can cause local or total extinction. The survival of many native animals depends on effective pest control.40 The management costs of permanent native forests vary widely and may include fencing. Expanding native forests on farms would result on a loss of grazing land, and potentially loss of other on-farm functions such as places to put animals to avoid pugging. However, there would be a reduction in the amount of time spent keeping this pasture free of scrub. 41 Manaaki Whenua estimate around 740,000 ha of marginal land not suitable for commercial forests could naturally regenerate (i.e. without planting) if pests are managed.42 The Ministry of Primary Industries (MPI) estimates around 400,000 ha of the privately owned native forests are suitable for selective harvesting.43
Avoiding deforestation
Deforestation is cutting down a forest and converting the land to a non-forest activity such as pastoral agriculture. This leads to a carbon dioxide emission equivalent to that held in the forest (above and below ground) and loss of ecosystem services. This is partially offset by a small gain in soil carbon if the land is converted to pasture. Chapter 3: How to measure progress shows that low but non-trivial levels of deforestation contribute between 1.2Mt and 2.4Mt CO2e- each year on an ongoing basis. The ‘glut’ of forests planted in the 1990s will be due for harvest in the mid-2020s, which is a natural decision point for replanting or converting to a different land use. Many of these forests are smaller and are also not in the Emissions Trading Scheme (NZ ETS), which means they are not subject to a ‘deforestation liability’.
39
(Anderegg et al., 2020) (Parliamentary Commissioner for the Environment, 2017) 41 (Parliamentary Commissioner for the Environment, 2016) 42 (The Aotearoa Circle, 2020) 43 (Ministry for Primary Industries, 2020b) 40
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Option Increasing carbon stocks in planted forests
Opportunities and challenges Improving forest genetics and forest management techniques could lead to higher wood density and volume. This would lead to an increase in carbon removals and storage per hectare. Current genetics programmes for pine forests focus on breeding traits such as straightness, speed of growth, wood quality and disease resistance. 44 Forest management changes in the last 20 years have increased the stocking rates and volumes. While the effects of these combined improvements have not been formally quantified, experts estimate an increase of volume of the planted forests of 15% by 203045 or double productivity by 2050.46 These estimates are likely optimistic as forest owners may harvest earlier as a result of more rapid growth. Current NZ ETS rules mean that these increases in carbon stocks may be recognised in forests established after 1989, but not those established prior to 1990. Chapter 3: How to measure progress details the conditions under which this increase in carbon stock could contribute towards budgets.
Increasing carbon stocks in natural forests
Improved management of around 7.8 million hectares of natural forest in Aotearoa could increase the amount of carbon stored in those forests. Pests such as deer, possums and goats browse on foliage, seedlings and saplings, altering the composition of a forest. Controlling these pests could help to increase carbon stocks, while protecting indigenous biodiversity.47 If such pests are not adequately controlled, then there may be long-term declines in the carbon already stored in mature forests.48 Depending on the pest, control can consist of shooting, trapping and poisoning. However, studies have shown that it is difficult to suppress these pests to low enough levels over large enough areas and for long enough to see a response.49 Carrying out more predator control, fencing out grazing and browsing animals, and preventing fires in regenerating and native forests can result in more native birds, more tree growth and prevent forest decline in the long term.50
44
(Radiata Pine Breeding Company, 2020; Scion, 2020) Heidi Dungey, Scion, Pers. Comms. 46 Timberlands expects to double the productivity of Kaingaroa forests in the Central North Island by 2050 (Ellegard, 2020) 47 (Carswell et al., 2015; Richardson et al., 2014; Wright et al., 2012) 48 The effects of wild animal control on carbon stocks could be measurable at the centennial timescale. Current studies have been mainly conducted at the decadal timescale. (Carswell et al., 2015) 49 (Nugent et al., 2010) 50 (Carswell et al., 2015) 45
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Option
Increasing carbon storage in forest products
Opportunities and challenges Accurately measuring the changes in natural forest carbon stocks that are due to changes in management is not currently possible. Many of the effects are realized over decades or centuries and distinguishing the size of the change from natural changes in the existing forest is extremely difficult. 51 For this reason, changes in natural carbon stocks from management changes are not included in the national GHG accounting and is not included as an option in our modelling. For more information, see Chapter 3: How to measure progress. Carbon is not released to the atmosphere at harvest but remains in the products made with the timber. Harvested wood products (HWP) in Aotearoa are an important pool of carbon stocks in our GHG inventory.52 There are three ways to increase the carbon stored in HWP: 1) increasing the amount of new forests and increasing yields in existing forests (earlier explained), 2) shifting the product mix to more long-lived products 3) making products last longer through, for example through recycling or circular economy approaches (See Chapter 4d: Waste). We focus on the second point in this section. Around 60% of the annual harvest is exported overseas as raw materials (logs, wood chips or pulp) and converted into short-lived products such as pulp, paper and packaging materials, which decay relatively quickly.53 Around 77% of domestic processing results in longterm lived HWP such as houses.54 Significant investment in domestic processing capacity would be required to achieve increase the volume of timber going to long-lived products. Investing in domestic processing facilities could result in a best-case scenario up to additional removals of 31.3 Mt CO2 between 2021-2050.55
Increasing soil carbon stock
Further information on the accounting for HWP is included in Chapter 3: How to measure progress. Aotearoa soils are of relatively high carbon content due to the temperate climate, the comparatively short time during which it has been under cultivation, and the fact that most of it is covered in permanent pasture.56,57 As such, there may be less potential in Aotearoa to sequester additional soil carbon compared to other parts of the world where soil carbon loss has been greater.
51
(Peltzer et al., 2010) (Wakelin, Searles, et al., 2020) 53 (Manley & Evison, 2017) 54 (Te Uru Rākau, 2018a) 55 (Scion, 2018) 56 (Pastoral Greenhouse Gas Research Consortium, 2015) 57 (The Nature Conservancy et al., 2020) 52
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Option
Opportunities and challenges Current evidence in Aotearoa suggests that soil carbon stocks were lower under irrigated than adjacent dryland pastures.58 There is some evidence that fertiliser inputs to tussock grasslands increased carbon stock. Occasional pasture renewal is unlikely to greatly affect soil carbon stocks. This contrasted with general losses of carbon due to frequent and repeated cultivation. There is no evidence that fertiliser application rate influenced soil carbon stocks. 59 The science and measurement of soil carbon is still developing and long-term monitoring programmes have been established in Aotearoa.60 There is little systematic data on practices that could increase soil carbon stocks in Aotearoa such as cover crops, no minimal till, biochar, full inversion tilling and peatland restoration. Cover crops provide land cover in between cropping cycles to protect soils from erosion, mitigate nutrient losses and provide biologically fixed nitrogen. Cover crops can store soil carbon and potentially reduce soil N2O emissions.61 An international meta-analysis estimated the average emissions reduction potential of cover cropping by increasing soil carbon in cropping systems using field recordings over 54 years at 1.17 ± 0.29 tCO2e per hectare per year.62 No till or reduced till approaches avoid soil disturbance and associated carbon loss by ploughing. Reducing tillage can lead to increased organic matter accumulation (including carbon) in the undisturbed topsoil. The evidence for this practice is mixed. In some cases, soil carbon increases at shallow depths were offset by decreases at deeper levels. The increase in soil carbon stock can be lost as farmers alternate between tilling and not tilling over several years.63 As most of agricultural land in Aotearoa is in long term pasture, the overall potential to store carbon would be more limited.64 Switching to ‘no-till’ approaches would likely incur capital costs for new machinery such as direct seed drills.65 Specific costs/capital requirements would likely vary by system type. Biochar is a high-carbon, fine grained product created through pyrolysis66 when biomass is burnt in the absence of oxygen. Biochar can improve soil physical properties, increase and stabilise soil organic carbon stocks, improve soil
58
(Mudge et al., 2017) (Schipper et al., 2017) 60 (NZAGRC, 2019) 61 Further research is needed to fully attribute this effect, see: (Basche et al., 2014) 62 Estimates for mean soil depth=22 cm (Poeplau & Don, 2015) 63 (Griscom et al., 2017; Powlson et al., 2014) 64 (Baker, 2016) 65 (Saskatchewan Soil Conservation Association, 2020) 66 Pyrolysis is the thermal decomposition of materials at elevated temperatures in an inert atmosphere. It involves a change of chemical composition. 59
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Option
Opportunities and challenges biological properties and reduce greenhouse gas emissions.67 Biochar can be retained in the soil at least for several hundred years. Further research would be needed to better understand the potential of biochar as a long-term option for carbon capture and storage.68
The potential of emissions reductions from biochar application depends on the production of biochar which in turn is dependent on the amount of biomass available to produce it. Our analysis indicates that biochar production could avoid approximately 0.73Mt CO2e of waste emissions69 or 0.32 Mt CO2e from avoided landfill emissions.70,71 The estimated cost of biochar production is expected to be in the range of $300-$800 per tonne.72
Full inversion tillage (FIT) is a technique that transfers carbon-rich topsoil into the subsoil73 (potentially slowing its decomposition) and exposes the inverted, carbon unsaturated, subsoil to higher inputs from the new pasture. FIT remains relatively unproven in Aotearoa and elsewhere. A recent trial in the Manawatu found FIT to successfully transfer soil organic content below 10cm. It showed the potential to reduce peak nitrous oxide emissions and maintain pasture production.74 A model estimated that an additional 3 Mt of carbon could be stored over a 30 year period in high producing grassland soils following a ‘one-off’ pasture renewal with FIT. 75 This number ought to be treated with caution as such potential is yet to be demonstrated in practice. Peatland restoration: Peatland soils hold large pools of carbon, accumulated over many centuries. When peat soils are drained for agriculture, they become a source of greenhouse gas emissions and remain one as long as the land remains drained.76
67
(Hedley et al., 2020) (Spokas, 2010) 69 Organic components of landfill and farm fill waste in Aotearoa account for 2.9Mt of solid waste, or 35% of the total, but account for almost all waste emissions This estimates assumes that 20% of this was converted into biochar via pyrolysis without any fugitive emissions (0.2*3.65MtCO2e), Total solid waste emissions are for 2018 from NZ’s GHG Inventory. 70 Griscom et al. (2017) estimate biochar carbon sequestration: 0.18t C/t dm (dry matter). Taking 20% the dry biological waste (wood, garden, and paper (0.2*1.29Mt=0.258) from landfills and assuming an 75% biochar carbon content (biochar tends to be 70-80% carbon). 71 (1.29/2.9Mt)*3.65MtCO2e*0.2=0.32Mt CO2e 72 This includes the initial plant capital and a 20 year operating life, see: (Jones & Camps, 2019) 73 FIT has shown more soil organic carbon than No-till at 21-35cm soil depth.(Angers & Eriksen-Hamel, 2008) 74 (Pereira et al., 2019) 75 The estimate assumes 10% farmer adoption (i.e. 367,000 ha, or 6% of New Zealand HPG) and 10% annual pasture renewal. See (Lawrence-Smith et al., 2015) 76 (Meduna, 2017) 68
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Option
Opportunities and challenges Avoiding further draining or destruction of the few remaining peatlands and wetlands would avoid emissions in Aotearoa. Restoring drained peat soils and wetlands (including on-farm) could potentially make a modest contribution but further research on this is needed to quantify it.77 Peat and wetland restoration costs include the costs of native species planting and fencing and vary by region.78 Maintaining and restoring wetlands also has cultural benefits. For example, many Māori have strong historic and cultural links with wetlands, which are taonga that could be enhanced through their restoration. They can be important habitats for native species and sources of traditional building and weaving materials, medicines, and food.79
5.2.3 Limits to removals from forests and risk of reversal Relying on forests to reach net emissions targets poses challenges, as continuous levels of afforestation would be needed to maintain similar levels of mitigation year on year. Over time the area suitable for new forest establishment would decrease and the newly planted forests would reach their long-term average carbon store, no longer contributing towards targets. There is also an ongoing global risk that the carbon stored in forests could be re-released back into the atmosphere if forests are destroyed or damaged.80 If the forest is not replaced, this results in a net increase of carbon dioxide in the atmosphere. Future decision makers in Aotearoa could decide to change landuse away from forest, in which case the carbon stored would be re-emitted. Natural hazards such as wind, fire or pests can also destroy established forests and these are expected to increase as the climate changes.81 Recent international examples show how vulnerable some forests can be to these kinds of threats and the potential climate impacts of large-scale destruction of forests. The bushfires in Australia in the summer of 2019/20, for example, are estimated to have approximately doubled Australia’s emissions for 2019.82 In Canada, an outbreak of Mountain Pine Beetle in the early 2000s destroyed hundreds of thousands of square kilometres of forest in British Columbia and by 2020 was expected to have led to the release of 270Mt of carbon into the atmosphere. 83 The native forests of Aotearoa are currently under threat from two pathogens, kauri dieback and myrtle rust, which pose significant threats to the survival of many species. Some native trees and shrubs are less susceptible to fire risks, while others are more susceptible.84
77
(Burrows et al., 2018) For example, in a plan for wetland restoration near the Ōtākaro Avon river, capital costs ranged between $20,000 and $100,000/ha (Regenerate Christchurch, 2018) 79 (Harmsworth, 2020) 80 (Anderegg et al., 2020) 81 (A Reisinger et al., 2014) 82 (Global Fire Database, 2020) 83 (Kurtz et al., 2008) 84 (Wyse et al., 2016) 78
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Forests are likely to become increasingly vulnerable to natural hazards and adverse effects as the impacts of climate change unfold. For example, it has been estimated that as air temperatures rise over time, the number of days with very high and extreme fire danger at forested sites across Aotearoa would increase 70% by 2040.85 Likewise, the range of many damaging pests and pathogens is likely to increase as climate changes. Increased air temperature is likely to increase the intensity and irregularity of rainfall, while winter wind speeds are also projected to rise. This would likely lead to more flooding and higher rates of windfall in both native and exotic plantation forests.86 Some areas are expected to experience more droughts, which could also lead to increased forest losses. The New Zealand Climate Change Risk Assessment87 concluded that climate change will have longterm impacts on the integrity and stability of forest ecosystems and species in Aotearoa. The evidence on the risks on tree physiology and broad-scale studies is however limited. Risks for both native and planted forest (the latter as part of land-based production systems) were considered to be ‘moderate’ by 2050 and to be ‘major’ by 2100. Important knowledge gaps remain in terms of the speed of impacts, geographic variation and the susceptibility of ecosystem and species. Accounting rules could potentially allow the release of carbon from major natural events like fire and windstorm to not be counted towards targets and emissions budgets. However, these rules would require forests to be replanted and would prevent further emissions removals by them from being counted. This is discussed further in Chapter 3: How to measure progress. Forest management practices need to consider the risks outline above through a portfolio of alternatives suited to the site conditions and future climate, such as species choice and harvesting techniques (see Table 5.1).
5.2.4 Land available for forestry The scale of land suitable for plantation forestry There is a large amount of land across Aotearoa which could be suitable for afforestation. For example, in 2019 Te Uru Rākau’s mapping estimated that up to 3.3 million hectares of non-forest land (typically low-producing pasture) could be suitable for afforestation.88 To put this in context, the Productivity Commission estimated that between 2.0 to 2.8 million hectares of planting could be required to achieve net zero all gases by 2050.89 In practice, not all of this land is suitable for planting commercial forests. For example, steep slopes and distance from ports and processing sites cam make harvesting difficult or uneconomic in some places. RMA legislation prevents commercial forestry activities on some steep slopes to avoid environmental impacts such as erosion and flooding.90 For erosion prone land, establishing
85
(Watt et al., 2019) (Parliamentary Commissioner for the Environment, 2019) 87 (Ministry for the Environment, 2020b) 88 Te Uru Rākau estimations cited in (Manley, 2019, p. 33) 89 (New Zealand Productivity Commission, 2018) 90 (Ministry for Primary Industries, 2020a) 86
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permanent forest or letting land revert to native forest is likely to be a more feasible option. There could be 1.15 to 1.4 million hectares of highly erodible land in Aotearoa suitable for forestry, though these estimates are preliminary.91 The relative profitability of different land uses also affects how a piece of land is used. This changes over time depending on market forces and other factors. Landowners base decisions about what to do with their land on many factors. Even if forestry is the most profitable land use option at a given point in time, some landowners are likely to maintain existing, non-forest, land uses for other reasons. The availability of land for forestry is ultimately a landowner decision.
Trees on farms Not all of afforestation is likely to occur at large scale. There are many small pockets of land across the country which may be suited to relatively small scale afforestation, or to being fenced off and left to regenerate into native forest. On some farms, trees may be able to be integrated into the farming system, for example, in the form of agroforestry. Trees on farms also provide other benefits such as animal shelter and erosion control. However, not all carbon removals by small scale planting are currently recognised in international and/or domestic accounting. Farmers already plant trees on their land for many reasons, including riparian plantings along waterways and to create shelterbelts. There is also a proportion of land across farms that is not very productive for livestock farming. A recent study found that, based on net present value analysis, 56% of the low-productivity non-dairy grasslands in the country are likely to financially benefit from afforestation.92 Beef + Lamb NZ estimated that forestry is likely to be more profitable, on an annuity basis, than (roughly) the bottom 30% of farms.93 Estimates of how much of this type of land is available vary but are commonly in the order of 5% of farmland. This is predominantly on sheep and beef farms.94 Overall, there is insufficient data to quantify the extent of land currently being farmed which is considered marginal and suitable for afforestation, though it could be significant.
Planting on Crown land There may also be scope for some afforestation on government-owned land. Planting trees on Crown land, including the conservation estate, land held by the Ministry of Defence and land held by the New Zealand Transport Agency could provide a carbon sink. The Department of Conservation
91
(Mason & Morgenroth, 2017; Ministry for Primary Industries, 2018; Stats NZ, 2019) (West et al., 2020) 93 (Andy Reisinger et al., 2017, p. 50) (Andy Reisinger et al., 2017, p. 50) 94 Research for the Biological Emissions Reference Group (Andy Reisinger et al., 2017) modelled the effect of planting forests on the most marginal 3-5 % of a farm, but made no assumption of how or whether this could be scaled up nationally (BERG, 2018). In the Cabinet Paper for the Billion Trees Programme, MPI identifies about 4 million hectares of lower producing farmland that could potentially be planted (Ministry for Primary Industries, 2018), 92
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estimated that 59,000 ha of Crown land would be suitable for afforestation, about 29,000 ha of these would be blocks of 50 ha or more in size.95
5.3 Carbon capture and storage There is increasing international interest in the use of carbon capture and storage to meet climate change targets and obligations. For example, most of the pathways the IPCC modelled with no or limited overshoot of the 1.5oC target relied on large-scale deployment of emissions removal technologies after 2050. The pathways which assume slower reductions in gross emissions from fossil fuel use require removals to scale up to around a third of current global carbon dioxide emissions levels by 2050. There is significant risk that the scale of carbon capture and storage (CCS) technologies required in some of the IPCC’s modelled pathways may not be feasible. Globally, there are 21 facilities in operation, three under construction and 35 in various stages of development. 96 Most of these facilities are associated with coal power generation or oil and gas production. CCS and CCS-based emissions removal options are relatively expensive, emerging technologies with highly variable, site-specific costs tailored to the region’s geology. The costs of CCS are influenced by several factors, including concentration of carbon dioxide in the emissions stream, type of capture technology, transport distance to the storage site, presence of existing well and pipeline infrastructure and the energy demand of the process.97 In Aotearoa, CCS technology has not progressed beyond the concept and research stage. This is because forestry is currently a lower cost emissions removal option and because zero to low emissions substitutes for fossil fuel combustion for energy are increasingly economic at current policy settings. For fossil fuel use as a feedstock or reductant, zero to low emissions alternatives to achieve gross emissions reduction are being investigated domestically and internationally. As such, interest in CCS has been limited. It is unlikely it would be required to meet our climate change targets and obligations. However, it may play a role in the latter half of the century to maintain net zero emissions in a 1.5°C compatible pathway and to address residual emissions from hard to abate sectors.
5.3.1 Options for increasing carbon removals through emissions capture For sectors with hard to abate emissions, such as cement and lime manufacturing, geothermal power generation and ongoing nitrous oxide emissions from agriculture, CCS might be an option in the latter half of the century to maintain net zero emissions in Aotearoa. Post-combustion carbon capture technology can ‘bolt-on’ to a conventional industrial plant to capture up to 90% of the emissions stream. Reinjection of fugitive emissions from geothermal power generation and oil and natural gas extraction activities back into the producing field or a nearby 95
Desktop estimations only that require ground-truthing (Department of Conservation, 2017). The Department of Conservation asked that this estimate should be caveated and noted that the purpose of Public Conservation Land is incompatible with exotic forestry (sub. DR370 to Productivity Commission) (New Zealand Productivity Commission, 2018). 96 (Global CCS Institute, 2020) 97 There are additional costs associated with reservoir mapping, injection, well operation and ongoing monitoring and compliance activities.
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storage location is a mature and technically feasible emissions removal option that could be deployed in Aotearoa. Depleted or producing (oil and) gas fields in the Taranaki region may offer significant storage potential. For example, a 2016 study98 estimated the total storage potential to be roughly 15,000Mt CO2. The achievable storage potential would require detailed field assessments but is likely to be significantly less. The primary advantage of these fields over other potential storage sites is that they are well understood geologically and have existing infrastructure which may be adapted for CCS. Given the location near an active plate margin, additional research and analysis would be needed to fully understand and assess the feasibility for permanent storage and risk of reversal from natural disasters such as earthquakes.99 Additional research would also be required to better understand the potential for induced seismicity and interactions with other subsurface activities. There are a range of existing regulatory mechanisms and carbon accounting rules which do not currently incentivise the development of CCS. They do not fully account for the environmental, health and safety, access to land, and mineral and property rights associated with the process. There may also be a perception that CCS is merely a means to prolonging the emissions stemming from fossil fuel production activities and fossil fuel combustion for energy, which would be in conflict with ambitions to reduce gross emissions. CCS and other CCS-based emissions removals options requires consideration around the potential value and roles of land use in climate change. Similar to other infrastructure or plant developments, assessment of ecological and environmental impacts would be required to ensure alignment with broader national government or community objectives. Particularly for bioenergy with CCS, increased competition for land and resources may impact the ability for sectors to decarbonise through the use of biofuels and may remove land from food production. There may also be additional considerations in order to fulfil obligations under Te Tiriti o Waitangi including land and water (taonga) use and allocation, kaitiakitanga and traditional hunting and fishing grounds. CCS applications can leverage different emissions capture approaches and technologies. These approaches are discussed briefly in the table below. While there is increased international interest in these approaches, there remains considerable uncertainty as to their potential achievable contribution to Aotearoa reaching net zero emissions in practice.100 Table 5.2: Options for increasing carbon removals through emissions capture Option Reinjection of geothermal gases and other fugitive emissions
Opportunities and challenges Reinjection has potential to reduce fugitive emissions from geothermal power generation and oil and natural gas extraction. Geothermal fluid contains mostly carbon dioxide with small volumes of methane and hydrogen sulphide. During operation of a geothermal power
98
(Field, 2016) (Field, 2016) 100 (IEA, 2020a) 99
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plant some of the gases can become separated from the geothermal fluid as a result of changes in temperature and pressure when the fluid is extracted. The gases are released to the atmosphere as a part of the power generation process.101 It may be possible to reinject some or all of the gases from geothermal power generation and oil and natural gas extraction sites back into the producing field or reservoir or a nearby storage location. The economics and technology for emissions capture and reinjection would depend on the composition of the gases released, the pressure of the gas at the outlet or wells and the volume of gases released. Additional costs may be incurred from the need to site new suitable reinjection wells, increased field monitoring and management and the potential alteration of, or interaction with, the chemistry of producing reservoirs. Reinjection technologies and practices are a deployable emissions reduction option in Aotearoa. Bioenergy with carbon capture and storage (BECCS)
BECCS is the combination of two capture options: increased biological uptake through forests and plants (biomass) and engineered direct emissions capture. The biomass is harvested and then combusted to generate energy in the form of heat, power or processed into liquid biofuels. The emissions from combustion or processing activities are captured through post-combustion carbon capture technology and then compressed, transported, injected and stored.
BECCS is an emissions removal option which could provide net negative emissions. In order to be considered net negative, the emissions associated with production and combustion (or processing) of biomass, emissions capture and transport cannot exceed the amount of emissions removed through biological uptake.102 The biomass must also originate from sustainably managed forests in order to be considered carbon neutral.103
Biomass is a key emissions reduction opportunity across industry and transport. Increasing competition for biomass and land through BECCS may increase prices and limit availability. This could constrain the uptake
101
(New Zealand Geothermal Association, 2019) (Fajardy & Köberle, 2019) 103 Woody biomass is considered carbon neutral as the carbon dioxide released during combustion is equivalent to the amount absorbed by the tree during growth. If the wood originates from sustainably managed forests, then this is a renewable energy source. 102
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of biomass to displace fossil fuels for combustion for energy. Clear government signals and coordination is required to prioritise the resource for its most valuable end-uses across the economy, in terms of displacing emissions. Doing so in a coherent and planned manner may lessen some of the effects of competition.104 Deployment of BECCS may be further limited by competition for land, potential impacts on water, biodiversity, soil health and social equity (particularly in rural communities).105 Deploying BECCS as part of a suite of measures could lessen some of these potential impacts.106 While there is increasing international interest and development of CCS applications, BECCS is a relatively expensive and emerging technology. Deployment of BECCS would be dependent on the coordination of multiple areas of the economy, such as forestry, industry, communities, and government. Given the relatively dispersed nature of large point sources of emissions and bioenergy resources in Aotearoa, cross-sectoral collaboration would be critical to establish the shared infrastructure and investment required to deploy BECCS.
An alternative approach to emissions removal through increased biological uptake is through increased use of durable engineered wood products in the built environment. The duration of emissions removal would be limited to the life of the building. See also Chapter 4b: Reducing emissions – opportunities and challenges across sectors: Transport, Buildings and Urban Form. Direct air capture with carbon capture and storage (DACCS)
Direct air capture is the direct engineered capture of carbon from the atmosphere. It involves passively or actively passing large volumes of air over a liquid or solid compound to adsorb (chemically bond) carbon dioxide from the atmosphere. The carbon dioxide is then separated and regenerated with heat, water or both and released in a more concentrated form.107,108 Once released, the emissions are captured, compressed, transported, injected and stored. DACCS requires a large volume of air flow for a relatively small amount of carbon dioxide capture. Different technologies can be used for direct air capture and adsorption, but the processes all have high energy or heat and water requirements109 which may be supplied from renewable
104
(Committee on Climate Change, 2018) (Fajardy & Köberle, 2019) 106 (The Royal Society & Royal Academy of Engineering, 2018, p. 8) 107 (The Royal Society & Royal Academy of Engineering, 2018, p. 59) 108 (IEA, 2020b) 109 (IEA, 2020b) 105
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sources or waste heat depending on project design and location. As with other CCS-based emissions removal options, DACCS has implications on resource use.
Carbon capture and utilisation (CCU)
Globally, DACCS is a developing technology with a limited number of pilot projects. Costs are highly variable but generally expensive. As an alternative to storage, the captured carbon dioxide can be used in other industrial processes or products. There are three main categories of carbon dioxide-based products: fuels, chemicals and building materials. Conventional use of captured carbon dioxide includes production of carbonated beverages and to enhance photosynthesis in hot houses. An emerging application is the production of low carbon concrete. Carbon dioxide can be added and absorbed into concrete during the curing process. This may reduce the amount of cement required to produce equivalent-strength concrete with the benefits of improved durability.110 However, this may affect the curing time of concrete which can have economic impacts on the end user which could outweigh the emissions reduction benefits and limit uptake. Uptake may also be limited by perceptions of risk in using new products, difference in cost between products and limitations within New Zealand Standards regarding blended cement and concrete products. Another potential application of CCU is in the production of petrochemicals (urea and methanol) where a pure carbon dioxide source can be used in conjunction with green hydrogen. The carbon dioxide source could be supplied from the Kapuni Gas Treatment Plant where it is stripped out from the natural gas during processing. The Kapuni gas field contains a concentration of about 44% carbon dioxide. The extent to which CCU removes emissions is highly dependent on the source of the emissions stream, the category of carbon dioxide-based product it is used in and the lifetime of the product. The deployment of CCU is also dependent on uptake of carbon capture to provide a long term supply of carbon dioxide to produce carbon dioxide-based products. Globally, CCU is an emerging technology with a limited number of pilot projects. Costs are highly variable but generally expensive. See also Chapter 4a: Reducing emissions – opportunities and challenges across sectors: Heat, industry and power (Industrial Processes and Production).
110
(Energy Transitions Commission, 2020)
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5.4 References Anderegg, W. R. L., Trugman, A. T., Badgley, G., Anderson, C. M., Bartuska, A., Ciais, P., Cullenward, D., Field, C. B., Freeman, J., Goetz, S. J., Hicke, J. A., Huntzinger, D., Jackson, R. B., Nickerson, J., Pacala, S., & Randerson, J. T. (2020). Climate-driven risks to the climate mitigation potential of forests. Science, 368(6497), eaaz7005. https://doi.org/10.1126/science.aaz7005 Angers, D. A., & Eriksen-Hamel, N. S. (2008). Full-inversion tillage and organic carbon distribution in soil profiles: A meta-analysis. Soil Science Society of America Journal, 72(5), 1370–1374. https://doi.org/10.2136/sssaj2007.0342 Baker, D. J. (2016, December 12). Low-Disturbance No-Tillage: Opportunities for NZ. Pure Advantage. https://pureadvantage.org/news/2016/12/13/low-disturbance-no-tillageopportunities-nz/ Basche, A. D., Miguez, F. E., Kaspar, T. C., & Castellano, M. J. (2014). Do cover crops increase or decrease nitrous oxide emissions? A meta-analysis. Journal of Soil and Water Conservation, 69(6), 471–482. https://doi.org/10.2489/jswc.69.6.471 BERG. (2018). Report of the Biological Emissions Reference Group (BERG) (p. 56). Beef + Lamb, Federated Farmers, Fonterra, Dairy NZ, Deer Industry New Zealand, Horticulture New Zealand, Ministry for the Environment, Fertilizer Association, Ministry for Primary Industries. https://www.mpi.govt.nz/funding-rural-support/environment-and-naturalresources/biological-emissions-reference-group/ Bergen, D., & Gea, L. (2007). Native trees: Planting and early management for wood production. New Zealand Indigenous Tree Bulletin. New Zealand Forest Research Institute, 3, 44. Borkin, K. M., & Parsons, S. (2010). The importance of exotic plantation forest for the New Zealand long-tailed bat (Chalinolobus tuberculatus ). New Zealand Journal of Zoology, 37(1), 35–51. https://doi.org/10.1080/03014221003602190 Brockerhoff, E., Ecroyd, C., Leckie, A., & Kimberly, M. (2003). Diversity and succession of adventive and indigenous vascular understorey plants in Pinus radiata plantation forests in New Zealand. Forest Ecology and Management, 185(3). https://www.sciencedirect.com/science/article/abs/pii/S0378112703002275 Brockerhoff, E. G., Ecroyd, C. E., & Langer, E. R. (2001). Biodiversity in New Zealand plantation forests: Policy trends, incentives, and the state of our knowledge. New Zealand Journal of Forestry, 46(1), 31–37.
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Burrows, L., Easdale, T., Wakelin, S., Quinn, J., Graham, E., & Mackay, A. (2018). Carbon sequestration potential of non-ETS land on farms (Report Prepared for the Ministry of Primary Industries No. LC3161). https://www.mpi.govt.nz/dmsdocument/32134/direct Carswell, F., Holdaway, R., Mason, N., Richardson, S., Burrows, L., Allen, R., & Peltzer, D. (2015). Wild Animal Control for Emissions Management (WACEM) research synthesis (Prepared for the Department of Conservation No. DOC4424). Manaaki Whenua Landcare Research. https://www.doc.govt.nz/globalassets/documents/conservation/threats-andimpacts/animal-pests/wild-animal-control-emissions-management.pdf Committee on Climate Change. (2018). Biomass in a low-carbon economy (p. 162). Committee on Climate Change. https://www.theccc.org.uk/wp-content/uploads/2018/11/Biomass-in-alow-carbon-economy-CCC-2018.pdf Department of Conservation. (2017). Desktop analysis of potential afforestation opportunity – February 2017. Department of Conservation. (2020). Te mana o Te Taiao—Aotearoa New Zealand Biodiversity Strategy 2020 (p. 73). https://www.doc.govt.nz/nature/biodiversity/aotearoa-new-zealandbiodiversity-strategy/ Ellegard, J. (2020). Radiata. The race to grow a better tree. New Zealand Logger, Special feature. https://www.rpbc.co.nz/resources/the-race-to-grow-a-better-tree Energy Transitions Commission. (2020). Making mission possible: Delivering a net-zero economy. Energy Transitions Commission. https://www.energy-transitions.org/wpcontent/uploads/2020/09/Making-Mission-Possible-Full-Report.pdf Fajardy, M., & Köberle, D. A. (2019). BECCS deployment: A reality check. Grantham Institute. https://www.imperial.ac.uk/media/imperial-college/granthaminstitute/public/publications/briefing-papers/BECCS-deployment---a-reality-check.pdf Field, B. (2016). Feasibility of storing carbon dioxide on a tectonically active margin: New Zealand. AAPG International Conference & Exhibition, Melbourne, Australia. http://www.searchanddiscovery.com/documents/2016/80527field/ndx_field.pdf Forbes, A. S., Norton, D. A., & Carswell, F. E. (2015). Underplanting degraded exotic Pinus with indigenous conifers assists forest restoration. Ecological Management & Restoration, 16(1), 41–49. https://doi.org/10.1111/emr.12137 Forbes, A. S., Norton, D. A., & Carswell, F. E. (2019). Opportunities and limitations of exotic Pinus radiata as a facilitative nurse for New Zealand indigenous forest restoration. New Zealand Journal of Forestry Science, 49. https://doi.org/10.33494/nzjfs492019x45x
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Forbes, A. S., Wallace, K., Buckley, H., Case, B., Clarkson, B., & Norton, D. (2020). Restoring maturephase forest tree species through enrichment planting in New Zealand’s lowland landscapes. New Zealand Journal of Ecology, 44(1). https://doi.org/10.20417/nzjecol.44.10 Global CCS Institute. (2020). Carbon capture and storage pipeline grows by 10 large-scale facilities globally. https://www.globalccsinstitute.com/news-media/press-room/mediareleases/carbon-capture-and-storage-pipeline-grows-by-10-large-scale-facilities-globally/ Global Fire Database. (2020). 2019-20 Australian bushfire season. https://globalfiredata.org/pages/2020/01/03/2019-20-australian-bushfires/ Griscom, B. W., Adams, J., Ellis, P. W., Houghton, R. A., Lomax, G., Miteva, D. A., Schlesinger, W. H., Shoch, D., Siikamäki, J. V., Smith, P., Woodbury, P., Zganjar, C., Blackman, A., Campari, J., Conant, R. T., Delgado, C., Elias, P., Gopalakrishna, T., Hamsik, M. R., … Fargione, J. (2017). Natural climate solutions. Proceedings of the National Academy of Sciences, 114(44), 11645– 11650. https://doi.org/10.1073/pnas.1710465114 Harmsworth, G. (2020). Māori Values and Wetland Enhancement. Manaaki Whenua Landcare Research. https://www.landcareresearch.co.nz/uploads/public/Publications/Te-reo-o-terepo/Poster_Maori_Values_and_Wetlands.pdf Hedley, M. J., Camps-Arbestain, M., McLaren, S., Jones, J., & Chen, Q. (2020). A review of evidence for the potential role of biochar to reduce net GHG emissions from New Zealand agriculture [A report prepared for the New Zealand Ministry of Primary Industries and the New Zealand Agricultural Greenhouse Gas Research Centre]. MJ & CB Hedley Soil Science, Massey University. Holdaway, Easdale, Mason, & Carswell. (2014). LUCAS natural forest carbon analysis. Report prepared for MfE by Landcare Research. MfE. IEA. (2020a). Energy Technology Perspectives 2020. Special Report on Carbon Capture, Utilisation and Storage: CCUS in clean energy transitions (p. 174). IEA. IEA. (2020b, June). Direct Air Capture – Analysis. IEA. https://www.iea.org/reports/direct-air-capture Jaram, D. M. (2009). Joe Harawira: The emergence of a mātauranga Māori environmentalist. MAI Review, 1(Intern Research Report 3). http://www.review.mai.ac.nz/mrindex/MR/article/view/211.html Jones, J., & Camps, M. (2019). Estimating the environmental impact and economic cost of biochar [Comment to MPI]. Massey University. Ka-Uri Unearthed, K. (2019). Ka-Uri Unearthed. Kāuri Unearthed. https://ka-uri.com/
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Kurtz, W., Dymond, C., Stinson, G., Rampley, G., Neilson, E., Carroll, A., Ebata, T., & Safranyik, L. (2008). Mountain pine beetle and forest carbon feedback to climate change. Nature, 452, 987–990. Lake Taupō Forest Trust. (2020). Land & Forest. Lake Taupō Forest Trust. https://www.ltft.co.nz/land-forest/ Lawrence-Smith, E., Curtin, D., Beare, M., & Kelliher, F. (2015). Potential applications of full inversion tillage to increase soil carbon storage during pasture renewal in New Zealand. Plant & Food Research Rangahau Ahumāra Kai. Lovelock, C. E., & Duarte, C. M. (2019). Dimensions of Blue Carbon and emerging perspectives. Biology Letters, 15(3), 20180781. https://doi.org/10.1098/rsbl.2018.0781 Macreadie, P. I., Anton, A., Raven, J. A., Beaumont, N., Connolly, R. M., Friess, D. A., Kelleway, J. J., Kennedy, H., Kuwae, T., Lavery, P. S., Lovelock, C. E., Smale, D. A., Apostolaki, E. T., Atwood, T. B., Baldock, J., Bianchi, T. S., Chmura, G. L., Eyre, B. D., Fourqurean, J. W., … Duarte, C. M. (2019). The future of Blue Carbon science. Nature Communications, 10(1), 3998. https://doi.org/10.1038/s41467-019-11693-w Manley, B. (2019). Impacts of carbon prices on forest management (MPI Technical Paper No: 2019/13). Ministry of Primary Industries. https://www.teururakau.govt.nz/dmsdocument/37113/direct Manley, B., & Evison, D. (2017). Quantifying the carbon in harvested wood products from logs exported from New Zealand. New Zealand Journal of Forestry, 62(3), 36–44. Mason, E., & Morgenroth, J. (2017). Potential for forestry on highly erodible land in New Zealand. New Zealand Journal of Forestry, 62(1), 8–15. Meduna, V. (2017). New Offset Options for New Zealand [Economic and Public Policy Research]. Motu. https://motu.nz/assets/Documents/our-work/environment-and-resources/climatechange-mitigation/emissions-trading/Offset-options-for-NZ2.pdf Ministry for Primary Industries. (Unpublished). Fourth Biennial Report projections. Ministry for Primary Industries. (2017). A guide to carbon look-up tables for forestry in the Emissions Trading Scheme. Ministry for Primary Industries. https://www.mpi.govt.nz/dmsdocument/4762/direct Ministry for Primary Industries. (2017). Stock exclusion costs report (Technical Paper No: 2017/11). Ministry of Primary Industries. https://www.mpi.govt.nz/dmsdocument/16537/direct
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Ministry for Primary Industries. (2018). One Billion Trees programme: Actions and decisions for implementation. Ministry for Primary Industries. https://www.mpi.govt.nz/dmsdocument/30942/direct Ministry for Primary Industries. (2020a). National Environmental Standards for Plantation Forestry. Ministry for Primary Industries. https://www.mpi.govt.nz/forestry/national-environmentalstandards-plantation-forestry/ Ministry for Primary Industries. (2020b). Native (indigenous) forests. Ministry for Primary Industries. https://www.mpi.govt.nz/forestry/native-indigenous-forests/ Ministry for Primary Industries. (2020c). Wilding conifer control in NZ. Ministry for Primary Industries. https://www.mpi.govt.nz/biosecurity/long-term-biosecurity-managementprogrammes/wilding-conifers/ Ministry for the Environment. (2019). Environment Aotearoa 2019. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Environmental%20reporting/environme nt%20-aotearoa-2019.pdf Ministry for the Environment. (2020a). Marginal abatement cost curves analysis for New Zealand: Potential greenhouse gas mitigation options and their costs (p. 102). Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/marginalabatement-cost-curves-analysis_0.pdf Ministry for the Environment. (2020b). National Climate Change Risk Assessment for New Zealand – Arotakenga Tūraru mō te Huringa Āhuarangi o Āotearoa: Technical report – Pūrongo whaihanga. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/national-climatechange-risk-assessment-technical-report.pdf Mudge, P. L., Kelliher, F. M., Knight, T. L., O’Connell, D., Fraser, S., & Schipper, L. A. (2017). Irrigating grazed pasture decreases soil carbon and nitrogen stocks. Global Change Biology, 23(2), 945–954. https://doi.org/10.1111/gcb.13448 New Zealand Geothermal Association. (2019). Geothermal Emissions. https://nzgeothermal.org.nz/geothermal-energy/emissions/ New Zealand Plant Producers Incorporated (NZPPI). (2019). Growing New Zealand. Native nurseries survey insights. New Zealand Plant Producers Incorporated. New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission.
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https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf New Zealand Productivity Commission. (2019). Local government funding and financing. The New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/a40d80048d/Final-report_Localgovernment-funding-and-financing.pdf Ngati Hine Forestry Trust. (2019). Ngati Hine Forestry Trust – He Whenua Hua – He Tangata Ora. http://www.ngatihine.maori.nz/ Nugent, G., Whitford, J., Sweetapple, P., Duncan, R., & Holland, P. (2010). Effect of one-hit control on the density of possums (Trichosurus vulpecula) and their impacts on native forest (No. 304; p. 64). Department of Conservation. https://www.doc.govt.nz/Documents/science-andtechnical/sfc304entire.pdf NZ Carbon Farming. (2019). Our Approach. NZ Carbon Farming. https://nzcarbonfarming.co.nz/about/our-approach/ NZAGRC. (2019). New Zealand Agricultural Greenhouse Gas Research Centre—Soil Carbon. https://www.nzagrc.org.nz/soil-carbon.html Parliamentary Commissioner for the Environment. (2016). Climate change and agriculture: Understanding the biological greenhouse gases. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/1678/climate-change-and-agricultureweb.pdf Parliamentary Commissioner for the Environment. (2017). Taonga of an island nation: Saving New Zealand’s birds. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/publications/taonga-of-an-island-nation-saving-newzealands-birds Parliamentary Commissioner for the Environment. (2019). Farms, forests and fossil fuels: The next great landscape transformation? Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/196523/report-farms-forests-and-fossil-fuels.pdf Pastoral Greenhouse Gas Research Consortium. (2015). Reducing New Zealand’s Agricultural Greenhouse Gases: Soil Carbon. University of Waikato. https://www.pggrc.co.nz/files/1499904102107.pdf Paul, T., Kimberley, M., & Beets, P. (Unpublished). Carbon stocks and change in New Zealand’s natural forests: Estimates from the first two complete inventory cycles 2002–2007 and 2007– 2014 [Contract report prepared for the Ministry for the Environment]. New Zealand Forest Research Institute Ltd (trading as Scion).
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Pawson, Stephen M., Brockerhoff, E. G., Meenken, E. D., & Didham, R. K. (2008). Non-native plantation forests as alternative habitat for native forest beetles in a heavily modified landscape. Biodiversity and Conservation, 17(5), 1127–1148. https://doi.org/10.1007/s10531-008-9363-y Pawson, Steve M., Ecroyd, C. E., Seaton, R., Shaw, W. B., & Brockerhoff, E. G. (2010). New Zealand’s exotic plantation forests as habitats for threatened indigenous species. New Zealand Journal of Ecology, 34(3), 342–355. Peltzer, D. A., Allen, R. B., Lovett, G. M., Whitehead, D., & Wardle, D. A. (2010). Effects of biological invasions on forest carbon sequestration. Global Change Biology, 16(2), 732–746. https://doi.org/10.1111/j.1365-2486.2009.02038.x Pereira, R. C., Hedley, M. J., Hanly, J., Hedges, M., Bretherton, M., Beare, M. H., & McNally, S. R. (2019). Full inversion tillage pasture renewal offers greenhouse gas mitigation options: The Manawatu experience. Pizzirani, S., Monge, J. J., Hall, P., Steward, G. A., Dowling, L., Caskey, P., & McLaren, S. J. (2019). Exploring forestry options with Māori landowners: An economic assessment of radiata pine, rimu, and mānuka. New Zealand Journal of Forestry Science, 49. https://doi.org/10.33494/nzjfs492019x44x Poeplau, C., & Don, A. (2015). Carbon sequestration in agricultural soils via cultivation of cover crops – A meta-analysis. Agriculture, Ecosystems & Environment, 200, 33–41. https://doi.org/10.1016/j.agee.2014.10.024 Powlson, D. S., Stirling, C. M., Jat, M. L., Gerard, B. G., Palm, C. A., Sanchez, P. A., & Cassman, K. G. (2014). Limited potential of no-till agriculture for climate change mitigation. Nature Climate Change, 4(8), 678–683. https://doi.org/10.1038/nclimate2292 Radiata Pine Breeding Company. (2020). Tree Breeding. Tree Breeding. https://www.rpbc.co.nz/pages/tree-breeding Regenerate Christchurch. (2018). Ōtākaro Avon River Corridor Regeneration Plan: Land Use Assessment Report—Ecological Restoration. https://s3-ap-southeast2.amazonaws.com/ehq-productionaustralia/915e6a630e32fd0b2ff1719baee28ea3d7a44a8f/documents/attachments/000/064 /559/original/Revised_LUAR_Ecological_-_May_2018.pdf?1527558501 Reisinger, A, Kitching, R., Chiew, F., Hughes, L., Newton, P., Schuster, S., Tait, A., & Whetton, P. (2014). Australasia. In In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Barros, V.R., C.B. Field, D.J. Dokken, M.D.
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Mastrandrea, K.J. Mach, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L. White (eds.)]. (pp. 1371–1438). Cambridge University Press. Reisinger, Andy, Clark, H., Journeaux, P., Clark, D., & Lambert, G. (2017). On-farm options to reduce agricultural GHG emissions in New Zealand [Report to the Biological Emissions Reference Group]. New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC). https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potential-final Richardson, S. J., Holdaway, R. J., & Carswell, F. (2014). Evidence for arrested successional processes after fire in the Waikare River catchment, Te Urewera. New Zealand Journal of Ecology, 38(2), 221–229. Saskatchewan Soil Conservation Association. (2020). Economics of Direct Seeding. Saskatchewan Soil Conservation Association. https://ssca.ca/economics-of-direct-seeding Schipper, L. A., Mudge, P. L., Kirschbaum, M. U. F., Hedley, C. B., Golubiewski, N. E., Smaill, S. J., & Kelliher, F. M. (2017). A review of soil carbon change in New Zealand’s grazed grasslands. New Zealand Journal of Agricultural Research, 60(2), 93–118. https://doi.org/10.1080/00288233.2017.1284134 Scion. (2018). Feasibility and benefits of methods to incentivise production of longer-lived harvested wood products from New Zealand’s forest harvest [Report to Ministry for Primary Industries]. Scion. (2020). Breeding better trees. Breeding Better Trees. https://www.scionresearch.com/science/growing-the-value-of-forests/breeding-bettertrees Scrimgeour, F., Kumar, V., & Weenink, G. (2017). Investment in covenanted land conservation. A report prepared for Queen Elizabeth II National Trust. Institute for Business Research, The University of Waikato; QEII National Trust. https://qeiinationaltrust.org.nz/wpcontent/uploads/2018/04/waikato-investment-convenanted-land.pdf Spokas, K. A. (2010). Review of the stability of biochar in soils: Predictability of O:C molar ratios. Carbon Management, 1(2), 289–303. https://doi.org/10.4155/cmt.10.32 Stats NZ. (2019). Highly erodible land. https://www.stats.govt.nz/indicators/highly-erodible-land Tane’s Tree Trust. (2014). Carbon sequestration by planted native trees and shrubs. https://www.tanestrees.org.nz/site/assets/files/1069/10_5_carbon_sequestrat Te Runanganui o Ngati Porou. (2018). Ngati Porou Forests Ltd. https://ngatiporou.com/natibiz/doing-business-ngati-porou/nati-biz-directory/ngati-porou-forests-ltd
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Te Uru Rākau. (2018a). A better ETS for forestry: Proposed amendments to the Climate Change Response Act 2002 (Te Uru Rākau Discussion Paper No: 2018/02). Te Uru Rākau. https://www.mpi.govt.nz/dmsdocument/30285/direct Te Uru Rākau. (2018b). A guide to the field measurement approach for forestry in the Emissions Trading Scheme. Ministry for Primary Industries. www.mpi.govt.nz/growing-andproducing/forestry/forestry-in-the-emissions-trading-scheme/using-the-field-measurementapproach/ The Aotearoa Circle. (2020). Native Forests: Resetting the balance (p. 26). The Aotearoa Circle. https://www.theaotearoacircle.nz/s/The-Aotearoa-Circle-Native-Forests-Report_FINAL002.pdf The Nature Conservancy, Cornell University, ISRIC, & Woodwell Climate Research Centre. (2020). Soils Revealed. https://soilsrevealed.org/ The Royal Society & Royal Academy of Engineering. (2018). Greenhouse gas removal. Tōtara Industry Pilot. (2019). Project update, November 2019. https://www.totaraindustry.co.nz/resources-status-updates Wakelin, S. J., Paul, T. S. H., West, T. A. P., & Dowling, L. (2020). Reporting New Zealand’s Nationally Determined Contribution under the Paris Agreement using averaging accounting for post1989 forests (Report to Ministry for Primary Industries No. 18451018). Wakelin, S. J., Searles, N., Lawrence, D., & Paul, T. S. H. (2020). Estimating New Zealand’s harvested wood products carbon stocks and stock changes. Carbon Balance and Management, 15(1), 10. https://doi.org/10.1186/s13021-020-00144-5 Watt, M., Kirschbaum, M. U. F., Moore, J., Pearce, H., Bulman, L., Brockerhoff, E., & Melia, N. (2019). Assessment of multiple climate change effects on plantation forests in New Zealand. Forestry: An International Journal of Forest Research, 92(1), 1–15. West, T. A. P., Monge, J. J., Dowling, L. J., Wakelin, S. J., & Gibbs, H. K. (2020). Promotion of afforestation in New Zealand’s marginal agricultural lands through payments for environmental services. Ecosystem Services, 46, 101212. https://doi.org/10.1016/j.ecoser.2020.101212 Wotton, D. M., & McAlpine, K. G. (2014). Predicting native plant succession through woody weeds in New Zealand (DOC Research and Development Series No. 336; p. 32). Department of Conservation. https://www.moasark.co.nz/wp-content/uploads/2014/11/WottonMcAlpine-2013-drds336entire.pdf Wright, D. M., Tanentzap, A. J., Flores, O., Husheer, S. W., Duncan, R. P., Wiser, S. K., & Coomes, D. A. (2012). Impacts of culling and exclusion of browsers on vegetation recovery across New
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Zealand forests. Biological Conservation, 153, 64–71. https://doi.org/10.1016/j.biocon.2012.04.033 Wyse, S. V., Perry, G. L. W., O’Connell, D. M., Holland, P. S., Wright, M. J., Hosted, C. L., Whitelock, S. L., Geary, I. J., Maurin, K. J. L., & Curran, T. J. (2016). A quantitative assessment of shoot flammability for 60 tree and shrub species supports rankings based on expert opinion. International Journal of Wildland Fire, 25(4), 466. https://doi.org/10.1071/WF15047
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Chapter 6: Perspectives from Tangata Whenua: Considering impacts of emissions reductions and removals for iwi/Māori. Emissions reduction options and associated impacts for iwi and Māori will vary across the motu. Supporting the Crown to be a good Treaty Partner and promoting intergenerationally equitable outcomes for iwi/Māori requires an understanding of the issues and opportunities through a Te Ao Māori lens, from the perspectives of Tangata Whenua. This chapter draws on He Ara Waiora – A Pathway towards Wellbeing and insights gathered though engagement with Māori to explore potential impacts for iwi/Māori of different emissions reductions options. We saw many examples where iwi/Māori demonstrate climate positive leadership in their decision making by exercising rangatiratanga and kaitiakitanga and identify key considerations that Aotearoa should factor into climate positive decisions and actions.
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Contents 6.1 Introduction ............................................................................................................... 3 6.1.1 Purpose ...................................................................................................................................... 4 6.1.2 How we engaged with iwi/Māori and gathered insights ........................................................... 4
6.2 Part 1: Context ............................................................................................................ 5 6.2.1 Iwi and Māori constructs ........................................................................................................... 5 6.2.2 Māori-collectives........................................................................................................................ 5 6.2.3 Traditional Māori social and economic constructs .................................................................... 6 6.2.4 Te Ao Māori values .................................................................................................................... 7 6.2.5 He Ara Waiora – A pathway towards wellbeing ........................................................................ 8 6.2.6 The Māori economy ................................................................................................................. 10 6.2.7 The Māori emissions profile..................................................................................................... 11
6.3 Part 2: Impacts.......................................................................................................... 13 6.3.1 Overview .................................................................................................................................. 13 6.3.2 Land use ................................................................................................................................... 14 6.3.4 Forestry .................................................................................................................................... 15 6.3.5 Agriculture ............................................................................................................................... 19 6.3.6 Other land use.......................................................................................................................... 22 6.3.7 Energy and Electrification ........................................................................................................ 23 6.3.8 Fisheries ................................................................................................................................... 26
6.4 Summary: He Ara Waiora wellbeing domains ............................................................ 29 6.5 References ................................................................................................................ 30 Appendix 1: He Ara Waiora v.2 ....................................................................................... 34
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Emissions reduction options and associated impacts for iwi and Māori will vary across the motu. Supporting the Crown to be a good Treaty Partner and promoting intergenerationally equitable outcomes for iwi/Māori requires an understanding of the issues and opportunities through a Te Ao Māori lens, from the perspectives of Tangata Whenua. This chapter draws on He Ara Waiora – A Pathway towards Wellbeing and insights gathered though engagement with Māori to explore potential impacts for iwi/Māori of different emissions reductions options. We saw many examples where iwi/Māori demonstrate climate positive leadership in their decision making by exercising rangatiratanga and kaitiakitanga and identify key considerations that Aotearoa should factor into climate positive decisions and actions.
6.1 Introduction The Climate Change Response Act 2002 (the Act) 1 requires that the Commission considers the Crown-Māori relationship, Te Ao Māori, and specific effects on iwi and Māori in all the advice it gives to the Government (section 5M(f)). The Act requires that when the Government acts on our advice, it explicitly includes strategies to recognise and mitigate the impacts on iwi and Māori of reducing emissions and increasing removals (section 3A(ad)), and that it considers economic, social, health, environmental, ecological and cultural effects of climate change for iwi and Māori. Both the Climate Change Commission and the Government must also adequately consult with iwi and Māori on their advice and plans. (section 5N for the Commission and section 3A(ad) and section 5ZS(6) for the Minister). Recognising relevant reduction options and potential impacts requires an understanding of what matters to iwi and Māori from a Māori perspective, or a Te Ao Māori view. This chapter sets out our key findings and insights that enable the development of an appropriate strategy to meet our legislative obligations. Te Ao Māori view is a distinct way of understanding and being in the world unique to tangata whenua of Aotearoa. Within Te Ao Māori, societal constructs are comprised of iwi, hapū and whānau who occupy different takiwā (tribal regions). Between iwi, hapū and their respective takiwā, expressions of tikanga and mātauranga are diverse and there is also dialectal variation within te reo Māori. Given the diversity across iwi/Māori, we understand that iwi/Māori across the motu will be affected differently due to their unique histories and the characteristics of their tribal takiwā. Our approach to gathering insights included building an understanding of the historic and contemporary context to frame what we heard.
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(Climate Change Response Act 2002 (as at 01 December 2020))
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6.1.1 Purpose While impacts for iwi and Māori are considered throughout the report, the purpose of this chapter is to provide an overview of the insights we gathered from tangata whenua. This was achieved through engagement and literature, to provide the appropriate context, supporting evidence and the rationale underpinning our impacts analysis specific to iwi and Māori. This chapter is intended to set the foundations of our work to understand impacts for iwi and Māori, to enable iwi and Māori to test our understanding and analysis of impacts and provide feedback. While this section is written to ensure iwi and Māori are able to participate in the process in a focused and efficient way, we hope that the content may be useful to other audiences.
6.1.2 How we engaged with iwi/Māori and gathered insights Climate change emissions reduction options and associated impacts for iwi and Māori will vary across the motu. As an indication of diversity across iwi and Māori, there are approximately 95 iwi, each with affiliated hapū and associated marae. Of the larger iwi Ngapuhi has 110 affiliated hapū, Ngāti Porou has 58 affiliated hapū, Ngāi Tahu have 5 primary hapū (although there were over 100 hapū pre-settlement), Waikato-Tainui have 33 affiliated hapū and Ngāti Tūwharetoa have 26 affiliated hapū. There are also 8,406 2 entities managing 27,456 Māori freehold land titles and several pan-iwi and pan-Māori organisations. Considering the vastness of iwi and Māori perspectives within Aotearoa we acknowledge we are not able to represent perspectives on behalf of all Māori. However, we applied a range of methods to reach out and connect with iwi and Māori between February and October 2020, as an initial approach to gather a broad range of insights for our first consultation round. These included: 1) Building on the insights gathered through the Interim Climate Change Committee’s submissions process and their engagement with Iwi and Māori. 2) Undertaking an assessment of Iwi Management Plans to understand iwi aspirations for resources within their takiwā. 3) Undertaking a review of literature pertaining to Māori perspectives on climate change and/or protecting te ao tūroa/te taiao. 4) Drawing on He Ara Waiora 3, a high-level Māori wellbeing framework sourced in mātauranga Māori. This approach enabled us to draw on insights Māori thought leaders have already provided to the Crown while trying not to exacerbate engagement fatigue. 5) Ensuring Māori with the relevant expertise were members of the Technical Reference Groups. 6) Conducting Zoom sessions with Māori thought leaders, iwi representatives, Māori business leaders and Māori scientists. 7) Engaging with Māori who connected with us.
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(Ministry of Justice & Te Kooti Whenua Māori (Māori Land Court), 2019) (McMeeking et al., 2019)
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8) Development of case studies with representatives of Māori-collectives. 4 The insights we heard through engagement with iwi/Māori inform this chapter and are summarised in Part 2 under barriers, opportunities/benefits and key considerations in alignment with the Treaty principles. Going forward we will expand our engagement with iwi/Māori to ensure we are understanding Māori perspectives more broadly across the motu. This chapter is comprised of two parts: o
Part 1: Context – this part contains foundational context which provides the basis of our analysis for impacts on iwi and Māori to support the development of the reports for this consultation period and set up a base level of knowledge for our work going forward.
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Part 2: Impacts – this part identifies potential impacts for iwi and Māori based on our findings in relation to the context and the sector reduction options and pathways.
Further work will be undertaken to address impacts for iwi and Māori with regard to adaptation, however, the focus of our work to date has been to capture the potential impacts for iwi and Māori of proposed options to reduce and remove emissions.
6.2 Part 1: Context 6.2.1 Iwi and Māori constructs Impacts on iwi and Māori can only be considered through a Te Ao Māori view and with an understanding of traditional and contemporary Māori societal and economic frameworks. Traditionally Māori societal frameworks consisted of whānau, hapū and iwi connected through whakapapa to a common ancestor and an area/territory (e.g., maunga, awa, moana, whenua) based on rights established by their tipuna. Today, following years of colonial disruption, in addition to traditional societal frameworks, iwi, hapū and whānau Māori maintain aspects of their cultural, social, environmental and economic functions through a range of organisational constructs. For the purposes of this report we have referred to all Māori traditional and contemporary constructs where members are connected through whakapapa as Māori-collectives. We refer to pan-iwi or pan-Māori organisations by their names. Where we use the phrase ‘iwi and Māori’ throughout the report this is specifically referring to and aligning with the Act and ‘iwi/Māori’ when we are speaking more generally given that culturally Māori as individuals, whānau and hapū are components of iwi.
6.2.2 Māori-collectives For the purposes of this chapter, Māori-collectives include:
We invited Māori-collectives from different takiwā to participate in case studies, however, only a small number of entities were able or willing to engage. Reasons for not engaging included timing/capacity constraints, no perceived reciprocation of value, lack of trust in the Crown’s desire to do right by Māori, or potential misrepresentation or lack of capability to understand and relay the information appropriately.
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Iwi – tribe or extended kinship group comprised of several hapū within a takiwā (tribal boundary). Iwi is largely recognized by Crown due to the large natural grouping policy prioritized under the Treaty Settlement process. Today iwi operate through a range of entities including Post-Settlement Governance Entities (PSGEs), charitable trusts, companies, or partnerships to undertake their duties and carry out operations.
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Māori Trust Boards – some iwi/Māori entities are constituted under the Māori Trust Boards Act 1955. This legal framework was initially established to enable iwi to manage compensation payments (prior to PSGEs). They typically hold collectively-owned tribal assets and their main objectives are political, social and cultural. Being a Crown construct there are ongoing tensions due to Crown control versus iwi/Māori autonomy.
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Post-Settlement Government Entities (PSGEs) – are typically iwi entities set up to receive and sometimes administer and manage redress assets on behalf of their members. Due to the government’s large natural grouping policy, PSGEs are often tasked with transferring redress assets back to the hapū/collective of hapū with the mana whenua status.
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Hapū – Kinship group or subtribe (subgroups referred to as hapori), some of the participants we engaged with considered their perspectives on climate change from a whānau and hapū perspective, with regard to how they could experience impacts. Note: whānau form the base unit of Māori societal constructs, however, we have not focused in on whānau in this chapter, as many of the impacts for Māori as individuals and whānau will be covered in other chapters.
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Marae – usually run by a board or committee and typically represent the centre for culture for whānau and hapū where they uphold cultural practices such as tangihanga, wānanga, hui-a-hapū.
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Te Ture Whenua Māori Entities – entities created under the Te Ture Whenua Māori Act 1993 to hold and manage Māori customary or freehold land. A large number of Māori entities operating in forestry and farming are Ahu Whenua Trusts and Māori Incorporations.
6.2.3 Traditional Māori social and economic constructs Kainga/Pā Traditionally the kāinga was the base economic unit of Māori society. The kāinga (also referred to as the Pā) was home to several whānau within a hapū and comprised of a small number of whare, sometimes a marae and had proximity to areas suitable for gathering food, rongoā and other resources essential for carrying out subsistence or customary practices within the established hapū boundaries. Within the kāinga, tikanga such as aroha, manaakitanga, utu and koha ensured the wellbeing of the resident whānau and supported intra-hapū and pan-iwi trading of resources. Haukāinga The haukāinga (home people/ whānau from the Pā), sometimes referred to as the ahi kā, provide a significant contribution to the sustainability and vitality of Māori culture due to their role in carrying
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on the kawa and tikanga of their marae, kāinga and hapū, as well as retaining local mātauranga and managing stocks of natural resources. In addition to upholding culture, the haukāinga also help maintain cohesive and resilient communities. Māori we engaged with who were raised on the pa and/or are active members of their haukāinga, described the Pa lifestyle as having a high degree of community connectivity and a strong sense of self-identity and belonging which enhanced resilience within their communities. We were told that the high level of connectedness within the haukāinga enhanced community resilience during the COVID-19 lockdown period and similarly climate change initiatives should consider the role and the effectiveness of the haukāinga (or ahi kaa) for their ability to build community cohesion and resilience particularly in times of crisis. Participants discussed how Māori communities are often viewed by Crown from a deficit perspective, however, following COVID-19 lockdown, these communities demonstrated their strength and prosperity in ways that should not be discounted when considering options to address climate change. Whānau Whānau encapsulates the extended family or family group and (within the kāinga) represents a key component of the primary economic unit of traditional Māori society. Within Māori social constructs, wellbeing can be enhanced with initiatives driven from within the whānau unit. Hapū Hapū, a larger kinship group consisting of several whānau who share a common ancestry. Hapū traditionally form the primary political unit, exercising rangatiratanga, mana motuhake, kaitiakitanga, ahi kā and other cultural related practices where they have mana whenua within their takiwā. While whānau form the base unit of Māori social constructs, whānau will collaborate as hapū to take on shared kaupapa that requires collective action. Iwi Iwi, an extended kinship group who share a common ancestor with established tribal boundaries or takiwā. Similar to whānau collectivising as hapū, hapū typically align as iwi to take on shared kaupapa and often iwi will work in collaboration with other iwi. In contemporary times, iwi is not just a genealogy-based construct, but has taken on a constitutional role subsequent to the Treaty Settlement process. Now, through Settlement legislation, the Crown must uphold obligations specific to individual iwi which climate change policy would need to give consideration to.
6.2.4 Te Ao Māori values Throughout engagement we heard from a range of Māori individuals and representatives from Māori-collectives who expressed how Māori concepts of whakapapa, whenua, whanaungatanga and tikanga such as kaitiakitanga, manaakitanga, kotahitanga shaped the way Māori live as tangata whenua in Aotearoa and how these values contribute to decision making. We also heard that mātauranga Māori and tikanga vary across iwi/hapū and different regions. However, at a high-level there are consistent themes that resonate broadly with iwi/Māori which
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have guided a Māori way of being in the world for many generations (e.g., societal frameworks, community responsibilities, resource management). There was not sufficient time to take soundings across a broad spectrum of Māori-collectives. However, based on these common themes, we have drawn on the framework He Ara Waiora – A Pathway towards Wellbeing (version 2) 5 to inform our understanding of a Te Ao Māori view and underpin our analysis regarding impacts for iwi/Māori. He Ara Waiora 6 presents a mātauranga Māori approach to wellbeing and provides appropriate framing to assess impacts of emissions reductions and increased removals for iwi and Māori.
6.2.5 He Ara Waiora – A pathway towards wellbeing He Ara Waiora aims to provide a potential “model for measuring and analysing wellbeing, sourced in mātauranga Māori” 7 and is a useful framework to apply our analysis as it provides a high-level interpretation of how Māori view the world holistically, which is consistent with the perspectives we heard through engagement with Māori. It also helps us think about how tikanga could be applied to our advice on climate change policy, which should consider the broader wellbeing of people and the environment for current and future generations. Through engagement with Māori we heard that all things are interconnected through wairua and whakapapa. Through whakapapa, Māori acknowledge their relationship to the environment (being the descendants of Io and of Ranginui and Papatūānuku). The ira tangata (the human realm) positions humans as the pōtiki (the youngest) in the whakapapa, therefore Māori inherit responsibilities to the other domains (e.g., Ranginui and Papatūānuku, Tangaroa - the sea, Tāne Mahuta – the forest and Tāne’s offspring the flora/fauna etc.) who preceded the emergence of humanity into Te Ao Marama (the light of the world/the world of knowledge). Accordingly, through whakapapa Māori inherit responsibilities to consider the wellbeing of the broader system and tikanga provides guidelines that enables a holistic way of living. An understanding of a Te Ao Māori view and how tikanga is applied could extend to the way we consider climate change related decisions. This relationality is presented in the He Ara Waiora framework (Figure 6.1) which is anchored in wairua as a source of wellbeing. The taiao at the centre (incorporating the ira atua: Ranginui, Papatūanuku, Tāne mahuta, Tangaroa etc.) iterates a Māori perspective that environmental wellbeing is a precursor to human wellbeing and wellbeing within the ira tangata (the human realm) is premised on an interdependence between individual and collective wellbeing. Māori who contributed to the development of the framework identified four dimensions of wellbeing within the ira tangata which include:
(McMeeking et al., 2019) He Ara Waiora was initiated by the Tax Working Group, co-designed with Māori thought leaders and iwi representatives and is currently under the stewardship of the Treasury. 7 (McMeeking et al., 2019, p. 5) 5 6
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o o o o
Mana tuku iho – Identity and belonging Mana tauutuutu – Individual and community rights and responsibilities Mana āheinga – Aspiration and capability Mana whanake – Sustainable prosperity
Figure 6.1: He Ara Waiora Framework Version 2.0.
We heard through engagement that many cultural and commercial Māori-collectives operate in accordance with the tikanga values that are relevant to them. Within the He Ara Waiora framework, tikanga is considered as a ‘means’ which combined with the ‘ends’ can achieve waiora or wellbeing. This was consistent with how Māori described the way tikanga applies to decision-making on their whenua, for example applying values of kaitiaki on Ōpepe Farm Trust meant that they had already reduced their nitrate discharge output before the Lake Taupō nitrate discharge allowance (NDA) grandparenting rules 8 were introduced (which then penalized them for being early movers and doing good). Māori we engaged with often talked about their kaitiaki obligations to their whenua. Comparatively the Commission serves in more of a tiaki capacity, as we transition to a thriving, climate-resilient low emissions Aotearoa, however, we can identify with the stewardship aspects of our respective responsibilities. He Ara Waiora indicates tikanga values that have high-frequency use within Māori organisations and were considered appropriate as a ‘means’ to achieving wellbeing. The most commonly applied tikanga by Māori organisations included kaitiakitanga, manaakitanga, tikanga, whanaungatanga and 8
(Duhon et al., 2015)
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kotahitanga. Drawing on these tikanga, we have adopted their application to help interpret the insights we gained through engagement and to consider potential impacts on iwi/Māori communities. From a tiakitanga perspective we will apply the tikanga as follows: 1. Manaakitanga – having a deep ethic of care towards people and whenua, acknowledging their role in the eco-system and how they could be impacted through this work. 2. Tikanga – ensuring the right decision makers are involved in the process and the right decision-making process is implemented. 3. Whanaungatanga 9 – being mindful of the relationality between all things, our connections to each other and how we connect to our whenua. 4. Kotahitanga – taking an inclusive approach and working collaboratively with other agencies/organisations, communities and people, to access the best ideas and information while uplifting our collective efforts to transition to a low emissions Aotearoa. While the Māori-collectives we engaged with identified as actively operating in accordance with their cultural values, some Māori who engaged with us from an individual perspective commented that there are Māori-collectives which do not operate in accordance with Māori cultural values. For the purposes of our work we have simply reflected the views of participants. 10 Our engagement process also included individuals, whose views are also reflected in this report. In addition to the tikanga reflected in He Ara Waiora, rangatiratanga, as guaranteed under the Treaty of Waitangi, was another key focus throughout engagement for Māori.
6.2.6 The Māori economy The Māori economy is a key aspect of Māori development and intergenerational sustainability and prosperity. It is also a contributor to emissions outputs and an enabler for emissions reductions and removals. Māori economic development tends to have a long-term outlook and is typically progressed alongside Māori cultural, social and environmental development strategies as a holistic approach to intergenerational wellbeing. In the early nineteenth century, Māori were progressive business owners and entrepreneurs, quickly adapting to new technologies and trading a range of products domestically and internationally (initially around Australia and the Pacific). Early Māori business models were fully integrated along the value chain and Māori operated with autonomy. He Ara Waiora development discussions did not fully explore the application of whanaungatanga to policy. We have summarised this tikanga based on what we heard through engagement. 10 Our view is that the self-determined application of cultural values is subjective and unique to the practitioner. A Māori-collective’s context, history and level of resourcing contribute to their activities and opportunities and individual perspectives vary according to their knowledge, exposure and/or experience. It is not our role to define cultural drivers, so we have simply reflected the views of participants. 9
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Māori commercial activity has always been a key enabler for the sustained physical, mental and spiritual wellbeing of the people. “The mana of a rangatira, and associated whānau, hapū and iwi, was measured by the ability of the group to produce, manage and profit from resources in a way that ensured the wellbeing, health, and prosperity of all”. 11 Accordingly, protecting and building the resource base was a central tenet of Māori economic development. The unjust acquisition and confiscation of Māori land, restrictive land management legislation, intervention by Crown officials or Crown appointed Trustees and a significantly reduced population due to introduced diseases left Māori alienated and disenfranchised. By the mid-twentieth century land that remained in Māori ownership was typically unproductive or the original owners had lost control (e.g., locked into perpetual leases or under management). Many Māori, unable to continue traditional subsistence lifestyles, migrated from their tūrangawaewae (place of belonging), leaving their communities and cultural base for unskilled or semi-skilled employment in urban centres. In recent decades, we have seen a resurgence in Māori economic development, due in part to the redress of historic injustices through the Treaty settlements process. Today Māori-collectives own a significant proportion of assets in the primary sectors (50% of the fishing quota, 40% of forestry, 30% in lamb production, 30% in sheep and beef production, 10% in dairy production and 10% in kiwifruit production). 12 Other asset classes include property, private equity, financial assets, tourism, geothermal and technology and innovation. 13 Driven by cultural values, some Māori-collectives are already identifying and/or moving into innovative low emissions industries (e.g., hemp, medicinal cannabis and koura, or investing in technology to drive innovations in nutraceuticals, fashion and tourism). The Māori asset base (estimated at $50 billion) is approximately 6% of our country’s total asset base. Only in the last 30 to 50 years, partly due to the Treaty Settlement process, the expiry of some perpetual leases and legislative review, have Māori-collectives really been able to reassert their mana motuhake and direct the use of their cultural and collectively-owned assets for economic progression. Accordingly, the Māori economy is like a developing economy within a developed economy. However, the rate of growth is exceeding our country’s economy (5% compared with 2.7% in 2016). 14 It is “expected that Māori will invest $1.5 billion per year over the next ten years” (ibid). This model of integrated and sustainable growth makes Māori-collectives well placed to demonstrate an alternative model of leadership and invest in emissions reducing initiatives over the coming emissions budget periods.
6.2.7 The Māori emissions profile In discussions with Māori representatives on Ahu Whenua Trusts we learnt that a range of incentives/disincentives lead Māori to make climate positive choices on their land (e.g., values of kaitiakitanga and a desire to do good for the taiao, regulations and compliance costs, a desire to support our country’s contribution to the Paris Agreement). (Ministry of Education & Te Kete Ipurangi, 2016) (Ministry of Foreign Affairs and Trade (MFAT), 2017) 13 (TBD Advisory, 2019) 14 (New Zealand Trade and Enterprise (NZTE) et al., 2017) 11 12
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A clear theme that emerged, however, was the view that a disproportionate amount of Māori ancestral land has been retained by the Crown and reserved for conservation that as a carbon sink or reservoir contributes to our country’s emissions baseline. A significant amount of Māori collectively-owned land is locked up in production forestry e.g., Central North Island Forest, Lake Taupō Forest Trust, Lake Rotoaira Forest Trust, (in part due to settlement redress). Some Māori land trusts supply geothermal energy and culturally significant lakes and rivers contribute to the production of hydro-energy. In addition, some Māori-collectives have historically opted not to develop land (e.g., conversions to farming or production forestry, housing, food production) where it could conflict with kaitiaki values and compromise the preservation of indigenous biodiversity or cultural practices. On this basis, it was viewed that collectively Māori have already contributed significantly to the country’s emissions reductions, either through carbon sequestration, culturally significant lakes and rivers being utilized to produce renewable energy, or the opportunity cost of not converting and developing natural environments. This raised the question of how our country’s emissions budgets and efforts to reduce emissions would be equitable without a clear understanding of the current state of a Māori emissions profile. It was suggested by representatives of Māori Land Trusts that a Māori emissions baseline was key to ensuring equity and upholding the treaty principles of partnership, participation and protection for Iwi/Māori as we progress emissions reductions objectives in Aotearoa. A Māori emissions baseline would also indicate carbon risk exposure for Māori-collectives and help identify potential impacts on Māori cultural prosperity and Māori economic development. A Māori emissions profile would enable Māori-collectives to manage emissions collaboratively across their takiwā. This is consistent with balancing traditional concepts of rangatiratanga and traditional practices i.e., resource preservation and management alongside the cultural, social and economic wellbeing of iwi, hapū and whānau. Through our research, we have identified that a crude attempt at developing a Māori emissions profile could be achieved by Crown agencies (including Te Puni Kōkiri, Ministry for the Environment, Ministry for Primary Industries, Manaaki Whenua, Te Tumu Paeroa and possibly other Crown Research Institutes) and local government, working collaboratively to improve the capability of Te Puni Kōkiri’s Toku Whenua platform (supporting tupu.nz 15), to include data on stocking rates, plantation site coverage data and iwi takiwā boundaries. Alternatively, Crown and local government could fund Māori-collectives to stand up a platform to determine their own emissions profile within their respective takiwā.
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(Te Puni Kokiri, 2020)
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6.3 Part 2: Impacts 6.3.1 Overview Prior to the 1840s, all land in Aotearoa was Māori land. Māori established territorial rights over land through customary law concepts such as tino rangatiratanga, asserting mana whenua, taonga tuku iho and ahi kā. Māori ways of living acknowledged existing relationships and interconnections, emphasizing integration within an ecosystem. Since the 1840s colonial action dispossessed Māori of their whenua, diminished rangatiratanga and the ability for iwi, hapū and whānau to live in accordance with their traditional values. The Native Schools Act 1867 supressed te reo Māori, having a devastating intergenerational effect. The Tohunga Supression Act 1907 contributed to the loss of traditional medicinal knowledge. From the 1930s 16 Māori communities were relocated from their pa/kāinga and many eventually relocated to urban centres. The culmination of historic events have fragmented and disrupted Māori social, cultural and economic practices and today many Māori experience compounded disadvantage and inequity. Māori often feature in low-sociodemographics for health, employment, education, experience substandard housing, lower home ownership and lower household income. The Māori population is expected to expand over the next 20 years from about 776,000 now, to approximately 1-1.16 million. In 20 years, Māori could account for almost 20% of total national projected population and one third of all children. 17,18 It is important to acknowledge our history so that climate change policies promote intergenerational equity. To avoid compounding historic grievances for iwi and Māori, strategies to reduce emissions and increase removals should incorporate a deep understanding of Te Ao Māori and of the relevant historic and contemporary context. Simultaneously, it is important that climate change policy is not constrained by focusing on a Māori deficit narrative, as outcomes for Māori have been improving over the past few decades, partly due to the Treaty Settlements process. Further, Māori communities have demonstrated significant resilience and cohesion in times of crisis and in many instances (the Canterbury earthquakes and COVID-19) are better positioned to respond. Therefore, they contain examples of leadership and organisation that could help inform climate change policy. Throughout part 2 we examine the reductions and removals options set out in Chapter 4: Reducing emissions - opportunities and challenges across sectors and Chapter 9: Which path could we take? to identify barriers or other impacts for iwi and Māori. We explore considerations which would inform a strategy to reduce these impacts through the Treaty principles of partnership, participation
(Derby, 2011) (Te Puni Kōkiri, 2017) 18 (Stats NZ, 2019) 16 17
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and protection. Key considerations aligned with the He Ara Waiora framework are also summarised at the end of this section.
6.3.2 Land use Traditionally within a Te Ao Māori view, occupation awarded hapū authority over an area and the right to carry out cultural, social and economic activity within that takiwā, which included a relationship with and the use of the whenua and associated resources. Occupation also incurred obligations and responsibilities to protect, nurture and preserve life and the ecosystem for current and future generations. These duties were captured in tikanga, the knowledge of which is preserved in whakapapa, mātauranga and other cultural knowledge and practices. Māori identify their connection to hapū and whenua (translated as both ‘land’ and ‘umbilical cord’) through whakapapa and it is through whakapapa that practices and obligations such as taonga tuku iho and kaitiakitanga are bestowed. 19 There is an increasing trend among organisations to incorporate ‘systems thinking’ in their strategies and decision making. In Te Ao Māori this is referred to as whakapapa, an ancient knowledge system passed down over generations that has provided a blueprint for Māori to always be aware of the connectivity between all things. After signing the Treaty of Waitangi in 1840, the Crown aggressively sought to obtain Māori land. This was achieved through two methods in particular, acquisition and raupatu (confiscation). 20 By 1862, the Crown had acquired approximately two-thirds of all land in Aotearoa. Subsequent legislation enabled the Crown to further acquire Māori land for settlement. Together, these methods effectively dispossessed Māori of most of their ancestral lands. 21 Today all that remains of Māori ancestral land (still owned by the descendants of the original owners) is approximately 1.4 million hectares (approximately 5% of Aotearoa). 22 With the land acquired from Māori, British settler society sought to replicate the lifestyles of their homeland, draining wetlands and converting landscapes to fit within the British farming models they were accustomed to. 23 Today, Aotearoa is highly dependent economically on the historic conversions of natural landscapes to highly productive farmland. As a consequence, our current distribution of land use is a key contributor to our country’s greenhouse gas emissions. This combined with the mass clearing of indigenous forestry, by Māori and Pākehā, reducing total forest cover over time from 80% pre-human settlement to approximately 23% by 2000 24, draining of
19
(McMeeking et al., 2019) The New Zealand Settlement Act 1863 allowed for the confiscation (raupatu) of land without compensation. (Audit Office, 2004) 21 The Public Works Act 1928, Maori Reserve Lands Act 1955 and the Reserves Act 1977 allowed the Crown to further alienate and displace Māori from their ancestral lands. Māori Affairs Amendment Act 1967 introduced compulsory conversion of Māori freehold land with four or fewer owners into general land making it easier to acquire e.g., when rates were in arrears (often owners did not know rates were accruing) or surveying costs could not be met, it also increased the powers of the Māori Trustee to compulsorily acquire and sell so-called uneconomic interests in Māori land. 22 (Ministry of Justice & Te Kooti Whenua Māori (Māori Land Court), 2019) 23 (McLeod et al., 2006) 24 (McSaveney, 2015) 20
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wetlands and loss of associated indigenous biodiversity, have led to an imbalance in our management of greenhouse gas emissions. 25 Of the remaining 1.4 million hectares still in customary ownership (Māori freehold land title), land blocks are highly fragmented with over 27,456 land titles. Of these land titles 42% (representing 82% of land mass) have some form of governance structure with 8,406 governance structures in total. It is estimated that a considerable portion is underutilised or underproductive. A large percentage of Māori freehold land is located in Māori Land Court regions Aotea (~29%), Waiariki (~22%) and Tairawhiti (~20%). 26 Māori freehold land governance structures are provided for under the Te Ture Whenua Māori Act 1993. The most common structures are Ahu Whenua Trusts and Māori Incorporations. Governed land blocks have an average size of 100 hectares and an average of 211 owners. 27 Due to issues regarding succession, legislative constraints, diverse governance and management capability, access to capital and challenges identifying owners, progressing initiatives on many Māori freehold land blocks can pose a significant barrier to development. In addition to Māori freehold land title, Māori-collectives also own general title land such as redress land or tenths reserves.
6.3.4 Forestry Background Māori own approximately 40% of forestry in Aotearoa. 28 Crown acquisition prioritised high quality land or strategic locations, the land retained by Māori was generally of lower quality but suitable for forestry. Some iwi retained areas of native forestry and through Treaty Settlement some iwi have had forestry and/or forest land, returned through redress. According to a 2016 Agriculture Production Survey of Māori land (based on Māori authorities’ 29 activity base), areas of forest plantation on farmland, between 2006 and 2016, increased by 67.6% (from 65,864 hectares) and bush and scrub decreased by 32.5% (from 111,710 hectares) 30. Chapter 9: Which path could we take? indicates that a significant reduction in atmospheric carbon can be achieved through removals by either exotic or indigenous afforestation. While there are opportunities to encourage or incentivise afforestation on marginal and underutilised land across Aotearoa, is not without its practical challenges particularly where private landowners have other aspirations or face various challenges or barriers to transition land use.
(Dawson, 2007) (Ministry of Justice & Te Kooti Whenua Māori (Māori Land Court), 2019) 27 (Ministry of Justice & Te Kooti Whenua Māori (Māori Land Court), 2019) 28 (Ministry of Foreign Affairs and Trade (MFAT), 2017) 29 Certain Māori-collectives who meet Inland Revenue’s eligibility criteria (e.g. Te Ture Whenua entities) can elect to have Māori Authority status for income tax purposes. 30 (Stats NZ & Ministry for the Environment, 2018) 25 26
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The four largest privately owned land parcels in Aotearoa are foreign-owned forestry companies 31. The 50 largest privately owned land parcels amount to just over one million hectares (~4% of total land) and ranged from 9,000 hectares to 102,000 hectares. Land parcels had an average size of 22,000 hectares and median of 14,000 hectares. Approximately 25% of privately owned land parcels were foreign-owned. The five largest Māori-collective and pan-iwi land holdings totalled approximately 630,000 hectares (Table 6.1). Table 6.1. Landholding from the five largest Māori-collective/Pan-Iwi holdings Māori-collective/Pan-Iwi holdings Landholding (ha) Ngāi Tuhoe 243,495 CNI Holdings Limited 126,147 Ngāti Tūwharetoa 113,414 Ngāi Tahu 102,136 Proprietors of Mangatu Blocks 44,663 Total 629,855 Source: Newton (2019)
In addition to the Māori-collective/Pan-iwi holdings outlined in the article, the Māori Land Court data set indicates at least nine Māori freehold land management structures, managing amalgamated land blocks of contiguous land, or land blocks in close proximity of over 14,000 hectares in size, with a collective value of 253,000 hectares. 32 The size of land holdings do not indicate availability of land for afforestation. It is merely an indication of effort versus potential required to implement afforestation strategies. Barriers Strategically, the Crown working in partnership with Iwi/Māori could increase afforestation in the short to medium term, on the basis that Māori-collectives own reasonably large areas of land with the potential for afforestation, provided there is an appetite from Māori-collectives. Working with Māori-collectives would require acknowledgement of rangatiratanga, a deep understanding of whānau/hapū/iwi aspirations for the whenua and an approach that applies the tikanga set out in He Ara Waiora. There are a range of known barriers to afforestation for iwi and Māori. These would need to be addressed to ensure iwi and Māori have equitable opportunities for increasing afforestation. Associated barriers and/or considerations for increasing afforestation on Māori land include: o
Constraints and challenges associated with the management of collectively-owned Māori land under Te Ture Whenua Māori Act 1993. While the Te Ture Whenua Māori (Succession,
31
(Newton, 2019) Data from Māori Land Court Māori Freehold Land dataset (Māori Land Court, 2020). The dataset includes collectives of management structures over neighbouring blocks with shared whakapapa. 32
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Dispute Resolution and Related Matters) Amendment Act 2020 should go some way to ameliorate challenges for Māori landowners, there are still practical challenges for management structures to identify owners and achieve consensus on large issues. o
Capital outlay – costs for conversion or development. The cost of changing land use is high, particularly for Māori-collectives that may be asset rich but cash poor. Land conversion costs and other capital outlay costs such as nursery stock, planting, pest control, or wind protection. This can be a barrier to entry for Māori-collectives with low revenue streams, or unproductive and/or underutilised land. Economies of scale are also difficult to achieve in plantation forestry with smaller or fragmented land blocks. This occurs particularly where there is poor roading or landlocked land and would not be viable.
o
A short fall of capability and/or resourcing to uptake afforestation funding options. This is particularly an issue on smaller land trusts where the level of resourcing (time, funding, staff) capability, or specialisation is not sufficient to complete funding applications, feasibility analysis, or manage the implementation projects.
o
Access to regular revenue streams to cover Council rates and other costs. Some Māoricollectives with inherited commercial forestry combined with a low proportion of liquid assets and commitments to the Emissions Trading Scheme (NZ ETS) are effectively locked in. On smaller land blocks commercial forestry does not return annual or regular revenue streams or other cultural and social co-benefits for owners, ongoing commitment to forestry may not align with their intergenerational aspirations. Insurance, forestry management, pest control also require regular cashflow streams.
o
Proximity to ports and roading infrastructure for viable commercial forestry. Limited roading and rail infrastructure and proximity to ports can mean commercial forestry is not a viable option for Māori-collectives in remote areas wanting to participate in profitable forestry opportunities.
o
Access to nursery stock. We heard from some Māori-collectives that they had faced challenges accessing nursery stock with the appropriate genetics to endure the conditions.
There are also negative impacts of forestry, particularly commercial forestry, for Māori-collectives, including: o
The opportunity costs of utilising land for papakāinga development and maara/mahinga kai to meet the needs and aspirations of owners.
o
The impact of harvesting on the environment. There are negative impacts on waterways when exotic production forests are harvested through clear-fell. The overall impact over the full cycle (~28 years) is positive in terms of erosion prevention. 33
Opportunities Some key opportunities associated with forestry, particularly indigenous forestry for Māoricollectives include: o
33
Riparian planting can contribute to protecting water bodies from nitrate run-off and erosion.
(Baillie & Neary, 2015)
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o
Potential to work with Māori-collectives who are already considering long-term strategies to replace exotics with natives, particularly species with longer growth cycles, for example, kauri, rātā, tōtara.
o
Increased NZ ETS price could make afforestation a more viable option for Māori-collectives where previous barriers would have precluded afforestation as a land use option
o
Improved and increased hunting grounds to support the haukāinga/ahi kā and the marae (provided access is enabled and whānau are not locked off the whenua).
o
Increased cover of indigenous forestry to support revitalization and preservation of indigenous biodiversity, mahinga kai species and rongoā. Exotic afforestation also provides biodiversity benefits but not as large as indigenous forests. 34,35
Alignment with Treaty Principles Key considerations in alignment with the Treaty principles of partnership, participation and protection include (Table 6.2): Table 6.2: Key considerations on forestry in alignment with Treaty principles Requirement Consideration Partnership 1. The Crown’s approach to afforestation should take measures to emphasise rangatiratanga and collaboration through a genuine partnership with iwi and Māori. Genuine partnership will ensure iwi/Māori aspirations and the appropriate mātauranga are incorporated into afforestation solutions and opportunities 2. Māori-collectives with large land holdings should be considered for private/public investments which should incorporate kaitiaki and/or tikanga values and provide opportunities for Māori-collectives to participate in ownership further along the value chain.
Participation
34 35
3.
Consideration should be given to how Māori-collectives could manage their emissions by takiwā in accordance with whakapapa and traditional kaitiaki management practices.
4.
Consideration should be given to investments that enable Māoricollectives to participate across the supply chain and support local economies. For example, jobs - we heard from participants who represented Trusts operating in forestry that traditional labouring jobs in forestry are being replaced with automation in modern day production.
5.
Consideration should be given to ensure Māori-collectives are not further disadvantaged if transitioning land use for competing strategies such as food sovereignty and papakāinga development, or when remaining Crown forest licenced land is returned through settlement.
(Bremer & Farley, 2010) (Brockerhoff et al., 2008)
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Requirement
6.
7.
Protection
Consideration Forestry is a key employment sector for Māori, consideration should be given to potential job loss/volatility due to increased automation and opportunities to upskill/transition into specialized wood products. Consideration should be given to the unintended consequences of policies that incentivise afforestation and the opportunity cost of commercial forestry for some Māori-collectives.
8.
Consideration should be given to the availability of access to Māoricollectives for training on the NZ ETS.
9.
Consideration should be given to climate change policy and associated regulations and how they should enhance the ability for iwi and Māori to exercise rangatiratanga and kaitiakitanga within their takiwā.
10.
Consideration should be given to the need for flexibility in the NZ ETS to enable Māori-collectives to change land use where it could support other social, cultural, environmental or economic priorities for the intergenerational wellbeing of their members such as food sovereignty and papakāinga development. Being locked in to a particular land use does not enable the flexible management required for intergenerational organisations. Consideration should be given to mechanisms to incentivise increased afforestation not constraining Māori-collectives from producing food. We heard that food sovereignty has become more of a focus post COVID-19.
11.
12.
13.
Consideration should be given to species diversification e.g., natives (e.g., kānuka/mānuka for short term and by products, or long-term species such as kauri, tōtara and rātā), or exotics (e.g., pine, douglas fir, beech, eucalyptus, etc.) Consideration should be given to deeper exploration of the mātauranga relating to the realm of Tāne Mahuta with respect to sustainability, biodiversity, rongoā and traditional practices.
6.3.5 Agriculture Background Māori-collectives operate in agriculture, with the output percentage of total production estimated at 30% in lamb production, 30% in sheep and beef production, 10% in dairy production 36. According to a 2016 Agriculture Production Survey 450,593 hectares (ha) of Māori land (based on Māori authorities’ activity base) identified as farms used for primary production. Nearly half the total was in grassland or pasture (217,933 ha), followed by forest plantation (110,393 ha), bush and scrub (75,351 ha) and horticulture (2,668 ha). Agriculture is estimated to account for around 1 in 5
36
(Ministry of Foreign Affairs and Trade (MFAT), 2017)
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Māori authority enterprises. 37 Livestock recorded in the survey included farmed beef and dairy cattle, sheep and deer. Barriers Māori-collectives and individuals we engaged with relayed diverse views on managing emissions from agriculture. Some Māori-collectives are already exploring regenerative farming models as a means of balancing their cultural, social, environmental and economic outcomes. Others are looking to transition out of dairy or farming altogether (noting these farms were not on highly productive land). However, for some Māori-collectives the cost to transition would be too high given the heavy investment they had already made to improve productivity. Individuals we talked to explained that farming had become a tradition which they were proud of and it provided economic returns to their owners. While there was an openness to plant up marginal and un-productive areas, practicality, resourcing and cost were raised as barriers. In general, we heard from some Māori-collectives that they are actively developing strategies and making decisions in alignment with their tikanga values particularly kaitiakitanga. Sometimes they are penalised for ‘doing good’ ahead of others 38 in their efforts to balance cultural, social, environmental and economic outcomes. Almost 85% of Māori freehold land has a Land Use Capability (LUC) of 4-8 39. This is not highly productive land and could explain the higher rates of Māori authorities operating in lamb, sheep and beef production (30%) compared to Māori authorities in dairy production (10%). Some Māoricollectives, particularly in the case of Ahu Whenua Trusts, are not able to sell the land or make it available as collateral due to its status as taonga tuku iho and legislative constraints under Te Ture Whenua Māori Act (1993). Accordingly, these entities operate with a low debt to equity ratio and can have challenges raising equity, which presents barriers to transitioning land use and portfolio diversification or expansion. Based on engagement discussions with Māori-collectives some of the barriers to changing behaviours and/or reducing emissions included: o
The introduction of new regulations should determine what Māori are already doing by way of better waste management and environmental protection practices. Māori-collectives we heard from who were early adopters prior to the introduction of new legislation/regulations effectively had to ‘pay twice’ (e.g., NDAs).
o
Often smaller Māori-collectives do not have the capability or capacity required to know what is out there or complete the application demands or keep up with changes in regulations.
o
Farming provides a means for Māori-collectives to support their whānau, hapū and marae through the provision of kai for tangi and other cultural events. Consideration should be given to the need for flexibility in the NZ ETS to enable Māori-collectives to change land use where it could support other social, cultural, environmental or economic priorities for the
(Stats NZ & Ministry for the Environment, 2018) Such as those who moved early to reduce NDAs were locked in at a lower rate than neighbouring farmers who can operate more intensively. 39 (Māori Land Court, 2020) 37 38
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intergenerational wellbeing of their members (e.g., food sovereignty and papakāinga development). Being locked into a particular land use does not enable the flexible management required for intergenerational organisations. o
There were concerns raised that more effort was needed to understand how technologies such as methane vaccines and methane inhibitors align with or contradict Māori cultural and spiritual practices.
o
There is also potential that Māori, given their tikanga based management approach, could demonstrate leadership in the transition to a low emissions Aotearoa.
o
Historically, under Crown management, some Māori-collective landowners were locked into perpetual leases (often peppercorn leases for 100 years). Where these leases are still active, Māori landowners are not able to exercise rangatiratanga or kaitiakitanga.
o
We heard that often Māori-collectives looking to improve on-farm practice are limited by the capability and knowledge of their farm advisors. If they are not able to access the right advisors, the flow-on effects compromise improvements monitoring, measuring, on-farm practice, management and governance oversight.
Opportunities Some key opportunities associated with agriculture for Māori-collectives include: o o o o o o
Māori we talked to are already exploring options to improve on-farm practice, plant up marginal land, transition to regenerative farming, or diversify land use, including to manuka/kanuka honey. Some Māori-collectives are actively planting up waterways and boundaries in alignment with kaitiaki values. Support for these initiatives could help build skills and nursery stock amongst whānau and hapū for larger or ongoing initiatives. More research into the efficiency and profitability of regenerative farming would assist Māori landowners in understanding how to maximise productivity while maintaining the right balance across their social, cultural, economic and environmental outcomes. Māori-collectives who were early adopters of better waste management and environmental protection practices should be recognised in pricing policies. Māori-collectives should be able to manage their emissions by takiwā in accordance with whakapapa and traditional kaitiaki management practices. Improved monitoring and measuring tools for on-farm inputs and run off. Efficiency metrics/ratios that are supported by the External Reporting Board (XRB) and audit processes.
Alignment with Treaty Principles Key considerations in alignment with the Treaty principles of partnership, participation and protection include (Table 6.3):
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Table 6.3: Key considerations on agriculture in alignment with Treaty principles Requirement Partnership
Participation
Protection
Consideration 1. An emphasis on rangatiratanga and a genuine partnership with iwi/Māori would enable a kaitiaki approach to resource management. 2. Partnership is essential to progressing viable options and removing barriers to progress transitional land use. 3. Consideration should be given to ensure Māori collective landowners are not further disadvantaged when perpetual leases expire. 4. Consideration should be given to how monitoring and measuring tools for on-farm inputs and run off can be improved. Also the introduction of efficiency metrics/ratios that are supported by the External Reporting Board (XRB) and audit processes. 5. Consideration should be given to ensure Māori-collectives have access to farm advisors with the appropriate level of capability and expertise to provide suitable advice. 6. Consideration should be given to the nature of support available to smaller Māori-collectives and if it is fit-for-purpose, to increase uptake of education and funding initiatives to support optimal land use or the skills/knowledge required to support transitioning land use. 7. Consideration should be given to the availability of access to Māoricollectives for training on the NZ ETS to promote equitable participation. 8. Consideration should be given to climate change policy and associated regulations and how they should enhance the ability for iwi and Māori to exercise rangatiratanga and kaitiakitanga within their takiwā. 9. Consideration should be given to Māori-collectives’ ability to produce kai for their whānau, hapū and iwi in accordance with cultural practice (e.g., manaakitanga) and food sovereignty strategies. 10. Consideration should be given to species diversification e.g., natives (e.g., kanuka/manuka for short term and by products, or long-term species such as kauri, tōtara and rātā), or exotics (e.g., pine, douglas fir, beech, eucalyptus).
6.3.6 Other land use In addition to forestry and agriculture, Māori-collectives are also exploring a range of other land use options which align with their social, cultural, environmental and economic drivers. These options include: o
Wetland restoration – We heard from Māori-collectives that from around the 1950s Crown initiatives encouraged the draining of wetlands for conversion to farming. This disrupted the preservation of endemic species in the rohe and associated cultural practices. Restoring drained organic soils to wetlands can help prevent the loss of soil carbon stocks 40, 41. Some
While wetlands store large amounts of carbon, wetland restoration in Aotearoa have modest and highly uncertain carbon sequestration rates. (Burrows et al., 2018) 41 See ‘Wetland drainage and rewetting’ defined in (UNFCCC, 2012, p. 13). 40
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Māori-collectives see wetland restoration as an important contribution to balancing land use and enhancing biodiversity. o
Eco-sanctuary development – consistent with kaitiaki drivers, Māori-collectives discussed plans to develop eco-sanctuaries on their ancestral māunga, such is the case with Tauhara Mountain Trust (approximately 1,165 hectares). Working alongside Māori-collectives (e.g., relevant iwi, hapū, or ahu whenua trusts) could create opportunities to increase carbon stocks on ancestral mountains. Some of the barriers include resources (costs, time, biological stock, fencing), knowledge and capability.
o
Papakāinga development – with the increased demand for quality affordable housing, some Māori-collectives are looking to utilise collectively-owned land for papakāinga development. Māori-collectives we engaged with discussed that they are even considering reducing forestry stocks to accommodate the needs of their people. There is an opportunity to work alongside Māori-collectives to explore options for papakāinga development projects with a low carbon footprint. While we did not engage widely on papakāinga development, there are examples of leadership in low carbon development on Māori collectively-owned land.
o
Land use diversification – Many Māori-collectives we engaged with or reviewed practice a range of land use diversification options including planting up marginal areas of farmland, replanting areas with kanuka and manuka expanding into honey, growing ginseng in pine forests, identifying areas of land suitable for horticulture, hemp, medicinal cannabis and exploring land based koura (freshwater crayfish) farming. Part of the rationale is to spread risk, but also to reduce emissions, or look for land use options which are better aligned with the broader social, cultural, environmental and economic outcomes. Further investigation into some of these diversification models could provide exemplars for other landowners wanting to take a more holistic approach to land use.
In general, we heard from some Māori-collectives that managing emissions and achieving positive environmental outcomes can be challenging given the insufficiency of tools to effectively capture all of the inputs which are relevant to kaitiaki-based resource management.
6.3.7 Energy and Electrification Background In this section we identify areas where iwi and Māori could be impacted by emissions reduction options outlined in the Evidence report. For a more thorough exploration of reductions relevant to energy use and generation refer to Chapter 4a: Reducing emissions, opportunities and challenges across sectors - Heat, industry and power and Chapter 4b: Reducing emissions, opportunities and challenges across sectors - Transport and buildings. Key considerations for iwi and Māori include: 1. Energy equality - Māori engage in many aspects of the energy supply chain as owners and kaitiaki of natural resources used in energy production, as producers and consumers. Many Māori-collectives own forestry, lake beds and geothermal assets they operate these in various arrangements, including with power companies. As consumers, tangata whenua comprise 16.5% of the population, projected to increase to 20% by 2038. Given the income gap for 1 February 2021 Draft Supporting Evidence for Consultation
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Māori compared to the rest of Aotearoa (estimated at $140 less per person per week) and the proportion of multi-family households in areas such as Auckland, Gisborne, Hawkes Bay and Bay of Plenty, increased electricity consumption associated with increased electrification could exacerbate inequitable outcomes for Māori. 2. Transport – about 25% of Māori in Aotearoa reside in Auckland with whakapapa connections outside of Auckland, this is similar to Māori residing in other urban centres across the motu. Advancing electrification of transport requires proactive, targeted support to ensure that lower income and rural households could also benefit from EVs. Urban Māori who travel long distances to return to their marae/whenua to practice ahi kā regularly may also be impacted. There are also opportunities to support Māori-collectives already investigating options to provide access to electrified transportation for whānau (including bikes and community-based car share options). 3. Māori Economic Development - since the Treaty Settlement process began to acknowledge historic grievances with redress packages, there has been a resurgence of Māori economic development over the last few decades. The effect has been a developing economy within a developed economy. Transitioning to a low-emissions Aotearoa could create inequitable outcomes for Māori-collectives, particularly iwi/PSGEs, who are just starting to generate returns from their recently returned assets. Then there are Māori collective landowners with perpetual leases coming up for termination who have yet to start operating in accordance with their own aspirations. 4. Geothermal - several Māori-collectives, particularly iwi, hapū and Māori land trusts between Whakaari Island (White Island) and Tongariro, have strong associations with geothermal energy, which, in these areas, is a taonga brought to Aotearoa by Ngatoroirangi (note: iwi and hapū from other rohe or takiwā will have their own stories). Iwi and hapū from these areas have many customary practices associated with the use of geothermal energy. Some Māoricollectives utilise geothermal as a direct energy source for food production and other industrial processes, a few are also exploring carbon capture storage and hydrogen fuel cell technology. In the main, majority of energy generated from geothermal power plants have relatively low life-cycle emissions, however, there are some geothermal fields that emit high levels of carbon dioxide. 5. Hydropower - currently iwi/Māori rights and interests in freshwater are unresolved, some Māori-collectives are still working to have their rangatiratanga acknowledged, other Māoricollectives are recognized as the rangatira of lake beds, but not the water bodies within them. Accordingly, some Māori-collectives work in partnership with power companies operating hydropower generation. We heard these schemes impact on the biodiversity within and surrounding lakes. We also heard stories about lakeside erosion, possibly caused by movement on top of the water level, Māori we talked with believe this activity has caused their lakes to change over time. 6. Building - The shortfall in housing stock and the desire for some Māori to return to their turangawaewae, presents an opportunity for new papakāinga developments to incorporate low carbon materials and energy efficient buildings. 7. Off-grid for community resilience - we also had discussions with representatives of hapū with aspirations for their communities to go off-grid to enhance the resilience of whānau and 1 February 2021 Draft Supporting Evidence for Consultation
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promote self-sufficient communities to future proof against unforeseen shocks and uncertainties. One of the major barriers to realising these sorts of aspirations is cost and access to capital. 8. Renewable energy - given Māori-collectives’ participation in forestry and ownership of large contiguous or amalgamated land holdings, there are opportunities to further explore bioenergy as well as solar and wind generation. Barriers Based on engagement discussions with Māori-collectives some of the barriers to changing behaviours and/or reducing emissions or up taking opportunities included: A key disadvantage raised through engagement was the disruption of iwi and Māori integration along the value chain, which was prevalent in early Māori economic models. Aside from the enduring social, cultural and economic disadvantages consequent of colonial history, iwi and Māori continue to experience the time dimension of these impacts. This is particularly evident economically where iwi and Māori were denied opportunities to benefit from the use of their resources and capital appreciation of assets acquired or confiscated, revenue generation from the asset base over time, or time value of money. We heard that there are a lot of whānau experiencing energy poverty, while in some cases iwi or Māori-collectives responsible for managing the resources that are used in energy production, have no direct means to provide alternative products or services to these whānau. Mātauranga is localised knowledge, retained and maintained in different ways to standard Western pedagogies, or methods of knowledge capture and dissemination. To ensure the preservation and vitality of endemic species and unforeseen future impacts of natural resource utilisation for energy use, there needs to be a deeper exploration of mātauranga associated with the realms of atua, including, Tāne-mahuta, Tangaroa, Rūaumoko, in different takiwā. Drivers that would trigger further exploration include feasibility and viability of tidal-energy production, extraction of minerals used as an input for energy storage, such as lithium, as well as the impacts of hydro-energy on indigenous biodiversity and their natural habitats. As for other emissions reduction options, acknowledgement of rangatiratanga and a genuine partnership with iwi/Māori is essential to ensure future energy requirements take a kaitiaki approach to resource management and trade-offs between sufficient energy supply and protecting our natural environment. Going forward consideration should be given to strategic partnerships between Crown and Māori where there is an opportunity to advance research and development in carbon capture storages and hydrogen fuel cell technology. Alignment with Treaty Principles Key considerations in alignment with the Treaty principles of partnership, participation and protection include (Table 6.4): Table 6.4: Key considerations on electricity and electrification in alignment with Treaty principles
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Requirement Partnership 1.
2.
3.
Participation
4. 5. 6. 7.
Protection
Consideration Emphasis on rangatiratanga and a genuine partnership with iwi/Māori is essential to ensure future energy requirements take a kaitiaki approach to resource management and trade-offs between sufficient energy supply and protecting our natural environment. Consideration should be given to opportunities for Māori-collectives within a takiwā to partner with Crown in future local/regional energy production and distribution investments where benefits can flow through to whānau (particularly low-income households) and businesses. Consideration should be given to strategic partnerships between Crown and Māori where there is an opportunity to advance research and development in carbon capture storages and hydrogen fuel cell technology. Māori-collectives, particularly iwi and hapū, should be able to effectively exercise their rangatira and kaitiaki roles within their takiwā and participate in resource and asset management. Consideration should be given to the energy requirements of the Māori economy being a developing economy, particularly in remote/rural communities. Consideration should be given to potential inequitable impacts on iwi and Māori of increased electrification, particularly Māori living in low-income households. Consideration should be given to support self-sufficient energy infrastructure in papakāinga development projects or projects which enable remote Māori communities to go off-grid, particularly where it enables whānau to live out their cultural and social aspirations in a low emissions way.
8.
A genuine acknowledgement of rangatiratanga is essential to ensure Māori can exercise their kaitiaki roles and manage and protect natural resources within their takiwā.
9.
Further exploration of mātauranga Māori should be prioritised to identify potential future impacts of natural resource utilisation for energy use.
6.3.8 Fisheries Background To date, our work programme has not focused on impacts for iwi/Māori fisheries, however, on the basis that Māori-collectives hold 50% of quota, further work will be required. The connection Māori have with fishing and harvesting kai moana is embedded in whakapapa that links Māori to Tangaroa (the ocean) through space, place and time. Kai moana has an extensive history of sustaining Māori nutritionally, socially, culturally, spiritually and economically. Prior to European colonisation, this connection to kai moana saw Māori coastal communities flourishing, with a strong economic base dependent on fishing. 42
42
(Memon & Cullen, 1992)
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Low market demand and virtually no European competition enabled Māori fishing practices to continue as they did prior to colonisation for about thirty years after the Treaty was signed. 43 By the 1870s certain fish laws were introduced which severely restricted Māori fishing interests with respect to where they could fish and what they could fish. These limits were based on a European assumption of what Māori required to satisfy their personal needs. 44 These limits and Crown imposed actions had an ongoing negative effect on tikanga, mātauranga, cultural rights and access to fishing grounds and disrupted whakapapa connections to the moana. 45 Over time Māori cultural, social, economic and environmental connections to fisheries were further disrupted through stock depletion, habitat degradation and government-imposed fisheries policies. 46,47 The introduction of the Exclusive Economic Zone Act (1977) almost eliminated the Māori economy dependant on fishing activities and excluded Māori fishing practices and associated kaitiakitanga and mātauranga. 48 The fishing industry restructure in the 1980s, which removed commercial fishing rights for part-time fishers (many who were Māori) and the introduction of the Individual Transferable Quotas (ITQ) (which later became the Quota Management System (QMS)) 49 raised concerns that Māori rights to fisheries, guaranteed under the Treaty of Waitangi, were being alienated by the Crown. These series of events led to the Muriwhenua claim in 1986 50 and the subsequent Muriwhenua Fishing Report (1988) 51 which was instrumental in the 1992 Māori fishing claims to offshore fishing. 52 The Muriwhenua Fishing Report found that the Crown was in breach of Treaty obligations, which revealed that the allocation of rights had not recognised Māori interests. In 1989 the Māori Fisheries Commission was set up to aid Māori entry into the fishing industry, by 1992 Māori gained control over one third of our country’s commercial fisheries. 53 Through settlement Māori acquired 50% of Sealord (the largest fishing company in Aotearoa) utilising redress assets and were awarded a further 20% of the commercial quota shares of any new species brought into the QMS. 54 The Māori Fisheries Act was passed in 2004 and Te Ohu Kaimoana was established to oversee the settlement of all Māori commercial fishing assets. 55 Half of the settlement redress (quota) was allocated to iwi. The assets of the Treaty of Waitangi Fisheries Commission (cash) was allocated to a new company, Aotearoa Fisheries Limited, the custodian of commercial fisheries assets returned to Māori through the Treaty of Waitangi Fisheries Settlement with the Crown. 56
(Waitangi Tribunal, 1989, p. 78) (Waitangi Tribunal, 1989, p. 78) 45 (Wehi et al., 2013) 46 (Memon & Cullen, 1992) 47 (Hale & Rude, 2017) 48 (Memon & Cullen, 1992, p. 158,162) 49 (Hale & Rude, 2017) 50 (Waitangi Tribunal, 1989, p. 5) 51 (Waitangi Tribunal, 1989) 52 (Taonui, 2017) 53 (Ellison, 2010) 54 (Waitangi Tribunal, 1989) 55 (Science Learning Hub, 2009) 56 (Glaysher et al., 2014) 43 44
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In 2018, Aotearoa Fisheries Limited rebranded as Moana New Zealand (Moana) and is the largest Māori-owned seafood company and operate across four divisions of the seafood industry including inshore fishing, oyster farming, deep sea fishing and processing. Moana’s inshore vessels are made up of a fleet of contract fishers, mainly small whānau owned business that have been harvesting seafood for generations. 57 Sealord fleet is comprised of eight deep-sea vessels. Both fleets are made up of vessels that vary in size, age, species targeted, fish hold capacity, number of employees and on-board production methods. 58 Ngāi Tahu is another major stakeholder in the Māori fisheries sector. Ngāi Tahu Seafood Group is one of the leading seafood companies in Aotearoa 59,60 and a niche supplier of high-quality seafood to international and domestic markets. Ngāi Tahu quota is predominantly caught by Ngāi Tahu fishers; many are whānau who have been fishing for generations. 61 In 2018, emissions from fuel use on fishing boats was around 0.08 Mt CO2. 62 Refrigeration systems on boats also use hydrofluorocarbons (HFCs) which can also leak. 63 Accordingly, it’s possible that the Māori fisheries sector will be impacted again as we transition to a low emissions Aotearoa. While emissions associated with fisheries, or the impacts of ocean acidification on kaimoana was not a key focus of our work programme for the first emissions budget period, our next phase of work will explore how emissions reductions in Māori fisheries could impact on iwi and Māori going forward.
(Moana New Zealand, 2017) (Sealord, 2016) 59 (Meridith, 2006) 60 (Ngāi Tahu Seafood Limited, 2018) 61 (Ngāi Tahu Seafood Limited, 2018) 62 (Ministry for the Environment, 2020) 63 (Ministry for the Environment, 2018) 57 58
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6.4 Summary: He Ara Waiora wellbeing domains To summarise, we have drawn on the wellbeing domains identified in He Ara Waiora v.2 as a useful categorization framework 64 to reiterate what we heard in respect of what ‘good’ would look for iwi and Māori (Table 6.5). Table 6.5: What we heard in the context of He Ara Waiora wellbeing domains Wairuatanga
Taiao
Mana Tuku Iho
Source of wellbeing
Environmental wellbeing
Identity and belonging (individual and communities)
Note: further work to be done in this domain. Suggestions included enhanced mauri within our natural environment as co-benefits will flow through to individuals and communities.
A healthy environment, clean water and air, managed through recognised measures.
Strong in cultural identity, social connectedness, social capital, te reo and culture.
The presence and abundance of indigenous species and mahinga kai species in particular.
Confident resilient communities following their aspiration. Thriving communities that have access to services, food, etc.
Management and restoration of sites of significance, native restoration and/or remnant vegetation.
Sustainable use of quality traditional food and other cultural resources.
Ability of taiao and mahinga kai sites to sustain traditional Māori values and practices.
Activities within a low environmental footprint, including being carbon neutral.
Mana Tau utuutu
Mana Āheinga
Full participation in communities, particularly in a future with increased electrification. Mana Whanake
Interdependent rights and responsibilities
Aspirations and capabilities
A genuine expression of Treaty Partnership and acknowledgement of Rangatiratanga.
Resources e.g., knowledge, skills, education, healthy homes, time use, living healthy lifestyles, connectivity, etc.
Rangatiratanga and kaitiaki roles are exercised.
Sustainable jobs which are fit for purpose in the future.
Māori emissions profile of each takiwā enables iwi and hapū to actively manage emissions and provide full disclosure.
Food sovereignty, access to education and employment opportunities which enable whānau to have high quality employment in the regions proximate to their communities.
Māori are not further affected by the compounding of historic grievances.
Sustainable prosperity Sustainable prosperity, jobs, employment and earnings, income and consumption, economic resilience within whānau, Kāinga and broader community. Wages/koha in return for services to the kāinga recognising opportunity cost for time and ensuring tikanga is upheld and retained over generations. Intergenerational prosperity.
A Māori wellbeing framework (developed through a collaboration between the Treasury and a group of Māori thought leaders) identifying wellbeing outcomes from a Māori perspective. 64
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6.5 References Audit Office. (2004). Māori land administration: Client service performance of the Māori Land Court Unit and the Māori Trustee. Audit Office. Baillie, B. R., & Neary, D. G. (2015). Water quality in New Zealand’s planted forests: A review. New Zealand Journal of Forestry Science, 45(1), 7. https://doi.org/10.1186/s40490-015-0040-0 Bremer, L. L., & Farley, K. A. (2010). Does plantation forestry restore biodiversity or create green deserts? A synthesis of the effects of land-use transitions on plant species richness. Biodiversity and Conservation, 19(14), 3893–3915. https://doi.org/10.1007/s10531-0109936-4 Brockerhoff, E. G., Jactel, H., Parrotta, J. A., Quine, C. P., & Sayer, J. (2008). Plantation forests and biodiversity: Oxymoron or opportunity? Biodiversity and Conservation, 17(5), 925–951. https://doi.org/10.1007/s10531-008-9380-x Burrows, L., Easdale, T., Wakelin, S., Quinn, J., Graham, E., & Mackay, A. (2018). Carbon sequestration potential of non-ETS land on farms (Report Prepared for the Ministry of Primary Industries No. LC3161). https://www.mpi.govt.nz/dmsdocument/32134/direct Climate Change Response Act 2002 (as at 01 December 2020), Public Act 2002 No 40, Public Act Contents – New Zealand Legislation, Date of assent 18 November 2002, Commencement see section 2 (2020). http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM158584.html#LMS282029 Dawson, J. (2007). Conifer–broadleaf forests—Loss of conifer–broadleaf forests. Te Ara - the Encyclopaedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. http://www.TeAra.govt.nz/en/interactive/11674/deforestation-of-new-zealand Derby, M. (2011). Māori–Pākehā relations—Māori urban migration [Web page]. Te Ara - the Encyclopedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. https://teara.govt.nz/en/maori-pakeha-relations/page-5 Duhon, M., McDonald, H., & Kerr, S. (2015). Nitrogen Trading in Lake Taupo: An Analysis and Evaluation of an Innovative Water Management Policy (Motu Working Paper 15-07). Motu
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Economic and Public Policy Research. https://www.motu.nz/our-expertise/environmentand-resources/nutrient-trading-and-water-quality/nitrogen-trading-in-lake-taupo-ananalysis-and-evaluation-of-an-innovative-water-management-policy/ Ellison, E. (2010). Ngā haumi a iwi – Māori investment—Fisheries and Treaty settlements [Web page]. Te Ara - the Encyclopaedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. https://teara.govt.nz/en/nga-haumi-a-iwi-maori-investment/page-3 Glaysher, A., Craig, T., & Short, K. (2014). New Zealand Pilot of the corporate ecosytem services case study: Aotearoa Fisheries Ltd. Corporate ecosystem services review. Corporate ecosystem services review. https://www.sbc.org.nz/__data/assets/pdf_file/0019/103078/AotearoaFisheries-Ltd.pdf Hale, L. Z., & Rude, J. (2017). Learning from New Zealand’s 30 Years of Experience Managing Fisheries Under a Quota Management System. The Nature Conservancy. Māori Land Court. (2020). Māori Freehold Land dataset. McLeod, C., Hunt, L. M., Rosin, C., Fairweather, J. R., Cook, A. J., & Campbell, H. (2006). New Zealand farmers and wetlands [Report]. Agriculture Research Group on Sustainability. https://hdl.handle.net/10182/65 McMeeking, S., Kahi, H., & Kururangi, G. (2019). He Ara Waiora: Background paper on the development and content of He Ara Waiora. The Treasury. https://ir.canterbury.ac.nz/bitstream/handle/10092/17576/FNL%20%20He%20Ara%20Waio ra%20Background%20Paper.pdf?sequence=2&isAllowed=y McSaveney, E. (2015). Vegetation – the green mantle. Te Ara - the Encyclopedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. https://teara.govt.nz/en/landscapesoverview/page-2 Memon, P., & Cullen, R. (1992). Fishery policies and their impact on Māori. Marine Resources Economics, 7, 153–167. https://doi.org/10.1086/mre.7.3.42629031 Meridith, P. (2006). Fisheries management and practice—Story: Te hī ika – Māori fishing. Te Ara - the Encyclopedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. https://teara.govt.nz/en/te-hi-ika-maori-fishing/page-6
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Ministry for the Environment. (2018). Hydroflourocarbon Consumption in New Zealand [Prepared by Expert Group]. Ministry for the Environment. https://www.mfe.govt.nz/publications/climate-change/hydrofluorocarbon-consumptionnew-zealand Ministry for the Environment. (2020). NZ’s Interactive Emissions Tracker. https://emissionstracker.mfe.govt.nz Ministry of Education, & Te Kete Ipurangi. (2016, February). Māori Business: Historical context [MoE - Government]. New Zealand Curriculum Guide. https://seniorsecondary.tki.org.nz/Socialsciences/Business-studies/Maori-business/Historical-contextt Ministry of Foreign Affairs and Trade (MFAT). (2017). The Māori economy. https://www.mfat.govt.nz/assets/Trade-agreements/UK-NZ-FTA/The-Maori-Economy_2.pdf Ministry of Justice, & Te Kooti Whenua Māori (Māori Land Court). (2019). Māori Land Update – Ngā Āhuatanga o te whenua June 2019 Pipiri 2019. Ministry of Justice. https://maorilandcourt.govt.nz/assets/Documents/Publications/MLU-2019.pdf Moana New Zealand. (2017). Fin Fish. https://moana.co.nz/seafood/fin-fish/ New Zealand Trade and Enterprise (NZTE), Ministry of Business, Innovation and Employment (MBIE), & KPMG New Zealand. (2017). Māori economy investor guide. https://www.mbie.govt.nz/dmsdocument/1051-maori-economy-investor-guide-pdf Newton, K. (2019). New Zealand’s biggest 50 landowners revealed. Stuff.Co.Nz, 17 October 2019. https://www.stuff.co.nz/business/farming/116661441/new-zealands-biggest-50landowners-revealed Ngāi Tahu Seafood Limited. (2018). Ngāi Tahu Seafood. https://www.ngaitahuseafood.com/operations/ Science Learning Hub. (2009). Fisheries in New Zealand – timeline. Science Learning Hub. https://www.sciencelearn.org.nz/resources/1865-fisheries-in-new-zealand-timeline Sealord. (2016). Fleet Guide. https://www.sealord.com/media/2148/sealord-fleet-guide.pdf Stats NZ. (2019). New Zealand’s population reflects growing diversity. https://www.stats.govt.nz/news/new-zealands-population-reflects-growing-diversity
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Stats NZ, & Ministry for the Environment. (2018). Change in use of Māori land for primary production. Stats NZ and MfE. http://www.stats.govt.nz Taonui, R. (2017). Muriwhenua tribes—European contact. Te Ara - the Encyclopedia of New Zealand; Ministry for Culture and Heritage Te Manatu Taonga. https://teara.govt.nz/en/muriwhenuatribes/page-4 TBD Advisory. (2019). Iwi investment report 2018. https://www.tdb.co.nz/wpcontent/uploads/2019/02/TDB-2018-Iwi-Investment-Report.pdf Te Puni Kōkiri. (2017). Tātai tāngata ki te whenua. Wāhanga tuatahi: Te maha, te whakatupu, me te pakeketanga o te Ira Taupori. Future demographic trends for Māori. Part one, Population size, growth and age structure. Te Puni Kōkiri. https://www.tpk.govt.nz/documents/download/2849/tpk-futuredemographictrends-part12017(1).pdf Te Puni Kokiri. (2020). About Tupu.nz. /en/about-us/about-tupu-nz/ Waitangi Tribunal. (1989). Report of the Waitangi Tribunal on the Muriwhenua Fishing Claim (WAI 22) (p. 395) [Waitangi Tribunal Calim]. Ministry of Justice. https://forms.justice.govt.nz/search/Documents/WT/wt_DOC_68478237/Muriwhenua%20F ishing%20Report%201988.compressed.pdf Wehi, P., Cox, M., Roa, T., & Whaanga, H. (2013). Marine resources in Māori oral tradition: He kai moana, he kai mā te hinengaro. Journal of Marine and Island Cultures, 2(2), 59–68. https://doi.org/10.1016/j.imic.2013.11.006
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Appendix 1: He Ara Waiora v.2
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Key contributors over the course of the development of this framework included 65: Key Contributors
Other Contributors
Sacha McMeeking (UoC – Facilitator) Hinerangi Raumati – PKW/TWG Trevor Moeke, The Treasury Dr Manuka Henare, UoA Dr Piri Sciascia Rikirangi Gage – Leader Te Whānau-a-Apanui Rangimarie Huni – CE Whai Maia (Ngāti Whātua Ōrākei) Dame Naida Glavish Temuera Hall – CNI, Ōpepe Paula McKenzie, Te Wānanga o Raukawa
65
Dr Charlotte Severne – Te Tumu Paeroa Mavis Mullins – Poutama Trust Donna Flavell – CE Waikato-Tainui Rukumoana Shaafhausen – WaikatoTainui Kerensa Johnston – Whakatu Incorporation
(McMeeking et al., 2019)
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Chapter 7: Where are we currently heading? This chapter provides a glimpse of what future emissions in Aotearoa could look like if we keep progressing as we are now – with no policy changes or new regulations. It does this through the Current Policy Reference case, which provides the platform that allows us to test and adjust our thinking to create alternate scenarios which form the basis of our advice. We dive deep into each sector and explore how the future might play out if policies continue as they are. This chapter also introduces our ENZ modelling tool and discusses the possible impacts of COVID19 on our future emissions.
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Contents Chapter 7:................................................................................................................................................ 1 7.1 Introduction ...................................................................................................................................... 4 7.2 What is the Current Policy Reference case? ..................................................................................... 4 7.2.1 Uncertainty and the Current Policy Reference case .................................................................. 5 7.2.2 How we built the Current Policy Reference case....................................................................... 6 7.3 Overall emissions .............................................................................................................................. 8 7.3.1 Long-lived gases ......................................................................................................................... 9 7.3.2 Biogenic methane .................................................................................................................... 10 7.4 Transport......................................................................................................................................... 11 7.4.1 Domestic transport carbon dioxide emissions by travel type ................................................. 11 7.4.2 Household transport by transport type ................................................................................... 13 7.4.3 Road transport emissions by vehicle class ............................................................................... 15 7.4.4 Electric vehicle uptake ............................................................................................................. 16 7.4.5 Emissions from transport including international transport ................................................... 18 7.5 Buildings .......................................................................................................................................... 19 7.5.1 Emissions from fossil fuel use in buildings ............................................................................... 20 7.6 Heat, industry and power ............................................................................................................... 21 7.6.1 Primary metal production ........................................................................................................ 22 7.6.2 Petrochemical production ....................................................................................................... 24 7.6.3 Cement, lime and glass production ......................................................................................... 25 7.6.4 Food and wood, pulp and paper processing ............................................................................ 26 7.6.5 Electricity generation ............................................................................................................... 27 7.6.6 Fossil fuel production............................................................................................................... 29 7.6.7 Motive power - mining, construction and agriculture ............................................................. 30 7.6.8 Residual emissions ................................................................................................................... 31 7.7 Land ................................................................................................................................................. 32 7.7.1 Agriculture emissions - biogenic methane............................................................................... 33 7.7.2 Agriculture emissions - nitrous oxide ...................................................................................... 34 7.7.3 Agriculture emissions - carbon dioxide.................................................................................... 36 7.7.4 Agricultural and forest land area ............................................................................................. 37 7.7.5 Afforestation ............................................................................................................................ 39 7.7.6 Deforestation ........................................................................................................................... 40 7.7.7 Net emissions removals by forests .......................................................................................... 41 7.7.8 Forestry output ........................................................................................................................ 42
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7.7.9 Sheep and beef production...................................................................................................... 43 7.7.10 Sheep and beef stock numbers.............................................................................................. 44 7.7.11 Dairy production .................................................................................................................... 45 7.7.12 Dairy milking cows ................................................................................................................. 46 7.8 Waste .............................................................................................................................................. 47 7.8.1 Waste Emissions by Category .................................................................................................. 48 7.8.2 Waste Emissions by Gas ........................................................................................................... 49 7.8.3 Waste Biogenic Methane Emissions ........................................................................................ 51 7.8.4 Waste Volumes at Disposal Sites ............................................................................................. 52 7.8.5 Hydrofluorocarbon gases (HFCs) ............................................................................................. 53 7.9 Comparisons with other projections .............................................................................................. 54 7.9.1 Non-transport energy emissions ............................................................................................. 55 7.9.2 Industrial process and product use emissions ......................................................................... 56 7.9.3 Transport emissions ................................................................................................................. 57 7.9.4 Land .......................................................................................................................................... 59 7.9.5 Waste ....................................................................................................................................... 60 7.10 Dealing with uncertainty ............................................................................................................... 61 7.10.1 Transport................................................................................................................................ 61 7.10.2 Heat, industry and power ...................................................................................................... 62 7.10.3 Land ........................................................................................................................................ 62 7.10.4 Waste ..................................................................................................................................... 67 7.10.5 Impact of COVID-19 ............................................................................................................... 67 7.11 References .................................................................................................................................... 70 Appendix 1: ENZ .................................................................................................................................... 73 Appendix 2: Detailed Current Policy Reference case assumptions ...................................................... 78
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This chapter provides a glimpse of what future emissions in Aotearoa could look like if we keep progressing as we are now – with no policy changes or new regulations. It does this through the Current Policy Reference case, which provides the platform that allows us to test and adjust our thinking to create alternate scenarios which form the basis of our advice. We dive deep into each sector and explore how the future might play out if policies continue as they are. This chapter also introduces our ENZ modelling tool and discusses the possible impacts of COVID19 on our future emissions.
7.1 Introduction This chapter introduces the Current Policy Reference case, which projects how emissions and activities could change in the future assuming no changes to current Government policy. It provides a point of reference for comparing our recommended budgets and pathway. The first section of this chapter describes the Current Policy Reference case in more detail and how it was constructed. The second section presents the reference case with charts and tables for key aspects of each sector. The third section considers comparisons between the Current Policy Reference case and other projections of a similar nature. The fourth section provides a discussion of key sources of uncertainty in the reference case, including the impact of COVID-19.
7.2 What is the Current Policy Reference case? The Current Policy Reference case provides a projection of what our emissions could look like out to 2050 if no additional measures are implemented. This reference case is a scenario, and as such the outcomes described are neither what we consider “will” nor “should” occur. Instead, it serves to paint a picture of the types and amounts of emissions reductions which could occur if we keep to the path we are currently on. The Current Policy Reference case incorporates, through assumption, anticipated changes which are consistent with a future where there are no further developments in Government climate legislation and regulation. The reference case assumes market conditions, technology cost reductions and policies continue on current trajectories. Government policies already in place and funded as of 17 October 2020 are included but proposed or as-of-yet unfunded policies are not. 1 Policies proposed during the October 2020 election that have not been legislated, for example, are not included. A more detailed discussion of the key recent policy developments included in the reference case is provided below. 0F
The Current Policy Reference case is not designed to necessarily meet the 2050 targets or emissions budgets – it is a starting point for our analysis. We use it to calibrate our models with detailed Government projections and to help us understand what additional effort might be required to meet emissions budgets and targets. The reference case also gives a benchmark against which to test the
1
17 October is chosen as the cut-off point as the day of the 2020 general election to highlight that policies of the newly elected Government are not included in the Current Policy Reference case. All policies and measures included in the reference case were in place prior to this date.
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relative impacts of different scenarios and the effectiveness of different interventions in achieving emissions reduction targets. The emissions trajectory of ‘current’ Government policies will, of course, change as new climate policies are introduced. Through its role in monitoring progress of Aotearoa towards budgets and the 2050 target, we will revise and update the reference case over time. The next advice on emissions budgets, to be delivered in 2024, will be based on a new Current Policy Reference case which reflects action taken and external developments between now and then. Government projections and scenarios will also continue to evolve during this time. Our Current Policy Reference case is, as such, not a fixed scenario against which we will compare repeatedly until 2050. It is a starting reference case for developing the first emissions budgets and the beginning of an iterative modelling and monitoring process which we will continue moving forward. This underpins the dynamic, adaptive approach we are taking towards our policy advice.
7.2.1 Uncertainty and the Current Policy Reference case There is, inevitably, significant uncertainty within the Current Policy Reference case. We present a single reference case that largely mirrors Government “with existing measures” scenarios. The reference case depends on a set of assumptions which are detailed in the sections that follow. These assumptions, and the resulting emissions trajectories, are subject to uncertainty. This is based on possible actions within Aotearoa, as well as external developments – many of which are international. A discussion of the uncertainties for each sector in the reference case is provided in the final section of this chapter. The discussion on uncertainty also includes a section dedicated to the potential effects of COVID-19. As we have a long-term planning focus, the key uncertainty is the duration of impacts caused by the pandemic. For reasons described at the end of this chapter, we assume the economic impacts of the pandemic will be relatively short term and do not adjust the Current Policy Reference case to include COVID-19 impacts. If these uncertainties cause variations for the Current Policy Reference case, a different degree of work would be required to meet emissions budgets and the 2050 target. We recognise and incorporate the major uncertainties which might affect emissions trajectories through modelling multiple future scenarios in addition to the reference case. With the time and resources available to produce this first set of advice, we are unable to model the entire spectrum of possible future scenarios. We have focused on four plausible scenarios which reflect key sources of variation in the drivers of emissions and potential emissions reductions. These are presented in Chapter 8: What our future could look like. The emissions budgets we propose are ones we believe are achievable under a range of possible futures. The wellbeing of iwi/Māori throughout the transition to low emissions is a central part to this. He Ara Waiora2 presents a Te Ao Māori approach to wellbeing, sourced in mātauranga Māori, and provides valuable and appropriate framing to understand and assess impacts of climate policy for iwi/Māori. It is also a frame that considers broader wellbeing of people and environment for current and future generations. When developing and implementing the emissions reduction plan, the government 2
McMeeking (2019)
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should consider how those measures impact the four dimensions of wellbeing identified in the framework.
7.2.2 How we built the Current Policy Reference case The Current Policy Reference case was generated using a purpose-built computer model called ENZ that was originally developed by Concept Consulting. ‘ENZ’ was originally an acronym for ‘Energy Emissions in New Zealand’ but is now the complete name of the model. We purchased ENZ and have enhanced it to meet our needs. ENZ allows us to investigate, from a whole-of-system point of view, which emission reductions might be technically and economically achievable in each sector of the economy. It also allows us to factor in anticipated technological developments. As well as the Current Policy Reference case, we use ENZ to generate other scenarios to investigate alternative possible futures in Chapter 8: What our future could look like. The exact design of the Current Policy Reference case varies across sectors. Inputs were derived through a combination of in-house analysis and external engagement. We examined Government projections, including the October 2020 update; expected future reductions in technology costs; research on international trends and committed policies and industry plans within Aotearoa. We also drew on responses to our call for evidence and engaged widely with industry and sector experts for additional input. Box 7.1: Key policies shaping the Current Policy Reference case
Freshwater policy The Essential Freshwater policies and regulations that came into force on 3 September 2020 contained two major components: 1) The National Environmental Standards for Freshwater: these regulate activities deemed to pose risks to the health of freshwater and freshwater ecosystems. The standards include regulations for winter grazing, restrict agricultural intensification until 2024, and a limit for synthetic nitrogen fertiliser use on pastoral land of 190kg per hectare per year. 2) National Policy Statement for Freshwater Management: this provides direction to local authorities on managing freshwater under the Resource Management Act. It sets national objectives for freshwater management, including on wetland protection and restoration, water quality monitoring and tougher national bottom lines for ammonia and nitrate toxicity. These freshwater policies and regulations are expected to have implications for land sector activities, particularly pastoral agriculture. The effects have been estimated and incorporated by MPI in their October 2020 updated activity projections, which were fed into ENZ. The main impact on the activity data was a reduction in projected livestock numbers, which flows through into lower projected agricultural emissions.
Emissions Trading Scheme The NZ ETS is one of the Government’s main tools for reducing GHG emissions. It does this by placing a price on emissions by requiring certain sectors of the economy to purchase New Zealand 1 February 2021 Draft Supporting Evidence for Consultation
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Units (NZUs) equal to their annual emissions. Post-1989 forest owners can also receive NZUs for the emissions removals generated by their forests. The Current Policy Reference case includes a $35 carbon price in the NZ ETS in line with the updated all-government assumptions. This is assumed to hold constant in real terms until 2050 and reflects a mid-point between the current upper bound of the cost containment reserve ($50) and the NZU auction reserve price ($20). There is a system of free allocation in the NZ ETS for certain industrial activities determined to be emissions-intensive and trade-exposed. Our analysis assumes changes to industrial allocation do not influence industrial output or incentives to reduce emissions. Animal agriculture emissions are currently exempt from the emissions price in the NZ ETS, but legislation includes a provision for them to lose this exemption in 2025 unless an alternative pricing mechanism is developed. He Waka Eke Noa is working towards this and we will have a role in assessing its progress in 2022. The legislated pricing for agricultural emissions from 2025 would take place at the processor level and with 95% free allocation – this is factored into MPI’s activity data that underpin the current policy reference case. Non-animal agricultural emissions such as on-farm fossil fuel use are already subject to emissions pricing. The amendments to the NZ ETS passed in June 2020 contained a number of technical changes for forestry in the scheme. These included introducing averaging accounting for post-1989 forests and creating a new permanent forestry activity. These changes will phase in by 2023 and have given more certainty for forestry in the scheme, with the net effect of increasing projected future afforestation in Aotearoa. This has been incorporated into the MPI October 2020 data update which is used in ENZ to generate the Current Policy Reference case. Waste is included in the NZ ETS with disposal facilities having obligations to purchase NZUs. However, this only applies to landfills that accept household waste, which only account for approximately one third of waste emissions. Higher NZ ETS prices are unlikely to materially impact waste volumes or waste emissions. This is because most municipal landfills are required to collect greenhouse gas emissions under the National Environmental Standards for Air Quality. These landfills are able to apply for a ‘Unique Emissions Factor’ (UEF) to reduce their NZ ETS obligations. A UEF can be applied for by landfills if they produce less emissions than the ‘default emissions factor.’ Most household waste goes to landfills that have received a UEF, meaning that they are already at a high rate of capture efficiency . 4F
Waste levy A waste disposal levy also applies to landfills with the current price for municipal sites set to increase from $10 to $60 per tonne and for non-municipal sites from $0 to between $10-$30 by 2024. As waste volumes are relatively price inelastic3 and the increases to the waste levy are quite low, we have been conservative and assumed that the small increase to the waste levy will not substantially affect the current policy reference case.
No new offshore oil and gas exploration permits In 2018, the Government announced that there would be no new oil and gas exploration permits offered, except on land in Taranaki. This policy has been included in the current policy reference 3
(Clough, 2019)
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case. While this has not affected existing exploration permits or companies’ ability to extract oil and gas from known reservoirs, we have assumed that our natural gas reserves do not increase.
Kigali phasedown In October 2016 Aotearoa adopted the Kigali Amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer. This requires Aotearoa and other signatories to gradually phase down HFC production and use. Aotearoa, as a developed country, is required to phase down HFC production and use by 85% by 2036. The Amendment was brought into force for Aotearoa on 1 January 2020.
We take historic data for the model from New Zealand’s Greenhouse Gas Inventory. The most recent data currently available is from 2018, so we use this as the base year in ENZ. The model then projects data for 2019 onwards. The land and waste sector reference cases draw directly on Government activity projections, so they are almost identical to Government “with existing measures” scenarios. The reference cases for transport, buildings and industry, however, draw more on internally developed assumptions. They are still broadly aligned with Government projections but less so than for the land and waste sectors. Comparisons between the ENZ reference cases and projections from Government and other organisations are provided later in this chapter. The following sections describe ENZ and the Current Policy Reference case for each sector. First, overall long-lived gas and biogenic methane emissions are presented. This is followed by charts, tables and supporting notes highlight projected emissions and activity data out to 2050 for transport; buildings; heat, industry and power; land; and waste. All figures are presented in real terms. A more detailed account of the ENZ model is provided in Appendix 1. Detailed Current Policy Reference case assumptions are provided in Appendix 2.
7.3 Overall emissions We first present total long-lived gases and biogenic methane (CH4) emissions to give a sense of progress towards the 2050 and 2030 targets. Following that, the sectoral data is largely split by gas in order to more clearly highlight the mix of gases being emitted. This provides a platform for a targeted consideration of the opportunities for reducing emissions to meet our targets in Part 3.
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7.3.1 Long-lived gases
Figure 7.1: Current Policy Reference case total long-lived gases emissions and removals by sector Source: Commission analysis. Table 7.1: Current Policy Reference case total long-lived gases emissions and removals by sector (Mt CO2e)
Waste and HFCs Agriculture Heat, Industry and Power Buildings Transport Forests Net Gross
2018 2.0 8.3 17.4 1.4 16.6 -9.5 36.3 45.7
2030 1.9 7.8 13.3 1.6 16.3 -9.3 31.4 40.8
2040 1.5 7.6 13.6 1.5 13.0 -18.2 19.0 37.2
2050 1.5 7.4 13.4 1.5 5.7 -23.2 6.3 29.5
Notes: •
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Long-lived gas emissions in Aotearoa come from a range of sources and are comprised of all gases other than biogenic methane. They are largely carbon dioxide (CO2) and nitrous oxide (N2O), with some much smaller amounts of F-gases and fossil methane. Figure 7.1 presents these alongside emissions removals by forests, which together account for net emissions of long-lived gases. Gross long-lived gas emissions increased steadily from 32.5 megatonnes (Mt) CO2e in 1990, peaking at 46.8Mt CO2e in 2008 and reaching 45.7Mt CO2e in 2018. Note that this is distorted due to major underestimation of transport emissions prior to 2001.
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From 2018, gross emissions decline to 40.8Mt CO2e in 2030 and 29.5Mt CO2e in 2050. This is driven in large part by projected decreases in transport emissions after 2030, which drop from 16.3Mt CO2e in 2030 to 5.7Mt CO2e in 2050. Other sources of emissions also decline steadily from 2018 to 2050. The decrease in transport emissions is largely due to the projected electrification of the light vehicle fleet. This is one area where the ENZ Current Policy Reference case differs significantly from other Government projections. A discussion of these comparisons is provided later in this chapter. Emissions removals by forests fluctuated between 1990 and 2018. In the Current Policy Reference case, they are expected to increase steadily from 9.5Mt CO2e in 2018 to 23.2Mt CO2e in 2050. This results in net emissions of long-lived gases declining from 36.3Mt CO2e in 2018 to 6.3Mt CO2e in 2050. A more detailed discussion of emissions removals by forests in the Current Policy Reference case are discussed in the land subsection below. The emission sources which are included under each of the categories in Figure 7.2 and Table 7.2 are detailed in the following sections.
7.3.2 Biogenic methane
Figure 7.2: Current Policy Reference case total biogenic methane emissions by sector Source: Commission analysis. Table 7.2: Current Policy Reference case total biogenic methane emissions by sector (Mt CH4)
Agriculture Waste Total
2018 1.18 0.14 1.32
2030 1.09 0.13 1.22
2040 1.06 0.13 1.19
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2050 1.02 0.13 1.15
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Notes: • • •
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Biogenic methane emissions largely come from ruminant livestock and organic waste decomposition. Agricultural biogenic methane emissions increased steadily from 1.09Mt CH4 in 1990, peaking at 1.21Mt CH4 in 2006 before declining to 1.18Mt CH4 in 2018. In the Current Policy Reference case, agricultural biogenic methane emissions decline to 1.09Mt CH4 in 2030 and 1.02Mt CH4 in 2050. Details of these emissions are described in the land section of this chapter below. Waste emissions are indicative and pending updates. This is discussed further in the waste section below.
7.4 Transport ENZ includes road, rail, shipping and aviation, with the latter two split into domestic and international. It also includes different fuel types: fossil and alternatives. It models the main levers which influence emissions, including the makeup of the vehicle fleet, transport demand and the factors driving them, such as the size of the population. ENZ also takes account of behavioural change, including shifts between travel types, such as more walking or cycling, or reduced demand for travel because of more working from home. In both cases, ENZ responds by reducing the distance travelled by road.
7.4.1 Domestic transport carbon dioxide emissions by travel type
Figure 7.3: Current Policy Reference case domestic transport emissions by travel type Source: Commission analysis.
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Table 7.3: Current Policy Reference case domestic transport emissions by type (Mt CO2)
Road Rail Domestic aviation Domestic shipping Total
2018 15.1 0.1 1.1 0.3 16.6
2020 13.6 0.1 0.6 0.3 14.7
2030 14.8 0.1 1.0 0.3 16.3
2040 11.5 0.1 1.0 0.3 13.0
2050 4.3 0.1 1.1 0.3 5.7
Notes: •
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Figure 7.3 shows transport emissions for the major domestic types of travel. In line with the Commission’s current policy mandate, we have excluded international aviation and international shipping from this graph, however, we do address international transport in Figure 7.7 below. Between 1990 and 2018, emissions from road vehicles have dominated domestic transport CO2 emissions and have nearly doubled. Emissions from other modes (domestic aviation, railways and domestic shipping) are smaller and have not seen much growth. After 2018, emissions from road vehicles are projected to rise slowly to the mid-2020s, then decline steadily due mainly to the expected uptake of electric vehicles; emissions from other travel types would not change much. Greenhouse gas emissions in the transport sector were more than 99% CO2 in 2018.4 We have not modelled other greenhouse gas emissions in transport as they are insignificant. Between 1990 and 2018, road vehicle emissions have grown with the population and the economy, with little improvement in vehicle efficiency to offset the growth in traffic. In domestic aviation, improvements in fuel efficiency and increases in passenger occupancy have helped to offset growth in aviation traffic. The efficiency improvements are expected to continue, but further increases in passenger occupancy may not be feasible. Emissions from railways and domestic shipping are small and expected to remain that way.
Ministry for the Environment (2020).
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7.4.2 Household transport by transport type
Figure 7.4: Current Policy Reference case household passenger kilometres by travel type Source: Commission analysis. Table 7.4: Current Policy Reference case household passenger kilometres by travel type (billions)
Pedestrian Cyclist Local train Local bus Local ferry Motorcycle Taxi / vehicle share Light vehicle passenger Light vehicle driver Total
2018 0.9 0.3 0.6 1.2 0.1 0.3 0.1 18.4 34.1 56.0
2020 0.8 0.3 0.7 1.1 0.1 0.3 0.1 16.6 31.2 51.2
2030 0.9 0.4 1.5 1.5 0.1 0.3 0.2 19.4 38.0 62.2
2040 1.0 0.4 1.9 1.7 0.1 0.3 0.2 20.0 40.4 66.0
2050 1.0 0.4 2.3 2.0 0.1 0.3 0.2 20.5 41.9 68.7
Notes: •
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Figure 7.4 shows household travel, which includes most local travel other than travel for business purposes. It would, for example, exclude tradespeople travelling to job sites or couriers making deliveries. Between 1990 and 2018, household travel was dominated by light vehicle drivers and light vehicle passengers, which accounted for about 95% of person-kilometres travelled. After 2018, household travel continues to be dominated by light vehicle drivers and light vehicle passengers; there would be significant percentage growth in public transport (local
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train and local bus) due to ongoing improvements in infrastructure and services, but from a small initial base. Household travel accounts for about 75% of light vehicle travel and is therefore the major driver of domestic transport emissions; commercial travel accounts for most of the remaining light vehicle travel. Cities in Aotearoa generally have a sprawling land-use pattern, which has been difficult to serve with public transport, or walking and cycling. Government transport expenditures have historically focused on roading, accentuating this pattern. In the Current Policy Reference case, we do not assume any potential long-term increase in remote working, which could reduce travel demand.
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7.4.3 Road transport emissions by vehicle class
Figure 7.5: Current Policy Reference case emissions by vehicle class Source: Commission analysis. Table 7.5: Current Policy Reference case emissions by vehicle class (Mt CO2)
Light passenger vehicles Light commercial vehicles Motorcycles Medium trucks Heavy trucks Buses Total
2018 8.1 2.7 0.0 2.4 1.5 0.3 15.1
2020 7.3 2.5 0.0 2.1 1.4 0.2 13.6
2030 7.7 2.8 0.0 2.2 1.8 0.3 14.8
2040 5.5 2.0 0.0 1.9 1.8 0.2 11.5
2050 1.5 0.5 0.0 0.8 1.5 0.0 4.3
Notes: • • • •
Figure 7.5 shows road transport emissions broken out by the class of vehicle. Between 1990 and 2018, emissions grew from all six classes of vehicles. Growth has been especially large for medium and heavy trucks and for light commercial vehicles (vans and utes). After 2018, emissions from most vehicle classes are expected to rise until the mid-2020s, then decline as the vehicle fleet becomes increasingly electrified. The terms ‘light passenger vehicles’ and ‘light commercial vehicles’ refer to the body type of the vehicle, not the use or ownership of the vehicle. The light passenger vehicle class
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includes cars and SUVs; the light commercial vehicle class includes vans and utes. Close to 60% of light commercial vehicles are owned by households, not businesses.5 Between 2000 and 2018, light commercial vehicle numbers have gone up about 80% compared to about 54% for light passenger vehicles, reflecting the growing popularity of these large vehicles for both households and businesses.6 Emissions per kilometre for most classes of vehicles have historically gone down very slowly, as efficiency improvements have been offset by growing vehicle size and growing engine size. This pattern is expected to continue for internal combustion engine vehicles. While the projected long-term decline in road transport emissions is good news, there are three important caveats to this Current Policy Reference case projection: 1. As noted, later in this chapter, the continuing decline in battery costs and increasing competitiveness of electric vehicles, which is driving these results, is subject to uncertainty. 2. Emissions from road transport remains at current high levels for at least another 10 years, before they begin to decline significantly 3. Even in 2050, there would still be around 4Mt CO2 emissions from road vehicles.
Taken together, these caveats imply that the long-term decline in road transport emissions in the Current Policy Reference case would almost certainly be insufficient to meet our emission reduction commitments.
7.4.4 Electric vehicle uptake
Figure 7.6: Current Policy Reference case percentage of electric vehicles entering the fleet Source: Commission analysis.
5 6
Ministry of Transport (2019c), see the ‘All Light Vehicles’ sheet. Ministry of Transport (2019a), see tab ‘1.1, 1.2’.
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Table 7.6: Current Policy Reference case percentage of electric vehicles entering the fleet
Light passenger vehicles Light commercial vehicles Motorcycles Medium trucks Heavy trucks Buses
2018 2% 0% 0% 0% 0% 2%
2020 2% 1% 0% 0% 0% 4%
2030 17% 15% 10% 3% 2% 34%
2040 71% 78% 55% 30% 13% 94%
2050 99% 100% 99% 88% 52% 100%
Notes: •
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•
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•
Figure 7.6 shows the expected uptake of electric vehicles as a percentage of newly registered vehicles (both imported new and imported used) entering the fleet each year. These percentages are not to be confused with the percentage of electric vehicles in the fleet each year, which will lag significantly behind the percentage of electric vehicles entering the fleet. See the Appendix 1 for more information on how we model electric vehicles. Numbers of electric vehicles entering the fleet in 2018 and previous years were very small— less than 10,000. Declining battery costs make it likely that electric vehicles will become increasingly competitive with conventional vehicles, implying that electric vehicle numbers are likely to grow even in the absence of strong Government policies to promote them. As noted in Figure 7.5, the resulting long-term decline in road transport emissions in the Current Policy Reference case would almost certainly be insufficient to meet’s our emission reduction commitments. Given the many uncertainties, projecting the timing of the growth of electric vehicle sales is difficult. The Current Policy Reference case suggests that for light passenger vehicles, the time when more than half the vehicles imported into Aotearoa (both imported new and imported used) would be electric is in the late 2030s, with electric vehicles completely taking over the light passenger vehicle market in the early 2040s. Light commercial vehicles switch-over to electric at a similar rate to light passenger vehicles. Buses switch over faster; medium and heavy trucks take longer due to the challenges of using battery power for heavy vehicles travelling long distances. The bus fleet is split fairly evenly between local public transport buses and buses designed for longer-distances, which serve mainly tourists. The public transport portion of the bus fleet is amenable to electrification and almost entirely under Government control, so it would likely be an early adopter of electrification. Our model is based on battery cost projections from Bloomberg New Energy Finance (BNEF), 7 a well-regarded source for clean technology trends. The battery cost reductions projected by BNEF result in a rapidly falling cost for electric vehicle ownership. However, it is reasonable to expect a lag between the costs of electric vehicles falling and rapid uptake by consumers. Reasons for the potentially lagging uptake of electric vehicles in Aotearoa include the small size of our new vehicle market and the fact that we drive on the left. Both of these factors restrict our access to new vehicle models. We are also heavily dependent on used vehicles imported from Japan, which limits us to used vehicles available in the Japanese fleet. Our slow fleet turnover is also a factor. Evidence also suggests that consumer behaviour does not respond only to the relative cost of ownership of electric vehicles versus conventional F
•
7
BloombergNEF (2020)
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vehicles – other factors such as range anxiety or new technology hesitancy may also delay uptake.
7.4.5 Emissions from transport including international transport
Figure 7.7: Current Policy Reference case emissions from transport including international transport Source: Commission analysis. Table 7.7: Current Policy Reference case emissions from transport including international transport (Mt CO2)
Road Rail Domestic aviation Domestic shipping International aviation International shipping Total
2018 15.1 0.1 1.1 0.3 3.9 1.0 21.5
2020 13.6 0.1 0.6 0.3 1.4 0.8 17.0
2030 14.8 0.1 1.0 0.3 4.1 1.0 21.3
2040 11.5 0.1 1.0 0.3 4.9 0.8 18.7
2050 4.3 0.1 1.1 0.3 5.8 0.7 12.3
Notes: • •
•
Figure 7.7 shows emissions by travel type, similar to Figure 7.3, but with the two international modes, international aviation and international shipping, added. Between 1990 and 2018, emissions from international transport have been a significant and growing portion of transport emissions in Aotearoa. This is mainly due to growth of international aviation emissions. After the COVID-19 shock, international aviation emissions are likely to resume their growth, driven by increasing numbers of overseas visitors visiting Aotearoa.
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As noted in Chapter 3: How to measure progress, international transport emissions are not within the scope of the first emissions budget, but we may elect to include them in later budgets. International aviation and international shipping are also already subject to specific international agreements to reduce emissions: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) under the International Civil Aviation Organization and the greenhouse gas reduction provisions of the International Convention for the Prevention of Pollution from Ships (MARPOL) under the International Maritime Organisation. There is no internationally agreed approach to measuring a country’s contribution to international aviation and shipping emissions. These graphs are based on purchases of bunker fuel in Aotearoa by international carriers. Historically, growth in international air traffic has outpaced improvements in aviation fuel efficiency, resulting in growing international aviation emissions. Although subject to significant uncertainty due to the potential long-term impacts of COVID-19, this trend is likely to resume in the future. International shipping emissions have not grown significantly as ship efficiency has kept pace with the relatively slow growth in international shipments. International shipping emissions are expected to decline modestly by 2050 as improving ship efficiency outpaces growth in shipments.
7.5 Buildings Buildings in ENZ are represented in terms of the energy utilised in their operation. Energy used for space and water heating as well as cooking, lighting and electrical equipment are modelled explicitly within ENZ at an aggregated level for residential, commercial and public buildings. Greenhouse gas emissions from these uses of energy and are accounted for in ENZ. Whether from gas combusted onsite in a gas boiler or from the plants which generate the electricity used in a hot water cylinder. This means that we can see from a whole energy system point of view the emissions footprint of operating our homes and workplaces. As population and GDP increase within the model, the number of buildings and requirement for energy increase. Within the model, buildings are split into existing and future builds with varying energy efficiency opportunities, construction rates and retrofit cycles. Energy uses are disaggregated into space heating, water heating, cooking, lighting and other for each fuel type (electricity, gas, LPG, coal and biomass). In the model, consumer choice of heating technology (fossil fuel or electric) at the time of a new build or retrofit is based on relative costs of equipment and fuel. A fossil fuel phaseout profile overrides this economic based selection – this phaseout either reflects societal behavioural changes or a mandated approach. The energy efficiency of heating in buildings and in appliances are also represented in ENZ. Efficiency measures such as improved insulation or a conversion of lighting to LEDs reduce the operational energy demand for buildings in the model.
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7.5.1 Emissions from fossil fuel use in buildings
Figure 7.8: Current Policy Reference case emissions from onsite fuel use in buildings Source: Commission analysis. Table 7.8: Current Policy Reference case emissions from onsite fuel use in buildings (Mt CO2)
Residential buildings Commercial and public buildings Total
2018 0.7 0.7 1.4
2030 0.7 0.8 1.6
2040 0.8 0.8 1.5
2050 0.7 0.7 1.5
Notes: •
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Direct emissions from fossil fuel use in buildings are primarily from the combustion of gas, coal and liquid fossil fuels for cooking and space and water heating in residential, commercial and public buildings. The annual total of these emissions has held roughly constant during the period from 1990 to 2018 at an average of 1.5Mt CO2 despite a 40% increase in population and building stock. Figure 7.8 shows that total emissions are projected to remain roughly constant relative to 2018 and are 1.6Mt CO2 at 2030 and 1.5Mt CO2 at 2050. In this reference projection gas and LPG remain affordable fuels for heating in homes and buildings and the total number of gas connections is assumed to increase as the total building stock increases. However, despite this, combustion emissions hold relatively flat due to efficiency improvements in space and water heating system and improvements in building performance. Coal use contributes about 10% of the total emissions in 2018 and in this projection is continued to be used as there is no targeted phase out.
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Electricity use in buildings can also contribute to periods of peak demand and the usage of fossil fuelled thermal plants for electricity generation. These indirect emissions due to thermal generation are accounted for under the classification of electricity generation in this Current Policy Reference case. Similarly, there are emissions from building construction and from the materials used for construction. Construction activity, energy use and emissions are accounted for under industrial activity as are emissions from domestic industries which produce construction material. The buildings categorisation shown in Figure 7.1. This includes only the direct emissions from the on-site fossil fuel use in residential, commercial and public buildings. This convention is continued in the other sections of this report which present emissions totals across all sectors.
7.6 Heat, industry and power Heat, industry and power includes the energy supply sector and other industrial activities which use energy and cause emissions. Within ENZ, it is this module where the supply of energy for transport, buildings and other industrial activities is represented. This includes generating electricity for heating buildings and the refining of oil into petroleum for transport. ENZ models future industrial activity based on historic trends, assumed growth and known dependencies such as fuel costs, competition for resource and other input drivers. ENZ deploys new emissions reduction technologies when they become technologically ready and economically viable. Much of our industrial activity which produces emissions is condensed in a small number of plants owned by a small number of firms. Several of these are modelled explicitly, such as the refinery, steel mill and aluminium smelter. Their level of future activity will be a key driver of sector emissions and is also highly uncertain. For example, during 2020, a number of firms undertook strategic reviews and may dramatically change their future operation in Aotearoa. As it is not possible for ENZ to predict these potential step changes in activity, we conservatively assume most of these activities continue at close to current levels, with existing plants and efficiencies. The exceptions to this are the Tiwai Point aluminium smelter and methanol producing facilities which are assumed to close by the late 2020s. This reflects the signalled exit of the aluminium smelter from Aotearoa by owner Rio Tinto. Methanol production is assumed to stop in 2029, when Methanex’s existing natural gas contracts expire. It is assumed Methanex ceases to produce as our largest natural gas fields near the end of their economic life. Future energy costs and emission pricing will also be key in determining future emissions within the industrial and energy sectors. Energy and emissions pricing drives most of the modelled dynamics around industry decarbonisation in ENZ. Boiler conversion from coal to lower emissions fuels occurs in the model when the continuing operating cost of a coal boiler and paying a carbon charge rises above the costs of replacing the boiler and purchasing an alternative fuel. Practical constraints are built into the model around the regional availability of fuels and the rate at which equipment can be replaced and infrastructure can be built. Changes in rates of industrial allocation in the NZ ETS are assumed to have no effect on industrial output, nor on uptake of mitigation options, where decisions are assumed to be made based on marginal costs. This Current Policy Reference case largely assumes future energy costs and emissions pricing are similar to current levels. Because of this, there is limited switching to lower emission fuels.
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The commodities produced by our industries and consumed by our society are traded globally. For example, we export infant formula which has been produced from local milk to families in China and import televisions from China. ENZ includes assumptions on the future cost of a small number of commodities which can then influence domestic activity and emissions but does not model international trade. In addition to this, ENZ is based on a production-based accounting of greenhouse gas emissions. This means ENZ does not capture emissions embodied in imported materials or the emissions leakage which would occur if domestic industrial activity was displaced with imported material. These are important issues and dynamics and although they are not captured in the model, they will be addressed in commentary throughout this evidence report.
7.6.1 Primary metal production
Figure 7.9: Current Policy Reference case emissions from primary metal production Source: Commission analysis. Table 7.9: Current Policy Reference case emissions from primary metal production (Mt CO2) 2018
2030
2040
2050
Iron and Steel
1.8
1.7
1.7
1.7
Aluminium
0.6
0.0
0.0
0.0
Total
2.4
1.7
1.7
1.7
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Domestic emissions from iron and steel production are mostly from the chemical reaction which occurs between iron sand and coal to produce iron metal. From 1990 to 2018 these emissions have remained largely flat at an average of 1.7Mt CO2. Direct process emissions and fossil fuel use from the production of aluminium have held constant at around 0.6Mt CO2 since the early 1990s. The operation largely eliminated F-gas emissions at the beginning of the displayed record. Since this time the emissions have been around 90% carbon dioxide and 10% F-gas emissions. Aluminium production emissions are projected to reduce from current levels to zero by 2027, where they remain out to 2050. This reduction is due to an assumed closure of the Tiwai Point aluminium smelter with production ramping down from 2024 to 2026. There is uncertainty of the timing of this closure – smelter owner Rio Tinto have signalled their intention to close the smelter in 2021 but it is understood they are in discussion with the Government for an extension of a further three to five years.8 Projected emissions for iron and steel production reduce immediately in the projection and then remain constant at 1.7Mt CO2 out to the end of this period. However, there is considerable uncertainty around the future emission from this activity. The steel mill has recently decided to cut 150-200 jobs following a strategic review.9 The step reduction of 10% of emissions is an assumption around how this restructure will influence emissions in the future. Bluescope Steel (owner of NZ Steel) has signalled potential closure of the mill if restructuring and redundancies do not improve profitability. It is assumed that only integrated steel mill will not undergo modernisation or transformation during this period.
New Zealand Labour Party (2020) Carroll (2020)
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7.6.2 Petrochemical production
Figure 7.10: Current Policy Reference case emissions from petrochemical production Source: Commission analysis. Table 7.10: Current Policy Reference case emissions from petrochemical production (Mt CO2)
Petrochemical production
2018 1.4
2030 0.3
2040 0.3
2050 0.3
Notes: •
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Emissions from chemical production in Aotearoa are mostly from the combustion of natural gas in steam methane reformers to produce methanol and urea. These industries were enabled following the discovery and production of natural gas from onshore and offshore Taranaki fields. Production and emissions from these industries has closely followed the lifecycle of producing natural gas fields. The Maui field established and sustained the industry until around 2000 and the Pohokura field has ramped up since this time. In the reference case, the projected emissions hold at the recent average level of 1.9Mt CO2 until 2026 and then drop to 0.3Mt CO2 by 2029. They remain at this level until 2050. This step change in emissions between 2026 and 2029 is due to the assumed completion of methanol production which is in line with the end of the producing company’s publicly disclosed gas contracts. It is possible that production would cease before or continue after this date, however the current rate of natural gas consumption for methanol production is incompatible with estimates of permitted natural gas reserve. Because of this, for this modelling exercise an assumption around closure date has been required. The residual emissions beyond this date are primarily from the production of urea. Because of the uncertainty in the level of future methanol production, there is considerable uncertainty in future emissions in chemical production.
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This projection draws on the analysis of Concept Consulting (2019) in their Long-Term Gas and Supply Reports for the Gas Industry Company.
7.6.3 Cement, lime and glass production
Figure 7.11: Current Policy Reference case emissions from cement, lime and glass production Source: Commission analysis. Table 7.11: Current Policy Reference case emissions from cement, lime and glass production (Mt CO2)
Cement, lime and glass production
2018 1.1
2030 1.1
2040 1.1
2050 1.1
Notes: •
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Carbon dioxide emissions from cement, lime and glass manufacturing are from fuel combustion for process heat and the calcination reaction which converts limestone into the desired products. Historic emissions have fluctuated slightly due to changes in plants and production but have averaged around 1.3Mt CO2. In the reference case, projected emissions would hold constant at 2018 levels at 1.1Mt CO2. Under the Current Policy Reference case, small amounts of emission reductions would be achieved in cement manufacturing through increased use of biofuels and waste materials as an alternative to coal for energy.
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7.6.4 Food and wood, pulp and paper processing
Figure 7.12: Current Policy Reference case emissions from food and wood processing Source: Commission analysis. Table 7.12: Current Policy Reference case emissions from food and wood processing (Mt CO2) 2018
2030
2040
2050
Wood, pulp and paper processing
0.6
0.5
0.5
0.5
Food processing
2.9
2.9
2.7
2.5
Total
3.5
3.4
3.3
3.1
Notes: •
• •
Emissions in food processing and wood, pulp and paper manufacturing are largely from the combustion of coal, gas and diesel for process heat. Food processing emissions have increased considerably over the historic period largely due to increases in total dairy production. Wood, pulp and paper processing emissions have remained constant over this period despite increases in production of wood products. In the reference case, projected emissions in food processing would peak at 3.3Mt CO2 in 2019 and then would reduce to 2.9Mt CO2 in 2030 and 2.5Mt CO2 by 2050. This Current Policy Reference projects peak agricultural milk production would occur in 2019 and maximum processing emissions would be concurrent with this. Beyond this, total production would be largely constant, but emissions would reduce at around 0.7% per year due to assumed improvements in energy efficiency and plant modernisation.
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•
Projected emissions in wood, pulp and paper processing would remain constant at around 0.6Mt CO2 despite increases in production as increasing energy demand would be offset by greater use of biomass as a fuel.
7.6.5 Electricity generation
Figure 7.13: Current Policy Reference case emissions from electricity generation by fuel Source: Commission analysis. Table 7.13: Current Policy Reference case emissions from electricity generation by fuel (Mt CO2)
Gas Coal Liquid Fuels Geothermal Total
2018 2.5 0.9 0.0 0.7 4.2
2030 1.3 0.0 0.0 0.9 2.2
2040 1.4 0.0 0.0 1.0 2.5
2050 1.5 0.0 0.0 1.1 2.6
Notes: •
•
Past emissions from electricity generation have been primarily from the use of coal and gas used in thermal generation plants. The amount of coal and natural gas used depends on electricity demand and climatic conditions. Electricity demand changes depending on the time of day, with daily peaks in the morning and evening. Demand also varies with the season and is generally higher in winter than in summer. Electricity emissions tend to be higher in years when hydro storage is low and more fossil fuels are used to meet the shortfall in generation. Geothermal electricity generation also contributes to overall electricity emissions, but average emissions per kilowatt-hour are about a quarter that of natural gas, with substantial variation from field to field. Electricity generation emissions peaked at 9.5Mt CO2 in 2005.
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•
•
•
•
Under the reference case, emissions would be projected to decrease from 4.2Mt CO2 in 2018 to 2.2Mt CO2 in 2030 and 2.6Mt CO2 in 2050 despite a 40% increase in total electricity generation. The system operates at between 92% and 94% renewables from 2028. Projected generation emissions would be at a minimum at around 2027. This is a consequence of the assumed closure of the aluminium smelter which would release a surplus of hydroelectricity to the market and temporarily displaces some use of gas. Geothermal, wind and solar generation would provide increases in electricity supply and would also further displace thermal generation as they would become increasingly affordable to build. Residual emissions beyond 2030 would be from the use of gas for dry year firming and peaking, and from geothermal fields. This is shown in Figure 7.14. These emissions and electricity generation totals include cogeneration plants.
Figure 7.14: Current Policy Reference case electricity generation by fuel type Source: Commission analysis.
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7.6.6 Fossil fuel production
Figure 7.15: Current Policy Reference case emissions from fossil fuel production Source: Commission analysis. Table 7.14: Current Policy Reference case emissions from fossil fuel production (Mt CO2e)
Refining Other fossil fuel production Total
16F
2018 1.0 1.3 2.3
2030 0.8 0.7 1.7
2040 0.8 0.7 1.7
2050 0.8 0.7 1.5
Notes: •
• •
•
Emissions from fossil fuel production are mostly from petroleum refining and oil and gas production. Oil and gas production emissions result from operational venting and flaring of carbon dioxide and fugitive emission of methane at wells and in pipelines – these emissions have fluctuated over the historic period. Refining emissions have remained largely constant and have averaged 1Mt CO2e per year since 1990. Total emissions from these activities are projected to decrease from 2.3Mt CO2e in 2018 to 1.7Mt CO2e in 2030 and 1.5Mt CO2e in 2050. The reduction in production emissions out to 2030 is largely due to a 50% downscale in domestic natural gas production due to reduced demand for electricity generation and the assumed completion of methanol production in 2029. Uncertainty around the level of future of domestic methanol production contributes uncertainty to this projection. Refining activity and emissions reduced in 2020 to 20% below current levels and then holds constant until the end of the projection.
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•
The refinery has recently announced it will cut back production volumes to 1995 levels and this initial reduction represents this restructure. Beyond this the emissions remain constant despite a reduction in demand for petroleum for transport because it is assumed that the 40% of current petroleum which is imported refined is displaced before the domestic processing is reduced. The refinery’s future operations is still uncertain and introduces uncertainty in this projection.
7.6.7 Motive power - mining, construction and agriculture
Figure 7.16: Current Policy Reference case motive power emissions Source: Commission analysis. Table 7.15: Current Policy Reference case motive power emissions (Mt CO2) Mining and construction Agriculture Total
2018 0.7 1.0 1.7
2030 0.9 1.2 2.1
2040 1.1 1.2 2.3
2050 1.2 1.0 2.2
Notes: •
Motive power emissions are generated by liquid fossil fuel use in the mining, quarrying, construction, agriculture, forestry and fishing sectors. This is primarily diesel for use in machinery and off-road vehicles. There are a diverse set of use cases including mining trucks, farm machinery and fishing vessels. The totals here include the entire share of liquid fuel used in agriculture and the mining and construction sectors.10
10
The Energy Efficiency and Conservation Authority (EECA)’s end use database substantiates that liquid fuel use in these sectors is overwhelmingly for motive power (Energy Efficiency and Conservation Authority, 2020).
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• • •
Total emissions have fluctuated over the historic period but with an average of 1.8Mt CO2 per year. Total emissions are projected to increase from 1.8Mt CO2 in 2018 to 2.0Mt CO2 in 2030 and to 2.3Mt CO2 by 2050. The increase in emissions is due to an assumed increase in activity in the mining, quarrying and construction sectors at a rate of 2.5% per year. This growth is a continuation of the historic trend and consistent with requirements for infrastructure and building projects to support a growing population. Energy demand in the agricultural and forestry sectors is assumed to be constant at current levels. There is a downwards turn in emissions beyond 2040 as electric vehicles and machinery begin to become available and economic for these use cases.
7.6.8 Residual emissions Table 7.16: Current Policy Reference case residual emissions (Mt CO2)
Residual
2018 0.8
2030 0.8
2040 0.8
2050 0.7
Notes: •
In addition to the emissions broken out in the above transport, buildings and industry sectors, there is a total of emissions which have not been allocated to a specific sector and activity. Most of this is classified as ‘other industry’ in New Zealand’s Greenhouse Gas Inventory classification. For these emissions we note that: o Historical emissions have ranged from 0.7Mt CO2 to 1.9Mt CO2. o Projected emissions largely hold at the 2020 value of 0.8Mt CO2. o For these emissions we coarsely assume that liquid fuel use would decarbonise at the same rate as motive power applications in the mining, construction and ag sectors. Solid and gas fuel use would transition fuel use in the same way as the food processing sector.
There is, however, sparse data on non-transport uses of liquid fuel. EECA have identified this as an information gap and is targeting improving the evidence base on these energy uses with a project in 2021.
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7.7 Land ENZ contains the area and emissions associated with the following land uses. While these are not the only land uses that contribute to emissions or emissions removals, they make the biggest contribution towards emissions budgets and targets. 11 The land uses included in ENZ are: • Sheep, beef and deer farming 12 • Dairy farming • Horticulture • Arable farming • Exotic forest (pre-1990 and post-1989) • New native forest (Post-1989) • Other 13 1F
2F
ENZ models land in Aotearoa at a national level. However, also understanding the uses of Māori collectively-owned land would be a valuable layer in the analysis. Data limitations mean it is not possible to consider specific projections for Māori collectively-owned land out to 2050 but relevant information about Māori collectively-owned land is considered alongside the reference case projections. What is known is that some iwi/Māori-collectives own large tracts of land and could face challenges transitioning land use. The Crown needs to work in partnership with iwi/Māori-collectives to understand their aspirations for land, particularly forestry, and the barriers to achieving these. We use ENZ to generate our Current Policy Reference case using land areas and livestock numbers from the Ministry for Primary Industries (MPI) October 2020 data update for their “with existing measures” scenario. This input data reflects important recent policy developments, such as the National Policy Statement for Freshwater Management and amendments to the Emissions Trading Scheme (NZ ETS) passed by Government in 2020. The key model underlying this activity data is MPI’s Pastoral Supply Response Model, which projects trends in animal populations, primarily in response to export prices, productivity trends and the returns on agricultural land relative to forestry. Fertiliser emissions are attributed to the land use where it is applied. In the reference case, the 2017 fertiliser use per hectare for each land use is assumed to be constant until 2050. The percentage of fertiliser used on each farming system is taken from the Fertiliser Association, who draw on the Stats NZ 2017 Agricultural census.14 The same split among land uses is also applied to emissions from liming and urea on farms. A level of ongoing productivity gains is also assumed for land uses in the reference case but there is no adoption of new technologies such as methane inhibitors or vaccines for ruminants. The impact of these technologies is investigated in future policy scenarios presented in Chapter 8: What our future could look like.
11
Pre-1990 native forest area is not modelled as emissions removals from it are not part of emissions accounting for the first set of emissions budgets. Deforestation emissions from these forests are included, however, but do not require a full modelling of the total land area. For a full discussion of forest accounting see Chapter 3: How to measure progress. 12 Area used for production, not whole owned area. 13 “Other” land is a broad category that includes other types of farming and areas of land on-farm that are not in pasture, crops, or forest. 14 Fertiliser Association (2019)
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Our Current Policy Reference case land emissions projections are similar but not identical those from MPI models, as shown in the 7.9 Comparisons with other projections section later in this chapter.
7.7.1 Agriculture emissions - biogenic methane
Figure 7.17: Current Policy Reference case biogenic methane emissions from agriculture Source: Commission analysis. Table 7.17: Current Policy Reference case biogenic methane emissions from agriculture (Mt CH4)
Dairy Sheep and beef Other agriculture Total
2018 0.59 0.56 0.03 1.18
2030 0.54 0.52 0.03 1.09
2040 0.53 0.50 0.03 1.06
2050 0.52 0.48 0.02 1.02
Notes • •
• •
Agricultural biogenic methane emissions largely come from dairy and sheep and beef farming. From 1990 to 2018, biogenic methane emissions from dairy farming increased significantly from 0.25Mt CH4 to 0.59Mt CH4. Sheep and beef biogenic methane emissions declined from 0.81Mt CH4 to 0.59Mt CH4. Biogenic methane emissions from other agriculture stayed constant at approximately 0.03Mt CH4 in the same period. In the Current Policy Reference case, total agricultural biogenic methane emissions decline steadily from 1.18Mt CH4 in 2018 to 1.02Mt CH4 in 2050. Within this reference case total, dairy biogenic methane emissions decline to 0.54Mt CH4 in 2030 and 0.52Mt CH4 in 2050. Sheep and beef biogenic methane emissions decline from to
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•
•
•
0.52Mt CH4 in 2030 and 0.48Mt CH4 in 2050. For other types of agriculture, biogenic methane emissions reduce to 0.02Mt CH4 in 2050. These are mostly from deer farming. These reductions are primarily driven by a combination of ongoing emissions intensity improvements and land use change. Biogenic methane emissions per kilogram of milk solids and sheep and beef meat decline by an average annualised rate of 0.6% and 1.0%, respectively. The rate slowly reduces towards 2050. This is in line with or slightly more conservative than historic trends, which have seen methane emissions efficiency improvements of approximately 1.0% per year across both dairy and meat farming since 1990. These improvements are due to a combination of animal genetics, farm management practices and structural changes in the sector such as less efficient producers exiting the market. Land use change includes slight decreases in dairy land over time and more substantial decreases in sheep and beef land (although at a much slower rate than historic trends). Details of land use change are provided in the 7.7.4 Agricultural and forest land area section below. These national trends may be different on Māori collectively-owned land, where governance strategic priorities, management practices and owners’ aspirations differ from other farms in Aotearoa. For example, there is some evidence that Māori collectively-owned farms have lower animal stocking rates than the national average 15 . This could mean that emissions reductions linked to stocking rates on Māori collectivelyowned land might plateau earlier as the potential for further reductions are exhausted. 17F
•
7.7.2 Agriculture emissions - nitrous oxide
Figure 7.18: Current Policy Reference case nitrous oxide emissions from agriculture Source: Commission analysis.
15
Stats NZ (2020)
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Table 7.18: Current Policy Reference case nitrous oxide emissions from agriculture (kt N2O) Dairy Sheep and beef Other agriculture Total
2018 14.8 7.6 1.6 24.1
2030 13.6 7.2 1.6 22.4
2040 13.4 6.9 1.6 21.9
2050 13.1 6.6 1.6 21.3
Notes: • •
•
•
•
16
Agricultural nitrous oxide emissions largely come from animal urine patches and, to a lesser extent, fertiliser use and manure management. From 1990 to 2018, nitrous oxide emissions from dairy farming increased significantly from 5.5kt N2O to 14.8kt N2O. Sheep and beef nitrous oxide emissions declined from 8.4kt N2O to 7.6kt N2O. Nitrous oxide emissions from other agriculture stayed relatively constant at 1.6kt N2O during this period. In the Current Policy Reference case, total agricultural nitrous oxide emissions decline from 24.1kt N2O in 2018 to 21.3kt N2O in 2050. Dairy nitrous oxide emissions decline from 2018 levels to 13.6kt N2O in 2030 and 13.1kt N2O in 2050. Sheep and beef nitrous oxide emissions decline to 7.2kt N2O in 2030 and 6.6kt N2O in 2050. Nitrous oxide emissions from other types of stay roughly constant. These reductions are primarily driven by a combination of ongoing efficiency gains and land use change. Nitrous oxide emissions per kilogram of milk solids and sheep and beef meat decline between 2018-2050 at an annualised average rate of 0.5% and 0.9%, respectively. The rate slowly reduces towards 2050 and is similar to historic trends. These improvements are due to a combination of animal genetics, farm management practices and structural changes in the sector such as less efficient producers dropping out of the market. Details of land use change are provided in the Agricultural and forest land area section below. The distinct trends on Māori collectively-owned land, mentioned above, in relation to biogenic methane would also apply to nitrous oxide. For example, Māori collectively-owned farms used an average of 22 tonnes of fertiliser per hectare of grassland in 2018, compared to 28 for farms in Aotearoa as a whole.16 This suggests fertiliser emissions reductions could be occurring more quickly on Māori collectively-owned land (possibly because of water policies in specific areas) and/or that these reductions could plateau earlier.
Stats NZ (2020)
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7.7.3 Agriculture emissions - carbon dioxide
Figure 7.19: Current Policy Reference case carbon dioxide emissions by agriculture Source: Commission analysis. Table 7.19: Current Policy Reference case carbon dioxide emissions by agriculture (Mt CO2) Dairy Sheep and beef Other agriculture Total
2018 0.69 0.32 0.09 1.10
2030 0.70 0.30 0.08 1.08
2040 0.69 0.29 0.09 1.06
2050 0.69 0.28 0.09 1.05
Notes: • •
•
•
Agricultural carbon dioxide emissions come from the use of limestone and urea on soils. Emissions from electricity, transport and other energy uses on farm are not included here but in the relevant non-land sector emissions. From 1990 to 2018, carbon dioxide emissions from dairy farming increased significantly from 0.17Mt CO2 to 0.69Mt CO2. Sheep and beef carbon dioxide emissions increased from 0.19Mt CO2 in 1990 to 0.32Mt CO2 in 2018. Carbon dioxide emissions from other agriculture increased from 0.04Mt CO2 to 0.09Mt CO2 in the same period. In the Current Policy Reference case, dairy carbon dioxide emissions stay relatively stable, increasing to 0.70Mt CO2 in 2030 before dropping to 0.69Mt CO2 in 2050. Sheep and beef carbon dioxide emissions decline to 0.30Mt CO2 in 2030 and 0.28Mt CO2 in 2050. Carbon dioxide emissions from other agriculture stays stable out to 2050. The distinct trends on Māori collectively-owned land mentioned above in relation to nitrogen fertiliser could also apply to carbon dioxide from lime and urea.
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7.7.4 Agricultural and forest land area
Figure 7.20: Current Policy Reference case agriculture and forest land use (large areas) Source: Commission analysis.
Figure 7.21: Current Policy Reference case agriculture and forest land use (small areas) Source: Commission analysis.
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Table 7.20: Current Policy Reference case agricultural and forest land areas (Mha) Dairy Sheep, beef and deer Exotic forest (pre1990 and post-1989) New native forest (post-1989) Horticulture Arable Other
2018 1.74 8.17 1.77
2030 1.71 7.41 2.05
2040 1.69 7.12 2.36
2050 1.66 6.75 2.75
0.05
0.11
0.15
0.19
0.11 0.15 1.99
0.12 0.13 1.80
0.12 0.13 1.77
0.13 0.13 1.77
Notes: •
•
• •
•
•
•
•
Land use change is a key driver of emissions and removals by agriculture and forests. Different land uses make different contributions and change between them is driven by a complex set of economic, environmental, cultural and social factors. Between 1990 and 2018, the biggest land use change was the significant decrease in sheep and beef farming area, from 12 million hectares (Mha) to 8.15Mha. This was in large part due to the economic restructuring of the late 1980s and early 1990s and the development of more lucrative markets for dairy and forestry. Dairy farming area increased from 1Mha in 1990 to 1.74Mha in 2018. Exotic forest area increased from 1Mha in 1990 to 1.77Mha in 2018. Areas of horticulture and arable farming as well as new native forest did not change significantly between 1990 and 2018. In the Current Policy Reference case, sheep and beef farming area decreases to 7.4Mha in 2030 and 6.75Mha in 2050. This is a significantly slower rate of decrease than the historic trend. Dairy farm area decreases to 1.71Ma in 2030 and 1.66Mha in 2050. Exotic forest area increases to 2.05Mha in 2030 and 2.75Mha in 2050. New native forest area increases to 0.11Mha in 2030 and 0.19Mha in 2050 These land use changes are likely driven by a combination of sheep and beef farms retiring unproductive land, stricter freshwater policies limiting dairy area and a higher emissions price driving more afforestation. The total area of exotic forest on Māori collectively-owned land would also likely increase as Treaty settlements return the remaining Crown forest licensed lands to iwi. Strategically, if there is alignment with iwi/Māori aspirations, the Crown could work in partnership with iwi and other relevant Māori-collectives to increase afforestation in the short to medium term. This approach is particularly relevant given Māori-collectives own reasonably large areas of land with potential for afforestation or optimised afforestation. Additionally, there are opportunities associated with forestry that would support iwi/Māori cultural drivers iwi/Māori aspirations, as increased cover of indigenous forestry would support revitalisation and preservation of indigenous biodiversity, mahinga kai species and rongoā. Horticulture and arable farming both occupy relatively small land areas and change slightly in the current policy reference case. Arable farming decreases in area from 0.15Mha in 2018 to 0.13Mha in 2050. Horticulture area expands slightly from 0.11Mha in 2018 to 0.13Mha in 2050.
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7.7.5 Afforestation
Figure 7.22: Current Policy Reference case gross afforestation Source: Commission analysis. Table 7.21: Current Policy Reference case gross afforestation (hectares/year) Exotic forest Native forest Total
2018 7,174 1,339 8,512
2030 27,381 3,042 30,424
2040 34,862 3,874 38,736
2050 41,595 4,622 46,216
Notes: • • •
• •
Gross afforestation represents the increase in post-1989 exotic and native forest. During the 1990s, there was a large spike in afforestation, reaching over 70,000ha per year. This was followed by a period of net deforestation and low afforestation until 2018. In the Current Policy Reference case, most of afforestation is of exotic forests.17 Exotic afforestation rates increase from 7,174ha in 2018 to 27,381ha in 2030 and 41,595ha in 2050. Native afforestation rates increase from 1,339ha in 2018 to 3,042ha in 2030 and 4,622ha in 2050. The additional spike in afforestation between 2018 and 2023 is due to the One Billion Trees afforestation grant scheme. The afforestation numbers are taken from MPI, who use an assumption that 90% of afforestation driven by the NZ ETS is exotic and 10% native. The data also includes an assumption that 6.1% of the exotic forests are permanent and not harvested. Total gross exotic afforestation in the reference case between 2018-2050 is 1.1Mha.
17
Afforestation areas refer to “net-stocked” area, meaning the total area of actual forest, excluding roads and other non-forest parts of a forested area.
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•
Māori collectively-owned land use is likely to follow a slightly different trajectory than these national numbers. Cultural and spiritual ties with the whenua and indigenous biodiversity mean some Māori-collectives have stronger preferences for native forests over exotic forests. This means that the percentage of afforestation on Māori collectively-owned land driven by the NZ ETS that are native forests in the Current Policy Reference case is likely to be higher than the 10% nationwide number.
7.7.6 Deforestation
Figure 7.23: Current Policy Reference case deforestation (hectares) Source: Commission analysis. Table 7.22: Current Policy Reference case deforestation (hectares)
Post-1989 exotic Pre-1990 exotic Post-1989 native Pre-1990 native Total exotic deforestation Total native deforestation
2018 562 1941 46 740 2503 786
2030 620 73 0 664 693 664
2040 0 73 0 664 73 664
2050 0 73 0 664 73 664
Notes: • •
Deforestation is when forests are removed and converted to another land use. In the 1990s there were spikes in deforestation in anticipation of the introduction and reforms to the NZ ETS. In 2018 there were 562ha and 1,941ha of post-1989 and pre-1990 exotic deforestation, respectively. There were 46ha and 740ha of post-1989 and pre-1990 native deforestation, respectively.
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•
In the Current Policy Reference case there are low levels of ongoing deforestation. Post-1989 exotic deforestation decreases to 620ha in 2030 and then 0ha from 2037 onwards. Pre-1990 exotic deforestation is stable at 73ha per year from 2023. From 2019 onwards there is no projected post-1989 native deforestation and pre-1990 native deforestation rates are constant at 664ha.
7.7.7 Net emissions removals by forests
Figure 7.24: Current Policy Reference case net forest emissions Source: Commission analysis. Table 7.23: Current Policy Reference case net forest emissions (Mt CO2) Exotic forest emissions removals Native forest emissions removals Exotic forest deforestation emissions Deforestation forest deforestation emissions Exotic forest net emissions Native forest net emissions Total net forest emissions
2018
2030
2040
2050
-12
-10
-18
-23
-0.3
-0.7
-0.9
-1.1
2.20
0.67
0.07
0.07
0.43
0.39
0.40
0.40
-9.6
-9.1
-17.7
-22.5
0.1
-0.3
-0.5
-0.7
-9.5
-9.3
-18.2
-23.2
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Notes: •
• •
Net forest emissions represent the carbon sequestered by forests minus emissions associated with deforestation and land use change. Greater emissions removals result in negative net forest emissions when they exceed deforestation emissions. Net forest emissions therefore align closely with afforestation and deforestation rates. In the Current Policy Reference case, net forest emissions decline from -9.5Mt CO2 in 2018 to -5.7Mt CO2 in 2023, before steadily increasing to reach -9.3Mt CO2 by 2030 and -23.2Mt CO2 by 2050. Most of these net emissions removals are from exotic forests. Within net forest emissions, there are exotic deforestation emissions decline from 2.2Mt CO2 in 2018 to 0.67Mt CO2 in 2030 and to 0.07Mt CO2 from 2040 onwards. Native deforestation emissions stay constant at about 0.4Mt CO2 from 2018 onwards.
7.7.8 Forestry output
Figure 7.25: Current Policy Reference case forestry harvested volumes and revenue Source: Commission analysis. Table 7.24: Current Policy Reference case forestry harvested volumes and revenue
Forestry harvest volume (million cubic metres) Forestry revenue ($ billions)
2018 35.3 4.46
2030 43.0 5.30
2040 38.0 4.69
2050 51.8 6.38
Notes: • •
Our production forests are mostly radiata pine and produce significant volumes of harvested wood for both export and domestic use. Between 1990 and 2018, harvested volumes increased from 14.8 to 35.3 million cubic metres. The growth is staggered in large part because of the mixed age class of the
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•
production forests. Forestry revenue increased from $3.4 billion in 199418 to $4.46 billion in 2018. In the Current Policy Reference case, harvested volumes increase to 43.0 million cubic metres in 2030 and 52.1 million cubic metres in 2050. Forestry revenue increases to $5.31 billion in 2030 and $6.42 billion in 2050. The growth in forestry output after 2030 is linked to the large projected increases exotic production forests shown above.
7.7.9 Sheep and beef production
Figure 7.26: Current policy reference case sheep and beef production Source: Commission analysis. Table 7.25: Current policy reference case sheep and beef production Meat production (billion kg) Sheep and beef farming revenue ($ billions)
18
2018 1.12
2030 1.15
2040 1.21
2050 1.25
7.06
7.44
7.79
8.07
Forestry revenue data was only available from 1994.
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Notes: • • • •
• •
Our meat exports are primarily based on sheep and beef meat. Between 1990 and 2018 meat production fluctuated between 0.97 and 1.21 billion kg per year. In the Current Policy Reference case, meat production increases from 1.12 billion kg in 2018 to 1.25 billion kg by 2050. This is due to improving animal performance, with an annualised averaged productivity gains in meat production per stock unit between 2018-2050 of 1.0% in the reference case. The historical rate from 1990-2018 was 2.6%. However, these gains are partially offset by the decline in sheep and beef land area shown in the Agriculture and forest land area section above. In turn, sheep and beef revenue19 is expected to increase, from $7.06 billion in 2018 to $7.44 billion in 2030, and $8.07 billion in 2050. Revenue reflects production and the export price assumptions in Table 7.44.
7.7.10 Sheep and beef stock numbers
Figure 7.27: Current Policy Reference case sheep and beef stock units Source: Commission analysis. Table 7.26: Current Policy Reference case sheep and beef stock units (millions) Sheep and beef stock units
19
2018
2030
2040
2050
47.6
43.9
42.1
40.2
Sheep and beef revenue data was only available from 2010.
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Notes: •
Stock units is a measurement to standardise sheep and beef herds across animal type and size. Different types of sheep convert to between 0.7-1.0 stock units, while cattle convert to between 4.0 and 6.0. 20 Between 1990 and 2018 sheep and beef stock units decreased steadily from 83.5 million to 47.6 million. This was driven by the significant decrease in sheep and beef land area shown in Figure 7.20. In the Current Policy Reference case, sheep and beef stock units are expected to decline more slowly than the historical trend, in line with sheep and beef farm area. Stocking units reach 43.9 million in 2030 and 40.2 million in 2050. 18F
• •
7.7.11 Dairy production
Figure 7.28: Current Policy Reference case dairy production Source: Commission analysis. Table 7.27: Current Policy Reference case dairy production Milk solids (billion kg) Dairy farming revenue ($ billions)
2018 1.84
2030 1.81
2040 1.85
2050 1.89
13.4
13.4
13.7
13.9
20
Beef + Lamb NZ (2017, p. 21) and BakerAg (2018). Animal numbers were provided by MPI and converted into stock units by our team.
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Notes: • • • • •
Dairy products are some of our leading exports and production typically measured in terms of kilograms of milk solids. Between 1990 and 2018, milk solids production increased steadily, from 600 million kg milk solids to 1.84 billion. This is driven by both productivity gains and a growing area of land dedicated to dairy farming. The average annualised growth of milk solids production per milking cow between 2018-2050 is 0.7% in the reference case. This compares to 1.6% for the period 1990-2018. Dairy revenue follows a similar trend to production.21 It increases steadily from 1990 to 2018, varying due to changes in export prices and reaching $13.39 billion in 2018. In the Current Policy Reference case, milk solids production decreases to 1.81 billion kg in 2030 but increases to 1.89 billion kg in 2050. Dairy revenue follows a similar trend, reaching $13.9 billion in 2050.
7.7.12 Dairy milking cows
Figure 7.29: Current Policy Reference case dairy stock numbers Source: Commission analysis. Table 7.28: Current Policy Reference case dairy milking cows (millions)
Dairy milking cows
21
2018 4.95
2030 4.45
2040 4.31
2050 4.16
Dairy revenue data was only available from 2000.
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Notes:
• • • •
Dairy stock numbers are measured in terms of milking cows. Between 1990 and 2018 the number of milking cows increased substantially in line with the increasing land area used for dairy farming. Milking cows increased from 2.65 million in 1990 to 4.95 million in 2018. In the Current Policy Reference case milking cow numbers are expected to decrease to 4.45 million in 2030 and 4.16 million in 2050. This decrease is due to a combination of declining in dairy farming land area shown in the 7.7.4 Agricultural and forest land area section and some decreases in animal stocking rates.
7.8 Waste For the waste sector, ENZ draws on the Ministry for the Environment’s (MfE) “with existing measures” scenario modelling and assumptions for both future volumes and destinations of waste, and the current use of different emissions reduction technologies. These Government projections estimate what might occur in the waste sector if existing policies and measures are maintained. It models the main parameters which affect waste generation and waste emissions: how much waste ends up in landfill sites, how much waste can be recovered from landfill and how widespread and efficient gas capture systems are at disposal sites. ENZ includes the broad categories of disposal sites: municipal with landfill gas (LFG) capture, municipal with no LFG capture, non-municipal landfills and farm fills. It also includes other waste disposal end points including biological treatment (composting), anaerobic digestion and open burning/incineration. The Current Policy Reference case assumes that in the absence of further support and direction from Government, that waste reduction and waste recovery rates remain low and that there are no expansion of gas sites or increases in the average gas recovery rate. Please note that all information in this section are provisional as the CCC has not been able to access the latest version of the updated calculations for the upcoming Greenhouse Gas Inventory due to Tier 1 statistics limitations. Our staff have done some analysis based on the 4th Biennial Report which gives a rough idea of overall biogenic methane emission trends in waste but may change for the final report depending on updated information from the 2021 update of the Greenhouse Gas Inventory.
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7.8.1 Waste Emissions by Category
Figure 7.30: Current Policy Reference case waste emissions per category Source: Commission analysis. Table 7.29: Current Policy Reference case waste emissions per category (Mt CO2e) Solid Waste Disposal Biological Treatment of Solid Waste Incineration and Open Burning of Waste Wastewater Treatment and Discharge Total waste
2018 3.0317 0.0349 0.1832 0.3621 3.6120
2020 3.0151 0.0303 0.1811 0.3689 3.5954
2030 2.9805 0.0324 0.1706 0.3962 3.5796
2040 2.9645 0.0324 0.1600 0.4162 3.5730
2050 2.9069 0.0284 0.1494 0.4325 3.5173
Notes: • Waste emissions in Aotearoa are mostly from organic waste decomposing at landfill which produces biogenic methane emissions (81%), with the second largest source from wastewater treatment (10%), with the remainder coming from open burning/incineration (6%) and composting (3%). These emissions are mostly biogenic methane emissions (94%) with a smaller portion coming from nitrous oxide emissions (4%) and carbon dioxide (2%). • Despite the large increase in waste volumes of nearly 50% from 1990 to 2018, this has been counteracted by the increased adaptation of landfill gas capture technology due to the requirements imposed by the National Environment Standards for Air Quality (Air Quality NES). The Air Quality NES require landfills that meet a particular threshold of organic content and waste volumes to have landfill gas capture systems, this has driven a consolidation of municipal landfills from 300 municipal landfills in 1990 to 19 landfills by 2017. • In the Current Policy Reference case waste emissions are set to have a slight decrease due to decreasing volumes of organic waste going to landfill.
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7.8.2 Waste Emissions by Gas
Figure 7.31: Waste emissions by gas Mt CO2e Source: Commission analysis. Table 7.30: Waste emissions by gas kt CO2e (actual methane in Mt and nitrous oxide amounts in kt within the bracket) 2018
2030
2040
2050
Carbon Dioxide
0.0735
0.06841
0.0642
0.0600
Methane
3.3881 (0.135)
3.35062 (0.134)
3.3423 (0.133)
3.2882 (0.131)
Nitrous Oxide
0.1504 (15.04)
0.16061 (16.06)
0.1666 (16.66)
0.1691 (16.9)
Total
3.6120
3.57964
3.5730
3.5173
Notes: • •
•
These emissions are mostly biogenic methane emissions (94%) with a smaller portion coming from nitrous oxide emissions (4%) and carbon dioxide (2%). Biogenic methane emissions are mostly from waste decomposing from landfill, with some coming from wastewater treatment plants and another smaller portion from burning and composting. A slight decrease to 2050 is projected due to the decrease in municipal and farm fill waste volumes. Nitrous oxide emissions are mostly from wastewater treatment plants and are expected to increase through to 2050 driven largely by an increase in population.
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•
Carbon dioxide emissions are from the open burning of waste in rural areas and incineration of mostly medical waste. They are project to decline through to 2050 due to the decrease in farm activity.
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7.8.3 Waste Biogenic Methane Emissions
Figure 7.32: Current Policy Reference case biogenic waste emissions Source: Commission analysis. Table 7.31: Current Policy Reference case waste biogenic methane emissions (Mt CH4) 2018
2030
2040
2050
Municipal Landfill with LFG
0.0279
0.0389
0.0457
0.0484
Municipal Landfill without LFG Capture Non-Municipal Landfill
0. 0278 0.0420
0.0172 0.0406
0.0115 0.0401
0.0081 0.0397
Farm Fills
0.0236
0.0225
0.0214
0.0201
Total Solid Waste
0.1213
0.1192
0.1186
0.1163
Other Total
0.00137 0.1350
0.0148 0.1340
0.0144 0.1330
0.0147 0.1310
Notes: • •
Solid waste is the largest source of biogenic methane in waste with wastewater treatment, composting and open burning/incineration making up the rest of the ‘other’ emissions. Between 1990 and 2018, emissions from municipal landfills without LFG capture and farm fill emissions fell, while emissions from municipal landfill with LFG capture and non-municipal landfills rose. The shift in municipal landfill emissions is due to closure of many municipal landfills without LFG capture due to the requirement to capture LFG emissions which led to the shift of waste volumes towards sites with LFG capture. The change in non-municipal and farm film emissions can be attributed to changing waste volumes from decreased farm activity and increased industrial, construction and commercial activity.
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7.8.4 Waste Volumes at Disposal Sites
Figure 7.33: Current Policy Reference case waste emissions per category Source: Commission analysis. Table 7.32: Current Policy Reference case waste volumes at end disposal sites (kt) Municipal with LFG capture Municipal without LFG capture Total municipal Non-Municipal Farm sites
2018 3,557
2030 3,674
2040 3,717
2050 3,256
153
109
68
63
3,706 5,517 1,043
3,783 6,683 513
3,786 7,655 480
3,319 8,626 448
Notes: • • •
Waste volumes are a key driver of waste emissions as organic waste decomposes at landfill and produces emissions. As previously mentioned, the shift in waste volumes between 1990 and 2018 from municipal landfills without LFG capture and municipal sites with LFG capture has been driven by the NESAQ. In the Current Policy Reference case, while non-municipal waste volumes are projected to increase, this is largely inert waste. Municipal waste peaks at 2040 before decreasing by 2050 and farm fill waste has a consistent decline from the decrease in the number of farms.
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7.8.5 Hydrofluorocarbon gases (HFCs)
Figure 7.34: Current Policy Reference case HFC emissions Source: Commission analysis. Table 7.33: Current Policy Reference case F-gases emissions (Mt CO2e) 2018 1.8
HFCs
2030 1.7
2040 1.3
2050 1.3
Notes: •
• •
•
These emissions are primarily from leakage and improper disposal of hydrofluorocarbons (HFCs) used in refrigeration and air conditioning equipment. Over the period from 1990 to 2018 these emissions increased significantly due to the growing use of HFCs as a replacement for chlorofluorocarbons (CFCs). CFCs were recognised as being destructive to the ozone layer and the Montreal Protocol, an international treaty, successfully phased out their use. Projected emissions from HFCs peak at around 1.9Mt CO2e in 2024 and reduce to 1.7Mt CO2e in 2030 and 1.3Mt CO2e by 2050. The reduction in emissions is a result of the Kigali Amendment to the Montreal Protocol which restricts the bulk imports of HFCs in new equipment from 2019 and the uptake of alternative low global warming potential refrigerants. Despite the regulation, emissions reductions are limited due to continued use of HFCs in existing equipment. This projection was produced by the Verum Group in a 2020 piece of work commissioned by MfE. 22 19F
22
Verum Group (2020)
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7.9 Comparisons with other projections As part of our obligation to the United Nations Framework Convention on Climate Change, the Government publishes biennial reports which track historic emissions and project future trends. The most recent version of this is the ‘Fourth Biennial Report’ produced by MfE in December 2019 drawing on contributions by multiple Ministries23 These Government projections were updated in October 2020 24 in order to reflect new policy developments and the ongoing disruption the COVID-19 pandemic has had across the economy. Shown below are comparisons between our Current Policy Reference case, as presented throughout this chapter, and the updated Government projections. The Government projections explore multiple emissions scenarios, however the comparisons shown here are for the ‘with existing measures’ projection, which, in exploring a future without additional policy intervention to target emission reductions, is similar in logic to the Current Policy Reference case. The comparisons here are made at an aggregated level with emissions largely classified in terms of the Greenhouse Gas Inventory conventions. Emissions are split between transport, non-transport energy, IPPU, land use and waste. 21F
As mentioned earlier in this chapter, a major strength of the ENZ modelling tool, which has been used to create our Current Policy Reference case, is that it can represent ways of reducing emissions for all sectors of the economy in detail. It also represents many of the key interactions that can happen between sectors; for example, changes to dairy production would impact the energy requirement in the food processing sector. Because of this additional detail, our Current Policy Reference case may present a more consistent vision of our future emissions than the Government projections. In addition to the official Government projections, there have been other modelling efforts which consider future emissions in the energy sector. Most notably, the BusinessNZ Energy Council contributed their BEC 2060 Energy Modelling Scenarios, which explored two alternative futures for Aotearoa. 25 Neither of their scenarios is a strictly current policy scenario. Their ‘Tūī’ scenario, however, assumes a limited policy response. Although it does assume Aotearoa takes some action on climate change, it does so only as a ‘follower’. We include this scenario in our comparison for transport, but not for the other sectors. 2F
23
Ministry for the Environment (2019). The Ministry of Business, Innovation and Employment (MBIE) contributes energy use emissions, MfE contributes IPPU and waste emission projections and MPI contributes forestry and agriculture emissions projections 24 The updated projections were unpublished at the time of this writing but were provided to us by government agencies. 25 Business NZ Energy Council (2019)
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7.9.1 Non-transport energy emissions
Figure 7.35: Comparison of Current Policy Reference case and Government projected non-transport energy emissions Source: Commission analysis. Table 7.34: Comparison of Current Policy Reference case non-transport energy emissions with other projections (Mt CO2e)
Current Policy Reference Government projections
2018 15.5 15.3
2030 12.3 13.8
2040 12.6 12.2
2050 12.3 12.6
Notes: • •
•
Non-transport energy includes emissions from fossil fuel use in industry, buildings and in electricity generation as well as fugitive emissions. There is broad agreement between the official Government projections and this Current Policy Reference case for non-transport energy, as shown in Figure 7.35. Both projections show a general reduction in emissions with levels plateauing at around 12Mt CO2e per year by 2035. The discrepancies in non-transport energy emissions prior to 2030 are largely due to variances in the projected amount of fossil fuel electricity generation. The Current Policy Reference case projects a higher initial amount of this thermal generation but then a faster displacement of this generation with renewable generation plants. The Current Policy Reference case also projects a more abrupt completion of domestic methanol production.
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7.9.2 Industrial process and product use emissions
Figure 7.36: Comparison of Current Policy Reference case and Government projected IPPU emissions Source: Commission analysis. Table 7.35: Comparison of Current Policy Reference case IPPU emissions with other projections (Mt CO2e per year)
Current Policy Reference Government projections
2018 5.2 5.2
2030 4.2 4.2
2040 3.8 3.8
2050 3.9 3.8
Notes: •
• •
Industrial process and product use (IPPU) emissions includes non-energy emissions from steelmaking, cement production and other industrial activities. It also includes emissions from HFCs and other F-gases. There is good agreement between the official Government projections and this Current Policy Reference case for IPPU emissions, as shown in Figure 7.36. Both projections show stepped reductions in the level of emissions due to the closure of the aluminium smelter at Tiwai Point beginning in 2025 and steady emissions of around 4Mt CO2e per year beyond this.
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7.9.3 Transport emissions
Figure 7.37: Comparison of Current Policy Reference case transport emissions with other projections Source: Commission analysis. Table 7.36: Comparison of Current Policy Reference case transport emissions with other projections (Mt CO2)
Current Policy Reference BEC 2050 - Tūī Ministry of Transport Government Projections
2018 16.6 16.3 16.4 16.6
2030 16.3 16.3 15.9 15.3
2040 13.0 11.5 11.5 13.1
2050 5.7 5.5 8.1 10.6
Notes: •
•
•
26
All of the projections considered show a long-term decline in transport emissions, driven by the uptake of electric vehicles. As the speed of this uptake is quite uncertain, it is not surprising that the shape of the curves differ. The Ministry of Transport Vehicle Fleet Emission Model 26 projections are very similar to our Current Policy Reference case, although they have a steeper decline in the earlier years and a slower decline in the later years. Government projections of transport emissions show a strong shock in 2020 due to the COVID-19 pandemic, followed by a partial recovery and the start of a long-term decline, which is not as rapid as our Current Policy Reference case. 23F
Ministry of Transport (2019b)
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•
The Business NZ Energy Council Tūī scenario projections 27 are similar to our current policy case but drop off somewhat more rapidly. This is probably because the Tūī scenario is not a strictly current policy scenario, in that it does assume Aotearoa takes some action on climate change. 24F
Figure 7.38: Comparison of Current Policy Reference case electric vehicle uptake for light passenger vehicles (cars/SUVs) with other projections Source: Commission analysis. Table 7.37: Comparison of Current Policy Reference electric vehicle uptake for light passenger vehicles (cars and SUVs) with other projections
Current Policy Reference BNEF 2020 - Global BNEF 2020 - Europe BNEF 2020 - Japan TIMES-NZ - Tui TIMES-NZ - Kea IEA Stated Policy Scenario, Global Ministry of Transport
2018 2% 0% 0% 0% 0% 0% 0% 2%
2030 17% 28% 34% 14% 11% 42% 17% 41%
2040 71% 58% 66% 60% 100% 100% NA 87%
2050 99% NA NA NA 100% 100% NA 85%
Notes: •
•
27
Figure 7.38 compares the ENZ model projections of electric vehicle uptake rates for light passenger vehicles (cars and SUVs) to recent projections produced by other organisations in for Aotearoa, Europe, Japan and globally. The projections for Japan are especially relevant as Aotearoa imports the majority of its second-hand fleet from there. Figure 7.38 demonstrates that the projected uptake of electric vehicles in ENZ is reasonably aligned with the other projections.
BusinessNZ Energy Council (2019)
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•
•
The Ministry of Transport projections of electric light passenger vehicle uptake plateau in the late 2030s as their model assumes internal combustion engine vehicles continue to improve in fuel efficiency and continue to decline in cost, thereby keeping them competitive with electric vehicles. The Ministry of Transport is currently re-examining their assumptions. The Bloomberg New Energy projections use the same battery cost assumptions as the Current Policy Reference case. We do not have a good understanding as to why their projections are lower than ours in the later years.
7.9.4 Land Other organisations have modelled the dynamics of future developments in the land sector using sector specific models. Motu’s Land Use in Rural New Zealand (LURNZ) model simulates land-use change in response to changes in economic returns for different land uses. Manaaki Whenua – Landcare Research’s New Zealand Forestry and Agricultural Regional Model (NZFARM) is another model which projects agricultural production and land use. It optimises these for maximum profits based on costs, prices and environmental constraints. Motu used LURNZ and NZFARM to project a land sector base case for the Biological Emissions Reference Group in 2018 28 and reports by the Productivity Commission 29 and the Parliamentary Commissioner for the Environment 30 have used LURNZ to project avenues towards future emissions reductions targets. However, these projections are not directly comparable with the Current Policy Reference case. Significant policy developments since they were published mean that key assumptions used in those modelling efforts differ considerably from those in our reference case. The emissions reductions targets used in these reports are also different from the 2050 and 2030 targets now under legislation. 25F
26F
27F
One important land sector comparison to make is between our Current Policy Reference case and government projections. As mentioned, we used Government “with existing measures” baseline projections activity data to inform our forestry projection. We aimed to make our ENZ-generated reference case projections identical to those from MPI. As shown in Figure 7.39 below, our projections are closely aligned but some minor difference remain that we have not yet been able to reconcile.
28
Dorner et al. (2018) New Zealand Productivity Commission (2018) 30 Parliamentary Commissioner for the Environment (2019) 29
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Figure 7.39: Current Policy Reference case net forest emissions compared to Government WEM baseline projections Source: Commission analysis. Table 7.38: Current Policy Reference case net forest emissions compared to Government WEM baseline projections (Mt CO2e)
Current Policy Reference case Government WEM baseline projections
2018 -9.5 -9.6
2030 -9.3 -10.1
2040 -18.2 -18.8
2050 -23.2 -24.0
7.9.5 Waste We have drawn heavily on MfE’s waste models with the result that our projections are near identical to their 4th Biennial Report. However, there are two key differences with the BR4 report: •
•
Our analysis of the source reports for farm fill emissions have informed us that almost all of the wood waste from farms are being burnt rather than buried. We can potentially infer that farmers are burning almost all of their waste rather than having separated systems of burial and burning. However, due to the paucity of the data and in the absence of further analysis, we have assumed that half of all farm waste is burnt with the other half being buried, rather than assuming that all of it is being burnt. MfE’s linear projection of non-municipal waste emissions overestimates emissions. Commission staff explored several projection methods including a linear extrapolation of waste volume trends, however we ran into the problem of organic waste streams such as garden and wood waste eventually reaching zero within 10-20 years. In the end, we decided
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to go with a conservative approach of flatlining all non-municipal waste types at their current volume except for inert waste which was a linear projection. Given the absence of good quality data for non-municipal waste, this cautious approach was appropriate. It is likely that the waste Current Policy Reference case will change before the final report in May with updated data in the upcoming Greenhouse Gas Inventory. These will likely include changes to: • • •
Composting baseline and projection The fraction of decayable waste for different waste types Projected waste volumes
7.10 Dealing with uncertainty As discussed at the beginning of this chapter, there is uncertainty surrounding the single Current Policy Reference case presented here. The broader issue of potentially significantly different futures is addressed largely through our consideration of multiple future scenarios in Chapter 8: What our future could look like. Smaller uncertainties, related to potential variation in key variables and assumptions, however, can also be very important. We have considered the these through two primary routes. 1. Where possible, we have compared our results to a range of domestic and international projections for emissions and other indicators. These comparisons were discussed in the previous section. 2. We have tested the sensitivity of the projections, to see what would happen if specific things were different. For example, what if global oil prices were higher or lower, than our assumptions? The key uncertainties for each sector are discussed below alongside the presentation of select key sensitivity analyses.
7.10.1 Transport Probably the largest source of uncertainty in our Current Policy Reference scenario for transport is the cost and performance of batteries for electric vehicles. We believe our assumptions are in line with both the expectations of industry experts and ongoing trends. If battery costs decline as we have assumed, electric vehicles would become increasingly competitive with conventional fossilfuelled vehicles. There are, however, no guarantees that this will happen, or about the speed at which it would happen. Other key sources of uncertainty in our Current Policy Reference case for transport include •
• • •
Oil prices, which affect both the competitiveness of fossil-fuelled vehicles compared to electric vehicles, and the attractiveness of owning larger and less energy efficient conventional vehicles; Population and economic growth rates, which underlie the demand for transport; Changing work practices and advancing information technology, which could facilitate more remote working; Changing tastes and markets for housing, including potential shifts to more multi-family housing and more urban living;
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• •
• •
Changing tastes in transport choices, including potential shifts to more walking, cycling and public transport; Certain behavioural changes to car ownership could be highlighted through an initiative Ākina are piloting which is enabling fifty whānau in Manaukau South access to low emissions cars via leasehold arrangements; Self-driving vehicle technologies, which could change the amount of travel and the way vehicles are used, in ways that are still unclear; For international aviation especially, the long-term impacts of COVID-19 are another huge source of uncertainty, which are discussed in a separate section below.
7.10.2 Heat, industry and power As discussed throughout the sector discussion, much of the emissions across these sectors results from the production activity of individual industries. Changes in the level or production of these industries would have a significant impact on the emission totals over the budget periods. This makes industry activity a key uncertainty. Emission-intensive industrial activity in Aotearoa is concentrated at a small number of sites operated by a small number of companies. The signalled closure of the aluminium smelter at Tiwai Point demonstrates the significant impact on the emissions trajectory, and expected totals for any given Budget period, that even a single major change can have. For this Current Policy Reference case, we assume that heavy industry largely continues to operate at close to current production levels. The exceptions to this are the aluminium smelter and the petrochemical industry.
7.10.3 Land There are multiple sources of uncertainty for the land sector relevant to the Current Policy Reference case. First, there are a number of external market factors which could affect the sector. For example, if the price of milk or logs changes significantly from what is in the Current Policy Reference case. Changes in export prices can strongly influence land use decisions with significant implications for emissions by the sector. There are multiple factors which could shape export prices, with global demand for meat and dairy products being of crucial relevance to producers in Aotearoa. Two important trends in this regard include a growing global middle class that may demand more of these products and the development of plant-based and synthetic protein products that may undercut demand for traditional meat and dairy. Market factors are also a key source of uncertainty for forestry, with global log demand being the key driver of harvesting activity in Aotearoa. Changes in the average harvest age of planted forests due to processing constraints and market forces could cause fluctuations in estimates of emissions removals compared to our Current Policy Reference case. Log demand also combines with the NZ ETS carbon price to drive commercial afforestation in Aotearoa. Deviations in the carbon price from the constant $35 in real terms used in the Current Policy Reference case would likely see variation in afforestation and thereby net forest emissions forests. We consider sensitivity of case to alternative afforestation rates driven by different carbon prices through the effect of MPI’s “high” and “low” “with existing measures” (WEM) afforestation scenarios that use a constant $50 and $25 real emissions price, respectively.
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5 4.5 4
Current Policy Reference case
3.5
Mha
3
MPI WEM high forestry
2.5 2
MPI WEM low forestry
1.5
1 0.5
2050
2045
2040
2035
2030
2025
2020
2015
2010
2005
2000
1995
1990
0
Figure 7.40: Current Policy Reference case exotic forest area compared to MPI high and low afforestation scenarios Source: Commission analysis. Table 7.39: Current Policy Reference case exotic forest area compared to MPI high and low afforestation scenarios (Mha) Current Policy Reference case High afforestation Low afforestation
2018 1.77
2030 2.05
2040 2.36
2050 2.75
1.75 1.75
2.09 1.99
2.52 2.19
3.10 2.42
Notes: • • •
Figure 7.40 shows exotic afforestation in the Current Policy Reference case, which uses a $35 carbon price, compared to MPI’s “high” and “low” afforestation scenarios. As shown in Table 7.39, by 2030, the exotic forest area in the high afforestation scenario is 0.04Mha greater than the Current Policy Reference case and 0.35Mha greater in 2050. The low afforestation scenario sees 0.06Mha and 0.33Mha less exotic forest area in 2030 and 2050, respectively, compared to the Current Policy Reference case.
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Figure 7.41: 2050 Sectoral and net long-lived gas emissions in the Current Policy Reference case compared to alternative forestry scenarios Source: Commission analysis. Table 7.40: 2050 Sectoral and net long-lived gas emissions in the Current Policy Reference case compared to alternative forestry scenarios (Mt CO2e)
Gross Forestry Net
Current Policy Reference case 29.5 -23.2 6.3
MPI WEM High forestry 29.4 -31.7 -2.3
MPI WEM low forestry 29.6 -15.9 13.7
Notes: • •
•
Figure 7.41 shows sectoral and net long-lived gas emissions in 2050 for the Current Policy Reference case compared to the high and low MPI forestry scenarios. Gross emissions are essentially the same across the scenarios. Notably, however, net-zero long-lived gas emissions is reached and surpassed in 2050 under the high forestry scenario. This represents a scenario of “planting our way out” to achieve the 2050 target as there are little to no gross emissions reductions beyond the Current Policy Reference case. Due to the risks associated with such a large reliance on forestry and the impacts that would be associated with this, it is not a route towards the targets we support. The high forestry scenario results in an additional 8.5Mt CO2e of emissions removals beyond the Current Policy Reference case. The low forestry scenario achieves 7.3Mt CO2e less emissions removals.
Market forces and export prices also likely intersect with the trend of declining sheep, beef and deer land area. Higher meat export prices may mean land that might have otherwise been unprofitable to
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farm becomes productive again. Lower prices would have the opposite effect. This could alter the trend of sheep, beef and deer land retirement, which is strong historically, but which essentially stops in the Current Policy Reference case after 2025. As exotic afforestation is assumed to occur on sheep, beef and deer land, varied carbon and log prices may also lead to a change in sheep, beef and deer land area. We test this sensitivity with an alternate reference case where land retirement reduces gradually to zero by 2050 instead of suddenly in 2025.
16 14 12 Exotic Forestry
Mha
10
Native forestry 8
Other
6
Sheep & beef
4
Dairy
2
Horticulture Arable
0 2018
Current MPI WEM MPI WEM Reference Policy high forestry low forestry case further Reference land case retirement
Figure 7.42: Current Policy Reference case sheep, beef and deer area compared to MPI high and low afforestation scenarios and further land retirement Source: Commission analysis. Table 7.41: Current Policy Reference case sheep, beef and deer area compared to MPI high and low afforestation scenarios and further land retirement (Mha) 2018
2030
2040
2050
8.17
7.41
7.12
6.75
8.17
7.36
6.95
6.40
Low afforestation
8.17
7.45
7.25
7.05
Reference case further land retirement
8.17
7.13
6.45
5.94
Current Policy Reference case High afforestation
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Notes: • •
• •
Figure 7.42 shows sheep, beef and deer land in the Current Policy Reference case, the MPI high and low forestry scenarios and a modified reference case where land retirement reduces gradually to zero by 2050 instead of suddenly in 2025. The low forestry scenario results in 0.30Mha more sheep, beef and deer land in 2050 compared to the Current Policy Reference case. The high afforestation and further land retirement scenarios result in 0.35Mha and 0.81Mha less than the Current Policy Reference case. This highlights that perhaps the greatest trend affecting sheep, beef and deer land is that of retiring land. These differences in sheep, beef and deer land also have important flow-on effects for biogenic methane emissions.
Figure 7.43: Current Policy Reference case biogenic methane emissions in 2050 compared to alternative scenarios and 2018 emissions Source: Commission analysis. Table 7.42: Current Policy Reference case biogenic methane emissions compared to alternative scenarios
Current Policy Reference case High afforestation Low afforestation Reference case further land retirement
2018 1.32 1.32 1.32 1.32
2030 1.22 1.22 1.22 1.20
2040 1.19 1.18 1.20 1.15
2050 1.15 1.13 1.17 1.10
Notes:
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• •
Table 7.42 compares the Current Policy Reference case projected biogenic methane emissions to those in alternative reference case scenarios continues out to 2050. The high forestry scenario results in an additional 2.3% reduction in biogenic methane emissions by 2050 while the low forestry scenario results in 1.8% less. The further land retirement, however, results in an additional 4.1% reduction beyond the Current Policy Reference case.
Physical climate change effects The physical effects of climate change itself and responses to this could affect the land sector. These climate response dynamics are not included in the Current Policy Reference case. Yet, the risk of extreme weather events increases with continued global warming, and weather and temperature patterns are also likely to change. This may create fundamental challenges to agriculture and forestry by 2050. These could include large areas of land becoming unsuitable for their current land use or the rapid adoption of different technologies and practices, such as irrigation, in order to adapt. Research is underway to quantify these potential impacts, but data is not yet available to include in our modelling.
7.10.4 Waste The unreliability of activity data for waste in non-municipal sites and farm fills means that any projections must be considered with a high degree of caution. The efficiency of landfill gas capture efficiency, particularly for non-municipal and legacy fills also makes it difficult to estimate with a high degree of accuracy. Another potential variable is the potential impact of the waste levy increases, which has not yet been incorporated into the Current Policy Reference case. However, depending on the level of actual sensitivity of waste volumes to the levy increases, this may result in higher or lower increases than forecast. There is also large uncertainty around the refrigerants space, such as the impacts of the carbon price on the consumption of F-gases, potential for continued imports of recycled HFCs and the potential leakage rates. Because of these uncertainties, there is potential for the Current Policy Reference case to be under or overstating the emissions reductions from the Kigali Amendment.
7.10.5 Impact of COVID-19 Of course, any discussion the uncertainties in future emissions must address the current COVID-19 public health crisis. At the time of this writing, international aviation to and from Aotearoa is operating at token levels, the tourism and tertiary education sectors in Aotearoa are taking a huge hit, export and import supply chains for many products have been disrupted, seasonal workers and many skilled workers are unable to enter the country and unemployment is well above levels of the past few years. Yet the Commission’s planning horizon remains a long-term one, to 2050 and beyond. Our first budget period does not even begin until 2022. The key uncertainty around COVID19 for the Commission is therefore the long-term impacts. The ENZ model results presented in this section have been adjusted to reflect our best estimate of the short and long-run impacts of COVID-19. In the short-term, defined to be 2020 and 2021, our transport and industrial projections have been scaled down to match the demand impacts on each
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type of transport and industry, as shown in the most recent update to the Government projections of emissions. These generally show a sharp drop in 2020 compared to 2019, with an assumed recovery in 2021. The recovery is, however, not a complete one, in that it will only bring demand back to roughly where it was in 2019, rather than showing growth relative to 2019, as would have been expected pre-COVID-19. After 2021, we assume growth continues at a rate similar to what would have been expected pre-COVID-19, but starting from this new, slightly lower level. Complicating the situation is that there appears to have been a downgrading of economic growth expectations over the last few years even apart from COVID-19. Figure 7.44 shows a comparison of GDP projections underlying three of the emission projections discussed under ‘Comparisons with other projections’ above. The one from 2016 underlies the Ministry of Transport emission projections; the one from 2019 underlies the Fourth Biennial Report, while the one from 2020 underlies the latest Government projections. The Figure shows that the GDP projections have trended lower over time, even in the 2016 to 2019 period preceding COVID-19.
600
GDP ($ billion, real 2009/10 NZD)
Historical
Projected 2020 projection
500 400
2019 projection
300 2016 Projection
200 100
2050
2045
2040
2035
2030
2025
2020
2015
2010
2005
2000
1995
1990
0
Figure 7.44: Comparison of GDP Projections Underlying Recent Emissions Projections Source: Commission analysis. Table 7.43: Comparison of GDP Projections Underlying Recent Emissions Projections ($ billion, real 2009/10 NZD)
2020 projection 2019 projection 2016 Projection
2018 249 248 244
2020 244 262 261
2030 319 324 331
2040 375 387 407
2050 435 458 496
Although we have adjusted our long-term projections to reflect the impacts of COVID-19, and implicitly other changes to the economic outlook since 2019, these impacts are relatively small. This
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view is consistent with the fact that, at the time of this writing, COVID-19 vaccines appear to be imminent. If successful, they should bring the health crisis to a close within the next year or so. We recognise that there is a wide divergence of opinion as to what the long-term impacts of COVID19 will be on emissions and the economy. Our message here is not intended to be dismissive. COVID19 poses very serious challenges to the future of the world economy and severe long-term outcomes are within the realm of possibility. The Commission will need to closely monitor the situation and adjust its projections to reflect any new developments. For the moment, however, we are taking the view that the crisis will resolve in a relatively short time and that economic growth will return to something like its previous path. This is also a conservative assumption. COVID-19 cannot, and should not, be counted upon to provide Aotearoa with much help in reaching net zero emissions by 2050.
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7.11 References Atkins, D. M. (2019). Options to Reduce New Zealand’s Process Heat Emissions. University of Waikato. https://www.eeca.govt.nz/assets/EECA-Resources/Research-papersguides/Options-to-Reduce-New-Zealands-Process-Heat-Emissions.pdf BakerAg. (2018). 2018 Rem Survey Stock Units & Ratio. https://www.bakerag.co.nz/sites/default/files/2018%20Rem%20Survey%20Stock%20Units% 20%26%20Ratio.xlsx Beef + Lamb NZ. (2017). Land and Environment Plan Guidelines Version two. https://beeflambnz.com/sites/default/files/factsheets/pdfs/RB2-LEP-level-2-guidelines.pdf BloombergNEF. (2020). Electric Vehicle Outlook 2020. BloombergNEF. https://about.bnef.com/electric-vehicle-outlook/ BusinessNZ Energy Council. (2019). New Zealand Energy Scenarios: Navigating our flight path to 2060 (p. 74). BusinessNZ Energy Council. https://www.bec2060.org.nz/__data/assets/pdf_file/0020/182711/Energy-Scenarios.pdf Carroll, M. (2020). New Zealand Steel plans to cut 150 to 200 jobs after review. Stuff. https://www.stuff.co.nz/business/industries/122661091/new-zealand-steel-plans-to-cut150-to-200-jobs-after-review Concept Consulting. (2019). Long-term gas supply and demand scenarios: 2019 Update. Gas Industry Company. https://www.gasindustry.co.nz/work-programmes/gas-supply-and-demand/longterm-gas-supply-and-demand-scenarios-2019-update/document/6588 Dorner, Z., Djanibekov, U., Soliman, T., Stroombergen, A., Kerr, S., Fleming, D., Cortes-Acosta, S., & Greenhalgh, S. (2018). Land-use Change as a Mitigation Option for Climate Change [Report to the BERG]. Motu. https://motu.nz/assets/Documents/our-work/environment-andagriculture/agricultural-economics/agricultural-greenhouse-gas-emissions/Land-use-changeas-a-mitigation-option-BERG-report.pdf Energy Efficiency and Conservation Authority. (2020). Energy end use database 2017-2019. Te Tari Tiaki Pūngao - Energy Efficiency & Conservation Authority. https://tools.eeca.govt.nz/energy-end-use-database/
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Fertiliser Assocation. (2019). Fertiliser use in NZ. Fertiliser Association. http://www.fertresearch.org.nz/site/about/fertiliser_use_in_nz.aspx Grimes, A., Young, C., Arnold, R., Denne, T., Howden-Chapman, P., Preval, N., & Telfar-Barnard, L. (2011). Warming Up New Zealand: Impacts of the New Zealand Insulation Fund on Metered Household Energy Use [Paper prepared for Ministry of Economic Development]. Motu. IEA. (2020). World Energy Outlook 2020 (World Energy Outlook, p. 464). IEA. https://www.iea.org/reports/world-energy-outlook-2020 McMeeking, S., Kahi, H., & Kururangi, G. (2019). He Ara Waiora: Background paper on the development and content of He Ara Waiora. The Treasury. https://ir.canterbury.ac.nz/bitstream/handle/10092/17576/FNL%20%20He%20Ara%20Waio ra%20Background%20Paper.pdf?sequence=2&isAllowed=y Methanex. (2018). Methanex Reaches Long-Term Agreement for Natural Gas Supply to Its New Zealand Operations. https://www.methanex.com/news/methanex-reaches-long-termagreement-natural-gas-supply-its-new-zealand-operations Ministry for Primary Industries. (2020). Emissions Trading Scheme improvements for forestry. Ministry for Primary Industries; Ministry for Primary Industries. https://www.mpi.govt.nz/forestry/forestry-in-the-emissions-trading-scheme/emissionstrading-scheme-improvements/ Ministry for the Environment. (2019). New Zealand’s fourth biennial report under the United Nations Framework Convention on Climate Change. Ministry for the Environment. https://www.mfe.govt.nz/publications/climate-change/new-zealands-fourth-biennialreport-under-united-nations-framework Ministry for the Environment. (2020). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealandsgreenhouse-gas-inventory-1990-2018-vol-1.pdf Ministry for Transport. (2019). Transport outlook: Future state model results. Ministry of Transport. https://www.transport.govt.nz/statistics-and-insights/transport-outlook/sheet/updatedfuture-state-model-results
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Ministry of Business, Innovation & Employment. (2020). Petroleum reserves data. Ministry of Business, Innovation & Employment. https://www.mbie.govt.nz/building-andenergy/energy-and-natural-resources/energy-statistics-and-modelling/energystatistics/petroleum-reserves-data/ Ministry of Transport. (2019a). The New Zealand 2018 Vehicle Fleet: Data Spreadsheet. Ministry of Transport. https://www.transport.govt.nz/assets/Uploads/Data/NZ-Vehicle-Fleet-Statistics2018_web.xlsx Ministry of Transport. (2019b). VKT and Vehicle Numbers Model Version 2 Base. Ministry of Transport. https://www.transport.govt.nz/assets/Uploads/Data/Transport-outlookupdated/VKT-and-Vehicle-Numbers-Model-Version-2-base-20190702.xlsx Ministry of Transport. (2020). New Zealand Household Travel Survey. Ministry of Transport. https://www.transport.govt.nz/area-of-interest/public-transport/new-zealand-householdtravel-survey/ New Zealand Labour Party. (2020). A locally led transition for Southland. New Zealand Labour Party. https://www.labour.org.nz/release-a-locally-led-transition-for-southland New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf Parliamentary Commissioner for the Environment. (2019). Farms, forests and fossil fuels: The next great landscape transformation? Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/196523/report-farms-forests-and-fossil-fuels.pdf Stats NZ. (2020). Tatauranga umanga Māori – Statistics on Māori businesses: 2019 (English). Stats NZ. https://www.stats.govt.nz/information-releases/tatauranga-umanga-maori-statistics-onmaori-businesses-2019-english Verum Group. (2020). Projections of HFC stocks and emissions to 2050 in relation to key factors influencing HFC consumption [Prepared for Ministry for the Environment]. Verum Group.
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Appendix 1: ENZ ENZ: our scenarios model We produce our emissions scenarios, including the Current Policy Reference case, using a purposebuilt computer model called ENZ that was originally developed by Concept Consulting. ‘ENZ’ was originally an acronym for ‘Energy Emissions in New Zealand’ but is now the complete name of the model. We purchased ENZ and have enhanced it to meet our needs. ENZ allows us to investigate, from a whole-of-system point of view, which emission reductions might be technically and economically achievable in each sector of the economy. It also allows us to factor in anticipated technological developments. As well as the Current Policy Reference case, we use ENZ to generate other scenarios to investigate alternative possible futures in Chapter 8: What our future could look like. ENZ models all the main emissions sectors of the Aotearoa economy – energy, industry, transport, agriculture, forestry, product use and waste. It gives a detailed sense of feasible emissions reductions in each of these sectors by factoring in specific technologies and emissions reductions opportunities. The model accounts for key supply chain links between sectors and factors in resource constraints. For example, if ENZ projects the number of electric vehicles to rise, it also calculates the increase in electricity demand and increases electricity generation accordingly. If ENZ projects a conversion of coal boilers to using biomass, it also calculates the forestry residues required to supply this. The main sectors are included in ENZ as follows: Transport ENZ includes road, rail, shipping and aviation, with the latter two split into domestic and international. It also includes different fuel types: fossil and alternatives. It models the main levers which influence emissions, including the makeup of the vehicle fleet, transport demand and the factors driving them, such as the size of the population. The model also takes account of behavioural change, including shifts between travel types, such as more walking or cycling, or reduced demand for travel because of a move to working from home. In both cases, ENZ responds by reducing the distance travelled by road. Electric vehicles One of the most significant aspects of the transport modelling in ENZ is the uptake of electric vehicles. In the light vehicle market, electric vehicles may be either pure battery electric vehicles or plug-in hybrids. The split between these two vehicle types for vehicles imported new starts with the actual split in 2019 and moves gradually to 100% battery electric by 2035. ENZ assumes that consumers choose between conventional vehicles and electric vehicles based on the total cost of ownership of each type of vehicle over an assumed five-year ownership period. 2F2F
The major driver of electric vehicle uptake is the assumed decline in battery costs. These are based on projections by Bloomberg New Energy Finance’s Electric Vehicle Outlook 2020.1 These figures suggest, for example, that the cost of batteries for a typical light passenger vehicle will decline from about NZD13,500 in 2018 to NZD6,100 in 2030 even while the battery size increases from 53kWh to 66kWh (with a corresponding increase in vehicle range). It also implies that, based on cost alone (excluding penalties), the purchase price of a light electric vehicle will drop below the purchase price of a conventional vehicle sometime between now and 2030.
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There are also non-price barriers to electric vehicle uptake, such as consumer range anxiety and lack of vehicle charging infrastructure. These barriers are discussed in more detail in Chapter 4b: Reducing emissions – opportunities and challenges across sectors, Transport, Buildings and Urban Form. To represent these, ENZ includes three classes of penalties to slow the uptake of electric vehicles in Aotearoa compared to what costs alone would indicate: • • •
global early tech capital cost penalties, reflecting the global barriers to electric vehicle production; Aotearoa-specific capital cost penalties, reflecting barriers to electric vehicle uptake specific to this country; productivity penalties, which apply mainly to trucks, reflecting how batteries could reduce vehicle payload or range, thereby increasing operating costs per unit of payload.
In addition, there is a bias against electric vehicles built into the consumer choice function. This causes conventional vehicles to take a larger share of the market than electric vehicles even when the total operating costs of electric vehicles (including penalties) and conventional vehicles are the same. This bias reduces as electric vehicles gain in market share. There are also limits in the model on the speed at which the electric vehicle shares of newly registered vehicles can increase. Assumptions are also made for the number of vehicle kilometres travelled by each class of vehicle in the reference case to reflect assumed travel type shifts for both travellers and freight. Buildings Buildings in ENZ are represented in terms of the energy utilised in their operation. Energy used for space and water heating as well as cooking, lighting and electrical equipment are modelled explicitly within ENZ at an aggregated level for residential, commercial and public buildings. As population and GDP increase within the model, the number of buildings and requirement for energy increase. Greenhouse gas emissions from these uses of energy and are accounted for in ENZ. Whether it from gas combusted onsite in a gas boiler or from the plants which generate the electricity used in a hot water cylinder. This means that we can see from a whole energy system point of view the emissions footprint of operating our homes and workplaces. Within the model, buildings are split into existing and future builds with varying energy efficiency opportunities, construction rates and retrofit cycles. Energy uses are disaggregated into space heating, water heating, cooking, lighting and other for each fuel type (electricity, gas, LPG, coal, biomass). In the model, consumer choice of heating technology (fossil fuel or electric) at the time of a new build or retrofit is based on relative costs of equipment and fuel. A fossil fuel phaseout profile overrides this economic based selection – this phaseout either reflect societal behavioural changes or a mandated approach. Improvements in energy efficiency improvements of appliances and in buildings are also represented within ENZ. Heat, industry and power There are a diverse range of energy use types and industrial processes represented within ENZ. Generally, the activities which produce the largest share of emissions are represented in the most detail. A number of high emitting, single site industries are also modelled explicitly. For example, the refinery, steel mill, aluminium smelter and cement plant.
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How industries operate and function within the model is based on detailed in-house analysis as well as analysis of published literature. It is also informed by engagement with technical experts, industry specialists and takes into account industry forecasts. This means where there are physical constraints on how a plant operates, for example, this is reflected. ENZ models future activity for heat, industry and power based on historic trends, assumed growth and known dependencies such as fuel costs, competition for resource and other input drivers. ENZ deploys new emissions reduction technologies when they become technologically ready and economically viable. Electricity generation ENZ includes a basic representation of the electricity sector and runs and builds generation to meet the demand set by industries, households and other user groups. Demand is coarsely classified in terms of baseload demand and flexible demand – flexible demand sets the requirement for flexible generation which fossil fuelled ‘thermal’ power plants help to meet in the system. Most thermal generation plants are represented explicitly in the model, whereas renewable resources are aggregated by primary energy resource. There is a short ‘generation stack’ of committed projects which add to this renewable resource and beyond this a representative cost and supply curve of new geothermal, wind and solar projects. Thermal generation runs in the model up to the threshold where it would be equivalent cost to build a renewable resource which is only generating some of the time and spilling energy for the rest. As the cost of thermal generation increases with fuel and carbon price, and the cost of renewable generation is projected to fall, thermal generation plays a decreasing share in each of these scenarios. Other points to note: •
•
•
• •
As wind and solar generation penetrate further into the system they became less valuable in the electricity market as they can be always generating, or not generating at the same time – this effect is represented by cost penalties in the model which dynamically increase the cost of these resources. The operation of gas and coal generation is one cause of electricity generation emissions that the model reports. The model also reports aggregate emissions from geothermal generation. The model does not represent varying hydro flows and manage hydro reservoir resource. Hydro generation is for an average year, but the dry year risk sets the capacity of thermal generation still in the system. This is not a market model with offers and bidders. The wholesale electricity price for the year is set by the long run marginal cost of the next renewable project to be built. This price becomes the input for other users in the model and is a factor on their decision to fuel switch to electricity.
Process heat ENZ includes a regional representation of process heat users in Aotearoa which links in with the forestry and agricultural modules. The food processing sector is represented in the most detail with dairy, meat and other food processing activity broken down to the regions of Northland, Central North Island, East Coast, Hawke’s Bay, Southern North Island, Nelson and Marlborough, West Coast, Canterbury, Otago and Southland. 1 February 2021 Draft Supporting Evidence for Consultation
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Within the model the regional agricultural activity sets the demand for energy for the meat and dairy processing sectors. Along with deploying efficiency measures, these industries undertake fuel switching to biomass or electricity as fossil fuel costs increase. The local forestry harvest sets the availability of biomass as forestry residue or pulp logs which users generally take up to the extent they are available. The model ensures that the biomass resource is not utilised multiple times. The cost of fuel switching from coal, gas and diesel to biomass or electricity is based on new boiler cost estimates, connection costs and fuel prices. These factors are incapsulated within a ‘marginal abatement cost’ calculation and industries begin to convert their boilers as the carbon price approaches this. Land ENZ contains the land uses which are the main sources of emissions and removals from the land sector. It includes the area and emissions associated with each land use. The land uses included in ENZ are: • Sheep, beef and deer farming31 • Dairy farming • Horticulture • Arable farming • Exotic forest (pre-1990 and post-1989) • New native forest (Post-1989) • Other 1F
2F1
While these are not the only land uses that contribute to emissions or emissions removals, they make the biggest contribution towards emissions budgets and targets. For example, pre-1990 native forests are not included in the model as legal protections mean their area is restricted from changing significantly. 3F1
ENZ models land in Aotearoa at a national level. However, also understanding the trends in Māori collectively-owned land is a critical layer in the analysis. Data limitations mean it is not possible to consider specific projections for Māori collectively-owned land out to 2050 but relevant information about Māori collectively-owned land is considered alongside the reference case projections. Of note, a crude attempt at estimating a Māori emissions profile by iwi takiwā could be achieved through Crown agencies including Te Puni Kōkiri, Ministry for the Environment, Ministry for Primary Industries, Manaaki Whenua, Te Tumu Paeroa and other Crown Research Institutes, giving effect to kotahitanga and working collaboratively to build on existing data. Addressing this gap, and the associated information and capability enablement required, is consistent with giving effect to rangatiratanga and supporting more equitable outcomes for iwi/Māori. However, it is imperative that the enabling platform/mechanism ensures iwi/Māori-collectives maintain mana motuhake (control and autonomy) over their data and information. For the land sector, ENZ draws on land areas and livestock numbers from the Ministry for Primary Industries (MPI) October 2020 data update and uses these to model emissions and output. ENZ is calibrated to historic data and produces similar but not identical outcomes to Government models. 31
Area used for production, not whole owned area.
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The key model underlying the activity data is MPI’s Pastoral Supply Response Model, which projects trends in animal populations, primarily in response to export prices, productivity trends and the returns on agricultural land relative to forestry. Greenhouse gas emissions are calculated as a function of land area, stocking rates, animal productivity and the application of emissions reduction technologies: • • •
• •
Land areas for the different farm types are input assumptions Average stocking rates are specified for dairy and sheep and beef. In the Current Policy Reference case these are based on projected livestock populations from MPI. Production per animal is projected based on two factors: (1) a baseline rate of improvement based on MPI’s projections, (2) an equation relating changes in stocking rate to changes in production. The latter assumes production per animal can increase up a curve towards a maximum value as stocking rate is reduced. The curve parameters are varied by scenario. Baseline emissions per animal are projected based on the observed relationship to production per animal, with parameters fitted to historic data. The impact of emissions reduction technologies, such as low-methane breeding, is superimposed on this baseline trend. These technologies are assumed to have no impact on production.
Forestry carbon dioxide emissions and removals are calculated in the ENZ model using methodology and assumptions consistent with MPI’s forestry emissions model. We apply the accounting approach described in Chapter 3: How we measure progress, with post-1989 exotic production forests credited up to an ‘averaging age’ of 22 years. Forestry yields and economics are modelled based on assumptions provided by Scion. Harvest yields are assumed to increase over successive forestry vintages due to genetic improvements. However, carbon sequestration lookup tables are assumed to remain constant over time, in line with current accounting conventions. Volumes of forest harvest residues, pulp logs and saw logs are calculated to provide estimates of available biomass supply for bioenergy and forestry sector revenue. The small proportion of emissions from other livestock is taken as a fixed projection from MPI. Emissions from horticulture and cropping, which arise from fertiliser and lime application, are assumed to scale with land area. Waste For the waste sector, ENZ draws on the Ministry for the Environment’s (MfE) “with existing measures” scenario modelling and assumptions for both future volumes and destinations of waste and the current use of different emissions reduction technologies. These Government projections estimate what might occur in the waste sector if existing policies and measures are maintained. It models the main parameters which affect landfill and waste emissions: how much waste ends up in landfill sites, how much waste can be recovered from landfill and how widespread and efficient gas capture systems are at disposal sites. The recovery measures modelled in the waste module are: recycling, composting, anaerobic digestion and boiler fuel. The baseline for all the recovery measures has been set at zero, as any changes to waste volumes will reduce the waste to landfill baseline.
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ENZ includes the broad categories of disposal sites: municipal with landfill gas (LFG) capture, municipal with no LFG capture, non-municipal landfills and farm fills. It also includes other waste disposal end points including biological treatment (composting), anaerobic digestion and open burning/incineration.
Appendix 2: Detailed Current Policy Reference case assumptions In addition to what has been outlined in this chapter, the Current Policy Reference case uses several other assumptions for the overall economy and each sector. These are presented here. The assumptions represent some of the vectors of uncertainty discussed in the chapter and as such should not be taken as expectations of what “will” happen in the future. Real values will likely vary from the reference case assumptions. We aim to capture the potential variation this may cause for the level of additional effort required to meet emissions budgets through the multiple scenarios developed in Chapter 8: What our future could look like. Table 7.44: Key assumptions in the Current Policy Reference case Assumption
2018
Population (million) GDP (billion NZD) NZ ETS carbon price (real NZD) Oil Price (real 2020 USD/barrel
4.841
Exchange rate (NZD/USD) Notes and explanations Assumption Total household passengerkilometres (billions) Total freight tonnekilometres (billions)
2030 General 5.524
2050
Source/evidence
6.160
Stats NZ (50th percentile population) Stats NZ (1.2% labour productivity growth) Government October 2020 data update Broadly consistent with International Energy Agency, Sustainable Development Scenario32
248
324
458
$35
$35
$35
$70
$60
$60
1.5
1.5
1.5
2018 56.0
Transport 2030 62.2
2050 68.7
Source/evidence Ministry of Transport (2019A)*33
30.6
36.3
41.1
Ministry of Transport (2019A)*
32
IEA (2020) Items with a “*” also incorporate Commission updates to reflect revised assumptions about population, GDP, and COVID-19. 33
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Domestic air 7.3 8.0 11.0 Ministry of Transport passenger(2019A)* kilometres (billions) International air 6.0 7.0 12.0 Ministry of Transport passenger (2019A)* departures (millions) International 51 56 48 Ministry of Transport shipping tonnes (2019A)* imports + exports (millions) Public transport 3.4% 5.0% 6.3% Ministry of Transport type share by (2019A)* distance Walking and 2.2% 2.1% 2.1% Ministry of Transport cycling share by (2019A) distance Rail and coastal 26.3% 24.5% 24.6% Ministry of Transport shipping freight (2019A) share by tonnekilometres Cost of batteries $176 $60 $37 BloombergNEF New (USD/kWh) Energy Finance (2020) Capital cost 26% 15% 0% Commission Staff penalties on Assumption light passenger electric vehicles Productivity 20% 16% 9% Commission Staff penalty for Assumption electric heavy trucks RUC Exemption Light electric vehicles are assumed to be exempt from road user charges (RUC) for electric until 2022, and heavy electric vehicles are assumed to be exempt from RUC until vehicles 2028, consistent with existing policy. After these dates, electric vehicles are assumed to pay applicable RUC for their vehicle class. Notes and Household travel is defined as per the New Zealand Household Travel Survey. 34 It explanations includes travel for personal reasons and commuting to work, but does not include other business travel. 6F
International shipping declines between 2030 and 2050 due to the expected peaking in log shipments in the 2030s, the so-called ‘wall of wood’. Rail and coastal shipping freight share declines slightly due to expected declines in two major rail commodities: logs and coal. Both types of transport are assumed to maintain their current market share for each major commodity group. Buildings 34
Ministry of Transport (2020)
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Assumption
2018
2030
2050
Number of residential buildings
1.77 million
2.00 million
2.23 million
Number of commercial and public buildings
0.18 million
0.21 million
0.23 million
Energy intensity of retrofitted building relative to 2018 building stock average
95% (residential buildings) 90% (commercial and public buildings)
Energy intensity of new buildings relative to 2018 building stock average Retrofit cycle
100%
77% (space heating) 89% (water heating)
70% (space heating) 85% (water heating)
Source/evidence 2018 value is number of registered electricity meters. Projection is based on historic relationship with population 2018 value is number of registered electricity meters. Projection is based on historic relationship with GDP Modest energy reduction is consistent with findings from Warmer Kiwi Homes program that energy efficiency improvements in existing homes do not reduce metered energy use but do lead to warmer and healthier homes.35 More substantial opportunities in other buildings which are not underheated to the same extent. More significant opportunity for reducing energy use in new buildings compared with existing.
1.3% of total residential buildings per year 2.5% of total commercial and public buildings per year
Notes and explanations
The modelling approach is a basic building stock model of residential and commercial and public buildings. Old and new buildings have different assumptions around existing and future energy intensity. Assumptions around use of gas are the most critical in terms of operational emissions. There is a consumer choice function in the model which selects gas or electric heating at the time of a new build or during a retrofit. The selection depends on the relative costs of technologies and operation. In this Current Policy Reference case, energy costs do not change significantly and so the balance of gas heating to electric systems is similar to today. Heat, industry and power
35
Grimes et al (2011)
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Assumption
2018
2030
2050
Food processing efficiency improvements per year Aluminium smelter closure
0.7%
0.7%
0.7%
Methanol production completion Iron and steel production
Oil refining production
Notes and explanations
Staged closure between 2024 and 2026
Staged closure between 2026 and 2029
Source/evidence Based on industry engagement and industry targets Assuming a further 3-5 years operation beyond signalled closure date. The Government has signalled that this is the extension they are trying to negotiate.36 Based on Methanex’s current gas contracts37
10% reduction in production in 2020 relative to 2016-2019 average. Constant production beyond this.
Bluescope Steel are undertaking operation restructuring which is likely to reduce production 18% reduction in production in 2020 relative to Based on Refining New 2016-2019 average. Constant production beyond Zealand’s this. announcement that production is being cut to 1995 levels38 The assumptions of food processing energy efficiency improvements represent business as usual improvements which are largely met by industry under annual energy performance targets. These energy intensity reductions are not price driven in the model to acknowledge the barriers to energy efficiency which exist, even when many technologies are identified as low cost.39 There are not enough gas reserves for methanol production to continue out to 2050, based on current production levels.40 As such, the closure of methanol production is assumed. The assumption that production will end in 2029 is based on the end date of Methanex’s existing gas contracts. When a closure occurs is subject to a high level of uncertainty. There is a high degree of uncertainty in the assumption that steel, cement, oil refining and lime and glass production remain constant out to 2050. In 2020, strategic reviews of both the oil refinery and the steel mill were undertaken. The outcome of both reviews resulted in a cut back on jobs and production, and the ongoing operation of these sites remains uncertain. Land
Assumption
2018
2030
2050
Source/evidence
36
New Zealand Labour Party (2020) Methanex (2018) 38 Refinery New Zealand (2020) 39 Atkins (2019) 40 Ministry of Business, Innovation & Employment (2020) 37
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Average log price ($/t harvest volume) Milk price ($/kg milk solids) Meat prices (indexed to 2019 actual price) Methane inhibitor or vaccine Freshwater policy
148.54
145.00
145.00
MPI October 2020 update
6.73
6.83
6.83
0.98
1
1
MPI October 2020 update MPI October 2020 update
None
National Environmental Standards for Freshwater Incorporated in MPI and National Policy Statement for Freshwater October 2020 updated Management (3 September 2020) activity data NZ ETS policy - Agriculture included at the processor level with Reflected in Settings 95% free allocation from 2025 Government October - June 2020 amendments to forestry in the NZ 2020 projections update ETS, including averaging for post-1989 forests and a permanent forest activity phasing in by 2023.41 Notes and Key land sector assumptions include commodity prices for meat, milk and logs, explanations which are taken from MPI projections. As future export prices are notoriously difficult to predict, these projections hold constant from five years onwards. Waste Assumption 2018 2030 2050 Source/evidence Waste to landfill 9,779 kt 10,978 kt 12,394 kt Modified BR4/MfE waste models Waste recovery Commission Staff (increase from Assumption 2018 levels) Sites with LFG Existing Existing municipal Existing municipal MfE waste models capture municipal sites sites sites LFG recovery 68% 68% 68% MfE staff rate Notes and The assumptions of total waste volumes have been taken from MfE projections, explanations as have the number of sites with landfill gas capture and the average landfill gas recovery rate. There has been no increase of waste recovery in alignment with MfE’s “With Existing Measures” scenario. Any potential changes to future waste volumes in the upcoming Greenhouse Gas Inventory will be reflected as a new baseline for total waste volumes
41
For further details see Ministry for Primary Industries (2020).
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82
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83
Chapter 8: What our future could look like Developing different scenarios allows us to see what the future of Aotearoa could look like. These scenarios are based on our modelling and analysis and help us determine the course of action we should embark on. This chapter outlines four scenarios: Headwinds, Further Technology Change, Further Behaviour Change, and Tailwinds. These scenarios explore the uncertainty around how technologies and social factors could develop and present different ways of achieving our 2050 target.
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Contents 8.1 Introduction ........................................................................................................................... 3 8.2 Key findings from the scenario analysis ................................................................................... 3 8.3 Creating long-term scenarios .................................................................................................. 5 8.3.1 How our scenarios differ from the Current Policy Reference case ........................................... 6 8.3.2 Locking in net zero ..................................................................................................................... 6 8.3.4 Scenario design and assumptions .............................................................................................. 7 8.4 Economy-wide emissions results ........................................................................................... 10 8.4.1 Long-lived gases ....................................................................................................................... 10 8.4.2 Biogenic methane .................................................................................................................... 12 8.4.3 Emissions reductions by sector ................................................................................................ 14 8.4.4 Looking beyond 2050 ............................................................................................................... 15 8.5 Sector assumptions, results and insights ............................................................................... 18 8.5.1 Total primary energy use ......................................................................................................... 18 8.5.2 Transport.................................................................................................................................. 19 8.4.3 Buildings ................................................................................................................................... 28 8.4.4 Heat, Industry and Power ........................................................................................................ 30 8.4.5 Forestry .................................................................................................................................... 43 8.4.6 Agriculture ............................................................................................................................... 45 8.4.7 Waste ....................................................................................................................................... 52 8.4.8 F-gases...................................................................................................................................... 54 8.6 Cross sector implications ...................................................................................................... 55 8.6.1 The role of bioenergy ............................................................................................................... 55 8.6.2 Hydrogen.................................................................................................................................. 58 8.6.3 Alternative carbon dioxide removals ....................................................................................... 59 8.7 Comparison to 1.5 degree pathways and international pathways .......................................... 60 8.8 References ........................................................................................................................... 62 Appendix: Detailed scenario assumptions................................................................................... 63
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Developing different scenarios allows us to see what the future of Aotearoa could look like. These scenarios are based on our modelling and analysis and help us determine the course of action we should embark on. This chapter outlines four scenarios: Headwinds, Further Technology Change, Further Behaviour Change, and Tailwinds. These scenarios explore the uncertainty around how technologies and social factors could develop and present different ways of achieving our 2050 target.
8.1 Introduction Under the Climate Change Response Act, emissions budgets must be set with a view to meeting the 2050 target. In simple terms, the emissions budgets are to act as stepping-stones towards the 2050 target. To this end, we have developed detailed long-term scenarios to explore and demonstrate how the 2050 target can be met. These scenarios build on the analysis of emissions reduction options (Chapter 4: Reducing emissions – opportunities and challenges across sectors) and our current path (Chapter 7: Where are we currently headed?) using our bottom-up modelling framework. The analysis presented in this chapter supports our advice on how the emissions budgets and ultimately the 2050 target may realistically be met. This chapter covers: • • • • • •
Key findings from the scenario analysis What our long-term scenarios are, and how we designed them Economy-wide emissions results – including breakdowns by gas and by sector, and post2050 considerations Sector assumptions, results and insights – unpacking the detailed changes happening within each sector Cross-sector implications – considering the role of bioenergy, hydrogen and alternative carbon dioxide removals Comparison to global 1.5 °C pathways and other international pathways.
8.2 Key findings from the scenario analysis Overall, the four scenarios show a range of potential paths which are compatible with meeting the 2050 emissions reduction target. The following key findings can be drawn from our analysis:
Meeting the net zero long-lived gases target: •
Aotearoa can achieve net zero emissions of long-lived gases by 2050 with significantly lower levels of forestry planting than previous studies have suggested. Our scenarios also show how it would be possible for Aotearoa to maintain net zero after 2050 with relatively little additional effort, either through additional afforestation, further reductions in long-lived gases, or other forms of carbon dioxide removals.
Meeting the biogenic methane targets: •
For biogenic methane, it is possible to meet the 2030 target and the less ambitious end of the 2050 target range through existing farm management practices and a combination of waste reduction and diversion from landfills.
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•
•
Developing and widely adopting new technologies to reduce agricultural methane emissions would enable Aotearoa to reach the more ambitious end of the of the 2050 methane target range. Increasing landfill gas capture would also contribute. Without new technologies, meeting the more ambitious end of the target range would likely require lower agricultural production from livestock and more land use change.
Transport •
Through switching to electric vehicles, road transport, including heavy vehicles, can be almost decarbonised by 2050. This requires a rapid increase in electric vehicle sales so that nearly all vehicles entering the fleet in Aotearoa are electric by 2035. The switch to electric vehicles is expected to deliver significant cost savings while also reducing air and noise pollution and replacing imported fuels with local renewable electricity.
Heat, industry and power •
•
•
Wider electrification of energy use is an essential part of the transition and this would require a major expansion of the electricity system. Wind, geothermal and solar power can meet the expected growth in demand from electrifying transport and heat to 2050 while keeping electricity affordable. Despite this growth, the emissions from the generation of electricity can reduce considerably relative to today. Low and medium temperature heat in industry and buildings could be decarbonised by 2050 through a switch away from coal, diesel and gas to electricity and biomass. Our analysis indicates that these costs could range up to $250 per tCO2e reduced but would be less than this where heat pumps or biomass can be used. Sustainable biomass supply constrains the deployment of biofuels out to 2050, particularly if we seek to produce biofuels for international aviation and shipping.
Forestry •
•
With a sustained high rate of planting through to 2050, new native forests could provide a long-term carbon sink of more than 4 MtCO2 per year, helping to offset residual emissions from hard-to-abate sources such as agricultural nitrous oxide. Exotic plantation forestry continues to have a role to play in removing carbon dioxide, particularly until other more enduring sources of carbon removals, such as native forestry, can scale up. The deep reductions in gross emissions in our scenarios means the 2050 target could be met with a significantly smaller area of new exotic forestry than would occur under current policy settings.
General findings •
•
Inertia in the system, particularly due to stock turnover dynamics, limits the rate at which emissions can be reduced without escalating costs due to early scrappage of assets. For instance, only a small fraction of the vehicle fleet turns over each year, so even if all newly registered vehicles could become electric immediately the reduction in emissions would take time to accrue. Energy efficiency and behaviour changes play an important role in many areas. These can help to cut emissions sooner and in hard-to-abate sectors. They can also contribute cost reductions and co-benefits.
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8.3 Creating long-term scenarios The Intergovernmental Panel on Climate Change (IPCC) defines a scenario as “a plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (e.g. rates of technological change, prices) and relationships”.1 We have developed four scenarios which are defined in terms of the nature and scale of assumed changes in technology and behaviours. These scenarios serve to explore the uncertainty around how technologies and social factors may develop. They also explore how this may affect the potential for individual mitigation options to reduce emissions and the set of choices and actions required to meet the 2050 target. The four scenarios are described in Table 8.1 and illustrated in Figure 8.1. Table 8.1 Scenario descriptions Headwinds
Further Technology Change
Further Behaviour Change
Tailwinds
1
In this scenario there are higher barriers to uptake of both technology and behaviour changes across key measures. It assumes conservative improvements in technology relative to the Current Policy Reference case. It assumes a modest change from existing behaviour trends among people and businesses. In this scenario technology changes help to deliver greater emissions reductions. It makes assumptions about the technologies which are developed and deployed which could allow faster emissions reductions to occur. Relative to the Headwinds scenario, technologies could be available sooner, perform better or have lower costs which help drive greater adoption. In this scenario changes in people’s and businesses’ preferences encourage more behaviour changes away from high emitting activities and practices. There are conservative improvements in technology as per the Headwinds scenario, but barriers to adoption of existing technologies are lower as people and businesses make greater efforts to adopt them. This scenario combines further technology and further behaviour change assumptions to provide a potential upper bound for how far and how quickly emissions could be reduced based on current evidence and judgements.
(IPCC, 2018)
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Figure 8.1: Scenario structure
8.3.1 How our scenarios differ from the Current Policy Reference case As we outlined in Chapter 7: Where are we currently headed? current government policies and settings do not put Aotearoa on track to meet the targets in the Climate Change Response Act. This is not surprising, given these policies were largely set before the 2050 target in the Act came into force. Our analysis of current policies is set out in our Current Policy Reference case. It indicates that emissions of long-lived gases would not reach net zero by 2050 and biogenic methane emissions would only be reduced by around 12% below 2017 levels by 2050. Our scenarios have been developed to test how the targets in the Act could be met. Thus, they are a step change from the world represented by the Current Policy Reference case and represent a fundamentally different future.
8.3.2 Locking in net zero The scenarios have been developed to examine different ways in which the 2050 target and the 2030 biogenic methane target can be met. In doing so, the we have applied the principles laid out in the Commission’s Advice Report. Of importance is the long-term perspective to ensure that our path to meeting the 2050 target does not impose unfair burdens on future generations. A path relying excessively on carbon dioxide removals from forestry while delaying the actual decarbonisation of our energy system and economy would fail to ensure this. Some paths to 2050 could achieve net zero emissions of long-lived gases in a way which can be sustained indefinitely with minimal further effort required after 2050. If Aotearoa choses a path that ‘locked in net zero’ by 2050, this would require two key transformations: • •
decarbonising the sources of long-lived gas emissions as far as possible, and building a sustained carbon sink large enough to offset residual emissions without ongoing land use conversion. 6 1 February 2021 Draft Supporting Evidence for Consultation
The scenarios have been developed to reflect these objectives through a focus on reducing gross emissions and establishing new permanent native forests.
8.3.4 Scenario design and assumptions Within the bottom-up model, ENZ, many emissions reduction actions are imposed by assumption. We have arrived at assumptions for effectiveness and adoption in each scenario based on an assessment of available evidence and engagement with experts and stakeholders. These assumptions take into account likely costs and benefits of the reduction options and judgements about realistically achievable rates of change. These assumptions are set out in the appendix to this chapter.
Emissions values The model simulates changes in some sectors by reference to the abatement cost for particular actions, where actions are taken if their abatement cost is less than a specified emissions value which is imposed on the model. The emissions values, in dollars per tonne of emissions, are incorporated into decision-making alongside the other cost factors, such as fuel and capital costs. The main areas where the emissions values influence decisions in the model are electricity generation, fuel switching for process heat and the choice of vehicle technology (internal combustion engine or electric) for vehicles entering the fleet. The emissions values in the scenarios have been set at a level to achieve deep decarbonisation of these areas, particularly heat, by 2050. For agriculture, forestry and waste, explicit emissions values are not used. In the scenario design, the level of exotic afforestation is selected to ensure there is sufficient removal of carbon dioxide so that the net zero component of the 2050 target is met. The path of emissions values was constructed by choosing a value in 2050 ($250), discounting this back using a 3% discount rate to a value in 2030 (~$140) and drawing a straight line to this from estimated NZ ETS prices in 2020 ($30). This is similar to the UK Government’s approach to setting ‘carbon values’ for policy appraisal. The emissions values used in the scenarios should not be directly interpreted as emissions prices which would be observed in the NZ ETS. The actions selected under the scenarios could be encouraged through a mix of pricing and other policies, which could mean that the market price in the NZ ETS would not necessarily equal the emissions values needed to meet the 2050 target.
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Figure 8.2: Emissions values used in the bottom-up scenario modelling in ENZ. These apply to the energy and transport sectors only.
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Box 8.1: Role of forestry Even if the primary goal is to reduce gross emissions by 2050 as far as possible, it may not be feasible to completely eliminate all gross emissions. Therefore, some carbon dioxide removals would be required to reach and maintain net zero emissions. Relying on forests to reach net emissions targets poses challenges. Perhaps the greatest risk is that of it being a temporary measure, with forests being vulnerable to extreme events such as fires, floods or pest infestations and other issues, particularly as the physical impacts of climate change intensify and can cause a re-release of stored carbon. The impacts of afforestation vary widely depending on where it occurs and what type of forests are established. Positive impacts can include generating business opportunities and promoting biodiversity, while potential negative impacts of large-scale afforestation include disruption to local employment in rural communities. Further discussion of these impacts is contained in Chapter 13: Households and impacts and Chapter 14: Environment and ecology. We see a role for a diverse range of forests which provide emissions removals to help achieve emissions budgets and targets, with active management of risks and impacts. Native afforestation can help develop an enduring source of emissions removals which could offset remaining emissions beyond 2050. They can offer significant co-benefits such as for biodiversity, mahinga kai, water quality, culture, recreation and provide forest products such as honey and medicines. Permanent native forests can be established on marginal land and thereby provide these benefits without displacing other economic activity and with limited negative impacts on local communities. The slow growth of native forests means they store carbon at a relatively slow rate, but unlike production exotic forests they would continue to do so for at least 50 years, possibly even centuries. Exotic forests grow rapidly and can contribute significant emissions removals, including by 2030 and therefore for the first NDC. Rapid growth and sequestration mean they can serve as a flexibility mechanism to ensure emissions budgets and the 2050 target are met. Production forests have well established markets for their products, generate jobs and exports. They ensure Aotearoa has a sustainable supply of wood products, now and in the future. However, they contribute only mediumterm emissions removals under the current Government’s averaging accounting for forests. Policies have provided incentives for the planting of exotic forests and to a lesser extent for native forests. More recently the incentives are more focused on native afforestation and reversion. Achieving a desirable balance of forests would require early action to remove barriers to native afforestation on marginal land so there is time to build a large emissions sink by 2050. There are challenges to increasing the rates of planting of native forests. In our modelling we have assumed these challenges can be overcome through policy or other interventions. The planting trajectory for exotic forests captured in the Current Policy Reference case should be maintained until 2030 to help achieve emissions budgets and the first NDC. Consideration should be given to managing a declining reliance on emissions removals from exotic forests after 2030 as the native forests become established and deeper reductions in gross emissions are achieved. Forestry would also support other parts of a low emissions Aotearoa through the use of residues for biofuel and timber in the built environment. There is significant potential for diversifying forestry e.g. through better integration of trees on farms, developing native forestry, continuous cover forestry and shortening harvesting rotation lengths. These should be explored as ways of maximising the benefits of forests while minimising potential negative impacts of large-scale afforestation.
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8.4 Economy-wide emissions results 8.4.1 Long-lived gases Figure 8.3 shows the trajectories of net long-lived gas emissions in the four scenarios and the Current Policy Reference case. The year that net zero is first reached ranges from 2040 in Tailwinds to 2048 in Headwinds. Figure 8.4 shows a breakdown of the emissions path by sector for the Headwinds and Tailwinds scenarios. The trajectories show relatively little difference until the late 2020s but diverge significantly thereafter. This in part reflects time lags between when some actions are taken (for example, scaling up EV sales) and the resulting emissions reductions. The results also highlight that the assumed technology changes have a greater overall impact on the emissions trajectories than the assumed behaviour changes. Gross emissions of long-lived gases in 2050 range from 9.6 Mt CO2e in the Tailwinds scenario to 17.6 Mt CO2e in Headwinds, compared with 45.7 Mt CO2e in 2018 (Figure 8.5). The Further Technology Change and Tailwinds scenarios reach net zero emissions earlier and with less reliance on removals.
Figure 8.3: Net long-lived gas emissions from 2010-2050 Source: Commission analysis.
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Figure 8.4: Long-lived gas emissions by sector in the Headwinds and Tailwinds scenarios Source: Commission analysis.
Figure 8.5: Long-lived gas emissions by sector in 2050 compared with 2018 Source: Commission analysis.
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8.4.2 Biogenic methane The scenarios all meet the 2030 and 2050 targets for biogenic methane but display a wide range in their emissions paths (Figure 8.6). This reflects the different assumptions around the availability, effectiveness and uptake of technologies to reduce enteric methane emissions from ruminant livestock. The Headwinds and Further Behaviour Change scenarios indicate that it is possible to meet the less ambitious end of the 2050 target range with very limited contribution from technologies reducing enteric methane emissions and with less land use change to exotic forestry than in the Current Policy Reference case. The Further Technology Change scenario indicates that it could be possible to meet or exceed the more ambitious end of the 2050 target range should the optimistic assumptions on methanereducing technologies eventuate.
Figure 8.6: Biogenic methane emissions from 2010-2050 Source: Commission analysis.
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Figure 8.7: Biogenic methane emissions by sector in 2050 compared with 2018 Source: Commission analysis. Table 8.2: Summary emissions results for the scenarios Headwinds
Further Behaviour Change
Further Technology Change
Tailwinds
Year net zero reached
2048
2045
2040
Gross emissions in 2050 (MtCO2e)
17.6
15.0
11.8
9.6
Net emissions in 2050 (MtCO2e)
-1.9
-5.2
-6.6
-9.5
Cumulative gross emissions 2021-2050 (MtCO2e)
954
901
800
759
Cumulative net emissions 2021-2050 (MtCO2e)
558
488
408
351
Change in gross emissions 2018-2030
CO2
-19%
-21%
-29%
-30%
N2O
-7%
-11%
-10%
-13%
F-gases
-12%
-26%
-12%
-26%
CO2
-73%
-76%
-87%
-89%
N2O
-20%
-28%
-32%
-39%
F-gases
-30%
-83%
-30%
-83%
CO2
1.5
1.4
0.8
0.6
N2O
1.0
0.9
0.8
0.8
F-gases
0.2
0.1
0.2
0.1
Change in emissions 2017-2030
-10%
-14%
-21%
-24%
Change in emissions 2017-2050
-25%
-34%
-55%
-59%
3.9
3.5
2.4
2.1
Long-lived gases
Change in gross emissions 2018-2050 Per capita emissions in 2050 (tCO2e/person)
2040
Biogenic methane
Per capita emissions in 2050 (in tCO2e/person)
Source: Commission analysis.
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8.4.3 Emissions reductions by sector Figure 8.8 shows changes in emissions from 2018-2050 across sectors in the Headwinds and Tailwinds scenarios, alongside the Current Policy Reference case. Below we give a broad summary of the major drivers of change in each sector.
Figure 8.8: Change in emissions from 2018-2050 by sector for the Headwinds and Tailwinds scenarios. The top chart shows the percentage change and the bottom shows the absolute change. Source: Commission analysis.
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Transport Emissions reductions are slow to begin, especially in the Headwinds scenario, but gather pace as electric vehicle sales reach critical mass and then steadily take over the fleet. This leads to road travel, as well as rail and domestic shipping, being almost fully decarbonised by 2050. Reduced travel demand and shifting passenger and freight transport to lower emissions modes help to deliver earlier emissions cuts. Domestic aviation emissions do not reduce at all in the Headwinds scenario, while in the Tailwinds scenario these are heavily reduced by 2050 through electrification of shorter trips and use of low carbon liquid fuels.
Heat, Industry and Power The Current Policy Reference case sees significant reductions in electricity and manufacturing emissions by 2030 as a result of the construction of new renewable generation and the assumed closure of aluminium and methanol plants (Chapter 7: Where are we currently headed?). Further manufacturing emission reductions in the four scenarios come from fuel switching and additional efficiency in food processing and other medium temperature process heat uses. Tailwinds also sees the steel plant converting to emissions-free production by 2050. Further emissions reductions come from electrification of off-road vehicles and machinery, assumed to occur at a similar pace to electrification of heavy trucks and the use of liquid biofuels.
Buildings Tailwinds sees building heat almost fully decarbonised by 2050 while in Headwinds around half of current gas use remains.
Agriculture Changes in emissions follow a broadly similar pattern across the Headwinds and Tailwinds scenarios but with much deeper reductions in Tailwinds through its combination of high technology impact, improved farm management and some land use change from dairy into horticulture or other low emission uses. The widespread adoption of methane inhibitors and vaccines in the Tailwinds scenario has a particularly large impact.
Waste The Headwinds scenario sees very modest reductions in methane emissions from waste, underdelivering relative to the 2030 and 2050 biogenic methane targets. By contrast the Tailwinds scenario, with deep reductions in waste to landfill along with comprehensive landfill gas capture, would significantly outperform the targets. Nitrous oxide emissions increase slightly compared with the Current Policy Reference due to increased composting.
8.4.4 Looking beyond 2050 The scenarios indicate that it is possible to reach a point where net zero could be sustained with little additional effort beyond 2050. Figure 8.9 demonstrates this with the Tailwinds scenario, which would come closest to achieving this goal. By 2050, the transport, energy and industry sectors would be largely decarbonised, with carbon dioxide emissions reduced almost 90% from 2018. Meanwhile, 0.7 million hectares of new native forest would lead to a long-term carbon sink of over 4 MtCO2 per year, similar in size to the residual nitrous oxide emissions.
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After 2050, emissions would still bounce back above net zero to around 1 MtCO2e in 2075 without new actions to reduce or further afforestation (solid black line). 2 Further options exist to reduce the residual emissions after 2050 (such as hydrogen for high temperature heat) and to pursue other sources of carbon dioxide removals, but these have not been modelled here. Alternatively, continued planting of 5,000 hectares per year of exotic forest would be sufficient on its own to sustain net negative emissions indefinitely (dotted black line). F
Figure 8.9: Long-lived gas emissions to 2075 in the Tailwinds scenario, with and without further afforestation after 2050 Source: Commission analysis. The Headwinds scenario would leave more work to be done after 2050, due to its slower reduction in gross emissions and slower rate of native afforestation. By implementing additional mitigations which occur in Tailwinds (such as biofuels and zero emissions steel production), Headwinds could arrive at a similar point sometime after 2050. Alternatively, net zero could be sustained in this scenario without additional mitigation actions but with higher continued afforestation of around 15,000 hectares of exotic forest per year.
2
Carbon dioxide emissions shrink slightly further after 2050 in the model, mainly from continued electrification of off-road vehicles with stock turnover.
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Box 8.2: Sustaining net zero Chapter 3 of the advice report: The path to 2035 sets out our approach to meeting the 2050 target, guided by the considerations in the Climate Change Response Act. Our approach has focused on reducing gross long-lived gas emissions and seeking to ‘lock in net zero’ by 2050. We have tested to understand how different our approach is to the approach used previously that focusses on only on net emissions. We found that increasing the NZ ETS price from $35 under the Current Policy Reference case to $50 would be sufficient to meet the 2050 net zero target for long-lived gases (Figure 8.10).The higher NZ ETS emissions price would encourage only a small reduction in gross emissions but would encourage much higher planting of exotic forestry (an increase of 8.5 Mt from the Current Policy Reference case). Significant further afforestation and land-use change would be required every year after 2050 to maintain net zero long-lived gas emissions. Figure 8.10 shows that if there were no further afforestation or policy changes net emissions would bounce back above zero by 2067 as the temporary exotic forest carbon sink declines. This would be despite gross emissions reducing significantly after 2050 due to continued turnover of the road vehicle fleet to electric vehicles and reductions in gas use as supply runs out.
Figure 8.10: Long-lived gas emissions in the Modified Current Policy scenario, with a $50 emissions value applied to forestry, energy and transport Source: Commission analysis.
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8.5 Sector assumptions, results and insights 8.5.1 Total primary energy use The scenarios show that for Aotearoa to achieve a low emission future a transition is required in primary energy supply away from fossil fuels and towards renewable sources. Electricity generated from wind, solar and geothermal, along with increasing use of biomass as a combustible fuel displace much of the current energy supply from oil, gas and coal in all four scenarios. This transition, shown in Figure 8.11 for the Further Behaviour scenario, takes Aotearoa to a position where total primary energy source is between 80-90% from renewable sources by 2050.
Figure 8.11: Total primary energy for the further behaviour scenario Source: Commission analysis. Improvements in energy efficiency mean that the total energy required in 2050 is around 25% less than 2018. This reduction is largely due to the replacement of internal combustion engines with electric motors. Table 8.3: Renewable percentage of total primary energy
Current Policy Reference Government projections Further behaviour Further technology Tailwinds
2018 40% 40% 40% 40% 40%
2035 49% 54% 57% 64% 65%
2050 61% 80% 84% 85% 89%
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The percentage of renewable energy can be calculated either on the supply side, as a share of total primary supply, or on the consumption side as a share of total energy consumed. This can make a substantial difference to the figure in a given year. It is therefore an important metric to consider, for example, in setting targets. Renewable energy as a share of total primary energy supply is the measure in the Energy in New Zealand publication and currently around 40%. One disadvantage of this measure is that geothermal energy used for electricity generation distorts the renewable totals as it has a very low conversion efficiency to electricity. The renewable energy share in total final consumption is the percentage of final consumption of energy that is derived from renewable resources. Some international targets on renewables, such as those in the EU Directive, in the UN Sustainable Development Goals, have been set by looking at final consumption shares.
8.5.2 Transport Transport emissions fall dramatically in the later years in all our scenarios as is shown in Figure 8.12. In the Tailwinds and Further Technology scenarios emissions fall to near zero by 2050, while Headwinds and Further Behaviour Change have approximately 2 MtCO2 remaining.
Figure 8.12: Total Transport Emissions by Scenario Source: Commission analysis. The reduction in transport emissions primarily comes from the electrification of road transport, which currently makes up the largest share of transport emissions. There is some limited electrification of air and rail as well as the use of liquid biofuels to target transport types which are difficult to electrify. Figure 8.13 below shows the total domestic transport emissions in 2050 under four scenarios compared to 2018.
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The take up of electric vehicles drives the rapid decline of transport emissions across all scenarios. The take up of electric vehicles is considerably faster in the Headwinds scenario compared to the Current Policy Reference case, while uptake in the Tailwinds scenario is faster still.
Figure 8.13: Transport emissions in 2050 compared to 2018 Source: Commission analysis.
Light vehicles (cars, SUVs, vans and utes) Uptake of electric vehicles In the modelled scenarios, newly registered light vehicles move to 100% electric well before 2050. The Tailwinds and Further Technology scenarios reach this point by around 2030, whereas in the Headwinds and Further Behaviour it does not occur until around 2040. Here the term ‘newly registered’ includes both vehicles imported new and vehicles imported used. ..
The top chart in Figure 8.14 shows the percentage of newly registered light vehicles that are electric for the scenarios and the Current Policy Reference case. Because vehicles have a long operational life and the fleet is slow to turn over, the proportion of electric vehicles in the total vehicle fleet lags behind these uptakes. The bottom chart in Figure 8.14 shows the total percentage of light vehicles in the fleet that are electric by scenario. In none of the scenarios is a 100% electric fleet achieved by 2050, although the Tailwinds scenario gets very close.
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Figure 8.14: Percentage of newly registered light passenger vehicles that are electric by scenario (top) and percentage of total light passenger vehicle fleet that are electric (bottom) Source: Commission analysis.
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Table 8.4: Percentage of newly registered light passenger vehicles that are electric by scenario
Current Policy Reference Headwinds and Further Behaviour Tailwinds and Further Technology
2018 2% 2% 2%
2030 17% 26% 100%
2040 72% 100% 100%
2050 99% 100% 100%
Table 8.5: Percentage of light passenger vehicles in the fleet that are electric by scenario
Current Policy Reference Headwinds Tailwinds
2018 0% 0% 0%
2030 5% 7% 22%
2040 27% 41% 65%
2050 69% 81% 95%
Vehicle efficiency Figure 8.15 shows the assumed changes in emissions per kilometre travelled by internal combustion vehicles for the two classes of light vehicles: light passenger vehicles (cars/SUVs) and light commercial vehicles (vans/utes). The assumed emissions per vehicle-kilometre are the same in all scenarios with a modest improvement over time. The assumed efficiency improvements account for the increased adoption of conventional hybrid vehicles. Although conventional hybrid vehicles are at least partly powered by electric motors, they are still internal combustion engine vehicles as their batteries cannot be charged from the grid.
Figure 8.15: Emissions per vehicle kilometre travelled by internal combustion vehicles Source: Commission analysis. 22 1 February 2021 Draft Supporting Evidence for Consultation
Reducing the vehicle kilometres travelled by light vehicles Figure 8.16 shows the vehicle-kilometres travelled by light vehicles in the scenarios compared with the Current Policy Reference case. These vehicle kilometres include commercial as well as household travel. The figure again shows the impact that behavioural changes, including reduced need for travel and change in type of transport, can have on vehicle kilometres.
Figure 8.16: Vehicle-Kilometres travelled by light vehicles Source: Commission analysis. In our Tailwinds scenario we estimate that 30% of labour force can work from home and that by 2030, this 30% works from home an average of one day a week more than currently. This reduces travel to work by 6% compared to the Current Policy Reference case; by 2040, this becomes 12%. We also assume that the average trip is shortened due to compact urban design. Further reductions in light vehicle kilometres travelled come from increased walking, cycling and public transport use. For example: •
By 2030, cycling is up 100% compared to the Current Policy Reference case. By 2040 cycling is up 400%.
•
By 2030, public transport is up 50% compared to the Current Policy Reference case. By 2040 public transport is up 125%, with proportionate reductions in vehicle driver and vehicle passenger travel.
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Other Road Transport Trucks and buses are also increasingly electrified in these scenarios. However, because of suitability and costs the uptake is different for these vehicle types. This variation is shown in comparison to light vehicles in Figure 8.17 for the Tailwinds and Further Technology scenarios.
Figure 8.17: Percentage of newly registered trucks and buses that are electric for the Tailwinds and Further Technology scenario Source: Commission analysis. Trucks are slower to convert to electric propulsion than light vehicles due to their higher power requirements. Medium trucks are defined here to have a fully loaded weight less than 30 tonnes. Heavy trucks are the most challenging vehicles to electrify as they may be approaching legal size and weight limits for trucks, so batteries could reduce the payload the truck can carry. Heavy trucks are defined here to have a fully loaded weight greater than 30 tonnes. Table 8.6: Year by which 100% of newly registered vehicles are electric for all road vehicle classes
Light passenger vehicles Medium trucks Heavy trucks Buses
Headwinds & Further Behaviour 2041 2047 after 2050 2040
Tailwinds & Further Technology 2032 2037 2048 2030
Buses present an attractive electrification opportunity. This is especially true of public transport buses because they generally do not travel far in a day and because electric buses can be highly efficient in stop-and-go traffic. The reason is that they can use otherwise wasted energy from
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braking to recharge their batteries. Electric buses also have the valuable urban co-benefits of being quiet and free of exhaust fumes. Emissions from trucking may also be reduced by diverting freight to rail and coastal shipping, which have lower emissions per tonne-kilometre. Our Headwinds and Further Technology scenarios assume a 20% increase in rail and coastal shipping freight tonne-kilometres by 2042 compared to the Current Policy Reference case due to diversion of freight from trucks. This diversion starts with an 8% increase in rail and coastal shipping freight by 2027. Our Tailwinds and Further Behaviour Change scenarios assume a 67% increase in rail and coastal shipping tonne-kilometres by 2042 compared to the Current Policy Reference case due to diversion of freight from trucks. The diversion starts with a 14.5% increase by 2027.
Aviation Options to limit emissions from domestic aviation beyond what is assumed in the Current Policy Reference case are currently limited. Electrification of aircraft is challenging due to the weight of the batteries. There are currently no electric aircraft in commercial operation anywhere in the world, although at least two manufacturers are currently planning to offer small electric aircraft suitable for short-distance commercial flights. Electric aviation is assumed to become viable only in the Tailwinds and Further Technology scenarios. In these scenarios, the percentage of domestic air passenger-kilometres in electric aircraft rises from zero in 2030 to 10% by 2040 and 50% by 2050. There is also an assumed uptake of low carbon liquid fuels in the Tailwinds and Further Technology scenarios for all types of transport, as well as for off-road vehicles and equipment. Our modelling assumes these low carbon liquid fuels to be biofuels, however, they could also be synthetic e-fuels made from green hydrogen. Low carbon liquid fuel production starts at a small amount in 2025 and grows steadily to 9.5 PJs, or about 270 million litres, by 2035. These low carbon liquid fuels could be blended into all liquid fuels. In 2035, this would be a relatively small share of liquid fuels, about 6%. However, after 2035, increasing electrification causes liquid fuel demand to drop off rapidly. By 2050, these 270 million litres enable a reduction in domestic liquid fossil fuel use and associated emissions, of about 43%. Competitive ground transport alternatives are limited for most domestic air travel and likely to remain so for the foreseeable future. There is a potential role for communications technology to substitute for some business travel. We have not, however, assumed any demand shifts in our domestic aviation scenarios. The impacts of demand shifts on international aviation could be more significant given the cost and environmental impacts of long-distance air travel to and from Aotearoa. Also, improving communications technology, as demonstrated in the Covid-19 experience, may permanently reduce the demand for international business travel. In the Headwinds and Further Technology Change scenarios, we assume people become more conscious of the environmental impacts of international aviation and choose to limit their trips. By 2030, we assume that international aviation is down 10% compared to the Current Policy Reference case and grows at half the Current Policy Reference case rate thereafter. These impacts are even stronger in the Tailwinds and Further Behaviour Change Scenarios, which assume that by 2030, international aviation is down 25% compared to the Current Policy Reference case and ceases to grow thereafter. Recall, however, that international aviation emissions are not included in the Commission’s initial emission budgets. 25 1 February 2021 Draft Supporting Evidence for Consultation
Domestic Coastal Shipping and Cook Strait Ferries All four alternative scenarios assume existing ships are replaced by plug-in hybrids as they reach normal end-of-life. The batteries on these ships could be upgraded in future years as battery technology continues to improve. The upgraded batteries would allow the ships to reduce the fraction of their travel that is fossil fuel powered. In the Headwinds and Further Behaviour Change scenarios, this results in 1% of coastal shipping and Cook Strait ferries tonne-kilometres being handled by electric propulsion in 2026, with the share rising by 1% each year to 25% by 2050. In the Tailwinds and Further Technology Change scenarios, 4% of coastal shipping and Cook Strait ferries tonne-kilometres are handled by electric propulsion in 2026, with the share rising by 4% each year to 100% by 2050. On the demand side, coastal shipping benefits from a diversion of freight from trucks, discussed above under ‘Trucks and freight transport’.
Rail Emissions from rail freight could be reduced through electrifying additional lines, although this would be economic only on heavily used lines. The North Island Main Trunk between Auckland and Wellington is already mostly electrified, with two remaining short gaps between the end of the Auckland commuter zone and Hamilton and the end of the Wellington commuter zone and Palmerston North. The Current Policy Reference case assumes electric operations are retained between Hamilton and Palmerston North, as this is an existing policy. Rail passenger operations, which serve mainly the Auckland and Wellington metro areas, are also already mostly electrified. The Headwinds and Further Behaviour Change scenarios assume the gaps in the Auckland to Wellington electrification are filled, as well as electrification of the short and heavily used connecting line from Hamilton to Tauranga, by 2031. Complete electric operations would then be possible between five major cities on the North Island. The Tailwinds and Further Technology Change scenarios move the completion date for this project up to 2026. There is also a long-term opportunity to use battery-powered locomotives on non-electrified rail lines. This technology is, however, still in the early stages of development and we have not assumed its use in our scenarios. On the demand side, rail freight benefits from a diversion of freight from trucks, discussed above under ‘Trucks and freight transport’.
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Box 17.4: Hydrogen for transport Hydrogen has not been modelled as an emissions reduction option in the scenarios presented here. We have modelled the uptake of battery electric vehicles. If we had also modelled hydrogen vehicles, the model would have always picked battery electric vehicles over hydrogen vehicles. This is because, due to the conversion losses involved in producing hydrogen from renewable electricity and then converting the hydrogen back to electricity in the vehicle, it takes almost three times as much renewable electricity to power a hydrogen vehicle compared to a battery electric vehicle. There are, however, segments of the transport sector which are difficult to power with battery electric vehicles. Aircraft are the most obvious example, as today’s batteries are too heavy to power long-distance aircraft. Battery electric heavy trucks are another, as they may have to travel long-distances pulling heavy loads without stopping to recharge. The size and weight of the batteries could also reduce the carrying capacity of the truck. Off-road vehicles and equipment may also be challenging to electrify, especially the types that work long hours in remote locations. In these three segments, as well as for long-distance ships and railway locomotives, hydrogen may have a role to play. There are at least three potential future low carbon options for these hard to electrify segments of the transport sector. One is low carbon liquid fuels, either biofuels or liquid electrofuels, which could be used in conventional internal combustion engine vehicles. Electrofuels, or e-fuels, are liquid fuels that could be made from green hydrogen and captured carbon dioxide. Another option is improved battery technology, which might offer significantly more energy storage per unit of weight. The third is direct use of hydrogen. Since each of these low carbon technologies is evolving rapidly, it is not possible to say which could emerge as the winner. We have specified a modest uptake of low carbon liquid fuels for all travel types in our Further Technology Change and Tailwinds scenarios, but none in the Headwinds or Further Behaviour Change scenarios. This low carbon liquid fuel could equally well be interpreted as hydrogen. Due to their high costs, the market is unlikely to implement any of these low carbon technologies in the first three budget periods without supporting policies. However, it is important that Aotearoa gains experience with emerging low carbon technologies to spur market development, innovation and learnings which can be drawn-upon in future budgets.
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8.4.3 Buildings Emissions from the combustion of fossil fuels for heating and cooking in buildings decrease significantly in all scenarios relative to 2018 and to the Current Policy Reference case. This is partly a result of improvements in energy efficiency due to thermal performance improvements and operational changes. In addition to this, these scenarios explore fuel switching away from the use of fossil fuels for heating systems. Efficiency improvements in existing and new buildings are varied across the scenarios. The Further Technology and Tailwinds scenario achieve the greatest reduction in the operational energy intensity of buildings by improved new build standards and from retrofitting existing buildings. Figure 8.18 shows the historical share of building energy supply and a future transition from natural gas to electricity for the Tailwinds scenario. The plot also shows that total energy demand can remain constant despite an increasing population due to improvements in energy efficiency.
Figure 8.18: Historical and projected supply of energy in buildings for the Tailwinds scenario. The demand avoided wedge shows the energy avoided through improvements in efficiency relative to the Current Reference Policy case efficiency improvements. Source: Commission analysis. In all scenarios the adoption of natural gas and bottled LPG in new builds stops before 2040 and the Further Behaviour and Tailwinds scenario achieve the largest emissions reduction by transitioning the use of gas in all buildings to electricity or biomass by 2050. The use of coal for heating is
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eliminated in all scenarios by 2030. The reduction in emissions for the Tailwinds scenario is shown in Figure 8.19 below.
Figure 8.19: Historical and projected emissions from fossil fuel combustion in buildings in the Tailwinds scenario Source: Commission analysis. Heating systems in buildings can have a long operational life and the phased reduction of gas and LPG systems are assumed to be compatible with normal capital replacement cycles. These scenarios require the replacement of end of life gas heating systems with electric heat pumps and hot water cylinders. Figure 8.20 shows the residual emissions from fossil fuel combustion in buildings at 2050. In the Further Behaviour and Tailwinds scenarios which have eliminated gas from heating in buildings, residual emissions in 2050 are primarily from the combustion of biomass in home fireplace3 and liquid fuel use for commerical motors.
3
Although it is generally assumed that combustion of biomass has zero net emissions, there are methane emissions associated with the incomplete combustion of biomass in home fireplaces.
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Figure 8.20: Fossil fuel combustion emissions in buildings in 2050 across the modelled scenarios Source: Commission analysis.
8.4.4 Heat, Industry and Power Electricity demand, generation and emissions Electricity is increasingly relied upon as a carrier of energy in these scenarios. Despite increasing demand across all scenarios, emissions from the generation of electricity are projected to decrease from 4.2 MtCO2e in 2018 to 1.5 - 1.9MtCO2e by 2035 and 0.8 - 1.4MtCO2e by 2050 as is shown in Figure 8.21 below.
Figure 8.21: Electricity generation emissions in 2050 compared with 2018
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Source: Commission analysis. The scenarios show increasing electricity demand due to the electrification of transport, off-road vehicles, industrial and building heating. These electrification measures are all necessary to meet the 2050 targets. Annual demand for electricity would increase from 40 GWh in 2018, to 43–47 GWh by 2035 and to around 63 GWh by 2050. This demand growth is shown below.
Figure 8.22: Electricity demand growth in the Further Behaviour scenario Source: Commission analysis.
In these scenarios, the maximum rate at which electricity demand increases is 1.6 TWh per year. The generation capacity required to supply this increment is equivalent to an additional three wind farms of the scale of the West Wind project on Wellington’s West Coast. Most of the demand growth in the scenarios is met by new wind generation, the installed base increases by 1500% to 6–7 GW. In addition to this, by 2050 new geothermal generation contributes 4 - 5 TWh per annum of generation and utility solar, mostly built beyond 2040, contributes 6 - 11 TWh per annum. The change in the electricity generation by generation type is shown in Figure 8.23 below.
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Figure 8.23: Electricity generation growth in the Further Behaviour scenario Source: Commission analysis. Electrification also requires considerable expansion and increases in capacity of electricity transmission and distribution infrastructure, connections to new generation sites and remote areas. As was the case in the Current Policy Reference projections, coal and gas play a reducing share as fuels for electricity generation. However, in these scenarios thermal generation plays an even smaller role and contribute fewer emissions due to the higher emission price assumed to be faced by electricity generators. Our scenarios suggest that fossil fuels could stop being used as a fuel for baseload electricity generation and instead be used exclusively for flexible generation. Flexible generation includes, providing peaking capacity during cool winter nights and during dry year periods when the hydro lakes are low. Electricity generation is currently the second largest consumer of gas in Aotearoa. Although the share of gas generation decreases in all four modelled scenarios, gas generation remains a critical part of the electricity system for meeting peak requirements and dry year needs. Most importantly, in these scenarios, gas provides cover for dry year conditions which reduce the energy resource for hydro generation. The use of gas for electricity generation is projected in the scenarios to fall and during the early 2040s the total emissions from gas generation would fall below those from geothermal generation. Emissions from geothermal generation vary widely from field to field, with the worst emitting fields being comparable to gas generation. While it may be possible to reduce emissions by capturing and reinjecting them, it is anticipated that the worst emitting geothermal plants would close before 2030 as they may not be economic to operate at the emission pricing faced during this period. In the Further Technology scenario and the Tailwinds scenario carbon capture and storage are applied to geothermal fields. This achieves a 35% reduction in the generation emissions and is the main reason for the variation in emissions shown between the scenarios as shown in Figure 8.21. 32 1 February 2021 Draft Supporting Evidence for Consultation
Box 8.6: What would a pumped storage system mean for the electricity sector? The Commission considered the emissions reduction potential of a large pumped storage scheme, such as that under investigation as part of the NZ Battery project, led by the Ministry of Business, Innovation and Employment (MBIE). The Interim Climate Change Committee (ICCC) investigated a 100% renewables target in 2019 and recommended that decarbonising process heat and transport offered greater potential. The ‘dry year problem’ happens when hydro-power catchments do not receive enough rain or snowmelt and the level of the storage lakes gets low. When this occurs some form of back-up is needed; this is currently provided by fossil fuel generation. As set out by MBIE, the purpose of the NZ Battery is to evaluate the viability of pumped hydro. The project will consider this solution against alternative methods to resolve New Zealand’s storage problem in order to achieve 100% renewable electricity and help to decarbonise the wider energy system. Although all of our ENZ scenarios achieve significant reductions in emissions from electricity generation, none of them achieve a 100% renewable, or emission-free electricity sector. The scenarios show that it is possible to meet the 2050 emissions target without achieving 100% renewable electricity. We undertook further modelling runs to examine the emissions savings a pumped hydro scheme operating at Lake Onslow could provide. This modelling is based on the demand profiles from the ENZ scenarios and performed using Energy Link’s E-market and I-gen models. In this standalone modelling piece, a pumped storage scheme with 5TWh of storage is deployed in the model in 2032 and is filled and fully operational by 2035. The scheme is assumed to operate in the market in a similar way to existing hydrogeneration. Once operational the storage scheme dramatically reduces the impact of varying hydro flows on the electricity sector and this reduces the dependence on gas. Figure 8.24 shows the difference in thermal generation required in a system with and without this pumped storage scheme. The base year chosen is the “average” hydro over the last 87 years on record. The result shows that once operational the scheme removes around 0.6TWh of thermal generation per year. This is equivalent to 0.3Mt CO2 of emissions per year.
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Figure 8.24: Total annual thermal generation in electricity system with and without a pumped storage scheme. This is for a demand profile representative of the Headwinds scenario; the totals are averages across a full record of hydrological years and do not include cogeneration. The Step reduction in generation from 2036 – 2037 is caused by the forced closure of the e3p gas generation plant. Source: Commission analysis. Gas could remain a component of the electricity system in Aotearoa. Electricity supply security challenges may occur if the size of the gas market was to contract as is shown in these scenarios. The occasional use of gas for electricity generation may not be supported in the same manner as it is currently which could lead to electricity price increases and supply interruptions which could hinder decarbonisation efforts. This result is not an endorsement of such a scheme as there remains considerable uncertainty around the cost and practicality. The NZ Battery project which is currently being undertaken by the Ministry of Business, Innovation and Employment (MBIE) will make recommendations as to whether this is a solution that Aotearoa should pursue.
Low and medium temperature process heat In all scenarios the food processing sector is expected to almost completely decarbonise by achieving widespread energy efficiency improvements and switching heating from coal, gas and diesel to biomass and electricity. This is achieved without significant changes to the total amount of food produced relative to today. The wood, pulp and paper processing sectors also achieve significant reductions in emissions across all scenarios. In these processing applications, the use of gas and coal for low and medium temperature applications is displaced with woody biomass.
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In all scenarios, total food processing energy use peaks immediately and the overall energy intensity begins to reduce. The rate of improvement in energy efficiency is varied across the scenarios and by 2050 the sector achieves between 20% - 40% reduction in energy intensity relative to the starting year. Simultaneous to these efficiency improvements, boiler heating begins to switch away from coal. In regions where readily available, woody biomass is used by blending with coal in existing boilers and then being used in replacement boilers which are optimised for biomass combustion. The modelled biomass resource is forestry residue and what are currently exported pulp logs.4 No domestic uses of timber are diverted for this energy resource.
Figure 8.25: Food processing fuel use in the Further Technology scenario Source: Commission analysis. Electrification of process heat also occurs in these scenarios, but more gradually than switching to biomass. It is assumed that heat pumps, which offer highly efficient heating, are used for low temperature heating applications in food processing but that their uptake is gradual as they are difficult to integrate in existing factories. Electrode boilers also play a considerable role but mostly in regions where the supply of biomass is limited. For example, in Canterbury, a region which has limited forestry resource, 50% of coal heating has been converted to electrode boilers by 2035 in the Further Technology scenario. The scenarios demonstrate a balance between the use of bioenergy and electricity for process heat in these projected futures. There is uncertainty around both the availability of biomass resource and the extent to which biomass can be practically and economically used. The scenarios explore this uncertainty by varying the regional availability of the biomass resource. The Headwinds and Further Behaviour scenarios have 50% of the biomass resource that is available in the Tailwinds and Further Technology scenarios. Because biomass is generally a lower cost option than electrification,
4
Pulp logs are low quality logs used for making paper and other pulp products.
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decarbonisation of the sector is slower in the scenarios where the biomass supply is restricted. This is shown in Figure 8.26.
Figure 8.26: Food processing emissions across the modelled scenarios. Source: Commission analysis. In these scenarios, improvements in energy efficiency and fuel switching to biomass or electricity combine to achieve a reduction in the use of coal of up to about 1.5PJ per year across the food processing sector. This is a rapid energy transition and is equivalent to the conversion of one of the largest dairy processing plants or a number of smaller sites per year5 and at this rate coal is eliminated from food processing by 2040. In total the use of 20PJ per year of coal is displaced – this is a vast amount of energy and this future would require significant electricity infrastructure upgrades, the construction of new electricity generation, factory conversions and the establishment of a significant biomass supply chain. The food processing sector does not begin fuel switching away from natural gas until after 2030 in these scenarios, although the use of gas has been reduced prior to this from efficiency improvements. Starting in the 2030s, the sector begins to replace the use of gas with biomass and electricity and has completely converted by 2050. There are technologies which are not reflected in our modelled scenarios which could significantly alter the ease and cost at which this sector can decarbonise. High temperature heat pumps are an emerging technology which could potentially produce much of the steam required for food processing factories. The high coefficient of performance of these heat pumps would reduce the effective electricity cost per amount of heat which would significantly reduce the cost of electrification as a low emission heating option.
5
Fonterra converted the 40MW boiler at their Te Awamutu plant in 2020 to run off wood pellets. The coal that this displaced is equivalent to around 1PJ.
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Fossil fuel production The scenarios show emissions from the production of fossil fuels are projected to decrease from 2MtCO2 today to less than 1MtCO2 by mid-century. We have assumed a proportional reduction in the emissions from fossil fuel production (vented and flared carbon dioxide and fugitive methane emissions) as overall demand for natural gas reduces. Domestic refining of crude oil to produce petroleum products for transportation is projected to decrease in the scenarios as transport electrifies. However, this only begins to occur beyond 2035 when the demand for fuel drops below the capacity of the Marsden Point refinery.
Heavy industrial processes Achieving emissions reductions in some industries will be a considerable challenge for global decarbonisation efforts as reduction requires radical conversion of industrial process and use of alternative feedstocks. These scenarios reflect these challenges by having generally conservative assumptions around the potential to reduce emissions for certain industrial process. In the further technology and tailwinds scenario domestic steel making converts to a zero emission process in 2040. In the model the process converts to green hydrogen-based steel making, but this could be one of a number of zero emission steel processes which are on the horizon. We assume no such conversion for cement and lime production as we judge alternative technologies as less ready. The 2050 emissions for these heavy industrial sectors are shown in Figure 8.27 below.
Figure 8.27: Emissions in 2050 from heavy industries relative to 2018 and the Current Policy Reference case Source: Commission analysis.
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Although the model demonstrates the potential for radical technological transformation by decarbonising steel production, it is not realistic to assume that domestic industries would achieve this type of conversion in isolation. Achieving decarbonisation in these difficult to abate industries may require a coordinated long-term partnership between the industry, government and researchers, along with the development of new supporting industries and infrastructure.
Box 8.7: Hydrogen use in industry The use of hydrogen as an emissions reduction opportunity for the iron and steel manufacturing sector has been modelled in the Tailwinds and Further Technology scenarios. Emissions from iron and steel manufacturing stem from fossil fuel combustion to generate high temperature process heat and from industrial process reactions such as the reduction of iron sand using coal. Over 80% of emissions from the sector are process emissions. The scenarios are ambitious and assume green hydrogen-based steel making achieves full decarbonisation of the sector by 2040, reducing the emissions of Aotearoa by nearly 2 MtCO2. This application of hydrogen has been explicitly modelled as it offers significant emissions reduction and it has been judged likely to be technically achievable globally before 2050. There are other niche industrial opportunities for hydrogen which have not been modelled but would likely be required to achieve deep decarbonisation in other sectors. For example, urea production can be decarbonised by utilising green or blue hydrogen as a chemical feedstock. Industrial applications which require high temperature heat may also convert to hydrogen if the use of natural gas and coal is to cease. It is estimated that the additional opportunity for reducing emissions from the use of hydrogen in Aotearoa is around 1 MtCO2 per year.
Off-road vehicles and machinery The use of petrol and diesel in off-road vehicles and machinery reduces considerably in all modelled scenarios. This use of motive power occurs primarily in the mining, construction, agriculture, forestry and fishing sectors. There are a diverse set of fuel uses in these sectors. However, we assume that generally these motor applications would electrify in the long term and can use low carbon liquid fuels in the interim. For these scenarios it is assumed that motive power in these applications electrifies at the same rate as heavy trucks. Heavy trucks are assumed to be a slow type of transport to electrify due to their weight and the long distances they travel. This is therefore a conservative assumption for off-road vehicles and machinery but is a practical proxy given the diverse energy uses in this these applications. Although some applications could electrify faster than heavy trucks, the remoteness or activities and particular requirements would likely make many difficult to electrify. Figure 8.28 shows the emissions in 2050 from off-road vehicles and machinery across the scenarios compared with the Current Policy Reference case. A 3% per year increase in energy for mining and construction activities is assumed in these projections. The electrification of these applications achieves an approximately 50% reduction in emissions by 2050. The Further Technology and Tailwinds scenarios deploy biofuels blended with conventional diesel to achieve greater emissions reductions.
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Figure 8.28: Emissions from off-road vehicles and machinery in 2050 across the scenarios compared with the Current Policy Reference case and 2018 emissions Source: Commission analysis.
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Box 8.8: The future of gas The use of gas decreases considerably under all modelled scenarios as is shown in Figure 8.29. As was the case for the Current Policy Reference projection, the large portion of gas currently used for methanol production is assumed to stop by 2029. By this time the requirement for gas for electricity generation has also reduced due to the displacement of baseload generation with new renewable projects. However, gas generation remains a necessity for covering dry year conditions and peaking requirements. Other industrial uses of gas and gas use in buildings also reduces in all scenarios. This is due to electrification of heating and conversion to biomass with total conversion of low to medium temperature process heat by 2050.
Figure 8.29: Gas demand in 2050 across the scenarios and Current Policy Reference case relative to 2018 totals Source: Commission analysis.
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Figure 8.30: Projected gas demand in in the Further Technology scenario Source: Commission analysis. These are the modelled scenarios and there are layers of uncertainties around the future of gas in Aotearoa. The Government restrictions on offshore oil and gas exploration6 announced in 2018 may limit future production pending a significant new find. Although a general shrinking trend in production and consumption towards 2050 has been projected, there are some market specifics that make forecasting emissions from gas challenging, especially with regard to timing. We have considered the role of players within the market, the uses of gas and the options for lower emissions alternatives.
The importance of Methanex Methanex produce methanol from natural gas and export the majority overseas. They are a significant export earner and employer in Taranaki. They also underpin the domestic gas market by purchasing most of the domestic supply. In 2019 Methanex consumed 40% of domestic gas. This large demand provides sufficient incentive for gas producers to continue upstream investment to secure supply. This is important to sustaining the domestic market longer-term. Methanex may no longer operate in Aotearoa if it cannot access sufficient gas, or gas at a price at which they can profitably produce methanol. Methanex provide critical flexibility as a gas user and can reduce parts of their production at times of scarcity. The flexibility they offer in varying their requirements by altering their production levels enables security of supply for other users – for example, Methanex can on sell their gas to electricity generators to provide cover for dry year relief. Although they perform this arbitraging role, Methanex would prefer to focus on their core business of methanol production where it provides a higher profit margin. Methanex currently hold gas supply contracts extending to 2029.7 It is not clear whether contracts would be extended. This depends on several factors including global methanol prices, plant refurbishment requirements and gas supply in Aotearoa.
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Under our modelling, it is assumed that Methanex would cease domestic production in 2029 when the current gas contract expires. We have consulted extensively with industry players in the gas market about the size and cost of future gas supplies. We note the uncertainty around the assumption and welcome feedback. Because of the anchor role and flexibility that Methanex play in the domestic gas industry, if they were to stop production in Aotearoa then this could have significant impacts for other gas users.
Natural gas supply in Aotearoa The natural gas used in Aotearoa is supplied from onshore and offshore fields in the Taranaki region and the supply industry is of significant scale. Existing offshore permits for oil and gas exploration issued prior to 2018 may result in substantial new production. There are potential new onshore permits, for example, Block Offer 2020 is ongoing. We have set aside this possibility as an uncertainty that would require further analysis. We welcome feedback on this. The offshore Maui and Pohokura fields have been the largest producers historically. However, their output has reduced as they approach the end of their operational life. Although the total amount of natural gas in permitted fields is reducing, there are still reserves that could be produced through continued operation. This production requires continued investment. Figure 8.31 below shows a modelled projection of future gas supply, mostly from existing fields in the Taranaki region. This projection assumes that the existing reserves would be produced. However, commercial decision around production economics and future demand would determine whether the gas is brought to market. The projection shows that the offshore Pohokura field would continue to produce until beyond 2035. Given that this is an offshore field with high operating costs, it might not make commercial sense for the fields owners to produce in this manner. It is not possible to model these dynamics.
Figure 8.31: Natural gas supply in the Further technology scenario
6
7
(New Zealand Government, 2018) (Methanex, 2018)
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Source: Commission analysis. It is plausible that a market for gas continues to exist, but domestic production is not able to meet it because wells are nearing the end of life. The wells may not produce sufficient gas and may also not be adjustable in terms of being able to increase and reduce production to meet variation in demand. In a situation without Methanex, solutions would be required to meet occasional users’ needs for large amounts of gas. Options include storing large volumes of gas or supplementing domestic production with flexible supply in the form the form of imported LNG. These outcomes are likely to result in higher supply costs then current wholesale gas prices which could increase energy costs for users and could result in higher electricity prices. Using the EnergyLink modelling tools we investigated the impact of significantly higher gas price on the wholesale electricity price. We assumed that following Methanex’s departure in 2029 the price of gas for electricity generation jumps from $8/GJ to $14/GJ which causes a wholesale electricity price increase of 20% or around $15-20/MWh. If such a price increase was to occur then this could slow and add cost to the transition to electricity as a low emission fuel for industry, business and households.
8.4.5 Forestry Box 8.9: Modelling land use and forestry Land areas are an input assumption in all our modelling. The starting point for all scenarios is the Current Policy Reference case, informed by projections from the Ministry for Primary Industries (MPI) (see Chapter 7: Where are we currently headed? for more information). For each scenario, we specify annual areas of exotic and native afforestation and deforestation. The change in forest land area relative to the Current Policy Reference case is calculated and corresponding adjustments are made to other land use categories. Exotic forestry is assumed to compete with productive sheep and beef farmland; for example, a decrease in exotic afforestation relative to the Current Policy Reference case leads to increased land available for sheep and beef farming. New native forest is assumed to be established on unproductive land and have no impacts on livestock numbers or production. We have developed assumptions on levels of afforestation based on evidence and judgement. In the case of exotic forestry, we have used a manual refinement process to ‘goal seek’ and ensure the net zero target for long-lived gases is met by 2050 or earlier.
Figure 8.32 below shows the trajectories and total areas of native and exotic afforestation in the scenarios and the Current Policy Reference case. The scenarios feature significantly less exotic afforestation and more native afforestation compared with the Current Policy Reference case. The overall level of afforestation is similar, at 1.1 to 1.3 million hectares by 2050, but native forest on less productive land would account for about 40 to 55% of this. The total area of new native forest ranges from approximately 0.4 to 0.7 million hectares by 2050. Higher rates of native afforestation are assumed in the Further Behaviour Change and Tailwinds 43 1 February 2021 Draft Supporting Evidence for Consultation
scenarios. The upper bound of 0.7 million hectares is informed by recent analysis from Manaaki Whenua on the potential area suitable for regenerating native forests.8 The scenario trajectories consider practical limits on how fast native forest planting could be ramped up, particularly nursery capacity.9 The total area of new exotic forest in the scenarios ranges from 0.6 to 0.7 million hectares by 2050. This is comparable to the total area planted between 1990 and 2010. The exotic afforestation trajectories were designed by following the Current Policy Reference case up until 2030 and then ramping down to a level sufficient to meet and sustain net zero long-lived gas emissions by 2050.
Figure 8.32: Annual change (left) and cumulative change (right) in exotic and native forest area by scenario Source: Commission analysis. Figure 8.33 shows the resulting net forestry emissions out to 2050. Differences across the scenarios are relatively small, but greater variation would be seen after 2050 due to the diverging rates of exotic afforestation (post-2050 implications were explored in the Looking beyond 2050 section 8 9
(The Aotearoa Circle, 2020) (New Zealand Plant Producers Incorporated (NZPPI), 2019)
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earlier in this chapter). In 2050, native forestry delivers annual net carbon dioxide removals of 2.7 MtCO2e in the Headwinds and Further Technology Change scenarios and 4.4 MtCO2e in the Further Behaviour Change and Tailwinds scenarios. The annual rate of carbon dioxide removals in the scenarios peaks around 2040, about 10 years after the peak in exotic forest planting. Cumulative net carbon dioxide removals from 2021 to 2050 range from 392 to 413 MtCO2e, slightly higher compared to the Current Policy Reference case. However, the rate of removals is still growing in 2050 in the Current Policy Reference case due to the assumption exotic afforestation continues at an increasing rate.
Figure 8.33: Net forestry emissions 1990-2050 Source: Commission analysis.
8.4.6 Agriculture Land use All scenarios see a reduction in the total area of land used for food production 2018 to 2050 (Figure 8.34). However, the reduction is smaller than in the Current Policy Reference case presented in Chapter 7: Where we are currently heading. Compared with the Current Policy Reference case, the scenarios feature: •
•
A smaller reduction in sheep and beef land due to lower rates of conversion to exotic forestry. Pasture used for sheep and beef farming reduces from 8.17 million hectares in 2018 to between 7.04 and 7.15 million hectares in 2050 (compared to 6.75 million hectares in the Current Policy Reference case). The largest reduction is seen in the Headwinds scenario. The same change in dairy land area in the Headwinds and Further Technology Change scenarios, reducing from 1.74 million hectares in 2018 to 1.66 million hectares in 2050. The Further Behaviour Change and Tailwinds scenarios assume a further 5% of current dairy land (around 87,000 hectares) is converted to other uses such as horticulture.
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• •
Significantly greater native afforestation on unproductive land, as discussed above.10 The same assumption on retirement of agricultural land into other uses.
Figure 8.34: Agriculture and forestry land area in 2050 compared with 2018 Source: Commission analysis.
Changes to farm management practices Chapter 4c: Reducing emissions – opportunities and challenges across sectors, Agriculture discusses a number of shifts in farm management practices which can reduce total feed inputs and emissions. Different approaches would better suit the diversity of farm situations, farmer preferences and objectives. Rather than making assumptions about adoption of individual practice changes, our scenarios consider the overall changes to livestock numbers and production that could result from a range of practice changes being adopted across different farms. The different practice changes have different implications for livestock numbers and production, as summarised in Table 8.7. Some changes could allow farmers to maintain production levels from fewer animals, which is likely to improve profitability. Others would see production levels reduced, which could either reduce or improve profitability depending on the associated changes in inputs (such as feed and labour). Within some options there is potential for a rebound effect, where unutilised pasture or feed could be used to increase stock numbers or consumed elsewhere. For these options to lead to a reduction in emissions may then require an associated change in land use, such as putting some low-producing pasture into native forest or other uses.
10
In Figure 8.34 this is shown as taking land from the ‘Other’ category, which does not contribute to production. In reality, some native afforestation will likely occur on low producing sheep and beef or dairy pastureland. Some could also occur on land that is not classified as agricultural land, such as lifestyle blocks.
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Table 8.7: Impacts of potential farm practice changes on livestock numbers, production and emissions Production per animal
Stock numbers
Total production
Feed inputs and emissions
Increase
Reduce
Maintain
Reduce
Maintain or slightly reduce
Reduce
Reduce
Reduce
No rebound effect
Reduce
Maintain
Reduce
Reduce
Rebound effect
Reduce
Increase
Maintain or slightly reduce
Maintain or slightly reduce
No rebound effect
Increase
Reduce
Maintain
Reduce
Rebound effect
Increase
Maintain
Increase
Maintain
Improving animal performance while decreasing stocking rates Moving to lower input farm system Once a day milking
Reducing breeding and replacement animals
Our scenarios explore two distinct futures from potential changes in farm management practices. Historic and future changes in livestock numbers, animal productivity and total milk and red meat production are shown below in Figure 8.35–Figure 8.37. These charts do not show the Further Technology Change and Tailwinds scenarios as they are almost identical to the Headwinds and Further Behaviour Change scenarios respectively.11 The Headwinds scenario assumes modest additional reduction in livestock numbers relative to the Current Policy Reference case, with only small corresponding increases in animal performance. As a result, total production is slightly reduced from current levels (by around 6% for dairy and 3% for sheep and beef in 2050). Relative to the Current Policy Reference case, production of sheep and beef meat is similar in 2050 due to less land being converted to exotic forestry. This scenario could represent a future in which some farmers choose to adopt practice changes that result in lower production, without necessarily reducing profitability. Alternatively, it could represent a future where farmers are less successful in improving animal performance, meaning there is limited potential for lowering stocking rates without significant profitability impacts. By contrast, the Further Behaviour Change scenario represents a future where animal performance can be significantly improved, allowing deeper reductions in livestock numbers while maintaining similar production levels. This scenario sees particularly large reductions in the dairy herd due its explicit assumption that 5% of current dairy land is converted to other uses such as horticulture. Figure 8.37 shows that these production outcomes could be achieved if improvements in animal performance can continue at a similar rate to what has been achieved since 1990. Improvements in sheep and beef productivity occur at a declining rate out to 2050. Figure 8.38 and Figure 8.39 below show the resulting methane emissions intensity for dairy and sheep and beef respectively. These results include the effects of technology adoption (discussed below), but the effect of changes in farm management practices can be seen in the difference between the Headwinds and Further Behaviour scenarios.
11
Small differences in livestock numbers and production arise due to the scenarios’ different assumptions on the level of exotic afforestation.
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Figure 8.35: Number of milking cows (left) and sheep and beef stock units (right), 1990-2050 Source: Commission analysis.
Figure 8.36: Production per milking cow in kilograms of milk solids (left) and sheep and beef stock unit (right), 1990-2050 Source: Commission analysis.
Figure 8.37: Total production of milk solids (left) and sheep and beef meat (right), 1990-2050 Source: Commission analysis. 48 1 February 2021 Draft Supporting Evidence for Consultation
Technological changes The scenarios include assumptions on the adoption of several emerging technologies as described in the assumptions table in the appendix. The Headwinds and Further Behaviour scenarios assume small impacts from low emissions breeding for sheep and beef only, and from methane inhibitors for dairy only. The Further Technology and Tailwinds scenarios assume high impacts from low emissions breeding, including for dairy, and from methane inhibitors and vaccines that could also be adopted on sheep and beef farms. Figure 8.38 and Figure 8.39 show the impacts of these technology assumptions on methane emissions per unit of product.
Figure 8.38: Dairy methane emissions intensity 1990-2050
Figure 8.39: Sheep and beef methane emissions intensity 1990-2050 Source: Commission analysis.
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Total methane and nitrous oxide emissions Figure 8.40 shows the total biogenic methane emissions in 2050 across the scenarios compared with the Current Policy Reference case and with emissions in 2018. Relative to 2017 (the base year for the biogenic methane target), the scenarios see reductions of 27 to 59% by 2050. Figure 8.41 shows the emissions trajectory for all scenarios.
Figure 8.40: Agriculture methane emissions in 2050 compared with 2018 Source: Commission analysis.
Figure 8.41: Agriculture methane emissions 2010-2050 across the scenarios Source: Commission analysis.
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Figure 8.42 and Figure 8.43 show the same information for nitrous oxide emissions.
Figure 8.42: Agriculture nitrous oxide emissions in 2050 compared to 2018 Source: Commission analysis.
Figure 8.43: Agriculture nitrous oxide emissions 2010-2050 across the scenarios Source: Commission analysis.
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8.4.7 Waste Future emissions from waste span a wide range across our four scenarios (Figure 8.44). In both the Headwinds and Further Behaviour scenarios, methane emissions reduce by less than 10% by 2030 compared to 2017, meaning the waste sector would be under-delivering relative to the 2030 biogenic methane target. The Further Behaviour scenario sees much larger reductions occurring over time, to 39% below 2017 levels by 2050. Despite large and fast cuts in the amount of organic waste sent to landfill in this scenario, emissions reductions occur more slowly as organic matter already in landfills continues to release methane for many years. This demonstrates the inertia associated with the waste decay process, as organic matter already in landfills continues to release methane for many years. Improvements to landfill gas capture in the Further Technology and Tailwinds scenarios lead to sharper reductions of 18 and 23% by 2030, and 52% and 63% by 2050 respectively. This highlights the opportunity landfill gas capture provides to drive faster emissions cuts.
Figure 8.44: Methane emissions from waste by scenario Source: Commission analysis.
Waste Generation All scenarios see a reduction in waste generation from 2018 to 2050 for municipal food and paper waste, with further reductions to other waste types in scenarios with greater behaviour change. In comparison to the Current Policy Reference Case, waste generation settings in the different scenarios are: •
•
Headwinds and Further Technology Change: Municipal food and paper waste are 15% lower compared to the Current Policy Reference Case. All other waste types across all disposal sites have the same level of waste generation as baseline. Tailwinds and Further Behaviour Change: Paper waste is 35% lower, food waste is 30% lower, all other waste types are 15% lower for municipal landfills by 2050. Garden and wood 52 1 February 2021 Draft Supporting Evidence for Consultation
waste is 15% lower in non-municipal landfills and all other waste types across non-municipal landfills and farm fills are 10% lower by 2050. The only exception is sludge waste which remains at baseline.
Waste Recovery Overall waste recovery is higher in all scenarios in comparison to the baseline, with the degree of increased recovery and the balance of recovery options varying by scenario. In comparison to the Current Policy Reference Case, waste recovery settings in the different scenarios are: •
•
Headwinds and Further Technology Change: 50% of food waste, 28% of Garden waste, 33% of paper waste, 23% of wood waste, 15% of textile waste and 18% of construction waste is recovered by 2050. Composting is the most common recovery option for recovered food and garden waste. Recycling is the most common recovery option for textile, paper and construction waste and use as boiler fuel is the most common recovery option for wood waste. Tailwinds and Further Behaviour Change: 90% of food waste, 84% of garden waste, 92% of paper waste, 60% of wood waste, 50% of textile waste and 48% of construction waste is recovered by 2050. Food waste is evenly recovered across recycling, composting and anaerobic digestion. Garden waste is evenly recovered across composting and anaerobic digestion. Recycling remains the most common recovery option for construction, paper and textile waste and use as boiler fuel is still the most common recovery option for wood waste.
Figure 8.45 shows the combined effect of reduced waste generation and waste recovery on the amount of organic waste sent to landfill in the Further Behaviour scenario.
Figure 8.45: Total organic waste sent to landfill in the Further Behaviour scenario compared with the Current Policy Reference case, showing the effect of reduced waste generation and waste recovery Source: Commission analysis. 53 1 February 2021 Draft Supporting Evidence for Consultation
Landfill gas capture The two key variables in landfill gas capture are the efficiency of landfill gas capture and the portion of disposal sites with landfill gas capture. The efficiency of landfill gas capture refers to the portion of methane gas captured over the lifespan of the landfill and the portion of disposal sites with landfill gas capture refers to the percentage of sites with landfill gas capture in that particular category. In comparison to the Current Policy Reference Case, landfill gas capture efficiency and portion of sites with landfill gas capture in the different scenarios are: •
•
Headwinds and Further Behaviour Change: Landfill gas capture efficiency is the same as in baseline with 68% being the assumed constant through to 2050 and no change in the portion of sites with landfill gas capture. Tailwinds and Further Technology Change: Landfill gas capture efficiency for municipal landfills increases to 90% and 60% for other landfill sites by 2050. In addition, 100% of nonmunicipal sites would have landfill gas capture and 50% of municipal landfills with no landfill gas capture would have landfill gas capture by 2050.
8.4.8 F-gases F-gas emissions are largely from the leakage and improper disposal of HFCs in refrigeration and air conditioning equipment. Two projections for F-gas emissions are demonstrated in these scenarios; •
The Headwinds and Further Technology scenarios make the same projection in emissions as the Current Policy Refence case. In these scenarios, emissions reduce only by 30% from current levels due to the continued usage of HFCs. In this future the Kigali phasedown on HFCs is largely ineffective due to a continued importation of recycled HFCs and HFCs in equipment and there are no improvements in industry practice around leak reduction or end of life disposal.
•
The Further Behaviour and Tailwinds Scenario achieve substantial reductions in emissions relative to this due to replacement of refrigeration and air conditioning equipment with alternative systems charged with low-GWP refrigerants. In addition to this, industry practice improvements reduce emissions from equipment leakage and improper end of life disposal.
The emissions projections for these scenarios is shown in Figure 8.46 below. Over the period of 2020 to 2050 there is an 18 MtCO2e difference in cumulative emissions between these two projections.
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Figure 8.46: HFC emission projections across the scenarios Source: Commission analysis. These emissions projections are taken from a modelling exercise undertaken by the Verum Group on behalf of the Ministry for the Environment.12 There is considerable uncertainty in the future emissions from HFCs.
8.6 Cross sector implications 8.6.1 The role of bioenergy Bioenergy can be used in the form of woody biomass, liquid biofuels and biogas. It needs to be used sustainably and co-managed with forestry and waste workstreams. These scenarios assume that all bioenergy is domestically produced and consumed.
12
(Verum Group, 2020)
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Figure 8.47: Additional biomass demand in 2035 across the scenarios and relative to 2018 Source: Commission analysis. These scenarios show that woody biomass can be expected to play a significant role in decarbonising process heat. Usage in the food, wood, pulp and paper sectors increases considerably with 2035 consumption totals around 10 - 16PJ and increasing to 18-25PJ by 2050, as shown in Figure 8.47. When available, woody biomass is the lowest cost fuel for these applications and this future requires the mobilisation of significant woody biomass resource. The Further Technology and Tailwinds scenario used further biomass resource to produce liquid biofuels for hard to electrify uses such as the heavy transport fleet, off road vehicles and machinery, and aviation and shipping. Increasing domestic production of biofuels would require large quantities of feedstock and increased commercial scale production facilities. These scenarios see biofuels production scaling up to 270 million litres of fuel per year. For scale, Z Energy’s currently mothballed biodiesel plant in Wiri has a capacity of 20 million litres per year. The entirety of the biomass resource used in these scenarios is woody biomass from existing forests. Figure 8.48 shows that the scenarios take some time to ramp up demand to meet the available supply – this reflects time to convert plants and establish supply chains. The available bioenergy resource is currently underused.
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Figure 8.48: Biomass for energy demand for the Further Technology scenario. Note that this is additional bio energy to the amount already consumed. Source: Commission analysis. In these scenarios bioenergy supply and demand are regionally constrained for process heat use. This however has not been replicated for liquid fuel production. It is acknowledged that the high cost and practicality of transporting biomass can be a barrier to use. Additional analysis could be done on geographical location optimisation, for example, on centralised refineries around forestry resources. There is a link to the long-term regional perspectives on bioenergy carbon capture and storage (Chapter 5: Removing carbon from our atmosphere) which may also require a geographic and industry specific lens. This has not been modelled in the scenarios. Under the scenario modelling the use of woody biomass is from forestry waste streams and low value product. No land use change has been assumed and no dedicated energy crops are required under these assumptions. It is assumed that some low value export pulp logs are used as a biomass resource. The modelling includes a small increase in timber processing domestically as forestry expands, however the wood processing residue has not been quantified and deployed in the model. Biogas harnessed from landfills and other waste streams presents an additional opportunity which is not included in these scenarios. At present, biogas currently represents a very small proportion of energy supply in Aotearoa, but there is further potential to use it as a resource for niche applications that are located close to landfills.
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Box 8.10: Opportunities and challenges for a bioeconomy Increased use of wood products in the built environment could assist the development of a bioeconomy. More timber could be used in domestic buildings, increasing the amount of stored carbon in the built environment and reducing the demand for emissions-intensive materials such as steel or concrete. Increased demand for timber and/or more domestic timber processing could also increase the availability of biomass residues which can be used for energy. There are multiple barriers to the development of a sustainable bioeconomy and risks that need to be managed. Uncertainty regarding the long-term supply of bioenergy resources could impede decision-making and investment in bioenergy technologies. The lack of robust and recent data coupled with changes in forestry and wood processing market conditions such as log and lumber prices, transport costs, and exchange rates, could impact the cost and availability of bioenergy resources. This has not been an area of government focus of commitment to date. While the use of bioenergy could be significantly increased, it is important to note the potential scarcity of bioenergy resources in the future, due to the long-term supply decisions, large areas of land required and its competing uses. It may be appropriate to focus the use of bioenergy on opportunities which offer considerable emissions reductions which cannot be easily or cheaply achieved by competing technologies. Liquid biofuels for aviation may be an example of this.
8.6.2 Hydrogen Hydrogen could be described as the “missing link” in achieving full decarbonisation of our energy system and some hard to abate sectors. With a planned approach, it is possible the use of green hydrogen13 would enable Aotearoa to reach lower emission levels by 2050 than could be achieved without it. Hydrogen can complement electrification in industry and transport. In particular green hydrogen could play a valuable role decarbonising long-haul transport (heavy trucks, ships, and aviation) and could enable a switch away from fossil fuels in high-temperature industrial processes that require both physical and chemical properties of molecule-based fuels. Green hydrogen also offers the potential for medium to long term energy storage of surplus renewable electricity and could boost domestic energy security by reducing our reliance on energy imports. Over the longer-term, Aotearoa has the potential for a green hydrogen economy because of our abundance of renewable energy, water, infrastructure potential, and highly skilled workforce. Various transition pathways for hydrogen can be envisaged. The pace and pathway of a domestic green hydrogen economy depends on: 14 •
the potential scale up of hydrogen production - based on international markets and technological innovation influencing production costs (including the cost reduction curve of electrolysers and the ability to integrate abundant low-cost renewable electricity generation with efficient hydrogen production)
13
Green hydrogen – hydrogen produced with zero carbon emissions from renewable energy sources like wind, solar or hydro via water electrolysis, or from biomass (and nuclear energy sources) through a gasification process. 14 (Venture Taranaki, 2018, p. 14; Pflugmann and De Blasio, 2020, p. 9)
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• • •
level of government leadership and support (e.g. policy to deploy and grow jobs, clear and enduring regulation, growth in financial incentives) industry investment and knowledge sharing in different applications to grow expertise a social licence to scale up the hydrogen economy through awareness and public acceptance.
Blue hydrogen could be used in the transition to a zero carbon economy. However, its reliance on carbon intensive gas supplies and carbon capture and storage (CCS) technology mean it may not be an appropriate long-term solution for climate change mitigation in Aotearoa. Blue hydrogen production economics are influenced by: • •
the availability of natural gas reserves and cost competitive gas supply the potential to economically utilize or store large volumes of captured carbon dioxide the size of an accessible market to support larger volumes enabling economies of scale in production facilities.
8.6.3 Alternative carbon dioxide removals In these scenarios there are residual emissions stemming from hard to abate sectors such as carbon dioxide from cement and lime manufacturing and nitrous oxide from agriculture. In order to achieve net zero emissions, these scenarios offset residual emissions with forestry removals. Carbon capture and storage or utilisation (CCSU) is an alternative form of emissions removal. CCSU involves capturing the emissions associated with an activity, for example burning coal or an industrial process, transporting them to a storage facility and permanently locking them away in a reservoir or utilising them in another process. Variations of CCSU include direct air capture with carbon capture and storage (DACCS) or bioenergy with carbon capture and storage (BECCS). In Aotearoa, CCS technology has not progressed beyond the concept stage. The low cost of forestry as an alternative removal technology and the limited requirement for removals from the energy industry in Aotearoa has restricted interest in CCS. CCS is an expensive technology with highly variable, site-specific costs. The effectiveness, applicability, uptake and realisable emissions reduction potential of CCS in Aotearoa is uncertain. International project designs may not be applicable to our unique circumstances. Additionally, the technological readiness of CCS as an emissions removal option is markedly different compared to forestry as an emissions removal option. As such, CCS has not been included in the scenario modelling at this time. CCS may play a role in our contribution to global efforts to limit warming to 1.5oC above preindustrial levels in the latter half of the century. To maintain this optionality for the future, it would be beneficial to retain and leverage capabilities, skills and workforce in forestry, oil and gas, and geothermal energy in Aotearoa to support efforts of other countries in meeting their commitments under the Paris Agreement. CCS may have broader implications around the potential role of land use in carbon dioxide removals. Where new infrastructure needs to be built to enable CCS, there may be ecosystem, biodiversity and other resource considerations. For BECCS in particular, there may be increased competition for land and biomass resources.
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8.7 Comparison to 1.5 degree pathways and international pathways In carrying out our analysis for the domestic emission reduction targets, we are required to set emissions budgets that are aligned with the goal of limiting warming to 1.5 degrees. These budgets must be “ambitious budgets that can realistically be met” and have a focus on domestic actions. The Climate Change Response Act requires that the emissions budgets that are set are indeed met. We have compared the changes in use of fossil fuels for energy and emissions of methane and nitrous oxide from agriculture in our scenarios against the reductions in these fuels and gases modelled by the IPCC in their 1.5oC compatible pathways (see Figure 8.49 below). The key features driving global reductions in emissions in 1.5 o compatible scenarios are: • • • • •
deep cuts in coal use between 2020 and 2030 (by about ~75% from 2010 levels) reductions in gas use, except where it replaces coal use oil use peaking between 2020 and 2025 and declining steadily thereafter ongoing but more moderate reductions in agricultural methane emissions stabilisation or moderate reductions in nitrous oxide.
Figure 8.49 shows that our scenarios would achieve reductions in the use of coal, oil and gas that are broadly compatible with the reductions seen in the IPCC’s global pathways. However, the scenarios compare less favourably in terms of the total reductions in carbon dioxide emissions from energy and industrial processes, particularly the Headwinds scenario. In part, this reflects the country’s different energy profile compared with the world. Globally, coal power generation accounts for a much larger share of emissions and it is here the sharpest early reductions occur in the IPCC pathways. It also likely reflects significant deployment of carbon capture and storage occurring in the IPCC pathways. The reductions in agricultural methane and nitrous oxide emissions in our scenarios are also seen to be broadly compatible with the IPCC pathways, spanning a similar range to the IPCC’s interquartile range.
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Figure 8.49: Changes in carbon dioxide emissions from energy and industry, agricultural methane and nitrous oxide emissions, and use of fossil fuels for energy in our scenarios compared with IPCC 1.5°C pathways.
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8.8 References IPCC (2018) IPCC Data Distribution Centre Glossary. Available at: http://phobos.badc.rl.ac.uk/guidelines/pages/glossary/glossary_s.html (Accessed: 17 November 2020). Methanex (2018) Methanex Reaches Long-Term Agreement for Natural Gas Supply to Its New Zealand Operations. Available at: https://www.methanex.com/news/methanex-reaches-long-termagreement-natural-gas-supply-its-new-zealand-operations (Accessed: 17 November 2020). New Zealand Government (2018) Planning for the future - no new offshore oil and gas exploration permits, The Beehive. Available at: http://www.beehive.govt.nz/release/planning-future-no-newoffshore-oil-and-gas-exploration-permits (Accessed: 17 November 2020). New Zealand Plant Producers Incorporated (NZPPI) (2019) Growing New Zealand. Native nurseries survey insights. New Zealand Plant Producers Incorporated. The Aotearoa Circle (2020) Native Forests: Resetting the balance. The Aotearoa Circle, p. 26. Available at: https://www.theaotearoacircle.nz/s/The-Aotearoa-Circle-Native-Forests-Report_FINAL002.pdf.
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Appendix: Detailed scenario assumptions Assumptions held constant across all scenarios are not listed in the table below. This includes all macro drivers such as population and GDP. For other assumptions used in the Current Policy Reference case, see the appendix in Chapter 7: Where are we currently headed? The Tailwinds scenario is not shown for brevity. In general, Tailwinds combines the further behaviour change and further technology change assumptions.
Table legend
Same as Current Policy Reference
Transport
Total household passengerkilometres Public transport share by distance Walking and cycling share by distance Rail and coastal shipping freight share by tonnekilometres Cost of batteries (USD/kWh) Capital cost penalties on light passenger electric vehicles
Low change from Current Policy Reference
High change from Current Policy Reference
Other
Current Policy Reference
Headwinds
Further Behaviour Change
Further Technology Change
68.7 billion in 2050 (56.0 in 2018)
62.5 billion in 2050
56.5 billion in 2050
Same as Headwinds
6.3% in 2050
10.9% in 2050
15.4% in 2050
Same as Headwinds
Walking 1.4% / cycling 0.6% in 2050
Walking 1.9% / cycling 1.6% in 2050
Walking 2.3% / cycling 3.9% in 2050
Same as Headwinds
Rail 13% / coastal shipping 12% in 2050
Rail 15% / coastal shipping 14%
Rail 21% / coastal shipping 20%
Same as Headwinds
US$60/kWh in 2030 US$37/kWh in 2050 25% in 2019, phase out by 2050
25% in 2019, phase out by 2040
US$38/kWh in 2030 US$19/kWh in 2050 25% in 2019, phase out by 2040
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Transport (cont.)
Current Policy Reference Phaseout date for internal combustion engine vehicle imports (backstop)1 Electrification of rail and coastal shipping Electrification of air travel
NA
Further Behaviour Change
Light vehicles: new 2040 / used 2042 Medium trucks: 2045 Heavy trucks: NA
Further Technology Change Light vehicles: new 2030 / used 2032 Medium trucks: 2035 Heavy trucks 2045
Rail: 12% in 2018, then follows heavy truck electrification once this exceeds 12% Coastal shipping: follows heavy truck electrification
Rail increases to 23% in 2031, then follows heavy truck electrification
None
None to 2030; 50% by 2050
None
Increases to 270 million litres of biofuel by 2035, then constant
Low carbon liquid fuel utilisation2
Buildings
Headwinds
Household energy intensity reduction3
4% by 2035, 6% by 2050
Commercial and public building energy intensity reduction3
4% by 2035, 7% by 2050
11% by 2035, 20% by 2050
13% by 2035, 22% by 2050
16% by 2035, 26% by 2050
Phaseout date for fossil fuel heating in new buildings4
NA
2040 for commercial and public buildings, 2035 for residential buildings
2025 for all buildings
Same as Headwinds
Phaseout schedule for fossil fuel heating in all buildings
NA
Beginning 2040 and complete by 2060
Beginning 2030 and complete by 2050
Same as Headwinds
6% by 2035, 10% by 2050
9% by 2035, 14% by 2050
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Land use change
Heat Industry and Power
Food processing energy efficiency improvement Biomass availability for food processing Kinleith pulp mill conversion date to high efficiency recovery boiler Zero-emissions steel production date
Current Policy Reference
Headwinds
Further Behaviour Change
Further Technology Change
0.7% per year
0.9% per year
Additional 0.2% per year from reducing uptake barriers
Additional 0.2% per year from technology improvements
25% of regional forestry residue and export pulp logs
NA
50% of regional forestry residue and export pulp logs
2035
2025
NA
2040
Low carbon liquid fuel utilisation2
None
Increases to 270 million litres of biofuel by 2035, then constant
Renewable electricity generation capital cost reductions
Wind: 0.5% per year Utility solar: 2.0% per year
Wind: 0.8% per year Utility solar: 3.0% per year
Geothermal carbon capture and storage
NA
35% emission capture for all fields
Exotic afforestation5 Native afforestation6
1.0 million hectares from 2020-2050 0.14 million hectares from 2020-2050
Exotic deforestation7
P89: 620 hectares per year until 2036 P90: 73 hectares per year
0.70 million hectares
0.64 million hectares
0.64 million hectares
0.44 million hectares
0.68 million hectares
Same as Headwinds
P89: 310 hectares per year until 2036 P90: none from 2022
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Land use change (cont.)
Native deforestation Horticulture
Agriculture
Livestock numbers8
Animal productivity improvements
Low methane breeding
Current Policy Reference
Headwinds
Further Behaviour Change
Further Technology Change
664 hectares per year
498 hectares per year
Zero from 2026
Same as Headwinds
Additional 87,000 hectares of dairy land (5%) converted by 2050
Same as Current Policy Reference and Headwinds
Dairy milking cows: 3.98 million in 2050
Dairy milking cows: 3.38 million in 2050
Dairy milking cows: 3.98 million in 2050
Sheep-beef stock units: 38.0 million in 2050
Sheep-beef stock units: 36.2 million in 2050
Sheep-beef stock units: 38.3 million in 2050
Dairy: 24% increase Sheep and beef: 37% increase
Dairy: 38% increase Sheep and beef: 47% increase
Same as Headwinds
Area increases from 112,000 hectares in 2018 to 131,000 hectares in 2050 Dairy milking cows: 4.16 million in 2050 (4.95 million in 2018) Sheep-beef stock units: 40.2 million in 2050 (47.6 million in 2018) Dairy: 22% increase from 2018 to 2050 Sheep and beef: 32% increase
Dairy: Available from 2030, methane emissions reductions increase linearly to 7.5% in 2050 (15% effectiveness x 50% adoption). None Sheep and beef: Available from 2025, methane emissions reductions increase linearly to 4.5% in 2050 (15% effectiveness x 30% adoption).
Dairy: Emissions reductions increase to 13.5% in 2050 (15% effectiveness x 90% adoption). Sheep and beef: Emissions reductions increase to 7.5% in 2050 (15% effectiveness x 50% adoption).
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Current Policy Reference
Methane inhibitor
None
Headwinds
Further Behaviour Change
Dairy: Methane emissions reductions of 1% by 2030 (10% effectiveness x 10% adoption) and 12% by 2050 (30% effectiveness x 40% adoption).
Agriculture (cont.)
Sheep and beef: None.
Further Technology Change Dairy: Methane emissions reductions of 12% by 2030 (30% effectiveness x 40% adoption) and 37.5% by 2050 (50% effectiveness x 75% adoption). Sheep and beef: methane reductions of 1.5% by 2030 and 20% by 2050 (50% effectiveness x 40% adoption). Dairy: Additional methane reductions of 3% by 2030 (30% effectiveness x adoption of 10%) and 4.5% by 2050 (30% effectiveness x adoption of 15%) on top of those from inhibitor.
Methane vaccine9
None Sheep and beef: Additional methane reductions of 10.5% by 2030 (30% effectiveness x adoption of 35%) and 12% by 2050 (30% effectiveness x adoption of 40%) on top of inhibitor.
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Agriculture (cont.)
Current Policy Reference
Nitrification inhibitor
Headwinds
Further Behaviour Change
Dairy: Available from 2030, nitrous oxide emissions reductions increase to 2.5% by 2035 (60% effectiveness x 10% adoption x application in 5/12 months) and 12% by 2050 (60% effectiveness x 20% adoption with yearround application).
None
Further Technology Change Dairy: Emissions reductions increase to 7.5% by 2035 (60% effectiveness x 30% adoption x application in 5/12 months) and 30% by 2050 (60% effectiveness x 50% adoption with year-round application).
Sheep and beef: none Sheep and beef: none
Waste
Waste generation
Waste recovery/diversion: percentage recovered by 2050
Sites with LFG capture
LFG recovery rate (average)
Baseline in 2050: Food 555.7 kt; Garden 695.3 kt; Paper 362.3 kt; Wood 785.3 kt, Textiles 186.3 kt; Construction & demolition 1322 kt
NA (Baseline)
Reduction from baseline in 2050: Food 15%; Paper 15%
Reduction from baseline in 2050: Food 30%; Garden 14%; Paper 34%; Wood 14%; Textiles 15%; Construction & demolition 10%
Same as Headwinds
Food 50%; Garden 28%; Paper 33%; Wood 23%; Textiles 15%; Construction & Demolition: 18%
Food 90%; Garden 84%; Paper 92%; Wood 60%; Textiles 50%; Construction & demolition 48%
Same as Headwinds
Status quo: Municipal landfills required to capture
68% constant through to 2050
LFG capture installed at 100% of non-municipal landfills by 2050 and 50% of municipal landfills currently without LFG capture 90% for municipal landfills, 60% efficiency for other sites by 2050
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F-Gases
Current Policy Reference HFCs
Headwinds
21% emissions reduction from 2018 by 2035, 28% reduction by 2050
Further Behaviour Change
Further Technology Change
47% reduction by 2035, 83% by 2050
Same as Current Policy Reference and Headwinds
Assumption notes: 1) 2) 3) 4) 5) 6) 7) 8) 9)
There is a 5-year transitional period for the phaseout. Low carbon liquid fuel total is shared between transportation and off-road vehicles and machinery uses. Given percentages are relative to 2018. Figure is for total energy use which includes heating, cooling and appliances. There is a 3-year transitional period for the phaseout. Exotic afforestation is assumed to occur on productive sheep and beef land. In Tailwinds the total area from 2020-2050 is 0.59 million hectares. Native afforestation is assumed to have no net effect on agricultural production. P89 = post-1989 forest land, P90 = pre-1990 forest land. P90 deforestation area is the net area after offsetting with carbon equivalent forest. Sheep-beef stock numbers are slightly higher in Further Technology Change due to less land converted to exotic forestry. Methane inhibitor and vaccine are assumed to be mutually exclusive, so cannot both be applied to the same animal. Combined adoption of inhibitor and vaccine in 2050 in the Further Technology Change and Tailwinds scenarios is 90% for dairy and 80% for sheep and beef.
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Chapter 9: Which path could we take? Our previous chapter set out several different future scenarios. The question is: what path should Aotearoa take now to put itself on track to meet the 2050 targets? The emissions budgets we recommend need to be both ambitious and achievable. This chapter presents analysis which supports the Commission’s path to 2035 for reducing emissions.
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Contents Chapter 9: Which path could we take? 9.1 Introduction………………………………………………………………………………………………………………………..…3 9.1.1 An ambitious and achievable path............................................................................................. 3 9.2 Setting a path to 2035…………………………………………………………………………………………………………….4 9.2.1 Summary of our path ................................................................................................................. 4 9.2.2 What our path looks like in each sector .................................................................................... 8 Transport......................................................................................................................................... 8 Buildings ........................................................................................................................................ 10 Electricity....................................................................................................................................... 11 Natural gas use.............................................................................................................................. 13 Industry and heat .......................................................................................................................... 14 Agriculture .................................................................................................................................... 15 Forestry ......................................................................................................................................... 19 Waste ............................................................................................................................................ 20 F-gases........................................................................................................................................... 21 9.2.3 There is flexibility in how our recommended budgets can be achieved ................................. 21 9.2.4 Meeting the budgets................................................................................................................ 24 Using budgets to achieve both components of the 2050 target .................................................. 24 The Government should aim to overachieve the budgets ........................................................... 25 Domestic flexibilities to meet the budget..................................................................................... 25 9.2.5 Offshore mitigation .................................................................................................................. 26
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Our previous chapter set out several different future scenarios. The question is: what path should Aotearoa take now to put itself on track to meet the 2050 targets? The emissions budgets we recommend need to be both ambitious and achievable. This chapter presents analysis which supports the Commission’s path to 2035 for reducing emissions.
9.1 Introduction The scenarios presented in the previous chapter help to investigate the uncertainty around the potential for future emission reductions. They also provide a range for the level of emissions in each of the budget periods consistent with meeting the 2050 target. In arriving at recommended levels for the first three emissions budgets, we have identified a path to 2035 which, in our opinion, would be the best way to put Aotearoa on track to meeting the 2050 target. We have also tested alternative paths to ensure the recommended budgets can be met under a range of circumstances. Finally, we have offered recommendations on how the budgets should be met, including the use of flexibility mechanisms allowed under the Act.
9.1.1 An ambitious and achievable path In arriving at its recommended budget levels, we have sought to strike a balance across the range of considerations laid out in the Climate Change Response Act. At the highest level, we have sought to arrive at a path that is ambitious as possible while still achievable. We consider that the Tailwinds scenario – with its accelerated emissions reductions and lower reliance on forestry removals to meet the 2050 target – best represents the future Aotearoa should be aiming for. However, setting budgets in line with the Tailwinds scenario would entail significant delivery risks. The Tailwinds scenario makes strong assumptions about the pace and scale of several key actions and technology developments; for example, it assumes widespread adoption of methane inhibitors and/or vaccines which are not yet commercially available. While it is hoped this and the other scenario assumptions can be realised, the high uncertainty means it might not be prudent to set budgets today which are reliant on them occurring. Setting budget levels in line with the Headwinds scenario would entail much lower delivery risk due to conservative assumptions. However, we judge that doing so would fall short on ambition. The relatively slow pace of change would be less consistent with that required globally to limit warming to 1.5°C. While this path would still see Aotearoa on track to meet the 2050 target, it would do so with significantly more effort required in the period after 2035 and a greater reliance on carbon dioxide removals. It would also only put Aotearoa on course for the less ambitious end of the biogenic methane target range. We have drawn on insights from the scenarios and individual measures to build up a path that we judge would best set Aotearoa up for meeting the 2050 target and the other considerations in the Act. We have sought to set budgets which could be achieved under a range of circumstances, and through measures which are available today. The wider impacts of the pathway have been assessed and are discussed in Part 4: What this could mean for New Zealanders. We then have considered what policies could be used to put Aotearoa on the path. This is discussed in Part 5: How to make this happen.
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It is impossible for us to anticipate every new development which could reduce emissions in the future. However, there will be opportunities in the future for us to revise our analysis to incorporate new development when we advise on the level of subsequent emissions budgets.
Box 9.1: Setting a path that allows for international transport emissions International aviation and shipping emissions fall outside the Paris Agreement. Although they are not covered by the Paris Agreement, international aviation and shipping emissions are being addressed internationally. The International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO) have agreed on actions covering aviation and shipping emissions. Aotearoa is a party to both agreements. The Commission will be called upon to recommend whether international transport emissions should be included in the 2050 zero emission target no later than 2024 Our emissions from international aviation and shipping are not currently part of the 2050 target. We will review whether these should be included in the 2050 target in 2024. We have tested to make sure that our path could allow Aotearoa to meet the 2050 net zero long-lived gas emissions target including international aviation and shipping emissions in case a decision is made in future to include these in the 2050 target.
9.2 Setting a path to 2035 We have applied the principles set out in Chapter 2 of the Advice report to help guide our advice on the path to 2035, and subsequently the recommended levels of the first three budgets.
9.2.1 Summary of our path Table 3.1 below provides a summary of key actions in our path across the first three budget periods. In the following section we give a more detailed description of the changes that would happen within each sector. In relation to our long-term scenarios described in the previous chapter, our path would see reductions in long-lived gas emissions near the most ambitious end of the range (Figure 9.1). Net long-lived gas emissions would fall by 33% by 2030 and 64% by 2035 compared to 2018. Emissions reductions would mostly come from road transport and heat, industry and power, with gross carbon dioxide emissions roughly halving by 2035 (Figure 9.3, Figure 9.4). This path would set Aotearoa up to achieve net zero long-lived gas emissions in the early 2040s. If this was chosen, Aotearoa would be able to meet a net zero long-lived greenhouse gas target by 2050 that includes its share of international aviation and shipping. For biogenic methane, our conservative approach to new technologies means that we have not assumed any adoption of a methane inhibitor or other methane reducing technologies that are not already available. Because of this, our path sees biogenic methane emissions towards the high end of the scenario range as all scenarios assumed some adoption of new technologies (Figure 9.4). Our path would push hard on driving changes to low emissions farm practices, alongside strong action to reduce methane emissions from landfills.
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Table 9.1: Key transitions along our path.
Waste and F-gases
Land
Heat, Industry and Power
Transport
Budget 1
Budget 2
Budget 3
Road transport
Accelerate EV uptake Improve average efficiency of new ICE vehicles
Phase out new light ICE vehicles Electrify medium and heavy trucks
Reducing travel demand
Encourage remote working for those who can Encourage switching to walking, cycling and public transport
Non-road transport
Electrification of rail
Buildings
No new gas heating systems installed after 2025 Improve thermal efficiency
Start phase out of gas in buildings
Electricity
Phase out fossil baseload generation
Expand renewable generation base Achieve ~95% renewable generation
Industrial process heat
Replace coal with biomass and electricity
Replace gas with biomass and electricity
Agriculture
Adopt low emissions practices on-farm
Encourage the adoption of new low methane technologies when available
Native Forests
Ramp up establishing new native forests
Establish 25,000 hectares per year
Exotic Forests
Average 25,000 hectares per year of new exotic plantation forests
Ramp down planting new exotic plantation forests for carbon storage
Waste
Divert organic waste from landfill Improve and extend landfill gas capture
Hydrofluorocarb ons (HFCs)
Reduce import of HFCs in second-hand products Increase end-of-life recovery
Biofuel blending Start electrification of ferries and costal shipping
Transmission and distribution grid upgrades Reduce geothermal emissions
Adopt low emissions breeding for sheep
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Figure 9.1: Net long-lived gas emissions in our path to 2035 compared with our scenario range. Source: Commission analysis.
Figure 9.2: Biogenic methane emissions in our path to 2035 compared with our scenario range. Source: Commission analysis.
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Figure 9.3: Snapshots of emissions in 2025, 2030 and 2035 in our path, compared with 2018. Source: Commission analysis.
Figure 9.4: Reductions in emissions by sector from 2018 to 2035 in our path Source: Commission analysis. 1 February 2021 Draft Supporting Evidence for Consultation
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9.2.2 What our path looks like in each sector Our path combines a broad portfolio of current and emerging measures to reduce our emissions. The following sections describe the measures and actions envisaged in each sector under our path.
Transport Under our approach to meeting the 2050 targets, Aotearoa would need to almost completely decarbonise land transport. This means changing how most vehicles are powered, including heavy vehicles. Road vehicles Electric vehicles are currently more expensive to purchase than internal combustion engine vehicles but are cheaper to run. Their upfront costs are expected to fall further leading to significantly lower lifetime costs. In addition to saving emissions, they also improve local air quality and reduce noise pollution. For these reasons, our path sees ambitious adoption of light electric vehicles, including cars, vans and utes, with no further internal combustion engine light vehicles imported after 2032. This would mean more than half of all light vehicle travel would be in electric vehicles by 2035, and 40% of the light vehicle fleet would be electric vehicles by 2035 (Figure 9.). In our path medium and heavy trucks are slower to electrify because of the greater daily distances they need to travel. Of the trucks imported in 2030, 15% of medium trucks and 8% of heavy trucks would be electric. By 2035, these would increase to 84% and 69% respectively.
Figure 9.5: Uptake of light electric vehicles in our path. Source: Commission analysis. To meet our proposed emissions budgets Aotearoa would need to phase out imports of light internal combustion engine vehicles sometime between 2030-2035. Achieving this phase out is ambitious, but achievable with strong supporting government action. This timeframe is consistent with the phase out dates being set by a growing number of countries.
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While electric vehicle supply grows, there would also need to be a focus on importing more efficient internal combustion engine vehicles, including increasing the share of conventional hybrids. Our path assumes the average efficiency of light internal combustion engine vehicles improves by 15% by 2035, or around 1% per year. Reducing demand for private vehicles In addition to changing the vehicles we drive, changes to how and how much New Zealanders travel play an important role in our path. We assume the average household travel distance per person can be reduced by around 7% by 2030, for example through more compact urban form and encouraging remote working. We also assume that the share of this distance travelled by walking, cycling and public transport can be increased by 25%, 95% and 120% respectively by 2030. Overall, this would see total household vehicle travel staying relatively flat despite a growing population (Figure 9.5).
Figure 9.5: Household light vehicle travel in our path compared with under current policies. Source: Commission analysis. Emissions from freight can be reduced by switching some freight movements from road to rail and coastal shipping. Our path assumes 4% of freight tonne-kilometres can switch by 2030. Further reductions in freight emissions could be achieved by completing the electrification of the Auckland to Wellington railway line and electrifying the Hamilton to Tauranga railway line. Our path is consistent with assuming that most new public transport ferries would be electric beginning almost immediately. There are only a few coastal shipping and Cook Strait ferry ships, but our path is consistent with assuming that new ones would be plug-in hybrid. These plug-in hybrid ships could be increasingly operated in electric mode as battery costs decline. Biofuels There will continue to be a need for liquid fuels for some transport uses, such as off-road vehicles and equipment, aviation and shipping. Aotearoa should take action to scale up the manufacture of low emissions fuels like biofuels or synthetic e-fuels in the first three emissions budget periods. Our
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path assumes 70 million litres of low emissions fuels could be made by 2030 and 140 million litres by 2035. This equates to roughly 3% of total domestic liquid fuel demand in 2035, or 1.5% of total fuel demand including international transport, under our path.
Buildings Under our approach to meeting the 2050 targets, Aotearoa would need to improve the energy efficiency of buildings, alongside decarbonising the energy used for heating, hot water and cooking. Homes Improving the energy efficiency of homes reduces emissions and can improve the occupants’ health, particularly for low-income households. Because homes in Aotearoa are typically underheated in winter, households may choose to heat their home more after improving energy efficiency, rather than reducing their energy use or emissions (see chapter 5). We assume that existing homes’ energy intensity improves by 6% by 2035. We assume newly built homes are 35% more energy efficient compared to today’s performance. It is already feasible to transition away from heating homes with coal and natural gas. Heat pumps already offer a lower cost way to heat homes than natural gas. For hot water, where feasible, electric resistive hot water cylinders offer an alternative to natural gas systems with comparable costs. Heat pumps will offer a lower cost option to heat most new commercial and public buildings. For existing buildings, renovations offer an opportunity to replace fossil fuel heating systems, such as gas central heating, with lower emissions alternatives such as heat pumps or biomass. Commercial and public buildings Commercial and public buildings offer large opportunities to improve energy efficiency through improved insulation and greater control of energy use. New commercial and public buildings can be built to higher standards, and existing buildings retrofitted to achieve these improvements. Our path assumes a 30% improvement in commercial and public buildings’ energy intensity is possible by 2035 compared to today’s performance. Commercial and public buildings can quickly transition away from coal to alternatives such as biomass which could use existing boilers. Our path assumes that by 2030 coal use in commercial and public buildings has been eliminated. The Government announcement in 2020 that all coal boilers in public sector buildings will be phased out is a step towards this. Avoiding lock-in of new gas heating systems Fossil fuel heating systems will typically last for 20 years or longer. Our path looks to avoid new heating systems having to be scrapped before the end of their useful lives. This means that our path assumes all new space heating or hot water systems installed after 2025, either in new buildings or when replacing existing systems, are either electric or biomass. No further natural gas connections to the grid, or bottled LPG connections occur after 2025. This would allow time for a steady transition, to be on track for a complete transition away from using natural gas in buildings by 2050. Figure 9.6 shows the outcome of these changes.
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Figure 9.6: Energy use in buildings in our path. Source: Commission analysis.
Electricity The use of low emissions electricity allows other sectors to reduce emissions. Electrifying light passenger vehicles will require significant expansion in electricity generation capacity. Demand for electricity will also increase as buildings and process heat switch away from fossil fuels. Increased demand will need to be accompanied by expanding transmission and distribution infrastructure. Electricity supply Our path requires rapid expansion of renewable wind and solar generation in the 2030s and beyond to meet increased electricity demand as electric vehicles are widely adopted (Figure 9.7 and Figure 9.8). However, in the short term, electricity generation companies may not commit to this expansion in capacity while there is uncertainty around the future of the New Zealand Aluminium Smelter at Tiwai Point. The New Zealand Aluminium Smelter is the single largest consumer of electricity. Over the last 5 years it used on average around 13% of the country’s electricity. Its future is currently under review. If it leaves, this electricity would be available for other uses. In our path the Smelter closes gradually, coming to a full close in 2026. Wind, solar and geothermal offer low cost and low emissions ways of generating electricity. Our path assumes that the build of in the 2020s pauses due the closure of the New Zealand Aluminium Smelter and resumes in the 2030s. This is illustrated in Figure 9.7 and Figure 9.8.
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Figure 9.7: Electricity generation by fuel in our path. Source: Commission analysis.
Figure 9.8: Annual increase (positive) or decrease (negative) in electricity generation compared to the previous year. Source: Commission analysis. Reducing emissions from geothermal Some geothermal fields have high emissions from their geothermal fluid, with an equivalent emissions intensity as gas generation. In our path these high emitting geothermal fields would close before 2030 reducing geothermal emissions by around 25% while only reducing generation by 6%.
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Solving the dry year challenge There is also uncertainty around the solution to the dry year challenge – solutions for generating electricity in years when hydro lake levels are low. Multiple options are being considered under the NZ Battery project that could offer a fossil fuel free solution to providing electricity in dry years where hydro lake levels are low. There are questions over the technical and economic feasibility and public support of the proposals. Gas generation provides flexibility to meet daily and seasonal peaks in demand and backs up renewable generation. While our path would see reductions in gas generation, some gas is still required to provide this flexibility until 2035 at least. In our path, coal fired generation at Huntly closes in the 2020s. The challenge is delivering a timely, reliable and affordable build out of the electricity system, while managing the opposing risks of under or over-investing in the system. Continuing to build new electricity generation and transmission infrastructure throughout the 2020s would avoid construction bottlenecks and potential delays to wider decarbonisation in the 2030s. Over-investment could result in sunk assets or increase the delivered cost of electricity and disincentivise electrification. Underinvestment could delay progress on wider decarbonisation efforts in transport, industry and buildings.
Natural gas use The total amount of natural gas used in Aotearoa needs to reduce in order to achieve the 2050 targets. Much of the natural gas currently used for process heat, heating and cooking in buildings, and electricity generation will need to convert to low emissions technologies. Natural gas currently plays a significant role in the electricity system by backing up renewable generation, particularly in dry years when hydro lake levels are low. Using gas in this way supports the reliability and affordability of the country’s electricity system. There are options to eliminate the use of natural gas for electricity generation. However, these are likely to be expensive for the size of the emissions reductions they deliver. In addition, the transition away from gas across the economy would need to occur without compromising the affordability and security of the electricity supply or increasing total emissions. There is a critical dependency between domestic gas supply and the company Methanex. Methanex produces methanol from natural gas and consumes around 40% of the total gas supply. Their demand incentivises natural gas producers to continue to invest to sustain production. Methanex has provided flexibility by reducing its demand when natural gas is constrained, benefitting all other gas users and reducing methanol production. Without continued exploration and development, the country’s natural gas fields are likely to reach the end of their economic life. This will reduce the amount of gas available for all users. In the medium term, it may become uneconomic for Methanex to continue operating in Aotearoa in its current form. A reduction in gas used by Methanex could have flow on cost and supply implications for other gas users including electricity generation and domestic users of gas. The impact on the electricity and gas system and the potential for large changes in supply and demand from industries exiting the market are discussed further in chapter 5 of our Advice report.
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Industry and heat There are proven options for decarbonising low and medium temperature process heat. These include switching fuel use from coal and natural gas to biomass and electricity. There are also opportunities to improve energy efficiency. Biomass for Process heat Some coal boilers in the the food processing sector are already being replaced with biomass or electricity. Our path assumes a steady, but reasonably rapid, rate of conversion to be on track to eliminate coal use for food processing by 2037 (Figure 9.9). This is roughly equivalent to converting one to two very large dairy processing plants away from coal each year or converting a larger number of smaller plants. Along with boiler conversion, our path assumes significant improvements in energy efficiency across the food processing sector.
Figure 9.9: Food processing energy use in our path. Source: Commission analysis. Where available, biomass from forestry and wood processing residues are a low-cost fuel switching opportunity. There may be constraints on biomass supply in some regions where there is not significant forestry. In these regions, electric boilers will be needed, but at a significantly higher operational cost. Electrification of process heat will also require expansion of the electricity transmission and distribution grids. This will add to the total cost. In our path, fuel switching to biomass also occurs in some other energy-intensive industries such as pulp and paper production. Overall, our path takes advantage of the country’s currently under-used biomass resource, moving towards a more circular economy. Achieving this uptake will require the development of supply chains for gathering and processing biomass along with the establishment of local markets.
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Industry In our path, we assume all of the country’s heavy industries continue to produce at current levels, except aluminium and methanol production which are assumed to close in our Current Policy Reference case. High temperature process heat is more challenging to decarbonise and our path sees continued use of gas and coal in these sectors. While there is potential to further decarbonise a range of industrial processes through emerging technologies, we do not assume these are available for uptake before 2035.
Agriculture The two main agricultural greenhouse gases are biogenic methane and nitrous oxide. Biogenic methane has a different target to other gases, while nitrous oxide is included in the long-lived greenhouse gas target. The agriculture sector has focussed in recent years on making productivity improvements that have also decreased their emissions intensity. The sector is addressing water quality issues through actions that can also reduce emissions. These efforts need to increase to reach the 2030 and 2050 emissions targets. On-farm practice changes There are changes that farmers can make now to reduce emissions on their farms, if given sufficient support. These can improve animal performance while reducing stock numbers, reducing the number of breeding animals required, and moving to lower input farm systems. The Biological Emissions Reference Group found that, when successfully implemented, these changes could be made while not significantly reducing production and while maintaining or even improving profitability. In setting our path and emissions budget levels, we have conservatively assumed that no new technologies to reduce methane emissions from agriculture are available before 2035. As a result, our path involves changes in farming practices that start pushing towards the limit of what we are confident can be delivered. Overall, our path would see dairy and sheep and beef animal numbers each reduced by around 15% from 2018 levels by 2030. This compares with an 8-10% reduction projected under current policies. In this, we have included transforming a small amount of dairy land into horticulture, at a rate of 2,000 hectares per year from 2025. With these changes, the 2030 biogenic methane target could be met without relying on new technologies. If farmers can continue to achieve productivity improvements in line with historic trends, these outcomes could be achieved while maintaining total production at a similar level to today. This is illustrated in Figure 9.10 and Figure 9.11. Methane reducing technologies Selective breeding for lower emissions sheep is a proven option which is in the early stages of commercial deployment. Our path assumes that this can be progressively adopted, reducing total biogenic methane emissions from sheep and beef farming by 1.5% by 2030 and 3% by 2035. No adoption has been assumed for the first budget period. Breeding for low emissions cattle is a future possibility but the research is in an earlier stage. We have not assumed any contribution from this by 2035. Methane inhibitors and vaccines are being researched. These could reduce the amount of methane that is released from cattle and sheep. While there has been progress on inhibitors, these are not yet commercially available. There is uncertainty around when inhibitors will be available, what their costs could be and how effectively they could reduce emissions. Therefore, as mentioned, our path
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has been set so that the budgets can be achieved without the use of either methane inhibitors or vaccines. However, if any of these technologies could be brought to market before 2035, they would provide additional options for meeting the emissions budgets. We will be reviewing progress on the developing these technologies and will consider changes to the emissions budgets if we believe they can be widely adopted in the future.
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Figure 9.10: Changes in livestock numbers, production and emissions since 1990 and in our path for dairy farming (top) and sheep and beef farming (bottom). Source: Commission analysis.
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Figure 9.11: Changes in livestock numbers, production and emissions in our path to 2035 compared with changes from 2000-2018 Source: Commission analysis.
Figure 9.12: Land use for agriculture and forestry in our path Source: Commission analysis.
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Forestry Native forests Our path would see a significant increase in new native forests established on less productive land. The Ministry for Primary Industries forecasts that there will be around 12,000 hectares of new native forests established in 2021. Our path would see this ramp up to 25,000 hectares per year from 2030 (Figure 9.13). In total, close to 300,000 hectares of new native forests would be established by 2035 (Figure 9.12 above). The rate that we can plant or revert native forest would likely be limited by nursery capacity, pest control and fencing. Estimates from recent studies suggest there is on the order of 1,150,000 to 1,400,000 hectares of marginal land that could be planted in forestry. As much of this land is steep and prone to erosion, we consider that it would be more suitable for permanent forests, particularly native forests. Exotic forests In our path, exotic afforestation would continue on the trajectory expected under current policies up until 2030, averaging around 25,000 hectares per year. From 2030 onwards, the rate of afforestation for carbon removals would reduce. In total, around 380,000 hectares of new exotic forestry would be established by 2035. We have not assumed any change in the percentage of permanent exotic forest above Ministry for Primary Industries projections as this is not required to reach emissions targets. As well as planting new forests our path would reduce deforestation, which is still a considerable source of emissions in Aotearoa. Our path assumes that no further native deforestation occurs after 2025.
Figure 9.13: Afforestation and deforestation by year in our path. Source: Commission analysis. Bioenergy Trees can help in the transition a low emissions Aotearoa in other ways.
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Bioenergy offers a low-cost route for decarbonising some sectors, including process heat. Overall, there appears to be a large potential biomass supply from collecting and using waste from forestry and wood processing. However, the availability is likely to vary across the country due to regional mismatches in supply and demand of biomass, and the cost of transporting biomass. While the supply of biomass residues may appear to be abundant in some regions, trade-offs may also need to be made when deciding what parts of the economy to decarbonise using biomass first. Timber can displace emissions intensive materials such as steel and cement in buildings. This reduces embodied emissions and can lock up carbon for several decades.
Waste Reusing and recovering waste materials is a key part of a circular economy. Our path would see a reduction in the amount of waste generated and a focus on reducing the amount of organic waste, such as food, wood and paper, that go into landfills. We assume varying portions of the different organic waste streams can be diverted to recycling, anaerobic digestion, composting, and for use as boiler fuel. Our path would see the total amount of organic waste going to landfills decrease by 23% from 2018 to 2030 (Figure 9.14). Of the different waste types, food and paper waste would see the greatest decrease, with the amount going to landfills reduced by around 40% by 2030 (Figure 9.15). Waste emissions can also be reduced by increasing the amount of biogenic methane which is captured and destroyed from landfills, through either upgrading landfill gas capture systems, or diverting organic waste from sites without landfill gas capture to those with capture. In our path we assume minor improvements in capture efficiency at landfills with existing gas capture systems, and increased coverage to 10% of non-municipal landfills and other municipal landfills by 2030. These steps would reduce total methane emissions from waste by an additional 4% by 2030.
Figure 9.14: Total organic waste sent to landfill in our path. Source: Commission analysis.
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Figure 9.15: Tonnes of waste sent to landfill, indexed to 2018 values Source: Commission analysis.
F-gases Fluorinated gases, including hydrofluorocarbons (HFCs), are greenhouse gases that are primarily used as refrigerants in fridges, freezers and air conditioning systems. Our path assumes emissions from HFCs reduce by at least 18% by 2030 and 33% by 2035 in line with the actions Aotearoa takes under the Kigali amendment to the Montreal Protocol. This can be achieved through reducing the import of HFCs in second-hand products, reducing equipment leakage, and increasing end-of-life recovery of products that contain these gases.
9.2.3 There is flexibility in how our recommended budgets can be achieved We have tested the proposed emissions budgets to ensure that they can be met across a range of future circumstances. These tests have examined the flexibility to meet the emissions budgets with different mixes of actions. We have developed two illustrative alternative paths to examine distinct variations to our main path which could meet the same budget levels via different mixes of measures. The alternative paths also achieve broadly the same balance of long-lived gases and biogenic methane within the budgets. Alternative path A tests how our proposed emissions budgets could still be met with a slower uptake of electric vehicles and with less emissions reduction achieved through changes in farm management practices. In this case, the emissions budgets could be met through: •
further reducing travel or shifting to lower emissions travel modes
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• • • •
further land use change from livestock agriculture into horticulture, exotic forestry and other uses further reducing the amount of organic waste sent to landfill phasing out F-gas refrigerants faster an earlier switch away from gas use in the wood processing sector.
Alternative path B tests how our proposed emissions budgets could still be met with less change from current behaviours. In this case, the emissions budgets could be met through: • • •
further accelerating uptake of electric vehicles so that all new light vehicles entering the fleet are electric by 2030 a methane inhibitor being widely adopted on dairy farms, reducing methane emissions from dairy cattle by around 5% in 2030 and 15% by 2035 further increases in landfill gas capture.
The specific variations in alternative paths A and B compared with our path are set out in Table 9.2 below. Other actions common to all three paths are as described in the previous section above. Table 9.3 shows the emissions and removals for each path over the three budget periods. The alternative paths would meet the overall emission budgets defined by our path to within 1 Mt CO2e, and with a similar balance of greenhouse gases and removals.
Table 9.2: Actions that differ between our path and alternate paths A and B EV share of light vehicle registrations Household light vehicle travel
Low carbon liquid fuels Electric air travel
Kinleith pulp mill conversion Farm management changes
Our path 50% by 2028 100% by 2032
Alternative path A 50% by 2030 100% by 2035
Alternative path B 50% by 2027 100% by 2030
34 billion vehicle-km in 2035 (1% reduction from 2018)
32 billion vehicle-km in 2035 (6% decrease from 2018)
36 billion vehiclekm in 2035 (6% increase from 2018)
140 million litres per year by 2035
None
None
5% of domestic air passenger-km electric by 2035
2030
2025
Reduce average emissions per hectare by 13% for dairy and 7% for sheep and beef by 2035
Methane inhibitors and vaccine
2030
Reduce average emissions per hectare by 8% for dairy and 3% for sheep and beef by 2035
None
Reduces dairy enteric methane by 5% by 2030 and 15% by 2035
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Nitrification inhibitor
Reduces dairy nitrous oxide emissions by 5% by 2035
None
Same as our path
Exotic afforestation
Average of 25,000 hectares per year to 2030
Additional 5,000 hectares per year from 2025-2029
Same as our path
Dairy to horticulture conversion
2,000 hectares per year converted from 2025 (additional to MPI baseline)
3,500 hectares per year converted from 2021
None
Sheep and beef land retirement
~500,000 hectares by 2025 then no further retirement (per MPI baseline)
Further 500,000 hectares retired by 2035
Same as our path
Reduce total organic waste to landfill by 23% by 2030
Reduce total organic waste to landfill by 39% by 2030
Same as our path
Waste recovery/diversion Landfill gas capture
HFCs
By 2035: Municipal landfill capture efficiency increased to 73% Capture systems at 20% of non-municipal landfill sites
33% emissions reduction by 2035
45% emissions reduction by 2035
Municipal landfill capture efficiency increased to 80%; Capture systems at 70% of nonmunicipal landfill sites Same as our path
Table 9.3: Emissions and removals by budget period in our path and alternative paths A and B, in CO2e
Budget 1 (2022-2025) Budget 2 (2026-2030) Budget 3 (2031-2035)
Our path Alt. path A Alt. path B Our path Alt. path A Alt. path B Our path Alt. path A Alt. path B
Biogenic methane (Mt CO2e) 123 124 124 146 147 146 138 138 135
Long-lived gas emissions (Mt CO2e) 174 172 174 190 189 190 153 157 153
Removals
Net total
(Mt CO2e) 26 26 26 49 49 49 68 72 68
(Mt CO2e) 271 270 272 286 286 287 223 224 220
These illustrative alternative paths show that there are a range of ways in which the recommended budgets could be achieved through different combinations of measures. However, the ambition level of the proposed budgets means there is limited flexibility in the rate of adoption of key 1 February 2021 Draft Supporting Evidence for Consultation
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measures. For example, the proposed budgets would be unlikely to be achieved without electric vehicles reaching 100% of new light vehicle imports by 2035 at the latest. Achieving this sooner would give greater flexibility in how the budgets could be met. The potential emissions reductions from methane technologies such as inhibitors and vaccines are large. When these technologies become available, we will expect that the budgets are set at a level which would encourage their adoption. While we currently do not have sufficient confidence to set budgets which would require the use of these technologies, when they are proven and available, we expect to reassess the recommended budgets to take this into account.
9.2.4 Meeting the budgets Our analysis above shows that the proposed emissions budgets are achievable under a range of circumstances. Our path is one way the budgets could be met. However, there will be many other ways to meet the budgets. We consider that our path would be a good starting point for the Government’s consideration of the actions required under the emissions reduction plan to meet the budgets. Our path would enable a portfolio of measures to be developed which would provide flexibility in how the budgets are met. In addition, it would enable a basis for a wider range of measures for the Government to use to meet the later budgets. In this way our path does not just seek to keep open the option of deploying some measures, but to actively encourage the development of new options.
Using budgets to achieve both components of the 2050 target The Act specifies that the budgets are the total emissions across all gases, both biogenic methane and long-lived gases, expressed as a net quantity of carbon dioxide equivalent. While the Commission advises on the expected amounts of biogenic methane and other gases, the budgets can be met through any mix of the two. Because of the different warming impacts of different greenhouse gases, the balance between the two components of the 2050 target makes a difference both to our contribution to long term global temperature increases, and to the feasibility of meeting the 2050 target. For instance, achieving the recommended budgets through greater than envisaged reductions in biogenic methane could increase the risks of not being on track to meet the net zero long-lived gas component of the 2050 target. Planning to meet the budgets through significantly more reliance on exotic forest removals we have advised on would result in delaying taking actions that reduce emissions. This could mean faster more costly actions are required later to keep on track to achieve net zero long-lived gas emissions by 2050. Greater reliance on exotic forest removals would also expose Aotearoa to increased risk from future climate changes such as forest fires, droughts and pests, reducing the stock of carbon in the forest. Therefore, we consider that in setting actions and policies to meet the recommended budgets, the Government should aim as far as possible to achieve broadly the same mix of long-lived gas and biogenic methane as set out in our advice. It is appropriate for there to be some flexibility to meet budgets through different combinations of long-lived gases and biogenic methane. This flexibility is useful in managing uncertainty in how effective the portfolio of policies will be. However, in its response to budgets we suggest that the Government plan to meet budgets as if the two components of the 2050 target were to be separately achieved.
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Taking such an approach would also be more likely to ensure that our emissions reductions are in line with the IPCC path that limit warming to 1.5C.
The Government should aim to overachieve the budgets Under the Act, the Minister must ensure that the emissions over the specified budget period do not exceed the budget level. This suggests that, in planning to meet the budgets, the Government should aim to overachieve the budgets in order to have high confidence that emissions will be below budget level. There is a delay of up to 2.5 years between emissions occurring and their reporting in the Greenhouse Gas Inventory. Therefore, it will be difficult for Government to monitor emissions in real time and to make adjustments to its policies to ensure that it is on track to meet the budgets. One strategy to provide greater flexibility would be for the Government to put in place a wide range of polices that mutually reinforce each other which would give it more options for making adjustments to help meet the emissions budgets. This strategy would also help to avoid the risk that some actions fail to deliver the expected emissions reductions for whatever reason. We believe it would be prudent for the Government to set out plans which aim to overachieve the budgets, to ensure that there is high confidence that the budgets can be met. While the Act provides some limited ability to meet budgets by borrowing against future budgets, the Government should not plan on using this flexibility in setting its policy and because it will increase the risks and costs to future generations and create inequities.
Domestic flexibilities to meet the budget There are a number of flexibility mechanisms under the Act that allow for a budget to be met domestically. These include: •
Setting emissions budgets so that they are resilient to uncertainty: the risks and uncertainties about future opportunities to reduce emissions can be factored in upfront. This makes it more feasible to still meet the emissions budgets domestically, even if some policies or actions do not deliver the expected quantity of reductions. This is the approach we have taken to recommending the first three emissions budgets.
•
Revising emissions budgets: emissions budgets that have already been notified can be revised when a further emission budget is being put in place. For example, in 2024 the fourth emissions budget is due to be set. At this time, the second and third emissions budget can also be revised, if there has been a significant change in circumstances since those emissions budgets were set.
•
Borrowing: at the end of an emissions budget, a small amount (1%) of the volume from the next emissions budget can be brought forward to help meet the current emissions budget.
Our view is that in planning to meet the emissions budgets, the Government should not intend to rely on borrowing to meet the budgets. Borrowing should only be used when the Government finds itself in a position where there is not sufficient time in the budget period to adjust policies to ensure emissions are below the budget level. Emissions removals from exotic forest can also be used as a flexibility mechanism to help ensure that the budgets are achieved. Additional removals from exotic forests, above what is set out in our path, could have a useful role to provide some headroom to ensure budgets are always met. 1 February 2021 Draft Supporting Evidence for Consultation
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Because of the time taken for forests to sequester substantial carbon, advance planning to encourage this additional planting could be a useful flexibility mechanism for the Government. These removals could form a reserve which the Government could call on in case other actions fail to deliver the expected emissions reductions.
9.2.5 Offshore mitigation The Minister must set emissions budgets that Aotearoa can reach using our own domestic emissions reductions and removals. Emissions budgets must also be met as far as possible through domestic emissions reductions and removals. It is possible, however, to resort to the use of offshore mitigation to meet an emissions budget under certain circumstances. “Offshore mitigation” refers to units or emissions reductions and removals bought from overseas. We must advise on the circumstances that would justify the use of offshore mitigation as well as a limit on how much offshore mitigation should be used for meeting an emissions budget. Circumstances justifying the use of offshore mitigation Offshore mitigation gives the government flexibility to meet emissions budgets if reducing emissions domestically turns out to be more difficult than expected. It is not the only flexibility that is available. We have identified two categories of circumstances that might arise that could make it difficult for Aotearoa to meet its emissions budgets: •
Known unknowns: these are risks and conditions that are known but somewhat uncertain or difficult to quantify. Examples include the cost and uptake rates of electric vehicles, or exactly when the Tiwai Point aluminium smelter or the Huntly power plant close. The government may also be able to influence these factors to some extent through policy.
•
Unknown unknowns: these are unexpected situations that cannot be foreseen or quantified in advance. These could be characterised as exceptional circumstances or force majeure events which are unpredictable, outside the control of the Government, unpreventable and which cause a large one-off increase in emissions. Examples would be natural disasters such as earthquakes or volcanic eruptions, or a (not reasonably preventable) fire that affects the HVDC inter-island link connecting the electricity networks of the North and South Islands.
When it comes to known unknowns, we think the three domestic options outlined above give the Government enough flexibility. At this early stage of our decarbonisation journey, our analysis shows that there is a range of options and path available for meeting the emissions budgets. This approach also aligns with the purpose of emissions budgets and the 2050 target to drive domestic emissions reductions and the transformation of our economy. If events in the “unknown unknowns” category occur, the timing and scale of the emissions increase may be so large that it cannot be made up for domestically. We consider that only these circumstances would justify using offshore mitigation for the first three emissions budgets. Domestic options should be exhausted first, however, as offshore mitigation should be the last resort.
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Chapter 10: Requests under s5K relating to the Nationally Determined Contribution and biogenic methane – supporting evidence We have been asked two additional questions – about the compatibility of the Nationally Determined Contribution (NDC) with the 1.5ᵒC goal, and about what long-term reductions of biogenic methane emissions the country might be required to make. In this chapter we show our work on how we have used the IPCC modelling in our assessment of the NDC. We also discuss the long-term global and local trends that will influence what contribution reductions of biogenic methane might need to make to limiting warming in the future.
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Contents Chapter 10: Requests under s5K relating to the Nationally Determined Contribution and biogenic methane – supporting evidence ................................................................................................... 1 10.1 Introduction ......................................................................................................................... 3 10.2 Methodology to convert NDC targets to NDC emission budgets ............................................. 4 10.2.1 General approach .................................................................................................................... 4 10.2.2 Kyoto Protocol approach ......................................................................................................... 5 10.2.3 Applying the IPCC modelled reductions to Aotearoa .............................................................. 6 10.2.4 Application to Aotearoa ........................................................................................................... 7 10.3 What social, economic and demographic changes may occur that could affect methane emissions from Aotearoa?.......................................................................................................... 10 10.3.1 Population growth and food demand.................................................................................... 10 10.3.2 Demand for low emissions agricultural production .............................................................. 13 10.3.3 Other environmental challenges ........................................................................................... 15 10.4 References ......................................................................................................................... 18
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We have been asked two additional questions – about the compatibility of the Nationally Determined Contribution (NDC) with the 1.5°C goal, and about what long-term reductions of biogenic methane emissions the country might be required to make. In this chapter we show our work on how we have used the IPCC modelling in our assessment of the NDC. We also discuss the long-term global and local trends that will influence what contribution reductions of biogenic methane might need to make to limiting warming in the future.
10.1 Introduction In addition to providing advice on first emissions budgets of Aotearoa, the Minister for Climate Change has asked the Commission to provide advice on two other matters. The first is related to biogenic methane. Specifically, the Minister has asked the Commission to provide: “advice on the potential reductions in biogenic methane emissions which might eventually be required by New Zealand as part of a global effort under the Paris Agreement to limit the global average temperature increase to 1.5o Celsius above preindustrial levels. In providing this advice the Commission must: a. leave aside considerations on the current target range for biogenic methane specified in section 5(Q)(1)(b) of the CCRA; b. consider the available scientific evidence on the global biogenic methane emissions reductions likely to be required to limit global average temperature increase to 1.5o Celsius above pre-industrial levels; c. consider New Zealand’s potential contribution to global efforts to limit biogenic methane emissions, reflecting its national circumstances; and d. consider a range of potential scenarios for economic, social and demographic changes which might occur in New Zealand and globally until 2100.” The second is related to Nationally Determined Contribution of Aotearoa under the Paris Agreement. Specifically, the Minister has asked the Commission to provide: “a report on New Zealand’s first Nationally Determined Contribution (NDC), including: a. advice on whether the NDC is compatible with contributing to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5o Celsius above pre-industrial levels; and b. recommendations on any changes to the NDC required to ensure it is compatible with global efforts under the Paris Agreement to limit the global average temperature increase to 1.5o Celsius above pre-industrial levels.” The methodology we have used to analyse the two questions and our findings are included in Chapter 8: The global 1.5°C goal and Nationally Determined Contribution for Aotearoa and Chapter 9: Eventual reductions in biogenic methane of the Advice report. This chapter outlines additional evidence relevant to the two requests under s5K of the Act. It describes: • •
The methodology for converting from emission targets to NDC emission budgets and how the results of the IPCC’s 1.5°C modelling has been applied to Aotearoa. Reference material on the future economic, social and demographic trends that might occur to 2100.
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Further evidence relevant to these requests is included in Chapter 1: The science of climate change and Chapter 2: What other countries are doing.
10.2 Methodology to convert NDC targets to NDC emission budgets In this section we describe the conceptual approach to converting targets to NDC emission budgets, how this was done under the Kyoto Protocol, and the approach we have taken to doing so and how that differs slightly from the methodology used under the Kyoto Protocol. The country’s first NDC is a 30% cut in net emissions by 2030 compared to 2005 gross levels. The NDC uses an emissions budget approach which means we are taking responsibility for emissions over the whole period 2021-2030. There is an approach to converting targets for a single year to allowed emissions over a whole period. This is described in a technical document developed for the Kyoto Protocol1 and the initial report on the country’s 2020 emissions target provides an example of its application in practice2. In assessing possible alternative NDCs associated with 1.5°C pathways we have used a version of this approach. Some features of that methodology are particular to the Kyoto Protocol and are no longer necessary and so have not been applied. This section describes how the calculation is done and the parameters and assumptions the Commission has chosen in doing so.
10.2.1 General approach The key concept is that the total amount of emissions the country is allowed to emit each year during the NDC period is calculated by taking a straight line from the previous target to the future target. The actual emissions pathway does not have to follow this exact trajectory so long as the country’s total emissions over the period is less than the allowed level.
Figure 10.1: Illustration of conversion of the existing 2030 target to an NDC amount3 1
(UNFCCC Secretariat, 2010) (Ministry for the Environment, 2016) 3 The 2030 target is to reduce emissions to 30% below 2005 levels. Here it is presented as a reduction against 1990 levels for easier comparison to the 2020 target that preceded it. 2
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10.2.2 Kyoto Protocol approach The Kyoto Protocol methodologies that were used to determine the allowed emissions under the first NDC use a slightly more complex calculation. Under the Kyoto Protocol approach, the starting point for the emissions trajectory is the midpoint of the previous period, not the final year of the previous target. This was chosen because under the Kyoto Protocol, allowed emissions levels were averaged over the period and it was this average that was the stated target. Using that average target level in the final year as the start point for the next target would overstate the allowed emissions as the emissions in the final year of the previous period should be below the average by the final year as illustrated in Figure 10.2 below.
Figure 10.2: Illustration of Kyoto approach to converting targets to NDC amounts
These approaches do not distinguish between gases and apply the overall emissions reduction to the total sum of greenhouse gases expressed in CO2e. Using this approach, the Ministry for the Environment previously calculated the allowed emissions budget for the NDC period 2021-2030 was 601 Mt CO2e.4 This was based on estimates of past emissions from the greenhouse gas inventory published in 2017. The 601 Mt CO2e figure will be adjusted and finalised in 2023/24 after the greenhouse gas inventory covering the 2020 year has been finalised and reviewed. We have applied this approach using the latest inventory figures and calculated that the current NDC allows net emissions of 585 Mt CO2e over 2021-2030. This is our current estimate of the NDC emissions budget. In assessing possible NDCs that would be compatible with the IPCC’s modelling of pathways compatible with 1.5°C, we have applied the general version starting from the previous 2020 target. This is because the country’s 2013-2020 commitment was expressed as a target level in 2020 and calculated as an emission budget from that stated target. As the target expresses a trajectory to a level in 2020 and not only an average over the period, it is unnecessary to start from the middle of the previous period.
4
(Ministry for the Environment, 2019b)
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10.2.3 Applying the IPCC modelled reductions to Aotearoa In our advice on the compatibility of the NDC, we compare the current NDC to hypothetical NDCs as if we had taken a target based on the reductions in greenhouse gases modelled by the IPCC in its Special Report on 1.5°C. Here we explain how that was done, the judgements that have to be made in applying the methodology above and what judgements and parameters we have used in doing so.
Gases We have applied separate trajectories for each of the three main greenhouse gases, carbon dioxide, methane, and nitrous oxide, to distinguish between the different levels of emissions reductions modelled for different gases. These were then reaggregated together using the GWP100 metric from the IPCC Fourth Assessment Report to create a total NDC emissions budget. Aggregate emissions of fluorinated gases were assumed to decrease by 85% below 2018 levels by 2036 in line with the phase out of these gases agreed under the Montreal Protocol. The cuts to agricultural methane and nitrous oxide modelled by the IPCC were applied to total emissions of methane and nitrous oxide respectively, as the vast majority of the country’s emissions of those gases are from the agriculture sector.
Start year We have applied the general approach beginning from the 2020 target level of 5% below 1990 levels. As the 2020 target was expressed as a reduction level to be achieved in 2020, it is unnecessary to start from the mid-point of the previous period. Further, to do so would be to inconsistently apply the emissions trajectory for the 2021-2030 period to the latter half of the 20132020 period. So long as the NDC emissions trajectory starts from the level of the 2020 target in 2020, this will correctly represent the transition from one target to another. In applying the IPCC modelled reductions by gas, we have applied the 2020 emissions reduction target of 5% on 1990 levels to each of the three main gases as the start point for each gas.
Base year The current NDC is expressed as a 30% reduction in emissions on 2005 levels. The emission reductions modelled by the IPCC for 1.5°C compatible pathways are expressed as percentage cuts by gas against 2010 levels. In describing the NDCs that would be associated with the IPCC 1.5°C range we have therefore used a 2010 base year to be consistent with how the IPCC developed them, and converted these targets to absolute levels of emissions in 2030 of each of the three main gases.
Forest accounting Consistent with the Kyoto Protocol based target accounting approach, forestry is excluded from the base year. The reductions in carbon dioxide modelled by the IPCC are to net emissions. Under the agreed accounting rules for the Kyoto protocol, emissions and removals of carbon from land use change and by forestry are excluded from the base year in calculating targets if the sector was a net sink of emissions in the base year – which it was in Aotearoa. This is because carbon removals from new plantation forestry deliver a one-off removal from the atmosphere over the first decades of the life of the forest. After that time, the forest is neither a sink nor a source of emissions as removals from growth are balanced by emissions at harvest. After that time, the forest is neither a sink nor a source of emissions as carbon removals from growth are
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balanced by emissions at harvest. Including these emissions removals in the base year would mean an ongoing level of new forest planting would be required to maintain net emissions at a constant level. This does not accurately represent the level of effort in the base year and would not be sustainable indefinitely. At a global level however emissions from land use change represent additional emissions every year through deforestation and need to be reduced in the same way gross emissions do. Chapter 3: How to measure progress, provides further detail on this issue.
Fluorinated gases The three main gases comprise 98% of total greenhouse gas emissions. The remaining 2% are from fluorinated gases – hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). In the NDC trajectories, fluorinated gases have been held constant at 2018 levels in 2020, and then reduced in a linear trajectory to the target of an 85% reduction by 2036 consistent with the agreement made under the Kigali amendment to the Montreal Protocol to reduce emissions from HFCs.5 HFCs comprise 95% of emissions of fluorinated gases so one trajectory has been applied for fluorinated gases in the aggregate.
10.2.4 Application to Aotearoa Trajectories for each of the three main gases are calculated from the 2020 starting point, to the 2030 target level, converted to carbon dioxide equivalent using GWP100 values from the Fourth Assessment Report (25 for methane, 298 for nitrous oxide), and aggregated together with the trajectory for fluorinated gases. The upper and lower quartiles of emissions reductions modelled by the IPCC for 1.5°C pathways by gas were used for the target level in 2030. The quartiles were used to exclude the least feasible of the modelled scenarios while still providing a range. The sum of emissions over the 2021-2030 period provides the indicative allowed emissions over the NDC period associated with the IPCC 1.5°C ranges. The range of emissions reductions modelled for the world for the three main greenhouse gases are given in Table 10.1 below. Table 10.1: Percentage emissions reductions by gas by 2030 modelled by the IPCC Percentage change relative to 2010 by 2030 Net carbon dioxide emissions Agricultural methane emissions Agricultural nitrous oxide emissions
Lower quartile -40% -11% +3%
Upper quartile -58% -30% -21%
Table 10.2 steps through the figures for each of the three main gases. It includes what emissions of each gas was in 1990, and therefore what the 2020 target level is pro-rated to each gas (a 5% reduction on 1990 levels). It includes 2010 emissions of each gas. The upper quartile and lower quartile emissions reductions from Table 10.1 are applied to 2010 emissions to get two sets of 2030 end points for the NDC trajectory for each gas.
5
(Ministry for the Environment, 2019a)
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Table 10.2: Aotearoa NDC emissions trajectory start and end point calculations by gas Start point 1990 2020 target emissions 5% reduction (kt gas) on 1990 (kt gas) Net carbon dioxide Methane Nitrous oxide
2010 emissions (kt gas)
End point IPCC 2030 Lower Quartile reductions (kt gas)
IPCC 2030 Upper Quartile reductions (kt gas)
25,446
24,174
34,958
20,975
14,682
1,292
1,227
1,373
1,222
961
16.5
15.7
23.1
23.8
18.2
Table 10.3 describes the start and end point for emissions of fluorinated gases used in the NDC calculations. As fluorinated gases comprise around 2% of total emissions, only one emissions trajectory has been used. Table 10.3: Aotearoa start and end points used for fluorinated gas emissions
Fluorinated gas emissions
2018 emissions (kt CO2e) 1,903
2036 target level, -85% (kt CO2e) 285
Table 10.4 and Table 10.5 then step through the emissions trajectories of each gas by drawing a straight path from the given start point in 2020 to the target level in 2030 for the lower quartile and upper quartile of IPCC 1.5°C pathways respectively. For the fluorinated gases, the trajectory is drawn to the target level in 2036 and the emissions over 2021-2030 are presented. Aggregating the volume of emissions allowed by these trajectories over 2021-2030 is how the NDC range of 524-604 Mt CO2e were calculated.
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Table 10.4: NDC emissions trajectories by gas and in total for the IPCC lower quartile 1.5ᵒC pathway Year
2020 start point 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total 20212030
Emissions trajectory associated with IPCC lower quartile cuts for 1.5°C pathways Carbon Methane Methane Nitrous Nitrous Fluorinated Total dioxide (kt CH4) (kt CO2e) oxide oxide gases (kt CO2e) (kt CO2) (kt N2O) (kt CO2e) (kt CO2e)
24,174 23,854 23,534 23,214 22,894 22,574 22,254 21,934 21,615 21,295 20,975
1,227 1,226 1,226 1,225 1,225 1,224 1,224 1,223 1,223 1,222 1,222
30,673 30,660 30,648 30,637 30,622 30,609 30,596 30,583 30,570 30,558 30,545
15.7 16.5 17.3 18.1 18.9 19.7 20.5 21.3 22.1 22.9 23.8
4,681 4,921 5,161 5,400 5,640 5,880 6,120 6,360 6,600 6,840 7,080
1,903 1,802 1,701 1,600 1,499 1,398 1,297 1,195 1,094 993 892
61,431 61,237 61,043 60,849 60,655 60,461 60,267 60,073 59,879 59,685 59,491
224,144
12,241
306,026
201.3
60,003
13,472
603,643
Table 10.5: NDC emissions trajectories by gas and in total for the IPCC upper quartile 1.5°C pathway Year
Emissions trajectory associated with IPCC upper quartile cuts for 1.5°C pathways Carbon Methane Methane Nitrous Nitrous Fluorinat Total dioxide (kt CH4) (kt CO2e) oxide oxide ed gases (kt CO2e) (kt CO2) (kt N2O) (kt CO2e) (kt CO2e)
2020 start point
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total 2021 2030
24,174
1,227
30,673
15.7
4,681
1,903
61,431
23,225 22,276 21,326 20,377 19,428 18,479 17,530 16,581 15,631 14,682
1,200 1,174 1,147 1,121 1,094 1,067 1,041 1,014 988 961
30,008 29,343 28,678 28,013 27,349 26,684 26,019 25,354 24,689 24,024
15.9 16.2 16.5 16.7 17.0 17.2 17.5 17.7 18.0 18.2
4,756 4,831 4,906 4,981 5,055 5,130 5,205 5,280 5,355 5,430
1,802 1,701 1,600 1,499 1,398 1,297 1,195 1,094 993 892
59,791 58,151 56,510 54,870 53,230 51,590 49,949 48,309 46,669 45,029
189,535
10,806
270,161
170.9
50,929
13,472
524,098
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10.3 What social, economic and demographic changes may occur that could affect methane emissions from Aotearoa? This section summarises information on key social, economic and demographic factors and changes that may occur until 2100 that could affect the level of methane reductions Aotearoa makes. The material considers both global ‘megatrends’ and factors within Aotearoa. The section draws on a number of domestic and international sources. Key amongst these is a summary report of national and international factors that can affect the primary sector and land use, produced by the Our Land and Water National Science Challenge.6
10.3.1 Population growth and food demand The world population is expected to continue to increase over the century, reaching more than 9 billion people by 2050. Figure 10.3 shows this with the medium, high and low projections from the United Nations Population Prospectus 2019. Global population growth rates are expected to slow over the century, although by how much is uncertain. Estimates used in the IPCC 1.5°C pathways put the likely global human population at between 9-11 billion by the end of the century.7 18 16
World population (billions)
14 12 10 8 6 4 2
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
0 Medium
High
Low
Historic
Figure 10.3: Historic and projected global population growth8 Population growth rates vary in different parts of the world. It is expected that Africa (predominantly sub-Saharan Africa) will account for most of this growth, with the population increasing from around
6
(Driver et al., 2019) (IPCC, 2018) 8 (United Nations, 2019) 7
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1.3 billion to 4.3 billion people by 2100. In comparison, European and Latin American populations are expected to decline by 2100.9 This growing population will require food and nutrition. A number of estimates exist for changes in food demand, which include both an increase in total amount and changes in the type food required. The Food and Agriculture Organisation (FAO) has estimated the need to double global food production by 2050 to meet the expected demand of around 9.7 billion people, although this need is not evenly distributed around the world. Food demand in sub-Saharan African and South Asia is expected to double, and increase by around a third in the rest of the world. The FAO also predicts increasing demand for animal products, fruit and vegetables and more processed foods, due to a combination of increasing wealth and greater urbanisation.10 The IPCC 1.5°C pathways also model food demand, and largely expect individual demand for food (calories/person/day) to stay the same or to increase over the rest of the century. Combined with the expected increases in total population, this will lead to an overall increase in food demand. Food exporting countries such as Aotearoa will have an important role to play in meeting this projected increased demand. As Figure 10.4 shows, many of the regions that will experience the greatest population growth are also already net food importers.
9
(United Nations, 2019) (FAO, 2017)
10
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Figure 10.4: Percentage of net food imports in domestic food supply in total calories11 Aotearoa exports food and fibre to over 140 countries. The top ten countries by revenue are shown in Figure 10.5. China is the country’s largest export destination, with dairy, meat and wool and forest products making up the majority of products sold.
11
(FAO, 2017, p. 29)
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Figure 10.5: the top ten countries that Aotearoa exports food and fibre to12
The bulk of global population growth is expected to occur in regions that are not currently major export destinations for Aotearoa, such as sub-Saharan Africa and South Asia. Most Aotearoa dairy and meat exports are targeted at middle-class and premium consumers in China, Europe and North America. However, in addition to global population growth, incomes in many developing countries are expected to rise and bring with it an expanded global middle-class. Historic trends and population surveys show a clear relationship between increasing incomes and consumption of meat and dairy products, which may favour producers in Aotearoa.13
10.3.2 Demand for low emissions agricultural production Both globally and domestically, there are growing concerns about quality and environmental footprint of food. Food safety and quality is a fundamental expectation, and Aotearoa does well in this regard. We have well developed systems and processes to ensure the quality of the food that we consume domestically and export. Rising consumer expectations regarding the climate impact of products could affect the context of the country’s biogenic methane emissions reductions in several ways. Firstly, it could lead to changes in demand for meat and dairy exports. On one hand, this could favour Aotearoa producers if consumers place a premium on lower emissions varieties of the products they already consume. The country’s meat and dairy products are already some of the least
12 13
(Ministry for Primary Industries, 2020, p. 5) (Godfray et al., 2018)
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emissions intensive (emissions per unit of product) in the world,14 and this efficiency has been increasing over time. There has been an efficiency gain of approximately 33% for sheep meat, a 30% for beef and a 20% for dairy between 1990 and 2017 (Figure 10.6).
Figure 10.6: Emissions intensity (emissions per unit of product) 1990 to 2017.15
Secondly, a shift in preferences towards low emissions products could negatively impact Aotearoa exports if preferences move not to lower emissions versions of meat and dairy products but away from these products entirely. The production of some alternative protein products has been shown to have lower environmental impacts, including producing significantly less greenhouse gas emissions, than traditional ruminantbased dairy production.16 Alternative dairy products, based on plant ingredients such as soy, nuts and other plant products are a growing global market. The global market for dairy alternatives was valued at US$15.5 billion in 2017 and expected to grow to US$38.9 billion by 2025.17 Global dairy company Danone has recently invested around US$60 million in plant-based production to allow it to complete in the alternative dairy category.18 Similar, demand for other alternative protein sources is also growing. These sources include foods such as edible insects, plant and non-ruminant proteins, and cultured or synthetic proteins. There has been significant growth the availability of plant-based proteins over the last decade, including within Aotearoa – one domestic supermarket chain recorded a 36% increase in demand for plant-based protein between 2018 and 2019.19 Globally, it has been estimated that plant-based
14
(Parliamentary Commissioner for the Environment, 2019) (Interim Climate Change Committee, 2019, p. 27) 16 For example, see (Poore & Nemecek, 2018) 17 (Driver et al., 2019) 18 (Driver et al., 2019) 19 (Stuff, 2019) 15
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meat replacements could make up 25% of global demand by 2040, compared to less than 10% in 2015.20 There is also growing interest in the production of cultured or synthetic proteins that are produced using biotechnical methods. They include culturing of animal tissue cells within laboratory conditions to create alternatives to animal grown ‘meat’, and recombinant genetic technologies to produce milk or milk constituents, in place of milk from a cow or other ruminant. Fonterra has recently invested in a US-based food developer involved in alternative milk production to diversify its product portfolio.21 To date, no company has successfully brought a cultured meat or milk alternative to market, although there are more than 30 companies globally that are seeking to do so.22 There are a range of reasons for this, including costs or production, uncertainties around acceptance by consumers, and a lack of regulatory systems to support commercialisation. Current estimates put the arrival of cultured meats on supermarket shelves at anywhere between 1-20 years.23 However, there is unlikely to be a global abandonment of animal-based proteins due to cultural and nutritional reasons. Animal-based food contain essential nutrients that are not always easily produced in certain environments. Vitamin B12, for example, is almost only found in animal products. It is not possible to definitively say what the overall impact of these developments – both increasing demand for relatively low emissions animal-based products that Aotearoa already produces, and for alternative sources of protein that do not come from ruminants – will be on production systems in Aotearoa. It is also not possible to say exactly what impact they may have on emissions of biogenic methane. In light of this, both producers and government agencies have largely taken a ‘watching brief’ approach,24 although as noted above, Fonterra has taken the more proactive step of investing in a US-based alternative milk company.
10.3.3 Other environmental challenges Other environmental challenges are also related to the sources of biogenic methane emissions in Aoatearoa (waste and agriculture). These include freshwater quality, soil health, biodiversity loss and soil erosion. The growing pressure of these challenges combined with efforts to address them may have important consequences for efforts to reduce methane emissions. Freshwater quality has been a particular focus of attention over the last few decades as large areas of sheep and beef farming and plantation forestry were converted to dairy. Although rates of nitrogen and phosphorus and pathogen loss into waterways varies with land management, rates of nutrient loss into waterways are generally higher from dairy operations than from sheep and beef farming and forestry.25 In some parts of the country where there have been large-scale land 20
(A. T. Kearney, 2019) (Fonterra, 2019) 22 (Burton, 2019) 23 (Driver et al., 2019) 24 For example, The Treasury states “While, artificial meats may not be in a position to significantly disrupt the market at present, they do pose a risk. This risk is not sufficiently certain in timing or magnitude to meaningfully incorporate into the Treasury's economic forecasts at this stage. However, it is a risk that the Treasury will continue to monitor.” (The Treasury, 2018) 25 (Parliamentary Commissioner for the Environment, 2013) 21
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conversions, such as Canterbury, Southland and the central North Island, indicators of water quality and ecological health have significantly declined.26 Declining freshwater quality is a threat to many native species, this is also exacerbated by the clearance and conversion of native habitats – such as forests, wetlands and natural grasslands – often into pasture.27 Farmers and farmer groups have traditionally self-managed many of the environmental impacts of farming – either as a by-product of production-based activities, or through voluntary actions. Over recent decades, farming industry bodies have also offered support to farmers in managing environmental impacts and have developed a range of voluntary schemes aimed at addressing environmental impacts. Most notably over the last few years, industry groups and agriculture companies have worked with the Government to manage impacts on freshwater through the voluntary accord Sustainable Dairying: Water Accord.28 The He Waka Eke Noa – Primary Sector Climate Action Partnership was established between the government and the primary sector in late 2019. The partnership aims “to equip farmers and growers to reduce emissions, maintain or increase sequestration, and adapt to a changing climate.”29 Local and central government have also introduced a range of legislation and actions aimed at manging the environmental impacts of farming. Key among these has been the Resource Management Act 1991, and more recently, the National Policy Statement for Freshwater Management and supporting National Environmental Standards.30 The Resource Management Act has driven in some key improvements in water quality – for example the removal or improvement of point-source discharges from dairy operations, has resulted in significant reductions in phosphorus levels and improvements in water clarity in many areas. The Government has also recently amended the National Policy Statement for Freshwater Management with the aim of strengthening environmental protection. The impact that the changes to the National Policy Statement for Freshwater Management are expected to have on greenhouse gas emissions are outlined in Chapter 7: Where are we currently heading?. Waste management is also associated with other environmental challenges. While modern, engineered landfills mitigate some of the environmental impacts associated with their construction and management, they have wider ecological effects which may lead to landscape changes, loss of habitats and displacement of fauna. Waste leaching, particularly from older landfills, can also contaminate nearby soils and aquifers.31 New landfills must be designed to prevent leaching and are subject to close compliance and environmental monitoring. Overall, efforts to manage the environmental impacts of agriculture and waste can be expected to have largely positive impacts on biogenic methane emissions. Changes to agricultural management practices that help improve water quality impacts – such as modifying livestock feed or adjusting 26
(Ministry for the Environment & Stats NZ, 2020) (Ministry for the Environment & Stats NZ, 2020) 28 (Dairy Environment Leadership Group (DELG), 2015) 29 (He Waka Eke Noa, 2020) 30 (New Zealand Government, 2020) and (Ministry for the Environment, 2020) 31 For example, a greater frequency of extreme weather events like storms and flooding as a result of climate change may also increase the risk that landfills are disturbed, resulting in the release of waste into the environment. Many old landfills are close to rivers or the coast. (Parliamentary Commissioner for the Environment, 2008) 27
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stocking rates – should also result in fewer methane emissions. Similarly, efforts to reduce the production of waste in the first place, or to divert waste away from landfills to composting or recycling, should also lead to reductions in biogenic methane emissions.
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10.4 References A. T. Kearney. (2019). How Will Cultured Meat and Meat Alternatives Disrupt the Agricultural Food Industry? https://www.kearney.com/documents/20152/2795757/How+Will+Cultured+Meat+and+Meat +Alternatives+Disrupt+the+Agricultural+and+Food+Industry.pdf/06ec385b-63a1-71d2-c08151c07ab88ad1 Burton, R. J. F. (2019). The potential impact of synthetic animal protein on livestock production: The new “war against agriculture”? Journal of Rural Studies, 68, 33–45. https://doi.org/10.1016/j.jrurstud.2019.03.002 Dairy Environment Leadership Group (DELG). (2015). Sustainable Dairying: Water Accord. https://www.dairynz.co.nz/media/3286407/sustainable-dairying-water-accord-2015.pdf Driver, T., Saunders, C., Duff, S., & Saunders, J. (2019). The Matrix of Drivers: 2019 Update [Report for Our Land and Water National Science Challenge]. Agribusiness & Economics Research Unit (AERU), Lincoln University. https://ourlandandwater.nz/wpcontent/uploads/2020/01/Matrix_OurLandandWaterScienceChallenge-TheMatrixofDrivers32019.pdf FAO. (2017). The future of food and agriculture: Trends and challenges (p. 163). Food and Agriculture Organization of the United Nations (FAO). Fonterra. (2019). Fonterra to explore opportunities in complementary nutrition. Fonterra. https://www.fonterra.com/nz/en/our-stories/media/fonterra-to-explore-opportunities-incomplementary-nutrition.html Godfray, H. C. J., Aveyard, P., Garnett, T., Hall, J. W., Key, T. J., Lorimer, J., Pierrehumbert, R. T., Scarborough, P., Springmann, M., & Jebb, S. A. (2018). Meat consumption, health, and the environment. Science, 361(6399). https://doi.org/10.1126/science.aam5324 He Waka Eke Noa. (2020). He Waka Eke Noa Primary Sector Climate Action Partnership. He Waka Eke Noa. https://hewakaekenoa.nz/ Interim Climate Change Committee. (2019). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agriculture-inquiryfinal-report/action-agricultural-emissions/
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IPCC. (2018). Global Warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. IPCC. https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf Ministry for Primary Industries. (2020). Situation and Outlook for Primary Industries, March 2020. Ministry for Primary Industries. https://www.mpi.govt.nz/resources-and-forms/economicintelligence/situation-and-outlook-for-primary-industries/sopi-reports/ Ministry for the Environment. (2016). New Zealand’s Report to facilitate the calculation of its emissions budget for the period 2013 to 2020 (p. 15). https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/New%20Zealand%27s %20Initial%20Report%20July%202016.pdf Ministry for the Environment. (2019a). Kigali Amendment to the Montreal Protocol. https://www.mfe.govt.nz/more/international-agreements-kigali-amendment Ministry for the Environment. (2019b). New Zealand’s fourth biennial report under the United Nations Framework Convention on Climate Change. Ministry for the Environment. https://www.mfe.govt.nz/publications/climate-change/new-zealands-fourth-biennial-reportunder-united-nations-framework Ministry for the Environment. (2020). National Environmental Standards for Freshwater. https://www.mfe.govt.nz/fresh-water/freshwater-acts-and-regulations/nationalenvironmental-standards-freshwater Ministry for the Environment, & Stats NZ. (2020). New Zealand’s Environmental Reporting Series: Our freshwater 2020 (p. 90). Ministry for the Environment & Stats NZ. https://www.mfe.govt.nz/publications/environmental-reporting/our-freshwater-2020 New Zealand Government. (2020). National Policy Statement for Freshwater Management 2020. https://www.mfe.govt.nz/publications/fresh-water/national-policy-statement-freshwatermanagement-2020 Parliamentary Commissioner for the Environment. (2008). Levin landfill: Environmental management review (p. 28). Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/publications/archive/2007-2010/levin-landfill-environmentalmanagement-review
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Parliamentary Commissioner for the Environment. (2013). Water quality in New Zealand: Land use and nutrient polution (p. 82). Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/1275/pce-water-quality-land-use-web-amended.pdf Parliamentary Commissioner for the Environment. (2019). Farms, forests and fossil fuels: The next great landscape transformation? Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/media/196523/report-farms-forests-and-fossil-fuels.pdf Poore, J., & Nemecek, T. (2018). Reducing food’s environmental impacts through producers and consumers. Science, 360(6392), 987–992. https://doi.org/10.1126/science.aaq0216 Stuff. (2019). Supermarket shoppers hunt down plant-based proteins. Stuff. https://www.stuff.co.nz/business/farming/116565410/supermarket-shoppers-hunt-downplantbased-proteins The Treasury. (2018). Monthly Economic Indicators August 2018. Special Topic: Alternative Proteins, Artificial Meats and the Implications for New Zealand’s Agricultural Sector. https://www.treasury.govt.nz/publications/mei/monthly-economic-indicators-august-2018html UNFCCC Secretariat. (2010). Issues relating to the transformation of pledges for emission reductions into quantified emission limitation and reduction objectives: Methodology and examples. Revised technical paper. FCCC/TP/2010/3/Rev.1, 22. https://unfccc.int/documents/6283 United Nations. (2019). World Population Prospects 2019: Highlights (ST/ESA/SER.A/423; p. 46). Department of Economic and Social Affairs, Population Division. https://population.un.org/wpp/Publications/Files/WPP2019_Highlights.pdf
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Chapter 11: Introduction: What could this mean for New Zealanders? The climate change transition for Aotearoa will bring opportunities, benefits, challenges and costs. The way we transition will have both positive and negative impacts on different groups of society, regions, sectors of the economy and generations. Aotearoa can transition in a way that considers the wellbeing of people, the land and the environment. This Part does not attempt to ‘sum up’ the positive and negative impacts of our transition, but instead addresses each potential impact in turn – looking at where impacts could be compounded and how they could be managed.
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Contents Chapter 11: Introduction: What could this mean for New Zealanders? .............................................. 1 11.1 Introduction .................................................................................................................................... 3 11.2 References ...................................................................................................................................... 5
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The climate change transition for Aotearoa will bring opportunities, benefits, challenges and costs. The way we transition will have both positive and negative impacts on different groups of society, regions, sectors of the economy and generations. Aotearoa can transition in a way that considers the wellbeing of people, the land and the environment. This Part does not attempt to ‘sum up’ the positive and negative impacts of our transition, but instead addresses each potential impact in turn – looking at where impacts could be compounded and how they could be managed.
11.1 Introduction Understanding the impacts of the climate change transition requires understanding that all things are connected – the people, the land, the atmosphere, the oceans. The connectivity between all things – material and non-material – is central to the Te Ao Māori view, delineated through the foundational concept of whakapapa. The concept of interconnectivity is also reflected in the carbon cycle and our place in it. In our economy, understanding the connections within our economic systems – our food production system, our energy production systems, and our transport system – and our global connections is essential to understanding how Aotearoa can transition to a thriving, climate-resilient and low emissions society. The transition would bring a mix of opportunities, benefits, challenges and inevitable costs. The way Aotearoa transitions, and the policies put in place would have diverse impacts – both positive and negative – on different groups of society, regions, sectors of the economy, and generations. Any such impacts must be compared to the counterfactual – in particular to the effects and costs of more severe droughts, sea level rise, storms from a lack of global action to reduce emissions. While Aotearoa acting alone to reduce emissions would not reduce these impacts, by playing its part as a responsible global citizen, Aotearoa will contribute to the global action necessary to reduce the severity of these impacts. Research shows that people in general share intrinsic values that allow us to think productively about reducing emissions. 1 New Zealanders have a protective concern for the welfare of others and preserving our habitats. We value responsible, long-term-focused steps to manage the issues facing our environment. We understand our fate is intertwined with the fate of the earth as one interactive system. Finally, we are hopeful, due to our history of being resourceful, clever and thoughtful to solve problems and generate new ideas. 0F0F
Aotearoa has the opportunity to transition in a way that considers the broader wellbeing of people, the land, and the environment – both now and in the future. Tikanga values that orientate around the perspective of tiakitanga – being a good guardian or steward – can help guide Aotearoa to achieve outcomes that consider our broader wellbeing: ▪
1
Manaakitanga – having a deep ethic of care towards people and the whenua (land), acknowledging their role in the ecosystem and how they could be impacted.
(Berentson-Shaw & Elliott, 2019)
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Tikanga – ensuring the right decision makers are involved in the process, and the right decision-making process is implemented.
▪
Whanaungatanga – being mindful of the relationality between all things, our connections to each other and how we connect to our whenua.
▪
Kotahitanga – taking an inclusive approach and working collaboratively to access the best ideas and information while uplifting our collective efforts to transition to a thriving climate-resilient, low emissions Aotearoa.
Placing these values at the forefront of the transition would help to give greater priority to ensuring that the transition to a thriving climate-resilient low emissions society is inclusive, equitable, and improves the wellbeing of all New Zealanders now and in the future. Done well, Aotearoa can ensure that the benefits of acting on climate change are shared across society. The economic stimulus planned to soften COVID-19 impacts in the coming months provides an opportunity to create jobs and address climate change. Making smart investment decisions in low emissions practices, technologies and infrastructure can create jobs and ensure people are better off, both now and in the future. 2 1F1F
The following chapters look at the potential positive and negative impacts that could occur as a result of the transition to a low emissions society. It considers how Aotearoa earns its way in the world, impacts on households and communities, impacts on the environment, and intergenerational equity. The chapters do not attempt to ‘sum up’ the positive and negative impacts. It is not clear that a cost in one area – such as a cost to low income families – can be offset by a benefit in another – such as reduced dependency on fossil fuel imports. It is also difficult to assess the distribution of potential impacts across groups of society. Instead, we address each potential impact in turn, considering where impacts could be compounded on some groups of society and how any negative impacts can be managed.
2
(Climate Change Commission, 2020)
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11.2 References Berentson-Shaw, J., & Elliott, M. (2019). How to talk about climate change: A toolkit for encouraging collective action. The Workshop, Oxfam New Zealand. https://www.oxfam.org.nz/wpcontent/uploads/2019/07/How-to-talk-about-Climate-Change_The-Workshop-Oxfam-NZ2019.pdf Climate Change Commission. (2020). Letter to Hon James Shaw, Minister for Climate Change. https://ccc-production-media.s3.ap-southeast2.amazonaws.com/public/Letter20to20Minister20-20Covid20Response2020720April202020.pdf
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Chapter 12: How we earn our way in the world
The impact of emissions reductions on the country’s economy will depend on the pace with which Aotearoa acts, the costs of reducing emissions and global action. Aotearoa needs strong, accelerated and predictable action so that businesses have predictability about where the country is headed, and to put us on a track where future generations inherit a thriving, climate-resilient and low emissions economy. This chapter looks at impacts on the economy; energy, food and fibre systems; businesses and workers; and the challenges and opportunities they would face from transitioning to a thriving, climate-resilient and low emissions Aotearoa.
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Contents Chapter 12: How we earn our way in the world ............................................................................ 1 12.1 Introduction ......................................................................................................................... 3 12.2 Economic growth .................................................................................................................. 6 12.2.1 Impact on GDP ......................................................................................................................... 6 12.2.2 A gradual vs abrupt transition ............................................................................................... 10 12.2.3 Impact on taxation and Government revenue ...................................................................... 11 12.2.4 Energy production.................................................................................................................. 13 12.2.5 Energy security ....................................................................................................................... 15 12.2.6 Emissions leakage and competitiveness in industrial sectors ............................................... 15 12.2.7 Food and fibre production ..................................................................................................... 18 12.2.8 Food security.......................................................................................................................... 21 12.2.9 Emissions leakage and competitiveness in the food and fibre sector ................................... 23 12.3 Māori economy .................................................................................................................. 24 12.4 Trade ................................................................................................................................. 25 12.5 Small businesses ................................................................................................................. 27 12.6 Employment and workers ................................................................................................... 29 12.6.1 Distribution of impact on jobs and employment ................................................................... 30 12.6.2 Impacts on jobs by sector ...................................................................................................... 31 12.6.3 Impacts on jobs by region ...................................................................................................... 34 12.6.4 Impact on jobs held by Māori, Pacific Peoples and other ethnic groups .............................. 36 12.6.5 Ensuring an equitable transition for workers ........................................................................ 37 12.7 References ......................................................................................................................... 41
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The impact of emissions reductions on the country’s economy will depend on the pace with which Aotearoa acts, the costs of reducing emissions and global action. Aotearoa needs strong, accelerated and predictable action so that businesses have predictability about where the country is headed, and to put us on a track where future generations inherit a thriving, climate-resilient and low emissions economy. This chapter looks at impacts on the economy; energy, food and fibre systems; businesses and workers; and the challenges and opportunities they would face from transitioning to a thriving, climate-resilient and low emissions Aotearoa.
12.1 Introduction The transition to a thriving, climate-resilient and low emissions Aotearoa provides both opportunities and challenges for sectors, businesses and workers. The shift to lower emissions products, services and infrastructure would see low emissions sectors do well and job growth in these sectors. The transition would be harder for the more emissions intensive sectors, particularly those that compete in international markets or have limited opportunities to reduce their emissions. There are concerns that climate policy in Aotearoa could increase costs and reduce the competitiveness of these industries, particularly if their overseas competitors do not face the same costs from their local climate policies. Signalling early the changes that are required would allow businesses the time to adapt and innovate. However, there would be situations where businesses would close as they are not sustainable in a lower emissions economy. This would particularly impact the people who work in these businesses, and the local economy and community in which those businesses are located. Overall, our analysis shows that the transition can be managed in a way that generates jobs but in the short term, it would come with some job losses. How policy is designed and tailored to local circumstances would be critical in ensuring that workers’ livelihoods are respected and that workers in industries going through change are empowered in the transition. This section looks more closely at the impact on the economy, the energy and food and fibre systems, businesses and workers, and the challenges and opportunities they may face as Aotearoa puts in place policy to reduce emissions. It then considers how these challenges can be managed and how workers can be supported throughout the transition. The analysis in this section draws on modelling using our Energy and Emissions in New Zealand (ENZ), Climate Policy Analysis (C-PLAN), and Distributional Impacts Microsimulation for Employment (DIM-E) models. There are differences in the ENZ and C-PLAN models, and therefore differences in the scenario runs. However, all modelling results reported in this section are based on scenario runs that align with the country’s domestic emissions reduction targets for biogenic methane and all other greenhouse gases. More detail on the ENZ model can be found in Chapter 8: What our future could look like. More detail on the C-PLAN and DIM-E models can be found in Box 12.1 and Box 12.3, respectively, in this chapter.
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Box 12.1: How the Climate Policy Analysis (C-PLAN) model works C-PLAN is a type of economic model referred to by economists as a ‘recursive-dynamic multiregion computable general equilibrium’ (CGE) model. This means it models the whole world economy over time. We use it to simulate what happens to the economy every year out to 2050.1 C-PLAN assumes that if there is a change in one part of the economy, other parts of the economy would also change so that there is no excess supply or demand. Models like C-PLAN are good at showing how changes would flow through an economy, but usually cannot include a large amount of technological detail. For this reason, the Commission uses C-PLAN alongside the ENZ model, which provides a richer picture of technologies and practice changes for reducing emissions. In C-PLAN, the world is divided into two regions – Aotearoa, and Rest of World. These regions have different climate policies to reduce emissions and may make things differently – for example, Aotearoa uses more land but less feed supplements to produce milk. However, both regions have the same sectors and can trade with each other where one region has a comparative advantage over the other. Climate mitigation is modelled in C-PLAN primarily through abatement cost. The model splits out biogenic methane from livestock and waste from all other greenhouse gases and models a separate abatement cost for each of these two types of emissions. The caps on emissions for each emissions type are imposed in the model for each year, and the model works out the cheapest way to meet them. C-PLAN has several ways that emissions caps can be met. These include specific technologies (methane vaccines and inhibitors, electric vehicles (EVs), bioenergy for process heat, electrification of process heat), switching between energy sources, price-induced energy efficiency improvements, and reducing output. The Commission also assumes that energy efficiency and emissions-intensity gradually improve over time. The forestry sector is included in C-PLAN but does not respond to abatement cost (due to the technical difficulties of modelling this). Instead, emissions caps are inserted into the model on a net basis. Land used for forestry and agricultural sectors in each year is fixed, so land use change does not respond to the abatement cost, but land use can vary across years and pathways. The effect of different levels of forestry is instead tested in the choices of target pathways. C-PLAN is a new model, having been commissioned by the Commission in late 2019. As with all models, C-PLAN will continue to be developed and refined over time. It is based on Massachusetts Institute of Technology’s Economics Projection and Policy Analysis (EPPA) model,2 which was first developed over 20 years ago and continues to be refined, and the Vivid Economy-Wide (ViEW) model developed by Vivid Economics. C-PLAN has some important differences from other CGE models that have been used in Aotearoa to inform climate mitigation policy. In particular, C-PLAN models emissions reducing in response to climate policy with little or no reduction in output, and so shows a smaller impact on gross domestic product (GDP) and abatement costs than other CGE models in Aotearoa.3 This occurs because C-PLAN explicitly includes key emissions-reducing technologies that allow emissions to be reduced without reducing output (e.g. a methane vaccine), and also allows industries to switch the energy sources they are using. The scenarios and Current Policy Reference (CPR) case that the Commission uses are also different to previous modelling exercises, and so it is difficult to 1
It uses base data from 2014. (Massachusetts Institute of Technology, 2017) 3 (NZIER, 2018; Winchester, 2019) 2
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compare the results. In particular, the New Zealand Institute of Economic Research (NZIER) modelling for the Zero Carbon Bill had more stringent targets for agriculture in some scenarios. The baseline scenario in C-PLAN also included a wider set of other policies that would reduce emissions, for example the new regulations for freshwater standards that the Government introduced in September 2020. Four scenarios, in addition to the Current Policy Reference, have been run in C-PLAN. While these scenarios have been informed by data from the ENZ model, these scenarios are different to the scenarios run in ENZ because of differences in the two models. Each of these C-PLAN scenarios makes only a small number of changes compared to the Current Policy Reference. This makes it easier to understand the effects of each change. New technologies are enabled, and a split gas approach is used. The contribution of biogenic methane and long-lived gases, the level of removals by forestry, and the availability and methane emissions reduction potential of technology for ruminants are changed between the scenarios, as shown in Table 12.1. In the text below, we present all four scenarios. However, in the Advice Report and text below we focus on Transition Pathways 3 and 4 (TP3 and TP4) as these scenarios are in line with our proposed emissions budgets and key assumptions. The insights on the implications of reducing emissions from the C-PLAN model are in line with other international research, such as the modelling carried out by the European Commission and United Kingdom (UK) Committee on Climate Change.4,5 Table 12.1: The key assumptions used in each of the scenarios run in C-PLAN.
Forestry
Methane technology
Long-lived gases
Biogenic methane
MPI’s current projections
None
Business as usual
Business as usual (from 2026)
Transition Pathway 1 (TP1): More removals
CPR exotic forestry (with additional native forests)
Low effectiveness and uptake only
Straight line path for gross emissions to net-zero in 2050
24% reduction in 2050
Transition Pathway 2 (TP2): Methane technology
CPR exotic forestry (with additional native forests)
Higher effectiveness and uptake (vaccine)
Straight line path for gross emissions to net-zero in 2050
47% reduction in 2050
Transition Pathway 3: (TP3) Less removals
About 2/3 of CPR exotic forestry (with additional native forests as in TP1)
Low effectiveness and uptake only
Straight line path for gross emissions to net-zero in 2050, accounting for forestry removals
24% reduction in 2050
Current Policy Reference (CPR)
4 5
(European Commission, 2020) (Committee on Climate Change, 2019)
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Transition Pathway 4 (TP4): Faster reductions
About 2/3 of CPR exotic forestry (with additional native forests as in TP1)
Low effectiveness and uptake only
36% reduction in gross emissions in 2030, net-zero in 2050
24% reduction in 2050
12.2 Economic growth How the economy grows as Aotearoa transitions to a thriving, climate-resilient and low emissions economy depends on the pace with which the country acts, the costs to businesses from reducing emissions, and the action the rest of the world takes. Global action to reduce emissions would reduce the increased severity of droughts, sea level rise and storms, and would reduce the cost to the economy of these impacts.
12.2.1 Impact on GDP Table 12.2 presents the results of economic modelling, using the Commission’s Climate Policy Analysis (C-PLAN) model. The modelling shows that Aotearoa can continue to grow its economy while taking actions to reduce emissions and achieve the country’s domestic emissions reduction targets for biogenic methane and all other greenhouse gases. Under current policy settings, GDP is projected to grow to $512 billion by 2050. This is likely to be an overestimate as this does not factor in the negative climate and trade impacts of not acting on climate change. By contrast, Aotearoa taking action in line with our proposed emissions budgets – i.e. TP3 and TP4 – would result in GDP growing to about $508 billion by 2050. This is approximately equivalent to GDP being less than 1% lower in 2050 or reaching the same level about 6-7 months later in 2050.6 Looking out to 2035, our modelling suggests that reducing emissions to meet our proposed emissions budgets would cost Aotearoa no more than $190 million each year over emissions budget 1, $2.3 billion each year over emissions budget 2, and $4.3 billion each year over emissions budget 3. It is difficult to estimate the benefits of action with any accuracy as there is significant uncertainty in how the benefits will actually be realised. This impact is small, compared to normal fluctuations in GDP caused by the business cycle. There would be recessions and booms in the next 30 years that are not due to climate change. By comparison, in the year ending March 2009, the global financial crisis caused a 1.6% drop in GDP from the previous year,7 as compared to growth of 2-3% in previous and subsequent years. The recession caused by COVID-19 is likely to be larger again.
6
This impact on GDP is likely to be an overestimate as the C-PLAN model does not include the full range of emissions reduction opportunities that the Commission is aware of and does not include endogenous technological change. 7 Calculated from data series SNE004AA Series, GDP(E), Chain volume, Actual, Total (Annual-Mar) from Stats NZ Infoshare, last updated 17 September 2020
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Table 12.2: GDP projections from the Commission’s C-PLAN modelling ($ billion) C-PLAN scenarios
2017
2025
2030
2035
2050
Current Policy Reference
270
329
362
396
512
Transition Pathway 1 (TP1): More removals
270
329
362
395
510
Transition Pathway 2 (TP2): Methane technology
270
329
362
395
510
Transition Pathway 3: (TP3) Less removals
270
329
362
395
508
Transition Pathway 4 (TP4): Faster reductions
270
329
358
392
508
These findings are in line with international estimates, such as those by the United Kingdom Committee on Climate Change and the European Commission.8 Internationally, the expected cost of deploying technology to meet emissions reduction targets is decreasing faster than expected. As a result, countries like the UK have re-assessed cost estimates of meeting emissions targets downwards over time. In 2019, the UK Committee on Climate Change assessed that achieving a 2050 net zero target for all greenhouse gases in the UK would cost approximately 1-2% of GDP. This is similar to the cost it assessed in 2008 of reducing emissions 80% relative to 1990, and in turn similar to the cost the UK Government assessed in 2003 of reducing emissions 60% relative to 1990.9 See Box 12.2 for more detail on how our cost estimates compared to international studies.
Box 12.2: How do our overall cost estimates compare to international studies? Our finding that meeting the 2050 emissions target could impact GDP on the order of 1% is consistent with recent international studies of pathways to achieve net zero emissions (Table 12.3). Overall, these other studies estimated GDP impacts in 2050 for the region in question ranging from 1.3% lower to 3% higher relative to the baseline. These estimates all exclude the cobenefits of the transition, the costs of adapting to climate change and avoided climate damages. Table 12.3: Cost estimates of achieving net zero emissions
8 9
Scope
Author
Estimation method
Cost or GDP impact in 2050
Aotearoa
CCC / Motu
Macroeconomic model (general equilibrium)
GDP 0.3-1% lower relative to current policy baseline
(Committee on Climate Change, 2019; European Commission, 2020) (Committee on Climate Change, 2019)
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United Kingdom
Committee on Climate Change
Resource cost assessment
Net cost less than 1% of projected GDP
Macroeconomic model (macro-econometric)
GDP 3% higher relative to current policy baseline
European Union
European Commission
Suite of three different macroeconomic models
GDP 1.3% lower to 2.2% higher relative to current policy baseline
Global, ‘hardto-abate’ sectors
Energy Transitions Commission
Resource cost assessment
Net cost 0.2–0.5% of projected GDP
Sources: (Committee on Climate Change, 2020). The Sixth Carbon Budget: The UK’s path to Net Zero. (European Commission, 2018). In-depth analysis in support of the Commission Communication COM 773, A Clean Planet for all: A European long-term strategic vision for a prosperous, modern, competitive and climate neutral economy. (Energy Transitions Commission, 2020). Making Mission Possible: Delivering a Net-Zero Economy.
The studies cited used different methods to quantify potential costs. Resource cost measures the net additional cost each year to deliver the same services with lower or zero emissions. This additional cost will not necessarily reduce economic output by an equivalent amount. For example, substituting imported fossil fuels with domestically produced renewable energy could boost GDP while increasing the cost of the energy system. Macroeconomic models provide estimates of how decarbonisation could affect GDP, employment and other economic metrics. These models simulate the flow-on effects of decarbonisation on how capital, labour and other resources are deployed throughout the economy. The studies all support the conclusion that the overall impact of decarbonisation on the economy will be small relative to projected growth. However, different macroeconomic models disagree on whether the impact on GDP will be negative or positive. This disagreement centres on distinct model assumptions around market imperfections and whether the economy operates at full capacity. General equilibrium models, like the Commission’s C-PLAN model, assume that the economy is at an equilibrium usually without any unused resources. This means that, for instance, the additional investment required to decarbonise will necessarily reduce investment somewhere else in the economy. The European Commission’s general equilibrium modelling results are similar to ours, with the net zero emissions pathway reducing GDP by 0.6-1.3% relative to the baseline in 2050. Other models, such as the E3ME macro-econometric model used in both the UK and EU studies, do not assume equilibrium. This means that the economy has unused capacity and the additional investment in decarbonisation can provide a stimulus that boosts total economic output. These models found that a net zero emissions pathway could increase GDP above the baseline.
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That spare capacity in the economy could see climate action boost economic growth is an important insight from these international studies. In the current context of economic activity being suppressed due to the COVID-19 pandemic, spare capacity is very likely. This highlights the opportunity for investment in the transition in Aotearoa to stimulate the economy and support the post-COVID-19 recovery.
Our estimates of the cost of meeting the 2050 target are substantially lower than suggested by economic modelling undertaken to support the Zero Carbon Bill in 2019. The modelling undertaken by NZIER for the Ministry for the Environment tested a range of scenarios for different target forms and levels. In the scenarios relied on in the Zero Carbon Bill’s Regulatory Impact Statement, modelled GDP was 5-8% lower in 2050 relative to a baseline representing current policies.10 In contrast, our economic modelling indicates meeting the 2050 target could lead to less than a 1% reduction in GDP compared to the Current Policy Reference case. As climate policy and other factors have changed since the NZIER modelling was done in 2018, the NZIER baseline representing current policies has higher emissions than our current policy baseline, which is one factor making the costs appear larger. These differences are also discussed in Box 12.1. The C-PLAN model is good at showing how a change in one sector flows through to other sectors in the economy and to overall demand. Our four scenarios show that for most sectors, there would be little change in output compared to the Current Policy Reference case. High-emissions sectors would be replaced by lower-emissions alternatives and some high-emitting sectors that do not have alternative technologies in the model would decline. The C-PLAN model is purposefully designed to tell us about underlying trajectory of the economy to help us plan for long-term transformation. This is different from many other macro-economic models which are designed to focus on shorter term boom and bust cycles. This means C-PLAN is not an appropriate tool to assess the short-term impact of COVID-19. However, the latest Treasury forecast suggests COVID-19 is likely to result in a lower level of GDP but a similar or slightly higher rate of growth once the pandemic is over (Figure 12.1). Figure 12.1 shows the Treasury projections from the Half Year Economic and Fiscal Update released in December 2019 as compared to the Pre-election Economic and Fiscal Update released in September 2020.11
10
The NZIER report (NZIER, 2018, pp. 18, Table 7) uses the B-F-50 and B-F-75 scenarios, which are the same scenarios used in the Zero Carbon Bill’s Regulatory Impact Statement (Ministry for the Environment, 2019b) (see the Addendum on p. 33, noting different terminology) 11 (Te Tai Ōhanga The Treasury, 2019, 2020)
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Figure 12.1: Treasury forecasts of quarterly real production GDP prior to COVID-19 (light) and during COVID-19 (dark). Any analysis of the impact on GDP only provides a narrow picture of the impacts of reducing emissions. It does not reveal the indirect costs and benefits, nor who the costs and benefits fall on. The cost of not acting on climate change and the co-benefits of actions to reduce emissions, such as to health, the environment and productivity from increased innovation, are significant and provide even more reason for a country to act on climate change.12
12.2.2 A gradual vs abrupt transition A key challenge is judging how fast the country’s transition needs to be. There is a question as to how to balance the urgency of preventing dangerous climate change and its associated costs, with managing the impacts of disruptive economic transformation. There is also a question about our strategy as a nation – do we lead, which might come with higher costs but also first-mover advantages, or be a follower, delaying action until others show us the way and costs come down? Experience, including the country’s own experience of reforms in the 1980s, has shown that rapid transformative change is socially and economically painful. This counts against very fast early action. It also counts against waiting until solutions have been found and fully proven elsewhere before rapid uptake and transformation at home. Pursuing an early, steep decline in emissions is likely to come with higher adjustment costs. Even where low emissions technology exists now, such as electric vehicles, there are short-run supply constraints. Time is needed to build capacity in these new markets, as well as to set standards and train the workforce to support them. There would also be greater risks that existing assets would
12
(Karlsson et al., 2020)
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have to be retired before the end of their expected lifespan, and of a political and social backlash that could stall progress. Time is also needed to plan the transition and make sure affected businesses and workers are supported (see also 12.5 Small businesses, 12.6 Employment and workers and 12.6.5 Ensuring an equitable transition for workers sections below). An early and unplanned transition would make it harder to foresee other policy that could potentially compound the impacts on the same communities while also leaving less time to develop supportive policies for affected communities. Delaying action would lead to a similar abrupt decline in emissions, but later. This also carries risks of increased costs, even though technology solutions may be cheaper. Continued investment in the wrong type of infrastructure, for example, could lock in emissions and cause stranded assets.13 Delaying action would also increase the country’s contribution to global emissions. In contrast, early but consistent action would allow for a more gradual and steadier pace of change, with more scope for managing impacts. While there is uncertainty about the future pathway, the technologies for reaching emissions reduction targets in Aotearoa are mostly known. By adopting these technologies early rather than waiting for costs to come down, people can learn by ‘doing’, while steadily building up supporting infrastructure and services and helping overcome user barriers and reach critical mass. Early signalling gives businesses time to adapt and innovate, find solutions that are both good for the climate and good for the bottom line, and replace assets and infrastructure with low emissions options on as natural a cycle as possible. Modelling carried out for Westpac in 2018 showed that taking planned action on climate change was more cost effective and was could save Aotearoa $30 billion in GDP by 2050, compared to delaying action until 2030.14 Taking an early and well-paced pathway was also found to have fewer impacts on individuals and businesses, have less economic impact on emissions-intensive sectors, and be better for the economy as a whole.15 Conversely, delayed and more abrupt action would come at greater cost, could be more disruptive and could lock in emissions-intensive infrastructure that could later become stranded.16
12.2.3 Impact on taxation and Government revenue There are likely to be fiscal impacts the Government would need to plan for, as a result of actions to reduce emissions to meet emissions budgets and the country’s domestic targets for biogenic methane and all other gases. The extent of these impacts would depend on how policies such as road transport levies or the New Zealand Emissions Trading Scheme (NZ ETS) are set. At the moment, land transport revenue comes from petrol excise duty, road user charges for all other vehicles, and motor vehicle registration and licensing fees, as well as from other sources. In 2018/2019, net revenue from petrol excise duty was slightly less than $2.04 billion, from road user
13
(OECD, 2019a) (Westpac, 2018) 15 (OECD, 2019a; Westpac, 2018) 16 (OECD, 2019a) 14
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charges was $1.73 billion, from motor vehicle registration was $227 million.17 This revenue is hypothecated, and along with a few other sources,18 is used to fund the building, maintenance and operation of the land transport system. Petrol and diesel consumption are likely to decrease over time as electric vehicles and other low emissions transport modes become more popular and vehicle efficiency improves. While electric vehicles are currently exempt from road user charges, this exemption is set to expire on 31 December 2021.19 Revenue from petrol excise duty, road user charges and vehicles registrations would change over time, and the Government would need to plan how to fund land transport given these changes. The climate transition could also impact the Government’s spending on social assistance for workers and families, and health. The level of social assistance would depend on the transition strategy the Government puts in place and how well the transition is signalled and planned. The transition to a low emissions economy could result in better health outcomes for New Zealanders – for example, from warmer, drier homes and reduced air pollution – reducing the burden on the health system. However, this could be counterbalanced by the health impacts from a changing climate, such as heat stress from more heat waves, and increased exposure to new vector-borne diseases and microbial contamination.20 There are also opportunities to benefit both the economy and climate. The Government’s COVID-19 stimulus package can be used to both create jobs and stimulate the economy and address climate change, and proceeds of the NZ ETS could also be leveraged in a similar way. The NZ ETS can generate cash for the Government by selling emissions units. The amount of cash that would be generated over time would depend on both the volume of units sold (which itself depends on free allocation, decisions about forestry accounting,21 international unit and emissions budget volumes) as well as the market price for units. The amount of cash that can be generated by the NZ ETS over time would also depend on the policy mix Aotearoa uses to meet emissions budgets (refer to Chapter 17: The direction of policy for Aotearoa). For these reasons, it is not possible to draw firm conclusions from the Commission’s pathways analysis about how NZ ETS proceeds would be affected by meeting emissions budgets and domestic targets for biogenic methane and other gases. The Government has estimated that based on current NZ ETS settings proceeds from auctioning units would provide at least $3.1 billion over the next five years.22 The adoption of emissions budgets and flow-on changes to NZ ETS settings over 2021-2022 could significantly alter this forecast.
17
The number of $2.04 billion for petrol excise duty also includes a small amount of excise duty on liquid petroleum gas and compressed natural gas. (Office of the Minister of Transport, 2020) 18 The other sources equated to about an additional $700 million in 2018/2019. (Office of the Minister of Transport, 2020) 19 Road User Charges (Exemption Period for Light Electric RUC Vehicles) Order 2012 20 (Bolton, 2018; Royal Society Te Apārangi, 2017) 21 A significant proportion of post-1989 forests registered in the Emissions Trading Scheme are accounted for using the stock change approach. Decisions about whether and how to transition these forests onto averaging accounting may affect the amount of NZUs that the Government can auction into the scheme. 22 (Office of the Minister for Climate Change, 2020b)
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Decisions have yet to be made on how the Government would use these proceeds. Options include using the funds to:23 •
reduce the overall cost of policies to reduce emissions in Aotearoa, such as targeting investments
•
adapt to the impacts of climate change
•
enable an equitable and inclusive transition, for example through policies to reduce the distributional impacts of climate policy
•
buying international units that may be needed for meeting the first NDC.24
12.2.4 Energy production Energy is a vital part of New Zealanders’ day-to-day lives – from the electricity that is used in homes, petrol and diesel to fuel vehicles, to the heat that industries use to produce goods used here in Aotearoa and sold around the world. Reducing emissions would require a transformation of the current energy system. The Commission’s economic modelling suggests that, under the Current Policy Reference case, coal and natural gas use would reduce, while wind, solar and biomass would expand. This assumes that the costs of renewable technology would continue to decrease. Our modelling also suggests that a shift in climate policy, to reduce emissions and meet the country’s domestic targets, would speed up these trends. Increased renewable electricity generation would be needed to power more industry and electric vehicles (Figure 12.2).
23
(Office of the Minister for Climate Change, 2020b) As discussed in Chapter 10: Requests under s5K relating to the NDC and biogenic methane, meeting the NDC will require use of offshore mitigation. In future, it may be possible to devolve the purchasing the offshore mitigation to the private sector through the ETS. At present, however, the NZ ETS is being run as a domestic-only scheme. If this continues, the Government may have to purchase international units directly to ensure that the NDC is met. This is why funding the purchase of offshore mitigation is an important option to consider for use of NZ ETS auction proceeds. 24
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Figure 12.2: The changes in demand for coal, natural gas and liquid fossil fuels, and in geothermal, wind and solar generation that would occur in our path over the first three emissions budgets and out to 2050. Source: Commission’s ENZ modelling
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12.2.5 Energy security People and businesses also need to know they can meet their energy needs throughout the transition – they need energy security.25 Reliability and resilience of energy supply is crucial for medically dependent or vulnerable New Zealanders and for businesses where unplanned supply disruptions are costly.26 As Aotearoa shifts away from fossil fuels and increase its dependency on electricity generation, it needs to ensure the electricity system can reliably generate sufficient supply. At the moment, natural gas and coal provide this security of supply, particularly at peak times and in dry years when hydro lake levels are low. In addition, shifting energy reliance onto electricity to meet all transport, heating, cooking and industrial process needs carries risk in a nation exposed to natural hazards and other potential disruptions. Aotearoa has a long, thin electricity grid that generally moves electricity from the South Island where it is generated in large hydro schemes - to the major centres of demand in the North Island. However, there are ways to increase the resilience of the electricity grid and the system, such as building new generation in the North Island, reinforcing the transmission infrastructure, deploying new technologies such as batteries and diversifying into new fuels such as biofuels and hydrogen that boost energy security. Aotearoa faces a specific challenge around the dry year risk. Chapter 8: What our future could look like of the Evidence Report provides more detail on this. Decarbonising the transport sector would result in Aotearoa relying less on imported oil. In 2018, the latest year available, Aotearoa spent $11.2 billion on petroleum imports, the highest ever.27 The dependence on imported oil exposes Aotearoa to oil price volatility and potentially insecure supply. Moving to domestic sources of energy for transport, such as renewable electricity or domestically produced biofuels, could reduce oil imports. This would improve the country’s security of supply and provide opportunities for new businesses and jobs. The country’s energy vulnerability could increase in the long term, however, as we would rely more heavily on fewer sources. Careful planning and management would be needed.
12.2.6 Emissions leakage and competitiveness in industrial sectors Climate policies could potentially increase costs for many Aotearoa businesses, reducing their competitiveness. This is a particular concern for industries with high emissions and who compete in international markets for relatively undifferentiated commodities, where overseas competitors do not face similar costs from climate policies. In these cases, there is a risk of emissions leakage, where domestic climate policy inadvertently increases global emissions and so negates some of its intended effect. There are also possible impacts on employment when firms fail to stay internationally competitive.
25
The World Energy Council defines energy security as “a nation’s capacity to meet current and future energy demand reliably, withstand and bounce back quickly from system shocks with minimal disruption to supplies.” (World Energy Council, 2019) 26 For example, the 2018 unplanned outage at the Pohokura gas field event contributed to decreased production of methanol by approximately 0.3 million tonnes compared to the previous year. (Methanex Corporation, 2018) 27 (Statistics NZ, n.d.)
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This provides a particular challenge in Aotearoa, due to the small nature of its industries, where there are a number of industries that are made up of only one firm. In our modelling, we assume that the Tiwai Point aluminium smelter closes in 2026 based on Rio Tinto’s recent signalling, and that domestic methanol production ends in 2029 when Methanex’s current gas contracts expire.28 We have conservatively assumed that domestic steel making, cement and lime production continue to operate at current levels of production and do not achieve efficiency improvements. Climate policy is one of many factors that can influence the competitiveness of businesses, and its impacts need to be considered in this broader context. For example, in the United Kingdom, the key drivers of competitiveness in the steel, aluminium and cement industry were reduced demand, low global prices, a strong pound sterling and high fossil fuel energy costs, with climate policy also contributing but to a relatively small extent.29 How and to what extent industrial or energy-intensive businesses would be impacted by climate policies would depend not just on the direct cost of those policies, but also on the businesses’ ability to adapt and innovate as well as the other pressures they face, such as the price of key inputs. Climate policy would incentivise businesses to innovate, which can both reduce emissions and improve productivity. International evidence suggests that pricing greenhouse gas emissions stimulates innovation in existing low emissions technologies, increasingly so at higher emissions prices. By pricing emissions, businesses are incentivised to find lower emissions ways to produce their product or service. This means businesses become more efficient, innovate, and invest in low emissions technologies that become more attractive due to the emissions price. In turn, increased deployment and diffusion of these technologies results in a larger and more competitive market, further lowering technology prices, accelerating learning and attracting investment.30 While emissions pricing encourages the development, diffusion and deployment of new and existing practices and technologies, however, it does not provide a full incentive for low emissions innovation, taking into account positive spill over effects. Some businesses may find it hard to invest in reducing emissions or climate-related innovation as they already are facing other pressures. For example, putting aside the emissions price or other costs related to climate policies, the cost of energy itself is a significant influence on many industrial businesses’ operating margins. This may affect their ability to compete against global counterparts who may have lower energy costs or whose energy costs are a smaller proportion of their total production costs. A number of Aotearoa firms in energy-intensive sectors have recently carried out or announced strategic reviews, although none have cited costs from climate policy as a major driver of their current competitive situation. If these industries were to close or lose market share due to climate policies imposed in Aotearoa, there are risks that production could shift offshore to countries with less stringent controls on emissions, causing global emissions to increase – known as emissions leakage. How likely emissions
28
Rio Tinto have signalled their intention to close the smelter in 2021. Our modelling assumes a further 3-5 years operation beyond signalled closure date. The Government has signalled that this is the extension they are trying to negotiate. 29 (Cambridge Econometrics, 2017) 30 (Eden et al., 2018)
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leakage is to occur depends on where production is likely to shift to and how emissions intensive that production is.31 While climate policy has not been cited as a major factor in Rio Tinto’s announcement that it intends to close the Tiwai Point Aluminium Smelter, the smelter’s planned exit illustrates that understanding the risk of emissions leakage is not straightforward. Commentators have held various views on the implications of the smelter’s closure on global emissions. Some suggested that aluminium production could move to smelters in China that are powered by coal, while others suggested that it could move to low emissions plants in Canada. Analysis by Sense Partners in 2018 suggested that there was no perceptible evidence of reduced competitiveness in Aotearoa from climate policy in place at that time. However, they noted that this could change in the future if climate policies continued to be unevenly applied globally.32 There are options for mitigating the risks of reduced competitiveness and emissions leakage. So far competitiveness and emissions leakage concerns are managed in Aotearoa by providing potentially exposed businesses with output-based free allocation under the NZ ETS.33 This is similar to approaches taken in other jurisdictions with emissions pricing. Firms undertaking emissionsintensive and trade-exposed activities receive free emissions units under the Government’s Industrial Allocation policy. Activities that are highly emissions intensive receive 90% free allocation while moderately emissions intensive activities receive 60% free allocation.34 This reduces the cost of the NZ ETS on these firms. In 2019, there were 85 companies that received free allocations from the Government. In total, over 8 million units were allocated which, assuming an emissions price of $35 per unit, represents a value of almost $290 million. This is a cost to the Government because if it did not provide these units for free, it would be able to sell them by auction. Over half of the unit allocations were received by three companies, comprising of about five million units. Most unit allocations were relatively small – more than 75% of unit allocations were less than 20,000 units. Most of the recipient companies of these smaller levels of allocation are small horticultural producers, such as fresh cucumber, capsicum and tomato growers who do not participate in the NZ ETS, but receive free allocations because of the pass-through costs from their electricity or fuel use.35 Free allocation can effectively mitigate emissions leakage risk but it comes with downsides. Outputbased free allocation reduces downstream incentives for demand-side emissions reductions, such as resource efficiency and driving substitution of emissions-intensive goods, which can distort low emissions investment. This means that some cost-effective emission reductions would not be taken
31
(Sense Partners, 2018) (Sense Partners, 2018) 33 (Ministry for the Environment, 2018) 34 The purpose of Industrial Allocation is to reduce the risk of emissions leakage from production moving offshore to places with lower emissions pricing. There are currently 26 activities that are eligible to receive Industrial Allocation. Three firms receive 60% of total industrial allocation volume: New Zealand Steel near Auckland, New Zealand Aluminium Smelter in Southland, and Methanex in Taranaki collectively employing approximately 5,400 people. It is important to note that EITE firms will still face some incentive to reduce emissions as long as their allocation corresponds to less than 100% of their ETS costs, i.e. an ETS cost exists on a proportion of their emissions. By reducing their emissions, they can also benefit from selling the units that were allocated to them. 35 (EPA, 2019) 32
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up and, as a result, the emissions price in the NZ ETS would be higher than it would be if there were no free allocation. Providing free allocation to some firms can therefore put the burden of reducing emissions on others. For these reasons, it is important to make sure that the allocation regime is not overly generous. There is concern that currently the Government may be over-compensating firms in some industrial activities, by providing more units than are necessary to address emissions leakage risk.36 The Government is looking to undertake a first principles review of industrial allocation policy to address this concern. Over time, other options for providing leakage protection should also be explored – such as product standards, consumption charges or border carbon adjustments. These alternatives all come with their own, not insignificant implementation challenges, particularly in relation to trade policy and political economy concerns, so are likely to be options for the longer-term. The impact of increased emissions prices on emissions-intensive and trade-exposed businesses depends on the industrial allocation policy in the short to medium term, as well as the climate policies put in place internationally. Nonetheless, it would be important to monitor global markets and actions by competitors to ensure that domestic climate policy contributes to global environmental benefits. This would be an important task for the Commission, with a new function of advising on the industrial allocation phase out rates, which includes assessing emissions leakage risk. Emissions budgets should also be set with a mind to such risks and uncertainties. We need to assure ourselves the emissions budgets can be met in multiple ways, to make sure they are resilient. The work we are doing to narrow down on emissions budget numbers is looking to ensure that the emissions budgets can be met in multiple ways.
12.2.7 Food and fibre production A number of New Zealanders work in the food and fibre sector – from farmers, farm workers and foresters to those transporting food and fibre around the country, working in processing plants, and exporting food and fibre products. This income also supports broader rural communities and is an important export earner for the nation. Our ENZ modelling suggests that in the Current Policy Reference scenario, under current policy, production of milk solids would remain relatively stable over the first three emissions budget periods, and increase slightly by 2050. In our emissions budgets path, milk solids output would reduce slightly. In comparison, meat production would stay relatively stable over the first two emissions budget periods, and then increase slightly looking out to 2050 under the Current Policy Reference scenario. Our emissions budgets path would follow a similar trend. For forestry, the total harvestable volume would fall in the second emissions budget, but then increase in the third emissions budget and out to 2050. Our path would result the same total harvestable volume by 2050 as our reference case (Figure 12.3). This reflects the long-term nature of forestry. Due to the long harvest cycles for pine forests, new planting will not make a difference to
36
(Office of the Minister for Climate Change, 2020a)
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harvest volumes until around 2050. The variations up until 2050 are due to the age profile of trees already in the ground. Over time, we are assuming increasing harvest yield from new vintages due to improvements in genetics and silvicultural practices.
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Figure 12.3: The changes in output of milk solids, meat and forestry that would occur in our path over the first three emissions budgets and out to 2050. Source: Commission’s ENZ modelling
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12.2.8 Food security As a food producing and exporting nation that is estimated to contribute to feeding over 40 million people,37 Aotearoa must consider the potential effects that climate policies could have on the country’s agricultural production, and domestic and global food security. Food security not only depends on food production and availability, but also on nutritional content, and the ability to acquire affordable food, in which well-functioning markets play an important role. Global food security The Paris Agreement highlights the importance of food production and food security, recognising “the fundamental priority of safeguarding food security and ending hunger, and the particular vulnerabilities of food production systems to the adverse impacts of climate change”. Article 2 outlines that “This Agreement...aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by: ... (b) Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production.” The Paris Agreement is focused on efforts to adapt to the effects of climate change, in a way that helps to end hunger and poverty. Climate change is likely to exacerbate food insecurity globally, as rising temperatures increase crop failures, lower livestock production and heighten the risk of disease, pests, and extreme weather events in these regions.38 The Intergovernmental Panel on Climate Change has found that low income consumers are particularly at risk from the impacts of future climate change.39 Hunger and poverty are issues experienced more in developing countries. Therefore, safeguarding food security is to a large extent about ensuring access to basic food requirements, particularly for the 750 million people largely located in sub-Saharan Africa and South Asia classified as ‘severely food insecure’.40 The role of Aotearoa in helping to address global food security challenges is likely to be limited. This is because the country’s food production is focused on the premium value chain,41 and feeding the world’s growing middle-class and high-end consumers.42 In 2018, only 3.4% of food exports from Aotearoa went to the low-income food-deficit countries as classified by the Food and Agriculture Organization of the United Nations.43 Consumers of exports in these countries are also unlikely to be the rural poor and food insecure due to the relatively premium nature of Aotearoa products. In lowincome, food-deficit countries, 62% of dietary energy comes from cereals, roots, and tubers.44 This highlights that food security concerns primarily centres around the supply and cost of grains rather than the more premium products exported by Aotearoa.
37
KPMG (2017) FAO (2018) 39 IPCC (2019, p. 439) 40 FAO (2020c). The exact number is difficult to pinpoint because of variation in diets and the way Aotearoa export products are consumed. 41 Primary Sector Council (2020); B+LNZ (2020) 42 Productivity Commission (2018a, p. 317) 43 FAO (2020a); (Stats NZ, 2020) 44 (FAO, 2020b) 38
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Aotearoa does, however, make important contributions to global food security through trade policy, research, and development assistance. Aotearoa has long been a champion for a fair, open and rules-based trading regime and has played an important role in negotiating agreements which reduce distortions in global food trade. As the Organisation for Economic Cooperation and Development (OECD) has pointed out, food and nutritional security is dependent on production and trade, necessitating open and well-functioning supply chains to ensure food reaches markets where it is needed. Existing agricultural trade distortions tend to undermine food producers in food insecure countries.45 Aotearoa research and technical assistance on animal productivity and farm efficiency could also enhance global food security and the resilience of agricultural systems. This could be achieved through improving the contribution of livestock in food insecure countries to food supply and raising incomes. The Government’s role in founding and funding the Global Research Alliance on Agricultural Greenhouse Gases is a key example. Its ability to credibly lead such initiatives is enabled and underpinned by the country’s innovative ecosystem of farmers, researchers, and agriculture experts. Support for food production is also a key priority in the Government’s spend on foreign aid. Finally, one of the most important contributions Aotearoa could make would be to reduce emissions. Playing a role in mitigation and building momentum for an effective global effort to limit temperature increases would help to reduce the worst impacts of climate change on food security. Domestic food security Despite Aotearoa producing much more food than we consume, some disadvantaged communities find it challenging to access nutritious food. The Child Poverty Action Group notes that 160,000 Aotearoa children live in households without sufficient access to healthy food. While the overall cost of food rose by 4% in the last five years, the cost of fruit and vegetables rose by 9%.46 These domestic food security problems are driven primarily by low incomes rather than a lack of food supply. Given the export orientation of most of food production in Aotearoa, it is likely that international markets would affect domestic food prices to a greater extent than changes in production due to climate change policies. The possible exception to this is if production of items grown primarily for domestic consumption (such as some fresh vegetables) contracts, as this could drive prices up and exacerbate existing food and nutrition access for some vulnerable groups. However, in both the Current Policy Reference case and scenarios modelled in Chapter 7: Where are we currently headed? and Chapter 8: What our future could look like, horticultural area, and therefore production, increases in the years to 2050. In 2015/16, it was estimated that 39% of children in food insecure households were Māori.47 If food price increases do occur, they are likely to have a disproportionate effect on Māori. Strategies relevant to food security or correlated policy issues, should prioritise equitable outcomes for Māori households, particularly Māori children, who may be impacted by increases to food prices. However, given the high levels of food production in Aotearoa, and that horticulture production is unlikely to contract, reducing emissions to meet targets for biogenic methane and all other greenhouse gases is unlikely to exacerbate food insecurity domestically. Solutions to domestic food 45
OECD (2020) Child Poverty Action Group (2019a) 47 Child Poverty Action Group (2019b) 46
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security problems likely lie in addressing poverty and other barriers to nutritional access rather than in climate policy.
12.2.9 Emissions leakage and competitiveness in the food and fibre sector As with emissions-intensive and trade-exposed industrial businesses, there are risks that climate policy could reduce the competitiveness of the food and fibre sector and result in emissions leakage. The Interim Climate Change Committee noted that it was difficult to assess any potential reduction in competitiveness of the food and fibre sector from climate policy as compared to other factors that affect the overall competitiveness of Aotearoa in international markets. It noted that producer costs in all markets would continue to evolve through changes in labour markets, production systems, food safety requirements and health and safety regulations.48 The risk of emissions leakage is difficult to quantify precisely for the food and fibre sector. However, looking at some of the factors which contribute to emissions leakage, the Committee found that the risk of emissions leakage from reducing agricultural emissions in Aotearoa was unlikely to be high in the short-term. Any decrease in dairy production would likely be made up by an increase in production in Western Europe or North America. Those locations have dairy emissions footprints similar to Aotearoa, have economy-wide emissions caps, and their farm businesses also face environmental regulations on nitrate, ammonia and phosphorous pollution which would constrain production.49 The risk of emissions leakage from reduced meat and wool production is likely to be greater than for dairy. This is because not all competitor countries are advanced economies with economy-wide emissions reduction targets. However, Aotearoa producers’ increasing efforts to differentiate their products on quality, environmental credentials and provenance may moderate this risk.50 Under current legislation, agricultural emissions are set to be priced from 2025.51 At the same time, farm businesses would receive free allocation, which can be provided in a way to reduce emissions leakage risk.52 As with emissions-intensive and trade-exposed industrial businesses, it would be important to monitor global markets and actions by competitors to ensure that domestic climate policy contributes to global environmental benefits. This would be an important part of our future advice on what allocation should be given to participants in the alternative pricing system for farm-level agriculture emissions.53
48
(Interim Climate Change Committee, 2019b) (Interim Climate Change Committee, 2019b) 50 (Interim Climate Change Committee, 2019b) 51 (Climate Change Response Act 2002 (as at 01 December 2020), 2020, sec. 219) 52 (Interim Climate Change Committee, 2019a) 53 Before preparing a report on the system to price agricultural activities as an alternative to the ETS in 2022, the Ministers of Climate Change and Agriculture must request and consider advice from the Commission on “what assistance, if any, should be given to participants” (see section 215(4) of the Climate Change Response Act). 49
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12.3 Māori economy The Māori economy makes a significant contribution to the overall economy of the country. The Māori economy represents $50 billion or more in assets,54 which is approximately 6% of the country’s total asset base. These are the assets owned by Māori, including collectively owned trusts and incorporations, and Māori-owned businesses, service providers, and housing.55 Collectively, Māori own about $13 billion in primary sector assets – 50% of the fishing quota, 40% of forestry, 30% in lamb production, 30% in sheep and beef production, 10% in dairy production and 10% in kiwifruit production. The majority of the Māori economy sits outside the primary sector, and includes property, private equity, financial assets, tourism, geothermal energy and technology and innovation. Driven by cultural values, some Māori-collectives are already identifying, and/or moving into, innovative low emissions industries, such as hemp, medicinal cannabis, and koura, or investing in technology to drive innovations in nutraceuticals, fashion, and tourism. The Māori economy is like a developing economy within a developed economy. It is growing at a rate that exceeds that of the Aotearoa economy. In 2016, the Māori economy grew 5% compared to 2.7% for the Aotearoa economy, and Māori-collectives and businesses are expected to invest $1.5 billion a year for the next 10 years.56 Although Māori freehold land is estimated to comprise about 1.4 million hectares in Aotearoa, nearly 80% of all Māori land is of a less versatile land class (class 6, 7 and 8) and many parcels of Māori land are small and fragmented.57 Different structures and priorities have led to significant areas of iwi/Māori owned land being under-utilised for agricultural activities. The Ministry for Business, Innovation and Employment estimates that one-third of Māori land has potential for development or increased utility.58 Māori enterprises have different structures and priorities. Collective ownership structures result in lengthier decision-making processes to obtain agreement from all shareholders. Collective ownership, and concepts such as taonga tuku iho, also make it difficult to use land as security when seeking finance for development. Māori economic development also tends to have a long-term outlook and is typically progressed alongside Māori cultural, social, and environmental development strategies as a holistic approach to intergenerational wellbeing. Iwi/Māori put significant cultural value on the land, such as access to traditional medicines, hunting, providing social well-being, and maintaining connection to the land. Māori-collectives typically have a conservative risk appetite to ensure the protection of their cultural assets, and values-based decision-making is considerably more complex for iwi/Māori.59 It is important to note that different iwi, hapū, marae and whānau have diverse views and their own specific challenges. These differences affect the ability of many iwi/Māori landowners to respond to policy in a timely way, to minimise risk and maximise strategic opportunities.
54
(Chapman Tripp, 2017, 2018) (NZIER, 2003) 56 (Ministry for Business, Innovation and Employment, 2017a) 57 (Nana, 2019); (Harmsworth et al., 2012) 58 (Ministry for Business, Innovation and Employment, 2017a) 59 (Whetu Consultancy Group, 2019); (BERL & FOMA, 2019); (Funk, 2009) 55
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In addition to Māori-collectives and businesses, Māori workers also face particular challenges. This is considered in the employment and workers section (12.6 Employment and workers).
12.4 Trade International trade is critical for the Aotearoa economy, jobs and society. Currently, about 60% of economic activity in Aotearoa is from trade.60 The food and fibre sector is a major employer and exporter with about 85% of its meat,61 and 95% of its milk exported each year.62 Tourism and commercial services are also significant export earners for Aotearoa, with tourism having been particularly impacted by the COVID-19 pandemic. Trade is also beneficial for the Māori economy and offers opportunities for Māori exporters to gain access to new markets.63 Trading activity of Aotearoa affects its foreign exchange and balance of trade. Exporting products and services allows Aotearoa to pay for imported goods and services. Imports reduce costs and make more goods and services available to New Zealanders. Aotearoa imports a large range of goods, including crude oil and diesel, motor vehicles, clothing, and computers, mobile phones and other electrical goods.64 While the move to electric vehicles may see Aotearoa import less petrol in the future, New Zealanders would continue to rely on imports from other countries for a range of products and technologies. Figure 12.4 and Figure 12.5 show modelling results for exports and imports under the Current Policy Reference and target-aligned scenarios from our Climate Policy Analysis (C-PLAN) model. Our economic modelling suggests that under the Current Policy Reference case, both exports and imports would increase by 2050. In particular, services and manufacturing exports would increase, while more manufacturing products would also be imported. The target-aligned scenarios show very little difference to the Current Policy Reference case. These modelling results suggest that taking actions to meet emissions budgets and the country’s domestic targets for biogenic methane and all other greenhouse gases would not result in significant changes to exports and imports. However, this would depend on how Aotearoa transitions compared to its trade partners and competitors. Depending on the transition pathway Aotearoa takes, New Zealanders could see significant land-use change from pastoral agriculture to forestry. We have commissioned Infometrics to analyse the implications of land use change on the balance of payments. The provisional analysis of this study suggests that under some circumstances the income from the resulting timber exports would likely be greater than the lost earnings from pastoral agriculture.65 Aside from climate policy, other factors may play a role in the country’s trade flows. International markets would change over time as consumers’ preferences change, trade rules evolve, demographics change and other economic factors such as labour costs, education and innovation alter countries’ comparative advantages. The physical impacts of climate change would also affect trade. 60
(New Zealand Ministry of Foreign Affairs and Trade, 2018) (Meat Industry Association, 2020) 62 (DCANZ, 2020) 63 (Ministry for Business, Innovation and Employment, 2017a) 64 (Stats NZ, 2019) 65 (Infometrics, forthcoming) 61
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For Aotearoa, there are also economic opportunities in international markets for differentiating products for being low emissions, and risks to losing access to markets or to capital from not acting to reduce emissions.66 Globally, consumers are increasingly demanding products that meet specific environmental standards,67 and financial institutions are increasingly factoring climate risk into their decisions.68 Companies manufacturing or selling high value goods are turning to their supply chains and selecting inputs based on their environmental credentials.69 For example, the food company Danone has committed to becoming carbon neutral across their full supply chain by 2050 and require that their suppliers support this.70 Benefitting from these opportunities would require Aotearoa businesses to move ahead of other businesses. The physical impacts of climate change are also likely to affect production, and trade routes and infrastructure. Agricultural production may be affected by more frequent droughts. Higher sea levels and more frequent storms could result in more frequent port closures. How these changes affect trade flows in Aotearoa would depend largely on the relative impacts on its trading partners and competitors.71
Figure 12.4: Economic modelling of how the country’s exports would be impacted by 2050 under the Current Policy Reference (CPR) and the different Transition Pathways (TP1, TP1, TP3 and TP4). Source: Commission’s CPLAN modelling
66
(Interim Climate Change Committee, 2019a) (Unilever, 2017) 68 (Investor Group on Climate Change, 2020); (Eceiza et al., 2020) 69 For example, 115 global companies with US$3.3 trillion in procurement spend have signed up for CDP’s global environmental disclosure system. Of these companies, 43% are selecting or deselecting suppliers based on their environmental credentials. A further 30% are looking to follow this lead in the near future. (CDP, 2019) 70 (Danone, 2019) 71 (Dellink et al., 2017) 67
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Figure 12.5: Economic modelling of how Aotearoa imports would be impacted by 2050 under the Current Policy Reference (CPR) and the different Transition Pathways (TP1, TP1, TP3 and TP4). Source: Commission’s CPLAN modelling
12.5 Small businesses Aotearoa small businesses – those with fewer than 20 employees – make up about 97% of Aotearoa businesses and contribute about 30% of employment and over 25% of GDP.72 They include farm businesses, tradespeople and construction businesses, retail, hospitality and tourism.73 They play a crucial role in the economy, especially in supply chains and larger exporting businesses. Many of these businesses have been particularly affected by lockdowns due to the COVID-19 pandemic. Small businesses are diverse and would be impacted in different ways by the transition to reduce emissions, meet emissions budgets and eventually the country’s domestic targets. All small businesses would be exposed to the climate transition and emissions budgets in some way. Most would be exposed through their electricity and transport usage. However, this exposure is likely to be minor over the course of the first three emissions budgets as electricity prices are modelled to remain stable or decrease, and vehicles become more fuel efficient. Small businesses could reduce costs further by improving their energy efficiency or switching to EVs for transport. Small supermarkets and local dairies would also be exposed through the use of hydrofluorocarbons as refrigerants.
72 73
(Ministry for Business, Innovation and Employment, 2020) (Ministry for Business, Innovation and Employment, 2017b)
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There could also be opportunities for small businesses that have a heavy reliance on vehicles. Taxi drivers, couriers, builders and tradespeople that move to electric cars or vans would not only reduce their transport emissions, but also reduce ongoing running and maintenance costs. EVs are currently more expensive than conventional petrol and diesel vehicles, but our modelling expects that they would reach price parity in the late 2020s. There are also examples of larger companies helping their independent contractors purchase EVs. For example, recognising the upfront cost is preventing uptake, NZ Post is contributing a minimum of 50% of the price difference between an EV and its petrol/diesel equivalent to help its CourierPost, Pace, Rural Post and Provincial Delivery contractors purchase an EV.74 Some small businesses work with more emissions-intensive products and technologies in their businesses than others - for example, builders who use cement or steel in construction or mechanics who maintain vehicles with internal combustion engines. These businesses may need to start working with newer low emissions products and technologies and upskill to be able to do so. There would also be opportunities for new small businesses in developing and supplying these low emissions products and technologies. Some small businesses would face greater challenges and be more impacted by the move to a lower emissions society than others. Some businesses would be more directly impacted because their core business is no longer viable and would need to adapt. Some small businesses which depend on local industries, either directly (e.g. through supply chains) or indirectly (e.g. supporting coffee shops or mechanics) would also be exposed if those industries were to close down. This could be especially the case for small businesses that provide support services for emissions-intensive industries or are located in communities where an emissions-intensive industry is a large employer. Approximately 20,000 to 30,000 farm businesses in Aotearoa would be impacted by climate policy. These businesses would need to make practice changes and take up new technology as it becomes available to reduce biogenic methane and nitrous oxide. It may be more challenging for them to pass on any costs they incur from these changes as they supply milk, meat and wool into international markets. In addition, the need to reduce emissions on farms sits within a broader context for farm businesses, which are also responding to water quality, biodiversity and biosecurity regulation. For vegetable growers who heat their greenhouses, it would be costly to replace a coal boiler with a lower emissions option earlier than would otherwise be needed. Boilers are 20 to 30 year investments, and retiring them early comes at significant cost.75 Small businesses generally have less resource to dedicate to measuring their businesses’ emissions footprint, understanding where their emissions come from and assessing the options for reducing them. A 2019 survey of 707 farmers found that 50% of farmers had little or no understanding of the actions they could take to reduce their on-farm emissions, while only 14% had quantified their emissions in the last two years.76 The ability for small businesses to respond, adapt and innovate would depend on information, skills and capability, access to capital, and how early the necessary changes are signalled. In addition to ensuring that the workforce has the skillsets to respond, the Government would also need to play an
74
(NZ Post, 2020) (Horticulture New Zealand, 2020) 76 (The Nielsen Company, 2019) 75
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important role in working with small businesses, for example through extension programmes, to ensure they have the information and support to respond to climate policy.
12.6 Employment and workers There will be inevitable changes to employment and jobs as Aotearoa moves towards a low emissions society. Some regions and communities of Aotearoa will be more affected by the climate transition than others. Some communities may see the closure of large businesses that provide significant employment for the community. This would have a big impact as major job losses at a local level can lead to entire communities being left vulnerable and dislocated. Some affected workers may have the mobility and means to acquire new jobs in other industries and regions. Others may not. Affected communities can end up ‘stranded’, where workers with particular skills and expertise are no longer in demand. Aotearoa has already seen Rio Tinto announce the Tiwai Point aluminium smelter will close. Other emissions-intensive industries and large employers have also announced strategic reviews. There are many reasons for such industry closures besides climate change policy, with Rio Tinto citing energy costs and a challenging aluminium outlook. Closure of these industries has an impact on those who work there. To help understand the impact on employment, we commissioned a new model called the Distributional Impacts Microsimulation for Employment (DIM-E). We ran four scenarios through this model. We present results from all four scenarios in figures and tables in this section. However, we have focused on two of these scenarios in the text of this section – Transition Pathway 3 (TP3) and Transition Pathway 4 (TP4). TP3 and TP4 are in line with our proposed emissions budgets and key assumptions. Box 12.3 provides a description of the DIM-E model.77
Box 12.3: The Distributional Impacts Microsimulation for Employment Model The Distributional Impacts Microsimulation for Employment (DIM-E) model takes the results of the C-PLAN model and combines them with granular data from Stats NZ (particularly the
77
The results in this chapter are not official statistics. They have been created for research purposes from the Integrated Data Infrastructure (IDI), managed by Statistics New Zealand. The opinions, findings, recommendations, and conclusions expressed in this chapter are those of the authors, not Statistics NZ. Access to the anonymised data used in this study was provided by Statistics NZ under the security and confidentiality provisions of the Statistics Act 1975. Only people authorised by the Statistics Act 1975 are allowed to see data about a particular person, household, business, or organisation, and the results in this chapter have been confidentialised to protect these groups from identification and to keep their data safe. Careful consideration has been given to the privacy, security, and confidentiality issues associated with using administrative and survey data in the IDI. Further detail can be found in the Privacy impact assessment for the Integrated Data Infrastructure available from www.stats.govt.nz. The results are based in part on tax data supplied by Inland Revenue to Statistics NZ under the Tax Administration Act 1994. This tax data must be used only for statistical purposes, and no individual information may be published or disclosed in any other form, or provided to Inland Revenue for administrative or regulatory purposes. Any person who has had access to the unit record data has certified that they have been shown, have read, and have understood section 81 of the Tax Administration Act 1994, which relates to secrecy. Any discussion of data limitations or weaknesses is in the context of using the IDI for statistical purposes, and is not related to the data’s ability to support Inland Revenue’s core operational requirements.
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Integrated Data Infrastructure IDI and the Longitudinal Business Databases LBD). Using information on job characteristics by industry and demographic information for workers like age, ethnicity, education level, and location, the DIM-E can take the percentage changes in industry employment provided by C-PLAN and show which groups of people are most likely to be affected by the changes to the economy, as well as the size of those effects. For example, a 1% change in a large industry could mean more jobs being affected than a 5% change in a small industry. Moreover, instead of reducing their work force, employers may adjust employment by reducing the hours or earnings of the employees they have. Similarly, businesses may respond to increases in production by increasing the number of hours worked by their existing employees. For this reason, we should think of jobs being affected in terms of ‘job-equivalents’. Hence, DIM-E allows us to estimate the number of job-equivalents expected to be gained and lost across the economy based on the expected expansion and contraction of different industries. By comparing the characteristics of jobs potentially being lost to those being gained, we can then get a sense of whether the people who are expected to lose jobs due to changes in the economy would be able to find similar jobs in industries that are growing. This model cannot tell us about the aggregate effect on jobs in Aotearoa but provides insights on the flow of work across Aotearoa.
12.6.1 Distribution of impact on jobs and employment Our modelling cannot tell us about the aggregate impact on jobs and employment. However, it does provide insights on where job changes could occur. There will be both job gains and losses in the next 30 years whether or not new policy is put in place to transition Aotearoa to meet emissions budgets and emissions targets for biogenic methane and other greenhouse gases. This is in line with what Aotearoa has seen in the past as industries rise and fall over time depending on economic cycles. As a result, the analysis below focuses on the job gains and job losses that would occur under scenarios that would allow Aotearoa to meet our proposed emissions budgets and targets relative to the Current Policy Reference scenario. It is important to note that the Transition Pathways can provide more employment by resulting in more job gains in industries that are expanding, but also by resulting in fewer job losses in industries that are contracting relative to the Current Policy Reference scenario. Conversely the transition pathways can provide less employment by resulting in either fewer job gains in industries that are expanding or more job losses in industries that are contracting relative to the Current Policy Reference scenario. Although our analysis cannot tell us about net overall employment changes, international studies have estimated that the climate transition will have a net positive effect on jobs. This is because countries are expected to put greater attention on the impacts on jobs and employment as they decarbonise their economy. The International Labour Organisation (ILO) estimates that by 2030, about 25 million jobs will be created and about 7 million jobs lost globally.78 The UK Government estimated that its efforts to address climate change could create and support up to 250,000 green 78
(International Labour Organisation, 2019)
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jobs.79 However, job creation is not guaranteed. Government must invest in supporting policies to educate or retrain workers and provide support for those that need it to maximise the opportunities to create new jobs. In addition to creating jobs, existing jobs could be transformed and refined. The ILO estimates that about 5 million jobs will be reallocated into other industries. For example, electricians or engineers in emissions intensive sectors could be redeployed into other sectors in need of their skillsets.
12.6.2 Impacts on jobs by sector The actions taken to meet the country’s emissions targets will increase the demand for low emissions goods, services and skills. International trends show the growth and value of the clean energy transition, as jobs in the sector have grown to approximately 11.5 million, compared to 11 million in 2018.80 In the United States, wind turbine technicians and solar panel installers are the fastest-growing jobs.81 These jobs are also found to have a better gender balance than jobs in fossil fuel industries, as women hold an estimated 32% of the renewable energy jobs.82 Some sectors that are emissions-intensive will face challenges and may face greater employment changes than others. The literature suggests that those who work in legacy energy industries will be negatively impacted. Industries such as the automobile and servicing industry could face changes in employment from shifting towards low emissions transport. The coal mining and oil and gas sectors, and the services that support them, will be impacted by the transition away from fossil fuels. This would particularly affect Taranaki and the West Coast where the majority of these jobs are located. Under current policy settings, our modelling indicates that Aotearoa would see about 600 net job losses from these fossil fuel sectors between 2022 and 2035. However, taking action to meet our proposed emissions budgets would result in 600-1100 more net job losses in both these sectors by 2035 (Figure 12.6). If Aotearoa reduced emissions at a faster rate in the first two emissions budget periods, job losses in these sectors would occur earlier. The jobs that are lost from the oil and gas sector are likely to be highly skilled and therefore high paying jobs. The individuals affected are likely to have skillsets that could be valuable in other sectors, including sectors emerging as part of the transition to a low emissions economy.
79
(UK Government, 2020) (IRENA, 2020) 81 (US Bureau of Labor Statistics, 2020) 82 (IRENA, 2020) 80
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Figure 12.6: Simulation results of the average annual change in employment in the fossil fuel sectors (ANZSIC codes B060, B070, B109, C170, D270) in each emissions budget period under the Current Policy Reference case (CPR) and Transition Pathways 1-4 (TP1 - TP4) that are in line with our proposed emissions budgets. Source: DIM-E simulation results In some other sectors, our modelling indicates that there could be fewer job losses as a result of taking actions to meet our proposed emissions budgets. For example, our modelling suggests that, under current policy settings, there could be about 4,000 job losses in sheep, beef and grain farming by 2035. However, our modelling suggests that taking actions to meet our proposed emissions budgets would result in 400-700 fewer job losses. This is largely because our proposed emissions budgets would result in less land use change from sheep and beef farming to forestry.
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Figure 12.7: Simulation results of the average annual change in employment in the ANZSIC sector A014: Grain, Sheep and Beef Cattle Farming in each emissions budget period under the Current Policy Reference case (CPR) and Transition Pathways 1-4 (TP1 - TP4) that are in line with our proposed emissions budgets. Source: DIM-E simulation results While our modelling is able to look at existing industries, there will also be new industries that arise as a result of the low emissions transition and from regional development that our modelling is not able to foresee. For example, there are opportunities to create new jobs associated with the circular economy, such as using wood waste for biofuels,83 and new industries, such as hydrogen. New jobs could also be generated in energy efficiency and home energy audits, and advisory services for managing emissions on farm, for example. Generating jobs and taking advantage of these new opportunities will require investment and planning. To take advantage of these opportunities and support workers affected by the climate transition, Aotearoa will need the transition to be well-signalled to allow time to plan and localised transitions planning that is tailored by the community for the community. Many of the workers affected will have important skillsets that will be in demand in new low emissions industries. Workers will need to be supported to redeploy into these new areas of work, and provided opportunities to retrain and build new skillsets.
83
(Eunomia et al., 2017; Ministry for the Environment, 2019a)
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12.6.3 Impacts on jobs by region Job changes could be concentrated in certain regions, such as when a town depends on a single industry for employment or could be more structural changes that occur over a longer period of time, such as the innovation opportunities from increased demand for low emissions goods. Without transition planning, regions that are dependent on emissions-intensive activities, such as mining, could face lob losses or fewer job opportunities. These impacts can have adverse effects on the wider community, such as loss of community culture and economic decline of regions. The modelling suggests that Taranaki and the West Coast would be negatively impacted under our proposed emissions budgets, relative to the Current Policy Reference case, between 2022 and 2050. The job losses would largely occur in the oil and gas, mining, transport and manufacturing industries. Most of these job losses would occur over the course of the first and second emissions budget periods. Moreover, the jobs in these industries tend to pay more than the average job. By 2050, the other regions would largely gain more jobs than are lost under TP3 and TP4 that are in line with our proposed emissions budgets, relative to the Current Policy Reference case. Still, some regions of Aotearoa would experience disproportionately more job losses relative to the Current Policy Reference case though these would not be significant. The regions that could be disproportionately impacted by job losses include: Northland, Waikato, Taranaki and Wellington. To understand where job changes are occurring, it is helpful to group industries based on whether they are gaining or losing jobs, and whether they are growing or declining. This gives us four categories: •
Gain, more gain: More jobs in the industry in the Transition Pathway than in the Current Policy Reference case, and a growing industry • Gain, less loss: More jobs in the industry in the Transition Pathway than in the Current Policy Reference case, in a declining industry (so less job loss in the scenario than in the CPR) • Loss, less gain: Less jobs in the industry in the Transition Pathway than in the Current Policy Reference case, but a growing industry (so still more jobs than now, but not as many new jobs as we would have had without our mitigation actions) • Loss, more loss: Less jobs in the industry in the Transition Pathway than in the Current Policy Reference case, and a declining industry (so more job loss with our mitigation actions than we would have otherwise had) In each of these groups, our modelling then allows us to determine what proportion of jobs lost or gained nationally occurs in each region. For example, 34-35% of the jobs gained nationally in growing industries (gain, more gain category) are in Auckland, while 13-18% of jobs lost nationally in declining industries (loss, more loss category) are also in Auckland. In net terms, across the four categories, Auckland could gain around 80 jobs (in the TP3 scenario) or around 600 jobs (in the TP4 scenario).
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Figure 12.8: Job changes by region in the first three budget periods. Industries are grouped by whether they gain or lose jobs in the transition pathways compared to the CPR (top two and next two graphs respectively), and whether they are in growing or shrinking industries (first and third, and second and fourth graphs respectively). The fifth graph shows the net effect on jobs in each region. Source: DIM-E simulation results
12.6.4 Impact on jobs held by Māori, Pacific Peoples and other ethnic groups Some Māori individuals in the workforce could experience greater changes. Our analysis suggests that 18-25% of those who gain jobs from the transition would be Māori, while 13-21% of those who lose jobs from the transition would be Māori. Māori in the workforce would see more job gains than job losses across all three emission budget periods. Proportionately, Pacific Peoples could also experience greater changes. Our analysis suggests that 79% of those who gain jobs from the transition would be Pacific Peoples, while 3-9% of those who lose jobs from the transition would be Pacific Peoples. As with Māori, Pacific Peoples in the workforce would see more job gains than job losses across all three emission budget periods. BERL has estimated that the current income gap for Māori is $2.6 billion per year, equating to $140 less income per person per week for the working age Māori population. Over half of the working Māori population are in lower skilled jobs, and almost half are in jobs that have a high risk of being
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replaced by automation.84 Research indicates that current education and training providers are not serving Māori well and have low levels of engagement from Māori.85 Māori who need to retrain or update their skillsets as employment changes may be particularly impacted. Education and training developed by Māori for Māori would be important for reducing existing inequities and in ensuring an equitable transition. While our analysis does not allow us to distinguish the specific effects on Māori incomes, across the whole population the jobs gained are on average similar or lower paid than those jobs that are lost. The Crown–Māori Economic Development Strategy, He kai kei aku ringa, also has a goal of growing the future Māori workforce into higher-wage, higher-skilled jobs.86 These barriers would need to be addressed to enable Māori to fully participate in climate action, and ensure that Māori-collectives, businesses and workers are not disadvantaged. Any additional costs arising from climate policy could result in additional barriers for the continued development of iwi/Māori landholdings and businesses.
Impacts on jobs for different generations Our modelling suggests that over the first emissions budget period, workers aged 45 years and over would experience a disproportionate number of job losses under the target-aligned scenarios compared to the Current Policy Reference case. Looking out to 2050, there could be more new jobs in all age groups compared to the Current Policy Reference case. However, younger age groups would benefit more from the target-aligned scenarios than older age groups, and older workers are disproportionately impacted by job losses.
Impacts on jobs by highest qualification The modelling suggests that over the first emissions budget period, there would be fewer job gains under the scenarios that would put Aotearoa on track for its targets, which particularly impact those who have a Bachelors or postgraduate degree, than the Current Policy Reference case. This is due to the impact on the oil and gas and mining sectors, where a higher proportion of workers hold Bachelors or postgraduate degrees. Looking out to 2050, the modelling suggests that workers with qualifications would be better off under the target-aligned scenarios compared to the Current Policy Reference case. Workers with no university qualification would experience disproportionately more job losses.
12.6.5 Ensuring an equitable transition for workers The previous sections outline that, while overall the impact of the climate transition on businesses and jobs is likely to be manageable, some workers, industries and communities could be more severely impacted. This section considers how workers can be supported through the transition, particularly by investing in education and retraining to help prepare displaced workers for the new job opportunities that would emerge from the transition to a low emissions and climate-resilient economy and society. 84
(BERL, 2017) (Whetu Consultancy Group, 2019) 86 (Māori Economic Development Panel, 2012) 85
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Productivity, skills and innovation is important for ensuring an equitable transition where workers have the skills to move into new jobs, and businesses have the skills and capability to innovate, adopt new technologies and commercialise new ideas. Localised transitions planning would also be needed, particularly in communities that rely heavily on one or two industries for employment.
Productivity, skills and innovation Productivity refers to how well businesses, people or organisations convert inputs – like capital and labour – into the output of goods and services. By improving productivity, a certain amount of output can be created using fewer resources, or more or better outputs can be created from the same amount of resource.87 Productivity growth is a major driver of income growth and living standards.88 Policy that addresses both productivity growth and the low emissions transition can help to ensure more innovation, more inclusive economic growth, the creation of higher paying jobs, and therefore higher living standards. However, despite having high labour market performance relative to other OECD countries, Aotearoa has relatively weak labour productivity and earnings quality – a measure of how the level of wages contribute to living standards and wellbeing, and the distribution of wages across the workforce.89 Research by the Productivity Commission suggests that the country’s low productivity growth is due to weak technology diffusion from leading edge global businesses to the country’s leading businesses, low technology and knowledge spill over from domestic leading businesses to less productive businesses, and resources being concentrated in small unproductive businesses and not reallocating to more productive businesses.90 The decisions business owners make affect how well the productivity-enhancing processes of innovation, technology diffusion and resource allocation happen. Those decisions are in turn affected by government policy. Leading edge businesses develop and make smart use of new technologies and processes to improve their operations. They adopt innovative management practices, and flexible approaches to delivering their goods or services. These technologies and processes then diffuse to other firms in the economy, which can adapt them to improve their own productivity. In this way, these leading firms help to lift the productivity of the whole economy. Government policies that support these productivity enhancing processes would be an important part of an equitable transition to low emissions.91 The education, and science and innovation systems are critical for ensuring low emissions economic growth.92 The Productivity Commission suggests productivity growth in Aotearoa can be improved by strengthening international connections and integrating with high-value global value chains,
87
(New Zealand Productivity Commission, 2020) (Gurría, 2015). In Aotearoa, wages increase at a faster rate when there is strong growth in labour productivity. (Conway et al., 2015) 89 (OECD, 2018) 90 (New Zealand Productivity Commission, 2016) 91 The Productivity Commission is currently undertaking an inquiry into “frontier firms”, and how the Government can support the processes of innovation, diffusion and reallocation to improve productivity. The draft report was released in December 2020. Their issues paper is (New Zealand Productivity Commission, 2020). 92 (OECD, 2017a) 88
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improving the science and innovation system, and ensuring that New Zealanders have the skills that are needed for where the labour market is heading.93 A good skills and education system benefits workers, businesses and societies.94 For a worker, skills are important for allowing an individual to pursue their interests, for improving employability and wages, for empowering individuals and allowing autonomy in the workplace, and improving overall wellbeing.95 For businesses, skills and capability allow them to innovate, adopt new technologies or commercialise new ideas. Ensuring skills match what is needed in the labour market is important for enabling businesses can do this.96 Increased rates of innovation would also help to soften competitiveness impacts from strong climate action. Being an early mover in researching new technologies and adopting existing technologies could benefit Aotearoa, particularly in sectors where Aotearoa is particularly innovative such as agriculture. This could lead to new sectors, new business opportunities and new jobs.97 For societies, skills and innovation help to create new opportunities for transforming the economy, creating new jobs, and more inclusive sustainable growth.98 The education and training system would need to focus not just on learning at the start of an individual’s career, but lifelong learning, as well as ensuring individuals are provided with the skills that would be needed in the future labour market. Long-term skills development would need to include pre-employment and life skills training, secondary and tertiary education, vocational training and apprenticeships, ongoing training in the workplace, and training and retraining for those seeking work or new careers.99 Policy intervention would also need to focus on the skill requirements of those who work in industries where more change would be needed as part of the climate transition, and on those who would have the most difficulty gaining new employment. The education system would need to be more flexible, and address barriers that restrict all New Zealanders from participating in education and training, with particular focus on the challenges Māori face in accessing education and training.100 Chapter 17: The direction of policy for Aotearoa further explores the direction of policy needed to ensure that New Zealanders are equipped with the skills needed to thrive in the transition to low emissions economy.
Localised transition planning Some regions and communities of Aotearoa would be more affected by the climate transition than others. In particular, some communities may see the closure of large businesses that provide
93
(New Zealand Productivity Commission, 2016) (The Global Deal for Decent Work and Inclusive Growth et al., 2020) 95 (The Global Deal for Decent Work and Inclusive Growth et al., 2020) 96 (New Zealand Productivity Commission, 2016, 2019) 97 (Ministry for the Environment, 2018) 98 (The Global Deal for Decent Work and Inclusive Growth et al., 2020) 99 (The Global Deal for Decent Work and Inclusive Growth et al., 2020) 100 (New Zealand Productivity Commission, 2019; Whetu Consultancy Group, 2019) 94
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significant employment for the community. Such a closure can have a big impact, not just on employees, but also on businesses and workers in the wider community. Significant job losses at a local level can potentially lead to entire communities being left vulnerable and dislocated. Some affected workers may have the mobility and means to acquire new jobs in other industries and regions, while others may not. Affected communities may therefore end up ‘stranded’, with some workers with skills and expertise that are no longer in demand.101 Already disadvantaged groups, such as those on lower incomes, youth, elderly, Māori and Pacific Peoples, are also more likely to be more vulnerable to climate hazards.102 For example, some coastal communities that may need to relocate due to sea level rise and flooding, dislocating both the communities that remain and those resettling elsewhere.103 In such situations, localised transitions planning would be needed where central government works together with local businesses, workers, iwi/Māori, community and local interest groups, and local government to develop a long-term vision and strategies for affected regions. The OECD emphasises that localised transition planning would help to ensure climate change policies are tailored to regional and local circumstances, and address the needs and aspirations of different groups within the community.104 Localised planning is also important for achieving successful and enduring transition outcomes, and aligning government and business investment priorities.105 In some situations, businesses would only invest if they know that complementary investments, such as to infrastructure, are being made.106 Transparent and inclusive processes, and active social dialogue regarding the transition, would be key to achieving a transition that is accepted and enduring.107 There are several international examples of different approaches to inclusive transition planning. Research suggests that important elements of existing initiatives aimed at supporting an equitable transition include ensuring affected workers, businesses and communities are active and empowered participants in transition planning. The provision of targeted financial and capacity building support is also important. In Spain, for example, ‘just transition agreements’ have been required since 2018 between the government, unions, and businesses in all regions that are affected by climate transitions. Local civil society groups and the general public can also participate in the development of the agreements, which are designed to support strategies to reduce the negative impacts of the transition, and to finance green projects. The first such agreement was reached in October 2018 for regions impacted by coal mine closures.108
101
(OECD, 2017b) (Ministry for the Environment, 2020); (Islam & Winkel, 2017) 103 (Ministry for the Environment, 2020) 104 (OECD, 2017b) 105 (New Zealand Productivity Commission, 2018b) 106 (New Zealand Productivity Commission, 2018b) 107 (OECD, 2019b) 108 (Bouyé et al., 2019; Gobierno de España, 2020) 102
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12.7 References B+LNZ, M. (2020). Blueprint for partnership with the New Zealand Government. Beef + Lamb NZ and the Meat Industry Association. https://mia.co.nz/assets/MIA-Publications/Blueprint-forpartnership-with-the-New-Zealand-Government-Manifesto.pdf BERL. (2017). Change agenda: Income equity for Māori (No. 5844). BERL. http://www.maorifutures.co.nz/wp-content/uploads/2019/11/Income-Equity-for-Maori.pdf BERL & FOMA. (2019). Education, training, and extension services for Māori land owners. BERL, FOMA. https://www.iccc.mfe.govt.nz/assets/PDF_Library/f12a9f85fb/FINAL-BERL_FOMAEducation-training-and-extension-services-for-Maori-land-owners-BERL_FOMA.pdf Bolton, A. (2018). Climate Change and Environmental Health [. . Report prepared for Ministry of Health by ESR]. https://www.esr.cri.nz/assets/Uploads/Climate-Change-and-Env-HealthFINAL-20180517.pdf Bouyé et al. (2019). Growing Momentum for Just Transition: 5 Success Stories and New Commitments to Tackle Inequality Through Climate Action. World Resources Institute. https://www.wri.org/blog/2019/08/growing-momentum-just-transition-5-success-storiesand-new-commitments-tackle Cambridge Econometrics. (2017). Competitiveness impacts of carbon policies on UK energy-intensive industrial sectors to 2030: Report prepared for the Committee on Climate Change [Report prepared for Committee on Climate Change]. Cambridge Econometrics. CDP. (2019). Cascading commitments: Driving ambitious action through supply chain engagement. CDP Supply Chain Report 2018/19. CDP. https://6fefcbb86e61af1b2fc4c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/00 4/072/original/CDP_Supply_Chain_Report_2019.pdf?1550490556 Chapman Tripp. (2017). Te Ao Māori: Trends and insights, Pipiri 2017. Chapman Tripp. https://chapmantripp.com/media/j1slpr3f/te-ao-maori-2017-english.pdf Chapman Tripp. (2018). Te Ao Māori: Trends and insights, March 2018. Chapman Tripp. https://chapmantripp.com/media/ihhdeypu/te-ao-maori-2018-english.pdf
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Child Poverty Action Group. (2019a). Aotearoa,land of the long wide bare cupboard—Part 1: Food insecurity. https://www.cpag.org.nz/assets/191107%20CPAG%20Food%20Poverty%20Part%201%20FI NAL%20WEB.pdf Child Poverty Action Group. (2019b). Aotearoa,land of the long wide bare cupboard—Part 4: Food Insecurity in New Zealand. https://www.cpag.org.nz/assets/06062020%20CPAG%20Food%20Insecurity%20IV%20%20FINAL.pdf Committee on Climate Change. (2019). Net Zero: The UK’s contribution to stopping global warming (p. 275). Committee on Climate Change. https://www.theccc.org.uk/wpcontent/uploads/2019/05/Net-Zero-The-UKs-contribution-to-stopping-global-warming.pdf Conway, P., Meehan, L., & Parham, D. (2015). Who benefits from productivity growth? – The labour income share in New Zealand (p. 53) [New Zealand Productivity Commission Working Paper 2015/1]. New Zealand Productivity Commission. Danone. (2019, November 7). Towards carbon neutrality. Danone. https://www.danone.com/impact/planet/towards-carbon-neutrality.html DCANZ. (2020, October 19). About the NZ Dairy Industry. Dairy Companies Association of New Zealand. https://www.dcanz.com/about-the-nz-dairy-industry/ Dellink, R., Hwang, H., Lanzi, E., & Chateau, J. (2017). International trade consequences of climate change (OECD Trade and Environment Working Papers No. 2017/01; OECD Trade and Environment Working Papers, Vol. 2017/01). OECD. https://doi.org/10.1787/9f446180-en Eceiza, J., Harreis, H., Härtl, D., & Viscardi, S. (2020). Banking imperatives for managing climate risk. McKinsey & Company. https://www.mckinsey.com/business-functions/risk/ourinsights/banking-imperatives-for-managing-climate-risk Eden, A., Unger, C., Acworth, W., Wilkening, K., & Haug, C. (2018). Benefits of emissions trading: Taking stock of the impacts of emissions trading systems worldwide. International Carbon Action Partnership. https://icapcarbonaction.com/en/?option=com_attach&task=download&id=575
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EPA. (2019). Industrial allocations. https://www.epa.govt.nz/industry-areas/emissions-tradingscheme/industrial-allocations/decisions/ Eunomia. (2017). The New Zealand Waste Disposal Levy: Potential Impacts of Adjustments to the Current Levy Rate and Structure. [Final Report]. Eunomia. https://www.eunomia.co.uk/reports-tools/the-new-zealand-waste-disposal-levy-potentialimpacts-of-adjustments-to-the-current-levy-rate-and-structure/ European Commission. (2020). Impact assessment accompanying the document: Stepping up Europe’s 2030 climate ambition: Investing in a climate-neutral future for the benefit of our people (p. 140). European Commission. https://eurlex.europa.eu/resource.html?uri=cellar:749e04bb-f8c5-11ea-991b01aa75ed71a1.0001.02/DOC_1&format=PDF FAO. (2018). The State of Agricultural Commodity Markets. Food and Agriculture Organization of the United Nations. http://www.fao.org/3/I9542EN/i9542en.pdf FAO. (2020a). Low-Income Food-Deficit Countries (LIFDCs)—List for 2018. Food and Agriculture Organization of the United Nations. http://www.fao.org/countryprofiles/lifdc/en/?lang=en FAO. (2020b). Suite of Food Security Indicators. Food and Agriculture Organization of the United Nations. http://www.fao.org/faostat/en/#data/FS FAO. (2020c). The State of Food Security and Nutrition in the World 2020. Food and Agriculture Organization of the United Nations. Funk, J. (2009). Carbon farming on Māori land: Do governance structures matter? [PhD Thesis, Chapter IV, Stanford University]. https://www.motu.nz/our-expertise/environment-andresources/lurnz/carbon-farming-on-maori-land-do-governance-structures-matter/ Gobierno de España. (2020). Everything you need to know about Just Transition agreements. https://www.miteco.gob.es/es/transicion-justa/_default.aspx Gurría, Á. (2015, July 6). Keynote speech on the future of productivity: Productivity by all and for all. Address by Ángel Gurría, Secretary-General, OECD. http://www.oecd.org/about/secretarygeneral/keynote-productivity-by-all-and-for-all.htm
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Harmsworth, G., Tahi, M., & Insley, C. K. (2012). Climate change business opportunities for Māori land and Māori organisations (Prepared for the Ministry for Primary Industries by Landcare Research MPI Technical Paper No: 2012/43; p. 71). Horticulture New Zealand. (2020). Submission on: Accelerating renewable energy and energy efficiency (p. 45) [Submission to Ministry of Business, Innovation and Employment]. Horticulture NZ. https://www.tomatoesnz.co.nz/assets/Uploads/HortNZ-Submission-onMBIE-Accelerating-renewable-energy-FINAL-08032020.pdf Infometrics. (forthcoming). *Land Use, Balance of Payments and Emissions [Commissioned by Climate Change Commission]. Infometrics. Interim Climate Change Committee. (2019a). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ Interim Climate Change Committee. (2019b). Technical Appendix 7: International context and the risk of emissions leakage (Action on Agricultural Emissions). Interim Climate Change Committee. https://www.iccc.mfe.govt.nz/assets/PDF_Library/4aab1e95db/FINAL-ICCC-TechnicalAppendix-7-International-Context-and-Leakage.pdf International Labour Organisation. (2019). Skills for a greener future: A global view based on 32 country studies. International Labour Organization. http://www.ilo.org/skills/pubs/WCMS_732214/lang--en/index.htm Investor Group on Climate Change. (2020). 2020 Net zero investment survey (p. 26). Investor Group on Climate Change. https://igcc.org.au/wp-content/uploads/2020/10/Oct2020__Final-IGCCNet-Zero-Investment-Report.pdf IPCC. (2019). Climate Change and Land: An IPCC special report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in terrestrial ecosystems. https://www.ipcc.ch/srccl/ IRENA. (2020). Renewable Energy and Jobs – Annual Review 2020. IRENA. https://www.irena.org/publications/2020/Sep/Renewable-Energy-and-Jobs-Annual-Review2020
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Islam, S. N., & Winkel, J. (2017). Climate change and social inequality (UN/DESA Working Papers DESA Working Paper No. 152, ST/ESA/2017/DWP/152; p. 32). United Nations Department of Economic and Social Affairs. https://www.un.org/development/desa/publications/workingpaper Karlsson, M., Alfredsson, E., & Westling, N. (2020). Climate policy co-benefits: A review. Climate Policy, 20(3), 292–316. https://doi.org/10.1080/14693062.2020.1724070 KPMG. (2017). Agribusiness Agenda 2017. https://home.kpmg/content/dam/kpmg/nz/pdf/June/agri-agenda-2017-kpmg-nz.pdf Māori Economic Development Panel. (2012). He kai kei aku ringa: The Crown-Māori Economic Growth Partnership Strategy to 2040. https://www.mbie.govt.nz/assets/7ec02ea964/strategy-to-2040-maori-economicdevelopment-panel.pdf Massachusetts Institute of Technology. (2017). Human System Model: Economic Projection & Policy Analysis (EPPA) Model. MIT Joint Programme on the Science and Policy of Global Change. https://globalchange.mit.edu/research/research-tools/human-system-model Meat Industry Association. (2020, June). About the Meat Industry Association. MIA Meat Industry Association. https://mia.co.nz/about-mia/ Methanex Corporation. (2018). 2018 Methanex Corporation annual report. Methanex Corporation. https://www.methanex.com/sites/default/files/investor/annualreports/2018%20Methanex%20Annual%20Report.pdf Ministry for Business, Innovation and Employment. (2017a). Māori Economy Investor Guide. https://www.mbie.govt.nz/dmsdocument/1051-maori-economy-investor-guide-pdf Ministry for Business, Innovation and Employment. (2017b). Small business in New Zealand: How do they compare with larger firms? https://www.mbie.govt.nz/assets/30e852cf56/smallbusiness-factsheet-2017.pdf Ministry for Business, Innovation and Employment. (2020). Small business. https://www.mbie.govt.nz/business-and-employment/business/support-for-business/smallbusiness/
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Ministry for the Environment. (2018). Zero Carbon Bill Economic Analysis: A synthesis of economic impacts. Ministry for the Environment. https://www.mfe.govt.nz/publications/climatechange/zero-carbon-bill-economic-analysis-synthesis-of-economic-impacts Ministry for the Environment. (2019). Reducing waste: A more effective landfill levy—Consultation document. Ministry for the Environment. https://www.mfe.govt.nz/publications/waste/reducing-waste-more-effective-landfill-levyconsultation-document Ministry for the Environment. (2020). National Climate Change Risk Assessment for New Zealand. Arotakenga Tūraru mō te Huringa Āhuarangi o Āotearoa. Main report. Pūrongo Whakatōpū. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/national-climatechange-risk-assessment-main-report.pdf Nana, G. (2019). GHG costs and benefits on different land classes—Supplementary for Māori and iwi land. BERL. https://www.iccc.mfe.govt.nz/assets/PDF_Library/b08b31a727/FINAL-BERLGHG-costs-and-benefits-on-different-land-classes-supplementary-for-Maori-and-Iwi-landBERL.pdf New Zealand Ministry of Foreign Affairs and Trade. (2018). NZ trade policy. New Zealand Ministry of Foreign Affairs and Trade. https://www.mfat.govt.nz/en/trade/nz-trade-policy/ New Zealand Productivity Commission. (2016). Achieving New Zealand’s productivity potential: Overview. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/4d20990f98/Overview-Achieving-NZsproductivity-potential.pdf New Zealand Productivity Commission. (2018a). Low-emissions economy: Final report. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf New Zealand Productivity Commission. (2018b). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf New Zealand Productivity Commission. (2019). *Training New Zealand’s workforce: Technological change and the future of work.
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https://www.productivity.govt.nz/assets/Documents/da611be657/Draft-report-3_TrainingNew-Zealands-workforce-v2.pdf New Zealand Productivity Commission. (2020). New Zealand firms: Reaching for the frontier (p. 60) [Issues Paper]. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/990a36d674/Issues-paper_NewZealand-firms.pdf NZ Post. (2020, June 23). Electric vehicle incentive programme. Sustainability. https://www.nzpost.co.nz/about-us/sustainability/evan NZIER. (2003). Māori Economic Development: Te Ōhanga Whanaketanga Māori. NZ Institute of Economic Research (Inc.). NZIER. (2018). Economic impact analysis of 2050 emissions targets: A dynamic Computable General Equilibrium analysis. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/NZIER%20report%2 0-%20Economic%20impact%20analysis%20of%202050%20emissions%20targets%20%20FINAL.pdf OECD. (2017a). Investing in Climate, Investing in Growth. OECD Publishing. https://www.oecdilibrary.org/docserver/9789264273528en.pdf?expires=1603847130&id=id&accname=guest&checksum=EA9A87CFDC8824DD170ED 1285726E101 OECD. (2017b). Towards and inclusive transition. OECD Publishing. https://www.oecdilibrary.org/docserver/9789264273528-8en.pdf?expires=1603148712&id=id&accname=guest&checksum=5F1D5B73EA4D8BFDBCF03 E4A86F902E0 OECD. (2018). The new OECD Jobs Strategy: Good jobs for all in a changing world of work: How does New Zealand compare? OECD. https://www.oecd.org/newzealand/jobs-strategy-NEWZEALAND-EN.pdf OECD. (2019a). OECD work in support of climate action (p. 32). OECD Environment Directorate. https://www.oecd.org/env/cc/OECD-work-in-support-of-climate-action.pdf
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OECD. (2019b). Regions in Industrial Transition: Policies for People and Places. OECD Publishing. https://doi.org/10.1787/c76ec2a1-en OECD. (2020). COVID-19 and global food systems. OECD. http://www.oecd.org/coronavirus/policyresponses/covid-19-and-global-food-systems-aeb1434b/ Office of the Minister for Climate Change. (2020a). Cabinet paper: A review of industrial allocation in the Ne Zealand Emissions Trading Scheme. https://www.mfe.govt.nz/sites/default/files/media/Legislation/Cabinet%20paper/cabinetpaper-a-review-of-industrial-allocation.pdf Office of the Minister for Climate Change. (2020b). Cabinet paper: Proceeds from the New Zealand Emissions Trading Scheme. https://www.mfe.govt.nz/sites/default/files/media/Legislation/cab_paper_proceeds_from_ the_nzets_0.pdf Office of the Minister of Transport. (2020). Cabinet paper: Setting road user charges for 2020/21 to fund the Government Policy Statement on Land Transport 2018. https://transportnz.cwp.govt.nz//assets/Uploads/Cabinet/cabinet-paper-RUC-increase2020.pdf Primary Sector Council. (2020). Fit for a Better World. Primary Sector Council. https://fitforabetterworld.org.nz/assets/Uploads/PSC-Report_11June2020-WEB.pdf Royal Society Te Apārangi. (2017). Human Health Impacts of Climate Change for New Zealand: Evidence Summary (p. 18). Royal Society Te Apārangi. https://www.royalsociety.org.nz/assets/documents/Report-Human-Health-Impacts-ofClimate-Change-for-New-Zealand-Oct-2017.pdf Sense Partners. (2018). Countervailing forces: Climate targets and implications for competitiveness, leakage and innovation. Sense Partners. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/Countervailing%20f orces%20-%20Sense%20Partners%202018%20FINAL%20report.pdf Statistics NZ. (n.d.). Overseas goods trade – 2018 in review. Statistics NZ. Retrieved 28 October 2020, from https://www.stats.govt.nz/reports/overseas-goods-trade-2018-in-review
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Stats NZ. (2019). Overseas goods trade – 2018 in review. https://www.stats.govt.nz/reports/overseas-goods-trade-2018-in-review Stats NZ. (2020). New Zealand Trade Dashboard. https://statisticsnz.shinyapps.io/trade_dashboard/ Te Tai Ōhanga The Treasury. (2019). Half Year Economic and Fiscal Update 2019. The Treasury. Te Tai Ōhanga The Treasury. (2020). Pre-election Economic and Fiscal Update 2020 (p. 177). The Treasury. https://www.treasury.govt.nz/system/files/2020-09/prefu20.pdf The Global Deal for Decent Work and Inclusive Growth, OECD, & International Labour Organization. (2020). The Global Deal for Decent Work and Inclusive Growth flagship report: Social dialogue, skills and COVID-19 (p. 201). Global Deal, OECD, International Labour Organisation. https://www.theglobaldeal.com/resources/2020%20Global%20Deal%20Flagship%20Report. pdf The Nielsen Company. (2019). Climate issues facing farmers. Sustainable Land Management and Climate Change Research Programme [Prepared for the Ministry for Primary Industries]. Ministry for Primary Industries. https://www.agriculture.govt.nz/dmsdocument/33747/direct UK Government. (2020). The Ten Point Plan for a Green Industrial Revolution. Unilever. (2017). Making Purpose Pay—Inspiring Sustainable Living. Unilever. https://www.unilever.com/Images/making-purpose-pay-inspiring-sustainableliving_tcm244-506468_en.pdf US Bureau of Labor Statistics. (2020). Fastest Growing Occupations: Occupational Outlook Handbook: : U.S. Bureau of Labor Statistics. https://www.bls.gov/ooh/fastest-growing.htm Westpac. (2018). WestpacNZ. Climate Change Impact Report. Ernst & Young Limited. https://www.westpac.co.nz/who-we-are/sustainability-and-community/looking-after-ourenvironment/climate-change/climate-change-impact-report/ Whetu Consultancy Group. (2019). Integrating Māori Perspectives: An analysis of the impacts and opportunities for Māori of options proposed by the Interim Climate Change Committee (p. 137). https://www.iccc.mfe.govt.nz/assets/PDF_Library/b7b6ac127b/FINAL-WhetuIntegrating-Maori-Perspectives-An-analysis-of-the-impacts-and-opportunities-for-Maori-ofoptions-proposed-by-the.pdf 1 February 2021 Draft Supporting Evidence for Consultation
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Winchester, N. (2019). Review of Economic impact of meeting 2050 emissions targets Stage 2 modelling. https://www.mfe.govt.nz/publications/climate-change/economic-impact-ofmeeting-2050-emissions-targets-stage-2-modelling World Energy Council. (2019). World Energy Trilemma Index 2019 (p. 79). World Energy Council. https://www.worldenergy.org/assets/downloads/WETrilemma_2019_Full_Report_v4_pages .pdf
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Chapter 13: Households and communities Our modelling suggests that most households would not see an increase in electricity bills and petrol costs over the course of the first three emissions budgets. Energy efficient electric appliances, improvements in fuel efficiency, a shift to electric vehicles and more public transport, walking and cycling, will play an important role in meeting our proposed emissions budgets. This chapter looks at what impacts the climate transition may have on household bills, on access to transport and how land use changes could impact the communities of Aotearoa.
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Contents Chapter 13: Households and communities .................................................................................... 1 13.1 Introduction ......................................................................................................................... 3 13.2 Electricity ............................................................................................................................. 3 13.2.1 Regional electricity prices ........................................................................................................ 4 13.2.2 Electricity bills .......................................................................................................................... 5 13.2.3 Assisting lower income households ......................................................................................... 5 13.2.4 How this can be managed? ...................................................................................................... 6 13.3 Natural gas ........................................................................................................................... 6 13.3.1 How this can be managed? ...................................................................................................... 6 13.4 Petrol bills and access to transport ........................................................................................ 7 13.4.1 How this can be managed? ...................................................................................................... 9 13.5 Potential impacts from land use change ................................................................................ 9 13.5.1 Afforestation .......................................................................................................................... 13 13.5.2 Land use change to horticulture and other uses ................................................................... 16 13.6 Benefits of improved health to communities ....................................................................... 17 13.7 References ......................................................................................................................... 18
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Our modelling suggests that most households would not see an increase in electricity bills and petrol costs over the course of the first three emissions budgets. Energy efficient electric appliances, improvements in fuel efficiency, a shift to electric vehicles and more public transport, walking and cycling, will play an important role in meeting our proposed emissions budgets. This chapter looks at what impacts the climate transition may have on household bills, on access to transport and how land use changes could impact the communities of Aotearoa.
13.1 Introduction This chapter looks more closely at what impacts the climate transition may have on household bills due to changing electricity and petrol prices, on access to transport and the particular impact land use change to forestry could have on Aotearoa communities. Energy and petrol costs are key expenses for households. We analysed the potential impact of our proposed emissions budgets on household bills, access to transport and health. We found that our proposed emissions budgets would not increase bills for most households. Most households could see a reduction in electricity bills and transport costs, particularly if they switched to lower emissions heating and transport. However, not all households would benefit equally. For example, low income households could struggle to access these technologies, even though they would benefit the most from the cost savings and health co-benefits. Targeted assistance would be needed to ensure that low income households can access new low emissions technologies and are not disproportionately affected by the climate transition.
13.2 Electricity Our analysis suggests that overall household electricity bills for heating, cooking and lighting are unlikely to increase as a result of our proposed emissions budgets. However, exactly how they could change is highly uncertain. Household electricity bills depend on both electricity prices and household electricity demand. We modelled wholesale electricity prices, which is only one component of household bills. The results of our modelling, shown in Figure 13.1, suggest that wholesale electricity prices across the country would remain stable or fall over the course of the first three emissions budgets. One of the reasons for this is that we assume the Tiwai Point Aluminium Smelter closes, deferring the need for investment in new generation. However, we note there are uncertainties around the timing of the closure of the smelter and gas supply for electricity generation. These factors could cause different price outcomes from what has been modelled.
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Figure 13.1: In our modelling path, wholesale electricity prices in Aotearoa decrease and then return to close to 2021 levels by 2035. The shaded area shows the range between the maximum and minimum price for different regions. Source: Commission Analysis. Household electricity prices are influenced by wholesale prices but also depend on several other factors. Based purely on taking actions to meet our proposed emissions budgets, household electricity prices may follow the same trends as wholesale prices. However, projecting future electricity prices is very uncertain. There are a number of reforms currently being made by the Government for other purposes. The Government is currently making changes to electricity pricing structures, such as transmission and distribution pricing, which may change how costs are allocated to consumers.
13.2.1 Regional electricity prices Our emissions budgets are unlikely to change regional electricity prices beyond the level of regional variation that already exists. However, there are numerous factors outside of the factors included in our emissions budgets that make future electricity prices highly uncertain. Households electricity bills vary from region to region and even within regions. Different areas already face varying electricity prices. This reflects the cost of not only generating electricity, but also of distributing it. Communities further away from where electricity is generated often pay higher electricity prices. For example, electricity pricing surveys show that households in Kerikeri and the West Coast pay more for electricity than the national average. There can be as much as a 50% variation between regions.
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Average household electricity demand varies across Aotearoa and depends on climatic conditions, personal choice and whether the household uses gas, electricity or wood to heat their homes. For example, the average household electricity consumption is twice as much in Queenstown as in Westport.
13.2.2 Electricity bills Households that are able to make energy efficiency improvements, for example by switching to heat pumps, installing insulation or LED lightbulbs, should be able to reduce their household electricity bills. Households bills not only depend on residential electricity prices, but also on demand. Making energy efficiency improvements may be able to reduce household demand. There are a range of energy efficiency improvements that could reduce household demand and household bills. For example, replacing incandescent or halogen light bulbs with more efficient LED light bulbs, upgrading appliances with more energy efficient ones, or installing insulation, more efficient heating, curtains with thermal lining or double glazing would all help to improve a home’s energy efficiency and therefore reduce how much energy that home uses.1 Making energy efficiency improvements can also reduce energy use at peak times – in the mornings, evenings and in winter. Reducing demand at peak times helps the entire energy system as there is less need to upgrade electricity lines, avoiding potential additional costs for all households.2 This would require both the adoption of technologies for demand response and innovative business and pricing models. Electricity pricing incentives, such as low-cost night rates, combined with smart charging technology could be an effective way to address this issue. Household electricity bills could also increase if a household purchases an EV. However, if that EV is replacing a petrol car, then overall household energy bills could decrease.
13.2.3 Assisting lower income households Lower income households, some Māori and Pasifika households, elderly and people with disabilities will benefit more from making energy efficiency improvements. Some groups are more likely to live in older, poorly insulated homes3 and would therefore benefit more from energy initiatives and savings, or improved health from being able to use savings for additional heating, or healthy homes. An evaluation of the ‘Warm Up New Zealand’ programme found that the health benefits from insulating lower income households were substantial, resulting in savings of more than $800 a year on average. However, there were small benefits in terms of cost savings as households continued to heat their homes.4
1
(Gen Less, 2017) (Transpower, 2020) 3 (Environmental Health Indicators New Zealand, 2020) 4 (Grimes et al., 2012; Telfar Barnard et al., 2011) 2
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13.2.4 How this can be managed? Assistance will be needed to help those on lower incomes with the upfront cost for energy efficiency improvements. The Government’s ‘Warmer Kiwi Homes’ programme continues to provide funding to those on low incomes who own their own home to install insulation or more efficient heating. The Government has also introduced healthy home standards for rental homes that include standards for insulation and heating. Continued intervention would be needed to ensure that lower income households can access these benefits. The Government would need to assess whether the existing programmes are delivering at an appropriate pace and scale and consider whether these programmes have any impact more broadly on rental prices and affordability.
13.3 Natural gas Households that use natural gas for heating and cooking are likely to see an increase in their natural gas bills as a result of our proposed emissions budgets. In 2035, the impact of our emissions budgets could increase the average household gas bill by up to $150 a year. This would affect homes with reticulated natural gas and liquified petroleum gas. However, natural gas prices are hard to predict as the gas industry is at the beginning of a transition partly because of climate policy. This introduces considerable uncertainty into future gas prices. The transition away from natural gas may mean that, over time, many households would benefit from replacing gas appliances. This could happen as households naturally need to replace appliances and heating systems, reducing the cost to households.
13.3.1 How this can be managed? As part of the transition, the Government would need to pay particular attention to low income households who use natural gas, who may not have the money for the upfront conversion cost, or who may rent homes with natural gas appliances or heating. Landlords that own properties with natural gas may not have any incentive to replace them with lower emissions options and therefore low-cost options, as they would not benefit from the savings in running cost. There may be some efficiencies and cost savings from replacing old gas heating systems with modern electric systems. Portable gas heaters are still used by some households in Aotearoa. They are used proportionately more in the North Island, particularly in Gisborne and Northland.5 These heaters tend to be used by lower income households due to the low upfront cost and the ease of budgeting for heating bills. However, they contribute to mouldy homes and cause health problems.6 Although the number of these heaters is decreasing, replacing them with more efficient low emissions options would take continued government support.
5 6
(Stats NZ, 2018) (Canterbury District Health Board, 2015)
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13.4 Petrol bills and access to transport Transport is crucial to New Zealanders’ livelihoods, wellbeing and economy. It is important for people to connect to families, for allowing people to participate in wider society and for ensuring access to work or education, healthcare, supermarkets, banks and local activities. Our current system tends to prioritise travel by car, disadvantaging those who do not have easy access to vehicles. This particularly impacts young, elderly, disabled and economically disadvantaged communities. The design of cities, underinvestment in public transport and walking and cycling and incentives encouraging travel by car all contribute to this challenge.7 The New Zealand Health Survey 2018/19 found that 2.8% of the adult population had an unmet need for general practitioner (GP) services and 1% had an unmet need for after-hours healthcare due to lack of transport in the past 12 months.8 Additionally, low income households may also not be able to afford fast broadband, which limits virtual access to services. Improving fuel efficiency, a shift to electric vehicles and more public transport, walking and cycling would all be important parts of meeting our proposed emissions budgets. Our modelling indicates impacts from our budgets would increase petrol and diesel prices by up to 30 cents per litre over the course of our budgets. Some households may experience an increase in petrol bills if they are not able to replace their vehicle with a more fuel-efficient vehicle in the next 5, 10 or 15 years. To keep costs down, these individuals would need to reduce travel by car. This would be more likely to impact those on lower incomes or those with less access to public or shared transport. Intervention would be needed to support these households. For households that are able to upgrade to newer petrol vehicles, the higher petrol and diesel prices may be offset by fuel efficiency improvements. Our path shows that, by 2035, 40% of light passenger vehicles would need to be electric. Households that replace an internal combustion engine vehicle with an electric one could be $1,000 a year better off. This is because electric vehicles will be cheaper to buy and to operate. Although electricity bills would increase, the total household energy bill would decrease for these households. However, wealthier and urban households would benefit from electric vehicles earlier than lower income and rural households. The total energy costs for households with and without an electric vehicle are shown in Figure 13.2.
7 8
(Waka Kotahi (NZ Transport Agency), 2019) (Ministry of Health, 2019)
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Figure 13.2: Total household energy cost in 2035 for a single car household. Source: Commission Analysis. Access to transport is a particular issue for some Māori. Transport is hugely important for Māori to connect to their whānau, haukāinga and tūrangawaewae. About a quarter of Māori in Aotearoa live in Auckland, however, many have whakapapa connections outside of Auckland and may need to travel long distances to participate in iwi, hapū and whānau activities and events. Some Māori households are large or intergenerational and require larger vehicles. Transport, particularly utes, is also a key enabler for the haukāinga to collect resources and provide services to the marae.9 Some people and businesses have specific transport needs that the transition would need to address. Farmers, contractors and others in rural communities need vehicles that can carry heavy loads or access rugged or remote locations, such as a single or double-cab ute. Farm bikes and quad bikes are also an essential part of farming and rural landscapes. For these needs, there are costeffective solutions available now, or would be in the next few years. Public transport might not be feasible in smaller towns and rural areas, or for people with disabilities. In some smaller towns, mobility as a service may be a better option. For example, Timaru is trialling a new system called MyWay by Metro in place of the usual bus service. Through this system, people can request a vehicle directly through a smartphone app or call-centre. The technology identifies a ‘virtual bus stop’ within a short walking distance, allowing for shared trips without fixed routes or schedules. This system was developed because the previous bus service was not well used. Rather than reducing services or removing public transport altogether, on demand services were developed as an alternative. A low floor vehicle can be requested when booking for passengers with mobility aids, service animals and for parents with pushchairs. MyWay also offers enhanced mobility services at a fixed fee that is driveway to driveway in off-peak hours, enhancing accessibility.10
9
(Raerino et al., 2013) (MyWay by Metro, 2020)
10
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13.4.1 How this can be managed? Targeted assistance will be needed to ensure an equitable transition. More public transport, walking and cycling will have a positive impact, particularly on those who live in cities and larger urban areas. Central and local government would need to provide more and better transport options to increase access to transport to people with disabilities or on low incomes. Currently public transport is not always a realistic option for people with disabilities and many therefore rely on cars. Good policy and planning would be needed to ensure that transport systems are integrated and accessible. The Government would also need to provide proactive and targeted support to ensure that lower income and rural households and people with disabilities could also reap the benefits of electric vehicles and bring down costs. Policies that help to generate a second-hand electric vehicle market, encourage car sharing and that assist with purchasing an electric vehicle or electric bike could help. For example, California’s ‘Enhanced Fleet Modernization Program Plus-Up’ provides support to scrap old internal combustion engine vehicles and provides vouchers to purchase a replacement vehicle or for public transport and car-sharing services. The value of the vouchers varies depending on income.11
13.5 Potential impacts from land use change Our economic modelling suggests that in our current policy reference case, the land area in dairy and sheep and beef would decrease and the land area in exotic and native forestry would increase over the course of the first three emissions budgets and out to 2050 (See Figure 13.3). Our central path would see a reduction in dairy land area, but less reduction in the area in sheep and beef farming out to 2050 relative to the current policy reference case. Our path would also see comparatively less exotic forestry and more native forestry compared to the current policy reference case out to 2050. This is because our central path places less reliance on forestry removals and more reliance on gross emissions reductions. It is also because these our central path assumes a greater proportion of native forestry, reflecting the greater co-benefits of native forests.
11
(The Greenlining Institute, 2016)
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Sheep and beef land area (million ha)
Dairy land area (million ha) 8.2 8 7.8 7.6 7.4 7.2 7 6.8 6.6 6.4 6.2 6 2020
2025
2030
2035
2040
2045
2050
Years Reference case
Central path
Central path (after 2035)
Sheep and beef land area (million ha)
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Exotic forestry land area (million ha)
2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 2020
2025
2030
2035
2040
2045
2050
Years Reference case
Central path
Central path (after 2035)
Exotic forestry land area (million ha)
Native forest land area (million ha)
0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2020
2025
2030
2035
2040
2045
2050
Years Reference case
Central path
Central path (after 2035)
Native forest land area (million ha)
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Horticulture land area (million ha)
0.18 0.16
0.14 0.12 0.1 0.08 0.06 0.04 0.02
0 2020
2025
2030
2035
2040
2045
2050
Years Reference case
Central path
Central path (after 2035)
Horticulture land area (million ha)
Arable land area (million ha)
0.155
0.15 0.145 0.14 0.135 0.13 0.125
0.12 2020
2025
2030
2035
2040
2045
2050
Years Reference case
Central path
Central path (after 2035)
Arable land area (million ha)
Figure 13.3: The land area of the dairy, sheep and beef, exotic forestry, native forestry, horticulture, arable sectors under the reference case and our central path. Source: Commission Analysis.
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13.5.1 Afforestation Afforestation could play a role in helping achieve our emissions budgets and emissions reduction targets. However, there some concerns that the speed and potential extent of afforestation could have significant impacts on communities. This could impact both rural communities and provincial centres that are reliant on the food and fibre industry for work. Rural communities are particularly reliant on the primary sector for employment. The food and fibre produced in rural communities also supports the wider communities and the broader food system, including many of our towns, providing work for transporting and processing primary products. Impacts on rural communities can therefore have flow on effects to urban and provincial centres. Rural communities and the workers living there also face other pressures, for example from automation. Automation of jobs is expected to impact rural communities more than urban centres.12 These concerns reflect the experience of rural communities in the late 1980s when economic restructuring, including the reduction of state services and removal of agricultural subsidies, led to wholesale and rapid land use change. This negatively impacted some rural communities through reduced employment and population. The closure and consolidation of food and timber processing plants had dramatic effects on small towns previously dependent on them. These shifts drove demographic changes and affected key social institutions such as schools, libraries and sports clubs.13 Some rural communities are concerned that significant afforestation could occur on sheep and beef land, with associated employment impacts and flow-on effects. The impacts of any afforestation would depend on the scale, pace and species of trees that are grown, the purpose for which the trees are grown, the type of land that is afforested and how much other sectors are able to reduce gross emissions. Our modelling in ENZ does not determine the location of this afforestation, but recent research suggests the north-eastern North Island is where the largest afforestation would likely occur.14 This could also significantly intersect with collectively owned Māori land. Many sheep and beef farms have areas of land that are considered unproductive, due to steepness and susceptibility to erosion and which could be afforested without a significant impact on farming productivity or employment. There are a range of estimates as to how much land falls into this category. Recent studies put the potential area at 1,150,000 to 1,400,000 hectares,15 while the Biological Emissions Reference Group estimated that approximately 6% of hill country sheep and beef farms could be afforested without negatively affecting production, equating to approximately 250,000 hectares.16 However, the characteristics of some of this land also make it uneconomical or
12
(Infometrics, 2018) (Taylor, 2019) 14 (West et al., 2020) 15 (Manley, 2019; Mason & Morgenroth, 2017; Ministry for Primary Industries, 2018) 16 (Reisinger et al., 2018) 13
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highly environmentally risky to harvest forests on it, meaning permanent forest may be the more suitable land use.17 The bigger concern for many is that entire farms could be converted into forestry, thereby entirely displacing sheep and beef operations, with resulting economic and employment impacts. There are a number of studies that have looked at these potential impacts. Significant land-use change from pastoral agriculture to forestry would lower export earnings until the forests were first harvested – typically after 25-30 years for Pinus radiata. We have commissioned Infometrics to analyse the implications of land use change on the balance of payments. The provisional analysis of this study suggests that under some circumstances the income from the resulting timber exports would likely be greater than the lost earnings from pastoral agriculture.18 Jobs offered by forestry and sheep and beef farming varies by time and location and depends on the type of forestry. PwC carried out the most recent analysis of the number of jobs at the national level across the value chain for both production forestry and sheep and beef. Their analysis suggests that production forestry generates, on average, 38 full time equivalent jobs (FTEs) per 1,000 hectares across the whole value chain, from site to export, while the figure for the sheep and beef value chain is 17 FTEs. Plantation forestry integrated into sheep and beef farming and permanent carbon forestry were associated with 20 and 1 to 2 value chain FTEs per 1,000 hectares, respectively.19 These FTE numbers include direct jobs such as shepherding and logging as well as those in food and wood processing and indirect and induced jobs in areas such as transport, consulting, retail and hospitality.20 At a more local level, consultants looked at the direct jobs in Wairoa from sheep and beef farming compared to forestry, where direct jobs were considered to mean working 48 weeks a year for 40 hours per week at at least $25/hour.21 This study found that sheep and beef farming created 7.4 direct jobs per 1,000 hectares compared to 5.1 for forestry and 0.6 for carbon farming. They also found that there were fewer direct local forestry jobs for most of the rotation period before growing rapidly for a temporary period during harvest.22 However, the seasonal nature of forestry jobs could be managed by managing harvesting patterns and ensuring that the forest estate is a mixed age class. These numbers suggest that, on average, forestry could provide more jobs across the value chain but that wholesale or large conversions of sheep and beef farmland to forestry might reduce employment in the immediate area. This aligns with earlier work assessing the impact of increased forestry in the 1980s and 1990s, which found forestry provided slightly more jobs than pastoral
17
For example, some land may be physically difficult to access for cutting, or far from processing facilities, making it too costly to harvest. Other land may be too steep or close to sensitive waterways, meaning the risks of erosion and sedimentation are unacceptably high. 18 (Infometrics, Forthcoming) 19 The PwC analysis for permanent carbon forestry included radiata pine, exotic forests and indigenous forests using MPI look up tables. The value of 2 FTEs per 1,000 ha corresponds to radiata pine. The other two types of forest result in 1 FTE per 1,000 ha each (PwC, 2020). 20 (PwC, 2020) 21 This definition of ‘jobs’ is therefore weightier than FTEs used in the PwC report, which partly accounts for the lower number. 22 (Bruce & Harrison, 2019)
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agriculture overall, but these were more concentrated in larger rural towns, particularly those involved in processing.23 Forestry and pastoral farming vary not just in terms of the number and location of jobs, but also in terms of wages and skills required. In the past, the development of forestry boom towns was associated with higher Māori populations and comparative ethnic diversity.24 Māori workers made up 22% of the forestry workforce in 2017,25 while the average share of Māori in agriculture, forestry and fishing employment in 2013 was 11%.26 Initial analysis being carried out for the Commission by Motu, based on census and other Stats NZ data, has found the forestry and logging sectors have a higher percentage of male workers, full-time workers, permanent workers and Māori workers relative to pastoral farming. Workers in these sectors also tend to be paid more and are more likely than those in pastoral farming to only have one job, especially if they work full-time. However, forestry and logging workers are also much more likely to be based in locations outside of rural areas and are working in higher risk occupations. A shift in where workers live would have wider implications for the social structure of rural communities, potentially leading to declines in school rolls and spending in local businesses. This could affect all rural communities but potentially have particularly important ramifications for Māori who have already suffered displacement and disconnection from their whenua. Relying on forestry removals to reduce the effects of climate change would also create risks associated with the physical impacts of climate change and could also divert action away from reducing gross emissions in other sectors. Fires, high winds and other physical impacts that are exacerbated as a result of climate change would increasingly pose a risk to forests. The scale of afforestation that is expected to occur would in large part be driven by the emissions price in the New Zealand Emissions Trading Scheme (NZ ETS) and other financial incentives such as the One Billion Trees programme, in addition to export prices. Current policy settings and sector infrastructure heavily favour the planting of exotic Pinus radiata over other species. Increasing emissions prices would also incentivise greater shares of permanent exotic carbon forestry. Constraining this price incentive for afforestation through the NZ ETS could help limit its overall scale. However, it would not necessarily address the issue of wholesale farm conversions, which is what likely has the greatest effect on rural communities. Limiting this would likely require a regulatory approach, through the Resource Management Act or alternative intervention, that places restrictions on land use change. Capacity building and extension services for landowners focused on integrating trees or forestry onto farms as diversification rather than wholescale farm change could limit the impacts of afforestation. Developing carbon monitoring systems that allow for tracking and rewarding sequestration from smaller or dispersed areas of trees could also facilitate this.
23
(Fairweather et al., 2000) (Taylor, 2019) 25 (Te Uru Rākau et al., 2020) 26 (BERL & FOMA, 2019) 24
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Changing the balance of incentives in exotic versus native afforestation would also alter the impact on rural communities. Native afforestation might generate less value chain jobs than exotic forestry if it is not all planted and harvested. However, it could be suitable for areas of less productive land. It would, therefore, not come at the expense of other economic activity. Mechanisms to incentivise native afforestation could come by extending grant schemes such as One Billion Trees or by developing ecosystem services payment schemes that could reward the other environmental benefits of native forests. Efforts could also be made to promote a native forestry industry. This could be particularly relevant for iwi/Māori. Efforts to increase domestic timber demand by changing building policies could also stimulate the wood processing industry and increase the value chain employment of forestry.
13.5.2 Land use change to horticulture and other uses Diversifying land and switching some land currently in pastoral agriculture to horticulture, arable crops and other livestock such as pigs and poultry produce considerably lower biological greenhouse gas emissions per hectare.27 However, horticulture and arable systems often involve higher fossil fuel consumption.28 The combined area of land in horticulture and arable crops in Aotearoa is currently about 1% of total land use. More than 1.5 million hectares of land currently in livestock farming would be suitable for horticulture or arable cropping.29 However, there has not been significant diversification to horticulture despite it being more profitable per hectare than dairy or livestock farming. This indicates that there are barriers to shifting land use in this way. Barriers include: • • • • •
Labour shortages for seasonal workers, High capital investment of converting and lack of access to capital,30 Lack of infrastructure and supply chains,31 Challenges with market access and non-tariff barriers,32 Tightly managed markets to maintain premium prices.33
Workers require adequate housing, transportation and access to recreational facilities. Hence, labour shortages in horticulture and agriculture in general are a more complex issue than merely lack of capacity or skills. COVID-19 and the close of our borders has exacerbated existing labour shortages of the industry. Aotearoa citizens and permanent residents make up about 65%-75% of the horticultural labour force, with the remaining being workers on temporary visas.34 About 33% of the seasonal labour in
27
(Interim Climate Change Committee, 2019) (Reisinger et al., 2017, p. 61) 29 (Reisinger et al., 2017, p. 8). For example, apples, kiwifruit, grapes, vegetables and pulses. 30 Productive orchards sell for about NZ$350,000/ha for Green and NZ$500,000/ha for Zespri Gold, severely limiting new entrants to the industry. (Cradock-Henry, 2017) 31 (Clothier et al., 2017) 32 (Horticulture New Zealand, 2019; Journeaux et al., 2017; Westpac, 2016) 33 (ANZ, 2018) 34 Includes viticulture, seasonal and off-season (NZIER, 2019) 28
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2019 were part of the Recognised Seasonal Employer scheme and most workers for apple and pears sub-sector come from the Pacific.35 Globally, automation in horticulture would accelerate in the packhouse and the fields within the next 5 years. The use of machines may reduce contamination of plant diseases and transmission of human viruses. Opportunities may open in data science, technology and information and communications technology (ICT) related to the industry.36 Hence, in the long term, the industry will need to attract people who can work with machines, through apprenticeships and science, technology and mathematics education for the whole food and agriculture sector. This will require collaboration across agricultural sectors as well.37 Some Aotearoa companies are testing and using robotics for fruit picking and sorting.38 Automation would be constrained by access to capital.
13.6 Benefits of improved health to communities Many of the actions Aotearoa could take to address climate change would have broader health cobenefits and reduce the burden on the public health system, from better air quality to less noise and from more active local travel. There is growing evidence both within Aotearoa and internationally of the health benefits of reducing emissions. At an international scale, new modelling suggests that climate policy can deliver immediate global benefits, that outweigh costs, when health co-benefits and co-harms are considered. These health benefits would be observed most particularly in countries with high air pollution.39 Evidence from Aotearoa suggests that New Zealanders could benefit from improved health from warmer, drier homes,40 moving to more active forms of transport,41 and from reduced air pollution from a move away from fossil fuels.42 In addition, global action to reduce emissions would also reduce the costs that would occur as a result of the changing climate, including costs on the health system from increased heat stress from warmer temperatures and temperature extremes and changing patterns of infectious disease. The health impacts of climate change would be unlikely to be spread evenly across the population, with more vulnerable groups being more exposed.43
35
(New Zealand Kiwifruit Growers Incorporated (NZKGI), 2020) (Higgins et al., 2020) 37 (Higgins et al., 2020) 38 (Good Fruit & Vegetables, 2019; Jee, 2019; Robotic Plus, 2019) 39 (Scovronick et al., 2019) 40 (Grimes et al., 2012) 41 (Macmillan et al., 2014) 42 (Kuschel et al., 2012) 43 (Royal Society Te Apārangi, 2017) 36
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13.7 References ANZ. (2018). Insights into the Kiwifruit industry investment opportunities and challenges. BERL & FOMA. (2019). Education, training, and extension services for Māori land owners. BERL, FOMA. https://www.iccc.mfe.govt.nz/assets/PDF_Library/f12a9f85fb/FINAL-BERL_FOMAEducation-training-and-extension-services-for-Maori-land-owners-BERL_FOMA.pdf Bruce, H., & Harrison, E. (2019). Case study: Socio-economic impacts of large-scale afforestation on rural communities in the Wairoa District [Commissioned for Beef + Lamb NZ]. BakerAg. https://beeflambnz.com/sites/default/files/Wairoa%20Afforestation_FINAL.pdf Canterbury District Health Board. (2015). Unflued Gas Heaters: Position statement and background paper for the Canterbury District Health Board [Prepared by the Information Team Community and Public Health. Adopted by the Canterbury District Health Board July 2015]. Canterbury District Health Board. https://www.cdhb.health.nz/About-CDHB/corporatepublications/Documents/CDHB%20Unflued%20Gas%20Heaters%20PositionStatement.pdf Clothier, B., Muller, K., Hall, A., Thomas, S., van den Dijssel, C., Beare, M., Mason, K., Green, S., & George, S. (2017). Futures for New Zealand’s arable and horticultural industries in relation to their land area, productivity, profitability, greenhouse gas emissions and mitigations [Report for NZAGRC]. Plant & Food Research Rangahau Ahumāra Kai. Cradock-Henry, N. A. (2017). New Zealand kiwifruit growers’ vulnerability to climate and other stressors. Regional Environmental Change, 17(1), 245–259. https://doi.org/10.1007/s10113016-1000-9 Environmental Health Indicators New Zealand. (2020). Socioeconomic deprivation profile. https://ehinz.ac.nz/indicators/population-vulnerability/socioeconomic-deprivation-profile/ Fairweather, J. R., Mayell, P. J., & Swaffield, S. R. (2000). Forestry and agriculture on the New Zealand East Coast: Socio-economic characteristics associated with land use change. Lincoln University. Agribusiness and Economics Research Unit. https://hdl.handle.net/10182/591 Gen Less. (2017). Heating Your Home—Home Heating Options. Gen Less. https://genless.govt.nz/living/lower-energy-homes/heating-your-home/
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Good Fruit & Vegetables. (2019). NZ apple orchard uses world’s first commercial robot picker. Good Fruit & Vegetables. http://www.goodfruitandvegetables.com.au/story/5978042/nz-orchardsays-domo-arigato-mr-roboto/ Grimes, A., Denne, T., Howden-Chapman, P., Arnold, R., Telfar-Barnard, L., & Young, C. (2012). Cost Benefit Analysis of the Warm Up New Zealand: Heat Smart Programme (p. 30) [Prepared for the Ministry for Economic Development]. https://motu.nz/assets/Documents/ourwork/urban-and-regional/housing/Cost-Benefit-Analysis-of-the-Warm-Up-New-ZealandHeat-Smart-Programme.pdf Higgins, H., van Rijswick, C., & Fumasi, R. (2020). Covid-19 Changes the Horticulture Labour & Workplace Landscape. RaboResearch Food & Agribusiness. https://research.rabobank.com/far/en/sectors/fresh-produce/Podcast-covid-19-changesthe-horticulture-labour-and-workplace-landscape.html Horticulture New Zealand. (2019). Submission on action on agriculture. MfE. https://www.mfe.govt.nz/sites/default/files/media/Consultations/Attachments%20for%200 3028%20Horticulture%20NZ.pdf Infometrics. (Forthcoming). Land Use, Balance of Payments and Emissions [Commissioned by Climate Change Commission]. Infometrics. Infometrics. (2018). From education to employment: Megatrends affecting NZ’s working environment. Infometrics. https://static.infometrics.co.nz/Content/Infometrics_Megatrends_2018.pdf Interim Climate Change Committee. (2019). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ Jee, C. (2019). A robot apple-picker is now harvesting fruit in New Zealand orchards. MIT Technology Review. https://www.technologyreview.com/2019/03/28/239350/a-robot-apple-picker-isusing-machine-vision-to-harvest-fruit-in-new-zealand/ Journeaux, P., van Reenen, E., Manjala, T., Pike, S., & Hanmore, I. (2017). Analysis of drivers and barriers to land use change [Report prepared for the Ministry of Primary Industries]. Agfirst. https://www.mpi.govt.nz/dmsdocument/23056-analysis-of-drivers-and-barriers-to-landuse-change 19 1 February 2021 Draft Supporting Evidence for Consultation
Kuschel, G., Metcalfe, J., Wilton, E., Hales, S., Rolfe, K., & Woodward, A. (2012). Updated Health and Air Pollution in New Zealand Study, Volume 1: Summary Report (p. 89) [Prepared for Health Research Council of New Zealand, Ministry of Transport, Ministry for the Environment and New Zealand Transport Agency]. https://www.mfe.govt.nz/sites/default/files/media/Air/updated-health-and-air-pollutionnew-zealand-study-summary-report.pdf Macmillan, A., Connor, J., Witten, K., Kearns, R., Rees, D., & Woodward, A. (2014). The societal costs and benefits of commuter bicycling: Simulating the effects of specific policies using system dynamics modeling. Environmental Health Perspectives, 122(4), 335–344. https://doi.org/10.1289/ehp.1307250 Manley, B. (2019). Potential impacts of NZ ETS accounting rule changes for forestry – averaging and harvested wood products (MPI Technical Paper No: 2019/14). Ministry of Primary Industries. https://www.mpi.govt.nz/dmsdocument/37116/direct Mason, E., & Morgenroth, J. (2017). Potential for forestry on highly erodible land in New Zealand. New Zealand Journal of Forestry, 62(1), 8–15. Ministry for Primary Industries. (2018). One Billion Trees programme: Actions and decisions for implementation. Ministry for Primary Industries. https://www.mpi.govt.nz/dmsdocument/30942/direct Ministry of Health. (2019). NZ Health Survey 2018/19 Annual Data Explorer. Adults Topic: Barriers to Accessing Health Care. https://minhealthnz.shinyapps.io/nz-health-survey-2018-19-annualdata-explorer/_w_c7bd97e4/_w_54929b7f/#!/explore-topics MyWay by Metro. (2020). MyWay by Metro: Public transport designed around you. http://www.mywaybymetro.co.nz New Zealand Kiwifruit Growers Incorporated (NZKGI). (2020). RSE Survey 2020. https://www.hortnz.co.nz/news-events-and-media/media-releases/rse-survey-2020/ NZIER. (2019). Horticulture labour supply and demand 2019 update. [NZIER report to Horticulture NZ, Summerfruit NZ, NZ Kiwifruit Growers, NZ Apples and Pears and NZ Wine, June 2019]. NZIER.
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PwC. (2020). Economic impact of forestry in New Zealand [Report prepared for Te Uru Rakau]. https://www.nzfoa.org.nz/resources/file-libraries-resources/discussion-papers/848economic-impacts-of-forestry-pwc-report/file Raerino, K., MacMillan, A., & Jones, R. (2013). Indigenous Māori perspectives on urban transport patterns linked to health and wellbeing. https://doi.org/10.1016/j.healthplace.2013.04.007 Reisinger, A., Clark, H., Abercrombie, R., Aspin, M., Harris, M., Ettema, P., Hoggard, A., Newman, M., & Sneath, G. (2018). Future options to reduce biological GHG emissions on-farm: Critical assumptions and national-scale impact [Report to the Biological Emissions Reference Group]. https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potentialfinal Reisinger, A., Clark, H., Journeaux, P., Clark, D., & Lambert, G. (2017). On-farm options to reduce agricultural GHG emissions in New Zealand [Report to the Biological Emissions Reference Group]. New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC). https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potential-final Robotic Plus. (2019). Kiwifruit-Picker. Robotics Plus. https://www.roboticsplus.co.nz/kiwifruit-picker Royal Society Te Apārangi. (2017). Human Health Impacts of Climate Change for New Zealand: Evidence Summary (p. 18). Royal Society Te Apārangi. https://www.royalsociety.org.nz/assets/documents/Report-Human-Health-Impacts-ofClimate-Change-for-New-Zealand-Oct-2017.pdf Scovronick, N., Budolfson, M., Dennig, F., Errickson, F., Fleurbaey, M., Peng, W., Socolow, R. H., Spears, D., & Wagner, F. (2019). The impact of human health co-benefits on evaluations of global climate policy. Nature Communications, 10(1), 2095. https://doi.org/10.1038/s41467019-09499-x Stats NZ. (2018). Main types of heating used (total responses) by occupied dwelling type, for occupied private dwellings, 2018 Census. Stats NZ. http://nzdotstat.stats.govt.nz/WBOS/Index.aspx?DataSetCode=TABLECODE8390 Taylor, N. (2019). Potential impacts of price-based climate policies in rural people and communities: A review and scoping of issues for social impact assessment (p. 24). Nick Taylor and Associates. https://www.iccc.mfe.govt.nz/assets/PDF_Library/6b2fe1b5b8/FINAL-Taylor-
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Potential-impacts-of-price-based-climate-policies-on-rural-people-and-communities-areview-and-scoping-of-issu.pdf Te Uru Rākau, NZIF, Future Foresters, Forest Owners Association, Toi-Ohomai, Rayonier Matariki Forests, Competenz, FICA, & NZTIF. (2020). Forestry and Wood Processing Workforce Action Plan 2020-2024. https://www.teururakau.govt.nz/dmsdocument/40366-Forestry-WoodProcessing-Workforce-Action-Plan-20202024 Telfar Barnard, L., Preval, N., Howden-Chapman, P., Arnold, R., Young, C., Grimes, A., & Denne, T. (2011). The impact of retrofitted insulation and new heaters on health services utilisation and costs, pharmaceutical costs and mortality. Evaluation of Warm Up New Zealand: Heat Smart (p. 64). University of Otago, Victoria University of Wellington, Motu, Covec. http://www.healthyhousing.org.nz/wp-content/uploads/2012/03/NZIF_Health_reportFinal.pdf The Greenlining Institute. (2016). Electric vehicles for all: An equity toolkit. The Greenlining Institute. https://greenlining.org/resources/electric-vehicles-for-all/ Transpower. (2020). Whakamana i Te Mauri Hiko: Empowering our Energy Future. https://www.transpower.co.nz/sites/default/files/publications/resources/TP%20Whakaman a%20i%20Te%20Mauri%20Hiko.pdf Waka Kotahi (NZ Transport Agency). (2019). Keeping cities moving: Increasing the wellbeing of New Zealand’s cities by growing the share of travel by public transport, walking and cycling. https://www.nzta.govt.nz/assets/resources/keeping-cities-moving/Keeping-citiesmoving.pdf West, T. A. P., Monge, J. J., Dowling, L. J., Wakelin, S. J., Yao, R. T., Dunningham, A. G., & Payn, T. (2020). Comparison of spatial modelling frameworks for the identification of future afforestation in New Zealand. Landscape and Urban Planning, 198, 103780. https://doi.org/10.1016/j.landurbplan.2020.103780 Westpac. (2016). Industry insights: Horticulture. Westpac Institutional Bank.
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Chapter 14: Environment and ecology There could be positive and negative environmental and ecological impacts of the climate transition for Aotearoa. In addition to reducing our emissions, using low carbon technologies and changing land practices could have broader environmental impacts, including on biodiversity, water quality and air quality. This chapter looks at the environmental and ecological impacts from reducing emissions in the transport, heat, industry and power and land sectors.
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Contents Chapter 14: Environment and ecology .......................................................................................... 1 14.1 Introduction ......................................................................................................................... 3 14.2 Environmental and ecological impacts of actions to reduce emissions from transport and heat, industry and power ............................................................................................................. 3 14.2.1 Air quality benefits from moving to electric vehicles and improved fuel efficiency ............... 3 14.2.2 Land and water implications from low carbon fuels ............................................................... 4 14.2.3 Mining, recycling and disposal of minerals and metals for low emission technologies .......... 4 14.2.4 Environmental impacts from replacing fossil fuel boilers ....................................................... 5 14.2.5 Ecological consequences of new renewable electricity sources ............................................. 5 14.3 Environmental and ecological impacts of actions to reduce land emissions ............................ 6 14.3.1 On-farm practice change impact on water quality and soil health ......................................... 6 14.3.2 Biodiversity and water quality benefits from afforestation .................................................... 7 14.3.3 Water quality impacts from land use change to horticulture ................................................. 9 14.3.4 Policy synergies ........................................................................................................................ 9 14.4 References ......................................................................................................................... 10
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There could be positive and negative environmental and ecological impacts of the climate transition for Aotearoa. In addition to reducing our emissions, using low carbon technologies and changing land practices could have broader environmental impacts, including on biodiversity, water quality and air quality. This chapter looks at the environmental and ecological impacts from reducing emissions in the transport, heat, industry and power and land sectors.
14.1 Introduction This section looks at the environmental and ecological impacts of the climate transition. In addition to reducing our country’s emissions, using low carbon technologies and changing land practices would have broader environmental impacts, such as the effects on biodiversity and water quality as well as on the atmosphere. This section specifically looks at the environmental and ecological impacts from reducing emissions in transport, heat, industry and power and the land sector.
14.2 Environmental and ecological impacts of actions to reduce emissions from transport and heat, industry and power The changes made to reduce our country’s emissions in transport, heat, industry and power could bring positive or negative environmental and ecological impacts. This section looks more closely at the impacts from reducing emissions from electrification, such as moving to EVs and switching to low carbon fuels, such as biomass. Although building new hydroelectric dams is not explicitly included in our pathways, we have also considered its environmental effects given their scale and significance.
14.2.1 Air quality benefits from moving to electric vehicles and improved fuel efficiency Vehicle exhaust is a significant source of air pollution in Aotearoa, particularly in heavy transport areas. Vehicle exhaust emits a range of pollutants, including nitrogen oxides and fine particulate matter that is less than 2.5 micrometres wide. Fine particulate matter has greater health impacts than coarser particulate matter as it can get deeper into the lungs, causing respiratory issues. 1 0F
Moving to EVs from petrol and diesel would reduce air pollution and would reduce particulate matter that is less than 2.5 micrometres wide. EVs would continue to generate some air pollution as the weight of the vehicle wears down the road pavement, tyres and brake pads. However, these particulates tend to be coarser and have less health impact. 2 1F
Measurements show that as vehicles have become more emissions- and fuel-efficient over time in Aotearoa, air pollutants concentrations have decreased. 3 2F
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(Ministry for the Environment & Statistics NZ, 2018) (Ministry for the Environment & Statistics NZ, 2018) 3 (Bluett et al., 2016) 2
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In addition, studies in Aotearoa and internationally on the lifecycle assessment of EVs found they produce significantly fewer emissions than conventional petrol or diesel vehicles. 4 3F
14.2.2 Land and water implications from low carbon fuels There are environmental effects from using low emission fuels, such as biofuels or hydrogen, which would depend on how the fuels are supplied and distributed. Although liquid biofuel use in Aotearoa is currently very small (an estimated 0.1% of total transport fuels), increased demand for biofuels would have implications for land-use. For example, growing crops for biofuel feedstocks may compete with other land uses, such as food production. Using land to produce biofuels, may also generate other environmental benefits, such as erosion control and reducing freshwater nutrient loads. 5 It is important that biofuel production is economically and environmentally sustainable in order to maximise these benefits. 4F
Green hydrogen produced from renewable electricity is a potential low emissions option for transport or industry. Producing green hydrogen at-scale can be extremely energy intensive and require significant build out of new renewable electricity generation as well as hydrogen distribution infrastructure. The environmental implications of hydrogen production and use would depend on whether it is produced via electrolysis (water) with renewable electricity (green hydrogen) or via fossil fuels with carbon capture and storage (blue hydrogen).
14.2.3 Mining, recycling and disposal of minerals and metals for low emission technologies Many technologies that would be important in the transition to a low emissions economy – including wind turbines, solar panels and batteries – require mineral and metal inputs. How these minerals and metals are sourced, recycled and disposed of could have environmental impacts. There are environmental, social and supply chain concerns around the international mining of minerals, such as lithium or cobalt, which are used in the production of batteries for EVs. Studies have concluded that there are sufficient reserves of these critical metals to meet increased EV demand. 6 Further innovations in battery technology would also help to reduce the use of these metals. Sustainable management of supply chains is required to reduce the adverse social and environmental impacts. 7 5F
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Repurposing or reusing batteries – either as storage or recycling materials – would also extend their lifecycle. Work is underway in Aotearoa on the recycling and disposal of EV batteries. Through the Ministry for the Environment’s Waste Minimisation Fund, the Battery Industry Group (BIG) was set up in early 2020 to research and develop a co-designed framework for a product stewardship scheme for large batteries of all types used in Aotearoa. 8 7F
Disposing of the materials for renewable energy technologies, such as solar panels or wind panels, requires the necessary infrastructure and skills. For example, although the materials of solar panels 4
(Elkind et al., 2020; Life Cycle Strategies, 2015) (Suckling et al., 2018) 6 (Transport & Environment, 2017) 7 (Elkind et al., 2020) 8 (Battery Industry Group, 2019) 5
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are recyclable, Aotearoa does not currently have the capacity for recycling solar panels. 9 Facilities for recycling and disposing of solar PVs is expected to increase as recycling infrastructure grows in Aotearoa. 8F
Although wind turbines produce energy without any emissions, the turbine blades can be difficult to recycle or dispose of when turbines are decommissioned. This is because turbine blades are made of composite materials and it is costly to separate the materials for recycling. Internationally, most wind turbine blade waste is currently sent to landfill. However, the wind energy industry is working to find novel new methods for recycling composite waste. 10 9F
14.2.4 Environmental impacts from replacing fossil fuel boilers The environmental impacts of replacing fossil fuel boilers would depend on what they are replaced with. Electrode boilers and heat pumps can be used for producing lower temperature heat and reducing greenhouse gas emissions and improving energy efficiency. These boilers and pumps also do not emit particulate matter and other pollutants that contribute to localised air pollution. However, moving to biomass boilers – which can be used to produce low to high temperature heat – would be associated with emissions of some air pollutants. Canterbury District Health Board has replaced a coal fired boiler at Burwood Hospital with biomass and diesel fired boilers. In addition to reducing emissions, an assessment by BECA suggests this change would also reduce particulate matter and sulfur dioxide but increase nitrogen dioxide. However, it found that concentrations of these air pollutants would still be below air quality limits. 11 10F
The ash or biochar produced by most biomass boilers can also be used by horticulturalists to lift the productivity of agriculture and as a bioremediation tool for contaminated soils.12
14.2.5 Ecological consequences of new renewable electricity sources Our modelling does not show that new hydroelectric power plants would be needed to meet emissions budgets and the targets. However, building new hydroelectric dams could be part of the response. In addition, a pumped hydro scheme, such as that proposed on Lake Onslow, could help to reduce electricity emissions while providing flexible capacity to meet daily peaks in electricity demand as well as demand in dry years where hydro lake levels are low. However, such schemes can have substantial impacts on the landscape and carry ecological consequences. Hydro schemes require a large area of land to be flooded for water storage and can impact water flows downriver of the scheme, to the detriment of nationally significant wetlands, habitat for endemic bird and fish species and in some cases endangered or threatened species. Hydro dams can also obstruct native freshwater fish from migrating up and down rivers. More than half of our native freshwater fish migrate up rivers from the sea to suitable habitats and food sources and return to the sea at the end of their life. 13 12F
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(Ecotricity, 2020) (Cefic et al., 2020) 11 (BECA, 2015) 12 (Biochar Network New Zealand, 2019) 13 (Ministry for the Environment & Statistics NZ, 2017) 10
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Any proposed scheme would need to assess the environmental and ecological impacts, in particular on our endangered or threatened species and be consented under the resource management framework. In addition, given the freshwater implications, attention would also need to be paid to the commitments within Te Tiriti o Waitangi settlement legislation and other forms of statutory obligations or non-statutory agreements with iwi/Māori that relate to freshwater management.
14.3 Environmental and ecological impacts of actions to reduce land emissions The actions Aotearoa takes to reduce emissions from land could bring positive or negative environmental and ecological impacts. This section looks more closely at the environmental and ecological impacts of reducing emissions through on-farm practice change or new technologies, afforestation and land use change to horticulture.
14.3.1 On-farm practice change impact on water quality and soil health Changing farm practices to reduce emissions can also bring environmental and financial co-benefits, however the extent of these co-benefits would depend on the farm, the farm’s specific climate and soil conditions, the current management system and the advice and skills farm businesses can draw on. Making practice changes on farm can reduce emissions and improve water quality and soil health. This is particularly the case for practice changes that reduce nitrous oxide emissions, as nitrogen in the soil reacts to produce both nitrous oxide and nitrate that runs off into waterways. Careful balancing of stocking rates, pasture management and supplementary feed can lead to a farm system where production, profit, emissions and other environmental outcomes are optimised. What an optimal system looks like would vary considerably between farms and what any given farm can achieve would depend on how that farm is managed overall. For example, for some farmers applying nitrogen fertiliser more precisely – by using less and/or adjusting the rate and timing of applications – would reduce nitrous oxide emissions and nitrogen leaching and runoff. However, this must be carefully managed because if reductions in fertiliser result in lower pasture growth, but stocking rates are maintained by using high-nitrogen supplementary feed, the reductions of nitrous oxide may be minimal.14 Regenerative agriculture is an approach to farming that focusses on regenerating soil, improving water quality, enhancing ecosystem services, improving biodiversity and promoting livestock welfare. 15 Many farmers in Aotearoa already implement practices in line with these principles, such as cover cropping and mixed grass species in pastures that help to fix nitrogen and promote soil microbial diversity. 16 However, there is scope for further actions on our farms, for example by reducing synthetic fertiliser use and planting more trees. 14F
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See, for example (de Klein et al., 2016) (Lal, 2020; Newton et al., 2020; Siegfried, 2020) 16 (Vukicevich et al., 2016) 15
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Improving the drainage of soils that are not draining well or avoiding soil compaction could improve soil structure and therefore soil health, 17 and reduce nitrous oxide emissions. 18 16F
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14.3.2 Biodiversity and water quality benefits from afforestation The environmental and ecological impacts of land use change to forests depends on the desired objectives, the type of forest, where it is being planted and how it is managed. Trees sequester carbon dioxide no matter where they are planted – albeit at a faster rate for exotics compared to natives. 19 However, other environmental impacts are location and managementspecific. For example, planting trees on steep slopes and gullies can help reduce erosion and sediment runoff if the trees are selected and managed for that purpose. 20 18F
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If the right type of tree is planted in the right place at the right time, it can have water quality, soil health, erosion and biodiversity co-benefits in addition to sequestering carbon dioxide. Aotearoa research suggests that planting trees on agricultural land can improve water quality and stream health within four to six years, including reducing stream temperatures and reducing nitrogen and phosphorous run-off to water. While exotic forests provide many of the same benefits as native forests over much of the forest-growing cycle, there are negative impacts on waterways when exotic production forests are harvested through clear-fell. 21 20F
About one third of the original soil protection plantations in Aotearoa are now production forests that are being clear-felled. After clear-felling, the risk of landslides in exotic production forests – particularly those on steep slopes – increases and may cause debris to flow downstream affecting houses, roads and bridges. This can be reduced by changing forest management practices to harvesting over longer rotations, small-coupe clear-felling, continuous cover forests, 22 or retiring the forests from production. 23 21F
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The type of tree that is planted is important in determining the biodiversity co-benefits. Exotic forests provide some habitat for some native species, such as robins, fantails, kiwi and native falcons; 24 they host more native species than pasture. However, the biodiversity benefit of exotic forests is small in comparison to native forests, which host hundreds of threatened species and thousands of species. 25 23F
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Synergies can occur between carbon sequestration efforts and biodiversity protection for native forests. When carbon gain is prioritised for natural regeneration in Aotearoa, biodiversity suffers a larger trade-off than carbon when biodiversity is prioritised. If both carbon and biodiversity are
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(Kibblewhite et al., 2008) (de Klein & Ledgard, 2005) 19 Sequestration rates vary depending on tree species and site conditions (e.g. temperature, soil, slope) where trees are planted. Planted pines in Aotearoa sequester carbon dioxide about five times more quickly than native forests (Ministry for Primary Industries, Unpublished) 20 (Bloomberg et al., 2019; Satchell, 2018) 21 (Baillie & Neary, 2015) 22 (Amishev et al., 2014) 23 (Phillips et al., 2015) 24 (MacLeod et al., 2008) 25 (Brockerhoff et al., 2008) 18
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prioritised, then the average gains in carbon and biodiversity could be 10%-20% more than if either carbon or biodiversity is prioritised independently. 26 25F
Controlling herbivores and predators may enhance carbon stocks and biodiversity in native forests in the long term. Deer, wild pigs, wild cats, goats, possums and livestock can have negative impacts on native forests. These animals change both the composition of plant species and the animal communities that depend on them. 27 In Aotearoa possums are the major cause of the decline of native trees such as pōhutukawa, rewarewa, kāmahi, māhoe, tawa and rātā. 28 26F
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Carrying out more predator control, fencing out grazing and browsing animals and preventing fires in our regenerating and native forests can result in more native birds, more tree growth and prevent forest decline in the long term. 29 However, removing grazers and browsers is no easy task. Studies have shown that it is difficult to sufficiently suppress these species over large enough areas and for long enough to see a response. 30 Active control of browsers was found to be more beneficial in young forests that were still establishing. 31 28F
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Woody and riparian vegetation in production landscapes increases biodiversity values, improves water quality and reduces erosion. Increasing the amount and diversity of vegetation within production landscapes can have a range of environmental and ecological benefits, even without large-scale changes to forests. Woody patches, hedgerows and shelterbelts, riparian planting and wetlands can all increase the range of plants and animals found on farms and improve both the amount of carbon storage and biodiversity. 32 31F
On-farm native vegetation expands over 1.5 million hectares of sheep and beef land. 33 Much of this vegetation is on lowland ecosystems and is critical for biodiversity conservation as part of a larger network of sites that can improve connectivity in the landscape and serve as stepping stones for birds that disperse tree seeds. 34 Revegetation and fencing of farm gullies have co-benefits for erosion and biodiversity. 32F
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Planting trees and shrubs along gullies and stream banks can reduce soil erosion and the amounts of phosphorus getting into waterways by up to 60%. 35 A recent review of over 300 international studies found that the presence of these sorts of ‘non-productive’ vegetation resulted in positive improvements of ecological processes in most cases. 36 34F
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In Aotearoa, rare and unique native birds are of interest to many people and several studies have looked at native birds in production landscapes. For example, open farmland can provide important
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(Carswell et al., 2015) (Peltzer et al., 2014; Wardle et al., 2001; Wright et al., 2012) 28 (Nugent et al., 2010) 29 (Carswell et al., 2015) 30 (Nugent et al., 2010) 31 (Carswell et al., 2015) 32 (Burrows et al., 2018) 33 This comprises 8.2% indigenous forest (0.81 million ha), 5.5% mānuka/kānuka (0.56 million ha), 1.7% indigenous scrub and shrubland (0.17 million ha) ((2020)). 34 (Norton et al., 2018; Norton & Pannell, 2018) 35 (Parliamentary Commissioner for the Environment, 2012) 36 (Case et al., 2020) 27
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habitat for species like South Island pied oystercatcher and the world’s rarest gull, the black billed gull. 37 36F
The diversity within an individual farm can also affect the birds that are found there. A study of South Island sheep and beef farms found that the number of species present was strongly influenced by habitat composition, extent and diversity, with the most diverse farms having the greatest number of bird species and native birds. 38 7F
14.3.3 Water quality impacts from land use change to horticulture Land use change from dairy to horticulture on flatter and more productive land could reduce biogenic emissions per hectare. 39 However, this could also cause water quality to deteriorate due to the increased use of fertiliser and consequential nitrogen and phosphorus losses. Nutrient losses would vary depending on the crop, the site, weather conditions, the soils’ physical and chemical properties and how the land is managed. 40 38F
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Increasing the area of horticulture would increase water demand in Aotearoa. Climate change modelling for kiwifruit indicates that there would be higher water demand by the industry in regions such as Waikato and Hawke’s Bay and variable demand in other regions like Southland towards 2090. 41 In light of the physical impacts of climate change, this increased future demand needs to be balanced when considering expansion of horticulture as a way to reduce emissions. 40F
14.3.4 Policy synergies Other environmental policies would also help to reduce emissions. Many of the actions that are taken on-farm to improve fresh water in Aotearoa would also deliver emissions reductions. The National Policy Statement for Indigenous Biodiversity could provide synergies with climate change mitigation policies if support for biodiversity outcomes on productive land is recognised on a tangible way. In its current version the draft policy recognises the role of landowners, communities and tangata whenua as stewards, but does not mention how they would be supported to achieve the outcomes. Policy would need to be designed to make the most of the co-benefits and reduce the negative impacts of land use change and agricultural practice change. It would also need to be designed in the context of how different land uses and practices could integrate in a mosaic landscape, factoring in the impacts of land use change on rural communities and what this means for the whole food and fibre production system.
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(Parliamentary Commissioner for the Environment, 2017) (Blackwell et al., 2005; MacLeod et al., 2008) 39 The BERG estimates that that biological emissions from dairy are about 12 tCO e per hectare and between 3.5-2.1 tCO e 2 2 for sheep and beef. They estimate that biological emissions from horticulture range from 0.17-1 tCO2e per hectare. (Reisinger et al., 2017) 40 (Norris et al., 2017) 41 (Ausseil et al., 2019) 38
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14.4 References Amishev, D., Basher, L. R., Phillips, C. J., Hill, S., Marden, M., Bloomberg, M., Moore, J. R., & New Zealand. (2014). New forest management approaches to steep hills. Ministry for Primary Industries. Ausseil, A.-G., van de Weerden, T., Beare, M., Teixeira, E., Braisden, T., Lieffering, M., Guo, J., Keller, L., Law, R., & Noble, A. (2019). Climate change impacts on land use suitability (Contract Report: LC3573) [Prepared for: Deep South and Our Land and Water National Science Challenges]. Manaaki Whenua Landcare Research. https://ourlandandwater.nz/news/primary-industries-must-speed-up-their-adaptation-toour-changing-climate/ Baillie, B. R., & Neary, D. G. (2015). Water quality in New Zealand’s planted forests: A review. New Zealand Journal of Forestry Science, 45(1), 7. https://doi.org/10.1186/s40490-015-0040-0 Battery Industry Group. (2019). Battery Industry Group. Battery Industry Group. https://big.org.nz/ BECA. (2015). Burwood Hospital: Emissions to air and hazardous substance storage—Applications for resource consent and assessment of effects on the environment (p. 68) [Prepared for Ministry of Health for submission to Environment Canterbury]. BECA. https://api.ecan.govt.nz/TrimPublicAPI/documents/download/2261955 Biochar Network New Zealand. (2019). Biochar Network New Zealand. Biochar Network New Zealand. https://bnnz.org.nz/ Blackwell, G., O’Neill, E., Buzzi, F., Clarke, D., Dearlove, T., Green, M., Moller, H., Rate, S., & Wright, J. (2005). Bird community composition and relative abundance in production and natural habitats of New Zealand. ARGOS Research Report, 05/06(06). https://hdl.handle.net/10182/5500 Bloomberg, M., Cairns, E., Du, D., Palmer, H., & Perry, C. (2019). Alternatives to clearfelling for harvesting of radiata pine plantations on erosion-susceptible land. New Zealand Journal of Forestry, 64(3), 33–39. Bluett, J., Aguiar, M., & Smit, R. (2016). Understanding trends in roadside air quality. NZ Transport Agency research report (p. 171) [NZ Transport Agency research report 596 Contracted research organisation – Golder Associates (New Zealand) Limited].
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Brockerhoff, E. G., Jactel, H., Parrotta, J. A., Quine, C. P., & Sayer, J. (2008). Plantation forests and biodiversity: Oxymoron or opportunity? Biodiversity and Conservation, 17(5), 925–951. https://doi.org/10.1007/s10531-008-9380-x Burrows, L., Easdale, T., Wakelin, S., Quinn, J., Graham, E., & Mackay, A. (2018). Carbon sequestration potential of non-ETS land on farms (Report Prepared for the Ministry of Primary Industries No. LC3161). https://www.mpi.govt.nz/dmsdocument/32134/direct Carswell, F. E., Mason, N. W. H., Overton, J. McC., Price, R., Burrows, L. E., & Allen, R. B. (2015). Restricting new forests to conservation lands severely constrains carbon and biodiversity gains in New Zealand. Biological Conservation, 181, 206–218. https://doi.org/10.1016/j.biocon.2014.11.002 Carswell, F., Holdaway, R., Mason, N., Richardson, S., Burrows, L., Allen, R., & Peltzer, D. (2015). Wild Animal Control for Emissions Management (WACEM) research synthesis (Prepared for the Department of Conservation No. DOC4424). Manaaki Whenua Landcare Research. https://www.doc.govt.nz/globalassets/documents/conservation/threats-andimpacts/animal-pests/wild-animal-control-emissions-management.pdf Case, B., & Ryan, C. (2020). An analysis of carbon stocks and net carbon position for New Zealand sheep and beef farmland. Department of Applied Ecology, School of Science, Auckland University of Technology. Case, B. S., Pannell, J. L., Stanley, M. C., Norton, D. A., Brugman, A., Funaki, M., Mathieu, C., Songling, C., Suryaningrum, F., & Buckley, H. L. (2020). The roles of non-production vegetation in agroecosystems: A research framework for filling process knowledge gaps in a socialecological context. People and Nature, 2(2), 292–304. https://doi.org/10.1002/pan3.10093 Cefic, European Composites Industry Association, & WindEurope. (2020). Accelerating wind turbine blade circularity. https://windeurope.org/wp-content/uploads/files/aboutwind/reports/WindEurope-Accelerating-wind-turbine-blade-circularity.pdf de Klein, C. A. M., & Ledgard, S. F. (2005). Nitrous Oxide Emissions from New Zealand Agriculture – key Sources and Mitigation Strategies. Nutrient Cycling in Agroecosystems, 72(1), 77–85. https://doi.org/10.1007/s10705-004-7357-z de Klein, C., Cameron, K., Tinke, S., Dynes, R., Jonker, A., Di, H., Edwards, G., Dalley, D., & Waghorn, G. (2016). Assessment of the GHG footprint of the low and high input dairy systems of the 1 February 2021 Draft Supporting Evidence for Consultation
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Canterbury P21 farmlet trial [SLMACC Contract 131402]. AgResearch. https://www.agriculture.govt.nz/dmsdocument/28272/direct Ecotricity. (2020). Can solar panels be recycled? | Ecotricity NZ. https://ecotricity.co.nz/can-solarpanels-be-recycled/ Elkind, E., Heller, P., & Lamm, T. (2020). Sustainable Drive Sustainable Supply: Priorities to Improve the Electric Vehicle Battery Supply Chain (p. 40). Center for Law, Energy & the Environment and the Natural Resource Governance Institute. https://www.law.berkeley.edu/wpcontent/uploads/2020/07/Sustainable-Drive-Sustainable-Supply-July-2020.pdf Kibblewhite, M. G., Ritz, K., & Swift, M. J. (2008). Soil health in agricultural systems. Philosophical Transactions of the Royal Society B: Biological Sciences, 363(1492), 685–701. https://doi.org/10.1098/rstb.2007.2178 Lal, R. (2020). Regenerative agriculture for food and climate. Journal of Soil and Water Conservation, 75(5), 123A-124A. https://doi.org/10.2489/jswc.2020.0620A Life Cycle Strategies. (2015). Critical review of Life Cycle Assessment of Electric Vehicles [Commissioned by Energy Efficiency and Conservation Authority (EECA)]. Life Cycle Strategies. https://www.eeca.govt.nz/assets/EECA-Resources/Research-papers-guides/evlca-final-report-nov-2015.pdf MacLeod, C. J., Blackwell, G., Moller, H., Innes, J., & Powlesland, R. (2008). The forgotten 60%: Bird ecology and management in New Zealand’s agricultural landscape. New Zealand Journal of Ecology, 32(2). https://newzealandecology.org/nzje/2883 Ministry for Primary Industries. (Unpublished). Fourth Biennial Report projections. Ministry for the Environment & Statistics NZ. (2017). Our Fresh Water 2017: New Zealand’s Environment Reporting Series. Ministry for the Environment & Statistics NZ. (2018). New Zealand’s Environmental Reporting Series: Our air 2018. Ministry for the Environment, StatsNZ. http://www.mfe.govt.nz/sites/default/files/media/Air/our-air-2018.pdf Newton, P., Civita, N., Frankel-Goldwater, L., Bartel, K., & Johns, C. (2020). What Is Regenerative Agriculture? A Review of Scholar and Practitioner Definitions Based on Processes and
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Outcomes. Frontiers in Sustainable Food Systems, 4, 577723. https://doi.org/10.3389/fsufs.2020.577723 Norris, M., Johnstone, P., Green, S., Clark, G., Thomas, S., Williams, R., Mathers, D., & Halliday, A. (2017). Rootzone Reality – A network of fluxmeters measuring nutrient losses under cropping rotations. Summary of Year 1 and Year 2 results. Science and Policy: Nutrient Management Challenges for the next Generation, 10. Norton, D. A., Butt, J., & Bergin, D. O. (2018). Upscaling restoration of native biodiversity: A New Zealand perspective. Ecological Management & Restoration, 19, 26–35. https://doi.org/10.1111/emr.12316 Norton, D., & Pannell, J. (2018). Desk-top assessment of native vegetation on New Zealand sheep and beef farms. School of Forestry, University of Canterbury, Christchurch and Institute for Applied Ecology, Auckland University of Technology, Auckland. https://beeflambnz.com/sites/default/files/FINAL%20Norton%20Vegetation%20occurence% 20sheep%20beef%20farms.pdf Nugent, G., Whitford, J., Sweetapple, P., Duncan, R., & Holland, P. (2010). Effect of one-hit control on the density of possums (Trichosurus vulpecula) and their impacts on native forest (No. 304; p. 64). Department of Conservation. https://www.doc.govt.nz/Documents/science-andtechnical/sfc304entire.pdf Parliamentary Commissioner for the Environment. (2012). Water quality in New Zealand: Understanding the science. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/publications/water-quality-in-new-zealand-understandingthe-science Parliamentary Commissioner for the Environment. (2017). Taonga of an island nation: Saving New Zealand’s birds. Parliamentary Commissioner for the Environment. https://www.pce.parliament.nz/publications/taonga-of-an-island-nation-saving-newzealands-birds Peltzer, D. A., Allen, R. B., Bellingham, P. J., Richardson, S. J., Wright, E. F., Knightbridge, P. I., & Mason, N. W. H. (2014). Disentangling drivers of tree population size distributions. Forest Ecology and Management, 331, 165–179. https://doi.org/10.1016/j.foreco.2014.06.037
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Phillips, C., Marden, M., Du, D., & Basher, L. (2015). Forests and erosion protection—Getting to the root of the matter. New Zealand Journal of Forestry, 60(2), 11–15. Reisinger, A., Clark, H., Journeaux, P., Clark, D., & Lambert, G. (2017). On-farm options to reduce agricultural GHG emissions in New Zealand [Report to the Biological Emissions Reference Group]. New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC). https://www.mpi.govt.nz/dmsdocument/32158-berg-current-mitigaiton-potential-final Satchell, D. (2018). Trees for steep slopes. Forest Growers commodity levy. http://www.nzffa.org.nz/farm-forestry-model/why-farm-forestry/trees-forerosioncontrolsoil-conservation/report-trees-for-steep-slopes/ Siegfried, A. (2020). Insight into Regenerative Agriculture in New Zealand: The Good, the Bad, and the Opportunity. Pure Advantage. https://pureadvantage.org/news/2020/04/30/insightinto-regenerative-agriculture-in-new-zealand-the-good-the-bad-and-the-opportunity/ Suckling, I. D., De Miguel Mercader, F., Monge, J. J., Wakelin, S. J., Hall, P. W., & Bennett, P. J. (2018). New Zealand biofuels roadmap technical report. Scion. https://www.scionresearch.com/science/bioenergy/nz-biofuels-roadmap Transport & Environment. (2017). Electric vehicle life cycle analysis and raw material availability. Transport & Environment. https://www.transportenvironment.org/sites/te/files/publications/2017_10_EV_LCA_briefin g_final.pdf Vukicevich, E., Lowery, T., Bowen, P., Úrbez-Torres, J. R., & Hart, M. (2016). Cover crops to increase soil microbial diversity and mitigate decline in perennial agriculture. A review. Agronomy for Sustainable Development, 36(3), 48. https://doi.org/10.1007/s13593-016-0385-7 Wardle, D. A., Barker, G. M., Yeates, G. W., Bonner, K. I., & Ghani, A. (2001). Introduced Browsing Mammals in New Zealand Natural Forests: Aboveground and Belowground Consequences. Ecological Monographs, 71(4), 587–614. https://doi.org/10.1890/00129615(2001)071[0587:IBMINZ]2.0.CO;2 Wright, D. M., Tanentzap, A. J., Flores, O., Husheer, S. W., Duncan, R. P., Wiser, S. K., & Coomes, D. A. (2012). Impacts of culling and exclusion of browsers on vegetation recovery across New Zealand forests. Biological Conservation, 153, 64–71. https://doi.org/10.1016/j.biocon.2012.04.033 1 February 2021 Draft Supporting Evidence for Consultation
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Chapter 15: The mitigation – adaptation link We can already see the physical impacts of climate change in Aotearoa today, and these changes are expected to continue. On a global scale, acting earlier to tackle climate change will reduce total emissions and help to reduce the severity of impacts that we experience of climate change. The difference in impacts between a global temperature rise of 1.5˚C and 2˚C is large and serious. Therefore, it is important that Aotearoa is aware of the impact that contributing to global action to reduce emissions could have on our country’s ability to adapt. This chapter looks at the mitigation and adaptation link.
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Contents Chapter 15: The mitigation – adaptation link ...................................................................................... 1 15.1 Introduction ......................................................................................................................... 3 15.2 Considering adaptation in mitigation decisions ..................................................................... 4 15.3 References ........................................................................................................................... 6
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We can already see the physical impacts of climate change in Aotearoa today, and these changes are expected to continue. On a global scale, acting earlier to tackle climate change will reduce total emissions and help to reduce the severity of impacts that we experience of climate change. The difference in impacts between a global temperature rise of 1.5˚C and 2˚C is large and serious. Therefore, it is important that Aotearoa is aware of the impact that contributing to global action to reduce emissions could have on our country’s ability to adapt. This chapter looks at the mitigation and adaptation link.
15.1 Introduction The physical impacts of climate change are being observed in Aotearoa today; with increasing temperatures, changes in the frequency and severity of droughts, more extreme rainfall patterns and increasing fire risk, rising seas and shrinking glaciers.1 With ongoing climate change, these changes are expected to continue and in some cases accelerate. Far more than the current generation, future generations would bear the brunt of these impacts of climate change – both from the physical impacts that are locked in from historic emissions and from any current and future emissions. Globally, acting earlier to address climate change reduces cumulative emissions and avoids more severe physical impacts of climate change. The Intergovernmental Panel on Climate Change’s special report on 1.5°C concludes that climate risks would be significantly lower if warming is limited to 1.5°C rather than 2°C. In a 2°C world, sea levels are projected to rise more, there would be more species loss. Almost all of the world’s coral reefs would be destroyed. Globally, hundreds of millions more people would be exposed to climate-related risks, including risks to health, water supply, food security and economic growth.2 Earlier global action enhances the ability for society and natural systems to adapt to these physical impacts, reduces the impact on indigenous culture and reduces the number of people exposed to climate-related risks, including risks to health, water supply, food security and economic growth.3 Impacts such as rising sea levels and flooding pose a number of risks to households, businesses and communities. For example, increased flooding from storm surge and higher sea levels poses a risk to low-lying homes, the banks that provide mortgages and those who insure them. An assessment of our country’s exposure to rising sea levels suggests that there are 140,244 buildings within 1.2 metres of the spring high tide mark, with a replacement value of $43.78 billion in 2016 dollars.4 Sea level rise is also a risk to ancestral land, coastal marae, papakainga, wāhi tapu and urupa and could displace the haukāinga who uphold tikanga. Warmer temperatures, drought and the introduction of new pests and diseases could, for example, impact rural livelihoods and the wider food and fibre industry. They could also impact indigenous
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(Ministry for the Environment & Statistics NZ, 2020) (IPCC, 2018) 3 (IPCC, 2018) 4 (Paulik et al., 2019, p. 12) 2
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biodiversity, and disrupt mahinga kai, rongoā and other practices that enable members of whānau, hapū and iwi to apply and retain their tikanga and mātauranga.5 Analysis by Aotearoa scientists suggests that droughts alone cost Aotearoa $800 million between 2007 and 2017.6 While there are estimates of the damages from more severe climate change, there is a growing body of research showing that these estimates significantly underestimate the true cost.7 This is because it is challenging to quantify many of the most serious consequences of climate change as they lie outside of human experience. The most serious consequences include destabilisation of the Greenland and Antarctic ice sheets, disruption to ocean and atmospheric circulation, biodiversity loss and the collapse of ecosystems. These risks provide a compelling reason for the globe to work together to reduce emissions. While Aotearoa acting alone to reduce emissions would not reduce these impacts, by playing its part as a responsible global citizen, Aotearoa would contribute to the global action necessary to reduce the severity of these impacts.
15.2 Considering adaptation in mitigation decisions Some of the actions Aotearoa takes to reduce emissions can impact on the ability to adapt to these physical impacts. On the energy side, Aotearoa would become increasingly reliant on renewable energy that can also be affected as the climate changes. Wind, solar and hydro electricity generation depend on the weather. Shifts in rainfall, wind, temperature and the occurrence of storms could affect the availability of these energy resources. This would have broader impacts on the security of electricity supply. Seasonal rainfall and dry years already have a significant impact on our country’s electricity generation, prices and use of coal and gas. A recent modelling assessment projects that climate change would have a beneficial impact on inflows into hydro lakes due to increases in winter precipitation in major hydropower basins and a shift in the dry season towards summer.8 Modelling also suggests that wind generation would not be significantly impacted as windspeeds are projected to only change moderately.9 Electricity infrastructure would be impacted by warmer temperatures and extreme weather events. Transmission and distribution networks are vulnerable to increased risks of flooding, landslides and other natural hazards. This is because the carrying capacity of electric power cables decrease as temperatures rise. This may further impact the capacity of electricity systems, as increased demand for electricity puts pressure on the transmission and distribution network, thereby reducing their capacity.10
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(Ministry for the Environment & Statistics NZ, 2020) (Frame et al., 2020) 7 (DeFries et al., 2019) 6
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(Collins et al., 2020)
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(Meridian Energy, 2019) (Yalew et al., 2020)
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Electricity infrastructure could also be impacted if storms were to become more frequent and more severe. Power outages due to storms would be particularly problematic for charging electric vehicles. This infrastructure would need to be more resilient, particularly as our dependence on electricity increases with use of electricity for electric vehicles and process heat. Warmer temperatures would also mean demand for electricity would also increase in summer due to increased air conditioning. Our forests may also become more exposed to fire, wind damage and pest incursion as a result of climate change. Global climate modelling suggests that the risk of fire would increase in many parts of Aotearoa due to increased temperature and wind speed and reduced rainfall and humidity.11 This could have impacts on the supply of biomass for biomass industry and the ability to reduce emissions from higher temperature process heat. Animals would require more shade and shelter as rising temperatures increase the risk of heat stress.12 Trees on farms whether native or exotic can help to provide this shade. Native forests can also be used in green firebreaks to protect from the increased risk of fires due to climate change.13 On the other hand, some land use changes may reduce emissions but require more water that may be less available due to climate change. Exotic afforestation can also decrease water yield by 3050%.14 This could be a particular issue in areas that experience water shortages or where there is demand for irrigation, such as the eastern foothills of the Southern Alps and the tussock grasslands in the South Island.15 Nitrate leaching from pastures could also increase and become more variable with climate change.16 Practices that optimise fertiliser application to different types of soils as a mitigation measure could prepare for adapting to future climate variabilities.
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(Pearce et al., 2011) (Ausseil et al., 2019) 13 (Curran et al., 2018) 14 (Dymond et al., 2012) 15 (Dymond et al., 2012) 16 (Ausseil et al., 2019) 12
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15.3 References Ausseil, A.-G., van de Weerden, T., Beare, M., Teixeira, E., Braisden, T., Lieffering, M., Guo, J., Keller, L., Law, R., & Noble, A. (2019). Climate change impacts on land use suitability (Contract Report: LC3573) [Prepared for: Deep South and Our Land and Water National Science Challenges]. Manaaki Whenua Landcare Research. https://ourlandandwater.nz/news/primary-industries-must-speed-up-their-adaptation-toour-changing-climate/ Collins, D. B. G., Henderson, R. D., & Fischer, L. S. (2020). Shifts in hydropower generation under climate change in relation to growing electricity demand. Submitted to the Energy Journal, 21. Curran, T., Perry, G., Wyse, S., & Alam, M. (2018). Managing Fire and Biodiversity in the WildlandUrban Interface: A Role for Green Firebreaks. Fire, 1(1), 3. https://doi.org/10.3390/fire1010003 DeFries, R., Edenhofer, O., Halliday, A., Heal, G., Lenton, T., Puma, M., Rising, J., Rockström, J., Schellnhuber, H. J., Stainforth, D., Stern, N., Tedesco, M., & Ward, B. (2019). The missing economic risks in assessments of climate change impacts. 15. Dymond, J. R., Ausseil, A.-G. E., Ekanayake, J. C., & Kirschbaum, M. U. F. (2012). Tradeoffs between soil, water, and carbon – A national scale analysis from New Zealand. Journal of Environmental Management, 95(1), 124–131. https://doi.org/10.1016/j.jenvman.2011.09.019 Frame, D. J., Rosier, S. M., Noy, I., Harrington, L. J., Carey-Smith, T., Sparrow, S. N., Stone, D. A., & Dean, S. M. (2020). Climate change attribution and the economic costs of extreme weather events: A study on damages from extreme rainfall and drought. Climatic Change, 162(2), 781–797. https://doi.org/10.1007/s10584-020-02729-y IPCC. (2018). Summary for Policymakers. In Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. [MassonDelmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. MoufoumaOkia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. 1 February 2021 Draft Supporting Evidence for Consultation 6
Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. In Press. IPCC. https://www.ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_SPM_version_report_LR.pd f Meridian Energy. (2019). Climate change impacts on NZ renewable electricity generation to 2050. Presentation to MEUG. https://www.meridianenergy.co.nz/assets/Sustainability/8d965d2519/Climate-changeMeridian-modelling-May-2019.pdf Ministry for the Environment & Statistics NZ. (2020). New Zealand’s Environmental Reporting Series: Our Atmosphere and Climate 2020 (p. 79). Ministry for the Environment, StatsNZ. https://www.mfe.govt.nz/sites/default/files/media/Environmental%20reporting/ouratmosphere-and-climate-2020.pdf Paulik, R., Stephens, S., Wadwha, S., Bell, R., Popovich, B., & Robinson, B. (2019). Coastal flooding exposure under future sea-level rise for New Zealand (Prepared for the Deep South National Science Challenge No. 2019119WN; p. 76). NIWA. https://www.deepsouthchallenge.co.nz/sites/default/files/201908/2019119WN_DEPSI18301_Coast_Flood_Exp_under_Fut_Sealevel_rise_FINAL%20%281% 29_0.pdf Pearce, H. G., Kerr, J., Clark, A., Mullan, B., Ackerley, D., Carey-Smith, T., & Yang, E. (2011). Improved estimates of the effect of climate change on NZ fire danger. Prepared for the Ministry of Agriculture and Forestry (p. 83). Ministry of Agriculture and Forestry. Yalew, S. G., van Vliet, M. T. H., Gernaat, D. E. H. J., Ludwig, F., Miara, A., Park, C., Byers, E., De Cian, E., Piontek, F., Iyer, G., Mouratiadou, I., Glynn, J., Hejazi, M., Dessens, O., Rochedo, P., Pietzcker, R., Schaeffer, R., Fujimori, S., Dasgupta, S., … van Vuuren, D. P. (2020). Impacts of climate change on energy systems in global and regional scenarios. Nature Energy, 5(10), 794–802. https://doi.org/10.1038/s41560-020-0664-z
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Chapter 16: Our approach to policy The Commission’s vision of a “thriving, climate-resilient and low emissions Aotearoa” guides our approach to developing advice on policy direction. The wellbeing of the planet and the people of Aotearoa, and striving for an equitable and fair transition, remain our focus for reaching a better future. In developing policy, the Government needs to support and consider the wellbeing of iwi/Māori. This includes balancing what is good for tangata, the whenua and the wai, upholding whakapapa, enhancing whanaungatanga, and ensuring intergenerational sustainability and prosperity. These are values that are supported by many New Zealanders. This chapter presents the Commission’s approach to developing our advice on the direction of policy for the emissions reduction plan. It outlines the different elements that will be needed to drive the necessary change. The chapter that follows presents advice on specific policy issues.
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Contents Chapter 16: Our approach to policy ...................................................................................................... 1 16.1 Introduction .................................................................................................................................... 3 16.1.1 The Commission’s approach and considerations .................................................................... 3 16.2 Elements of a comprehensive climate policy package ................................................................... 5 16.2.1 Emissions pricing and other policies work together ................................................................ 6 16.3 Building on existing advice ............................................................................................................ 10 16.4 Conclusion ..................................................................................................................................... 12 16.5 References .................................................................................................................................... 13
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The Commission’s vision of a “thriving, climate-resilient and low emissions Aotearoa” guides our approach to developing advice on policy direction. The wellbeing of the planet and the people of Aotearoa, and striving for an equitable and fair transition, remain our focus for reaching a better future. In developing policy, the Government needs to support and consider the wellbeing of iwi/Māori. This includes balancing what is good for tangata, the whenua and the wai, upholding whakapapa, enhancing whanaungatanga, and ensuring intergenerational sustainability and prosperity. These are values that are supported by many New Zealanders. This chapter presents the Commission’s approach to developing our advice on the direction of policy for the emissions reduction plan. It outlines the different elements that will be needed to drive the necessary change. The chapter that follows presents advice on specific policy issues.
16.1 Introduction A key part of Aotearoa’s framework for achieving its climate targets is the requirement for the Government to develop an Emissions Reduction Plan. This must outline what the Government intends to do to make sure the next emissions budget (2022-2025) is met and can also include policies and strategies to meet the subsequent set of emissions budgets to 2035 (2026-2030, 20312035.) Meeting emissions budgets over the coming decades will require fundamental changes to Aotearoa’s economy and society. This includes changes to individual and corporate behaviour, changes to existing processes and ways of operating, as well as technological innovation. It is critical that households, businesses and investors have confidence in emission budgets, which is why Government needs to develop a deliberate plan outlining the action it intends to take. This will support credibility and greater predictability. In some areas, taking early action may have minimal impact on reducing emissions initially but may unlock the potential for significant reductions in future. It is important to identify these areas. It is also important to look beyond 2050. The Climate Change Response Act (CCRA) requires net emissions to remain at least net zero for every year after 2050; policies to meet emissions budgets must anticipate the need to “lock in net zero” beyond that date.
16.1.1 The Commission’s approach and considerations Our overall vision is of a “thriving, climate-resilient and low emissions Aotearoa”. To achieve this, the wellbeing of the planet and the wellbeing of current and future generations in Aotearoa must remain at the centre of decision making as the Government develops the Emissions Reduction Plan and puts in place policies and measures to drive the necessary changes. Having that focus is crucial for an equitable and fair transition, and for ensuring the changes and reductions in emissions are sustained and enduring. The wellbeing of iwi/Māori throughout the transition to low emissions is a core part of this. He Ara Waiora (see Chapter 1: We are seeking your feedback of the Advice Report) presents a Te Ao Māori approach to wellbeing, sourced in mātauranga Māori, and provides valuable and appropriate
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framing to understand and assess impacts of climate policy for iwi/Māori.1 It also provides a frame for ensuring that climate policies and approaches consider broader wellbeing of people and the environment, for current and future generations. In developing and implementing our advice, we have considered impacts on the four dimensions of wellbeing identified in the He Ara Waiora framework (Mana Tuku Iho, Mana Tauutuutu, Mana Āheinga and Mana Whanake). We also looked at how the actions align with the values of kotahitanga, manaakitanga, tikanga and whanaungatanga.2 In developing the Emissions Reduction Plan, the Government needs to make sure any policies and approaches it undertakes to reduce emissions support these dimensions and values. The Commission’s role The Minister for Climate Change is responsible for preparing the Emissions Reduction Plan, making the Minister ultimately accountable for the content of the plan and its delivery. In contrast, the Commission’s role is to provide the Minister with advice on the “direction of policy” required in the Emissions Reduction Plan. This indicates that our advice should be high-level rather than prescriptive. In general, this is how the Commission has approached the development of draft advice on policy direction. It does not, however, prevent more detailed comments being made about specific policies or policy design, if the Commission judges that it would be appropriate to do so. Under the legislation, in developing advice on policy direction the Commission must be guided by the same set of considerations as those that apply to advice on emissions budgets3. This has been articulated through the vision and principles framework (see Introduction Chapter of the Evidence Report). We are also required to regularly monitor and report on the government’s progress towards meeting emissions budgets.4 The Government’s Emissions Reduction Plan will provide accountability for delivery. The adequacy of the plan, the Government’s progress in implementing it, and the emissions reductions achieved will be monitored by the Commission over time. Our first annual monitoring report under the CCRA must be published in 2024, following the release of emissions data for 2022, the first year of the first emissions budget. The Commission may choose to comment on aspects of progress prior to this, focused on policy action and measures taken by the Government.
1
He Ara Waiora was initiated by the Tax Working Group, co-designed with Māori thought leaders and iwi representatives and is currently under the stewardship of the Treasury. 2 (McMeeking et al., 2019) 3 (Climate Change Response Act 2002 (as at 01 December 2020), 2020, secs. 5ZH and 5ZC(2)) 4 (Climate Change Response Act 2002 (as at 01 December 2020), 2020, sec. 5ZJ(1))
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16.2 Elements of a comprehensive climate policy package To drive the necessary changes and move towards meeting the 2050 target, the Government will need to put in place a comprehensive policy package. It will need to use a range of policy tools, including emissions pricing and other market incentives, regulation, and education. There will need to be significant investments in the future, not only in technology and infrastructure, but also in people and communities. Skills will be needed to ready the workforce, and transition planning will be critical to support people through change. The Government also needs to consider how best to engage both the minds and hearts in individuals, business, institutions and wider society to support the necessary change over the long term. Our approach to developing advice on policy direction is summarised in Figure 16.1 below. It highlights elements an effective climate policy package ought to contain. The focus is on supporting the development of a comprehensive and mutually reinforcing package of government policies that can achieve and sustain emissions reductions, in line with Aotearoa’s targets. Partnership Approach with iwi/Māori. The Government must partner with iwi/Māori to develop approaches to meeting the emissions budgets, that balance different objectives and considerations, while aligning with the He Ara Wairoa framework. This includes, for example, balancing what is good for tangata, the whenua and wai, upholding whakapapa, enhancing whanaungatanga, and ensuring intergenerational sustainability and prosperity. This is important, both for the wellbeing of Māori and all New Zealanders, and also to make sure approaches to meeting climate change goals have longevity, balance different objectives, and do not lock in historic or contemporary disadvantage for iwi/Māori. Clearly and credibly signal goals that align with targets. The Government must clearly and credibly signal the direction and scale of action required to meet emissions budgets and reduction targets. It must signal policy changes well in advance, while articulating a clear and credible vision for the future of different sectors, industries, and communities. Strong, consistent and clear signals would help provide certainty around the speed and direction of travel, as the transition to low emissions progresses. The case for action will be strengthened by making sure there is a clear link between the signals and the legislated targets, along with a transparent evidence base. Manage challenges and impacts for an equitable transition. As the transition unfolds, challenges and impacts need to be acknowledged and managed to ensure that people remain the clear focus. This is crucial for ensuring Mana Tauutuutu and Mana Āheinga. This means routes to achieving emissions budgets and targets ought to be deliberately paced and planned to give households and firms certainty about the direction of change, and time to find the opportunities for transition.5 Effective governance structures to deliver the transition. Finally, the policy approach will need to be supported by effective governance structures and institutional arrangements. Climate change is a complex and dynamic issue that will require fundamental changes right across the economy and society. Developing effective policy approaches, implementing and monitoring those approaches,
5
(New Zealand Productivity Commission, 2018)
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and supporting an equitable transition will require coordination across a wide range of government agencies6, levels of government, and partnership with iwi/Māori.
16.2.1 Emissions pricing and other policies work together In Aotearoa to date, the Emissions Trading Scheme (NZ ETS) has been our primary policy response to climate change. This has sometimes been to the detriment of efforts to implement a wider suite of climate policies. This reflects a view, prevalent in the early years of climate policy implementation, that emissions pricing is the main solution and other policy interventions are costly, wasted efforts that do not contribute to additional emission reductions. As international research and experience now shows, the most effective and efficient approach is to implement a much more comprehensive and diverse suite of climate policies.7 A comprehensive policy approach includes three different types of interventions to enable change: I.
Action to address barriers. There are a range of structural, political and behavioural barriers that prevent people and businesses making the most of opportunities to reduce emissions. Measures could include things like regulation to address split incentives8, mandatory and voluntary standards to drive performance improvements, information and support to address knowledge and capacity gaps over time, or policies that help to nurture and sustain public engagement in climate efforts.
II.
Pricing to influence investments and choices. The costs of emissions must be internalised, where possible. Emissions pricing incentivises businesses and individuals to make choices that lower emissions. The main pricing tool in Aotearoa is the NZ ETS, but there are other pricing tools that can also be used to incentivise investments and choices – such as taxation, electricity pricing and grants or subsidies. Incentives created by government policy that run counter to the goal of reducing emissions should be removed.
III.
Investment to spur innovation and system transformation. Targeted interventions would help speed up the transition and increase the emissions reductions that are achievable over the longer term.9 These interventions could include providing funding for research, development and deployment (RD&D) with spillover benefits, undertaking demonstration projects, and planning for and investing in infrastructure that can unlock deeper emissions reductions over time – for example electric vehicle (EV) charging infrastructure.
An effective policy package would include measures focused in each of the three areas. Each work on a different time horizon and is focused on different levels of decision making, from individual to
6
Including, for example, MfE, Treasury, MBIE, MPI, MOT, HUD, EECA, MSD, Ministry of Education. See, for example (Canada’s Ecofiscal Commission, 2017; Grubb et al., 2014; International Energy Agency, 2017; OECD, 2013b) 8 Split incentives can be a barrier to action to reduce greenhouse gas emissions, because they refer to a scenario where the actors who pay for an action are not those who will benefit from that action. For example, landlords may pay for and make the decision to install insulation, but it will be tenants who benefit from the added warmth and reduction in power bills that insulation provides. 9 (International Energy Agency, 2017) 7
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collective. Measures from all three areas of intervention must be integrated and used together in a mutually reinforcing way to meet emissions budgets.
Figure 16.1: Elements of a comprehensive climate policy package
The nature of an effective policy package, and the balance between the three areas of intervention, is likely to vary over time and between sectors. The International Energy Agency highlights this point, noting “the importance of both short-term policy actions that deliver immediate results and those that support long-term mitigation ambitions, such as RDD&D investment in emerging technologies. The role of carbon pricing across sub-sectors differs based on their sensitivity to price”.10 Emissions pricing is one of the strongest and most flexible levers available for tackling climate change. It works by making the businesses and people who make the decisions that create emissions feel the costs associated with those emissions. The power of emissions pricing comes from how it allows those driving emissions (both emitters and consumers) to find their own ways of reducing emissions. Given they know their business, needs and capabilities best, this frequently leads to cost-effective outcomes as the price helps direct the allocation of resources towards lower emissions activities. Emissions pricing can also have broad coverage, because the price incrementally affects a much wider range of decisions across the economy, on both the demand and supply side, than would be possible with more targeted policy interventions. There is extensive empirical evidence showing how effective emissions trading and
10
RDD&D stands for research, development, demonstration and deployment. (International Energy Agency, 2017, p. 34)
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other market-based measures are at helping to allocate financial resources efficiently and achieve reductions at low cost.11 There are limits to the effectiveness of emissions pricing, however, which can be overcome with other policy interventions. For example, high, visible emissions prices can be unpalatable and lead to issues of acceptability. There are also many other challenges associated with reducing emissions that are not strongly related to cost. For example, not every decision made by individuals and firms is based on an economically rational optimisation of costs. In these cases, standards and information can be more effective than emissions pricing in steering choices towards lower emissions measures. Other market problems can also hinder the uptake of cost-effective emissions reduction opportunities – for example, split incentives, network externalities, and policy coordination problems.12 Removing these barriers would aid the supply and demand response to an emissions price – boosting the price signal. The long time-horizon and enduring nature of the transition, along with the scale of innovation needed, also demands different approaches. Where viable low emissions solutions do not yet exist, emissions pricing provides some encouragement for their development. But it does not provide the ‘full incentive’ that would be justified when positive spillovers and other social benefits of low emissions innovation are taken into account. In some cases, the emissions price required to drive the innovation needed at the margin may be so high that is not politically feasible to implement. A long-term view of cost-effectiveness must be taken, to not only consider just what emissions reductions are cheapest in the near-term but also how actions now can influence future costs. For example, investments in demand-side incentives for key low emissions technologies – such as financial support for electric vehicles (EVs) – can lead to improvements that reduce costs for future users of those technologies. These dynamic effects go beyond the life of a particular intervention and mean that some apparently very expensive actions contribute to a more economically efficient, socially equitable, transition over time.13 Measures are also required to overcome political economy barriers. Emissions pricing can be perceived as unfairly penalising certain individuals, communities or businesses. This limited public acceptance can make it difficult for governments to implement emissions pricing in the most effective way, such as in terms of sector coverage or price level. It may be a pragmatic necessity to use other policies to help compensate for these limitations. For these reasons, emissions pricing works better when accompanied by other policies that address the full range of market or policy failures. For Aotearoa, this means that as well as continuing with efforts to improve the NZ ETS, the government should develop a comprehensive and mutually reinforcing policy package that spans all three areas of intervention outlined in our policy approach. Does the waterbed effect prevent additional policies from driving overall emissions reductions? The ‘waterbed effect’ is an objection frequently raised against using policies, such as regulation or targeted investment, alongside an ETS.
11
For example, (OECD, 2013a) (Verde & Kardish, 2020) 13 (Gillingham & Stock, 2018) 12
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It refers to the idea that emissions reductions achieved through other policies displace more costeffective reductions that would have otherwise occurred due to the ETS. This is akin to the way pushing down on a waterbed causes a bulge on the other side. The assumption is that in a system with an emissions cap (a limit on total emissions imposed by the ETS), each tonne of emissions not emitted by one party will be available for someone else to emit. It follows that reduction measures induced by non-ETS actions will simply increase costs for some and make it cheaper for others to keep emitting, rather than contributing to more reductions overall. The way the NZ ETS is managed, however, can prevent this scenario. The design of the scheme’s cap, enabled by recent reforms, is flexible. The unit volumes are set on a five-year rolling basis, which gives two avenues to adjust for the impact of other policies or investments on emissions: 1. Anticipated emissions reductions can be factored in upfront. This can be seen in the way the first five-year NZ ETS cap was set in 2020, covering the 2021-2025 period.14 The cap volumes are informed by the government’s emissions projections. Where possible, the projections include the expected, modelled effects of other policies on emissions, and this flows through to the setting of a lower cap for the NZ ETS. This includes where emissions reductions are a co-benefit rather than the main aim, such as in the case of freshwater policy. This approach is now also common practice in the way emissions caps are set in other systems, such as the European Union ETS. 2. The cap can be adjusted over time to reflect observed emissions reductions due to other polices. The rolling five-year process for the NZ ETS cap means that each year, a further year of unit volumes is added and the volumes for some other years can be updated. For example, in 2021 the government must extend the cap to cover the 2026 year. It can also update the unit volumes for the 2024 and 2025 years. The volumes for 2022 and 2023 can be updated if certain circumstances arise. This allows for adaptive management of the cap, amending it as more concrete data becomes available about the emissions impacts of other interventions, to avoid reductions being cancelled out. These approaches are illustrated by the diagram below.
14
(Ministry for the Environment, 2020)
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Figure 16.2: An explanation for the ETS cap It remains important, nevertheless, to carefully consider the rationale for policies outside the NZ ETS and to design them carefully. It also highlights the importance of ongoing efforts to improve forecasts of Aotearoa’s emissions, to assess the emissions impacts of policies, and to refine the method for setting and updating the NZ ETS cap. Together, this supports policy coherence, so that the NZ ETS and other policies can work together in a mutually supportive way.
16.3 Building on existing advice In the last five years, detailed advice has been developed by a wide range of government agencies and private companies on things we can do to reduce emissions, including policy approaches. Government has collated independent expert advice from the Productivity Commission, Parliamentary Commissioner for the Environment, the Interim Climate Change Committee, the Prime Minister’s Chief Science Adviser, and the Royal Society Te Apārangi. Relevant to our work is the Productivity Commission’s 2018 report on transitioning to a low emissions economy.15 The Productivity Commission made 76 recommendations across the economy, requiring implementation by multiple government agencies. The Productivity Commission identified some immediate priorities for Government. These included reforming the NZ ETS, devoting significantly more resource to low emissions innovation, prioritising policies to avoid high emissions lock-in (including introducing a feebate scheme to incentivise electric vehicles) and amending electricity pricing regulation to facilitate expansion of low emissions electricity. Some recommendations have already been implemented, including legislating targets and establishing the Commission. The Government has accepted all but one of the recommendations16 and last year began a work program (the Climate Action Plan) to implement the recommendations. 17 The Government has indicated that their response to the Productivity Commission’s report will lead into the development 15
(New Zealand Productivity Commission, 2018) The one recommendation the Government disagreed with was the recommendation to investigate incentivizing wastewater treatment plants. 17 (Ministry for the Environment, 2019b) 16
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of a low emissions development strategy, and that the findings and recommendations of the Productivity Commission will inform the development of the Government’s Emissions Reduction Plan.18 The Parliamentary Commissioner for the Environment released a report in 2019 presenting a climate policy approach that deals with biological emissions from agriculture and carbon sequestration by forests together. The Commissioner supported a separate target for carbon dioxide emissions from fossil fuels and proposed a landscape approach to managing climate and environmental issues in Aotearoa. Other advice was provided by the Interim Climate Change Committee, which made 13 recommendations in relation to electrification and agriculture in 2019. The Government has consulted on measures for encouraging energy efficiency and the uptake of renewable fuels in industry, and accelerating renewable electricity generation and infrastructure. In response to the report on agriculture, it has also initiated a process to measure and reduce emissions at a farm level – setting up a public-private partnership He Waka Eke Noa as the delivery vehicle. Milestones around farm emissions reporting and farm plans have been set in legislation.19 Some recent private sector initiatives also offer advice and recommendations. Earlier this year, the Aotearoa Circle hosted the Fenwick Forum, which brought together over 200 senior leaders from across the public and private sector to explore how Aotearoa’s COVID-19 recovery could support transition to a more sustainable and lower emissions future. The resulting report highlights three areas of focus for government action: a productive, sustainable and inclusive food system; an efficient, sustainable and inclusive transport system; and a productive, sustainable and inclusive energy system.20 For each of these, the report presents ‘required outcomes’, and recommends interventions and investments. The Sustainable Business Council and the Climate Leaders Coalition also recently released a ‘Briefing to incoming ministers’, focused on initiatives the incoming government can do to accelerate the transition to net zero by 2050. Three key recommendations from the report were to prioritise investing in low carbon transport, reducing emissions from process heat and accelerating the development and adoption of methane reduction technologies. Modelling by the Business New Zealand Energy Council has also explored elements that might influence the country’s future energy mix under different situations. The modelling indicates that electrifying the economy and increasing renewable electricity could create significant security of supply issues by 2050, meaning Aotearoa would need considerably more storable energy capability. There is also a substantial body of expert advice from international institutions. The Energy Transitions Commission released a report in September 2020 outlining three “critical priorities” for
18
(Ministry for the Environment, 2019a) These include: “A system for farm-level accounting and reporting of 2024 agricultural greenhouse gas emissions at farm level is in use by all farms by 1 January 2025” and “All farms have a written plan in place to measure and manage their greenhouse gas emissions by 1 January 2025” (He Waka Eke Noa, 2020) 20 (The Aotearoa Circle, 2020) 19
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nations in the 2020s, in the run up to the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) 26 in November 2021.21 The priorities identified are: •
Speed up deployment of proven zero carbon solutions.
•
Create the right policy and investment environment for technology diffusion.
•
Enable the emergence of the next wave of zero carbon technologies.
The above are a selection of the many reports that have been developed, not an exhaustive list. There are many other useful sources of information. However, these reports offer a combination of insightful recommendations to government, and others, for how Aotearoa could transition to a low emissions economy.
16.4 Conclusion Our advice on policy direction is primarily concerned with the policies and strategies needed to meet the first emissions budget (2022-2025). However, it also considers policies and strategies that are needed now to put Aotearoa on a firm footing for meeting the second and third emissions budgets, and for meeting the 2050 target and beyond. Meeting the budgets and the 2050 target will require a wide range of actions in every sector of the economy, across the three policy areas highlighted above – action to address barriers, pricing and investment to spur innovation and system transformation. It is also important to make sure climate policies and approaches consider broader wellbeing of people and the environment, for current and future generations. The following chapter – Chapter 17: The direction of policy for Aotearoa provides our targeted advice on where the government’s action ought to be targeted.
21
(Energy Transitions Commission, 2020)
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16.5 References Canada’s Ecofiscal Commission. (2017). Support carbon pricing: How to identify policies that genuinely complement an economy-wide carbon price. Ecofiscal Commission. http://ecofiscal.ca/wp-content/uploads/2017/06/Ecofiscal-Commission-Report-SupportingCarbon-Pricing-June-2017.pdf Climate Change Response Act 2002 (as at 01 December 2020), Public Act 2002 No 40, Public Act Contents – New Zealand Legislation, Date of assent 18 November 2002, Commencement see section 2 (2020). http://www.legislation.govt.nz/act/public/2002/0040/latest/DLM158584.html#LMS282029 Energy Transitions Commission. (2020). Making mission possible: Delivering a net-zero economy. Energy Transitions Commission. https://www.energy-transitions.org/wpcontent/uploads/2020/09/Making-Mission-Possible-Full-Report.pdf Gillingham, K., & Stock, J. H. (2018). The Cost of Reducing Greenhouse Gas Emissions. Journal of Economic Perspectives, 32(4), 53–72. https://doi.org/10.1257/jep.32.4.53 Grubb, M., Hourcade, J.-C., & Neuhoff, K. (2014). Planetary Economics: Energy, climate change and the three domains of sustainable development (1st ed.). Routledge. He Waka Eke Noa. (2020). He Waka Eke Noa Primary Sector Climate Action Partnership—5-year Programme Overview. He Waka Eke Noa. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/he-waka-eke-noaprimary-sector-climate-action-programme-July-2020.pdf International Energy Agency. (2017). Real-world policy packages for sustainable energy transitions: Shaping energy transition policies to fit national objectives and constraints (IEA Insight Series). International Energy Agency. https://webstore.iea.org/download/direct/1027 McMeeking, S., Kahi, H., & Kururangi, G. (2019). He Ara Waiora: Background paper on the development and content of He Ara Waiora. The Treasury. https://ir.canterbury.ac.nz/bitstream/handle/10092/17576/FNL%20%20He%20Ara%20Waio ra%20Background%20Paper.pdf?sequence=2&isAllowed=y Ministry for the Environment. (2019a). Cabinet paper: Transition to a low emissions economy: The Government’s response to the Productivity Commission’s Low Emissions Economy report. 13 1 February 2021 Draft Supporting Evidence for Consultation
https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/Transition%20to%2 0a%20low%20emissions%20economy%20%20The%20Governments%20response%20to%20the%20Productivity%20Commissions%20L ow%20Emissions%20Economy%20report%20%20%20Proactive%20Release%20%281%29.pdf Ministry for the Environment. (2019b). Transitioning to a low-emissions future: The Government response to the Productivity Commission’s Low Emissions Economy report (Info 908). Ministry for the Environment. https://www.productivity.govt.nz/assets/Documents/c3bc644f30/Governmentresponse_Transitioning-to-a-low-emissions-future-v2.pdf Ministry for the Environment. (2020). Emissions reduction targets and emissions budgets in the New Zealand Emissions Trading Scheme. https://www.mfe.govt.nz/reforming-nzets-emissionsreduction-targets-and-emissions-budgets New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf OECD. (2013a). Effective Carbon Prices. OECD. https://read.oecd-ilibrary.org/environment/effectivecarbon-prices_9789264196964-en OECD. (2013b). Climate and carbon: Aligning prices and policies (OECD Environment Policy Paper No 1). OECD. https://www.oecd-ilibrary.org/docserver/5k3z11hjg6r7en.pdf?expires=1600039314&id=id&accname=guest&checksum=DF862209000475528981C 073A5B9756D The Aotearoa Circle. (2020). Fenwick Forum: Report 2020 (p. 37). The Aotearoa Circle. https://www.theaotearoacircle.nz/news/fenwick-forum-2020 Verde, S., & Kardish, C. (2020). Achieving Zero Emissions Under a Cap-And-Trade System (Policy Brief Issue 2020/26). Florence School of Regulation, European University Institute. https://icapcarbonaction.com/index.php?option=com_attach&task=download&id=695
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Chapter 17: The direction of policy for Aotearoa Transitioning to low emissions in Aotearoa requires changes across the whole economy and society. The Commission has been tasked to advise on the direction of policy for the emission reduction plan, which will outline the Government’s approach to reducing emissions across all sectors. This chapter focuses on policy that is needed to support emissions reductions in different sectors of the economy, policies that cut across sectors and measures to address the impacts of mitigation policies. In preparing our analysis and advice on the emissions reduction plan, we have drawn on modelling, analysis of emissions reduction measures, uptake barriers, potential impacts and pathways for meeting the 2050 target.
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Contents 17.1 Introduction .................................................................................................................................... 3 17.2 Multi-sector strategy...................................................................................................................... 4 17.2.1 Strengthen market incentives to drive low emissions choices ................................................ 4 17.2.2 Integrate Government policy making across climate change and other domains .................. 9 17.2.3 Support innovation to speed up the transition to low emissions ......................................... 10 17.2.3 Information and behaviour change ....................................................................................... 12 17.3 Sector-specific policies ................................................................................................................. 17 17.3.1 Transport................................................................................................................................ 17 17.3.2 Heat, industry and power ...................................................................................................... 28 17.3.3 Transport, buildings and urban form ..................................................................................... 42 17.3.4 Agriculture ............................................................................................................................. 45 17.3.5 Forestry and removals ........................................................................................................... 51 17.3.6 Waste ..................................................................................................................................... 55 17.4 Policies to manage impacts.......................................................................................................... 60 17.5 Critical actions .................................................................................................................... 66 17.6 References ......................................................................................................................... 69
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Transitioning to low emissions in Aotearoa requires changes across the whole economy and society. The Commission has been tasked to advise on the direction of policy for the emission reduction plan, which will outline the Government’s approach to reducing emissions across all sectors. This chapter focuses on policy that is needed to support emissions reductions in different sectors of the economy, policies that cut across sectors and measures to address the impacts of mitigation policies. In preparing our analysis and advice on the emissions reduction plan, we have drawn on modelling, analysis of emissions reduction measures, uptake barriers, potential impacts and pathways for meeting the 2050 target.
17.1 Introduction This chapter presents the Commission’s advice on the direction of policy for the Government’s emissions reduction plan. The material in this chapter draws on the analysis and modelling in previous chapters around the Current Policy Reference case, scenarios and the pathway for meeting the 2050 target, mitigation options, uptake barriers and impacts. In accordance with the Climate Change Response Act (2002), we must: “provide to the Minister advice on the direction of the policy required in the emissions reduction plan” for the first emissions budget period. The Government’s first emissions reduction plan will focus on the first emissions budget period. However, it may also include policies and strategies to prepare for meeting subsequent emissions budgets, and to achieve and sustain the emissions reductions needed in the long term. This means the emissions reduction plan will need to identify areas where early action is needed to unlock potential for significant emissions reductions in the future. In order to provide relevant information, the Commission has considered the factors the Minister must consider under the CCRA in preparing the emissions reduction plan. These include: •
a multi-sector strategy
•
sector-specific policies, and
•
a strategy to mitigate impacts of policies on Iwi and Māori, employees, employers, regions, and wider communities, including the funding for any mitigation action.
We have used these components of the emissions reduction plan to organise the material in the following chapter. This advice aims to help clarify for the Government what its high-level strategy and priorities should be for tackling the substantial and complex task of driving the low emissions transition. The Commission has focused its advice on identifying the goals and key interventions that government climate change mitigation policies need to deliver. The technology and economic pathways analysis undertaken for emissions budgets provides the foundation on which much of our advice on policy direction is built. This is particularly the case for the sector-specific policies. This advice also aims to move beyond a techno-economic approach to consider the societal or system changes that are needed. This includes the role of different actors in the system (consumers, businesses, industry, central and local government), as well as issues of supply and demand, and cost and capability. As identified in Chapter 9: Which path could we take? our analysis shows that some technologies, such as electric vehicles and a methane inhibitor or vaccine, have the potential to achieve significant emissions reductions. However, government policy should encourage a wider set of actions than 3 1 February 2021 Draft Supporting Evidence for Consultation
simply what is necessary to meet the emissions budgets, because it is uncertain how new technologies would develop and progress over time, and some policies and actions are likely to deliver less emissions reductions than expected. In many instances, there would also be a lag time between implementing an ambitious policy and seeing significant results in the form of emissions reductions. For example, the slow turnover in the light vehicle fleet and industrial infrastructure means that ambitious policies would take some time to have a substantial impact on emissions. As previously noted, it is also set out in the legislation that government must partner with iwi/Māori to develop approaches to meeting the emissions budgets. Approaches should balance different objectives and considerations, and align with the He Awa Waiora framework. Incorporating mātauranga and tikanga Māori into solutions and decision-making by partnering with whānau, hapū, iwi, and communities would create change and facilitate the transfer of knowledge and actions to and for future generations. The Government and iwi/Māori must work in partnership at all stages of the policy process.
17.2 Multi-sector strategy This section focuses on identifying areas where action is needed, and which cut across all sectors. The transformation of Aotearoa to a low emissions society and economy is one that requires the combined effort of government, businesses, iwi/Māori, communities and individuals. The Commission is providing advice on the direction of policy to government, who have levers to affect change both directly and indirectly throughout Aotearoa. The following section sets out some of the options for influence which cut across sectors, such as the Emissions Trading Scheme, the work of agencies in partnership, government investment and accounting for emissions, innovation and research and development (R&D) spend, and information and behaviour change.
17.2.1 Strengthen market incentives to drive low emissions choices As noted in Chapter 16: Our approach to policy, emissions pricing is a powerful tool and an essential component of an effective and efficient policy package for reducing emissions. In Aotearoa, the main emissions pricing instrument is the Emissions Trading Scheme (NZ ETS). The NZ ETS is a key multisector policy as it covers all major sources of gross emissions, except biogenic methane and nitrous oxide from agriculture. The NZ ETS also covers a significant share of forests in Aotearoa. The NZ ETS will need to be adjusted on an ongoing basis to keep it fit for purpose. The NZ ETS has been in place since 2008, with limited success in reducing emissions. To a large extent this is due to flaws in how it was managed, which allowed the price of NZUs to drop to very low levels over 2012 – 2015. Since 2016, a series of reforms have been undertaken and the NZ ETS now has much of the architecture needed to be more effective. Further improvements are still needed, particularly with respect to NZ ETS unit volume and price control settings, and market governance. The following sections discuss the main areas where further improvements to the NZ ETS are necessary to make it more fit for purpose.
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Adjust NZ ETS unit volumes and price control settings to align with budgets The NZ ETS reforms have enabled a cap on units in the NZ ETS as well as an auction reserve price and cost containment reserve to discourage NZU prices from reaching unacceptably high or low levels. These will be set on a five-year rolling basis, with an annual process for adding a further year of settings and potentially amending other years’ settings. The first regulations establishing these settings for 2021-2025 have been finalised and will be implemented through auctioning from March 2021. As this had to be done prior to the Commission’s advice on emissions budgets, the settings adopted by the Government were informed by a provisional emissions budget for 2021-2025, which reflected a straight-line trajectory to the 2050 target. As expected, the modelling results developed by the Commission and the emissions budgets that it recommends differ from the provisional emissions budget (PEB). When the unit volume and price control settings are extended in 2021 to cover the 2022-2026 period, the Government has an opportunity to align them with the Commission’s advice. More broadly, the current framework for incentivising forests through the NZ ETS does not align with our recommended focus on driving gross emissions reductions and a change in the balance of exotic versus native afforestation as compared with the status quo. Challenges The most obvious area where NZ ETS settings need to change substantially is the price controls, with the existing settings being too low. The auction reserve price currently starts at $20 and rises to $21.65 in 2025. The cost containment reserve trigger price starts at $50 and increases to $54.12 in 2025. This is due to annual increases of 2% each year to reflect expected inflation. Continuing this approach would lead to an auction reserve price and cost containment reserve trigger of about $24 and $60 respectively in 2030. Our modelling indicates that the pathways for meeting the 2050 target might require actions to reduce emissions in some sectors with cost of about $140 in 2030, and $250 by 2050. These modelled costs are not a forecast of the NZ ETS market price. Rather, they reflect the marginal cost of the measures that would need to be implemented to meet the relevant emission budget and get on the pathway for meeting the 2050 target. The Government also has choices around the extent to which it relies on the NZ ETS or other policies to make these emission reductions happen. The more that non-ETS policies are used, the more likely it is that the NZU price in the NZ ETS can be lower while still achieving the same overall amount of emission reductions. This might not reduce the overall cost of reducing emissions – it would just mean that the cost of achieving some reductions was less visible in the emissions price, because it was not contributing to price formation in the NZ ETS market. Approach / policies: Increase the cost containment reserve and auction reserve price triggers. Whatever combination of policies the Government chooses to implement to meet the emissions budgets, our analysis indicates that the NZU auction price controls in the NZ ETS need to be significantly higher. Not increasing them from current levels would risk triggering the cost containment reserve to release more units at auction in particular. This would flow through to increasing the stockpile of surplus
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units in the market and depressing the NZU price, which in turn would make it very difficult to meet emissions budgets as the NZ ETS would not be able to drive the necessary emissions reductions. The auction reserve and cost containment reserve trigger prices are intended to act as safety valves to prevent unacceptably high or low NZU prices. They should not be set at levels at which they are likely to be triggered, rather they should provide a sufficiently wide corridor in which price discovery by the market can occur. As noted earlier, the marginal abatement cost of $140 in 2030 arising from the Commission’s modelling is not an NZU price forecast and the combination of policies the Government chooses to implement could cause the NZ ETS market price to be much lower. It does, however, indicate the level to aim for or exceed in 2030 for a cost containment reserve price that is unlikely to be triggered. The auction reserve price needs to be set at a level that balances signalling that higher prices can be expected in future to support investor confidence, with managing the risk of creating opportunities to profit speculatively simply from holding units. Importantly for the former, process heat is a sector where the emissions price can be expected to play an important role in driving decarbonisation over the 2020s and beyond. Our evidence suggests that, other than efficiency measures, mitigation opportunities in this sector such as fuel switching only start from around $50 upwards. There is a case to step the auction reserve price up to a level closer to recent market prices immediately, to protect investments made factoring in NZU prices over the past two-three years. Annual increases thereafter can be more moderate than increases to the cost containment reserve trigger price. Increases to these price controls should also factor in inflation, to avoid their erosion in real terms. Update unit volumes. The unit volumes will also need to be updated to reflect the first and second emissions budget, although there is less change in this respect between the Commission’s recommended budget volumes and the provisional emissions budget. The NZ ETS unit volumes, for a range of reasons, will not exactly align with the emissions budget but there should be a clear logic to the relationship between the two. One reason why they will not exactly correspond is that the Government will need to continue to restrict auction volumes to reduce the unit stockpile. Implement levers to manage forestry removals. The Government should also consider implementing a lever or levers into the NZ ETS to manage the amount of forestry removals that the scheme incentivises, in line with the pathway to meet emissions budgets (discussed in more detail below in the Forestry and removals section).
Improve NZ ETS market governance Good governance of the NZ ETS market is important for the integrity and efficiency of market trading and to reduce the risks of misconduct, which could distort the NZU price and reduce confidence in the scheme. Challenges The regulatory framework governing conduct in the NZ ETS market is patchy and incomplete. The Government has recognised that this is a problem, identifying several risks to the functioning of the NZ ETS market. This includes risks of insider trading; market manipulation; false or misleading advice
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to participants; potential lack of transparency and oversight of trades in the secondary market; money laundering; credit and counter-party risks; and conflicts of interest. In response to these problems the Government has established a market governance work programme to develop both regulatory and non-regulatory options to address these risks.1 This is an area where careful and detailed policy development is needed so it should not be unnecessarily rushed. However, progress on this work programme has been slower than would be ideal. It is difficult to determine to what extent, if at all, these risks are occurring in the NZ ETS market now. Some of these risks have the potential to severely damage confidence in the market and its effectiveness to drive emission reductions. Increasing NZU prices are likely to heighten the risks. Confidence in the NZ ETS market is still rebuilding after events such as the extremely low prices experienced over 2012-2015 period. Approach / policies: The NZ ETS is a critical tool for the low emissions transition so it should be safeguarded by appropriate market regulation. Internationally, most emissions trading schemes are regulated as financial markets. In these ETSs, the market participants can be generally categorised as wholesale. The NZ ETS market has special characteristics, including a large number of essentially retail-level participants such as small forest owners. This means that NZ ETS may need a bespoke regulatory regime, rather than full application of the Financial Markets Conduct Act (FMCA), although it may be appropriate to apply elements of the FMCA to the NZ ETS. The market governance work programme would therefore benefit from strong involvement of agencies with expertise in the FMCA and market regulation, such as the Ministry for Business, Innovation and Employment (MBIE).
Address other NZ ETS-related issues There are a range of other NZ ETS-related issues that should also be progressed, although they are not as critically important as the two highlighted above. They are briefly outlined below. Determining use of auction proceeds: The Government has indicated it is considering options for recycling some or all the cash that would be generated from NZ ETS unit auctions.2 Under current fiscal policy practices, this cash would be retained and allocated through Budget processes. Auction proceeds could be used for a specific purpose,3 which would provide an opportunity to boost public support for the ETS. For example, proceeds could be invested directly in emissionreduction activities and infrastructure, to support low-income households and communities through the transition and adjust to rising emissions prices, or for assisting communities and local authorities with the costs of adapting to the impacts of climate change. Another option that needs to be considered is purchasing offshore mitigation to enable Aotearoa to meet its Nationally Determined Contribution (NDC).
1
(Ministry for the Environment, 2019b, 2019a) (Cabinet Environment, Energy and Climate Committee, 2020) 3 This is often termed revenue recycling 2
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Future of industrial free allocation: The current approach in the NZ ETS to mitigate emissions leakage risk – output-based industrial free allocation – has some downsides. It limits demand-side emissions reduction, is not compatible with deep decarbonisation in the long term and uses taxpayer resources which then cannot be used for other purposes. •
A gradual phase-out of industrial free allocation was introduced through the recent NZ ETS reforms. The Government is also planning to undertake a first principles review of industrial free allocation policy, including looking at potentially updating the electricity allocation factor and allocative baselines. These are useful steps and should be pursued.
•
There are alternative policy instruments that could be used to address the risk of emissions leakage such as product standards, consumption taxes and border carbon adjustments (BCAs). These choices should be explored, as over the longer term they may be a more compatible with the 2050 target and allow industrial free allocation to be reduced more quickly.
Reducing the uncertainty about adjustments to NZ ETS settings: As we outlined in our submission to the consultation on the proposed NZ ETS settings in February 2020,4 it would be beneficial if the Government provided more information about how it intends to adjust unit volumes over time through the rolling five-year process for determining NZ ETS settings. To build confidence in the market and support informed decision-making by market participants, the process for adjusting NZ ETS settings should be predictable and transparent. Specifically, it would be useful for the Government to outline how it intends to manage unit volumes in the NZ ETS in light of the split-gas 2050 target. One option the Government could consider would be to outline its approach to making adjustments over time in a published document or policy. This would help to reduce uncertainty about future unit supply, facilitate price discovery and better enable the NZ ETS to drive low emissions investment. Voluntary action to reduce emissions and the voluntary emissions market: Some individuals and businesses wish to undertake voluntary action to contribute additional action towards or beyond meeting the emission-reduction targets. There is currently a lack of clarity about the role and avenues for voluntary emissions reductions in Aotearoa. This is due to the wide emissions coverage of the NZ ETS as well as the fact that negotiations about how trading in offshore mitigation will work in future have not concluded. There are also concerns within government that if a mechanism is enabled that allows the use of domestic emissions reductions for voluntary offsetting for carbon neutral claims, it would make achieving the emission reduction targets more costly overall. This lack of clarity means that desire for voluntary action in the private sector is not being leveraged for climate benefits, which is a missed opportunity. The Government should clarify the types of claims that can be made about voluntary emissions reduction action that are possible in Aotearoa. This should consider how the NZ ETS and targets are accounted for – which is discussed in Chapter 3: How to measure progress.
4
(Climate Change Commission, 2020)
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Factor target-consistent long-term abatement cost values into policy and investment analysis The Government’s policy decisions or investments in long-lived assets must not lock Aotearoa into a high-emissions development future or one that increases exposure to the impacts of climate change. A specific action that could have a powerful effect to help future-proof these decisions would be to require the incorporation of long-term abatement cost values consistent with climate change goals into the Government’s cost-benefit or cost-effectiveness analysis. This is sometimes termed a ‘shadow price’ on emissions. It is common practice internationally; the World Bank and a range of countries such as the UK and France include a shadow price path in financial analysis of investment and policy decisions. Challenges Government agencies in Aotearoa currently use a range of different emissions cost values in analysis – there is no consistent approach. The Productivity Commission’s Low-emissions economy report recommended use of a shadow emissions price. Work has progressed but an approach is still not widely bedded in within government. Our analysis also now provides new information and an opportunity for long-term abatement cost values consistent with the 2050 target to be adopted for this purpose. Approach / policies: The Government should adopt and implement, across government agencies, a centrally agreed path of abatement cost values for policy and investment analysis based on what is needed to meet the 2050 target. This will increase consistency and comparability in government investment decisionmaking, including in cost-benefit analyses. This shadow price path would also be useful for guiding local government and private sector decisions, to ensure that climate considerations are given appropriate weight and to avoid investments in assets that may later become stranded. Our analysis suggests that marginal abatement costs of around $140 in 2030 and $250 in 2050 in real prices are likely to be needed for Aotearoa to meet the proposed emissions budgets and the 2050 target. This information should inform the values used for policy and investment appraisal. These long-term marginal abatement cost values are not a forecast of NZ ETS unit prices and is conceptually different from the market price in the ETS.
17.2.2 Integrate Government policy making across climate change and other domains Transitioning Aotearoa to a low emissions economy requires a coherent and coordinated approach to climate change across government agencies, and across levels of government. A focus on coherent policy is important to ensure that households, business and communities receive clear and consistent signals about the transition to low emissions, and the nature and speed of change required. The fragmented nature of the government machinery poses a challenge in this regard. Challenges Responsibility for the development of climate policy is distributed across a number of different government agencies in Aotearoa. 9 1 February 2021 Draft Supporting Evidence for Consultation
While Ministry for the Environment (MfE) holds the lead in terms of the overall architecture of climate policy, the policy levers for the different sectors sit with other agencies. Ministry for Business, Innovation and Employment (MBIE), Ministry for Primary Industries (MPI), Ministry of Transport (MOT), Ministry of Foreign Affairs and Trade (MFAT), Treasury and the Environmental Protection Agency (EPA) all play different roles in terms of providing advice on mitigation, administrating mitigation policy (such as the ETS), or international climate related negotiations.5 Agencies like Ministry of Housing and Urban Development (HUD), Inland Revenue (IRD), Department of Conservation (DOC), Ministry of Education (Education), Ministry of Defence and others also have policy remit and levers that can be used to achieve climate change outcomes. For agencies aside from MfE climate change is not their core business, and climate considerations are often crowded out by other priorities. Currently climate change considerations are also not consistently ‘mainstreamed’ throughout all government policy and procedures, including understanding how government levers can be used as a mechanism to achieve climate change outcomes. Measures such as tax levers and structures, procurement procedures, and cost benefit and regulatory impact analysis (RIS) are all instruments that can be used to achieve outcomes, but this is not done systematically. This means that climate impacts are not reliably considered during the development of new policies, regulations or fiscal proposals – which can undermine climate change goals. Decisions being made by national (and local) agencies can be poorly aligned and lack policy coherence. Different agencies also give different weighting to various concerns in their decision making. Factoring target-consistent long-term abatement cost values into policy and investment analysis (as discussed in the previous section) will help to expand capabilities and mainstream climate considerations, but other approaches are also important. Some activities that take place across sectors, such as tourism, the food and fibre system and international education, have a significant impact on emissions. However, opportunities for reducing emissions from these activities are often not well understood due to their cross-cutting nature. The responsible government agencies do not have climate change as part of their core business, and therefore tend not to focus on low emissions objectives. Approach / policies: It is important to ensure that climate change objectives are given a high priority across government and factored into decision making. Ministerial focus on climate change goals and the use of connected Ministerial portfolios is helpful. Consistent signalling across investments, policy statements, direction to officials and internal policies and directives is also important to ensure that all regulatory and policy frameworks are aligned with low emissions objectives. Ensuring government procurement policies include climate considerations, and leveraging government purchasing power to support low emissions products and practices could also help reduce emissions.
17.2.3 Support innovation to speed up the transition to low emissions Innovation is the process of converting ideas and knowledge into new products, processes and ways of doing things. Transitioning Aotearoa to low emissions will require innovation right across the 5
(New Zealand Productivity Commission, 2018)
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economy, including energy and transport systems, buildings, industrial processes and how land is used. Innovation is an important driver of increased productivity and pushes out the boundaries of what is possible. Innovation is not always about developing something completely new, it is also about adapting existing technologies and practices to new circumstances. Aotearoa is likely to be a technology taker in many areas, but innovation will still be needed to absorb, adapt and deploy new technologies and processes developed elsewhere. Innovation results from investments in research, development and demonstration (RD&D), and from combining complementary ideas, skills and technologies in new ways.6 Public and private investments in RD&D support both the development of new technologies, and the testing, adaptation and adoption of technologies that already exist. Innovation also depends on access to knowledge, skills and finance. Challenges While innovation can play a central role in supporting the transition to low emissions, there are currently several challenges that can hinder the innovation process. Innovation is costly and risky, and its impacts are often uncertain. Investing in climate related innovation can be hard for business to justify in the face of competing pressures. Businesses have limited access to the money, time and skills needed to carry out innovation or to invest in adopting low emissions technologies and processes. The ‘spillover benefits’ from RD&D can also deter private companies from making investments. Spillover benefits occur when the development of new ideas or technologies benefit numerous businesses or people (including in the future) beyond those who pay for and develop them. Other businesses and individuals can copy the idea or practice, and so do not have to invest in research and innovation to create those benefits. Spillover benefits from low emissions innovation are good for the global climate, but it can act as a disincentive if the business or organization that created new technologies or processes cannot be sufficiently rewarded. Existing product standards and specifications can also inhibit innovation, as they do not explicitly allow use of emerging low carbon products. This means new approaches can be perceived as risky or unproven, which can constrain demand. At the same time, the process of achieving product assurance and certification for new approaches is resource intensive. Other factors that can inhibit innovation include lack of information about, or awareness of, the performance, cost and availability of low carbon products amongst trade professionals, suppliers, and end users. A lack of harmonisation across the supply chain can also limit awareness about opportunities to streamline engineering, procurement and construction in a way that increases energy and resource efficiency. Incentivising innovation has the potential to speed up emission reductions and lower their costs. Emissions pricing is one key aspect of incentivising innovation but, given the risks and long timeframes, it provides an uncomplete incentive. Pricing therefore needs to be supported by other policies to help overcome some critical barriers.
6
(New Zealand Productivity Commission, 2020)
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Given the long timeframes associated with RD&D, incentives need to be in place early to drive the innovation needed to support a cost-effective path to meeting the 2050 target. The Productivity Commission made several recommendations to improve the national innovation system and align it with climate change goals.7 This included establishing the goal of transitioning to low emissions as a key priority within the national innovation ecosystem. Approach / policies: Aotearoa needs to ensure that it has well designed policies and support in place that enable researchers and industry to develop, adapt and deploy low emission technologies. Effective emissions pricing will be an important part of incentivising innovation, but direct support for RD&D, and to support the development of necessary skills and capabilities will also be important. Measures could include, for example: •
Clearly signalling policy direction to incentivise innovation. This includes signalling policy changes and pathways to reaching the 2050 target well in advance;
•
Government RD&D investments should also be targeted to areas where Aotearoa is likely to be a technology leader, and where the spillover benefits are likely to be greatest – including RD&D to reduce emissions from agriculture.
•
Transitioning to a low emissions economy should be embedded as a key goal within programmes for supporting science and innovation, to ensure climate change objectives are prioritised – for example, through government-led schemes like Callaghan Innovation research and development grants, the Centres of Research Excellence, Crown Research Institutes, and the National Science Challenges.
•
Introduce measures to de-risk innovation and early uptake of low emissions technologies and processes – for example, more direct public backing and funding support for innovation focused on lowering emissions.
•
Increase industry, operator and consumer awareness and knowledge of low emissions products and practices, including through greater investments in pilots and demonstration projects.
17.2.3 Information and behaviour change Transitioning the economy to low emissions will require some significant changes to behaviour. This is highlighted by our modelling. Behaviour change will need to be at both an organisational and business level, as well as an individual one. There will need to be changes to the kinds of cars people drive, the way they travel, and how their homes are heated. These changes will need to be supported by infrastructure. Businesses, industry and investors will also need to make some different choices. Some businesses will need to switch to new processes and ways of doing things. Many farmers will need to change how they manage their land. All these things rely on changing behaviour, and frameworks that support that change. Policies, comprehensive research and measures will need to be put in place to support consumers, businesses, investors and others to make the necessary changes. One important element of this is
7
(New Zealand Productivity Commission, 2018)
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ensuring firms and financial entities provide information on the extent of their climate risk exposure and identify how those risks are being managed. This transparency is important to ensure that investors, insurers, lenders, Boards of Directors and other stakeholders can make informed decisions concerning their investments. Another important aspect is the need to undertake research to identify opportunities to change behaviour in a way that aligns with emissions reduction goals and create structures that support the pursuit of those opportunities.
Require entities with large investments to disclose climate-related risks Climate change exposes the financial system to risk and instability. An understanding of exposure to climate-related risk is important to help firms and other entities manage and appropriately price those risks. It also is important to inform lending, investment and insurance underwriting decisions, and allow companies to make decisions that reflect their view of how the transition to low emissions will play out. Firms or entities with large investments in fossil-fuel exploration, or in emissions-intensive infrastructure, are potentially exposed to considerable financial risk if those investments and assets lose value or become unusable as the world transitions to low emissions – known as “transition risks”. Many other firms without direct investments in fossil fuels might also be exposed to financial risk through reliance on emissions-intensive supply chains etc. Some firms will also be exposed to the physical risks of climate change. For example, many airports and ports will be more exposed to sea level rise and storm surges given they are located at or close to sea level. Publicly owned infrastructure such as roads, wastewater and stormwater, and electricity lines may also be affected. The 20,000 to 30,000 farm businesses in Aotearoa may also be impacted by more extreme weather events. Challenges Climate change poses a material financial risk not only to individual companies and investors, but to the entire financial system. Without clear and transparent information about exposure to climate risk, firms, lenders, investors, insurers and other stakeholders may be left with unforeseen liabilities, or risky investments. Climate-related financial risk disclosures require firms to provide information on the extent of their climate risk exposure and identify how those risks are being managed. Based on recommendations by the industry-led Task Force on Climate-Related Financial Disclosures (TCFD),8 disclosures should include information about: • • • •
8
the organisation’s governance around climate related risk; the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning; the organisation’s process for identifying, assessing and managing climate-related risks; and the metrics and targets used to assess and manage climate-related risks and opportunities.
(Bloomberg, 2017)
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Disclosing climate-related issues supports long-term resilience, benefitting not just firms, investors and markets, but also workers and society more broadly. It also allows Boards to take these issues into account when making short and long-term investment plans, expenditure, acquisition and reviewing corporate strategy. The Government has recently committed to implementing a mandatory financial disclosures regime.9 The proposal received strong support during consultation, including from three quarters of respondents that would be impacted by the proposed regime.10 The proposed mandatory financial disclosures regime would start no earlier than 2023. It would cover about 200 entities that manage about 90% assets in Aotearoa – including banks, credit unions, building societies, insurers, investment schemes, and Crown financial institutions that manage more than $1 billion in total assets, and all equity and debt issuers listed on NZX.11 Approach / policies: The mandatory financial disclosures regime proposed by the government is an important step in ensuring investors, insurers, consumers and others have the necessary information to make informed choices and avoid exposure to climate risks. The ongoing review of this regime will be important to ensure that it remains fit for purpose in the future, and as knowledge about the nature of climate risks evolves. The proposed regime is limited to institutions that manage more than $1 billion in total assets, and equity and debt issuers listed on NZX. While the cabinet paper noted that it is important for public entities to consider and disclose their long-term climate-related risks and opportunities, the regime will not capture public entities.12 The Government could consider extending the proposed regime to cover public entities at the national and local level.
Undertake research to identify opportunities to change behaviour and create structures to support the pursuit of those opportunities Understanding how to encourage long-term and sustainable behaviour change, and what levers to use (for example, education, policy) will require an evaluation of current and past programmes in Aotearoa and internationally, as well as a significant research programme to identify what tools to use and why. This recognises that changing behaviour is complex and requires a collaborative, focused and multiagency approach. In some cases, change may need to be driven at a hyper-local level, recognising the barriers to change within communities can be very different. Individuals within communities can be strong advocates and drivers of sustainable and authentic change. Stakeholders have told us that funding or recognising these community advocates could be one tactic that has had success for other complicated social issues, for example family violence.
9
(Cabinet Economic Development Committee, 2020; Ministry for the Environment & Ministry of Business, Innovation & Employment, 2019; New Zealand Government, 2020) 10 (Office of the Minister of Commerce and Consumer Affair & Office of the Minister for Climate Change, 2020) 11 (Cabinet Economic Development Committee, 2020; New Zealand Government, 2020) 12 (Office of the Minister of Commerce and Consumer Affair & Office of the Minister for Climate Change, 2020)
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Sustainable behaviour change campaigns use a carefully planned, audience-driven approach. This creates environments that support desired behaviour, rather than just targeting individuals, are grounded in good research, and continually evaluated.13 Challenges Supporting changes to corporate, group and individual behaviour in a way that aligns with transitioning the economy to low emissions will be important. Large scale behaviour change is required in every sector of the economy to meet the 2050 target. Processes that are well known in behavioural science, such as group polarization and science denial, pose a significant challenge to climate policy.14 There may well be other social, partisan or informational barriers that impede corporations, communities and individuals from making decisions and pursuing action that would lower emissions. Little research has taken place, especially in the Aotearoa context, into what opportunities may exist to support changes to behaviour that support emissions reductions. The opportunities to change behaviour will be diverse and require very different approaches. Approach/policies: An example of a joined-up approach, involving multiple agencies was the adoption of the Safe System to drive the country’s road safety strategy. The Safe System takes a system-wide view of road safety recognising that road safety is not the sole responsibility of the individual driver but depends on the entire road and transport system and the different levers and actors that make up the system. This includes legislation and enforcement, innovation, education and information, and leadership and capability. Multiple agencies operating at the different levels of the transport system – including policy, enforcement and operations at local and national levels – committed to the approach. Funding is allocated through the Land Transport Fund which directs income from petrol taxes and road user charges into things that the government wants to achieve for the transport network. If income from the ETS were directed toward climate change initiatives, it could be used in a similar way. Behaviour change in transport is directed by the NZ Transport Agency as the operations arm of the transport system. Work with local councils recognises that different communities have different needs and will respond to programmes that reflect this. There is no equivalent in climate, therefore a working group could be created across government to identify, scope, research and design sustainable and audience focused behaviour change initiatives.
Addressing identified gaps in evidence and data The Commission’s advice has relied heavily on the economic, social, cultural and environmental evidence and data that is available. Some sectors have a wealth of evidence and data available – for example transport. However, in other sectors the evidence and data available is old and inconsistent – for example land use classification data. There are some gaps in the evidence and data needed to properly analyse the impacts and co-benefits of climate change policy that need to be addressed.
13 14
(NSMC, 2011) (van der Linden et al., 2020)
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A key gap relates to the Māori economy, which is an enabler of Māori development and intergenerational sustainability and prosperity. The Māori asset base (estimated at $50 billion) makes up approximately 6% of the total asset base in Aotearoa. In comparison to the wider economy, the Māori economy has a lower asset base. However, the rate of growth exceeds the wider economy (5% compared with 2.7% in 2016). Challenges Examining historic disruptions to the ownership, utilisation, and management of Māori collectivelyowned land raises the question of how the emissions budgets and efforts to reduce emissions can be equitable without a clear understanding of the current state of emissions from Māori-collectives or a Māori emissions profile. A Māori emissions profile would enable Māori-collectives to have oversight of and manage emissions collaboratively across their takiwā. This would better enable balancing traditional concepts and practices of rangatiratanga/mana motuhake, e.g. resource preservation and management alongside contemporary cultural, social, and economic aspirations for iwi, hapū, and whānau intergenerational wellbeing and cultural vitality. Approach/policies: A crude attempt at estimating a Māori emissions profile by iwi takiwā could be achieved through Crown agencies (such as Te Puni Kōkiri, Ministry for the Environment, Ministry for Primary Industries, Manaaki Whenua, Te Tumu Paeroa and other Crown Research Institutes), giving effect to kotahitanga. By working collaboratively Crown agencies could build on existing data (e.g., Te Puni Kōkiri’s Toku Whenua platform) and include additional data (e.g., stocking rates, plantation/forestry site coverage data, and iwi/takiwā boundaries) to then support iwi/Māori to stand up their own platform to effectively manage and monitor emissions within their takiwā, and incorporate this information in current and future planning and decision making. Addressing this gap, and the associated information and capability enablement required, is consistent with giving effect to rangatiratanga and supporting more equitable outcomes for iwi/Māori. However, it is imperative that the enabling platform/mechanism ensures iwi/Māoricollectives maintain mana motuhake (control and autonomy) over their data and information. A platform that enables iwi/Māori-collectives to maintain an emissions profile within their mana whenua area/takiwā will enhance current and future decision making, trade-off analysis, and enable iwi/Māori-collectives to better understand their current contribution to emissions reductions and removals. It will also support Māori-collectives to set realistic goals to manage emissions going forward. Facilitating a platform/mechanism to enable iwi/Māori-collectives to measure and monitor their emissions profile, not only supports iwi/Māori-collectives to control their own emissions, but also to provide leadership locally and demonstrate impact in achieving climate positive goals.
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17.3 Sector-specific policies This section focuses on identifying areas where action is needed in each sector. Meeting the emissions reduction targets will require action in every sector of the economy. However, the Commission’s analysis indicates that greater gains can be expected in some sectors than in others, and that gains in each sector will be realised over varying timeframes. The Commission has identified what we consider to be the highest priority areas of action for each sector in the sections that follow.
17.3.1 Transport The transition to a low emissions economy will depend heavily on reducing emissions from transport. Near complete decarbonisation of transport will be critical to meeting the 2050 net zero target. At this stage international aviation and shipping are not included in our budgets. Across the transport sector, there are a range of solutions to support the shift to low emissions. This includes electrification of all forms of transport, use of low carbon fuels, reducing travel or shifting to active forms of transport like walking or cycling, and shifting freight off roads and onto rail or coastal shipping.
Develop an integrated national transport network to reduce travel by private vehicles and increase the proportion of clean public or shared transport and walking and cycling Increasing the use of low emissions public transport, shared transport and active types of transport is one way to reduce kilometres travelled by light vehicles. The Commission’s modelling assumes that a shift towards these ways of travelling could reduce emissions, though there are challenges. The Commission’s pathway sees annual household vehicle travel per person decreasing by around 1% each year after 2025, although the long lead times for investment in infrastructure for walking, cycling, and public transport would mean that light vehicle travel per person grows to 2025 before peaking. The pathway assumes no new public transport buses with internal combustion engines from around 2030-2035. Public transport ferries are highly amenable to electrification, and our preferred path is consistent with assuming that most new public transport ferries will be electric beginning almost immediately. The COVID-19 experience has demonstrated that productive remote working is feasible for many people, and this option will only become more attractive as technology continues to improve. Analysis for the Commission suggests that about 30% of the labour force in Aotearoa could work from home, at least some of the time. Challenges In many parts of the country there is not frequent, reliable, and affordable and connected public or shared transport choices. In many places there is also inadequate cycling and walking infrastructure, with cities and towns designed to prioritise cars. Unless walking, cycling and using public transport is safe, affordable, convenient and accessible, New Zealanders are likely to remain attached to private vehicles. Decades of under-investment in infrastructure and services for public transport, walking and cycling have often made these travel choices slower, less reliable, more dangerous and ultimately less 17 1 February 2021 Draft Supporting Evidence for Consultation
attractive than travelling by private vehicle. This under-investment was compounded in the 1990s and early 2000s by the deregulation of public transport, which made integrated network planning difficult, and undermined the delivery of quality services. Transport planning and funding is largely centered around private vehicle use, though this is starting to change. Of the approximately $4 billion spent on land transport in 2017, more than $3 billion is spent on roads. In comparison, about $600 million was spent on public transport and less than $100 million was spent on walking and cycling.15 This looks to improve going forward as directed by the new Government Policy Statement on Land Transport 2021 (GPS). Cities and regions in Aotearoa also tend to be structured in a way that encourages people to travel by car. They are generally characterised by low-density, dispersed and uncoordinated development, meaning that:
•
trips are often long (making walking and cycling unattractive);
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urban planning and street design guides generally prioritise private vehicles over other types; and
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poor integration between land use and transport decision-making has often led to mismatches between where growth happens, and where travel choices are better
These factors, together with rising incomes, have contributed to the high rates of car ownership and high rates of travel per person in Aotearoa. Access to transport choices is a key enabler for Māori. Transport plays an important role enabling Māori to realise various social, cultural, environmental, and economic aspirations including connecting to their whānau, supporting the haukāinga, and returning to their tūrangawaewae. About a quarter of Māori in Aotearoa live in Auckland;16 however, many have strong whakapapa connections outside of Auckland, and may need to travel long distances, often with large families,to participate in cultural activities and events.17 Access to transport choices is also a challenge for people with disabilities. Public transport may be impractical and expensive. 24% of New Zealanders have a disability and Māori have a proportionately higher disability rate which, if combined with a low-income household, could have a compounding effect on transportability. Whether it is possible for someone to avoid travel to and from work and work from home will depend on their occupation, access to a digital connection, and suitability of their home environment. Some households and geographic areas are not fully covered by high-speed broadband internet or 4G mobile communications, restricting the ability to work from home or access other virtual services. Some jobs or tasks are unable to be performed remotely. Some households are unsuitable for working from home, such as having insufficient space or other occupants, including young children.
15
(NZTA, 2020) (Stats NZ, 2007) 17 (Raerino et al., 2013) 16
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Approaches / policies One of the main ways to increase the share of clean public, shared and active types of transport is to develop and implement compact urban design policies. This requires a stronger and more deliberate relationship between urban planning, design and transport. Ensuring this happens at planning stage is more effective than retrofitting transport needs. An integrated approach to transport planning is vital. For example, nationally and locally, operations, such as trains, buses and coaches, should be coordinated to function together, with combined booking services and improved infrastructure. Developing a national public transport network is important to make a system that is accessible for people and to facilitate the scale of mobility shift that is required. Ensuring public and active transport receives appropriate planning and funding priority is also important as better infrastructure drives demand. Effective strategies in these areas could include strengthening the direction of the Government Policy Statement (GPS) on Land Transport to include specific and time bound targets to increase the proportion of low emissions public and shared transport, walking and cycling, and integrate low emissions transport options. Encouraging public transport uptake locally and nationally by reducing fares for targeted groups (such as for those under 25 years of age), and improving quality of service is a complementary approach. Such changes to the GPS can be effectively supported by supplementary policies to reduce car use. Potential measures include introducing congestion charging and increasing parking prices, zero emissions zones and pedestrian priority areas in cities. Government could also take the lead in supporting the establishment and roll out of car sharing schemes or encouraging e-bikes. End-to-end integrated solutions, including “first and last kilometre” solutions,18 and including park and ride options are further considerations, as well as mobility as a service as opposed to conventional public transport. This is particularly relevant in smaller urban centres and rural communities without easy access to public transport, or where the community is not concentrated enough to make public transport feasible. Targeted measures that are co-created with the disability community would be important to contribute to an equitable, accessible transport system. Regarding increased working from home, approaches include: •
Continue activities to create 100% access to high-speed broadband internet and facilitate the nation-wide roll out of 5G mobile broadband.
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Consider funding high-speed broadband access for lower socio-economic groups.
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Government can lead by example by more strongly encouraging and facilitating optional working from home for roles where this can be done.
18
The ‘first and last-kilometre’ is a term that describes the beginning and end of an individual’s public transport journey. Usually, after traveling on public transport, we need to walk, or take a second type of travel to reach our final destination. This gap from public transit to destination is seen as counterintuitive to establishing a truly connected city.
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•
Government provision of incentives for employers who create and enact policies allowing optional working from home. The tax-free allowance for employees working from home introduced could be maintained permanently, for example.
Box 17.1: Case study Experience overseas has shown that significant shift in ways of travel can be achieved with effective strategies. For example, in 2008 Vancouver set a target for half of all trips to be made by public transport, walking or cycling by 2020. This goal was met two years ahead of schedule and the city is now aiming for two thirds all trips by foot, bicycle and public transport by 2040. To achieve this change, Vancouver focused on providing people with travel choice, through investing heavily in walking, cycling and public transport improvements. Land use policies have also been a major part of Vancouver’s success. More recently the Republic of Ireland has announced that it will be spending 20% of its national transport budget on walking and cycling. The commitment will deliver a five-year programme linked with a specific target of new separated cycling and walking infrastructure that will be delivered or under construction by end 2024. The intention is to enable a step change in the number of people taking daily journeys by foot and bicycle which will help improve quality of life and air quality.19
Prioritise the accelerated electrification of light vehicles (cars, vans, SUVs) While there are many choices to reduce transport emissions, electrification of road transport will play a critical role in meeting the net zero target. The Commission’s modelling indicates that to decarbonise road transport by 2050, internal combustion engine light vehicle imports will need to be phased out by 2030-2035. Rapid replacement of the current conventional fleet is needed to ensure transport emissions fall by the third emissions budget period. Electric vehicle uptake is currently not happening fast enough for this to happen. EV ownership in Aotearoa is increasing but remains low, with nearly all vehicles running on petrol or diesel.20 Immediate action is required to rapidly increase the electric vehicle market in Aotearoa – from around 2% of new light vehicle registrations in 2020 to around 15% by 2025. Challenges At present, the upfront cost for a new electric vehicle is considerably higher than for a comparable fossil fuel vehicle. This cost difference acts as a disincentive, dissuading people from purchasing an electric vehicle. Upfront purchase price has been identified by consumers as the most important reason for not buying an electric vehicle.21 High upfront costs mean that low- and middle-income households may find it harder to access electric transport compared to wealthier households. This is likely to be more of a barrier for people
19
(Government of Ireland, 2020) As of October 2020, roughly 23,000 EVs were registered across light and heavy vehicles. Although this represents only about 0.4% of the total fleet the number of EVs in Aotearoa has almost tripled in the past two years. However, the small proportion of the fleet made up of EVs means that the shift has not materially decreased transport emissions. 21 As shown by a consumer survey run by EECA. (New Zealand Productivity Commission, 2018) 20
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who are disproportionately represented in low-income neighbourhoods, and in rental accommodation. Ability to access charging infrastructure is an additional limitation. About 85% of New Zealanders have access to off street parking,22 and the vast majority of electric vehicle charging is done at home. Electric vehicle charging infrastructure is relatively well developed for the number of electric vehicles currently on the road. However, apartment dwellers and those in rental accommodation face more difficulty in charging electric vehicle at home. Increased numbers of community charging stations will be required to ensure people who do not have access to home charging have access. Charging infrastructure will also need to keep pace with the projected rapid uptake of electric vehicles to ensure high amounts of coverage. Multiple chargers at key locations will be required, with rapid chargers that are able to charge cars more quickly, which will enable more vehicles to pass through the charging station. Measures to overcome practical barriers to the roll out of charging infrastructure may also be required, such as facilitating access to finance for charging infrastructure companies until such time as there is a high enough volume of electric vehicles for them to become more profitable. There is also the need for proactive action to build the technical and social infrastructure for reuse, recycling and responsible disposal solutions for batteries. Otherwise Aotearoa runs the risk of unintended environmental consequences, as current lithium-ion electric vehicle batteries can be highly polluting and pose a fire risk if not disposed of properly. Another challenge is the lack of choice of electric vehicles in Aotearoa, particularly for utes and people movers (7-9 seat) – which New Zealanders often favour over smaller vehicles.23 In particular, people in rural areas may not have access to an electric vehicle that fits their needs. Aotearoa accounts for a very small proportion of global vehicle sales, and electric models available in other countries are frequently not offered here. Some models are also offered at a significant price premium compared to the same model in other countries.24 There is also a lack of supply volume of electric vehicles from second-hand markets that Aotearoa depends on. Most of the EVs brought into the Aotearoa fleet are used cars, predominantly from Japan, and sourcing used electric vehicles will depend on the availability of electric vehicles there. According to the data in our ENZ model, the average age of a used light vehicle entering Aotearoa is 8.3 years. So, the used vehicles we will be importing in any given year will have been made 8 years earlier, for example, the vehicles we import in 2030 will be made in 2022 if this current trend continues. However, in 2019, there were only about 38,000 electric vehicles (BEV and PHEV) sold in Japan.25 This compares to over 160,000 used light vehicles imported into New Zealand in 2018 (MoT Vehicle Fleet Statistics). Aotearoa increasingly competes with other countries for low emission used Japanese vehicles. This dependence also makes Aotearoa consumer choice for electric vehicles dependent on what
22
(New Zealand Productivity Commission, 2018) The trend in NZ is that consumers are increasingly buying heavier new vehicles with higher emissions. In 2011 small vehicles were 16.6% of new vehicle sales. By 2019 their share of sales halved to 8.5%. (Ministry of Transport, 2019b) 24 (New Zealand Productivity Commission, 2018) 25 (Statista, 2020) 23
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Japanese manufacturers, governments and consumers choose five years (or more) prior to entering the Aotearoa market. This lack of choice is compounded by a lack of leverage in accessing future supply of new electric vehicles. Aotearoa is a small distant market, in need of right-hand drive vehicles. Automakers are expected to prioritise their passenger electric vehicle efforts on the markets with the most stringent regulations (such as China and Europe) for the next 10 years.26 This means Aotearoa may face restricted access to supply, particularly in the absence of any regulations or incentives to drive greater uptake. A challenge that needs to be carefully managed is that a large uptake of electric vehicle could add significant load to local electricity networks if they are all charged during peak periods – such as in the evening when everyone comes home from work. The additional electricity load at peak times could put pressure on the existing network and require large investments to provide more capacity.27 As electric vehicle numbers increase, measures would need to be implemented to help manage this risk – such as cost reflective pricing of electricity.28 Finally, there are some specific policy settings that may also be hampering efforts to increase the efficiency of the vehicle fleet – for example how the Fringe Benefit Tax (FBT) is calculated on light vehicles, and a lack of enforcement regarding FBT claimed against utes available for personal use. 29 It is worth noting that a shift towards electric vehicles and reduction in vehicle use will reduce government revenue from some current sources, such as road user charges and petrol excise duty, which are currently used to fund the building, operation and maintenance of the land transport system (including building roads and funding public transport). This is discussed in more detail in Chapter 12: How we earn our way in the world, and the Government will need to plan how best to restructure land transport funding in light of these changes. Approach / policies: A policy package to accelerate EV uptake must address demand side barriers as well as the supply side barriers. International experience shows that vehicle efficiency standards (discussed below) combined with fiscal incentives can achieve large emission reductions. Setting an ambitious policy package is important to ensure Aotearoa does not lose further ground with other countries that are already implementing policies to accelerate the electrification of their fleets. Without this we risk becoming a dumping ground as manufacturers send the cars they cannot sell in those markets to Aotearoa. Experience internationally shows that policies to reduce the up-front cost of efficient vehicles have the strongest impact on purchase decisions.30 Fiscal incentives like subsidies or “feebates” can help
26
(Electric Vehicle Outlook 2020 - Executive Summary, 2020) (New Zealand Productivity Commission, 2018) 28 Most customers pay a fixed price for their electricity no matter when in the day they use it. 29 The FBT is payable on light vehicles where they are available for an employee’s personal use. For simplicity, the rate of FBT is calculated based on the capital costs of the vehicle instead of capital and operating costs. Because EVs have higher capital costs and lower running costs, this puts them at a disadvantage because they are currently more expensive than ICE vehicles with similar specs. FBT should be applied to utes available for personal use, however lack of enforcement and widespread misunderstanding of FBT rules have resulted in many employers not paying the tax on utes available for employee use. 30 (German et al., 2018) 27
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to overcome barriers to consumer demand,31 encouraging the uptake of low emissions vehicles and discouraging the purchase of high emitting ones. Under a feebate scheme, all vehicles (new and used) are assessed for their greenhouse gas emissions potential. Higher-emissions vehicles incur a fee, while low emissions vehicles receive a rebate. The rebates could be funded via the fees paid for high emitting vehicles. The fees could also be used to fund the scheme’s costs and make it a fiscally neutral initiative. Another approach to addressing the higher pricing of electric vehicles is through the introduction of a fuel efficiency standard. This requires importers/manufacturers to reduce the average collective carbon dioxide emissions of all the vehicles they sell to meet a certain level over time, or they will pay a penalty. In order to meet the standard, vehicle importers can price electric vehicles at a level at which they sell in sufficient volumes to meet the standard for their whole range. Without a lower price, electric vehicles would be unlikely to sell in sufficient volumes to meet the standard. This policy is discussed further below under the priority of improving the emissions intensity of the light vehicle fleet. Other approaches include: •
Restricting or banning the import of new and/or used fossil-fuelled vehicles after a certain date. More and more countries are taking the course of action, with the UK bringing forward its date from 2040 to 2030.32
•
Government leadership in the electric vehicle uptake of its own fleets (including ensuring appropriate Budget allocation for agencies) will be critical in ensuring EVs enter the secondhand market.
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Government and/or the private sector bulk procure and ensure the supply of electric vehicles, or underwrite the risk of sale.
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Introduce battery refurbishment, replacement and recycling schemes.
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Piloting leasing schemes, particularly in low income areas, to remove the upfront and ongoing running costs of owning a vehicle.
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Facilitating the provision of public charging infrastructure.
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Direct subsidies or support for low-income households or support for car sharing schemes will be important to ensure electric vehicles are accessible for everyone.
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Encouraging business to buy electric vehicles, by reducing or removing the fringe benefit tax for corporate fleets.
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Introducing Zero Emissions Zones in city centres that can only be accessed by electric vehicles
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In use benefits for electric vehicles, such as low or reduced parking charges, or in the future low or reduced congestion charging fees.
Because fleet turnover is slow, policies need to be put in place as soon as to get us on track to meet the third budget period and 2050 target.
(German et al., 2018) 32
(Ambrose, 2020)
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Box 17.2: Case study The Clean Vehicle Rebate Project in California promotes clean vehicle adoption by offering rebates of up to $7,000 for the purchase or lease of new, eligible zero-emissions vehicles, including electric, plug-in hybrid and fuel cell vehicles. Incentives are based on household income. High income households do not get anything, and lowincome households get a bigger EV incentive than middle income households.33
Improve the efficiency of the light vehicle fleet Vehicles that enter the fleet today will be driven until they are on average almost 20 years old. This means that if Aotearoa is to achieve a low emissions fleet by 2050, nearly all the vehicles entering the fleet need to be low emissions by 2030. If the share of EVs in Aotearoa steadily increases, the overall fleet can become more efficient. Although EVs make the biggest difference, increasing the number of EVs, plug in hybrids, hybrids, and more efficient petrol and diesel cars can all contribute to improved emissions intensity of the light vehicle fleet. The fleet can also become more efficient by consumers choosing smaller vehicles. Challenges Over the next five years, more than 1.2 million light vehicles will likely enter the vehicle fleet. If powered by fossil fuels, these vehicles will lock in up to 50 Mt of carbon dioxide emissions over the next two decades. That is the equivalent of over half of the annual gross emissions in Aotearoa.34 The light vehicles imported into Aotearoa today are among the most fuel inefficient of any OECD country. Vehicles driven in Aotearoa produce more emissions and cost significantly more to run over the vehicles’ lifetime than in other countries. One of the key reasons for this is that Aotearoa has no regulations or restrictions to influence the fuel efficiency of light vehicles entering the fleet. Aotearoa is an outlier in this respect – one of only three OECD countries without vehicle fuel efficiency standards.35 The average light vehicle entering the Aotearoa vehicle fleet in 2018 produced about 180 grams of carbon dioxide per kilometre, compared to 120 grams of carbon dioxide per kilometre in the EU. Roughly half of the vehicles that come into Aotearoa each year are used imports. The average age of these vehicles at the time of import is around 8 years. Generally, for the same vehicle model, newer versions tend to be more energy efficient and thus have lower emissions. However, even new vehicles coming into Aotearoa are model variants that are less efficient and cheaper to manufacture than those supplied in countries with fuel efficiency standards.36 This 33
(California Clean Vehicle Rebate Project, 2016) (New Zealand Productivity Commission, 2018) 35 (New Zealand Productivity Commission, 2018) 36 In 2017, the most efficient vehicle models on our market had, on average, 21% higher emissions than their counterpart models in the United Kingdom. (Ministry of Transport, 2019a) 34
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means that vehicles in Aotearoa emit more carbon dioxide and cost more to run. Because these less efficient vehicles move into the second-hand market this disproportionately affects lower income households who spend more on transport. Without clear guidance from the Government on EV targets and emissions standards, Aotearoa risks becoming a ‘dumping ground’ for cheap petrol/diesel from the UK and Japan as they move to electric vehicles.37 The turnover of vehicles in the Aotearoa fleet is slow. The average vehicle is driven until it’s around 19 years old, and the age at which vehicles are scrapped is gradually increasing.38 This means that the carbon intensive vehicles arriving into the country remain in the fleet for a long time. Approach/policies A fuel efficiency or carbon dioxide standard would increase the supply of low emitting vehicles in the Aotearoa fleet. These regulations all require suppliers to meet an overall average fuel economy or carbon dioxide emissions level, weighted across new and used-import vehicle sales within the country where the standard applies. Internationally carbon dioxide standards, have been effective in driving emission reductions in light vehicles.39 There is a range of different international examples of how a standard could be designed. If such a standard were in place, suppliers would need to stock and sell more fuel-efficient conventional vehicles, more petrol hybrids and more EVs to meet carbon dioxide fleet targets or pay a penalty. Such a policy would work in tandem with other measures described above to increase EVs. Other approaches include: •
Setting limits on the age of used imports to encourage vehicles with newer, more energy efficient technology
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Introducing measures to shorten the lifespan of the vehicles in the fleet, such as scrappage schemes
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Targets for increased fuel efficiency
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Introducing measures to shift New Zealanders preferences away from larger, heavier vehicles through behavioural based actions; and
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Differential registration and use fees for vehicles with lower emissions.
37
(Drive Electric, 2020) (Ministry of Transport, 2019a, p. 8) 39 For example, a 2015 evaluation of the European Union’s vehicle fuel efficiency standard for new light vehicles, found that it is likely to have accounted for 65–85% of the reductions that occurred in tailpipe emissions over 2009–2014. The standard achieved an estimated rate of annual improvement of 3.4 to 4.8 gCO2/km. This compared to the annual rate of improvement of 1.1 to 1.9 gCO 2/km previously experienced under a voluntary industry standard. 38
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Increase the use of low carbon fuels for trains, ships, heavy trucks and planes Low carbon fuels offer an alternative to conventional fossil fuels (e.g. petrol and diesel) to power vehicles. This section is focused on three low carbon fuel options – electricity, green hydrogen and biofuels. The Commission’s modelling shows that low carbon fuels will play an important role in decarbonising transport by 2050. Even if the light vehicle fleet rapidly converts to EVs, low carbon fuels, such as biofuels or hydrogen are likely to be needed over the longer term for aircraft and longdistance trucks. These heavy vehicles are more difficult to electrify, so the transition is likely to take longer. Our preferred pathway shows that 6% of liquid fuels for domestic use are low carbon fuels by 2035, this is approximately 140 million litres per year. This would require building about another 7 equivalent sized plants similar in capacity to Z Energy’s existing Wiri plant, which has a capacity of 20 million litres per year. Challenges Low carbon liquid fuels are currently more expensive than fossil fuels. Unlike other countries, Aotearoa does not have incentives or regulations in place to support low emission fuels to become more competitive, or to encourage their uptake. The costs to produce green hydrogen and biofuels are currently more expensive than fossil fuel production. Green hydrogen is more expensive than more direct uses of electricity, in part due to inefficiencies involved in producing hydrogen from electricity. Biofuels also cost more to produce than fossil fuels, and as a result are sold only as a premium product in Aotearoa.40 A lack of production facilities in Aotearoa also contributes to the higher cost of low emission fuels. Aotearoa does not currently have a commercial supply of green hydrogen, or a nationally available supply of biofuels – although there is ample supply of electricity generation and feedstock potential for making both. Work is currently underway across the private sector to build hydrogen plants and develop a hydrogen refueling network in Aotearoa. The cost of creating this infrastructure is significant, and has required government funding to de-risk private sector investment. Aotearoa currently produces a small amount of conventional biofuels at commercial scale. This is blended in low percentages with fossil fuel. However, this is not sufficient to supply the entire heavy vehicle fleet.41 Bioenergy offers a decarbonisation solution for transport, as well as for industrial users of heat. However, there is a limited supply. For example, the Commission’s modelling shows that Aotearoa would need to look beyond using woody biomass as a feedstock if the country were to rely on bioenergy to decarbonise the heavy transport fleet. Competing land uses, particularly food production, also limit the amount of bioenergy available.
40 41
(New Zealand Productivity Commission, 2018) (Ministry of Transport, 2020)
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There are challenges associated with battery-electric heavy trucks due to the size, weight, and cost of the batteries, and time required to recharge them. These challenges are less of an issue for medium trucks typically used for local deliveries and other short-haul duties with lighter loads. Aviation is particularly challenging to decarbonise, as electric aircraft are not yet a proven commercial technology.42 Currently, there is no commercially viable sustainable aviation fuel (SAF) supply in Aotearoa. This is largely due to the lack of supportive policy. In offshore ports where SAF is being produced, its use has been supported by market by public funding and policy. Emissions from rail are small, as rail is an efficient way to move freight and proportions of the main trunk lines are already electrified. With significant potential to shift freight from road to rail, there is greater potential from decarbonising rail by further overhead electrification or use of battery-hybrid or low carbon fuel locomotives. However, the high cost of electrification is a significant barrier, particularly on less busy routes. Low emissions locomotives are not currently commercially available, though it is likely that alternatives to overhead line electrification will need to be implemented to achieve Kiwirail’s net zero carbon by 2050 objective. Significant parts of the freight rail network have been facing a state of managed decline due to lack of long-term investment and inadequate planning and funding frameworks. The Draft New Zealand Rail Plan sets out a remedial investment programme and a new planning and funding framework to maintain freight rail and provide a platform for future investments for growth. However, the Plan does not establish clear targets, or an investment strategy to increase the mode share of rail. Approaches / policies As with support for vehicle electrification, it is important that a policy package for low emission fuels addresses the supply and demand side barriers. Policies must also pay attention to the particular challenges associated with aviation. On the supply side, policy and investment support is required to help establish plants and close the commercial gap with traditional fossil fuel. Funding to support the production of low carbon liquid fuels, such as biofuel or hydrogen, could take the form of measures such as grants or tax credits. On the demand side, adjusting regulatory settings to support long-term demand is critical. Measures such as low carbon fuel standards or biofuel blend mandates can encourage and increase the sale of low carbon fuels. Regarding SAF, mandates requiring the ratcheting up of blending are emerging throughout Europe. For example, in Norway a 0.5% blend mandate is in effect from 1 January 2020. Norway’s ultimate target is for a 30% share of SAF in the aviation sector by 2030.43 The Swedish Government announced on 11 September 2020, a greenhouse gas reduction mandate for aviation fuel sold in Sweden in 2021. The reduction level is expected to be 0.8% in 2021, and gradually increase to 27% in 2030.44 The Draft New Zealand Rail Plan sets out a remedial investment programme and a new planning and funding framework to maintain freight rail and provide a platform for future investments for growth. 42
Electric aircraft are, however, a fast-developing technology, with several manufacturers planning to offer small commercial aircraft within the next few years. 43 (Norway Ministry of Climate and Environment, 2019) 44 (Neste.com, 2020)
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However, the Plan does not establish clear targets, or an investment strategy to increase the mode share of rail. There is also potential to shift freight from road to coastal shipping. Box 17.3: Low carbon fuel standards Several overseas jurisdictions have adopted low carbon fuel standards (LCFS) to reduce their transport emissions. LCFS take different forms. California sets a limit on the carbon intensity – the amount of GHGs emitted per megajoule of energy produced – of fuels across the vehicle market. The limit falls gradually each year. This forces fuel companies to source lower-emission alternatives to fossil fuels to meet their target (or purchase credits from suppliers who overachieved their target). Alternatively, the UK scheme requires fuel companies to supply renewable fuels as a set proportion of their sales. This scheme is similar to the previous Biofuel Sales Obligation.45
17.3.2 Heat, industry and power The heat, industry and power sector is broad, encompassing a wide range of sub-sectors and emissions sources. Reductions are likely to take place at varying rates across these different sources. The Commission’s modelling shows that emissions reductions from process heat and electricity production in the early budget periods will be important to help Aotearoa meet the 2050 target. Due to technological challenges and the slow turnover of infrastructure, emissions reductions in other parts of this sector, such as heavy industry, are likely to take place in later budget periods. The key opportunities over the first emissions budget period include maximising the use of electricity, scaling up provision of other low emissions energy sources, and using less energy through efficiency measures. Action is also needed to ensure new long-lived fossil fuel assets are not developed, and support is needed for innovation in hard to abate industrial processes, which will be required to decarbonise longer term – see Support innovation to reduce emissions from industrial processes section below. This section relates to the policy direction of energy supply and use, and therefore has direct implications for the transport sector (discussed above) so should be considered in parallel.
Decarbonise energy In Aotearoa, total energy supply is 40% renewable, with the remaining 60% coming from fossil fuels. This energy is used across the economy in transport, electricity generation, for heating buildings, and for manufacturing products in industry. Energy is a necessity in the modern world as a critical input into every good and service in the economy. The Commission’s analysis shows that achieving the 2050 target of net zero long-lived gases depends on transitioning away from fossil fuels to renewables in transport, heat, and electricity generation. This will require a significant expansion of the electricity system, including the national grid, and scaling up the production of low emission fuels such as biomass and hydrogen. It will also require considerable effort and investment to move to using low emissions energy in transport, industry and to heat buildings. Continually improving energy efficiency, encouraging system innovation and new 45
(New Zealand Productivity Commission, 2018)
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business models, and the deployment of storage technologies will all be important for ensuring the energy system remains affordable and reliable as it decarbonizes. Challenges The transition to a low emissions energy system will require action by individuals, communities, business and the Government, to both mitigate the risks of the transition as well as capturing opportunities and co-benefits it presents. As noted in MBIE’s discussion document Accelerating Renewable Energy and Energy Efficiency:46 “The package of policies that will enable the energy transition will affect technologies, natural resources, infrastructure, markets and institutions. There is no ‘one-size-fits-all’ policy solution suitable for the energy sector as it cuts across the entire economy. We must consider the different ways that energy is used in sectors of the economy and the relevant opportunities available in each case. Regional and geographic differences will influence the use and availability of low emissions energy sources, including wind, solar, biomass and geothermal. Effective change may require unique transition pathways and different timing and sequencing of changes across different sectors.”
The impact of these actions will need to be carefully managed in partnership with industry and communities (see time-critical necessary action 1 – An equitable, inclusive and well-planned transition). As fossil fuel industries phase down and energy systems and uses transform, there may be both anticipated and unanticipated effects, including on industries and communities, which could work against the transition to low emissions economy. Having a coordinated, long-term vision that looks across not just energy, but economic development, infrastructure and equitable transitions and other government objectives, may help to manage the transition and ensure good outcomes for Aotearoa. Building energy infrastructure, scaling up provision of low emissions fuels, and developing skills and capabilities for a low emissions energy system requires a long lead time. Coordination across the whole energy system will be necessary to manage a timely transition away from fossil fuels to low emissions alternatives. Policy action will be required to drive change across the energy system to achieve the pathway to 2050. At present, the Government is pursuing an uncoordinated approach to supporting the development and deployment of different low emission technologies, fuels and industries. Developments are happening without an overarching and clear set of objectives and outcomes for the energy system as a whole. Keeping costs to a minimum and ensuring security of supply requires an understanding of these objectives against a long-term set of goals. While the Government has made progress in setting out its vison for the electricity system, there is no clear and coordinated approach to planning the transformation of the wider energy system over the coming decades. The Government’s 100% renewable electricity target is a part of a bigger energy picture, which also encompasses transport fuels and heat amongst other things. Furthermore, transport and heat emissions both represent a larger share of the total energy emissions (about 50% and 22% respectively) than electricity (about 13%).47
46 47
(Ministry of Business, Innovation and Employment, 2019) (The Ministry for the Environment, 2020)
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Approach/policies The Government could provide industry with greater certainty by clearly signalling the timing and direction for the decarbonisation of the energy system, including transport, process heat, electricity generation, and buildings, so that industry, communities and households are better able to plan for the energy transition. Setting a broad, system-wide target for renewable energy could be a way to signal the required emissions reductions across the whole energy system and to encourage investment at a pace that aligns with the pathway to 2050. eveloping a coherent National Energy Strategy would be an effective way to do this. The development of a national energy strategy, with decarbonisation of the energy system at its center, could set direction for the different sectors of the energy system. A National Energy Strategy could consider future energy developments, infrastructure, equitable industry transitions, as well as regional and economic development planning needed to support the transition of the energy system, in a coherent way in Aotearoa. The objective of such a strategy would be to ensure that the phase down of fossil fuels, and scale up of new low emissions fuels, is smooth and appropriately sequenced. There will be some nationally significant forks in the road as the energy system decarbonises; choices will need to be made. For example, choices will need to be made about whether Aotearoa should keep its gas pipeline infrastructure long term as an option for low emissions gases, or whether a low emissions steel industry is critical for security of supply for the construction industry. Also, decisions will need to be made about whether the skills of those who work in the oil and gas sector should be actively retained in Aotearoa for new low emissions industries. Beginning conversations on these significant issues in a National Energy Strategy, and setting early direction, will be important for mitigating potential impacts on communities and industry, and for exploring the opportunities alternative options may offer. A National Energy Strategy could set out an overarching and clear set of objectives and outcomes for the energy system as a whole. A package of policies and sector specific strategies or roadmaps to drive emissions reductions would underpin the National Energy Strategy. An overarching strategy could help in aligning policies across the different sectors of the energy system and managing their interdependencies. The potential direction of this policy package is discussed in the rest of this section.
Maximise the use of electricity as a low emissions fuel Aotearoa has one of the lowest emission electricity systems globally. This advantage can be better leveraged to reduce emissions. To electrify transport and heat, the electricity system will need to grow substantially in the 2030s. Increased electricity demands will need to be met by new renewable electricity generation, new transmission and distribution connections, and upgrades of existing transmission and distribution capacity. It will be important to reduce the emissions from the electricity system as it grows. As noted above in the transport section, action is required to rapidly increase the electric vehicle market in Aotearoa – from around 2% of new light vehicle registrations in 2020 to around 15% by 2025. The Commission’s pathway also requires the steady reduction of process heat emissions out 30 1 February 2021 Draft Supporting Evidence for Consultation
to 2050. In early years we expect biomass to play a significant role in achieving this, while the electrification of industry is likely to ramp up in the 2030s. In the electricity system, the Commission’s pathway assumes that coal fired electricity generation is phased out by 2025, while gas use is significantly reduced and no longer used for baseload generation. Gas generation in the pathway reduces to around 3.0 TWh in 2025 and 1.5 TWh in 2030.48 Challenges One of the key challenges the electricity sector will face is the rapid expansion in generation, transmission and distribution assets that will be required to deliver the widespread electrification of transport and industry in the 2030s. Another challenge is ensuring that the delivered price of electricity remains affordable, and the system is reliable and resilient, throughout this period. The future of electricity demand and the sequencing of the build out of the electricity system in Aotearoa is uncertain. This due to a range of factors including a lack of government policy to incentivise the adoption of EVs, the expected future exit of the aluminium smelter, and the potential arrival of new dry-year storage solutions in the market. While some of these factors may lead to the closure of some fossil fired generation, they may also act to disincentivise investment in new renewable generation. Continuing to build new renewable electricity generation and transmission infrastructure throughout the 2020s would help to avoid potential construction bottlenecks that would delay the electrification of transport and industry in the 2030s. Increasing the use and provision of electricity will also require the timely and efficient development of transmission and distribution infrastructure. It will be important to manage the opposing risks of under and over-investing in the national grid to ensure the cost and reliability of electricity does not impede the role it can play in reducing emissions. The lead times for major new and upgraded transmission assets are also long compared to lead times required for new generation or demand. Issues with cost allocation and the risk of stranded assets associated with building transmission lines may slow or hold up new renewable electricity generation or the electrification of an industrial site, and risk delaying decarbonisation. The capacity and capability of local distribution networks to develop their networks to manage the disruption caused by emerging technologies, like EVs and household solar and batteries, could also be a challenge. Aotearoa currently has 29 electricity distribution businesses across the regions, with varying structures and capabilities.49 Like transmission, distribution networks need to be built to meet peak demand and need to manage a balance between over and underinvesting in their assets. Moving away from using fossil fuels in the electricity system will also create a challenge when considering dry-year risk. The Commission’s pathway assumes that gas continues to provide flexibility in the electricity system. The Government is currently undertaking work focused on potential energy storage solutions to address the country’s dry year electricity problem, through the NZ Battery Project. The project will add important knowledge and evidence to the understanding of the future electricity system. Aotearoa will likely need to solve the dry year problem at some point.
49
As local monopolies, 17 distributors are under the Commerce Commissions price-quality regulation, the other 12 are consumer-owned and exempt from the regulation as the Government considers that their consumers have enough input into how the business is run.
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However, while a solution would enable Aotearoa to reach 100% renewable electricity, it could cost taxpayers billions of dollars. As previously noted, reducing emissions from the electricity system is part of a broader energy transition. Consideration should also be given to alternative options for reducing emissions, as it is likely that other actions would have a larger impact for the same cost. Arriving at 100% renewable electricity is consistent with the aim of net zero emissions in 2050, but the timing and sequencing of the transition should be carefully considered as part of the decarbonisation of the wider energy system. Finally, the regulatory regime will need to quickly adapt and respond to new developments, to facilitate changing electricity market functions that will be driven by the electrification of transport and industry, and the adoption of distributed energy resources. This includes ensuring it can deliver the services needed such as demand response. The capacity and capability of electricity distribution businesses will be an important consideration. The Electricity Pricing Review and others have called for more innovation to be led by these businesses. Approach/policies There are several approaches that could enable greater use of electricity as a low emissions fuel. For information on the specific barriers and policies relating to EVs see the Prioritise the accelerated electrification of light vehicles (cars, vans, SUVs) section above, for process heat conversion see the Reduce process heat emissions section below. The reforms to the NZ ETS mentioned in the Multisector strategy above will also impact the case for switching to electricity, particularly as it affects the relative costs for fuels. A range of choices have been canvassed that could support a reduction in emissions from the generation of electricity in the first emissions budget period. These choices are set out in the work done by the Interim Climate Change Committee (ICCC),50 and in the consultation undertaken by MBIE and stakeholders in responding as part of the Accelerating renewable energy and energy efficiency discussion paper. However, since then, there have been some significant contextual changes – for example, COVID-19 and the Government’s response, the signalled aluminium smelter exit, multiple industry-initiated strategic reviews of the nation’s heavy industries, creation of the NZ Battery project, proposed changes to freshwater policy, and announced changes to the RMA. Measures that increase demand for electricity as an energy source will help to maximise its use and should be considered by both government and industry. The Major Electricity Users Group power purchase agreement (Renewable Electricity Generation Project)51 is an example of industry innovation in this area. This type of collaboration should be supported and encouraged. In terms of government support, choices include removing regulatory barriers, and creating legislative frameworks that send a strong signal about policy direction, including clear trigger mechanisms. Maximising the use of electricity as a low carbon fuel requires an electricity market that functions effectively and delivers affordable electricity in a reliable way. Keeping peak demand growth lower than overall electricity demand growth will be key to reducing emissions in a way that keeps the costs of the system down and effectively manages the increased volatility of a system with more
50 51
(Interim Climate Change Committee, 2019a) (Major Electricity Users’ Group, 2020)
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EVs, and more renewables. Encouraging greater cooperation between the 29 electricity distribution businesses, or aggregating them, could potentially support improved efficiencies and resilience. Smart grids, more distributed generation, and time of use pricing are examples of changes that could create opportunities for distribution businesses to manage peak demand. It will be important to understand and enable opportunities to optimise the building of transmission and distribution infrastructure alongside increases in electricity demand and new renewable generation, as this will help to ensure a smooth transition. Technology has the potential to change the way New Zealanders generate, store and consume electricity. It will affect how the electricity market functions, and create greater potential for independent and distributed generation, micro-grids and demand response. Innovations like peerto-peer trading are also emerging. These disruptions offer solutions for Māori-collectives, remote and rural communities and others. In order to reduce emissions from electricity generation, policy interventions that give greater certainty to the market should be considered. This includes certainty about timing for the retirement of generation assets, as well as measures to deter the build of new fossil fuelled generation. Measures that could help to provide certainty include announcement of a backstop date by which fossil fuelled generation assets must be retired, a disclosure regime for the market exit of generation assets, and/or a target for emissions from electricity generation. The retirement of fossil fuelled generation also presents a challenge to the sector with respect to its role in providing dry year security. This could prove a barrier to the exit of some infrastructure from the system. The Government can assist in overcoming this challenge by making evidence-based decisions about how and when to address the challenge of dry years. Some choices for addressing dry year challenge are very costly, and there may be more cost-effective ways to achieve larger emissions reductions elsewhere in the economy. It will be important, when making decisions about how to address difficult challenges like dry years, that costs and impacts of investments are carefully considered. The dry year challenge could be considered as part of a national energy strategy for Aotearoa.
Scale up the provision of low emissions energy sources Having a diversity of energy sources will be important in order to retain choices along the pathway to reaching the 2050 target, and beyond. It could also be useful to retain some energy sources that can be stored and transported in ways that do not rely on electricity and transmission lines. The Commission’s modelling identifies bioenergy and hydrogen as alternative fuel sources to displace emissions and provide diversity in the energy mix in Aotearoa – and both can be domestically produced. To support a diversity of energy sources, Aotearoa needs to increase its production of low emission fuels. Increased production of low emission fuels will need to be complemented with the development of supporting infrastructure and supply chains, and workforce capabilities. The Commission’s modelling highlights an opportunity to make better use of available bioenergy resources, such as forestry residue and pulp logs, in the years 2020-2030 to displace emissions. In the first three emissions budgets the Commission’s modelling indicates that there is little to no constraint on available resource. Deployment of biofuels out to 2050 may be constrained by the 33 1 February 2021 Draft Supporting Evidence for Consultation
desire to avoid the use of dedicated energy crops, particularly if Aotearoa undertakes to produce biofuels for international aviation and shipping. Other constraints may also exist, such as the speed at which supply chains can be created and the approach to emissions from bioenergy. Bioenergy should be considered in the broader framework of the bioeconomy. Hydrogen can be produced via number of routes, but will need to be low emissions if it is to have a place in a future Aotearoa economy. It is an energy-dense fuel that is versatile in how it can be used and where it can be produced. This means it could be helpful in providing energy security and meeting the needs of certain industries – for example, high temperature heat processes. The Commission’s modelling highlights an opportunity to use hydrogen for meeting the needs of one of the hard to abate industries. In its modelling the Commission has chosen steel as a representative, though it could be used for others, such as in the manufacture of ammonia-urea fertiliser, or to meet the needs of a new industry. In the modelling low carbon liquid fuels, which could be hydrogen or liquid biofuels, also support the long-term decarbonisation of some of aviation and heavy transport. Challenges Both hydrogen and bioenergy are generally more expensive than the fossil fuel alternatives under current policy settings. 52 The rising NZ ETS price will help to reduce this cost difference, as will technology improvements that reduce the cost of production of these low emissions fuels. However, for hydrogen, the trajectory for cost reductions mean that it is unlikely to be available beyond niche applications until later emissions budgets. Aotearoa is a technology taker for hydrogen electrolysers but has more control over the cost of bioenergy. The relatively small domestic market and high input costs can make it difficult to support new at-scale production facilities in Aotearoa. Scarce bioenergy resources and potential competing land uses, such as for food production, can create uncertainty along the supply chain and impede increased production of biofuels. In the absence of long-term demand certainty and policy or financial support, it may be difficult to develop the business case for investment to scale up the production of low emissions fuels. Transportation distance and effort of recovery would likely determine the extent to which biomass can be used economically in Aotearoa. Developing supply chains for collecting and processing bioenergy resources can be challenging, as the resource is dispersed across the whole of Aotearoa. Regional mismatches in supply and demand, coupled with differences in cost to transport biomass between regions, can result in areas with oversupply and areas of scarcity.53 Wide regional variation means that not all the potential biomass supply could be used. Hydrogen also faces challenges with respect to production and transport. A significant increase in renewable electricity generation and development of transmission infrastructure would be crucial. While the natural gas network could be utilised for a blended hydrogen and gas fuel, moving entirely to a hydrogen system would require new distribution and storage infrastructure. Incomplete information about future direction of government policy, emissions pricing and energy prices can affect investment decisions. The lack of a government plan regarding the optimal use of scarce bioenergy resources or the role of hydrogen in the economy can also hinder companies from
52 53
Using biomass to generate heat is cost competitive with coal in some regions at present. (Hall & Alcaraz, 2017)
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investing in new production facilities. Insufficient information on feedstock availability and price trajectories can also create uncertainty and hinder investment decisions. A national conversation about the role of these fuels will also be important. Both bioenergy and hydrogen have opportunities, risks and implications that have not yet been fully explored and understood in the Aotearoa context. Approaches/policies: There are several ways to help ensure that companies have the consistent signals they need to enable long term decisions. The reforms to the NZ ETS (set out in the Multi-sector strategy section above) will be key. Policy support will be needed during the first emissions budget to ensure that the provision of low emissions fuels can be scaled up to meet the emissions reductions required in later budgets. Measures that create demand for these fuels would help to build a market and reduce costs in the first emissions budget period. This is particularly the case for bioenergy, where the Commission’s modelling indicates an opportunity in the first and second emissions budget to make better use of existing bioenergy resources. As part of a long-term national energy strategy, Aotearoa could undertake some exploratory research into the development and deployment of bioenergy and hydrogen as low emissions fuels. This would increase understanding of the role they should play in the future. Policy effort should focus on the high value displacement of emissions in sectors where electrification is unsuitable or significantly to expensive. This could be the aviation industry, medium and high temperature process heat, or the heavy vehicle fleet. Well-targeted research and development incentives, enabling infrastructure through capital and finance offerings, and choices which reduce or share the risk of enterprises are all levers available to government to help develop an industry ecosystem. For bioenergy, the development of a coherent long-term plan towards a bioeconomy would be beneficial, as there is a clear role for government in providing direction and coordination. This could be considered as part of, or alongside, the Government’s Forestry Strategy, or as part of the proposed National Energy Strategy. A long-term plan for a bioeconomy should look across areas of land use, waste, transport, energy, buildings, domestic wood processing and industry, as each has role in the bioeconomy. The plan should also assess the potential for perverse outcomes and the likelihood that bioenergy resources could be constrained beyond 2035. It should also be focused on managing the resource in a way that targets it towards the highest value use, in terms of displacing emissions, and coordinating how the bioeconomy could develop across multiple sectors. iwi/Māori, not only as a Treaty Partner, but as tangata whenua and kaitiaki with significant interests in assets that will contribute to a bioeconomy. The strategy supporting the plan would benefit from tikanga based values that emphasise intergenerational wellbeing. For hydrogen, the Government needs to assess hydrogen’s place in a National Energy Strategy. This includes, for example, considering the energy demand and infrastructure requirements of producing green hydrogen at-scale, evaluating the trade-offs of using hydrogen against other low emissions fuels, and identifying the potential value and role of hydrogen across the economy. Further work is required to investigate whether blue hydrogen is compatible with emissions reductions targets, and
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whether it could be politically and socially acceptable as part of the transition. 54 The Commission has heard mixed views from stakeholders. Beginning a process of providing suppliers and consumers with more information will assist the expansion or growth of low emissions fuel production. This includes information about the availability of fuel feedstocks – such as pulp logs – over time, the size of the market, expected price trajectory, and engineering solutions that would be required. This will also support the development of the supply chains and workforce required to scale up both production and use of low emissions fuels.
Reduce process heat emissions The pathway to the 2050 target relies on major reductions in emissions from process heat. In the first three emissions budgets, reductions would be needed from low and medium temperature uses – as this is where technology is available. Avoiding the lock-in of new fossil fuel process heat assets and continued energy efficiency improvements will also be critical. The Commission’s pathway sees a steady pace of fossil fuel boiler plant conversions beginning immediately, in order to be on track for a complete transition by 2050. The pathway sees the phase out of coal use for low and medium temperature heat requirements by 2035, an immediate reduction of gas use through efficiency measures, and no new fossil fuel boiler installations. Continued reduction in gas use begins towards 2030 with the conversion of existing gas boilers. The pathway is dependent on scaling up the provision of low emissions energy sources, such as biomass and electricity. Challenges Manufacturing plants are often built to certain specifications and infrastructure is sized to fit existing coal and natural gas assets, and existing energy loads. In addition, because of the way some plants are configured, switching fuels may have an impact on related manufacturing processes. There may be practical engineering constraints around fuel switching and implementation of low emissions technologies. As such, the opportunities to reduce emissions are diverse and often site-specific, even across sites that produce similar goods – for example, milk powder. There are significant existing capital-intensive assets across industrial sectors in Aotearoa. Converting these assets in line with our pathway would require the retirement of some assets before the end of their economic life. This could have significant impact on a business’ accounts and ability to access further capital at attractive rates. Further there is variation in businesses’ capital allocation methods, risk appetites and debt thresholds. For example, there are currently an estimated 100 boilers across 60 different sites in the food manufacturing sector, using about 20PJ of coal per year. However, 75% of the coal use is concentrated in 10 large processing sites with around 25 boilers.55 Converting these large processing sites by 2035 through a combination of electrode and biomass boilers would have a capital cost of approximately $440 million plus additional costs associated with upgrades or connections to the 54
Blue hydrogen is hydrogen produced from gas with carbon capture and storage Data sourced from EECA and MBIE heat plant and boiler databases, plus information provided by Fonterra. Analysis undertaken internally with the incorporation of Transpower and Powerco transmission and distribution cost data. 55
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electricity grid. These additional costs are highly site specific but can be significant. This would also result in an increase in operating costs, particularly for sites which electrify. The rate at which plant conversion can happen will be limited by several factors, including fuel availability, the time required to convert plants, establish or expand fuel supply chains, and the time it takes to upgrade grid infrastructure and build new renewable electricity generation. It will also be limited by the availability of skills and expertise to undertake plant conversions and implement other emissions reduction options. Specific knowledge and skills are often required to undertake the appropriate site-specific analysis to support the business case for new technologies, and for their installation, operation and maintenance. Fuel switching decisions are long-term, involve high capital costs, and are highly dependent on the relative capital and fuel costs of different energy sources and technologies. At present, coal and gas are the cheapest forms of energy to supply process heat for many applications.56 Boilers are enduring assets with life cycles of up to 40 years, but can be extended indefinitely if it is maintained and repaired. This generally requires less upfront capital than replacing it. There are challenges to increasing fuel switching to both bioenergy and electricity. Uncertainty regarding long-term biomass supply may impede decision-making and investment in process heat conversions. For electrification, a key challenge is the cost and time associated with distribution and/or transmission grid connections. For large industrial users, connection costs can make up a larger proportion of a project’s cost than the equipment itself. In addition, it can take significantly longer to complete a new transmission line or interconnection upgrade than it does to develop and build a new processing plant – including planning, consenting and construction. Lack of government support and clear direction on the value and role of low emissions fuels across the economy can impede the development of robust supply chains and infrastructure needed to scale up the production and use of bioenergy and electricity to displace emissions. Coherent government leadership is required to provide businesses with the certainty needed to enable longterm investment decisions. Approaches / policies: Early action and government support will be necessary to phase out the use of coal in low and medium temperature heat in industry by 2035. Regulation should be introduced to immediately deter investment in new coal boilers. Efficiency gains and emission reductions from existing plants could potentially be outweighed by continued development of new fossil fuel heat plants. Government could provide additional certainty to industry by signalling milestones towards 2035 for the phase out of coal use in existing boilers. Continued energy efficiency improvements could unlock fuel switching opportunities at lower operating costs by reducing the quantity of low emission fuels needed to replace fossil fuels. This could also ease constraints on transmission or distribution capacity, limiting costly upgrades or connections, and reduce demand pressure on scarce bioenergy resources. Energy efficiency
56
Electric technologies can be more affordable than coal for some low temperature applications and biomass can be more affordable than coal in some regions.
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measures include optimising process design and the deployment of high efficiency electric technologies like mechanical vapour recompression technology.57 Demand-side measures should be introduced to reduce barriers to the uptake of low emissions technologies and develop infrastructure upgrades. This includes, for example, boiler conversions, new fuel handling and storage facilities, or grid infrastructure upgrades to distribution and transmission lines or substations. Demand-side measures could include facilitating access to finance or capital, increasing support for the identification of site-specific emission reduction opportunities and costs, and improving the relative cost of low emissions fuels to fossil fuels. Supply-side measures should also be considered as part of a bioeconomy plan and national energy strategy, to support fuel switching. Such measures could include fostering industry capability, supporting development of robust low emissions fuel supply chains, scaling up production of low emissions fuels, and timely build out of the renewable. See also the Decarbonise Energy and Scale up provision of low emissions energy sources sections above.
Efficiently use energy in buildings The most cost-effective way to reduce emissions from the sector is to reduce the amount of energy consumed. Energy efficiency in Aotearoa generally improves at the rate of 1% per year.58 If less energy is being used to achieve the same outcome, productivity improves. Energy consumption and GDP have traditionally been closely linked – growing the economy has led to growth in energy consumption and associated emissions. Some countries have managed to break this link, but Aotearoa has not yet managed to achieve this. Improving energy efficiency means households and businesses can spend less on energy bills. Improving energy efficiency will be critical in maintaining the affordability of energy in a low emissions system. It also means that where gas boilers are being used to heat water for homes, or where coal is being used to run an industrial plant, less fossil-fuel resource would be required to achieve the same outcome. This means that the total emissions would also reduce. The Commission’s analysis indicates that the greatest emissions reduction opportunity in buildings is switching from gas and LPG to low emission fuels. The Commission’s pathway shows an immediate reduction in the use of gas in new buildings due to restrictions on new gas connections and new gas heating systems after 2025. Across all buildings, gas use declines steadily towards 2050, falling by around 18% by 2030 and 35% by 3035. Continued energy efficiency improvements through higher building standards and voluntary action improves energy intensity by roughly 1% per year. Challenges Energy efficiency is well understood, as are the co-benefits associated with efficiency improvements. This includes improved health outcomes from warmer drier homes. Although Aotearoa has a predominantly renewable electricity system, there are still emissions benefits from reducing electricity consumption through energy efficiency. This is particularly the case if efficiency improvements can reduce peak demand. Alongside hydrogeneration, gas fired
57
Mechanical vapour recompression (MVR) is already widely used by New Zealand’s dairy sector as it is a very efficient way of evaporating water from milk. The opportunity is to deploy more advanced MVR to further increase its use in the dairy industry, and other industries that need to evaporate water. 58 Across sectors including but not limited to buildings.
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power stations are used to meet peak demand. Therefore, if peak demand can be lowered, less fossil-based generation would be required. However, some of the opportunities to make homes or businesses more efficient can be costly, and they are often not considered to be a necessary expenditure. This can be a hurdle to adoption, and one that can be compounded in businesses by the need for rapid payback on capital investments. Energy efficiency investments may be considered too small for banks to lend for, so raising finance may also be difficult. There can also be limited access to necessary expertise for understanding how to improve the efficiency of certain businesses or processes. There may also be a split incentive problem with energy efficiency investments. A common scenario is where the property owner bears the costs of undertaking the efficiency measure, but a tenant would benefit – for example in the form of lower energy bills or improved comfort. This can lead to no action being taken. See also section on Transport, buildings and urban form below. The complexity of the retail electricity market can also disincentivise consumers from making changes that could save them money and reduce emissions. Many consumers have limited understanding of their energy use patterns, and limited time to invest in choosing and switching price plans (or adopting new technologies) that would allow them to take advantage of opportunities to be more efficient, and of market competition to secure lower electricity prices. Consumers may perceive the potential cost savings as too small to be worth the effort, given other priorities. Approach / policies: Electricity will increasingly be used as the principal energy source in Aotearoa, and emissions from the electricity system will continue to reduce. However, even as these improvements continue there remains good rationale to continue to pursue efficiency improvements because they support consumer savings, household health benefits and improvements to the standard of the housing stock. There is a range of measures that can be used to support and accelerate energy efficiency. This includes continuing to amend legislation to improve energy efficiency standards for all buildings, both new and existing, through measures like improving insulation requirements, and introducing mandatory measures to improve the operational energy performance of commercial and public buildings. Government could also introduce a date after which no new natural gas connections or new natural gas heating systems can be installed. This would prevent emissions lock-in of long-lived assets. However, any measures introduced by government should also ensure lower income households have support in understanding and accessing low emissions heating options. As is proposed in the Taskforce for Financial Disclosures, mandating greater board level involvement and oversight of emissions information would enable greater understanding, and may encourage further action. See the sections on Strengthen market incentives to drive low emissions choices and Information and behaviour change for further suggestions in this space. The Energy Efficiency and Conservation Agency (EECA) has remit to assist companies through funding support and provision of information in order to encourage investing in energy efficiency projects.
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Support innovation to reduce emissions from industrial processes Aotearoa has several single company industries with industrial processes unique to this country. The emissions associated with these processes can be hard to abate. Transforming these processes to low emissions processes, for example shifting from coal-based steelmaking to a hydrogen-based process, is currently technically and economically challenging. Most of the hard to abate industries manufacture products that currently have a critical role in the economy, like cement, steel and iron. If government deems it critical to maintain existing domestic heavy industry, or to grow a new manufacturing base, they would need to work alongside industry to ensure it happens in a way that is aligned with the climate change targets. There are other options; Aotearoa could import products from overseas,59 offset emissions from current processes through forestry or other mechanisms, or support innovation and adoption of new industrial processes that require new feedstocks or reactants. This would also require the scale up in the provision of these new feedstocks or reactants. The timing of the transition for these hard to abate emissions is an important issue. Under the Commission’s pathway, many emissions intensive and trade exposed industries would continue to operate to 2050 at current production levels – though the aluminium smelter and methanol production both cease operations in the 2020s. In some modelling scenarios, steel production converts to hydrogen in the late 2040s.60 The products manufactured compete with internationally produced products. Therefore, these activities (production processes) are classified as ‘emissions-intensive and trade-exposed’ for the purposes of the NZ ETS and receive a free allocation of units. The free allocation of units will gradually phase down towards 2050. Emissions leakage is a concern. 61 At the same time, if production ceases in Aotearoa and is replaced by production elsewhere that does not increase global emissions there is not a concern from an emissions perspective, but there would be economic consequences. Challenges Currently, there are a limited number of commercially mature alternatives to fossil fuels for industrial processes. Decarbonisation of industrial processes through electrification is technically and economically challenging given the tightly integrated use of fossil fuels for high temperature process heat and as a feedstock or reductant. Aotearoa is generally a technology taker, and solutions that emerge internationally may not work for domestically unique processes (e.g. hydrogen steelmaking with iron sand) or may not make economic sense to adopt. Adopting new industrial processes would require significant investment in research, development and innovation. Industrial plants may need to be modernised and retrofitted with new technologies and equipment to utilise alternative feedstocks and different chemical reactions. Given the age of the integrated
59
In which case embodied emissions of imports and the potential for emissions leakage should be considered. This is not a specific recommendation from the Commission but is rather an example of a plausible step on the transition pathway. Green steel production is considered in the Tailwinds and Further Technology scenario. 61 Emissions leakage is where production reduces in Aotearoa, leading to an increase to higher emissions production elsewhere in the world, in a way that increases global emissions. Globally this is a poor outcome. 60
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manufacturing plants in Aotearoa, retrofitting may require significant capital investment on a scale similar to the cost of constructing a new plant. Currently, alternative feedstocks and reductants like green hydrogen are significantly more expensive than coal or gas. As noted in the Multi-sector strategy section, RD&D funding is not always well targeted or coordinated with broader government objectives, and greater levels of industry and international partnerships are needed to foster innovation in key areas. Increased competition for certain feedstocks over time can increase their cost, create supply uncertainty, and hinder long-term investment in transitioning industrial processes. This is the case with materials added to concrete, for example. There is currently an insufficient supply of alternative feedstocks domestically, though they can be sourced internationally. As the world decarbonises, these alternative materials may become increasingly constrained. Aotearoa is unlikely to be the technology leader when it comes to the R&D focused on reducing emissions from industrial processes. However, as processes for some of these industries are currently bespoke and are based on a specific resource found in Aotearoa – for example the type of coal or iron sands found here, Aotearoa will need to adapt technologies developed elsewhere to local circumstances. Many industries have already proved resourceful at doing this. Globally, hard to abate sectors, such as cement, will need to eventually transition as countries undertake action to limit the global average temperature increase to 1.5°C above pre-industrial levels. Some sectors may consolidate into certain regions that are able to undertake the process with lowest emissions – as a distant but renewable-abundant nation, Aotearoa may or may not be well placed to continue when this happens. Approach / policies: Aotearoa needs to begin a joint conversation with employers in these hard to abate sectors. These sectors are often large regional employers, and several are undertaking strategic reviews. There is a risk that, due to economic reasons, some of these industries may close. Whilst this would reduce emissions it would also lead to concentrated job losses, and some of these industries might be considered strategically important for the country. A clear government plan (along the lines of the UK’s Clean Growth Strategy) for the future of hard to abate sectors to bring economic strategy together with emission reduction goals could be helpful. This plan should be developed alongside the National Energy Strategy and could be done as part of the Just Transitions programme – see also the Localised transition planning section below. A focus on long term outcomes is important to ensure that investments align with policy goals. An assessment of the need to expand support for RD&D into new decarbonisation technologies focused on the hard to abate industries should be undertaken, based on the long-term outcomes within the plan – for example, into new technologies to make use of alternative feedstocks and new chemical processes and adapting them to local circumstances. Support for demonstration projects and small-scale pilots could also be useful.
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17.3.3 Transport, buildings and urban form Urban form, transport and buildings are an important consideration for achieving the emissions reductions targets. Aotearoa has a predominately urban population which is projected to increase. 62 The number of buildings in Aotearoa will need to increase to meet the needs of a growing population and economy. How the cities, communities, and buildings we live, work and play in are designed, constructed and operated will have an impact on emissions. Demand for transport and urban form are closely inter-linked. Population density, transport infrastructure, layout and land use are key drivers of emissions in urban areas. Low-density residential development – or urban sprawl – is associated with higher transport emissions. Cities with a lower average population density are less compact and their economic hubs (employment, education facilities, residences, shopping centres) are located farther from each other. These longer travel distances and higher transport demand are likely to be met by greater use of privately owned passenger cars. This results in an increase in vehicle kilometres and emissions. Equally so, high density cities that are not well designed and are congested can also lead to higher transport emissions. As cities grow they require more housing supply. Cities can ‘grow out’ (enabling construction at the edge of the city), ‘grow up’ (permitting more intensive development within established areas), or both. The Productivity Commisison found that cities in Aotearoa tend to grow out rather than up. As growth occurs at the urban boundary rather than the urban centre, this results in populations being farther from the city centre.63 There is limited opportunity to rapidly change urban form. The potential for emissions reduction and co-benefits through a shift towards compact urban form is high but the timeframes to realising these opportunities are slow due to the path dependencies created by the existing infrastructure. However, the decisions Aotearoa makes today can influence the type of buildings, communities and cities in the future and prevent emissions lock-in as transport systems, buildings and other infrastructure are long-lived assets. As urban areas densify and transport electrifies, it will be important to ensure that energy, water, and fibre infrastructure can accommodate more people living in the same area. It will also be important to develop connectivity across communities to facilitate shifting to different types of transport and to ensure accessibility for all New Zealanders. The Commission has, to date, had limited resource to focus on developing recommendations for how cities and towns can be planned and designed to reduce emissions. This is an area where further work in future could be beneficial. In the Commission’s pathway, existing commercial and institutional buildings reduce operational energy intensity by 30% across a 30-year retrofit cycle. All new buildings also have improving operational energy standards and reduce energy intensity at a rate of 1% per year. Existing residential buildings are assumed to reduce gas use by 35% by 2035 through transitioning to low emissions fuels and improved energy efficiency. The pathway assumes no new gas connections for new buildings by 2025.
62 63
Around 84% of New Zealanders live in an urban area (Stats NZ, 2020) (Productivity Commission, 2017, p. 80)
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Challenges It is currently unclear exactly the emissions reduction impact of urban planning and form, and there are numerous studies claiming different measures and magnitudes of emissions reduction potential from urban planning and design interventions. For example, the Productivity Commission notes that higher density urban centres can reduce vehicle kilometres travelled per capita by 5-12%.64 A study by the Stockholm Environment Institute highlights that urban planning for compact urban form can reduce emissions by 5% by 2030 and 6% by 2050.65 NZTA has identified potential for increased public transport and alternative modes from compact urban form.66 The global Coalition for Urban Transitions supports the notion that compact and mixed-use design of cities can reduce passenger car travel demand and encourage mode shift towards more sustainable transport means, such as walking, cycling and low emissions public transport (e.g. electric trains and buses).67 There is potential that widespread uptake of electric vehicles could fundamentally change the relationship between urban form and transport emissions – particularly in Aotearoa where there is access to renewable electricity. Under this scenario, urban planning and design would have less impact on reducing transport emissions (as transport fuel would be largely emissions free), although would continue to have co-benefits such as reduced congestion and energy efficiency (energy required for distance travelled). The planning of new communities or suburbs, and the redesign of shopping areas, affects transport choices, and therefore emissions from transport. Compact urban design can reduce emissions. As discussed below, location and amenities are often prioritised over energy use and potential emissions reduction for buildings. The intersection of waste, transport and energy emissions in relation to buildings and urban form can make it difficult to ensure accountability and joined-up government planning and decision-making towards clear outcomes. This is an area where further work to understand the opportunities and potential policy interventions to reduce emissions would be beneficial. The way a building is constructed determines its embodied emissions, and its design affects ongoing emissions from energy use. Construction, renovation and demolition over the life of a building generates waste and can therefore impact waste emissions. However, there is generally little or no coordination between the different companies involved in life cycle stages of a building. Designing and constructing high-performance, resilient buildings that exceed the minimum Building Code requirements is perceived as costly. There are mismatches between those bearing the cost of building beyond the minimum Building Code requirements and adopting low emissions technologies, and those accruing the benefits over time. There is also the risk that the cost of building beyond the Code will impact housing affordability if developers and property owners seek to pass on costs. There are significant remaining opportunities to improve energy efficiency and to switch to low emissions fuels across the built environment. However, it may be difficult for building designers, operators, occupants and trades professionals to obtain, understand and analyse information to assess options best suited to them. Additionally, the capital cost of technologies is often prioritised
64
(New Zealand Productivity Commission, 2018, p. 493)
65
(Erickson & Tempest, 2014) 66 (Waka Kotahi, 2019) 67 (Gouldson et al., 2018)
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over its whole-of-life costs and benefits. Other factors are also prioritised over energy savings and emissions reduction such as seismic ratings, location and proximity to amenities. Reducing emissions from transport, buildings and urban form requires coherent long-term thinking, because choices made in the next five years will have emissions consequences for the next 50. Approach / policies The Government could develop a consistent approach to estimate the long-term emissions impacts of urban development decisions and continually improve the way emissions consequences are integrated into decision making on land-use, transport and infrastructure investments. It could ensure a coordinated approach to decision making is used across Government agencies and local councils to embed a strong relationship between urban planning, design, and transport so that communities are well designed, supported by integrated, accessible transport options, including safe cycleways between home, work and education. The Government plans to make large investments in state housing over the first emissions budget period. Government should leverage this investment to maximise opportunities for emissions reductions, to avoid lock in and prevent stranded assets, and to drive growth in industry capability and readiness. Additionally, this investment can be leveraged to support a just transition by addressing energy affordability and ensuring equitable access to low emissions options, for example, in transitioning from portable LPG heaters to heat pumps. Government should use its significant procurement power to foster integration between building designers and builders, to accelerate capacity building and upskilling, and to build demand for lower emissions materials and practices across the construction industry. This would ensure an improvement in the emissions performance of future infrastructure, and current and future state housing, with benefits realised across the private sector. Upskilling across the construction industry should be backed by ongoing legislative reform, for example through the Building Code and reform of the resource management system. There also needs to be more co-design of urban form and transport planning with communities to ensure that communities, particularly lower income communities, are not developed in areas most at-risk to changes in future climatic conditions. Ongoing operational emissions from buildings are mostly from energy use – for example, from gas, coal or electricity. The Commission’s modelling indicates that the biggest opportunity to reduce emissions associated with operating buildings is by reducing the use of fossil fuels, especially gas. Over time, fossil fuel use would need to be replaced by low emissions fuels such as electricity. For existing buildings, continued improvements in energy efficiency is essential, particularly in large commercial buildings and institutional buildings. The Heat, Industry and Power section of this chapter contains additional suggestions of ways to reduce emissions from buildings. This includes maximising the use of electricity as a fuel in buildings and increasing energy efficiency. The recommendations in the Waste section of this report are also relevant, such as the suggestion to increase waste recovery and improve the circularity of the economy.
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17.3.4 Agriculture Under a Current Policy Reference case, emissions from agriculture are expected to fall, although agricultural output is maintained. Reductions in emissions are due largely to strengthened freshwater policy leading to a reduction in stock numbers, the NZ ETS incentivising land-use change to forestry, as well as continued efficiency improvements. However, more action will be needed to reduce emissions in line with meeting the 2050 methane target. See Chapter 7: Where are we currently heading? for more detail. The focus of climate policy for agriculture in the short term should be on supporting the widespread uptake of low emissions technologies and management practices that are commercially available. Significant gains could be made at a national level if all farms were brought up to the standard of the current best performers. Increased and continued investment in research to bring new technologies, such as methane inhibitors and vaccines, to fruition would also be important. However, there remains considerable uncertainty around when and if these technologies would become available to farmers. Even if such technologies are successfully brought to market, incentives or measures would still be needed to ensure that they are widely adopted by farmers as and when they become available. Many farmers have expressed a desire to be able to incorporate all sources and sinks of emissions within their farm systems into emissions calculations, and potentially see them integrated into any future emissions pricing system. This should drive investigation into the scale and feasibility of emissions and removals from trees and vegetation on farms that do not meet the definition of a forest. Further consideration is required about whether to include these in any scheme for pricing agricultural emissions – this issue is discussed in the Forestry and Removals section below.
Support farmers’ adoption of best practices for low emissions pastoral farming Most emissions from the agriculture sector come from livestock farming, and the methane and nitrous oxide emitted are the result of complex biological processes. Methane emissions are largely a function of the amount of feed an animal eats. Nitrous oxide emissions are largely a function of the amount of nitrogen added to the land through urine, dung and fertiliser. Reducing on-farm agricultural emissions therefore relies largely on changes to farm management practices that reduce total feed being produced and consumed, and nitrogen being deposited onto land. Adjusting stocking rate, supplementary feed and nitrogen inputs for emissions efficiency, and use of low-nitrogen feeds, can all help to reduce on-farm emissions. The Commission’s analysis shows that changing on-farm management with current practices will be enough alone to achieve the 2030 biogenic methane target. Challenges While making changes to the way farms are managed can reduce emissions, there are challenges to doing so. The interactions between the different aspects of the farm system are complex, and changing one aspect of a system would have knock-on effects in others. Soil quality, plant cover, climate and stocking rates, as well as what animals are fed and how they are housed, would all impact a farm’s emissions profile. The opportunity for gains will vary widely between individual farms, and between regions. 45 1 February 2021 Draft Supporting Evidence for Consultation
There is also some uncertainty about the impact of many on-farm mitigation options. Actual methane and nitrous oxide emissions on-farm cannot be measured directly so need to be calculated/estimated. This can be done in different ways that involve varying levels of complexity. Using relatively simple stock number and production data can recognise changes in emissions from production rate or stock level changes, but they are too blunt to be able to recognise emission reductions that might result from adjustments in the way farms are managed. Farm models that also consider farm-specific data around animal and diet characteristics can give a more accurate picture of changes to farm emissions, but require the collection of a lot more data, and are more expensive to implement. Estimating emissions at a farm level requires a balance between capturing as much farm-specific information as possible, and availability and cost of that data. No estimate will be able to completely capture and account for the complexities of different farm systems. The complexity of farm systems also means that achieving emission reductions of any scale relies on highly skilled farm management, as well as high quality data to support farmer decision making. Currently, many farmers, farm advisers and other professionals that farmers rely on do not have a good understanding of emission mitigation practices, or of how different approaches would work within different farm systems or contexts. Farmers are often faced with large amounts of advice that can be time-consuming to navigate, and from sources with a variety of interests. Building the knowledge and skills needed to ensure that measures are well understood, and can be well implemented, would be important – access to technology like rural broadband would help support better access to the information, advice and tools farmers need. Regenerative agriculture is an outcomes-focused approach that uses practices to improve soil quality, promote biodiversity, sequester carbon and increase resilience to the impacts of a changing climate. This approach can include practices like no/minimal tilling, use of cover crops, crop rotation and agro-forestry. Regenerative agriculture is relatively undeveloped in Aotearoa, with limited efforts to evaluate its impact on emissions to date. More investigation is required to understand the potential of approaches like regenerative agriculture to reduce emissions. There are changes farmers can make now to how their farms are managed that would help to adjust farm systems to achieve lower emissions but doing so in a way that maintains profitability is challenging. Many farmers hold high levels of debt, which can be a barrier to investing in new technologies, approaches or changes in land use that could reduce emissions. Measures that affect production would affect farmers’ ability to drive a return on capital they have already invested and could potentially lead to stranded assets. For changes to farm management to have a significant impact nationally, there would need to be widespread adoption of these kinds of practices. A combination of support, market incentives and direct regulation are likely to be required to drive the scale of change needed. Incentivising farmers to adopt and implement best practices and technologies for low emissions pastoral farming is a matter of urgency. Measures to incentivise best practices will also be important when (and if) new technologies are developed – such as a methane vaccine. Such technologies would only have an impact on methane emissions if they are widely adopted by farmers. Approaches / policies: 46 1 February 2021 Draft Supporting Evidence for Consultation
Meeting the 2030 methane target and the 2050 targets would require measures to incentivise more farmers to take action to lower methane and nitrous oxide emissions from pastoral farming. The Interim Climate Change Committee made a series of recommendations in their Action on Agriculture report.68 Some, but not all, of these have been implemented. The Interim Climate Change Committee (ICCC) concluded that the best way to reduce livestock emissions is to price them through a farm-level levy/rebate scheme.69 Therefore, ensuring that methane and nitrous oxide from agriculture face an emissions price should form a key part of the Governments’ approach in this sector. The Government should continue to advance implementation of the He Waka Eke Noa programme, which is tasked to develop a farmgate emissions pricing mechanism by 2025. Alternatively, agricultural emissions could be priced from 2025 through the NZ ETS.70 Alongside pricing, farmers also need better information and support to develop the skills needed to manage farms in a way consistent with low emissions. Some of these are already being progressed through the He Waka Eke Noa partnership and should continue to be supported. To support the development of skilled and effective low emissions farming, the Government should: •
Develop accessible, trusted, information hubs on emissions reduction measures for farmers. Such hubs can provide farmers with tools and resources to help them measure and manage emissions, as well as support services to implement changes.
•
Co-develop with farmers training and farm extension services that provide opportunities for farmers to share knowledge and experience. This should include specific training and extension services co-developed with and for iwi/Māori landowners.
•
Provide technical and financial support for the development of training and accreditation schemes to ensure farmers have access to advice from credible, impartial advisers and rural professionals who understand how emissions mitigation practices work in different farm contexts.
•
Accelerate and provide further resource to support the development of farm environment plans that consider greenhouse gas emissions on-farm alongside other environmental outcomes, and traditional business outcomes.
•
Continue to invest in farm system modelling to support good decision-making.
There are some other potential ways to support and incentivise farmers to adopt best practices and technologies which the Government should consider. These include: •
Providing, facilitating or supporting the provision of concessional farm finance for investments that lead to emissions reductions;
•
Investing in demonstration projects to experiment with novel technologies, practices and land uses to reduce emissions (eg, using Pāmu farms for demonstration projects).
68
(Interim Climate Change Committee, 2019b) (Interim Climate Change Committee, 2019b) 70 Agricultural emissions from different sources could also be priced through different mechanisms. For example, livestock emissions could be priced at the farm level through a rebate/levy with fertiliser emissions priced at the processor level in the NZ ETS. 69
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•
Supporting the rapid rollout of rural broadband, to ensure farmers have access to data to support decision making and the ability to practice precision agriculture.
Diversify agricultural production to reduce emissions Pastoral agriculture dominates the Aotearoa landscape, accounting for about 40% of total land area. The area of land in horticulture has increased in some places in recent years, including on iwi/Māori farms, but remains very small in terms of total percentage of Aotearoa land use – horticulture and arable combined account for only around 1% of total land use. Diversifying landscapes and switching some land currently in livestock agriculture to lower emission uses like horticulture or arable cropping could reduce emissions. Most expansion of horticulture or arable is likely to happen on land currently used for dairy. However, horticulture and arable are already very profitable land uses. This indicates that barriers to changing land use are likely to be significant. Challenges These are currently several barriers to shifting land use from pastoral farming to lower emissions activities. One of the main barriers is market access. Aotearoa fruit is mostly exported, and while it tends to achieve a premium price internationally due to its high quality, gaining access to new markets for fresh horticultural produce is a slow process, linked to the negotiation of international agreements.71 Expanding international export of produce would be likely to take considerable time and effort. Lack of experience, skills, support and infrastructure can also act as barriers to land use change. For example, the horticulture sector currently experiences seasonal labour shortages, and this has been exacerbated by COVID-19. Expansion of horticulture and arable farming would require access to high quality soils and water storage, as well as appropriate climatic and land characteristics. There is also currently a lack of high-quality information and data about potential land uses in different parts of the country, now and in the future. A lack of processing facilities, infrastructure and supply chains for lower emissions products can also act as a barrier to diversifying land use away from pastoral agriculture. As with pastoral farming, access to capital can also act as a barrier to landowners who want to diversify. Changing land use to horticulture or arable can require high capital investment. Existing dairy farms (typically the land most suitable for horticulture or arable) often have high levels of debt, and the need to drive a return on existing capital investments is a barrier to land use change that could reduce emissions. Some of the land potentially suitable for horticulture and arable would also be in fragmented pockets which may not be sufficiently large to be standalone horticultural enterprises. Approaches / policies: Currently disjointed policy objectives and siloed governance structures mean environmental issues, and issues associated with different land uses, are dealt with in isolation. To begin to overcome this, a national conversation about the future of land use across Aotearoa would be important. Different
71
(Horticulture New Zealand, 2019)
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land uses have opportunities, risks and implications that have not yet been fully explored and understood in the context of the transition to low emissions. Measures are also needed to support landowners who want to diversify some of their land to lower emissions activities. Government measures should focus on overcoming the barriers that currently prevent the shift to more profitable and lower emissions land uses. This includes: •
Undertaking detailed and targeted analysis to better understand the nature of current barriers to shifting to already profitable lower emissions land uses;
•
Ensuring that farmers have access to high quality, trusted information on changing or diversifying land use to lower emissions activities. This should include access to an evidence base to identify what can be grown where, now and in the future, as well as information regarding cultivation practices and markets. Improving access to rural broadband can support this outcome;
•
Encouraging cross-sectoral thinking and collaboration by government agencies and sector bodies, or the development of pan-sector governance structures for the primary industries;
•
Investing in market development and infrastructure for new and emerging low emissions agricultural products.
•
Verification of the emissions footprint and broader sustainability of products, including through approaches like certification and product labelling, can help to support market access for low emissions food products.
Provide increased and sustained funding to support R&D for technologies to reduce emissions from agriculture Investigating and developing new technologies has been a major focus of the Government’s approach to reducing greenhouse gas emissions from agriculture, and the focus of considerable research effort over recent years. The Government invests about $20 million each year into research focused on reducing greenhouse gas emissions from agriculture, and farmer extension programmes. The country plays an international role in research in this area, particularly to reduce methane emissions, including through the Global Research Alliance on Agricultural Greenhouse Gases. A wide range of industry actors also support a lot of scientific work in this area, including Fonterra, Beef + Lamb, DairyNZ, the Fertiliser Association, Deer Research and others. Investments into agriculture emissions research has already identified practical solutions, and there are a range of new technologies under development with considerable potential. Measures currently being investigated and developed that offer promise include a methane vaccine and a methane inhibitor that would be compatible with the pastoral farming system in Aotearoa. Continued investment in research to bring these (and other) new technologies to fruition is important. If these technologies are successfully developed, they could lead to substantial emissions reductions and give Aotearoa a wider range of potential paths to meeting the 2050 methane target. However, there is considerable uncertainty around when and if new technologies to reduce emissions would become available to farmers. 49 1 February 2021 Draft Supporting Evidence for Consultation
A key challenge for any future technology would be to ensure that it is able to be widely deployed in the pastoral farming system, and that once developed farmers are incentivised to use it. Challenges Future measures to reduce emissions currently being researched and developed hold a lot of potential. However, any technology that is not easily integrated into the pastoral farm system would be unlikely to be adopted on the scale needed to shift the dial on biological emissions. As noted in the multi-sector strategy section above, investments in RD&D are needed to support the development of new technologies (such as a methane vaccine), as well as the testing, adaptation and adoption of technologies that already exist (such as a methane inhibitor that is compatible with the pastoral system in Aotearoa). To date, the collective global effort to mitigate emissions in the agricultural sector has been weak72, and Aotearoa has the potential to be a global leader in this area. If successful, significant emissions reductions could be achieved in Aotearoa, which would give greater flexibility in terms of how the pathway to the 2050 target could be met. Breakthroughs in developing new technologies to reduce emissions from agriculture could also provide Aotearoa with an opportunity to export knowledge and technology that could have an impact on agricultural emissions globally. Given the long timeframes needed for investments in RD&D to produce technologies and innovations that can be adopted on-farm, the need for additional funding to support this research is urgent. Experience has shown it can take a long time to get products through the regulatory process (e.g. putting products on the Agricultural Compounds and Veterinary Medicines (ACVM) register) so that it can be used on farms. It is also not clear whether existing natural products, such as seaweed, need to be included on the ACVM register if they are advertised as reducing emissions. Approaches / policies: Reducing emission from agriculture is an issue of great importance to Aotearoa – much more so than for many other countries that have a much smaller share of their emissions from agriculture. This means that there is a strong reason for Aotearoa to invest in RD&D and innovation. Promising solutions are under development, but their success relies on continued investment by both the Government and the private sector. As highlighted by the ICCC, the Government needs to carefully balance research priorities, between current market potential and opening up new opportunities.73 As part of its approach to continued investment, the Government should:
72 73
•
Provide ongoing and increased support for RD&D and innovation to reduce emissions from agriculture, with particular focus on the development of a methane inhibitor suitable for use in the pastoral system, or of a methane vaccine.
•
Identify and address regulatory and market barriers to the early adoption of new methane reduction technologies, so they can be widely adopted when commercially available. This
(OECD, 2019a) (Interim Climate Change Committee, 2019b)
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should include streamlining the regulatory process for novel products to reduce emissions and making this process clear for companies to bring products to market.
17.3.5 Forestry and removals Because trees remove carbon dioxide from the atmosphere as they grow, they offer the opportunity to ‘offset’ or compensate for some of the emissions from other sources and help to reduce net emissions. However, relying too heavily on emissions removals by forestry could divert action away from reducing gross emissions in other sectors. It could also pose risks because forests are not a guaranteed permanent removal of carbon from the atmosphere – the carbon stored in forests could be re-released back into the atmosphere if forests are destroyed or damaged. There are options to design policies to manage these risks, for example the NZ ETS includes mechanisms to safeguard permanence and there are also other options such as establishing a buffer of removals as a sort of insurance against the destruction of forests. However, the greater the reliance on forestry, the more challenging it becomes to mitigate these risks. To help ensure emissions reductions occur in other sectors, the Commission has provided clear advice on the proportion of emissions reductions and removals that should comprise achieving the emissions budgets. The Commission sees forestry playing a role in helping Aotearoa to meet its emissions reduction targets that is nuanced in terms of scale and type. The role the Commission sees for forestry is informed by a consideration of the environmental, social, and economic impacts that forestry can have. Policies should be put in place to ensure that the pathway to meeting the 2050 target strikes the recommended balance between emissions reductions and removals, leveraging the varied contributions of different kinds of forests.
Increase amount of permanent native forest that provides a long-term carbon sink The rate at which native forest sequesters carbon is slower than for exotic planted forest, but a hectare of permanent native forest will continue to sequester carbon for hundreds of years. These forests would also offer other benefits, such as improving biodiversity and recreational benefits. If high rates of native afforestation can be sustained to 2050, there is potential to build an enduring carbon sink. Challenges We see a significant role for permanent native forest in providing an enduring carbon-sink to help Aotearoa to meet its 2050 target. The Commission’s pathway requires at least 16,000 ha of new native forests per year by 2025, and 25,000 ha per year by 2030 until at least 2050. Policy will be needed to support this. There is an estimated 1.15 to 1.4 million ha of erosion prone land, much of which would not be suitable for production forestry but could be suitable for converting to permanent forest. However, there is currently a lack of incentive for landowners to let less-productive farmland revert to permanent native forests. This is particularly the case for small or fragmented areas of trees that are of a scale not eligible for inclusion in the NZ ETS, but which still offer carbon benefits (as well as biodiversity and erosion control benefits).
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Look-up tables are used, for NZ ETS purposes, to calculate average forest carbon stocks in forests of less than 100 ha for a given year. For native forest, a default table applies to all native species across all regions for up to 50 years. While the amount of carbon sequestered by different types of native forest in different regions is likely to vary considerably, this is not reflected as current lookup tables are based on regenerating indigenous shrublands (mainly mānuka and kānuka).74 Nor do they reflect that many native species have long growth cycles. Establishing new permanent forests also comes at a cost for landowners – building and maintaining fences is expensive, and some land would be lost to grazing. Planting seedlings would be required in some places where there is not a natural seed source, which would be an additional cost. Some Māori-collectives that own large tracts of land may face challenges transitioning land use. The Crown needs to work in partnership with Māori-collectives to understand their aspirations for land use – forestry in particular. There are likely to be some specific barriers preventing Māori-collectives from afforesting their land in line with their aspirations – including, for example constraints and challenges associated with the management of collectively-owned iwi/Māori land under Te Ture Whenua Māori Act 1993, or considerations in line with kaitiaki and tikanga values. Large existing areas of permanent native forest already store and sequester a large amount of carbon in Aotearoa. Most does not count towards the targets, because it is forest that existed pre1990. Controlling pests that damage foliage, seedlings and affect tree health would help maintain carbon stocks, and may help to increase carbon stocks on this land. However, there is no incentive for landowners to undertake pest management or other measures to increase carbon stocks. Currently, it is difficult to detect the effects that management practices have on carbon stocks and so they are not reflected in national estimates of carbon sequestration by these forests. Many farms contain small areas of trees and other vegetation on-farm, including riparian plantings, shelter belts, and small pockets of native bush or exotic plantings. The carbon sequestered in these trees does not currently contribute to emissions budgets or targets, because they do not meet the rules around what can be counted as a carbon sink towards the emissions reduction targets. Chapter 3: How to measure progress discusses these accounting rules in more detail. Many farmers and other stakeholders have expressed a desire to be able to count all the carbon sequestered in trees and other vegetation on-farm. Some have expressed a sense of unfairness that all on-farm emissions sources should incur an obligation, while not all sinks are rewarded. However, there is currently a lack of robust data about the amount of carbon sequestered in small areas of trees or vegetation, and the costs of measuring and monitoring carbon sequestration could be considerable. Policies / approaches: There are a number of potential approaches to encourage the establishment and ongoing management of permanent native forests on marginal and erosion prone land. This includes:
74
•
Develop carbon monitoring systems that enable tracking of sequestration from different types of vegetation, smaller blocks or dispersed areas of trees, and develop mechanisms to reward this either inside or outside of the NZ ETS;
•
Establish and provide ongoing funding for pest control activities to ensure the carbon stocks in permanent forests are preserved;
(Ministry for Primary Industries, 2017)
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•
Provide financial incentives or subsidies to help reduce the costs of establishing and maintaining native plantings. This could include, for example: o
Extending grant schemes such as One Billion Trees, or providing targeted grants for native planting, fencing and predator control to facilitate reversion;
o
Results based finance for native afforestation (e.g. nature forest bond scheme);
o
Develop ways to recognise wider ecosystem services, which could reward the other environmental benefits of native forests (e.g. biodiversity).
•
Update the NZ ETS lookup tables for a wider range of native species;
•
Ensure the Crown works in partnership with iwi and other relevant Māori-collectives to understand their aspirations for land use, and understand specific barriers to afforestation that iwi/Māori landowners face.
•
Develop management plans for large permanent forests to protect and enhance carbon stocks and other benefits of these forests, and reduce the risks they are exposed to such as pests, disease and climate change impacts. The plan should also consider the community impacts of these forests.
Define a clear role for production forests in the transition to low emissions Most commercial forests in Aotearoa are radiata pine, which can sequester a lot of carbon quickly. Other exotic and to a lesser extent, native species, are established for production, sometimes using alternative forest management systems. This allows them to help us reduce net emissions in the short term and offer flexibility for meeting budgets and targets in the future. However, once an area of production forest land has been afforested and the trees have reached their long-term average carbon stock, no further removals contribute to meeting the targets. Maintaining established forests is important but is primarily about preventing loss of carbon stocks already accumulated. Production forests are helpful for providing removals over the short to medium term to reduce the climate impact of Aotearoa over the time needed to reduce gross emissions, but they are not a long-term solution. Challenges Relying too heavily on emissions removals by exotic forestry could divert action away from reducing gross emissions in other sectors. Heavy reliance on removals from exotic forestry to meet the 2050 target is also likely to make maintaining net zero emissions after that date challenging, and dependent on significant further conversion of land to forestry into the future. Current NZ ETS settings may incentivise more large-scale pine plantations than is desired to meet 2050 targets. Large-scale change from livestock farming to plantation forestry would also represent an economic transformation that would inevitably affect some communities in terms of the local workforce and culture. Some rural communities are concerned that afforestation could occur on sheep and beef land, with associated employment impacts and flow-on effects. The impacts of any afforestation would depend on the scale, the species of trees that are grown, the type of land that is afforested, and how much other sectors are able to reduce gross emissions. If adverse impacts of afforestation on rural communities are judged to be likely or come to pass, they would need to be managed. Approaches / policies: 53 1 February 2021 Draft Supporting Evidence for Consultation
A key priority for government policy must be to align emissions removals by forests with emissions budgets. This may need to be achieved through a combination of ETS changes and other policies. There are several potential ways to alter the incentive for afforestation from the ETS, examples include: •
Introduce a limit on the amount of forestry units that non-forestry NZ ETS participants can surrender.
•
Alter the amount or rate at which forestry units are allocated -for plantation forestry in the NZ ETS so that they earn less overall.
These options would need to be carefully explored and analysed, including with those who may be affected by the changes, to understand the implications and avoid unintended consequences. This is because different options would have different effects in terms of the relative price of forestry NZUs compared to other NZUs, and on the prevailing NZ ETS market price. Limits on either the earning or the use of forestry units in the NZ ETS would reduce the returns to forest owners but would do so by different mechanisms. Introducing a quantity limit in the NZ ETS would reduce the value of forestry units relative to other NZUs, while the second example above would not affect the price of forestry NZUs in that way, but the forest owner would earn less of them and so overall would still get a lower return. While amending the NZ ETS could provide a lever to limit the overall amount of afforestation that is incentivised, it would not be able to limit the amount of afforestation that occurs in specific places. Some stakeholders in the agriculture sector have expressed concern about whole farm conversions to forests or the scale of afforestation in certain regions having adverse impacts on rural communities. Addressing these concerns would likely require other approaches, such as rules about land use implemented under planning legislation. Non-ETS policies the Government could consider to support diverse and resilient production forests include: •
Use resource management instruments or reforms to manage land use conversion to forestry – for example, restrict extensive land use change in some regions, and remove existing limits in others to allow forestry. This option would help to control the amount of forestry that happens in a particular location, and could be used to address concerns about the impacts of whole farm conversion to forestry or impacts on rural communities in some regions.
•
Capacity building and extension services for landowners focused on integrating trees or forestry onto farms as diversification rather than wholescale farm change, to limit the impacts of afforestation on rural communities.
•
Investigate approaches for promoting a native forest industry.
•
Introduce measures to increase domestic timber demand, for example by changing building policies to stimulate the wood processing industry and increase the value chain employment of forestry.
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the carbon they store could be re-released back into the atmosphere if forests are destroyed or damaged. Furthermore, production forests offer only short to medium term removals. To improve resilience and provide on-going options for removals, diversifying options for long term emissions removals beyond forests may be beneficial. Higher cost alternative options for emissions removals already exist. These have been discussed in Chapter 5: Removing carbon from our atmosphere and includes Carbon Capture and Storage (CCS) and bioenergy combined with CCS (BECCS). Such approaches could play a role in the latter half of the century to help Aotearoa meet its contribution to global efforts to limit warming to 1.5°C above preindustrial levels. Challenges There are a range of existing regulatory mechanisms and carbon accounting rules which do not currently incentivise the development of CCS, and do not fully account for the environmental, health and safety, access to land, and mineral and property rights associated with the process. For example, the Resource Management Act does not address long-term liability for CCS operations after closure and does not facilitate the ongoing regulatory supervision of CCS projects over a very long timeframe. Additionally, the likelihood of a person developing CCS without a surrender obligation under the NZ ETS is low. CCS and CCS-based technologies like BECCS are largely a developing or emerging technology with highly variable, site-specific costs and long development timelines. In Aotearoa, CCS has not progressed beyond the research and concept stage. Approaches / policies: There are three priority actions the Government could advance that would maintain optionality in this area: •
Uphold its obligations under the Te Tiriti o Waitangi and initiate a broad process to understand iwi/Māori perspectives on CCS and BECCS.
•
Take action to develop a better understanding on the geophysical potential and suitability of CCS and BECCS approaches in Aotearoa. This could include: o
Staying informed of global developments in CCS technologies and applications, and broadly assessing their relevance and applicability to Aotearoa;
o
Investigating the potential and suitability of depleted or producing oil and gas fields in the Taranaki region for carbon storage; and
o
Researching the nature of skills, capabilities and workforce required to support the development and implementation of CCS and BECCS approaches, such as those in forestry, oil and gas, and geothermal energy.
17.3.6 Waste There are many emissions reduction opportunities in waste, most of which would generate cobenefits, synergies and spill overs for the economy, society and environment. Biological methane from waste does not make up a large proportion of total greenhouse gas emissions. Yet, compared
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to other sectors, reducing emissions from waste is less reliant on technology and can generally use proven reduction options that have been tried and tested overseas.75 While waste emissions may look like a small fraction of total greenhouse gas emissions,76 there are embodied emissions associated with the production and transportation of things that ultimately end up in landfill. This is a major area with potential to reduce overall emissions footprint and impact on the climate in Aotearoa. The preferred opportunity to reduce emissions from waste is by reducing the amount of waste generated in the first place. Other opportunities include recovering waste before it goes to landfill, and ensuring modern, efficient disposal sites. The Commission’s modelling indicates that there are a range of possible paths to achieving the 2050 methane target. While waste is only around 10% of overall biogenic methane emissions,77 it can play a substantial role in achieving this target as the ability to reduce emissions from waste is not reliant on the development of technology.
Reduce waste at source Preventing waste from being created is a crucial step in avoiding emissions from waste. Most waste in Aotearoa is generated by commercial and industrial activity, with a smaller proportion from households. Improving industrial processes and removing barriers to help change behaviour can help to minimise the amount of waste generated. Challenges With a large proportion of goods being imported Aotearoa has limited direct control over how much waste goods produce. There is also a lack of knowledge among businesses and households about how to reduce waste and a lack of market incentives for doing so. To enable consumer behaviour to shift, removing barriers that prevent consumers from pursuing choices and approaches that lower emissions would be important – for example, by addressing gaps in knowledge by providing information and support. For example, The Love Food Hate Waste Campaign that was run in London successfully reduced avoidable food waste by 14%, with every £1 spent on the campaign generating up to £8 in savings.78 This provides a good example of how consumers can be supported to shift behaviour, and in doing so can both reduce emissions and save money. Approaches / Policies: To achieve reduce waste generation at source, interventions need to be aimed at industry and businesses, as well as individual consumers. Possible approaches include: •
Develop information and support materials for producers and consumers on how to reduce waste at source, for example through targeted campaigns around the impact of waste.
•
Encourage innovation in technology and processes through investment in designing out waste and resource efficiency.
75
(New Zealand Productivity Commission, 2018) (Ministry for the Environment, 2020) 77 (Ministry for the Environment, 2020) 78 (Waste & Resources Action Programme, 2013) 76
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•
Remove structural barriers that prevent waste reduction at source for example by mandating the repairability of goods and machinery.
Increase resource recovery from waste Waste that cannot be avoided in the first place can be recovered instead of going to landfills in order to reduce the emissions they would otherwise create. Recovering organic waste from landfills can prevent emissions from being released as organic materials decay. Recycling and re-use can prevent other forms of waste from going landfill and can help to reduce emissions in other sectors. Many forms of waste can be converted to energy. Challenges There is currently a lack of collection and processing infrastructure which means that opportunities to divert and recover waste are inconsistent and limited.79 There is also uncertainty about the ability to access appropriate feedstock for producing recycled or reused products, uncertainty about markets for recovered or recycled products, and a lack of skills and knowledge about how to go about waste recovery – which adds to the challenge. The current lack of market incentives to invest in resource recovery from waste mean that it is often cheaper to dispose of waste in landfills, and to use virgin materials rather than recycled materials to make new products. For example, in rural areas of Aotearoa where there is a lack of collection infrastructure, many farmers are burdened with having to manage their own waste. Farmers often dispose of waste with a combination of burning or burying, both of which generate emissions. Setting up a nationwide network of collection points (similar to those set up by AgRecovery) can reduce emissions from farm waste, and find use for organic wastes. For example, wood waste can be upcycled into furniture, or used as a compost ingredient or as a fuel. Approach / policies: There are a range of measures that could be introduced to increase resource recovery from waste. These could include, for example:
79
•
Develop a coordinated national strategy and timeline for increasing resource recovery with the aim of increasing the waste recovery rate in Aotearoa.
•
Increase investment in the resource recovery sector – including infrastructure, knowledge base, technology to ensure Aotearoa has a fully modern resource recovery sector from collection to sorting to processing to recovery.
•
Shift the burden of resource recovery away from communities and nature to manufacturers, importers and retailers through increasing the use of regulated product stewardship schemes.
•
Ensure that pricing of waste encourages resource recovery, for example by increasing the waste levy and ensuring it applies at all landfill sites, and by ensuring the NZ ETS applies to all disposal sites.
•
Encourage the use of recovered material to create demand for products, for example by using financial incentives or regulation to support the use of waste compost on farms.
(WasteMINZ, 2020)
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•
Ensure consistent access to appropriate feedstock to enable resource recovery sector. This could be done, for example, by mandating recovery targets from landfill and introducing measures to encourage source separation to reduce contamination.
Box 17.4: Case study example: Living Earth Facility in Christchurch The Living Earth Facility in Christchurch, owned by Waste Management recovers 50,000 tonnes out of 65,000 mixed green and food waste from landfill annually. They turn this waste to compost and supply several nearby farms, with the compost having the beneficial impact of adding to the nutrient loads of the soil, without generating any harmful nitrogen run-off as would be the case if the farms were using synthetic nitrogen fertiliser. This is possible because of several factors that are unique in Christchurch: •
The Christchurch City Council has a separate waste collection for food and garden waste
•
Living Earth is owned by Waste Management, which means that they have access to a large pool of capital and funding from a larger organisation
•
The “Gate fees” of landfill in Christchurch has landfill costs equivalent to the cost of living earth, so it’s price competitive for Living Earth to compete with landfill options.
Ensure modern, low emissions landfills For waste that cannot be avoided or recovered, it is important that it be disposed of in modern landfills that minimise emissions. Modern, low emission landfills capture a portion of emissions generated from organic waste as it decays and can reuse it to generate energy. Challenges While many municipal landfills in Aotearoa are modern sites which have high rates of gas capture, there are some operational municipal sites which are not required to capture gas as the waste volumes are too low. In addition, there are also non-municipal landfills and farm fills which receive organic waste but do not capture any landfill gas. Lastly, closed legacy landfills that have no gas capture systems will continue to have emissions from the accumulated waste. This problem can be addressed by either diverting waste from non-municipal landfills and farm fills to sites with gas capture, or by installing gas capture systems at legacy and non-municipal landfills. Gas capture systems can be fitted to these sites, though is can be difficult and expensive to do so – meaning that they are unlikely to happen in the absence of market incentives or regulation. Gas capture systems at farm fill sites is also impractical due to the lower volumes of waste and large number of farm fills scattered across the country. Policies / approaches: Measures to support more landfills becoming low emissions could include, for example: •
Introduce regulation to prohibit organic waste from being sent to landfills that do not have gas capture systems or incentivise gas capture at landfills without gas capture systems
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•
Introducing measures to encourage best practise LFG management, including across a wider range of disposal sites (e.g. closed landfills, non-municipal landfills). This could include regulation that mandates non-municipal and legacy sites to capture LFG gas.
•
Require comprehensive audits of LFG capture systems to ensure they are up to standard.
Manage transition from hydrofluorocarbons Refrigerants are essential chemicals that support modern society by, for example, enabling the transport and storage of perishable food and cooling interior spaces. They could be relied on as space heating and cooling, and process heat transitions to the use of electricity as a fuel. Hydrofluorocarbons (HFCs) are the most common type of refrigerant used in Aotearoa. They are potent synthetic greenhouse gases with a global warming potential up to 14,800.80 In 2018, emissions from the leakage of refrigerants from refrigeration and air conditioning equipment was 1.7 Mt CO2e. As a signatory to the Kigali Amendment to the Montreal Protocol,81 Aotearoa aims to considerably reduce the use of HFCs through a controlled phasedown. In 2020, the Government declared refrigerants as one of six priority products under the Waste Minimisation Act. This will establish a mandatory product stewardship scheme aimed at increasing end of life recovery and destruction. Increased recovery, proper disposal, and alternative refrigerants are significant emissions reduction opportunities. The phasedown of HFCs in the Commission’s pathway sees total emissions from HFC use reduced by 18% by 2030 and 33% by 2035. The Commission also modelled a more stringent phasedown with early retirement of existing equipment, increased use of low global warming potential (low GWP) refrigerants, and improved industry practice that could see emissions reduced by 45% by 2035. Challenges There is a considerable bank of HFCs currently within equipment in Aotearoa.82 As such, there would be a lag between action taken to comply with the phasedown and achieving emissions reductions. In addition, there is no limit on the import of HFCs in finished products, or on recycled bulk refrigerants,83 which may result in the continued import and reuse of HFCs. This extends the duration of these types of refrigerants in the economy. Allowing the import of bulk recycled HFCs ensures sufficient amounts of refrigerant to service the existing equipment in Aotearoa without stranding assets. This limits the financial impact on end users but prolongs emissions from HFC use and results in a relatively ineffective phasedown of HFCs. In addition, the existing fleet of equipment is not compatible with most low GWP refrigerant alternatives. The cost of replacing equipment to ensure compatibility, and risk aversion to new, flammable compounds, act as barriers to a timely transition away from HFCs.
80
The global warming potential of HFCs range from 53 to 14,800 depending on the chemical make-up of the substance. 81 The Kigali Amendment puts in place a worldwide phase down on the production and consumption of HFCs. It limits the bulk net import of HFCs but does not restrict import of equipment pre-charged with HFC refrigerants. The Amendment requires Aotearoa to reduce emissions from HFCs by 85% by 2036. 82 Approximately 7,000 tonnes 83 Refrigerants can be recovered from equipment in large quantities. This unprocessed HFC gas can be imported, recycled and re-used under the Kigali Amendment.
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Over time, HFC scarcity and a rising carbon price would increase the cost of HFCs for end users. Although this would incentivise leak minimisation and improved handling practices, it is not expected to result in significant conversion to low GWP refrigerant compatible equipment as refrigerant cost would likely remain less than 10% of the total cost of new equipment. Approaches / Policies: Measures to reduce emissions from refrigerants and to support a managed transition away from HFCs include: •
Considering extending import restrictions to finished products and recycled bulk refrigerants.
•
Timely development, deployment and scale up of the mandatory product stewardship scheme under the Waste Minimisation Act to improve end-of-life recovery and destruction of HFCs.
•
Support workforce and end user education and safe practises. This includes technician training and licensing around monitoring, minimising equipment leakage, and improving disposal practices.
•
Measures to reduce the upfront capital cost of switching to low GWP compatible equipment.
17.4 Policies to manage impacts The transition to low emissions will bring a mix of opportunities, benefits, challenges and costs. The way Aotearoa transitions and the policies that we put in place will have diverse impacts – both positive and negative – on different groups of society, regions, sectors of the economy, and generations. These issues are discussed in considerable detail in the impacts chapter of this report. Actions and approaches to reduce emissions should ensure that the benefits of climate action are shared across society, and that certain individuals and sectors do not unfairly bear the cost-burden of the climate transition. This includes, for example, designing incentives that help to support lowerincome groups affected by costs stemming from climate mitigation policies, and to support affected regions. These elements are highlighted by the Stockholm Environment Institute, together with the need to support workers affected by downscaling, and the need to avoid ongoing investments in emissions intensive industries that would create carbon lock-in and undermine the transition.84 The wellbeing of iwi/Māori throughout the transition to low emissions is a central part of this. He Ara Waiora presents a mātauranga Māori approach to wellbeing and framework against which to assess impacts of climate policy for iwi/Māori.85 It also provides a frame for ensuring that climate policies and approaches consider broader wellbeing of people and the environment, for current and future generations. When developing and implementing the emissions reduction plan, the Government should consider how those measures impact the four dimensions of wellbeing identified in the framework (Mana Tuku Iho, Mana Tauutuutu, Mana Āheinga and Mana Whanake).
84
(Atteridge & Strambo, 2020) He Ara Waiora was initiated by the Tax Working Group, co-designed with Māori thought leaders and iwi representatives and is currently under the stewardship of the Treasury. (McMeeking et al., 2019) 85
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An equitable transition also supports the principles of tiakitanga and intergenerational equity. Managing challenges and impacts for an equitable climate transition requires considering not only the impacts on society today, but also the impacts on our mokopuna, and subsequent generations. The need to care for and be active stewards and custodians of our whenua and taonga for future generations must be central to our approach. This requires an inclusive approach to planning the transition. Managing the impacts of the transition must be a central consideration as the emissions reduction plan is developed. A wide range of approaches and measures will be needed over different timeframes to address diverse challenges. Some important action that needs to happen as a matter of urgency includes providing education and training to support a low emissions workforce, the provision of targeted support to vulnerable communities most affected by the transition, and the initiation of an inclusive, transparent transition planning process.
Localised transition planning that is inclusive and transparent Some regions and communities of Aotearoa will be more affected by the climate transition than others. In particular, some communities may see the closure of large businesses that provide significant employment for the community. In some places, entire communities, ways of life and local identities have been built around large businesses that may face closure. Such closures can therefore have a big impact beyond the people employed directly. If unemployment rises and consumer spending falls, there would be a flow-on effect to other businesses and workers within the wider community. Climate mitigation policies that are perceived to unfairly affect certain individuals, communities or businesses are at risk of losing their public acceptability. Maintaining the principle of equity and putting people at the centre of our climate policy will therefore help to ensure the equality of support across communities, industries and business. This is important to make sure that the policy response is enduring, and that emissions reductions can be sustained. Challenges The Grantham Institute and others emphasise that a “just transition” to a low emissions economy is a multidimensional challenge and note that the transition must address both social and spatial elements, ensuring that economic development through the transition is regionally inclusive.86 Significant job losses at a local level can potentially lead to entire communities being left vulnerable and dislocated. Some affected workers may have the mobility and means to acquire new jobs in other industries and regions, while many others will not. Affected communities may therefore end up ‘stranded’, with significant numbers of workers with skills and expertise that are no longer in demand.87 In such situations, transition planning that is tailored to the specific community or region would be needed. This would require central government to work closely with local businesses, workers, iwi/Māori, community and local interest groups, and local government to develop a long-term vision and strategy for the affected region. This includes exploring the infrastructure and skills available in the region, and potential new industries that could make become anchored in the region. 86 87
(Robins et al., 2018) (OECD, 2017b)
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The OECD emphasises that localised transition planning will help to ensure climate change policies are tailored to regional and local circumstances, and address the needs and aspirations of different groups within the community. 88 Transparent and inclusive processes, and active social dialogue regarding the transition, would be key to achieving a transition that is accepted and enduring.89 The goal of this approach is to ensure the transition is place-and-people led. Localised transition planning is also important for achieving successful and enduring transition outcomes and aligning government and business investment priorities.90 In some situations, businesses are likely to invest only if they know that complementary investments, such as to infrastructure, are being made.91 It will be important that there is alignment to ensure government initiatives are not working at cross-purposes to the outcomes being sought by the community or businesses. International examples and research suggest that important elements of initiatives to support an equitable transition include ensuring affected workers, businesses and communities are active and empowered participants in transition planning. The provision of targeted financial and capacity building support is also important. Approaches / policies: The Government needs to ensure that transition planning is co-developed through a bottom-up approach that involves local communities, iwi/Māori, businesses, civil society groups and other stakeholders. In developing an approach, the Government should research examples of transition planning that have taken place internationally and investigate their applicability to circumstances in Aotearoa. It will be important that, regardless of the specific approach Aotearoa takes to inclusive transition planning, that equitable access to opportunities for iwi/Māori and Pacific Communities is a central consideration. The Government should also investigate the potential for developing redeployment programmes, to support workers most affected by the transition.
Box 17.5: Some international examples of approaches to achieving a “just transition” In Spain, “just transition agreements” have been required since 2018 between the Government, unions, and businesses in all regions that are affected by ‘climate transitions’. Local civil society groups and the general public can also participate in the development of the agreements, which are designed to support strategies to mitigate the negative impacts of the transition, and to finance green projects. The first such agreement was reached in October 2018 for regions impacted by coal mine closures.92 In Germany, the successful shift away from a coal and steel-based economy in the West German Ruhr region is often cited as a model. Market forces led to a dramatic decline in the number of 88
(OECD, 2017b) (OECD, 2019b) 90 (New Zealand Productivity Commission, 2018) 91 (New Zealand Productivity Commission, 2018) 92 (Bouyé et al., 2019; Gobierno de España, 2020) 89
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mining industry and steel workers in the region in the second half of the twentieth century. In the early 1990s, after efforts to shore up the sector failed, the Government introduced an industry policy focused on active diversification. New and innovative industries have since developed in the region, and many coal workers found new employment opportunities. This was achieved in part thanks to wage subsidies, labour market support and the development of new infrastructure paid for with European funds. Early retirement support and worker retraining programmes were also central to the success, as was a “a clear vision of the future, supported by a comprehensive policy framework”.93
Provide targeted support to vulnerable communities Some communities will need targeted support through the transition, including to take advantage of opportunities to reduce emissions and associated costs. For example, low-income households may need financial assistance to install insulation or adopt low emissions technologies. Some workers could face job losses and may need support to find new work or retrain. Without targeted assistance vulnerable groups and communities – including low income households, iwi/Māori and Pasifika, people with disabilities, and women – would likely be disadvantaged and unfairly lose from the climate transition. The nature and combination of assistance should be specific to the community affected and focus on the communities whose livelihoods are most impacted. This includes households with the least ability to absorb costs, or workers who are least able to find new employment. A crucial component of the transition is equity and ensuring that existing social or economic inequalities are not exacerbated. Different time frames need to be considered as policies are designed to address the impacts the transition to a low emissions society. Support will be needed to help affected communities and individuals deal with immediate impacts in the near term, but it will also be important to help people their capability to adjust in the medium and longer terms. Challenges Low-income households spend a greater proportion of their income on emissions-intensive goods, like transport or energy. They also have limited means for reducing emissions by investing alternatives such as electric vehicles or home insultation, which can have high up-front costs. This is particularly relevant for iwi/Māori and Pacific Peoples households, who are overrepresented in lowincome groups. Targeting financial assistance to low-income households, either through social assistance or via tax credits, can help to alleviate some of the burden of higher prices.94 Policies that directly support low emissions alternatives, for example investments in home insulation, would also be beneficial. Communities that are reliant on emissions-intensive or single industries will also be vulnerable. Workers in these communities may face limited or reduced employment opportunities from the transition. Support can be provided directly to those affected via targeted financial assistance and active labour market policies.
93 94
(Gambhir et al., 2018) (New Zealand Productivity Commission, 2018)
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Approach / policies: There are a range of measures that can help to support vulnerable communities through the transition, including financial assistance through the welfare or tax system, support towards the costs of changes to reduce emissions (such as home insulation or public transport), or supporting workers through active labour market policies. Any financial assistance should be carefully targeted, and could either address direct financial losses, or a broader range of losses. In their Low Emissions Economy report the Productivity Commission recommended a combination of adjustments to existing benefits and tax credits as the lowest-cost option for assisting affected households.95 Benefits and superannuation are automatically adjusted to reflect changes in the cost of living, although some welfare payments, such as the Working for Families benefit, are not.96 However, income support may not be enough on its own to help some lower-income households, who will not be able to make the necessary one-off investments in low emissions alternatives – such as insulation or more efficient heating. These options often have a high upfront cost which can make them unaffordable, particularly for renting households where the landlord has little incentive to make the necessary investments. Policies specifically designed to improve energy efficiency and home insulation would help households save in energy costs and benefit from improved health outcomes from warmer and drier homes. See Chapter 13: Households and communities for more information. Similarly, given the higher upfront costs of electric vehicles compared with conventional ICE vehicles, low-income households may find it difficult to access low emissions transport options. See the transport section above for more information on measures to increase EV uptake. There are also a range of things we can do to support workers. This includes income-smoothing measures for displaced workers, or assistance to find new employment opportunities. The precise mix of support should be developed by local communities and affected groups, alongside government departments. The Government could also look into providing job-seeking services, mental health support and financial planning.
Education and training support a thriving, low emissions workforce Some high-emitting industries will be deeply affected by the transition to low emissions, and some workers will become displaced. Other industries will grow and thrive in a low emissions economy. Some completely new industries and businesses are likely to develop. As Aotearoa transitions to low emissions, new skills, knowledge and capability will be needed in the workforce. Ensuring that the workforce’s skills match what is required in the labour market is key to ensuring that businesses can innovate, adopt new technologies or commercialise new ideas.97 Thriving businesses will create flow-on benefits for workers and communities. Changes to current approaches to education and training will be needed to prepare the current and future workforce for rapid change. 95
(New Zealand Productivity Commission, 2018, p. 296) (New Zealand Productivity Commission, 2018) 97 (New Zealand Productivity Commission, 2016, 2019) 96
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Challenges The nature of the skills needed in the Aotearoa workforce will change with the transition to low emissions, along with other pressures such as technological change and automation. There are likely to be skills shortages in some areas likely to be important to support development and uptake of low emission technologies and practices – for example in science, technology, engineering and mathematics skills. However, there is currently a lack of alignment between firm needs and tertiary institutions offering training, which could make the skills’ gap worse over time. The current education and training system is largely aimed at young people moving in to the job market, with limited services aimed at ongoing training and supporting adults in need of retraining.98 This will create challenges, as the changes that will happen over the course of the transition to low emissions mean that individuals are likely to need to acquire new skills over their lifetimes. In the past, level of education has been the largest defining factor affecting rates of job displacement in Aotearoa. Compared to workers with a bachelor’s degree or higher, twice as many workers with lower secondary education or Level 1-3 certificates were displaced between 2009 and 2016, and almost three times as many people with no qualification.99 Our modelling suggests that, compared to what would occur under current policy settings, the low emissions transition will particularly affect individuals with higher levels of education, particularly those who work in the oil and gas sector. Investing in education and retraining would be important for supporting workers through the transition, and to help prepare displaced workers for the new job opportunities that emerge with it. Vocational education and training systems will need to be able to adapt quickly to changing skill demands.100 Approach / policies: Policy intervention should focus on the skill needs of those who have the most difficulty gaining new employment. For example, research shows that workers with few or no qualifications are most at risk of being displaced and are more likely to remain unemployed for extended periods of time. Older workers over the age of 50 are also particularly vulnerable to displacement, and the likelihood of finding a new job after being displaced decreases with age.101 Other measures include: •
Approaches to make the education system more flexible, and able to support the needs of mid-career professionals who face the need to re-skill or re-train;
•
Address barriers that restrict all New Zealanders from participating in education and training – including iwi/Māori, Pacific Peoples and low-income groups;
•
Education and training by Māori, for Māori also important. This should include supporting iwi/Māori to retrain for skilled jobs that will needed as Aotearoa transitions to a low emissions economy, and could include investments in schools, kura, and wānanga to ensure
98
(OECD, 2017a) (OECD, 2017a) 100 (OECD et al., 2015, p. 107) 101 (OECD, 2017a) 99
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they have the necessary resources and technology to prepare rangatahi for jobs of the future.
17.5 Critical actions As shown in our modelling, there is a clear gap between projected emissions based on current policy settings, and what would be needed to meet the 2030 and 2050 emissions reduction targets. The Commission investigated different ways of meeting the 2050 target through four scenarios which test different potential futures for how technology and behaviour could change over the next 30 years. Using these scenarios, the Commission has recommended a set of budgets to 2035 which are consistent with putting Aotearoa on track to meeting the 2050 target under a wide range of future circumstances. Based on the Commission’s analysis these budgets have been assessed to be feasible, the Commission considers that the actions to put Aotearoa on this path can be delivered, and that the Government can implement pricing and other policies to ensure this. To meet the pathway, policies would need to drive an appropriate balance between emissions reductions in long-lived gases, emissions reductions in biogenic methane, and removals from forestry. Achieving the actions under the pathway also depends on a balance between early efforts to reduce emissions now, and action that is necessary to unlock future emissions reductions and to ensure that reductions are enduring over time. Our modelling shows that changing behaviour can play an important role in helping achieve earlier emissions reductions, reducing costs and delivering wider benefits, but is insufficient on its own to deliver deep decarbonisation. The considerable inertia in the system, due largely to the dynamics of stock turnover, limits the rate at which emissions can be reduced without escalating costs. For example, only a small fraction of the vehicle fleet turns over each year, meaning that even if all new vehicle purchases were electric from now on the reduction in emissions would take time to accrue. The long lifetime of infrastructure and buildings, which are generally retrofitted or replaced only after many decades, offers another example. To overcome this inertia and drive the necessary change, the emission reduction plan needs to include actions to build markets, capability and skills needed to roll out and implement actions when they are required. To meet the pathway, we encourage early action in a number of areas. The key areas for urgent most action are described in the following sections. The Commission has identified seven key areas that are highest priority for action. These are areas that must be addressed as a matter of urgency in the Emissions Reduction Plan, or Aotearoa will be at risk of not meeting the emissions budgets and targets: I.
Drive low emissions choices through the ETS. To allow the NZ ETS to contribute effectively to drive low emissions choices consistent with our targets, NZ ETS unit volume and price control settings need to be aligned with the desired path for meeting emissions budgets. Key issues include increasing NZ ETS price control settings and considering how best to set up the NZ ETS to contribute to delivering the right amount and type of afforestation. An appropriate market governance regime is needed to 66 1 February 2021 Draft Supporting Evidence for Consultation
safeguard the scheme’s effectiveness and should be progressed as a high priority, with the involvement of agencies with financial markets expertise such as MBIE. II.
Align investments for climate outcomes. Policy decisions and investments made now must not lock Aotearoa onto a high emissions future or increase exposure to climate change risks. There are currently insufficient safeguards in place to prevent this from happening. The Government should incorporate long-term abatement cost values that are consistent with climate change goals into cost-benefit and cost-effectiveness analysis, to make sure that policy and investment decisions are compatible with net zero emissions. Local government and private sector use of long-term abatement cost values would also help to make sure that other infrastructure and investment decisions are future proof.
III.
Accelerate light electric vehicle uptake. Reducing the emissions of vehicles entering the fleet is a high priority, and the Government needs to take urgent action to stop high emitting vehicles entering the fleet. Meeting the third emissions budget requires significant uptake of EVs, and Aotearoa must be well on this pathway in earlier budgets. To achieve this, light EV uptake needs to be accelerated as fast as possible. The introduction of measures to reduce the upfront costs of EVs would support this. If Aotearoa is to achieve a low emissions vehicle fleet by 2050, all light vehicles entering the country must be low emissions by 2035. Implementing a restriction or ban on new internal combustion engine light vehicles entering Aotearoa would help to achieve this.
IV.
Target 60% renewable energy by no later than 2035. While a large proportion of electricity is generated from renewable sources, across the whole energy system only around 40% of energy use comes from renewables. Achieving the 2050 target of net zero long-lived gases means Aotearoa needs to transition away from fossil fuels and rely more heavily on renewable electricity and low emissions fuels like bioenergy and hydrogen, and improve energy efficiency. Setting a broader, system-wide target for renewable energy would signal the scale of emissions reductions required across the whole energy system. The development of a national energy strategy would help ensure that emissions reductions, future energy developments, infrastructure, equitable industry transitions, regional and economic development planning to support the transition of our country’s energy system are all considered in a coherent way.
V.
Reduce biogenic emissions from agriculture through on-farm efficiency and technologies. Changing on-farm management practices can reduce biological emissions now and will be enough to meet the 2030 biogenic methane target. The Government needs to incentivise and enable farmers to make the necessary efficiency improvements. Government is already working with industry through the He Waka Eke Noa Partnership to develop a farm level pricing system, information and support services. It will be important that these tools can deliver emissions reductions consistent with emission budgets and targets, and that they endure beyond 2025. The successful development of new technologies and practices to reduce biological emissions (such as a methane vaccine) would provide greater flexibility and allow Aotearoa to meet the more ambitious end of the 2050 biogenic methane target. The Government needs to develop a long-term plan for targeted R&D to reduce biogenic emissions from agriculture, and review regulatory regimes to ensure that new technologies can be rapidly deployed as and when they are developed. 67 1 February 2021 Draft Supporting Evidence for Consultation
VI.
Manage forests to provide a long-term carbon sink. Both production forests and new permanent native forests will play an important role in meeting the emissions budgets and targets for Aotearoa. Production forests can help to meet earlier emissions budgets, while new permanent native forests can provide an enduring carbon sink to balance emissions from hard to abate sectors in the long term. The Government will need to introduce measures to ensure that emissions removals by forests are aligned with emissions budgets. Policies should be put in place to encourage new permanent native forests on currently unproductive land. Forestry objectives will need to be achieved through a combination of policies, including amendments to the ETS, other financial incentives like grants and land use planning rules.
VII.
Ensure an equitable, inclusive and well-planned climate transition. The transition to a low emissions society needs to be well-signalled, equitable, and inclusive. This will support a transition to a low emissions society that maximises opportunities, minimises disruptions and reduces inequities. This is important to ensure that the transition is enduring. To make sure this happens, the Government will need to develop an evidence base to understand the distributional impacts of climate change policies, and a process for factoring those impacts into policy making.
In addition to these critical priorities, partnership with iwi/Māori throughout the policy process will be critical to success. In developing and implementing its emissions reduction plan, the Government should consider how approaches will impact the four dimensions of wellbeing identified in the He Ara Waiora framework, and partner with whānau, hapū, iwi, and communities to incorporate mātauranga and tikanga Māori into the ways solutions are developed and decisions are made.
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17.6 References Ambrose, J. (2020). UK plans to bring forward ban on fossil fuel vehicles to 2030. The Guardian. https://www.theguardian.com/environment/2020/sep/21/uk-plans-to-bring-forward-banon-fossil-fuel-vehicles-to-2030 Atteridge, A., & Strambo, C. (2020). Seven principles to realize a just transition to a low-carbon economy (p. 19). Stockholm Environment Institute. https://www.sei.org/publications/sevenprinciples-to-realize-a-just-transition-to-a-low-carbon-economy/ Bloomberg, M. (2017). Letter to Mr. Mark Carney. https://assets.bbhub.io/company/sites/60/2020/10/FINAL-2017-TCFD-Report-11052018.pdf Bouyé et al. (2019). Growing Momentum for Just Transition: 5 Success Stories and New Commitments to Tackle Inequality Through Climate Action. World Resources Institute. https://www.wri.org/blog/2019/08/growing-momentum-just-transition-5-success-storiesand-new-commitments-tackle Cabinet Economic Development Committee. (2020). Cabinet minute: Climate-Related Financial Disclosures. Cabinet Office. https://www.mfe.govt.nz/sites/default/files/media/Legislation/Cabinet%20minute/cab-minclimate-related-financial-disclosures.pdf Cabinet Environment, Energy and Climate Committee. (2020). Cabinet minute: Proceeds from the New Zealand Emissions Trading Scheme: Minute of decision. Cabinet Office. https://www.mfe.govt.nz/sites/default/files/media/Legislation/Cabinet%20minute/ENV-20MIN-0030_Proceeds_from_the_New_Zealand_Emissions_Trading_Scheme.pdf California Clean Vehicle Rebate Project. (2016). Income Eligibility. Clean Vehicle Rebate Project. https://cleanvehiclerebate.org/eng/income-eligibility Climate Change Commission. (2020). Submission on Reforming the NZ ETS: Proposed settings. https://ccc-production-media.s3.ap-southeast-
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2.amazonaws.com/public/FINAL20NZ20ETS20settings20submission20Climate20Change20Co mmission.pdf Drive Electric. (2020). Drive Electric: EV Discussion Document. https://driveelectric.org.nz/wpcontent/uploads/2020/08/DE-policy-discussion.pdf Electric Vehicle Outlook 2020—Executive Summary. (2020). https://bnef.turtl.co/story/evo-2020/ Erickson, P., & Tempest, K. (2014). The contribution of urban-scale actions to ambitious climate targets (p. 24). Stockholm Environment Institute. Gambhir, A., Green, F., & Pearson, P. (2018). Towards a just and equitable low-carbon energy transition. Imperial College London, Grantham Institute. https://www.imperial.ac.uk/media/imperial-college/granthaminstitute/public/publications/briefing-papers/26.-Towards-a-just-and-equitable-low-carbonenergy-transition.pdf German, R., Nijland, H., Pridmore, A., Ahlgren, C., & Williamson, T. (2018). Vehicle Emissions and Impacts of Taxes and Incentives in the Evolution of Past Emissions (Eionet Report ETC/ACM 2018/1). European Energy Agency (EEA). https://www.eionet.europa.eu/etcs/etcatni/products/etc-atnireports/eionet_rep_etcacm_2018_1_vehicle_taxes/@@download/file/EIONET_Rep_ETCAC M_2018_1_Vehicle_Taxes.pdf Gobierno de España. (2020). Everything you need to know about Just Transition agreements. https://www.miteco.gob.es/es/transicion-justa/_default.aspx Gouldson, A., Sudmant, A., Khreis, H., & Papargyropoulou, E. (2018). The Economic and Social Benefits of Low-Carbon Cities: A Systematic Review of the Evidence. 92. Government of Ireland. (2020). Budget 2021 funding for the Departments of the Environment, Climate and Communications, and Transport reflects Government ambition for a green, jobsled recovery. https://www.gov.ie/en/press-release/748e9-budget-2021-funding-for-the-
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departments-of-the-environment-climate-and-communications-and-transport-reflectsgovernment-ambition-for-a-green-jobs-led-recovery/ Hall, P., & Alcaraz, S. (2017). New Zealand solid fuels market analysis (p. 32). Scion. Horticulture New Zealand. (2019). Submission on action on agriculture. MfE. https://www.mfe.govt.nz/sites/default/files/media/Consultations/Attachments%20for%200 3028%20Horticulture%20NZ.pdf Interim Climate Change Committee. (2019a). Accelerated electrification: Evidence, analysis and recommendations (p. 117). https://www.iccc.mfe.govt.nz/assets/PDF_Library/daed426432/FINAL-ICCC-Electricityreport.pdf Interim Climate Change Committee. (2019b). Action on agricultural emissions: Evidence, analysis and recommendations. https://www.iccc.mfe.govt.nz/what-we-do/agriculture/agricultureinquiry-final-report/action-agricultural-emissions/ Major Electricity Users’ Group. (2020). Major Electricity Users’ Group: Update from the Chair October 2020. http://www.meug.co.nz/system/files_force/MEUG%20near%20term%20calendar%2019Oct-20%20public%20version.pdf?download=1 McMeeking, S., Kahi, H., & Kururangi, G. (2019). He Ara Waiora: Background paper on the development and content of He Ara Waiora. The Treasury. https://ir.canterbury.ac.nz/bitstream/handle/10092/17576/FNL%20%20He%20Ara%20Waio ra%20Background%20Paper.pdf?sequence=2&isAllowed=y Ministry for Primary Industries. (2017). A guide to carbon look-up tables for forestry in the Emissions Trading Scheme. Ministry for Primary Industries. https://www.mpi.govt.nz/dmsdocument/4762/direct Ministry for the Environment. (2019a). Impact Summary: Prohibiting insider trading and market manipulation in the New Zealand Emissions Trading Scheme. 71 1 February 2021 Draft Supporting Evidence for Consultation
https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/impact-summarynzets-prohibiting-insider-trading-market-manipulation.pdf Ministry for the Environment. (2019b). NZ ETS Tranche two: Market governance—Next steps. https://www.mfe.govt.nz/more/briefings-cabinet-papers-and-related-materialsearch/cabinet-papers/nz-ets-tranche-two-market Ministry for the Environment. (2020). New Zealand’s greenhouse gas inventory: 1990—2018. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/new-zealandsgreenhouse-gas-inventory-1990-2018-vol-1.pdf Ministry for the Environment, & Ministry of Business, Innovation & Employment. (2019). Climaterelated financial disclosures: Understanding your business risks and opportunities related to climate change : discussion document. Ministry for the Environment. https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/Climate-relatedfinancial-disclosures-discussion-document.pdf Ministry of Business, Innovation and Employment. (2019). Discussion document: Accelerating renewable energy and energy efficiency. https://www.mbie.govt.nz/dmsdocument/10349discussion-document-accelerating-renewable-energy-and-energy-efficiency Ministry of Transport. (2019a). Moving the light vehicle fleet to low-emissions: Discussion paper on a Clean Car Standard and Clean Car Discount. https://www.transport.govt.nz//assets/Uploads/Discussion/LEV-consultation-documentfinal.pdf Ministry of Transport. (2019b). The New Zealand 2018 Vehicle Fleet: Data Spreadsheet. Ministry of Transport. https://www.transport.govt.nz/assets/Uploads/Data/NZ-Vehicle-Fleet-Statistics2018_web.xlsx
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Ministry of Transport. (2020). 2020 Green freight strategic working paper. https://www.transport.govt.nz/assets/Uploads/Paper/Green-Freight-Strategic-WorkingPaper_FINAL-May-2020.pdf Neste.com. (2020). Neste: Sweden becomes a frontrunner in sustainable aviation | Neste. Neste: Sweden Becomes a Frontrunner in Sustainable Aviation. https://www.neste.com/releasesand-news/aviation/neste-sweden-becomes-frontrunner-sustainable-aviation New Zealand Government. (2020, September 15). Hon James Shaw media release: New Zealand first in the world to require climate risk reporting. The Beehive. http://www.beehive.govt.nz/release/new-zealand-first-world-require-climate-risk-reporting New Zealand Productivity Commission. (2016). Achieving New Zealand’s productivity potential: Overview. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/4d20990f98/Overview-Achieving-NZsproductivity-potential.pdf New Zealand Productivity Commission. (2018). Low-emissions economy: Final report. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/lowemissions/4e01d69a83/Productivit y-Commission_Low-emissions-economy_Final-Report_FINAL_2.pdf New Zealand Productivity Commission. (2019). *Training New Zealand’s workforce: Technological change and the future of work. https://www.productivity.govt.nz/assets/Documents/da611be657/Draft-report-3_TrainingNew-Zealands-workforce-v2.pdf New Zealand Productivity Commission. (2020). New Zealand firms: Reaching for the frontier (p. 60) [Issues Paper]. New Zealand Productivity Commission. https://www.productivity.govt.nz/assets/Documents/990a36d674/Issues-paper_NewZealand-firms.pdf
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Norway Ministry of Climate and Environment. (2019). More advanced biofuel in aviation [Nyhet]. Government of Norway; regjeringen.no. https://www.regjeringen.no/en/aktuelt/meravansert-biodrivstoff-i-luftfarten/id2643700/ NSMC. (2011). Case study: It’s not OK. NSMC. https://thensmc.com/resources/showcase/its-not-ok NZTA. (2020). Transport-related expenditure. https://www.nzta.govt.nz/assets/userfiles/transportdata/FundAllActivities.xlsx OECD. (2017a). Back to Work: New Zealand. Improving the re-employment prospects of displaced workers (Back to Work). https://read.oecd-ilibrary.org/employment/back-to-work-newzealand_9789264264434-en OECD. (2017b). Towards and inclusive transition. OECD Publishing. https://www.oecdilibrary.org/docserver/9789264273528-8en.pdf?expires=1603148712&id=id&accname=guest&checksum=5F1D5B73EA4D8BFDBCF03 E4A86F902E0 OECD. (2019a). Enhancing Climate Change Mitigation through Agriculture. OECD Publishing. https://www.oecd.org/fr/publications/enhancing-the-mitigation-of-climate-change-thoughagriculture-e9a79226en.htm#:~:text=Agriculture%2C%20with%20its%20growing%20contribution,the%20end%20 of%20the%20century. OECD. (2019b). Regions in Industrial Transition: Policies for People and Places. OECD Publishing. https://doi.org/10.1787/c76ec2a1-en OECD, IEA, NEA, & ITF. (2015). Aligning Policies for a Low-carbon Economy. OECD Publishing. https://doi.org/10.1787/9789264233294-en Office of the Minister of Commerce and Consumer Affair, & Office of the Minister for Climate Change. (2020). Cabinet paper: Climate-related financial disclosures. https://www.mfe.govt.nz/sites/default/files/media/Legislation/Cabinet%20paper/cabinetpaper-climate-related-financial-disclosures.pdf 74 1 February 2021 Draft Supporting Evidence for Consultation
Productivity Commission. (2017). Better urban planning. https://www.productivity.govt.nz/assets/Documents/0a784a22e2/Final-report.pdf Raerino, K., MacMillan, A., & Jones, R. (2013). Indigenous Māori perspectives on urban transport patterns linked to health and wellbeing. https://doi.org/10.1016/j.healthplace.2013.04.007 Robins, N., Brunsting, V., & Wood, D. (2018). Investing in a just transition. Why investors need to integrated a social dimension into their climate strategies and how they could take action (p. 43) [Policy insight]. Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy. Statista. (2020). Japan: New electric vehicle sales 2019. Statista. https://www.statista.com/statistics/1129942/japan-new-electric-cars-sales-volume/ Stats NZ. (2007). QuickStats About Māori. www.stats.govt.nz Stats NZ. (2020). Subnational population estimates (urban rural), by age and sex, at 30 June 19962020 (2020 boundaries). http://nzdotstat.stats.govt.nz/wbos/Index.aspx?DataSetCode=TABLECODE7981&_ga=2.1863 49865.1855301557.1606687323-753754144.1528936268 van der Linden, S., Pearson, A., & van Boven, L. (2020). Behavioural climate policy. Behavioural Public Policy, First View, 1–9. https://doi.org/10.1017/bpp.2020.44 Waka Kotahi. (2019). Keeping cities moving: Increasing the wellbeing of New Zealand’s cities by growing the share of travel by public transport, walking and cycling. https://www.nzta.govt.nz/assets/resources/keeping-cities-moving/Keeping-citiesmoving.pdf Waste & Resources Action Programme. (2013). The impact of Love Food Hate Waste. WRAP. https://www.wrap.org.uk/sites/files/wrap/West%20London%20LFHW%20Impact%20case% 20study_0.pdf WasteMINZ. (2020). Recommendations for standardisation of kerbside collections in Aotearoa. Prepared for MfE. 75 1 February 2021 Draft Supporting Evidence for Consultation
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