The Government has signalled a change in tack towards ‘Net Zero’ 2050 with the release of its proposals for New Zealand’s second Emissions Reduction Plan (ERP2).

The proposals are set out in a Discussion Document which consolidates the Government’s policies and strategy to reduce emissions and meet our national budget over the next five years (2026-2030). The proposals will inform the final publication of ERP2, due by the end of 2024.

A policy approach focussed on emissions offsets

In the preamble to the Discussion Document, Minister for Climate Change, Simon Watts, expresses a clear intention to increase production, while relying on technology and offsets to reach New Zealand’s emission targets. The proposals for ERP2 which follow reflect this ‘net-based’ policy approach: ERP2 will focus on offsetting emissions through carbon removals and plantation forestry and avoiding reduction-based policies that could limit or reduce production in high emission sectors of the economy.

This strategy is intended to keep New Zealand on track to meet our second emissions budget of 305 megatonnes of carbon dioxide (Mt CO₂-e).

However, the Ministry for the Environment’s updated projections provided here, show New Zealand is not on track to meet the third emissions budget of 240 Mt CO₂-e, or our domestic target of Net Zero carbon emissions by 2050. This calculation is based on an updated baseline that takes into account climate policy changes made by the Government over the last year. The Discussion Document does not directly address this issue.

Focusing reductions across key sectors

At a high level, the proposals for ERP2 focus on offsetting and reducing emissions across the energy, transport, agriculture, forestry, and waste sectors. These policies include:

• Strengthening and restoring market confidence in the Emissions Trading Scheme (ETS) by stabilising the price of NZUs and otherwise avoiding policy changes that threaten its credibility. 
• Partnering with the private sector to plant trees on low conservation value Crown Land. 
• Reducing cost and time associated with obtaining consent for renewable energy generation to support private investment into new projects, such as offshore windfarms 
• Investing in carbon capture technology, its utilisation and storage to prevent CO₂-e from entering the atmosphere. 
• Facilitating private investment into 10,000 electric vehicle charging points by 2030, encouraging a reduction in transport emissions. 
• Improving public transport options including through the rapid transit network for Auckland, again encouraging a reduction in transport emissions. 
• Investing in technology to assist the agriculture sector to reduce emissions without reducing production. This may include the potential to breed low-methane genetic rams, or introduce the uptake of methane inhibitors for diary, sheep, and beef. 
• Investing in infrastructure to dispose and process organic waste and landfill gas capture.

Agriculture

Agriculture is a focus for the second budget period, reflecting the Government’s coalition agreements that seek to liberalise the use of genetic technologies in the primary sector. The agriculture sectors’ inclusion in the ETS has been delayed from 2025 until 2030. In the meantime, proposed policies for ERP2 rely on new technologies that are not yet available at a commercial scale. These tools include low-methane sheep genetics and EcoPond^TM, a treatment to reduce methane emissions in dairy effluent ponds. It is expected that these technologies will be available to farmers from 2027/28, while other methods such as methane inhibitors and vaccines are still in the early stages of research. To prepare, the Government proposes to remove regulatory barriers to encourage research and development and approve new technology.

Forestry

To increase afforestation, the Government plans to explore options to plant a mixture of indigenous and exotic plantings on Crown land through partnerships with the private sector. Although in the early stages of investigation, the Government considers there are areas of Crown land which are currently unsuitable for farming, has low conservation value, and could be converted to forests for carbon sequestration. Opportunities for planting partnerships will be explored by the Ministry for Primary Industries, Land Information New Zealand and the Department of Conservation once the land availability assessments are complete. Although the Government’s proposals encourage afforestation, this is balanced by its preference to avoid farm-to-forestry conversions on high-quality productive land. To achieve this, the Government proposes to limit the number of ETS registration for whole-farm conversions to exotic forestry on high-quality productive land.

Energy

In the energy sector, reductions in the second budget period are expected to come primarily from increased electrification and increasing energy efficiency. The Government has committed to doubling renewable energy by 2050 through its Electrify NZ work programme, such as investment in removing consenting barriers to establish offshore windfarms. More details on this project are expected to be announced soon. We note that outside of the ERP2 policies, the Government is moving ahead with plans to reverse a prohibition on oil and gas exploration in New Zealand to help resolve concerns with depleting oil and gas reserves. This approach is expected to reduce reliance on coal during the transition to renewable energy.

Transport

Transport emissions are responsible for 17.5% of New Zealand’s greenhouse gas emissions and are the fifth highest per capita amongst industrially developed countries. As highlighted above, the Government plans to focus primarily on the introduction of EV charge points across New Zealand, to incentivize EV uptake in the short term and provide sufficient infrastructure to meet the expected demand. In addition, the Government intends to retain the Clean Car Importer Standard introduced by its predecessor, that established an annual carbon dioxide target to be met by vehicle suppliers each year. Investment in public transport projects is also expected to reduce emissions. Over the next decade the Government has signalled that these projects include the Auckland City Rail Link, Eastern Busway, Northwest Rapid Transit, Airport to Botany busway and rail upgrades in the lower North Island.

Opportunity for input

The proposed policies outlined in ERP2 will influence future regulatory and non-regulatory developments across the key sectors discussed above, over the 2026-2030 timeframe, and beyond.

Feedback is being sought by the Government as it finalises ERP2 over the coming months. Consultation opened on Wednesday, 17 July 2024 and closes on Wednesday, 21 August 2024. If you are interested in making a submission, please get in touch with one of our experts.

The Government will present information webinars on the ERP2 over the coming weeks, where Ministry for Environment experts will provide an opportunity to ask questions. Registration for each webinar can be found here.

This article was co-authored by Imogene Jones a Solicitor in our Environment team.