The Government is no longer on track to meet its third emissions budget, according to projections released with its draft Emissions Reduction Plan today.  

Significantly more work is needed to meet New Zealand’s Paris commitments, which will likely result in billions of dollars being sent offshore to pay for international climate mitigation.  

Projections published at the end of 2023 based on policies from the last Government, showed the country hitting its first three emissions budgets. Under new projections published today, which incorporate decisions the new Government has made to bin a host of Labour-era policies like decarbonising heavy industry and subsidies for EVs, the government will sail 17 Mt CO2-e above that third budget, which runs from 2031–35. 

The government is on track to meet its current budget, emissions budget 1, and the second emissions budget. 

An emissions reduction plan is a document the Government releases under the Zero Carbon Act. It is meant to set out policies that will help the Government to meet its emissions budgets on the way to hit the Government’s ultimate goal of net zero emissions for long-lived gasses in 2050. The Government has one more emissions budget to deploy to hit its third budget. 

The Government released its draft plan today for consultation. A final plan will be published before the end of the year. 

“This draft Emissions Reduction Plan shows that with effective climate change policies we can both grow the economy and deliver our climate change commitments,” Climate Change Minister Simon Watts said. 

The Government published an economic analysis with the plan and said that the policies contained within it will reduce New Zealand’s GDP by 0.4% by 2030 than it would be without any attempt to reduce emissions. It is keen to ensure reducing emissions does not come at the expense of growth. 

The impact on GDP is expected to remain at similar levels through to 2050. The effects of the plan will be felt most severely on households with an annual income of $35,000 to $61,000, particularly superannuitant households. These households will reduce their consumption by between 0.4% and just less than 0.6% on average, versus no change. 

The policies in the plan are mainly things the Government announced on the campaign trail like setting a target for 10,000 electric vehicle chargers by 2030, improving public transport in Auckland by opening the City Rail Link and investing in new rapid transit. Agriculture and forestry will make the largest contributions to the second emissions budget, although short-lived gasses like methane will remain outside the ETS. 

In the most recent fiscal Budget, the Government included a plan to improve organic waste and landfill gas capture and to invest in resource recovery through the Waste Minimisation Fund. 

Contribution to the second emissions budget by sector. Graphic / ERP 

Earlier this month, the Government announced a plan to invest in carbon capture, utilisation and storage which captures emissions, preventing them from entering the atmosphere. This also entered the plan. 

One of the main planks of the plan is not to reduce emissions, but to plant an enormous number of new trees to sequester emissions. 

The Government said it was keen to harness private investment to plant trees on Crown land. 

This land would be land that is not in a national park, is unsuitable for farming, and has low conservation value. 

“Estimates of the area of Crown land that is suitable for planting are preliminary and conservative. Further analysis will be required to confirm land suitability; however, it is likely that more land is available, and the potential abatement is greater than currently projected,” the plan said. 

The forests would, ideally, not just be pine forests, but native forests too. 

“Native forests can provide a long-term carbon sink and co-benefits, including biodiversity and adaptation value. 

“Established native forests are likely to be better suited to steep and erosion-prone land as they are more able to withstand extreme weather,” the plan said. 

It noted that currently, incentives disadvantage native forests compared with introduced trees. 

“[T]he Government is interested in exploring partnerships to improve the incentives for native planting,” it said. 

Assuming planting from 2027, the Government thinks there could be plantings of indigenous trees of 5000ha in 2027 and 7500ha from 2028 and exotic planting of 10,000ha from 2027. 

The current Government is keen to make greater use of the Emissions Trading Scheme to drive down emissions, but the scheme itself has not, thus far, been obliging. 

Impact by household. Graphic / ERP 

NZUs, a unit of emissions under the scheme, are currently trading at just above $50, far lower than in the past. 

The Government plans to make some changes to the ETS, but details are yet to be finalised. One big change could be tightening up on giveaway credits currently handed to industrial emitters. This will be a double-whammy for these emitters who have lost the hundreds of millions of dollars of decarbonisation subsidies offered by the last Government. 

The Government currently gives some industrial polluters free credits to ensure they are not disadvantaged when competing globally. 

These allocations must be regularly reviewed to ensure those firms feel enough pain from the ETS to reduce their emissions, but not so much that they are internationally disadvantaged. 

Former Climate Change Minister James Shaw began a review of these settings which were last set in 2010. The current Government will pick up that work to, in the words of the plan, “ensure that free allocations more accurately reflect emissions by firms receiving allocations”. 

“We will publish updated regulations later in 2024,” the report said. 

The report also warned that a lot more work will be needed to hit New Zealand’s Nationally Determined Contribution (NDC), the international climate target under the Paris agreement. 

The plan said that the policies in the plan will “contribute” to hitting the NDC, but “but we know that more is needed”. 

Watts said the Government was not just consulting on policies for its own emissions reduction plan, but on decisions it had made to bin parts of the last Government’s emissions plan. 

“Projections show that we remain on track to meeting the first Emissions Budget, however we want to seek public feedback on the impact of the change in approach,” he said. 

This is significant given the legal threat the government faces over its decision to bin a host of Labour-Green emissions policies. 

Lawyers for Climate Action have previously argued the Government is in breach of the Zero Carbon Act by dumping the last government’s emissions reduction plan policies without going through the emissions reduction plan process set out in legislation. 

The report said that 93 Mt CO2-e of additional abatement, on top of currently proposed policies, will be required to meet the NDC. 

The gap between the first and second emissions budgets and the NDC is 101 Mt CO2-e. 

That is an awful lot of emissions. The second budget is for 305 megatones over the whole five years of 3026 to 2031, an average 61 megatonnes per year. 

In all likelihood, this will mean New Zealand spending significant sums of money on purchasing international offsets, something that was part of the last Government’s plan too. 

Estimates for the cost of these offsets vary wildly. Treasury thinks they could cost anywhere between $3.3b and $23.7b. 

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.