The Government’s proposed emissions reduction plan needs major help. Here’s 12 ways to improve it.
The Government’s choices outlined in its proposed Emissions Reduction Plan would needlessly delay our transition towards a cleaner, healthier environment, society and economy.
ELI has made 12 recommendations that could go some way to rectifying the problematic plan proposed by the Government.
The Zero Carbon Act was designed to ensure governments of all demeanours reduce emissions on an arc toward zero net carbon emissions in Aotearoa by 2050. This is in recognition of the long-term and profound impacts climate change is already causing, and correspondingly, the scale of the policy response required.
The Act requires governments to set legally binding carbon budgets, which establish the maximum amount of greenhouse gas emissions New Zealand can produce over five-year periods.
In August, ELI made a submission on the Government’s proposals for New Zealand’s second emissions reduction plan (ERP2), relating to the second emissions budget period (EB2) from 2026 to 2030.
To summarise, the National-led coalition Government’s proposal puts at risk New Zealand’s ability to meet our climate goals. It leaves too much to chance and is based on inadequate consultation.
The Government has removed the policies that would guarantee emission reductions, such as investment in industry decarbonisation, requires next to no action from agriculture, and relies almost solely on the troubled emissions trading scheme. The risks associated with this proposal to communities, nature, our international reputation, and fiscal bottom-line, are alarming.
The proposal is in the context of the previous year being the warmest year on record, at 1.4°C warmer than when records began in the late nineteenth century. Climate change has substantially damaged all ecosystem types, is driving the extinction of species, has reduced food and water security, has resulted in human deaths and is increasingly driving displacement from affected regions.
Our collective global failure to reduce emissions to date means that “all countries must urgently accelerate economy-wide, low-carbon transformations to achieve the long-term temperature goal of the Paris Agreement”. In ELI’s view, this urgency is not reflected in the Government’s laissez faire approach to it’s climate policy.
ELI made the following 12 recommendations highlighting these deficiencies and the action needed to get Aotearoa back on track (to download the complete submission, including references, click here):
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New Zealand’s Emissions
New Zealand has an unusual greenhouse gas emissions profile, with 53 percent of its emissions coming from agriculture, the highest level of agricultural emissions in the OECD. Transport is the second highest emitting sector, representing 17.5 percent of emissions.
Most of the agriculture-related emissions are biological emissions, mainly methane from ruminant cattle and nitrous oxides from animal waste and fertilisers. Overall, methane and nitrous oxide emissions from all sources made up over half of New Zealand’s gross emissions (49 and 9 per cent, respectively) in 2022. New Zealand is the only developed country where carbon dioxide emissions make up less than half of the proportion of greenhouse gases on a CO2-equivalence basis.
In 2022, New Zealand’s gross emissions were 78.4 million tonnes of carbon dioxide equivalent (Mt CO2-e), a 14 per cent increase from emissions in 1990 (the base year for UNFCCC reporting). The latest emissions inventory report states that “Aotearoa New Zealand’s gross emissions peaked in 2006, and were relatively stable through to 2019. However, since 2019, emissions have been declining year on year.” However, there are concerns that the recent emissions reductions have been driven by one-off external factors such as global supply shocks reducing fertiliser demand.
Under the Paris Agreement, countries must submit an updated Nationally Determined Contribution (NDC) to the UNFCCC every five years. NDCs are a country’s commitments to reduce greenhouse gas emissions and must reflect the country’s highest possible ambition. The UNEP Emissions Gap reports make it clear that NDCs are currently inadequate to meet the scale of the change needed to avert climate catastrophe. Even if all current global NDCs were implemented, 2.5°C of warming would still be likely to occur.
In 2021, New Zealand’s NDC was set to reduce emissions by 50% below gross 2005 levels by 2030. New Zealand’s second NDC must be set by 2025 (to cover the period 2031-2035) and will be informed by advice from the Climate Change Commission (the Commission), scheduled to be provided by the end of this year.
New Zealand’s NDCs are expected to be met through a combination of domestic actions achieved through emissions reduction plans – a combination of emissions reductions and carbon removals by forests – and through offshore mitigation. According to the Technical Annex to the ERP2 Discussion Document, if the Government just achieves its first and second domestic emissions budgets, 101 MtCO2e of offshore mitigation will be needed to meet the NDC. The financial liability for this offshore mitigation is uncertain, but will be substantial: illustrative Treasury estimates from 2023 suggest that 101 MtCO2e of offshore mitigation could cost between $4.14 billion and $22.9 billion, depending on where the mitigation could be sourced from.
There are therefore significant reputational and financial risks associated with New Zealand’s domestic emissions reduction planning. The weaker our domestic climate action, the greater the gap between our domestic reductions and our NDCs, and therefore the greater the financial liability for offshore mitigation. The Government’s lack of ambition in ERP2 increases, rather than decreases, these risks.
The current ERP2 draft simply ignores these reputational and financial risks, particularly with respect to the purported ‘least-cost’ approach. We set out more detailed submissions on this aspect of ERP2 below.
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ERP2 – A plan to increase emissions
In the ERP2 Discussion Document, the Government is consulting on its proposals for ERP2 as well as changes to the emissions reduction plan currently in force (ERP1) in relation to the first emissions budget period from 2022-2025.
However, the overall effect of the policies being consulted on by the Government is actually to increase emissions projections for the second and third emissions budget periods. During EB2, the projected emissions reductions from the Government’s new policies for ERP2 (3.9Mt CO2-e), are outweighed by the projected emissions increases (of 7.6Mt CO2e) as a result of the discontinuation of vastly more effective policies from ERP1 including additional emissions of:
5.7Mt CO2e resulting from the removal of the Clean Car Discount and the dismantling of the Government Investment in Decarbonising Industry Fund; and
1.9Mt CO2e resulting from delaying the implementation of agricultural emissions pricing until 2030.
These projected emissions increases are a result of policy decisions that are entirely within the Government’s control.
In the context of United Nations’ calls for urgent and transformational emissions reductions, this is completely unacceptable.
Furthermore, in ELI’s view, the Government has not been transparent with the public about the fact that the Government’s policy choices will result in higher emissions across EB2 – we provide more detailed feedback below as to the inadequacy of the consultation process.
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A ‘least cost’ approach?
From the consultation materials provided, it is very difficult to understand the Government’s policy approach and why certain policies are being preferred to others. The Government has merely asserted that it is taking a ‘least cost’ approach to climate mitigation, “minimising the overall cost to the nation, by 2050, of reducing emissions and shifting to a net zero 2050.”
However, given that the Government’s definition of the relevant costs includes “costs to businesses and households investing in gross emissions reduction, fiscal costs to the Government, and the wider costs or benefits from changes to the things people value, such as clean air”, only a detailed cost benefit analysis could provide the evidence necessary to determine what the ‘least cost’ options are.
Despite the OECD’s recent recommendation that “New Zealand’s next overall emissions reduction plan should be underpinned by a rigorous and comprehensive cost-benefit comparison of the different emissions reduction options”, no such cost benefit analyses have been provided to support the Government’s preferred policy options. We are therefore not persuaded that the Government is in fact adhering to its own ‘least cost’ approach.
Furthermore, the Government has not even provided costings for its policies. For example, in relation to the agricultural pricing and mitigation technology policy, the Government has just modelled the emissions implications for assumed levels of uptake of certain technologies, giving no indication of the likely considerable cost of rolling out those technologies, and the level of emissions pricing or incentive payments that would be required to reach the modelled levels of uptake.
We are also concerned that the Government’s analysis of costs does not appear to include the costs of climate change itself or the costs of offshore mitigation required to meet New Zealand’s NDC. As set out above, we face a potential financial liability of tens of billions of dollars to purchase enough offshore mitigation to meet our NDC.
In particular, ELI is concerned that the Government gives a misleading impression in the ERP2 Discussion Document about the economic impacts of climate mitigation by not foregrounding the “notable limitation” of their economic modelling mentioned in the Technical Annex:
"that it neither accounts for the impacts of climate change itself on society and the economy, nor for the benefits of mitigating climate change impacts. The economic impacts of climate mitigation actions, which are mostly negative when compared with a counterfactual without mitigation actions, need to be considered in that context."
In essence, the Government is purporting to take a ‘least cost’ approach but without accounting for some of the key costs and benefits, including the costs of climate change impacts that are increasingly being felt in New Zealand.
We are also not persuaded that a “least cost” approach necessarily relies on markets, to the exclusion of “the Government [being involved] in directing where and how to make reductions” as the Government’s explanation seems to suggest. Leaving aside the flawed structure of the NZ ETS, there are many government decisions that underpin whether individuals and businesses will be able to make low emissions choices – transport policy being a prime example.
It is also well understood that markets fail to deliver economically efficient outcomes when the external costs and benefits of particular levels of production and consumption are not factored in – the costs of climate change caused by greenhouse gas emissions being an obvious example. However, while the Government may be attempting to partially internalise this externality through the NZ ETS (with the notable exception of the agricultural industry), it appears that no attempt is being made to internalise other externalities, such as the health impacts of air pollution from ICE vehicles or the costs of nitrogen pollution in freshwater, or the health benefits of supporting public and active transport. A detailed cost benefit analysis should include these impacts.
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Targets at risk
Commensurate with its glaring lack of ambition in the face of the global climate crisis and the increasing climate impacts faced by New Zealanders, the Government’s proposed approach to ERP2 poses significant risks to the achievement of our statutory climate targets.
According to the Government’s own interim projections of the ERP2 baseline (as contained in the Technical Annex) the 2030 biogenic methane target is not certain to be met and the 2050 biogenic methane target will not be met.
On the Government’s own interim projections of the emissions and removals in the first, second and third budget periods, it is also clear that with the currently proposed policies in ERP2, the third emissions budget will likely not be met: projected emissions under the “with new measures” scenario will be 257.4 ± 29 Mt CO2-e, well over the third emissions budget of of 240 Mt CO2-e of net emissions.
While the interim projections suggest that the second emissions budget could just be met (303.3 Mt CO2-e, just under the budget of 305MtCO2-e), this projection comes with an significant uncertainty margin of ±18 Mt CO2-e.
The Commission’s advice on the policy direction for ERP2 makes it clear that “[d]ecisions made in the second emissions budget period will impact Aotearoa New Zealand’s ability to meet the third emissions budget” and that without ambitious action, higher emissions can be locked in, making the necessary future emissions reductions “more costly and disruptive.”
The Commission’s monitoring report of July 2024 also sets out that “there is an urgent need to strengthen policies and strategies to put Aotearoa New Zealand on track to meet future emissions budgets and the 2050 target, including the 2030 biogenic methane component of the target.”
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The focus on net emissions is a major step backwards
The Government has proposed “taking a net-based approach to reduce emissions at least cost to New Zealanders.”
ELI notes with concern that an approach focussed on net emissions is contrary to the advice of the Commission and international expert bodies, including the IPCC. The Commission’s advice on ERP2 has noted that:
Reducing gross emissions is a pathway strongly recommended by the Intergovernmental Panel on Climate Change (IPCC), whose Sixth Assessment Report (AR6) states at a high level of confidence that “reaching net zero CO2 or greenhouse gas emissions primarily requires deep and rapid reductions in gross emissions of CO2, as well as substantial reductions of non-CO2 greenhouse gas emissions”.
The Commission has recommended that the Government “commit to specific levels of gross greenhouse gas emissions and carbon dioxide removals for the second and third emissions budgets and align policies to achieve or exceed the emissions reductions in the budgets.” It appears that the Government has ignored this recommendation as even with the ‘new’ policies being proposed for ERP2, the gross emissions projections for EB2 (364.5Mt CO2-e) and EB3 (339.7MtCO2-e) are above the target levels recommended by the Commission (362MtCO2-e and 322MtCO2-e respectively).
The Commission’s advice has also emphasised the significant risks involved in pursuing a net based approach, including the fact that carbon stored on land is increasingly vulnerable to disturbance in a warming climate.
A policy approach that relies so heavily on forest-based removals from exotic forestry is unnecessarily high risk. As the recent OECD survey of New Zealand has made explicit:
Relying so heavily on forest offsetting is risky. Gross GHG emissions, notably CO2, linger in the atmosphere for hundreds to thousands of years. To be a full offset for these long-lived emissions, forests would need to remain in existence for equally as long, something no policy can be realistically expected to guarantee, especially in a warming world.
The Commission has also pointed out the co-benefits of gross emissions reductions “including healthier homes and buildings, new market opportunities, and improved lives and choices for young people and future generations.”
It is not clear from the consultation document why the Government has chosen to not pursue a gross emissions reduction approach and/or how the co-benefits of such an approach have been assessed. It is also not clear how the risks of a land based net emissions approach (as set out the Commission) have been taken into account.
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Risk of delivery
The Commission’s monitoring report of July 2024 makes it clear that “[t]here are significant risks to meeting the second and third emissions budgets and the 2030 biogenic methane target under current policies.”
In the Commission’s view, “[m]ost areas show risk of underachievement against benchmark outcomes or goals.” The report provides an in depth assessment of the delivery risks, including on a sector by sector basis. The report used a policy scorecard to evaluate risks across four criteria:
Main policy tools: are there clear policy mechanism(s) capable of delivering the outcome...?
Funding and finance: are levels of funding sufficient and plans to mobilise private funding credible?
Barriers and enablers: are other barriers and enablers being addressed?
Timeline: Are appropriate timelines in place to meet the emissions budget?
This assessment of delivery risks is most relevant to the second emissions budget period (2026–2030) and third emissions budget period (2031–2035), as this in when policies will have the most effect.
The Commission’s assessment shows that agriculture and transport sectors are most at risk of not achieving required reductions:
In agriculture, this is “due to the absence of a confirmed emissions pricing system or alternative policy measures for reducing emissions.”
In the transport sector, this is due to the fact that “current policy tools on their own are unlikely to drive a shift to lower-carbon modes of transport and to decarbonise freight and aviation” in addition to the “risk that uptake of low and zero emissions light vehicles will fall behind benchmark levels due to reduced policy support.”
Bearing in mind this assessment, it is striking that the ERP2 consultation materials do not include any discussion or assessment of delivery risks in relation to the ERP2 policies (either baseline measures or new measures). In ELI’s view, this cuts across the need for effective consultation on the emissions reduction plan. This lack of delivery risk analysis also undermines the credibility of the proposed policies and risks misleading the public. We provide more detailed submissions below as to the inadequacy of the consultation process.
Appendix 2 of the Technical Annex to the ERP2 Discussion Document does include intervention logic maps explaining the links between selected policies and emissions impacts. However, these logic maps do not address delivery risk. Furthermore, the logic maps rely on a raft of assumptions and dependencies which are not explained or justified using evidence. In addition, some of the assumptions appear to contradict the policy decisions and assumed impacts. For example, the appendix contains an assumption that “[t]he main current barrier to light EV uptake is high upfront cost”, which contradicts the Government’s decision to facilitate charging infrastructure to tackle the secondary problem of “range anxiety”, rather than reinstating a policy such as the Clean Car Discount that actually addressed the primary barrier of high upfront cost.
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The need for legislative and policy alignment
The Commission’s advice to the Government on ERP2 states explicitly that:
Taking action on climate change will require effective actions across all of society. To support this, legislative and policy alignment across government agencies will be necessary for delivering low emissions outcomes. Alignment will be needed across many pieces of legislation, including the Local Government Act, the Building Act and Code, and the reforms of the Resource Management Act (the Spatial Planning Act and the Natural and Built Environment Act).
The Commission evaluated this legislative and policy alignment and made it clear that “there is a risk that Aotearoa New Zealand’s institutional and regulatory environment is not sufficiently aligned to enable meeting the second emissions budget or longer term emissions reduction targets.” The Commission went on to recommend that “the Government align and coordinate institutional and regulatory outcomes within and between levels of government and across all sectors of the economy to support the coherent implementation of the second emissions reduction plan.”
Despite this clear advice, the ERP2 consultation materials make no reference to the legislative and policy alignment required to meet the second emissions budget, or longer term emissions reduction targets. As the consultation documents make no reference to the Commission’s advice, it is not clear why such key provisions of a carbon emissions reduction response have been ignored. We provide further submissions on this absence of reference to the Commission’s ERP2 advice below.
Not only is the consultation material for ERP2 lacking this key information, but it is also clear from the Government’s legislative programme that major legislative changes are being prepared that have little regard to, and in some cases directly contradict, the urgent need to reduce carbon emissions. Recent examples include the Government’s proposals to reduce the protections on wetlands (which are key carbon sinks) to facilitate coal mining and policy development aimed at rolling back building insulation standards.
The policy and legislative alignment that will be necessary for delivering the urgent reductions in gross emissions required to meet our climate targets is clearly not in place.
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Consultation
The emissions reduction framework in the CCRA is aimed at the development and implementation of clear and stable climate change policies, with the intention of providing greater predictability for all those affected through the provision of advance information about what will be required to meet our domestic emissions reduction goals.
To minimise changes to climate policies, the CCRA framework requires emissions reductions plans to be thoroughly and transparently considered before they are published, with a plan development process that requires the provision of independent expert advice from the Commission and multiple opportunities for public input. Likewise, except for minor or technical changes, existing emissions reductions plans can only be changed following the same thorough and transparent process.
In ELI’s view, the Government’s purported consultation on changes to ERP1 and its proposals for ERP2 is at odds with the thorough and transparent policy-making required by the CCRA. We do not know how the Minister can consider this consultation process “adequate” when:
The Government has chosen not to respond directly to the Commission’s ERP2 advice in the ERP2 Discussion Document, despite the Government having received that advice more than six months before the Discussion Document was released. The Government has stated that “ERP2 will be the Government’s response to the Commission’s advice. This means it may contain additional detail and discussion related to that advice beyond what this discussion document presents.”
In order to make informed submissions, the public should have been provided with the government’s provisional responses to the Commission’s advice as part of this consultation in order to be able to assess the strengths and weaknesses of the Government’s proposed approach.
From our comparison of the Government’s proposed policy direction against the Commission’s advice in relation to ERP2, it appears that some of the key policy proposals in the ERP2 Discussion Document (including both removing policies from ERP1 and the new proposed policies for ERP2) either fail to address the concerns raised by the Commission or are in direct opposition to the Commission’s recommendations. The Government has provided no information on these divergences from the Commission’s advice.
The Government has already chosen to discontinue the ERP1 policies listed in Appendix 3 to the ERP2 Discussion Document, prior to this so-called consultation. Beyond this, even if the Government actually had an open mind as to the future of these policies, there is inadequate information in the ERP2 Discussion Document for the public to provide intelligent responses to the government’s proposals as:
no information has been provided as to the government’s justifications for the proposed changes to ERP1; and
the only information about the likely impacts of those policy changes appears to be Table 2 in the Technical Annex to the ERP2 Discussion Document which indicates that the modelled result of discontinuing just three of the ERP1 policies (the Clean Car Discount, the GIDI Fund and introducing agricultural emissions pricing from 2025) is increased emissions of 7.6 Mt CO2-e during the EB2 period, more than the total modelled impact of the Government’s new policy proposals for ERP2 of up to 4.1MtCO2-e during that same period. We note that it is only mentioned in the Technical Annex and not in the Discussion Document itself that the Government’s adjustments to the Clean Car Standard are actually modelled to increase emissions by 0.2MtCO2-e during that same period, taking the modelled net benefit of the Government’s ‘new’ policies down to only 3.9MtCO2-e of reductions.
It is unclear what policies will actually remain in ERP1, as it seems likely, based on the Commission’s monitoring report and the latest progress report released by the Climate Change Chief Executives Board, that the list of discontinued policies in Appendix 3 of the ERP2 Discussion Document does not include all of the ERP1 policies that have been or are intended to be discontinued by this government. It is also therefore unclear whether the gutted ERP1 will continue to include the required elements specified in s5ZG(3) of the CCRA.
Even when some ERP1 actions are apparently still active, the Discussion Document does not mention and build on those existing policies. A striking example of this is in relation to the actions in the Empowering Māori chapter of ERP1. Those actions include establishing a platform for Māori climate action, supporting development of a Māori climate strategy, and activating kaupapa Māori, tangata Māori solutions. While the Commission’s monitoring report states that delivery confidence is high for these policies, there is no mention of these existing initiatives in the ERP2 Discussion Document.
The New Zealand Emissions Trading Scheme
A key example of the Government’s proposals directly contradicting the Commission’s advice is in relation to the NZ ETS. In its advice on ERP2, the Commission recommended that the Government:
Align the emissions pricing system with delivering the desired levels of gross emissions for the second and third emissions budgets, and with the 2050 net zero target, by:
a. amending the NZ ETS to separate the incentives for gross emissions reductions from those applying to forests
b. providing durable incentives for net carbon dioxide removals by forests through to, and beyond, 2050.
The redesign of emissions pricing incentives must take into account the unique characteristics and historical circumstances of land owned by Māori and options must be developed in partnership with iwi/Māori under Te Tiriti o Waitangi/The Treaty of Waitangi.
These recommendations were made as a result of concerns about the ability of the NZ ETS to drive gross emissions reductions, and to provide appropriate incentives for necessary afforestation after the NZ ETS reaches net zero in supply and demand terms, which is projected to occur in the mid 2030s.
In direct opposition to the Commission’s recommendations, the Government has ruled out making any significant changes to the NZ ETS and, despite its recognised flaws in driving emissions reductions, has chosen to make the NZ ETS the centrepiece of its climate policy.
The lack of direct engagement with the Commission’s advice and recommendations in the ERP2 Discussion Document has allowed the Government to give a misleading impression to submitters about the efficacy of the NZ ETS and the Government’s control over the scheme’s settings. For instance, the Discussion Document and the associated Technical Annex make liberal reference, implicitly and explicitly, to the metaphor of the “waterbed” effect in relation to emissions from sectors covered by the NZ ETS:
If you jump on a waterbed, it sinks in one place and rises in another, but the amount of water in the bed remains the same. The waterbed effect applies the same concept to emissions in an ETS. If emissions are reduced by one participant, this frees up allowances for another participant to increase their emissions, such that total net emissions remain the same.
This idea is used in the ERP2 Discussion Document to give the impression that policies to directly reduce gross emissions in sectors covered by the ETS are largely pointless. However, the waterbed metaphor only holds if it is assumed that the amount of water in the bed cannot be changed. This is not true of the NZ ETS. Leaving aside the issue of the large amount of surplus NZUs in the system, the Government does have control over how many units it releases into the scheme each year. In the Commission’s advice to the Government about NZ ETS settings for the coming years, the Commission offered the Government the option of reducing the quantity of units in releases to account for the effect of non-NZ ETS policies that reduce emissions – a prime example being the installation of an electric arc furnace at the Glenbrook Steel Mill, which is projected to permanently reduce emissions by 800,000 tonnes of CO2e per annum. In the Commission’s view:
tightening the NZ ETS unit limits would help lock in the material downwards shift in emissions caused by the complementary policy as an additional contribution to meeting targets, especially the NDC, while maintaining the incentives for other NZ ETS participants at the same level as before.
The Commission viewed this as a viable option, but deferred to advise its adoption in light of the Government not yet making clear its preferred approach to the issue in the second emissions reductions plan. In the Government consultation relating to those settings, it did not quantify this option but said that feedback from that consultation “will inform the design of this option before consideration by the Minister and Cabinet.” We are not aware of this analysis having been publicly released. However, the Government has obviously declined to select this option when choosing the settings for the NZ ETS for the year (released 20 August 2024).
More troublingly, however, the Government gives the impression in the ERP2 Discussion Document, through reference to the waterbed effect and otherwise, that the NZ ETS provides effective incentives for market participants to reduce their emissions. However, the Commission has consistently advised the Government that the NZ ETS is not effective at driving gross emissions reductions, owing to what the OECD refers to as the “unique” design of the NZ ETS which places no limits on the quantity of forestry units accepted in the scheme.
The Government does recognise in the ERP2 Discussion Document that the NZ ETS does not give the Government the ability to control when and how emissions reductions occur, which means that it cannot be certain that the NZ ETS will drive the necessary emissions reductions required in the second emissions budget period. However, rather than keeping previous policies (such as the Clean Car Discount or the GIDI Fund) that would have directly addressed the capital costs of clean technologies (the major barrier to their uptake), the Government has removed those policies and refused to replace them based on the unsupported assertion (itself based on the spurious waterbed metaphor) that “[s]ubstitution policies can drive emissions reductions that displace more cost-effective reductions that would have otherwise occurred due to the NZ ETS.”
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Agriculture
Another key area where the Government’s proposed approach directly contradicts the Commission’s advice is in relation to agriculture. ELI wishes to provide some brief submissions on this departure from the Commission’s advice, due to the agricultural sector’s status as the country’s highest emitting sector.
In its advice for ERP2, the Commission recommends that the Government:
Advance the agricultural emissions pricing system to:
a. continuously broaden the range of recognised low emissions practices and technologies
b. incentivise gross biogenic methane emissions reductions in a manner consistent with achieving the 2030 biogenic methane component of the 2050 target and putting the country on a trajectory to achieve the 2050 target in full.
In direct opposition to this recommendation, the Government has chosen to delay implementation of an agricultural emissions pricing scheme until 2030, meaning that whatever system that eventuates will be of little use to meet the second emissions budget and the 2030 biogenic methane target.
The Government’s modelling suggests that this delay will result in 1.9Mt CO2e of extra emissions during the second emissions budget period, based on a comparison between the Government’s 2023 emissions projections and the ERP2 baseline modelling being used for this consultation.
However, it is likely that this figure understates the potential effect of the delay, as the ERP2 baseline model that the Government is using for this consultation contains more optimistic assumptions about the availability, efficacy and cost of agricultural emissions mitigation technologies than the asumptions used for the 2023 emissions projections – one of the contributing factors as to why agricultural emissions during ERP2 are 0.6 MtCO2e less in the ERP2 baseline model than the 2023 emissions projections just based on modelling differences.
Rather than relying on the supposed efficiency of emissions pricing as it has for other sectors, the Government has chosen an approach that relies on agricultural emissions mitigations technologies, many of which are not yet commercially available, or do not yet exist. Their ‘new’ policy for ERP2, labelled “Agricultural emissions pricing and mitigation technologies”, is supposedly modelled as reducing emissions by 0.1 MtCO2e in the second emissions budget period and 5.5 MtCO2e in the third.
However, this modelling was done on the basis of the assumed effects of possible technologies, rather than by assuming possible prices or incentive payments. It has used even more optimistic assumptions about the availability and efficacy of technologies that do not yet exist than it did in its baseline modelling. Even if their optimistic assumptions around efficacy and availability are borne out, the Government has not mentioned how much it would cost to achieve the high levels of uptake they have modelled.
ELI is also concerned that the ERP2 Discussion Document does not take into account the emissions increases that will result from the Government’s other reforms relating to agriculture. For instance, as the Commission observes in its monitoring report, the emissions co-benefits of the implementation of freshwater quality policies were factored in when the emissions budgets were set. The deferral of the implementation of those policies increases the risk that those emissions reductions co-benefits will not occur in the second and third emissions budget periods.
While the Government claims in the ERP2 Discussion Document that New Zealand producers are “among the most efficient producers in the world in terms of emissions intensity”, it is increasingly being recognised internationally that New Zealand’s farming practices are unsustainable. For instance, the Food and Agriculture Organization has estimated that for every dollar of agrifood production in New Zealand, there are 84 cents of hidden costs, with the impacts of nitrogen pollution being a significant factor.
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Submission ends.