The New Zealand emissions trading scheme (ETS), now in its fourteenth year of operation and much criticised for (so far) failing to cut emissions, is the centrepiece of the government’s climate action. Judging from Budget 2021, it will remain that way for years to come.
Auctioning of emissions units began in March, and 2022 will see the introduction of a falling cap on net emissions of long-lived greenhouse gases. (The precise level of the cap will be announced later in the year.)
If the level of allowed emissions is low enough, ideally low enough to fulfil the country’s obligations under the Paris Agreement, the carbon price could rise substantially. A key budget announcement is that all revenues from the auction – $3bn over five years, according to minister for climate change James Shaw, and potentially much more – will be dedicated to emissions reductions.
Shaw is trying to argue that he is playing a long game, and the Zero Carbon Bill, which dominated climate politics in New Zealand for the whole of the Labour-led government’s first term, is certainly a major accomplishment.
So could ETS revenues be the source of funding for the low-emission transition?
They would be at least a good start. According to the International Energy Agency’s (IEA) Net Zero 2050 report, the energy sector needs an extra 2% of GDP invested per year. Even 1%, which for New Zealand would be $3bn, would go a long way. That would cover the Lake Onslow pumped-hydro scheme, for example, now under consideration in the “NZ Battery” project.
Other budget announcements can look like small change in comparison. There is $14m for “just transition initiatives”, and $62m for further research on agricultural greenhouse gas emissions and to help farms prepare mitigation plans.
The low-emission vehicle fund will gradually rise from $6m to $25m a year, fulfilling a 2020 election pledge. There is $344m for a complete rebuild of Scott Base, the Antarctic research station established in 1957 that is essential to New Zealand’s polar climate research program. The Green Investment Fund, a 2017 initiative that has so invested $50m in industrial decarbonisation, gets a $300m boost.
But, in the words of Greenpeace’s Amanda Larsson: “This looks like tip-toeing away from a burning building when you should be running.”
There is $40m to administer the promised fuel-efficiency standard, and an exciting and mysterious $300m held in reserve for not-yet finalised electric vehicle incentives. This is the strongest hint yet that incentives will eventually materialise, after they failed to advance through parliament in 2019.
Unlike many other developed markets, EV sales in New Zealand have remained stagnant for years, while high-emission diesel utes continue to fly off the car transporters onto driveways and clogged motorways.
For more hints of future directions, we have to look elsewhere. This month, the minister of transport, Michael Wood, released Hīkina te Kohupara – Kia mauri ora ai te iwi – Transport Emissions: Pathways to Net Zero by 2050, a report outlining potential pathways to a zero-emission transport sector. As the report points out, New Zealand’s road transport emissions are the 5th highest in the OECD, having increased faster than any other country.
Achieving the emissions pathway suggested by the Climate Change Commission will require steep reductions in driving (40% by 2035), a massive expansion of public and active transport, more compact cities, the introduction of alternative fuels, and a shift of freight to rail and coastal shipping: essentially, pulling hard on every available lever.
Hīkina te Kohupara represents a massive change in thinking by a ministry previously identified with cars and motorways. The report also revealed that CO2-based road-user charges are on the way.
While budget announcements are important, much of the decarbonisation of transport will take place at the local level. This is where the cycleways will be built, the buses and local trains will run, where town plans determine housing density, where councils decide to subsidise airports and where many roading decisions are made.
This year many local authorities have developed and adopted both transport plans and long-term development plans. Despite some of them declaring climate emergencies, there is still momentum towards urban sprawl, more roads, and supporting aviation over passenger rail.
The capital, Wellington, is currently involved in a debate about expanding its airport and Christchurch City is promoting the building of a large new airport in Central Otago.
How the government reacts to this report and to the advice of the Climate Change Commission (set to be finalised at the end of the month) will set the overall national goals and pathways for decarbonisation. But it has already been announced that the public sector will become carbon neutral by 2025.
The budget allocates $67m to implement this program, including a boost of $20m to the successful State Sector Decarbonisation Fund, and $42m for leasing low-emission vehicles.
Analysis of public sector emissions shows that for many agencies air travel is significant. But there were no announcements on how the aviation sector, both domestic and international, can decarbonise. As yet, the government has not reacted to the parliamentary commissioner for the environment’s recommendation of a departure tax for international air travel.
For those wanting to see a transformation in rail, including the re-establishment of regional passenger rail services, the budget is disappointing. 2021 is the European Year of Rail, which involves the re-establishment of sleeper trains, the expansion of fast rail services and, in some countries, a push by governments to replace short haul air links with train services.
In New Zealand, it is more about patching up a run-down rail network primarily to support freight services. This was already signalled in the Future of Rail report released in April. The budget allocates $1.3bn towards rail including replacing wagons and locomotives. This includes $449m towards track and infrastructure, including maintenance and renewal across KiwiRail’s 3,700km network.
But the total funding allocated is about the same as the cost of building just one highway, the 27km Transmission Gully expressway into Wellington. There are no definite plans to build fast rail between Auckland, Hamilton and Tauranga. And no plans to re-introduce a night train between Auckland and Wellington.
Yes, climate politics does require winning the long game. But in the short term, that requires building unassailable support for climate action. New Zealanders need to see more positive changes happening all around them to start appreciating the benefits of ending fossil fuels. For now, that tipping point is still tantalisingly out of reach.
Robert McLachlan is a professor in applied mathematics at Massey University
Dr Paul Callister is a senior associate at the Institute of Governance and Policy Studies, at Victoria University of Wellington