Government and climate change
The Government is taking active steps to move New Zealand towards lower greenhouse gas emissions and greater resilience to a changing climate. This includes international and domestic reduction targets, a Climate Change Commission, changes to the Emissions Trading Scheme and the He Waka Eke Noa partnership on agricultural greenhouse gas emissions.
The Paris Agreement is the latest global agreement on climate change. It was adopted under the United Nations Framework Convention on Climate Change (UNFCCC) in December 2015 and commits all participating countries to act on climate change.
The Paris Agreement aims to:
- Keep the increase in global average temperature well below 2°C above pre-industrial levels, while pursuing efforts to limit the temperature increase to 1.5°C
- Strengthen the ability of countries to deal with the impacts of climate change
- Make sure that financial flows support the development of low-carbon and climate-resilient economies.
New Zealand is a signatory to the Paris Agreement, which commits us to:
- Setting and regularly updating a domestic emissions reduction target (also known as a ‘Nationally Determined Contribution’ or NDC)
- Continuing to report on our emissions and on progress towards meeting our target
- Planning for adaptation to a changing climate
- Continuing to provide financial support to assist developing countries' mitigation and adaptation efforts.
Under the Paris Agreement, New Zealand has committed to reducing greenhouse gas emissions by 50% below 2005 levels by 2030.
A credible, long-term greenhouse gas emissions reduction target is an important part of ensuring that New Zealand can meet its international commitments and make a smooth transition to a low emissions future.
This is achieved through the Climate Change Response (Zero Carbon) Amendment Act 2019 (also known as the Zero Carbon Act), which was passed into law in 2019. It provides a framework for New Zealand to:
- Contribute to the global effort under the Paris Agreement; and
- Prepare for, and adapt to, the effects of climate change.
The legislation puts in place long-term targets for reducing New Zealand's greenhouse gas emissions:
- Carbon dioxide and nitrous oxide (the 'long-lived' gases) are to reduce to net zero by 2050
- Methane emissions are to reduce to 10% below 2017 levels by 2030, and 24-47% below 2017 levels by 2050.
This is the first time there have been different targets for different gases in New Zealand, recognising the different warming effect of methane in the atmosphere.
The legislation also introduced a series of emissions 'budgets' to act as stepping-stones toward the 2050 targets. An emissions budget is a set quantity of emissions allowed during a defined period of time. The climate change legislation requires each emissions budget to cover five years, except for the first budget which covers the period 2022-2025. Three budgets must be in place at any one time.
The legislation established a Climate Change Commission (see below) to advise the Government on those emissions budgets. It also requires the Government to have an Emissions Reduction Plan that describes how New Zealand will meet the emissions budgets and make progress towards the 2050 targets. The legislation also puts in place specific requirements for the Government on adaptation.
The Government's first Emissions Reduction Plan was launched in May 2022 and sets out emissions budgets out to 2035. You can find more information here. The Government also announced a package of funding to support the initiatives in the Emissions Reduction Plan.
Climate Change Commission
As noted above, the Climate Change Commission - He Pou a Rangi - was established in November 2019. Its purpose is to provide independent, evidence-based advice to successive governments on New Zealand's greenhouse gas emissions and the potential impacts and effects of climate change. It also monitors and reviews progress towards the country's goals for reducing emissions and adapting to a changing climate.
One of its early pieces of work was to develop a package of advice for the Government on:
- The first three emissions budgets covering 2022-2035
- The direction for the Government's Emissions Reduction Plan
The package also included advice on two other questions specifically requested by the Minister of Climate Change: (i) whether New Zealand's current Nationally Determined Contribution under the UN Paris Agreement is compatible with contributing to global efforts to limit warming to 1.5°C above pre-industrial levels; and (ii) whether further reductions in biogenic methane might be required by New Zealand as part of those global efforts.
The Commission's advice was released in June 2021, following extensive public consultation. The Government then released its Emissions Reduction Plan in May 2022.
Emissions Trading Scheme
The Emissions Trading Scheme (ETS) is the Government's main tool for reducing greenhouse gas emissions in New Zealand and was established in 2008.
The ETS puts a price on greenhouse gas emissions, creating a financial incentive for businesses to reduce their emissions and landowners to earn money by planting forests that absorb carbon dioxide as the trees grow.
One emission unit, known as a New Zealand Unit or ‘NZU’, represents one metric tonne of carbon dioxide.
The Government provides NZUs to eligible foresters for carbon dioxide that is absorbed by their trees. The foresters can then sell these NZUs on the ETS market. Emitters (businesses with legal ‘surrender obligations’) must purchase enough NZUs to cover their emissions. These NZUs are then surrendered to the Government. It's up to the emitter to decide whether they reduce their emissions or purchase NZUs. The price the emitter pays for NZUs (also known as the carbon price) is set by supply and demand.
The ETS was intended to be an 'all sectors, all gases' scheme. However, agriculture is not included other than for reporting purposes. This means carbon dioxide is the only gas currently priced.
The ETS was reformed in 2020, via the Climate Change Response (Emissions Trading Reform) Amendment Act, to improve its effectiveness. The following changes were introduced:
- A cap on total emissions covered by the scheme that declines over time, in line with the 5-yearly emissions budgets and the 2050 targets
- Auctioning introduced from 2021 to allow the Government to sell NZUs from within the cap
- Establishment of controls to prevent unacceptably high or low prices
- Price floor of $20/NZU, which will increase by 2% for each subsequent year.
- Cost containment reserve triggered if the unit price reaches $50, which would release more NZUs into an auction to ease demand. This will increase by 2% for each subsequent year, based on forecast annual inflation.
- Phase-out of industrial allocation from 2021 at a rate of 1% per year until 2030, 2% per year from 2030-2040, and 3% per year from 2040-2050
- Changes to improve forestry's participation
For more information on the ETS, see the Ministry for the Environment website or the Ministry for Primary Industries website. You can also watch this video explaining the NZ ETS, produced by the Ministry for the Environment.
He Waka Eke Noa
Although agricultural greenhouse gas emissions are not included in the ETS, they are included in New Zealand's 2050 climate change targets, so a mechanism is needed to ensure reductions can be achieved. The Government has partnered with industry and Māori to develop this mechanism. The partnership is called He Waka Eke Noa and will see agricultural greenhouse gas emissions priced at the farm level by 2050. Because this is such an important topic, we have created a dedicated page on the He Waka Eke Noa partnership.
Published: December 2, 2021