Climate Change Commission urges new targets without forestry in new report

The government's plans to cut emissions will not be enough to meet its own targets, the Climate Change Commission says, once again warning we can't plant our way to success.

In a major change, it has for the first time called for additional, concrete targets for emissions reductions that exclude the benefits provided by planting trees.

This could mean more emphasis on reduction efforts, rather than forestry investment alone.

Commission chair Rod Carr warned changes would be needed to get back on track to the government's goals.

"Our current pathway of policies will not get us there," he said.

It's part of draft advice released by the Commission in a nearly 200-page report on how to slash enough emissions in the 2026-2030 period to be on track to be carbon neutral by 2050.

The report covered what the Commission viewed as the most critical areas that urgently needed to be strengthened in that time, and broadly concluded deeper and quicker cuts were needed in some areas.

It called for quicker action on new renewable energy generation and electric vehicle charging infrastructure; more investment in public transport; direct funding for Māori to support emissions reduction; more support for farmers to transition, and a faster transition away from burning coal for heating in factories, schools and hospitals.

It included some timeframes, like completing cycleway networks in cities by the end of the decade. Rapid transport networks like light rail and bus lanes should also be progressed so they are on track for completion by 2035.

The Commission also appeared to have slightly strengthened its advice about phasing out of the use of gas and other fossil fuels for cooking and heating - including hot water - in homes and buildings. It said the government should "prohibit the new installation of fossil gas in buildings where there are affordable and technically viable" low-emissions alternatives.

It also urged improvements in the emissions efficiency of new buildings, saying "existing urban form in Aotearoa New Zealand is not compatible with our climate challenges".

Scroll down to see a bullet-point summary of the Commission's recommendations

Cut emissions, don't just plant trees

Some of the Commission's primary recommendations again took aim at current Emissions Trading Scheme (ETS) settings, saying it would make getting to net zero far too reliant on forestry instead of making real cuts to emissions.

For the first time the Commission recommended the government commit to targets for gross emissions reductions, alongside the current net targets.

It said these would need to be at a minimum 362 megatonnes of carbon dioxide equivalent emissions reductions (megatonnes) between 2025 and 2030, and 322 megatonnes between 2030 and 2035.

Most targets are currently calculated in 'net' terms - which takes into account carbon sucked up and stored by planting trees and vegetation.

Relying too heavily on forestry is a risk, because forests can burn down or get damaged by storms or pests which could lead to carbon being released back into the atmosphere.

The amount of estimated exotic forestry planted last year was 60,000, double what had been projected.

Having the additional "gross" measure would also ensure government policy can be tracked for climate impact, and help businesses see the overall direction of travel.

The Commission said the ETS in its current form risked undermining reduction goals by driving down the price of carbon, undermining incentives to transition to low-emissions technology. The government is currently reviewing the ETS.

The ETS is the single biggest individual tool New Zealand currently has for reducing emissions. It sets a price for carbon to incentivise businesses to change practices.

However, Climate Change Commission chair Rod Carr said the ETS was a tool - not a strategy in itself - and could not be relied upon alone to achieve all the reductions required even if changes were made. If changes were not made, it could even cease to be viable.

"The current architecture of the ETS will mean that by the middle of the 2030s … the emissions trading scheme could potentially cease to be a tool to get emissions reductions," Carr said.

The report also said the policy of allocating free ETS credits to hard-to-transition industries was not consistent with the government's long-term targets, and no longer proportional to the justification for having them - the risk of losses to offshore businesses.

"The global context has significantly shifted since industrial free allocation was first introduced," the draft advice said.

The Commission said the transition to net zero would create business opportunities, and benefit the environment, but reiterated failure to move would put New Zealand's global competitiveness at risk.

It said it was still possible, and affordable, to reach emissions reduction targets and budgets.

The majority of reductions in the second half of the decade is expected to come from industry and energy, while transport will be the main target for the third emissions budget.

However, decisions made before that third budget period will have a major impact on hitting that sector's targets.

Government's policy bonfire affects targets

The report gives a provisional assessment of the government's first emissions reduction plan and other climate actions. (It will have far more in-depth analysis of the plan next year).

It said transport was set to be the most off-track by the third budget period (2030-2035), after Prime Minister Chris Hipkins' policy bonfire dumped or delayed a number of climate projects.

The canned biofuel mandate amounted to half the cuts from transport up to 2035.

However, the report noted the uptake of EVs had been faster than projected, which would help offset the losses.

The Commission said the government had not given enough information to assess the credibility of targets for agriculture, which made assumptions about improvements in technology -but much of the tech to reduce farming emissions is still being developed.

It said the government had also overestimated the speed at which process heat could be changed to lower-emitting approaches.

Draft recommendations for 2026-2030 *

Part 1: Fundamentals

• Add gross emission reduction targets of at least 362 MtCO2e for the second emissions budget, and at least 322 MtCO2e for the third. As opposed to net emissions reductions, these figures do not include the benefit from forestry capture of greenhouse gases.
• This approach should also be applied for indicative targets out to 2050, and communicated to the public - along with, separately, expectations of forestry sequestration.
• Redesign the NZ Emissions Trading Scheme (ETS) to make it fit for purpose, including splitting out forestry. The Commission this month separately advised specific changes including reducing the number of units available, raising trigger prices for cost containment and auction reserves, and changing to a two-tier cost containment reserve.
• Work with iwi and Māori to accelerate reductions - including with a direct funding scheme for Māori land owners - and integrate matauranga Māori into local and central government policy processes, driven by Māori.
• Add adaptation to climate change (e.g. flood defences, managed retreat etc) into the government's Equitable Transitions Strategy, which aims to support lower-income households with the changes.
• Use policy levers like the Winter Energy Payment and welfare to support people to deal with the increased costs associated with climate action, rather than delaying climate action. This comes after the government delayed action on ETS pricing controls, saying it would put pressure on households during the cost of living crisis.

Part 2: Create low-emission options

• No delays to bringing agriculture into emissions pricing schemes by 2025. This could mean either using the government's alternative plan based on the He Waka Eke Noa proposal put forward by industry and government, or including agriculture in the ETS.
• Build better services to help farmers reduce emissions, co-designed by industry and Māori.
• Integrate the land use planning and consents systems with transport planning, and incentivise building upwards in main centres, rather than sprawl. Carr says the government's proposed reforms to the Resource Management Act are expected to take a decade and would come too late to have the effect the second budget period would require.
• Incentivise emissions-efficient, resilient buildings.
• Ban new fossil fuel installations in buildings unless there is no other option. This includes commercial coal-fired boilers and gas-fired hot water heating in homes. The ban would not apply to existing setups. The government has been considering options for setting a deadline on such a ban after a similar recommendation ahead of the previous ERP.
• Speed up renewable energy supply construction and expansion of networks to handle it.
• Expand the replacement of industrial fossil fuel-fired boilers, and set up a framework for decarbonising other industry sectors and processes.
• Set forestry goals for emissions mitigation, and for adaptation.
• Simplify planning for integrated transport networks and boost funding. This includes completion of major cycleways by 2030, and setting up for the completion of rapid transport systems - like rail lines and buse lanes with separated right-of-way - by 2035.
• Remove or tackle barriers for scaling up EV charging infrastructure, and provide incentives for zero-emissions commercial vehicles.
• Tidy up regulations and policy around gas capture at landfills, to improve measurement and efficiency.

Part 3: System transformation

• Advice, but no recommendations.

The process

The Commission must provide its final advice by the end of the year, to feed into the government's next Emissions Reduction Plan (ERP) due in late 2024.

The draft advice released today sets out strategy and policy options for achieving promised cuts in greenhouse gas emissions, acting as a roadmap for the government's next ERP. The Commission takes its draft advice to the public for two months of consultation - ending 20 June - before delivering the final version to the government by 31 December.

The ERP forms the government's actual suite of policies aimed at meeting its goals.

Those goals are laid out in the government's first three emissions "budgets" - which have already been set for the three periods: 2022-2025, 2026-2030, and 2031-35. These determine the reductions needed to deliver on New Zealand's contribution to global attempts to avoid catastrophic-level climate change.

These targets include reaching net zero emissions of long-lived greenhouse gases and reducing biogenic methane by between 24 percent and 47 percent by 2050. The second budget period includes total reductions of 43.5 megatonnes, with about 17.4 megatonnes -40 percent - of that coming from energy and industry, and up to 8 megatonnes coming from transport, agriculture and forestry combined. The remaining 3.3 megatonnes comes from waste and F-gases.

The Commission also separately monitors progress on meeting emissions budgets, and is set to release its first monitoring report in the middle of next year.

The Commission noted its 19 recommendations were aimed at high-priority, critical changes - but its broader advice on other aspects of climate planning on things like hydrogen fuel and should still be taken into account.

"Even in those sectors without recommendations, action is important to create the conditions for future outcomes, and to achieve emissions budgets and targets," it said.

* Recommendations have been rewritten, combined and condensed for brevity and clarity