NZ will meet first target for transport emissions cuts without EV subsidy, Simeon Brown says

New Zealand will still meet its first target for cutting transport emissions even without government discounts for EVs, Transport Minister Simeon Brown says.

Brown has received advice on the climate impacts of the government's call to scrap the Clean Car Discount, which he said will be publicly released this week.

The minister said the advice showed scrapping EV payments would not derail the country from meeting its first carbon budget, which runs from 2022-2025.

He did not share what the advice said would happen beyond that.

However, other reports and briefings on climate policies and targets suggest the government's policy pivot could bite budgets after 2025, unless Cabinet comes up with substantial replacements for scrapping EV payments, delaying pricing on farm emissions, and ditching subsidies for companies switching away from coal boilers.

New Zealand has three budgets capping its planet-heating gases, running from 2022-25, 2026-2030 and 2031-2035. Each five-year period, the cuts get steeper.

How big is the climate hole?

The Climate Change Commission warned last week that seemingly small delays during the first budget could have major impacts on the second and third.

For example, it said, uptake of EVs this decade could make or break New Zealand's ability to meet its 2030-2035 transport targets.

Transport is not the only area where today's decisions can snowball.

In New Zealand's biennial emissions report, officials made a forward-looking snapshot of how much they thought 2022 policies would impact future emissions.

In 2025, policies already in place in 2022 would be saving the country 4.2 million tonnes of emissions a year, they estimated.

By 2030, the impact of those same policies would more than double to 10.1m tonnes - without changing said policies.

Climate policies can work a little like compounding interest on savings, growing in impact over time.

The open question is how big a gap the government has opened that it needs to fill during 2024.

The Climate Commission will release a stocktake of progress but not until mid next year.

In the meantime, the government itself has access to official briefings that will give it a steer. Officials declined RNZ's request to publicly release these under official information laws this side of Christmas.

Some clues, however, are available that give a hint of the task ahead.

Why it matters

New Zealand's first two emissions budgets - for 2022-2025 and 2026-2030 - are building blocks for meeting the country's international climate pledge, under the Paris Agreement.

Failing to meet the budgets means paying more for offshore credits, while beating them would save on spending money overseas.

Here is why.

Under the Paris Agreement the government has promised to shave around 150 million tonnes off normal greenhouse gas levels from 2021-2030 (roughly equal to culling two years' worth of emissions).

Paris requires countries to make their best efforts, compatible with keeping the planet under 1.5C-2C.

New Zealand's target was set in the full knowledge there was almost no chance of making what the government of the day considered a respectable contribution to the climate effort solely by making savings within New Zealand.

Instead, the plan was to make around 50 million tonnes of savings here - the most the commission thought realistic.

The other 100m tonnes were to be purchased from overseas, likely from Asia-Pacific countries, in the form of renewable energy or other projects. That will cost a minimum $3 billion from the public purse (but likely less than making the carbon savings here).

Those proportions are not set in stone, however.

Cabinet papers from July show the previous government wanted to try to beat the next budget, so it could spend less overseas. Cabinet asked government departments to prepare options for undershooting the 2026-2030 emissions cap using activities such as planting native forests. But those plans were in their infancy, and subject to feasibility checks.

New Climate Change Minister Simon Watts also made upbeat comments before the election about doing more inside New Zealand and spending less offshore.

As things stand, though, even meeting the budgets is looking difficult, let alone beating them.

Crucial years

When it comes to meeting New Zealand's international target, the years from 2026-2030 will be critical. With cuts having started slowly during 2022-2025, the five years after that are something of a catch-up period.

The Climate Commission calculates we need a total of 43m tonnes savings in the five years to 2030, to stay inside the budget.

Last week it told the government it was heading to be around 20m tonnes short.

Existing policies put New Zealand on track to make around 23m savings, while "planned" but not yet implemented measures could have saved another 14m, possibly shrinking the gap to around 7m.

But that assessment was based on policies in place before the election, several of which have been ditched, delayed or called into question.

The new government has promised it will not walk away from the budget, meaning it now has a gap to fill.

Farming

Even under Labour, pricing farming emissions from animals would not have kicked in until the second budget post-2025, but would have helped meet budgets from then.

The new government says it will defer pricing farming's methane and nitrous oxide until as late as 2030 - possibly sooner, but not from 2025.

According to an August 2023 Cabinet paper prepared for the then-Labour government, a six-month delay to making farmers record and pay for their greenhouse emissions would forgo emissions savings of around 0.54 million tonnes. On that basis, a year's delay could raise emissions by roughly a million tonnes.

Any progress on cutting farming emissions before 2025 was expected to be mainly a side-effect of rules to clean up freshwater and cap the use of nitrogen fertilisers.

According to the previous government's Emission Reduction Plan (published in 2022), government policies were estimated to cut farming emissions anywhere from 0.3 to 2.7m tonnes from 2022-2025.

The coalition government has announced it will repeal the freshwater policy and replace it with a new policy yet-to-be determined, potentially opening a hole there, too.

Farming emissions may still fall a little, because of farmers getting more efficient, and cow and sheep numbers dropping for other reasons, including incentives to convert farmland to forests to earn credits under the Emissions Trading Scheme (which will not change).

But the trajectory is likely to be slower than it would have been after 2025, unless something changes.

In an August 2023 Cabinet paper, officials reminded the previous government that any delay in pricing farm emissions could fall on other parts of society.

"Without reductions in agricultural emissions, New Zealand will need to reduce more emissions elsewhere in the economy, generate more [carbon] removals, or purchase more overseas emissions in order to achieve our [international climate target].

"This may impact household costs for energy and fuel, depending how the shortfall is met," the advice said.

Transport

Transport was already in danger of struggling to make much contribution in the short-term, after the previous government scrapped an obligation to use biofuels. Ditching the biofuel mandate was welcomed by many environmental groups, who feared unintended consequences, but it left transport without a reliable, quick option for carbon savings.

The new government made further changes, dropping EV subsidies and pouring cold water on councils' efforts to explore walking and cycling projects.

As for the size of the transport hole, a report by Concept Consulting for EV lobby group Drive Electric said repealing the Clean Car Discount will reduce EV uptake enough to boost emissions by 0.9 million tonnes by 2030, compared with keeping the policy. The government rejects the figure.

But it is during the post-2030 budget, not the first or second budget, when the country is most likely to feel the impacts of losing momentum on EVs now, according to last week's advice from the Climate Commission.

"The large jump in emissions reductions expected from transport in the third emissions budget (2031-2035) relies on a rapid scaling up of electric vehicle sales in the 2020s. Without that early scaling up, a higher-emissions vehicle fleet will be locked in, making the necessary emissions reductions from transport more costly and disruptive," the advice said.

The previous government's package of transport policies (from its emissions plan dated May 2022) also included a clean car standard for lowering tailpipe emissions, working to reduce pollution from large trucks and freight, and moves to boost cycling, walking and public transport.

Altogether, those initiatives were estimated to save 1.7 to 1.9 million tonnes of emissions in the budget period to 2025, with potentially much bigger impacts during the decade after that.

But with the biofuels mandate now scrapped by Labour, the Clean Car Discount gone and a push towards walking and cycling on pause, those savings are in question.

On walking and cycling, the previous government had a target for reducing private car travel by making foot- and bike- travel easier.

New minister Simeon Brown instructed councils to halt work on proposals to boost walking and cycling.

He told RNZ on Tuesday the work in question was not at the construction stage, but "just simply writing reports, councils writing endless reports" on how to reduce the distance travelled using private vehicles.

Burning coal and gas for energy

The energy and industrial sector is big user of coal and gas, and it was going to be the last government's heavy hitter for saving emissions from 2026-2030.

Of the 43 million tonnes' savings the commission estimates are needed during that period, energy and industry was going to deliver 17m, more than double the expected contribution from any other sector.

Even during the current period, 2022-2025, policies on energy and industry were expected to cut emissions by 2.7-6.2m tonnes, according to the previous government's Emissions Reduction Plan.

The bulk of the impact was coming from grants to large companies to help them replace their coal boilers - something the incoming government will scrap, on the basis companies should pay for this work themselves (and will, if the carbon price is high enough, National says).

Alongside this, there was work underway to boost energy efficiency in buildings (home insulation and retrofitting office buildings), develop plans to transition the country off gas, and improve electricity transmission and distribution (something National is also committed to). The previous government was also working on national standards for industrial emissions.

Some of the climate savings from the now-defunct corporate grant scheme - called GIDI, or Government Investment in Decarbonising Industry - are locked in whatever happens, and will help meet future emissions budgets.

As of 2022, 38 projects had been funded, which Labour said would save 6.56m tonnes over their lifetimes.

Since then, grants have been committed to Fonterra - saving around a million tonnes by end of 2030 - and NZ Steel, saving around 7.2m from 2027-2035 (0.8m a year), or possibly more if the company can access more scrap metal to replace virgin material. (These estimates are from official impact assessments earlier this year).

With the grants on the chopping block, there will be no further savings from GIDI, leaving the work up to other measures.

The new government has a year from now to design and publish its 2026-2030 emissions plan.

Snapshot from December 2022:

Growing impact: How 2022 government policies were expected to affect annual emissions, 2025 versus 2030

• Energy emissions: 13.59 million tonnes a year in 2025; Down to 12.05m in 2030
• Transport: 15.11m a year in 2025; Down to 14.8m in 2030
• Agriculture: 37.43m a year in 2025; Down to to 36.3m in 2030
• Total effect of 2022 climate policies in 2025: 4.2m tonnes of savings a year.
• Includes: 2.3m from energy, 0.2 million from transport, 0.7 from farming
• 2025 impact, including carbon absorbed by forests:11.4m savings
• Total effect of 2022 climate policies in 2030: 10.1m savings
• Includes: 4m from energy, 0.4m from transport, 2m from farming.
• 2030 impact, including carbon absorbed by forests: 30.1m savings

Source: New Zealand 5th Biennial Report under the UN Framework Convention on Climate Change