Climate Change

28 Jan 2009

Greenhouse Gas Discharges – A Matter of National Interest

The long awaited decision of the Supreme Court in Greenpeace New Zealand Inc v Genesis Power Ltd [2008] NZSC 112 was released shortly before Christmas. In a split decision, the majority of the Court has confirmed that a consent authority must not consider the effects of the discharge of greenhouse gases on climate change when dealing with a proposal which uses non-renewable energy.

The only circumstance when the effects of the discharge of greenhouse gases on climate change can be considered by a consent authority (and even then only to a limited extent) is where a proposal involves the use or development of renewal energy. In such a case, a consent authority can only consider the beneficial effect of a reduction in greenhouse gas discharges made possible by the use of renewable energy.

History and Background

The history and background to this case was discussed in our earlier FYI (November 2007: Climate Change, renewable energy and CO₂ emissions under the RMA). To recap, the matter centres on the interpretation of amendments made to the Resource Management Act 1991 (RMA) by the Resource Management (Energy and Climate Change) Amendment Act 2004 (2004 Amendment).

The 2004 Amendment

In 2004, Parliament amended the RMA, limiting the power of consent authorities to consider climate change, as it intended to deal with greenhouse gases by the imposition of a carbon tax. The carbon tax proposal was subsequently dropped and recently replaced with an emission trading scheme (ETS).

The 2004 Amendment clarified the responsibilities of consent authorities and central government with respect to greenhouse gas emissions. Amendments were made to section 7 of the RMA to provide that “particular regard” be had to:

• The efficiency of the end use of energy;
• The effects of climate change; and
• The benefits to be derived from the use and development of renewable energy.

However the key amendment limiting the power of consent authorities when considering resource consent applications was the insertion of a new section 104E, which provides:

When considering an application for a discharge permit or coastal permit to do something that would otherwise contravene section 15 or section 15B relating to the discharge into air of greenhouse gases, a consent authority must not have regard to the effects of such a discharge on climate change, except to the extent that the use and development of renewable energy enables a reduction in the discharge into air of greenhouse gases, either -

1. in absolute terms; or
2. relative to the use and development of non-renewable energy.

The Supreme Court decision is set against this legislative backdrop.

Factual Background

Genesis Power Ltd (Genesis) proposes to build a gas-fired electricity generating plant in Rodney District and in May 2007 sought various declarations from the High Court to clarify how section 104E of the RMA applied to its proposal. In essence, the declarations challenged the High Court’s decision in Greenpeace New Zealand v Northland Regional Council [2007] NZRMA 87 (Mighty River case). The matter was removed directly to the Court of Appeal so that that Court could consider whether the High Court had been correct in the view taken in the Mighty River case.

The Mighty River case involved the decision of Northland Regional Council to grant Mighty River Power the necessary air discharge consent for its proposed coal-fired power station at Marsden Point. Greenpeace had appealed the Council’s decision to grant consent, to the Environment Court. The Environment Court had then struck out two grounds of the Greenpeace appeal, and it was this decision that Greenpeace appealed to the High Court.

The High Court case turned on the interpretation of section 104E of the RMA which, as set out above, specifies the limited circumstances in which a consent authority can consider the effects of greenhouse gas discharges. The High Court held that the exception in section 104E of the RMA (namely, allowing the consideration by a consent authority of the effects of the reduction of greenhouse gas emissions which would arise from the use of renewable energy) applied both to applications that involved to renewable energy, and also those that used non-renewable energy.

The effect of that decision was not entirely clear, however it would appear that the High Court was of the view that even where a proposal does not involve renewable energy or the reduction of greenhouse gas emissions, a consent authority is not precluded from balancing that proposal against other possible alternatives that may result in the reduction of greenhouse gas emissions by the use and development of renewal energy.

In terms of the declarations sought by Genesis with respect to its proposal for a gas-fired electricity generating plant, the Court of Appeal found that the High Court’s approach in the Mighty River case was incorrect, and granted Genesis the following declaration:

In considering the application by Genesis Power for a discharge permit relating to the discharge into air of greenhouse gases associated with the proposed Rodney power station, the Auckland Regional Council must not have regard to the effects of that discharge on climate change.

Greenpeace then appealed the Court of Appeal’s decision to the Supreme Court.

The Supreme Court Decision

The key issue to be decided by the Supreme Court was succinctly stated in the majority decision of Justices Blanchard, Tipping, McGrath and Wilson:

The primary issue on this appeal is therefore whether the Court of Appeal was correct in interpreting the exception in section 104E as applying only to applications involving the use and development of renewable energy or whether, properly construed, the exception also applies if the energy is to be produced from a non-renewable source.

While Chief Justice Elias in her minority decision considered the conclusions reached by the Court of Appeal were inconsistent with the text of section 104E and the scheme of the RMA; the majority decision of Justices Blanchard, Tipping, McGrath and Wilson upheld the Court of Appeal decision, finding:

When section 104E is interpreted by reference to its text and its purpose, and the record of the passage through Parliament of the legislation of which it formed part is considered, the outcome is clear; the exception within it applies only to applications involving the use and development of renewable energy.

The majority decision accepted that the language in section 104E of the RMA (and section 70A which uses similar language) does not explicitly specify whether or not the exception is confined to proposals which involve the use and development of renewable energy, but considered that the language of the section demonstrated, in a number of ways, that implicitly the exception was to be confined in this way.

The purpose of the 2004 Amendment was also seen to support the Court of Appeal’s interpretation of section 104E, as upheld by the majority decision. Section 3 of the 2004 Amendment set out the purpose of the amendments, and included that the negative effects of greenhouse gases on climate change be addressed at a national and not local level, while enabling the positive effects of the use of renewable energy to be assessed at consent authority level.

What does this mean?

The Supreme Court decision has clarified that when faced with an application for the discharge of greenhouse gases arising from a proposal that uses non-renewable energy, a consent authority must not consider the effects of that discharge on climate change. The effects of the discharge of greenhouse gases on climate change are to be addressed at a national level.

However, should the proposal involve the use and development of renewable energy resources, then the positive effects of the reduction of greenhouse gas emissions as a consequence of the use and development of renewable energy, can be considered when assessing the application.

What is happening at a national level?

As noted above, both the Court of Appeal and majority of the Supreme Court considered that the 2004 Amendment indicated a clear legislative policy of “nationalising the approach to greenhouse gases and climate change.”

The most obvious step taken at a national level to address greenhouse gas emissions and climate change is the passing of the Climate Change Response (Emissions Trading) Amendment Act 2008 by the Labour-led Government, which establishes an ETS for New Zealand. For further details of the ETS see FYI Climate Change: Emissions Trading – a change in political climate (November 2008).

However, following the election the National-led Government has set up a Special Select Committee to review the ETS. Key features of the terms of reference for the Special Select Committee include the requirement that a "high quality, quantified regulatory impact analysis" is produced to identify the net benefits and costs to New Zealand and that an examination of the "relative merits of an emissions trading scheme or a tax on carbon or energy" is conducted.

While there was some early suggestion from the National-led Government that the ETS would be "suspended" pending review, comments from the Prime Minister indicate that the Government no longer considers this necessary, as the Government expects that amendments will be in place by September 2009.

The ETS Select Committee, chaired by Peter Dunne, met for the first time on 18 December 2008. Submissions will close on 13 February 2009. Clearly time will be of the essence in reporting, if amendment legislation is to be progressed within the Government's timeframe.

Authors

Dave Trueman

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Elisabeth Welson

Partner - Corporate & Commercial

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Craig Nelson

Senior Associate - Corporate & Commercial

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Michelle van Kampen

Senior Associate - Public Sector

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