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Zero Carbon Bill - creating opportunities for key industries and actors

May 20, 2019

Contacts

Partners Greg Allen, Matt Conway, Gerald Lanning, Sally McKechnie, Sarah Scott, Nick Wilson
Special Advisors Chris Browne
Senior Associates Victoria Anderson, Joanna Lim

Climate change (inc Zero Carbon Bill and Emissions Trading Scheme)

Overview of the Bill

The Climate Change Response (Zero Carbon) Amendment Bill (Zero Carbon Bill), introduced to parliament earlier this month, represents a concrete step in upholding our international obligations under the Paris Agreement.

As our earlier FYI outlined, the Bill will:

  • Establish a Climate Change Commission (Commission) designed to provide independent expert advice and monitoring and hold the Government to account;

  • Set a 2050 emissions reduction target “to signal an economy-wide transition”;

  • Create a series of emissions budgets as “stepping stones” towards the 2050 emissions reduction target; and

  • Establish a range of climate change adaptation measures to make sure New Zealand understands the risks we face and has a plan to address them.

In this FYI, we provide additional detail on sector effects and highlight a number of opportunities for key industries and actors provided by the Bill. It should give New Zealand businesses and organisations confidence to develop new technologies and strategies, and even become world leaders in climate change response.

Making a submission

The Bill, which is an amendment to the Climate Change Response Act 2002 rather than a stand-alone Act, is expected to come into force late this year. It is scheduled to have its first reading this week and will then be referred to the Select Committee for consideration, at which time public submissions can be made.  

Minister Shaw has made it clear that submissions on the Zero Carbon Bill will be considered in the context of the Paris Agreement, stating that there is no appetite for amendments which run contrary to New Zealand doing its part towards achieving the goal of limiting the global average temperature to 1.5 degrees Celsius above pre-industrial levels.  

Our contact people (above) are happy to provide advice around the Bill and assist you in preparing a submission on what will be “game changing” legislation that will affect many areas of New Zealand society.

Opportunities for leaders

Leaders have an opportunity right now to shape how their organisation reacts to the net zero carbon target, and in turn shape how stakeholders see them. Leaders can also be positioning their organisations for mitigation and adaptation possibilities, starting with:

  • ensuring their organisation invests in researching how climate change will impact it, not just considering the physical effects but also giving consideration to risk management and insurance, and being prepared to answer stakeholder questions;

  • developing a strategy that can be shared with stakeholders; and

  • developing milestones to provide some impetus for taking the steps that support the strategy.

We will be sharing more thoughts on governance considerations in a future FYI. Please get in touch with any of our contacts for assistance in the development of necessary policies and communications for your organisation in responding to the net zero carbon target, as well as climate change mitigation and adaptation.

Crown-Māori partnership

Underpinning many of the requirements in the Zero Carbon Bill will be an obligation to facilitate Māori representation and consultation, and ensure that the principles of Te Tiriti o Waitangi are considered. The effects of climate change on iwi and Māori must also be taken into account in preparing a national adaptation plan.

Māori and iwi place an importance on exercising kaitiakitanga (the practice of guardianship and environmental management in the interests of future generations) and this is likely to be a leading theme.

Local Government

Local government is seen as a key partner in delivering the Bill’s emissions reduction outcomes. In particular, local authorities and council-controlled organisations will be required to work closely with the Commission in providing information and expertise on two of its key tasks:

  • Creating risk assessments and adaptation plans; and

  • Reviewing budgets and emissions reduction plans.

Local authorities will have an important role as “reporting organisations,” which are required to provide information relating to:

  • assessments of climate change-related risks;

  • proposals and policies addressing the effects on climate change; and

  • an assessment on the progress made towards implementing these proposals and policies.

The adaptation and emission reduction plans will be significant bodies of work that are intended to shape our national response to climate change. The extent to which they will be relevant considerations in statutory decision-making is unclear, but there is provision for taking the 2050 target or an emissions budget into account in the exercise or performance of a public function, power or duty (subject to other requirements under law). There is certainly significant potential for local authorities to partner with central government and steer the development of clear, pragmatic policies and plans, including National Environmental Statements and National Policy Statements under the RMA.

Local authorities should be gearing up to provide feedback on the Bill and ensure that the government fully understands their issues, constraints and objectives in relation to climate change.

Agriculture

The option of treating biogenic gases differently to other greenhouse gases has been widely approved, in principle, by the farming community. However, some farming groups have concerns that the biogenic methane reduction target of 24-47% by 2050 is too high, because in their view:

  • the 2050 methane target is more than is required to reduce farming’s contributions to warming. The targets will therefore reduce warming caused by other greenhouse gases.

  • the targets rely on new technology becoming available, namely a methane inhibitor. Some farming groups have said they are happy to see a stricter target on methane if this technology becomes available, but not now as the reductions can only be met by reducing herd sizes.

Nitrous oxide and carbon dioxide emissions can be offset by planting forest sinks, but methane cannot as the Bill proposes gross cuts without any provision for offsets. Despite this difference, farmers also have opportunities for expansion into carbon farming and the proposed legislation is likely to spur on much-needed technological advances.

The Bill requires that emissions are offset domestically, as far as possible, as opposed to purchasing carbon credits on the international market. Carbon farming is at the forefront of our domestic efforts to sequester carbon. Farmers can use this to their advantage by utilising less valuable land, especially on hill country properties, for carbon farming to diversify their income.  

An increased urgency into researching methane-shrinking technology may also prove beneficial for farmers. Some biotech companies already have methane-reducing options in the pipeline. For example, Zest Biotech’s Biozest and AgResearch’s high-metabolised energy ryegrass can increase productivity while reducing greenhouse gas emissions. Biotech companies may now invest more time and money into finding cheaper, more effective solutions with the 2030 and 2050 reduction deadlines coming into place. We expect that the government will be keen to hear about how such innovations can assist to achieve the purpose of the proposed legislation.

Energy

A net-zero target for long-lived greenhouse gas emissions means huge changes for our energy sector, including in relation to the government’s 2035 100% renewable electricity target. There will likely need to be widespread electrification and significant investment in further renewable electricity generation sources.

New technologies, such as demand response or power-to-gas, hold great potential.  Biomass or tidal power generation could also emerge as a viable means to generate electricity in New Zealand, if economic incentives and regulatory settings are right. Solar and wind generation will almost certainly grow.

Central government is already investing in the energy sector - it has put aside $27 million in Budget funding to establish a National New Energy Development centre in Taranaki.  The centre will coordinate and support testing and development of new and emerging energy technologies including offshore wind, solar batteries, hydrogen and new forms of energy storage. It has also established NZ Green Investment Finance, which has a commercial focus on investing in low-emissions projects.

Forestry

Shortly after the Zero Carbon Bill was introduced, the Government announced its tranche two decisions on changes to the Emissions Trading Scheme (ETS).  

As detailed in our recent FYI on the ETS announcement, the changes demonstrate the Government’s intention to use the ETS as the machine, and the teeth, of the net-zero target in the Zero Carbon Bill. And both the ETS and the Zero Carbon Bill changes will be working hand in hand in the same legislation, the Climate Change Response Act 2002.

Interest in the forestry sector will likely surge on the back of these developments given forestry’s importance to achieving the goals and targets in the Zero Carbon Bill. This presents opportunities to open up more land for forestry and further investment in research.

Recent media coverage has highlighted a trend of overseas buyers snapping up prime agricultural land for forestry at prices that agriculture can’t match - potentially helped by subsidies under the One Billion Trees programme and a more lenient Overseas Investment Office process. If accurate, this will add to the existing pressure on agricultural sectors from the housing sector encroaching on high quality horticulture land, and should be monitored closely to see how it impacts those industries. 

How binding should the legislation be?

Initial public comments on the Bill have highlighted that there is no provision made for penalties or legal remedies in the Bill if the emissions reductions targets are not met. A declaration is the only remedy possible if the Government fails to meet the 2050 reductions target, which requires the Government to issue a response to the failure. Additionally, the Commission has no decision-making authority - it can advise on a course of action, but there is no legal obligation to take that course.  

The notion of the courts being able to ‘enforce’ compliance with, for example, an emissions budget, is problematic for a range of reasons. For example, the non-compliance may be due to historic decisions made by previous governments; or the non-compliance may be due to events outside of the government’s control (eg a large scale natural disaster, delays in the development of new technology). Furthermore, the Commission’s advice and recommendations are likely to have significant ramifications for our communities, environment and economy. Decisions on how this advice should be reflected in policy and law is probably best left for our elected representatives.

Contributors tamara.wimsett@simpsongrierson.com