$10 billion climate challenge deadline in six years

We now have the opportunity to take the lead in driving our country’s bid to meet our 2030 climate emissions targets under the Paris Agreement, says FinTechNZ’s Leeanna Kohn-Hardy. It is clear from recent budgetary announcements that reliance on government action alone is inadequate. The private sector must lead the way, and there is no group better equipped than fintech companies to spearhead this challenge.

We were excited with the confirmation of the trade agreement with Europe, which promises an extra $1.8 billion of exports per year by 2035 on top of the $27 trillion in 2023. As part of this, there was a caveat that each party would effectively implement our respective 2030 climate targets under the Paris Agreement. 

To remind you of what we have agreed to: 

Our part in the Paris Agreement

One of the purposes of the Paris Agreement is the pursuit of efforts to limit the global temperature increase by only 1.5° C. 

Under the Agreement, every country sets a Nationally Determined Contribution (NDC). One of the purposes of this NDC is to outline the contribution countries will make towards delivering on the goals.

Our NDC target (last updated on October 31, 2021, to cover the period 2021-2030) equates to around 51 Million Tonnes of Carbon Dioxide Equivalents (MtCO2e) per year by 2030 (excluding Land Use, Land Use Change and Forestry (LULUCF)). This target is equivalent to 21 per cent below 1990 levels.

Our contribution is already short of the purpose of this Agreement. To be consistent with limiting warming to 1.5°C we need to bring down our emissions level to 47 MtCO2e per year, or 44 per cent below 2005 emissions in 2030 (excluding LULUCF).

This trade agreement came into force less than two months ago. Perhaps we were too cavalier in making this climate promise, as recent announcements suggest we are already self-sabotaging.

One government announcement was to amend the Climate Change Response Act to remove agriculture, animal processors and fertiliser companies from entering the Emissions Trading Scheme (ETS) in 2025.

Over the next four years, there is $400 million in investment to accelerate the commercialisation of tools and technology to reduce on-farm emissions. There is also funding for the New Zealand Agricultural Greenhouse Gas Research Centre, scaled up with an additional $51m over the next five years in projects to find solutions to reduce emissions. However, this does little to offset the latest data (below), which shows the agriculture sector was responsible for 53 per cent of our gross emissions.

Gross greenhouse gas emissions percentages in 2022 by sector, category and gas type

Methane alone makes up 49 per cent of our total gross emissions, with more than 91 per cent coming from livestock. Methane is more than 28 times as potent as carbon dioxide at trapping heat in the atmosphere, despite only lasting a decade.

Complementing our contribution to the Paris Agreement is being a signatory to the Global Methane Pledge. We have made (along with over 100 other countries) a collective commitment to reducing global methane emissions by at least 30 per cent from 2020 levels by 2030. Achieving this goal would prevent over 200,000 premature deaths, hundreds of thousands of asthma-related emergency room visits, and over 20 million tons of crop losses a year by 2030.

Prioritising electrifying New Zealand

Despite this Goliath of emissions, at a recent Financial Services Council (FSC) breakfast, Hon. Simon Watts, Minister of Climate Change, reiterated one of the strategic pillars that the National Government is working towards – clean energy that is available and affordable. 

National plans to double renewable energy generation to Electrify New Zealand. Their rationale? Energy emits predominantly carbon emissions (which stay in our atmosphere for centuries but have less impact than Methane) and is increasing faster than the methane emissions in agriculture. We could reduce our emissions by 37 per cent (transport comprises 18 per cent) by using clean energy for our energy and transport needs.

In 2020, as part of the 10-point plan for a green industrial revolution, the UK Government announced that the sale of new zero-emission cars and vans would replace new petrol and diesel cars by 2035. The drive to electric vehicles has been backed by over £2 billion in government investment to make it easier to own an electric vehicle. This investment includes developing charging infrastructure and providing grant schemes and tax relief to lower the upfront and running costs of owning an EV. 

Here, the clean car discount programme finished in December 2023. In the lead-up to the election, our Government pledged $257 million over four years to increase the number of EV chargers from 1,400 to 10,000 by 2030. However, in their Budget announcement, they have only allocated $95 million over the same period.

The May 2024 Budget provided the Transport sector with a total operating budget of $879 million between now and 2028 and a total capital budget of $1,809 million between now and 2033. However, in drilling down into the figures, the broad allocation of funds is to go to rail, roading, civil aviation, response capability and recovery from severe weather impacts and emergency response capabilities for the Cook Strait. The only funding contingency to support the transition to Electrify New Zealand might sit within the Other Major Projects budget.

In addition, the Energy Efficient and Conservation Authority took a $176 million hit, stopping the Low Emissions Transport Freight Decarbonisation Grants programme and scaling back energy portfolio programmes like the Community Renewable Energy Fund, leaving only a $91 million operating budget until 2027 to support the core heating/insulation and some minor home repair components of Warmer Kiwi Homes.

So, while in principle, the plan to Electrify New Zealand and double our renewable energy generation is fantastic, the reality does not look as rosy. 

Accounting for our emissions

Compounding matters is the increasing difficulty of holding our Government accountable for actions to mitigate climate change and adapt to climate resilience. Following are examples of reallocations of funding which were to progress climate action.

The money from the Climate Emergency Response Fund, generated from selling ETS carbon credits to polluters to support climate-related projects, has been redistributed. 

$92 million has been committed over four years to deliver the resource management reforms, including fast-track consenting legislation (enabling it to bypass not only the Resource Management Act (RMA) but also the Wildlife Act, the Conservation Act, the Reserves Act, the Heritage Act, coastal permits under the Fisheries Act, the Crown Minerals Act, and the Public Works Act) by enabling decisions on applications for environmental permits to be made by three ministers:– 

• Hon. Shane Jones, Minister for Oceans and Fisheries (with competing interests as the Minister for Regional Development and Associate Minister for Energy)
• Hon. Chris Bishop, Minister for Infrastructure (and responsible for overseeing this RMA reform), and 
• Hon. Simeon Brown, Minister for Transport. 

In some cases, Hon. Tama Potaka, Minister of Conservation, will be involved. For reasons which are unknown to us, Hon. Simon Watts, Minister for Climate Change, and Hon. Penny Simmonds, Minister for the Environment, will not be engaged in these matters.

Job cuts at the MfE will save $22m by 2028, and by reducing funding for freshwater programmes, our Government would save more than $23m within the same timeframe.

One of the biggest challenges in climate reporting is sourcing current and quality climate data. Additionally, aggregating this data into a coherent and accurate reporting framework requires significant effort and resources. However, by 2028, $9.6m has been cut from funding for evidence and data in the form of consultants, external agencies and specialists that supply a range of services, including updates to environmental standards, monitoring, reporting, policy work and science assurance. 

Getting decision-useful information

Hon. Simon Watts indicated that while Crown Capital can support private green investment, we need to improve our ability to package up and sell renewable and cleantech investment opportunities to local and international investors. In the latter case, these opportunities will need to be large enough in size and scope to attract attention. We must be “much more commercial at a country level”. An example is the $2 billion investment from Blackrock to help us become 100 per cent renewable by 2030. Even this figure pales in comparison to the potential $12 billion cost indicated in the Treasury and the MfE’s assessment of the direct costs for increased investment on a series of key mitigation technologies up to 2050 ($155 million to $460 million per annum over the period). This includes a Government contribution of 10-30 per cent of investment costs.

Earlier investments in New Zealand’s climate mitigation efforts are crucial to avoid the high costs of purchasing offshore mitigation to meet our NDC.

In panel discussion later in the FSC breakfast, a panellist said (and this is not the first time we have heard this) that investment funding is available for the ‘right’ investments. 

Knowing that investment is available is a relief, given the number of times we hear how expensive it is to comply with climate-related disclosures. But given the Budget cuts mentioned above, it looks like the government has our climate change agenda on a slow burner, and more rapid progress is dependent on taking matters into our own hands.

In November 2022, ANZ Thinkstep and Spark launched research showcasing the use of technology to support emissions reductions. 

Since then, a Climate Tech Roadmap that looks holistically at the use of technology to support emissions reductions has been developed. It includes research that indicates that businesses will research, pilot and invest in the technology required. However, they want to partner with the government to establish the priorities, milestones and measurability targets. This Roadmap has been presented to and is gaining traction with the appropriate Government portfolios.

The ongoing collection and management of appropriate information that enables informed decision-making would be a facet of implementing this Roadmap. 

Improving the quality and accuracy of our data should be an ongoing activity, so investing resources in data verification and correction will better enable identification and ensure appropriate management of our most critical assets. Without the most up-to-date data, modelling, audit and assurance challenges arise, as does the accuracy of community need forecasts.

The transition to a low-emissions economy requires system-wide change. An example has been in the development of sector-based scenario analysis, where cross-sector collaboration (the energy sector working with the transport sector) has increased consideration around possible futures, challenges, and action needed. 

Our Government sees itself as having a role in moving at pace to bring together multiple groups to prepare coherent responses to the climate change effects but then to “get out of the way”.

In working together to access funding to implement the Climate Tech Roadmap, we can alleviate some of the data sourcing, aggregation and management challenges to decrease expenses for each business (that gets passed onto us – the consumers).

Collaborating to obtain clear, decision-useful information, including comparability between reporting entities (especially across sectors), is more likely to lead to better climate action that benefits regulators, climate reporting entities, investors and other stakeholders.

Getting funding support to improve efficiencies for some of our biggest challenges will enable businesses to reallocate funds to keep up with the rest of the world technologically by implementing aspects like digital reporting, which in the longer term will support greater ease in the collation of ESG data.

An update of our NDC to cover the period starting from 2031 is due next year. Based on what is happening, we will likely need all the help we can get to reach our 2030 target by maximising opportunities to generate billions in revenue from trade deals like the one with Europe, which can continue to support our green transition.