Emissions Reduction Plan

The Emissions Reduction Plan will set out policies and strategies to decarbonise every sector of the economy, including the Energy and Industry sectors.

Why has Government set Emissions Budgets and an Emissions Reduction Plan?

New Zealand has committed to both international and domestic emissions reduction targets.

Greenhouse gas emissions targets and reporting(external link) — Ministry for the Environment

The Climate Change Response Act 2002 requires the Government to set emissions budgets, following recommendations from the Climate Change Commission. An emissions budget is a total quantity of emissions that is allowed during an emissions budget period. Emissions budgets act as ‘stepping stones’ to keep us on track to meeting our long-term emissions reductions targets. Each emissions budget covers a period of 5 years (except for the first emissions budget which will cover the period 2022 to 2025).

Climate Change Response Act 2002(external link) — New Zealand Legislation

In June 2021, the Climate Change Commission released its final advice on the first 3 emissions budgets and on policy direction for the Government’s first Emissions Reduction Plan.

Ināia tonu nei: a low emissions future for Aotearoa(external link) — Climate Change Commission

Government has now set the first 3 emissions budgets and published an Emissions Reduction Plan.

The Emissions Reduction Plan sets out policies and strategies for meeting the first emissions budget period and sets a direction for emissions reductions in the second and third budget periods. It takes into account the Climate Change Commission’s recommendations.

The Emissions Reduction Plan includes actions relating to system settings for reducing emissions, including approaches for empowering Māori, ensuring an equitable transition and working with nature. It also includes plans for reducing emissions in key emitting sectors, including the energy and industry sectors.

Emissions budgets and the emissions reduction plan(external link) — Ministry for the Environment

What are the Energy and Industry sectors?

The range of activities included in the Energy and Industry chapter of the Emissions Reduction Plan are extremely diverse. Formally, these sectors cover emissions from 3 areas:

• Combustion of fuels such as coal and gas for electricity generation and industrial heat
• Fugitive emissions, for example from gas production and geothermal fields
• Industrial processes (such as production of cement, steel and aluminium).

This chapter of the Emissions Reduction Plan covers a wide range of activities from the manufacturing, construction and electricity sector through to emissions related to natural gas treatment plants, geothermal fields, and the production of steel, cement, aluminium and glass.

The Energy and Industry sectors play an important role in the New Zealand economy, but they also have a significant emissions profile. In 2019, emissions from the energy and industry sectors made up just over a quarter of New Zealand’s total gross greenhouse gas emissions. Reducing energy and industry emissions and building a secure, affordable and sustainable energy system that supports our wellbeing requires a combined effort from all New Zealanders. Businesses, communities and government all have an important role to play.

What does the Energy & Industry chapter of the Emissions Reduction Plan include?

The Government’s 2050 vision is for Aotearoa New Zealand to have a highly renewable, sustainable and efficient energy system supporting a low emissions economy:

• Energy will be accessible and affordable and support the wellbeing of all New Zealanders
• Energy supply will be secure, reliable and resilient, including in the face of global shocks
• Energy systems will support economic development and an equitable transition to a low emissions economy.

The New Zealand Emissions Trading Scheme (NZ ETS) is a key mechanism to drive emissions reductions in the Energy and Industry sectors. A rising carbon price creates an incentive to reduce fossil fuel use through energy efficiency improvements and fuel switching opportunities.

The Energy and Industry chapter sets out measures in the Energy and Industry sectors that are complementary to the NZ ETS. They aim to drive emissions reductions in areas that are not responsive to emissions pricing due to market or other barriers, to unlock co-benefits, and to address the distributional impacts of the transition.

Read more about the New Zealand Emissions Trading Scheme at the Ministry for the Environment webpage.

New Zealand Emissions Trading Scheme(external link) — Ministry for the Environment

Key actions in the energy and industry sectors

To meet our vision for the energy system, efforts to drive emissions reductions in the energy and industry sectors focus on 5 interdependent areas. Together these focus areas provide a framework to reduce emissions in the energy and industry sectors. Actions in the energy and industry sectors will also help to achieve emissions reductions in other sectors, including transport and building and construction.

Using energy efficiently and managing demand for energy

Improved energy efficiency reduces the need for new electricity generation and ensures New Zealanders can affordably heat and light their homes, power their businesses and meet other energy needs.

More information on energy efficiency work programmes in the Emissions Reduction Plan:

• Equipment Energy Efficiency Programme(external link) — Energy Efficiency & Conservation Authority
• Warmer Kiwi Homes(external link) — Energy Efficiency & Conservation Authority
• Energy efficient products and services consultation
• Support for Energy Education in Communities Programme
• State Sector Decarbonisation Fund(external link) — Energy Efficiency & Conservation Authority

Ensuring the electricity system is ready to meet future needs

Given its high level of existing and potential renewable electricity generation, Aotearoa New Zealand is well positioned to use its electricity system to drive a transition away from fossil fuel use in other sectors such as transport and industry. To transition our electricity system to meet our net-zero 2050 targets, we need to:

• Accelerate development of new renewable electricity generation across the economy
• Ensure the electricity system and market can support high levels of renewables
• Support development and efficient use of transmission and distribution infrastructure to further electrify the economy

More information on electricity system work programmes in the Emissions Reduction Plan:

• NZ Battery Project
• Māori and Public Housing Renewable Energy Fund
• Electricity market
• Energy hardship expert panel and reference group
• Renewable Energy Zones(external link) — Transpower
• Transmission Pricing Methodology(external link) — Electricity Authority
• Electricity Authority website(external link)
• Regulated industries(external link) — Commerce Commission New Zealand

Reducing our reliance on fossil fuels while supporting switching to low emissions fuels

Government is working to address challenges relating to reducing use of fossil gas and set out a pathway for the fossil gas sector.

Gas transition plan

At the same time as we reduce reliance on fossil fuels, Aotearoa New Zealand will be developing low emissions fuels, including bioenergy and hydrogen. Bioenergy has widespread potential applications in the energy, industry and transport sectors. Green hydrogen can help to reduce emissions in areas of the economy that are hard to electrify, such as high temperature industrial processes, aviation, and some parts of the heavy transport sector.

A vision for hydrogen in New Zealand

Reducing emissions and energy use in industry

Opportunities to accelerate emissions reductions in industrial low-to-medium temperature process heat are significant, low cost and can also improve productivity and increase energy resilience.

The Government is acting to decarbonise process heat and reduce industrial emissions. These actions, alongside actions to encourage greater energy efficiency, support electrification, and increase low-emissions fuel use will support industrial decarbonisation and provide clear investment signals for the future.

More information on work programmes for reducing emissions from industry in the Emissions Reduction Plan:

• Decarbonising process heat
• National direction on industrial greenhouse gas emissions
• Industry decarbonisation(external link) — Energy Efficiency & Conservation Authority
• Co-funding(external link) — Energy Efficiency & Conservation Authority
• Advanced manufacturing industry transformation plan

Strategic approaches and targets to guide us to 2050

To guide achievement of the vision for 2050 – and provide clarity to the energy sector – the Government will develop strategies and set targets for the energy system. Setting targets and monitoring energy system indicators will help measure progress towards our emissions reductions goals.

The Government is setting a target of 50% of total final energy consumption to come from renewable sources by 2035. This signals a commitment to reducing emissions and highlights the need for transformation across Aotearoa New Zealand’s energy system. Success will depend on using our energy system to best advantage in order to decarbonise other areas of the economy such as transport and industry.

Government is retaining an aspirational target of 100% renewable electricity by 2030. This target will be reviewed in 2024 ahead of development of the second emissions reduction plan. The review will draw on additional information available by that time, including information on potential solutions to dry year risk identified through the New Zealand Battery Project.

Government will develop an energy strategy for Aotearoa New Zealand by the end of 2024, fully collaborating and engaging with Māori and working with energy system stakeholders.

Aotearoa New Zealand energy strategy

Government will develop a new New Zealand Energy Efficiency and Conservation Strategy that better aligns with the emissions reduction plan and energy strategy.

Energy strategies for New Zealand