6 November 2024
Hon Simon Watts
Minister of Climate Change
Key messages
a we congratulate you for your selection as co-chair of the Article 6 negotiations for
COP 29, and wish to extend an offer of support if you should need anything to
prepare for this meeting;
b our second Nationally Determined Contribution (‘NDC2’) should encompass a
broadening of scope from a myopic focus on mitigation to include adaptation, and
the means of implementation (finance, technology and capacity building) and be set
in the context of the sustainable development goals as set out in Article 2 of the
Paris Agreement;
c your climate policy package is shaping up well and we are here to support you;
d we are greatly encouraged by the strong and positive messaging in your pre-
recorded interview for our Energy Resources Taranaki Forum, in particular your
careful balancing of the energy trilemma and your support of the sector;
e the latest progress report on the National Adaptation Plan shows promise in some
areas but we are still concerned that extreme and unlikely scenarios continue to be
used, with negative effects on development;
f the sector is now awaiting more regulatory and market clarity before we will have
any clear picture of how likely it is that carbon capture, utilisation and storage
(‘CCUS’) will be developed alongside more gas production; and
g Energy Resources Aotearoa would be delighted to represent New Zealand’s vital
energy sector on the Ministry for the Environment (‘MfE’) Climate Business Advisory
Group (‘CBAG’); specific representation for the sector is currently missing and
cannot be adequately represented by other private sector players.
link to page 2
COP 29 represents an opportunity for progress on Article 6 – international carbon
markets
1.
We wish to congratulate you on your appointment to co-chair negotiations on
Article 6 at this year’s United Nations Climate Change Conference (COP 29) in
Azerbaijan from 11-22 November 2024, alongside Singapore’s Minister for
Sustainability and Environment, Grace Fu. Your demonstrated knowledge of, and
leadership on, New Zealand’s Emissions Trading Scheme (NZETS) shows that you
will continue to represent us well to the international audience and will have much
wisdom to share.
2.
Having extensive policy and operational experience with respect to the NZETS (in
fact my experience with carbon pricing commenced with the initial proposal for a
carbon tax of $15/t), I would be delighted to provide you with any assistance in
preparing for this important meeting in regard to the NZETS, but also any items
that are pertinent to our energy and resources sectors, such as CCUS, natural gas
and bioenergy if you think these may come up.
Our NDC and a systemic approach to climate policy
3.
We are increasingly concerned about the current narrative on our first Nationally
Determined Contribution (NDC1) and 2030 target, how it must be met, and how
not doing so will have reputational and/or trade implications. We are also
concerned about the obsession with the use of international units to meet this
target. We believe that New Zealand should focus on long-term benefits and
mitigation opportunities that are unique to this country, and not compromise this
under pressure to be part of the pack internationally, especially given our unique
emissions profile.
4.
While much could be said about how we ended up with such an ambitious target
that we knowingly could not meet domestically in the first place, it is worthwhile
noting the recent comments by one of our most distinguished former climate
change ambassadors, Adrian Macey, quoted below:
“setting a target that couldn’t be met domestically was a mistake in
the first place”
and;
“we made a colossal cock-up in the target we pledged”. 1
5.
In this context, it would seem strange when considering NDC2 to strengthen it,
when we already know we cannot meet NDC1 domestically. This is especially
1
See
https://thespinoff.co.nz/politics/02-10-2024/paris-is-burning-will-new-zealand-abandon-its-climate-change-
targets
2
link to page 3
pertinent when we must purchase international units to make up the shortfall and
increasing the target would likely require purchasing more international units.
6.
We encourage you to rise above the narrative which suggests not meeting NDC1
and its 2030 target has the potential to seriously damage our national interests.
The reality is a single-minded pursuit of this target will see us exporting our
emissions via factory closures, job losses in regional New Zealand, and importing
more, higher emitting sources of energy, e.g., coal and LNG.
7.
We support your approach of doing all we can domestically, if efficient and
commercial to do so, with government helping to remove any ‘grit’ from the gears,
to allow the systems to interact more smoothly and with greater purpose. ‘Shaking
the tree’ is the right metaphor, and we are here to help.
8.
If any extra effort above our domestic capacity is warranted, this should be
directed at investing in New Zealand livelihoods, infrastructure, healthcare and
education. To fail to do so means we are effectively discarding the opportunities to
invest in our mitigation and adaptation here in New Zealand, with its associated
co-benefits.
9.
We understand that some models have New Zealand meeting its 2050 net zero
target before 2050. Given this possibility, we should be investing in first world
energy security, infrastructure and research, science and technology to ensure
New Zealand’s long-term prosperity.
Using the Sustainable Development Goals as context for our NDC
10. One of the ways to consider New Zealand’s NDC2 is in the context of the
Sustainable Development Goals (‘SDGs’). We see New Zealand’s climate action
being undertaken in parallel with energy security and resilience, not in conflict of.
This is consistent with the approach taken with the United Nations SDGs where
climate action (SDG 13) and energy (SDG 7) are both implemented together. These
provide important context for climate action and a country’s right to prosperity
and sustainable development and a more ambitious (in the adaptation space)
NDC, as envisaged by Article 2 of the Paris Agreement.
11. Such an approach allows New Zealand to refocus on a more systemic and
coherent policy approach across all our actions
.2
12. Needless to say, New Zealand is not alone with experiencing difficulties in meeting
its original target. Many other countries (e.g., Canada) are unlikely to meet their
targets and have not set their NDC1 as ambitious as ours.
2
We note that the UNFCCC website describes NDCs as embodying “efforts by each country to reduce national
emissions and adapt to the impacts of climate change.” Se
e https://unfccc.int/process-and-meetings/the-paris-
agreement/nationally-determined-contributions-ndcs.
3
13. Finally, we are interested in the process you intend to follow when preparing
NDC2, due in 2025, and wish to have input into that.
Reputation
14. Much has been made of New Zealand’s reputational risk if we do not meet the
target or are not seen as ambitious in setting a higher bar with our NDC2, but I see
this risk as overplayed.
15. We do not buy arguments based on reputation when others in similar
circumstances are either not subject to those arguments or pay no price for
making the choices we are contemplating to avoid blackouts. Norway for example,
has massively expanded its Arctic drilling programme. Norway has not damaged
their reputation or faced trade sanctions. We need to ask, why would we?
16. In any case, rather than incurring the condemnation of other countries, if they are
acting in the spirit of the Paris Agreement then they will seek to help us. This spirit
was evident in the recent UK delegation visit to Taranaki for offshore wind
partnership possibilities and the EU delegation in New Zealand’s collaborative
work, including on agriculture, and research, science and technology in the
context of climate action. We have closely watched activities in this space
undertaken by the Rt Hon Luxon and yourself internationally and see much value
in our member’s representation being more closely involved in this work, to
ensure domestic alignment and benefit for New Zealand.
We are here to support your climate policies as they progress
17. You have a busy programme ahead. By end of 2024 you will report back with your
second Emissions Reduction Plan (ERP2), you will be receiving advice from the
Climate Change Commission on ETS settings for 2026-30, and final advice from the
three consultations the Commission undertook earlier this year about the 2050
target, inclusion of international aviation and maritime emissions and the fourth
emissions budget (EB4).
18. In the new year you will lead advice for EB4, and the first ETS auction for 2025
which will see more than a halving of units and whatever response that receives
from the market (not to mention the setting of NDC2). We will be watching this on
behalf of our industrial members, such as Methanex, with interest.
19. It is important that all these climate policies are streamlined and work across the
multiple sectors they cross into.
20. We have been advised that responsible agencies will be undertaking targeted
consultation on ERP2 implementation. This is welcomed and we will work closely
with officials on energy and transport policies, as well as the adjacent portfolios
that manage waste and forestry to produce domestic bioenergy, such as biogas
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and biomass pellets. We also note the emergence of a potential role for long
duration energy storage (‘LDES’) and which to support its inclusion in to ERP2.
21. We are anticipating a ‘back to basics’ ERP2 from your government later this year
with clear responsibilities within and across sectoral boundaries. The energy
sector is already doing a lot of the emissions reduction ‘heavy lifting’ and we do
not want the sector to be unduly compromised in its efforts where other sectors
share responsibility – forestry and waste are prime examples in the bioenergy
supply chains.
22. Some low emissions fuels and technologies have regulatory barriers. We
encourage you to work with your colleagues to address these. Fuel specifications
are one example. Waste policies need to be clear at the national level so that local
councils can make investment decisions with confidence.
Your contribution to our Forum will be greatly appreciated by the sector
23. Thank you again for agreeing to our interview the other day. The Forum
participants are going to respond well to your key messages and will be heartened
by the words of support for the sector. I will be sure to pass on any feedback we
receive.
24. In particular, I was impressed with the breadth of the international efforts to
collaborate on emission reductions, and the importance of government credibility
in providing investment predictability through clear regulations and market
settings.
Adaptation will continue to grow in importance in the climate policy programme
25. As noted in our August briefing to you, we are pleased to see that adaptation
features in your climate strategy.
26. We are keen to understand the government’s response to the climate adaptation
inquiry, which you are due to report back on at the end of November. In
particular, we are interested in what a policy framework might entail and how it
would work with other climate and related policies.
27. We are still concerned about the ongoing utilisation of unlikely scenarios that have
continued to be used in local government planning and development documents.
We recommend you strongly urge MfE to walk back their reliance on unlikely
scenarios, such as the Intergovernmental Panel on Climate Change’s (IPCC) climate
model 8.5, and explain their low likelihood more clearly on the website.
28. The use of model 8.5 in coastal planning has resulted in assessments with
expected rates of sea level rise and projections of land subsidence that already are
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550% wrong after only 15 years. The flow on effects can be highly inflammatory
and are already having quite serious implications for the insurance on homes.
29. In our view, adaptation is not just about following a disaster recovery approach,
but rather about building in resilience through productivity and economic activity.
Our energy system is vital to a functioning economy and must be more visible in
any climate adaptation framework and resulting legislation. For reference, our
submission to Select Committee on the inquiry is linked
here.
CCUS is an integral part of the policy package for energy and climate
30. CCUS is internationally regarded as a leading emissions reduction technology. As
you will be aware, your ministerial colleagues have been working hard and with
speed to introduce legislation that will enable CCUS to reduce carbon emissions in
the natural gas industry. While this has been progressed as fast as possible, until
the details of the policy are announced, the sector is still in the same situation as
they have always been. Investors need regulatory predictability before making
long-term investment decisions and they are also closely monitoring the gas
supply conditions in the market to determine feasibility.
31. It is unfortunate that we will not have further insight ahead of market decisions.
32. While we have previously noted the importance of CCUS being recognised in some
applications as a gross reduction and not an offset, a further critical factor is the
regulatory treatment of stored carbon and length of time a CCUS project owner
will be responsible for meeting the necessary standards. If policy conditions fall in
favour of emitting and paying the carbon price, then CCUS will not have the
expected effect on emissions reduction that the draft ERP2 relies on. Nor can it if
CCUS is not feasible because the market cannot produce more gas.
33. We encourage you to discuss this with your ministerial colleagues to ensure that
incentives are best aligned with overall emissions reduction across the economy.
This will go hand in hand with policies that encourage more gas exploration.
34. Another consideration is emissions leakage. Natural gas with CCUS has far
superior emissions profiling than imported LNG or coal and must be the preferred
choice. While international emissions will be accounted for in their country of
production, the combustion will happen onshore in New Zealand and will be
covered by the ETS. Imports are a second-best option, but the leakage offshore
will have worse overall effects on climate change as it is a global problem.
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Energy Resources Net Zero Accord 2024 update
35. We are about to release our second annual update of the Energy Resources Net
Zero Accord (the Accord). The update provides trends with insights into emissions
reduction and intensity since our baseline year of 2010. The results speak for
themselves. Our four current signatories are in the oil and gas sector and have
demonstrated superb efforts in reducing carbon emissions through efficiencies
and new technologies. Each signatory has a case study in the report.
36. We are extremely proud of the Accord and the collaborative efforts that have
produced the very pleasing results in our update. Your office will receive copies in
coming weeks.
37. The Accord and progress against the target can be seen as a positive example of
the private sector in New Zealand taking action to achieve our long-term climate
goals. Here is a link to our first progress report:
https://www.energyresources.org.nz/assets/Uploads/Progress-
Report-Energy-Resources-Net-Zero-Accord-October-2023-.pdf
38. The Accord (which is a unique agreement in the global sector) could be included in
New Zealand’s climate reporting (in our biennial transparency report and global
stocktake reporting) under the Paris Agreement. The Accord demonstrates
progress in a hard to shift sector and the willingness of the sector to be
transparent about this.
Participation in any climate related leadership advisory groups
39. As noted above, the energy sector is already doing the heavy lifting in emission
reductions while taking action to deliver energy security and resilience. In our
view, it is inadequate that the energy sector be lumped into broader business
representation on leadership matters associated with climate policy setting
development and testing.
40. I note MfE has the CBAG and I would like to express my interest in being involved
in that, and anything similar that is run at the leadership level. As well as my
extensive experience with climate policy, this sort of collaborative approach is
most welcome in the energy sector and is core to the way we operate at Energy
Resources Aotearoa.
41. As such, we have a lot to offer advisory groups on topics of relevance, such as
climate change, and I would like to be involved.
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