Date posted: 30/05/2019 5 min read

The transition to a low-emissions economy

Business Reform Leader Karen McWilliams CA asks: How well does the 2019 Wellbeing Budget deliver on expectations to support New Zealand’s transition?

In Brief

  • $2.1bn for Rail Network is the key focus
  • $229m for sustainable land use, targeting agriculture and water quality
  • $157m for productive and high-value low emissions innovation

The Wellbeing Budget promised to focus on creating opportunities to transition to a sustainable and low-emissions economy. This has become especially relevant with the Climate Change Response Amendment) Bill now tabled in Parliament, despite the Government having yet to release its response to the October 2018 Productivity Commission's final report on a low carbon economy.

So does this Wellbeing Budget deliver on these expectations? Critical capital expenditure in the Rail Network is the big ticket initiative included under this Budget priority with $2.1bn capital spend. The Government has also identified a number of important environmental focused initiatives as supporting this Budget priority, but which, whilst critical, don't seem to align to this Budget objective.

"Importantly, there is also recognition of the already existing effects of climate change and the need for investment in adaptation as well as in mitigation measures."
Karen McWilliams CA, Business Reform Leader.

Our submission on the 2019 Budget Policy Statement encouraged targeted sector specific support for the transition. Importantly, in this respect, the Budget includes $229m for sustainable land use, which includes targeted spend on supporting the agriculture sector and on water quality. Further, to meet the climate change challenge, there is $8.5m to support the Global Research Alliance to Reduce Agricultural Emissions, $3.2m for an agricultural climate change research platform and $42.4m to support Forestry's transition, in addition to the $47m already announced earlier this month at the Taranaki Just Transitions Summit.

As New Zealand transitions to a low-emissions economy, Kiwis will have a role to play by changing behaviours and reducing their consumption over time. $4m has been allocated to the Ministry for Environment over the next four years to reduce waste and facilitate the transition to a circular economy.

A further $6.1m has also been included to improve energy efficiency in schools.

Investment in adaptation

Importantly, there is also recognition of the already existing effects of climate change and the need for investment in adaptation as well as in mitigation measures. This consists of a $4.9m investment to make New Zealand households and businesses safer during severe weather events through weather radar upgrades and improved forecasting services. Additionally, $18.5m has been allocated for better emergency responses.

Innovation is essential to New Zealand’s transition to a low emissions economy and to realising economic and wider societal opportunities from this transition. As an example of a specific initiative which cuts across more than one Budget priority, $157m is allocated to innovation under 'building a productive nation'. This is identified as targeting initiatives to support businesses to become more productive and develop high-value low emissions products. However, with this including amounts to support, incubate and grow start-ups, it is not clear how these will be targeted towards low-emissions products.

We are supportive of a holistic approach to New Zealand's transition. The Productivity Commission identified 3 key shifts for New Zealand's transition to a low emission economy:

  • We stop burning fossil fuels and switch to using electricity and other low-emission energy sources
  • We undertake substantial levels of afforestation
  • We make changes to the structure and methods of agricultural production

This Budget delivers measures to address the second and third shift and it appears the Government is relying on the Climate Change Response (Amendment) Bill and the changes to the Emissions Trading Scheme to deliver on the first.

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