Becoming a low-emissions economy

Manufacturers should expect a push to decarbonise heavy transport and freight.

-Barbara Nebel, thinkstep-nz

The Government’s new Emission Reduction Plan (ERP) will move all industries, including manufacturing, to a low-emissions economy over the next three decades.

In this article we look at what the ERP means for manufacturers: for the inputs you use (including transport, energy and buildings), the products you make and the waste you create.

What is the ERP?

Reducing greenhouse gas emissions is one of New Zealand’s biggest challenges. The ERP contains the strategies and policies that will make our Zero Carbon Act 2019 happen. It sets out how we will meet the first of three emissions budgets, for the period 2022 to 2025.

To reach our end goal (net-zero emissions by 2050), we need to cap emissions at 72.4 megatonnes of carbon dioxide equivalent greenhouse gases each year over the next three years.

Why does this matter, now more than ever?

The World Meteorological Organisation believes that there is a 50:50 chance that global temperatures will temporarily reach 1.5°C above pre-industrial levels in at least one of the next five years. This is one of the thresholds we need to avoid under the Paris Agreement.

Reducing emissions across your business’ value chain

The government has these sources of manufacturing emissions firmly in its sights: transport, energy, buildings, waste. It is also expanding the New Zealand Emissions Trading Scheme (NZ ETS).

Emissions from transport

Road transport accounts for about 20% of New Zealand’s emissions. It is our fastest-growing source. The ERP sets a goal of significantly reducing transport-related carbon emissions by 2035.

Manufacturers should expect a push to decarbonise heavy transport and freight. The government wants to reduce emissions from freight transport by 35% and the emissions intensity of transport fuels (the volume of emissions created per unit of GDP) by 10% by 2035.

You will continue be able to buy low-emission vehicles (including through the existing Clean Vehicle Discount scheme).

Emissions from energy

Emissions from New Zealand’s energy and industry sectors (the latter includes manufacturing) make up 27 percent of our emissions. The ERP sets a goal of creating an energy system in 2050 that is highly renewable, sustainable and efficient.

It must support a low-emissions economy and supply must be secure, reliable and resilient, including to global shocks.

Manufacturers should look out for funding to help switch plant and equipment powered by fossil fuels to low-emissions alternatives. Support will come from the new Government Investment in Decarbonising Industry (GIDI) fund and the Energy Efficiency and Conservation Authority’s (ECCA) business programmes. You should also be aware that the government is banning new low- and medium-temperature coal boilers and phasing out existing boilers by 2037.

A highly renewable national energy system is crucial to meeting this goal. The ERP sets out the government’s high-level plans to achieve this.

Emissions from buildings

In 2018, almost 9.4 per cent of domestic emissions came from our buildings. Manufacturers generate building-related emissions too. For example, when you run a factory, you generate operating emissions (e.g. through heating and cooling).

The building itself contains what is known as ‘embodied carbon’. This is the carbon emitted when the materials and products used to make the factory are manufactured, generated when the factory is built and released when the factory and its materials are disposed of at the end of their life.

The ERP sets a goal for 2050 of reducing New Zealand’s building-related emissions to near zero. Reducing the embodied carbon in construction materials is a focus, through innovation and regulating building materials and design practices.

There will also be support to make new and existing buildings more energy-efficient (e.g. by moving to more energy-efficient heating systems).

Emissions from waste

In 2019, 94 per cent of waste emissions were biogenic methane. Most were generated by decomposing organic waste, including food, wood and paper. The manufacturing sector generates some of these emissions from waste created during manufacturing. Your customers generate some too when they dispose of your products.

While biogenic waste contributes only a small percentage of New Zealand’s emissions, methane packs a climate-warming punch, 28 times greater than carbon dioxide.

The ERP sets a goal of creating a thriving circular economy (one that keeps materials in use for as long as possible) and bioeconomy (one that reuses biogenic materials) by 2050. Manufacturers should expect to hear much more about the ‘circular economy’, including a national strategy supported by R&D, investment and data collection.

You should also keep an eye out for support to help you ‘take your businesses circular’. (Our tip: circular economy is about more than reducing your waste! It can help you run a business that is less hostage to global shocks and unreliable supply chains.)

You will also see a national waste licensing scheme and activities to help reduce your organic waste and keep it out of landfill.

The products you create

The ERP hints that the government may consider incentives for Environmental Product Declarations (EPDs). An EPD is a verified, publicly available document that summarises the environmental footprint involved in making, using and disposing of a product over its life cycle.

If you are a manufacturer, an EPD will help you communicate your product’s environmental credentials. If you want to buy a product, an EPD contains environmental information you can trust.

New Zealand Emissions Trading Scheme (NZETS)

The NZETS is a tool that incorporates the costs of emitting and benefits of removing greenhouse gas into day-to-day economic activity. The NZETS already covers some industrial processes.

The government plans to strengthen the NZETS by including agricultural emissions from 2025. It is also reviewing how the NZETS incentivises forestry plantings (particularly of native trees). Other changes (e.g. the Clean Vehicle Discount) will also have an impact on the scheme.

It is too early to predict how these changes will affect manufacturers, including wood manufacturers. However, if you are covered by the scheme, you should be aware that unit prices may change.

Transitional activities 

The plan contains activities that support the move to a low-emissions economy. These include support for Māori solutions, jobs in low-emissions industries, training, advisory services for business, and finance and investment (e.g. the new Climate Emergency Response Fund).

Our July article will feature manufacturers who are ahead of the ERP and already taking major climate action.

 

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