Climate change poses risks but New Zealand’s Minister for Climate Change says it also offers capital and funding opportunities for the financial services sector.
In particular, he sees big scope when it comes to the two E’s: energy and emissions.
Boosting the country’s clean energy, which is both abundant and affordable according to Watts, is a big focus for the Government.
So is carbon pricing, which Watts described as the “most effective mechanism” for reducing emissions while speaking at a Financial Services Council event on Wednesday.
Watts, who is the Minister of Revenue as well as Minister of Climate Change, gave a speech where he outlined the “five pillars” making up the Government’s planned climate strategy.
Watts said a key driver of the country’s emissions came from energy which accounted for 40% of NZ’s total emissions. Transport makes up around 18% of that figure, he added.
“The way in which we decarbonise and reduce emissions in transport particularly is going to be through electrification for light vehicle fleets and most probably hydrogen for heavy fleet vehicles,” he said.
“If we can produce that energy here in New Zealand, we don't need to import that fossil fuel from offshore.”
That will have a significant fiscal impact as well as provide more energy security.
“And one can’t underestimate the importance of energy security and its linkage to food security in the current world of geopolitical instability, particularly in the Southeast Asia region,” he said.
Watts said NZ currently produces around eight gigawatts of electricity energy from geothermal power per year and the Government wants to push that up to 16 gigawatts in the next 25 years.
“That's a pretty significant commitment. But we believe it is possible and that will put us in a competitive advantage over many other countries because of the abundance of energy. Energy powers our economy, and that will give us options.”
The Government’s Fast Track Approvals Bill which has been in the headlines since it was announced in March would make the consenting processes for these big energy projects much quicker.
Watts said the Fast Track Bill took into account the challenges of “how long it takes to get stuff done in this country”.
“We really need to double down and accelerate the speed at which we're putting in renewables into New Zealand to enable to support our economy. And obviously those renewable energy aspects will also lead through to reduce high emission fuels.”
All about the ETS
Watts said the Emissions Trading Scheme (ETS) is a key area of focus in NZ, describing pricing carbon as the “most effective mechanism” when it came to reducing emissions.
New Zealand was “lucky” to have the second oldest and most mature carbon market in the world after the EU which made the country experienced in the carbon space, he said.
Watts added he’d been “very clear” this government would ensure no significant changes are made to the ETS – while also looking for areas to improve.
However, one significant change that is happening to the ETS is the Government’s decision to keep agriculture out of the ETS, which they announced on Tuesday.
The Labour government had planned to introduce agriculture to the ETS from January 2025 and had been working with the sector to develop agricultural pricing before the 2023 election.
Watts said at the FSC event that NZ’s economy had a huge reliance on its primary sector especially when it came to exports and the Government needed to work with that sector, not against it.
“There is no solution to agricultural methane on the ground at scale in New Zealand today. And so what we have said is that we will introduce pricing by 2030, but we want to work with the industry, not against it,” he said.
In the next 77 months to 2030, the Government would put in place on-farm measurement and monitoring, mandatory reporting and have a pricing panel in place.
Federated Farmers has said they will use the new Pasture Sector Group, also announced on Tuesday, to negotiate for no on-farm emissions pricing at all.
Federated Farmers President Wayne Langford said he hoped the new group would focus on reducing, rather than pricing, on-farm emissions.
Watts told interest.co.nz after the FSC event on Wednesday that he hadn’t heard Federated Farmers comments on no on-farm emissions pricing and that the Government had been “very clear” it would be working towards emissions pricing by 2030.
“New Zealand farmers are some of the most carbon efficient in the world, but there is also significant opportunity for the New Zealand agricultural sector to innovate and play its role to reduce emissions. Pricing of emissions is well known globally as most effective mechanism in order to achieve those outcomes,” he said.
When asked about his coalition partners Act and NZ First’s interest in the Government’s climate strategy, Watts said they shared a “united view” on climate opportunities.
“The overarching climate strategy that I've outlined today is the coalition government strategy and that is representative of the views of all of the coalition partners within the Government,” he said.
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