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Emission Control: What the Zero Carbon Act means for businesses

22 May 2020

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by John Mezger

One of the most significant pieces of new legislation introduced last year was the Climate Change Response (Zero Carbon) Amendment Act, more commonly referred to as the “Zero Carbon Act”.

The Act outlines the government’s plans over the next 30 years to reduce all greenhouse gas emissions (except methane) to net zero by the year 2050.

According to the Ministry for the Environment, the Act “provides a framework by which New Zealand can develop and implement clear and stable climate change policies that:

  • Contribute to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5° Celsius above pre-industrial levels;
  • Allow New Zealand to prepare for, and adapt to, the effects of climate change.”

What are the key points of the Zero Carbon Act?

Under the Act, the government has committed to:

  • Set a new domestic greenhouse gas emissions reduction target for New Zealand to reduce net emissions of all greenhouse gases (except biogenic methane) to zero by 2050 and reduce emissions of biogenic methane to 24–47% below 2017 levels by 2050, including to 10% below 2017 levels by 2030;
  • Establish a system of emissions budgets to act as stepping stones towards the long-term target;
  • Require the government to develop and implement policies for climate change adaptation and mitigation; and
  • Establish a new, independent Climate Change Commission to provide expert advice and monitoring to help keep successive governments on track to meeting long-term goals.

The Act was modelled after the 2008 Climate Change Act in the UK, which helped reduce the country’s greenhouse gas emissions by more than 44% compared to 1990 levels.

The ambitious new targets mean that New Zealand can’t maintain CO2 emissions at current levels. Neither is it enough to offset our emissions by planting millions of trees, which has largely been the way New Zealand governments have dealt with the issue in the past. Instead, we will need to make some massive cuts to our carbon usage over the next ten to 20 years.

The cost of carbon will increase significantly and as the New Zealand economy is predominantly a carbon economy that is very dependent on fossil fuels, businesses will face exposure.

What does it mean for businesses?

Ironically, considering the dramatic long-term implications the Act will have on how we do business in New Zealand, there are no immediate implications or obligations on business owners.

However, considering the pandemic and our movement to restart the economy, the opportunity exists to seriously rethink our options as a nation. While the path forward may be uncertain, the climate message remains clear: “We have to change.” Importantly, the new emissions targets will need to be factored into any future decisions around strategy, infrastructure, systems and investments.

It is worthwhile for businesses (and all of us, really) to consider how we can reduce our emissions because, at some point, we will all be encouraged to look at how we consume resources and make some changes. Regardless of your beliefs around climate change, the Act makes it a reality that cannot be avoided.

Before the government starts issuing directives, businesses can choose to be proactive and take a critical look at how they run their businesses. Businesses need to understand their carbon footprint and use that knowledge to help them identify areas for improvement and innovation.

“Carbon hotspots” could include their supply chain (if you are buying raw materials from overseas, is there a way you can do that more efficiently?), distribution, the sustainability of their business premises including air conditioning usage, electricity usage and so on, staff travel requirements including how they commute to work and domestic/international flights.

Be proactive

It is probably one of the few times in our collective history when all businesses have been forced to seriously consider every aspect of their existence. The new Act will affect you and your business, and the changes will be significant so it might pay to use this time now to refocus.

There are decisions that can be made in a business, irrespective of beliefs and politics that can have positive impacts. Being environmentally friendly doesn't always have to cost financially. It could be good for the bottom line to consider how you do things. Yes, there will be costs involved, but the Zero Carbon Act will also create opportunities for innovation.

Larger businesses and industry sectors with big carbon footprints will be most affected by rising emission prices and, therefore, will have the most incentive to come up with innovative solutions to reduce their emissions, or suffer the consequences. For smaller businesses and startups, there is a real opportunity to develop products and services with a low carbon footprint.

Prior to Covid-19 many businesses were already taking positive steps to make changes and get ahead of the curve by introducing initiatives such as electric vehicle car sharing, charging networks and renewable energy options.

The Zero Carbon Act in the new normal

The spread of the COVID-19 virus has impacted every aspect of our lives for every person around the globe. As New Zealand cautiously moves toward less restrictive forms of lockdown, we are faced with new economic, social and cultural realities. In this abruptly changed world, nearly every decision is made with the virus or its impact in mind.

From an environmental perspective, the world is presently filled with positive stories of clearer waters, mountains once obscured by pollution are now visible and motorways are empty. Consumer spending has also plummeted, leading to less household waste. It has also been reported that nitrogen dioxide pollution levels have dramatically decreased across Europe.

These improvements are contrasted by carbon dioxide levels in the atmosphere at near record level. At home, we have also seen less than favourable changes in street-side recycling as Councils struggle to adequately process materials domestically.

The environment will also be impacted by the negative cost of petroleum, which foreshadows cheaper plastics. Depending on demand, this may not bode well for the environment as plastic and gas are becoming more competitive against renewable energy and products. At present, the true impact on the environment is uncertain; however, we are clearly seeing signs of how drastically things can change for the better, and perhaps worse.

As governments arounds the world pump trillions of dollars into their economies in an attempt to reduce the severe hardship on their citizens and “restart” economies, many policymakers and business owners will be faced with having to make unprecedented decisions.

In an April 7letter to the Climate Change Minister, Dr Rod Carr, Chair of the Climate Change Commission, offered assistance as the government introduced various stimulus packages to kickstart the economy. In particular, the Commission suggests looking at the stimulus packages through a “climate change lens”. Dr Carr offered six principles to assist the government maintain its goals in relation to the Act:

  • Consider how stimulus investments can deliver long-term climate benefits;
  • Bring forward transformational climate change investments that need to happen anyway;
  • Prepare our workforce for the jobs of tomorrow;
  • Work in partnership with Iwi and work with the commercial sector to encourage private environmental development;
  • Maintain incentives to reduce emissions and adapt to climate change; and
  • Change how we measure the success of economic recovery.

The letter suggests the benefits of implementing the guidelines will pay dividends now and in the future. Such benefits included: clean energy and energy efficiency; improved transport systems; sustainable land use; resilient infrastructure; an empowered workforce; accelerated innovation; and improved wellbeing.

In many instances, these principles can be layered over the decisions made by business owners. Unfortunately, businesses and decision-makers may be forced to choose between options that are not environmentally desirable, but less expensive, and those that are more costly but benefit our goals under the Zero Carbon Act and ultimately address climate change. The difficulty with this situation is that a decision that eases the economic burden now, may just be a patch to another problem that needs to be readdressed in the near future.

Irrespective of the virus’s pervasive impact on all aspects of our lives, the Zero Carbon Act means New Zealand businesses have to dig deeper and assist in transitioning New Zealand to a carbon-zero economy by 2050. While the costs of the virus across business and society is tragic, it may be a timely opportunity to create and shape a more environmentally conscious future.