The Emissions Reduction Plan
In addition to legislating the requirement to set interim emissions budgets to support Aotearoa New Zealand's longer-term climate mitigation objectives, the Act also requires the development of Emissions Reduction Plans. These are intended to contain the Government's plans and strategies to reduce emissions, increase removal of emissions, and support an equitable transition to a low-emissions, climate resilient economy. Each Emissions Reduction Plan must publicly lay out a plan to meet the relevant emissions budget period and may also include plans and strategies for meeting the two subsequent emissions budget periods. As each new emissions budget period approaches, the Government will develop and publish a new Emissions Reduction Plan.
The first Emissions Reduction Plan (released on 16 May 2022) focuses on meeting our first emissions budget (2022-2025) and will lay important foundations for our plans and strategies to meet our second (2026-2030) and third (2031-2035) emissions budgets. More broadly, it reflects the scale and complexity of the action required to achieve a stable climate. It identifies opportunities to harness the benefits of new technologies and economic prosperity driven by the development of new sectors and increased productivity. It also emphasises the importance of supporting an equitable transition.
The Emissions Reduction Plan includes sector-specific policies to reduce emissions from the Transport, Energy and Industry, Building and Construction, Waste, Fluorinated Gases, Agriculture, and Forestry sectors. It also includes strategies and policy programmes for systems that span multiple sectors, such as supporting an Equitable Transition and Funding and Financing.
Funding our climate response: Design and establishment of the Climate Emergency Response Fund
In 2021, the Government announced the establishment of the CERF with an initial $4.5 billion ‘down payment' for Aotearoa New Zealand's climate spending by recycling the proceeds of the Emissions Trading Scheme into a dedicated fund.
The enduring, multi-year design of the CERF reflects the long-term nature of many of the challenges presented by climate change. By providing funding certainty over multi-year periods and a dedicated funding source for public investment on climate-related initiatives distinct from the main Budget allowances, the CERF will help ensure that longer-term climate objectives remain a key part of future Budgets and that the Government's climate change spending commitments are clearly signalled to the private sector.
At its establishment, the CERF was set up with funding equivalent to the available cash proceeds from the New Zealand Emissions Trading Scheme (ETS) over the period from 2022/23 to 2025/26. In the Budget Economic and Fiscal Update, Treasury has revised up its forecasts of ETS cash proceeds, indicating that another $800 million will be available over that same forecast period. The Government has decided that the CERF should be topped up proportionally, leaving $1.5 billion available in the fund after Budget 2022. It is important that we frontload our climate change response, which is why we have made such a significant investment commitment at Budget 2022 from the Fund.
We expect the size of the CERF to grow alongside the main Budget allowances as is necessary. The next review of the CERF is likely to be at the Budget Policy Statement for Budget 2023.
For Budget 2022, the CERF has focused on supporting Aotearoa New Zealand's mitigation response, particularly initiatives and programmes aimed at delivering the actions outlined in the Government's first Emissions Reduction Plan. The criteria for CERF funding in Budget 2022 were that an initiative either:
- was included in the Emissions Reduction Plan
- would directly reduce emissions
- had a main objective of removing barriers to or accelerating emissions reductions
- would support a te ao Māori approach to the climate response
- would facilitate the development of such proposals in the future, or
- would address the distributional impacts of emissions reducing policy.