Wellbeing Budget 2022

A Secure Future

Partnering with businesses to reduce emissions and costs and seize new opportunities

New Zealand's industrial sector is a key area of potential emissions reduction. In 2019, emissions from the energy and industry sectors made up just over a quarter (27 percent) of our total gross emissions. The Government is committed to working together with business in order to improve energy efficiency, productivity and economic performance.

Budget 2022 will provide $678 million to expand the Government Investment in Decarbonising Industry Fund (GIDI). This fund will support the diffusion of technologies to improve energy efficiency and enable fuel switching toward low-carbon alternatives. This will promote greater business energy security and help businesses cut energy costs, allowing them to become more profitable off the back of their climate action.

Government Investment in Decarbonising Industry Fund

The GIDI is a partnership between Government and business to accelerate the decarbonisation of industrial process heat. Since November 2020, three rounds of the GIDI Fund have been announced covering 53 projects. These projects include $68.7 million of funding from the Fund, crowding-in a total of $117 million of private funding for abatement projects.

In the latest round of the GIDI, for example, Southern Paprika Limited received close to $5 million to install Aotearoa New Zealand’s first CO2 recovered biomass boiler which is expected to result in 250,000 tonnes of carbon abatement over its lifetime, and Papakura Timber received close to $400,000 to install a wood boiler for kiln dryers which is expected to result in 33,000 tonnes of carbon abatement over its lifetime.

Process heat makes up around a third of Aotearoa New Zealand's overall energy use, and 60 percent of process heat is fossil-fuelled, mainly by gas and coal. This expansion to the GIDI will continue the progress made so far on decarbonising industrial processes in Aotearoa New Zealand, provide further stimulus to the domestic economy, and support local employment.

The investments we are making to support mitigation in the Energy & Industry sector through the CERF in Budget 2022 are anticipated to drive 11Mt - 24Mt of abatement over the first, second and third emissions budget periods, with up to 1.6Mt quantified to be driven in the first emissions budget period. A significant amount of this is anticipated to be driven by additional investment in the GIDI Fund.

Māori entities will be supported by a dedicated $35 million programme to develop tikanga-based approaches to change farm practices and enable Māori-led actions toward emissions reduction.

Budget 2022 includes a number of initiatives targeted at new economic opportunities in the forestry sector. $145 million will go towards increasing the development of carbon sinks through new approaches to afforestation; $111 million will be invested in improving carbon storage through natural sequestration; and $91 million will be provided to stimulate greater production of woody biomass and provide more options for business to switch away from the use of fossil fuels to improve their own energy security and reduce costs.

Agricultural emissions account for a disproportionate share of our emissions profile, compared to most other countries. The sector contributes 50 percent of Aotearoa New Zealand's gross emissions; approximately 94 percent of our nitrous oxide emissions and around 91 percent of our biogenic methane emissions are from agriculture. The Government will continue to support the industry to develop and disseminate new mitigation technologies through a $339 million investment in accelerating the development of greenhouse gas mitigations.

Agriculture emissions reduction - Accelerating the development of greenhouse gas mitigations

This initiative will accelerate research and development into new tools and practices farmers can use to reduce on-farm emissions. It will include capability-building programmes, new research and measurement infrastructure, Māori-led mātauranga programmes, demonstration programmes, and a new innovation prize. The initiative will also support the establishment of a Centre for Climate Action on Agricultural Emissions which will include a public-private joint venture focused on developing and commercialising practical tools to reduce emissions, and an enhancement of the New Zealand Agricultural Greenhouse Gas Research Centre to strengthen research and development more broadly into biological emissions.

The investments we are making to support the development of greenhouse gas mitigations for the Agriculture sector through the CERF in Budget 2022 will support a step change in investment and emissions reductions in the sector. Over the first, second and third emissions budget periods we anticipate this initiative will drive 23Mt - 120Mt of abatement, with up to 2.33Mt in the first emissions budget period.

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