The New Zealand government has announced the creation of a $NZ4.5 billion Climate Emergency Response Fund that will underwrite the Ardern government’s investments in cutting emissions and improving climate resilience, using money raised from the nation’s major greenhouse emitters.
The fund, announced in a budget update released by finance minister Grant Robertson on Wednesday, has been created using revenue collected by the government through New Zealand’s emissions trading scheme, meaning it is effectively being funded by major polluters.
“Climate change is one of the most pressing long-term challenges facing New Zealand. To respond effectively to this challenge, we will need to make significant investments across multiple budgets,” the update says.
“To address this, the government is establishing a Climate Emergency Response Fund (CERF), which will be allocated towards initiatives that support our climate change objectives. This will be an enduring, multi-year funding mechanism to support our transition to a low-emissions and climate resilient economy in a way that protects vulnerable communities.”
The fund will receive the proceeds from the sale of emissions permits under the New Zealand Emissions Trading Scheme, amounting to $NZ4.5 billion (A$4.26 billion) over the period from 2022-23 to 2025-26.
New Zealand’s minister for climate change, James Shaw, said the fund had been possible thanks to changes to the design of the emissions trading scheme that increased the amounts paid by the country’s greenhouse gas polluters.
“The Climate Emergency Response Fund is a game-changer that will provide billions of dollars over the next four years to help meet our government’s climate goals,” Shaw said.
“It has been made possible only because of the changes we made to the ETS that now means our largest polluters are finally paying a proper price for their climate pollution.”
Last year, reforms to New Zealand’s emissions trading scheme reduced the number of free allocations received by industrial emitters and introduced new penalties on emitters that failed to meet their obligations.
The reforms have helped drive a surge in the price of emissions permits in New Zealand, which are currently trading at around NZ$68 (A$64) per tonne. With the number of permits being given to emitters through free-allocations gradually being phased down each year, the revenue collected by the government has increased.
“Our intention is that these proceeds will start as a ‘down payment’ for our climate spending. We know that more funding is required to address a complex, multi-faceted issue like climate change,” the budget update says.
“We expect to review the CERF alongside the main budget allowances and increase the funding available as necessary to invest in high-value initiatives that will help us to achieve our climate objectives.”
Today is a very good day for climate action. Our Government has announced a new $4.5 billion Climate Emergency Response Fund, paid for by NZ’s largest polluters through our reformed ETS. pic.twitter.com/hRZu5OHcRw
— James Shaw (@jamespeshaw) December 15, 2021
Wednesday’s budget update said the funding would initially concentrate on delivering priorities identified under the Ardern government’s first ’emissions reduction plan’, which is expected to focus on boosting renewable energy and electric vehicle uptake, cutting emissions in the waste sector, as well as assisting New Zealand’s significant agricultural sector to reduce emissions.
It will also include an $800 million commitment to provide international funding support for other countries to prepare for the impacts of climate change, concentrating on the Pacific region.
In 2019, the New Zealand parliament passed historic legislation that enshrined a goal of reaching zero net carbon dioxide emissions by 2050 into law.
While the legislation excludes methane emissions, primarily caused by the agricultural sector and making up around half of New Zealand’s total greenhouse gas emissions footprint, the legislation has facilitated stronger climate action and greater levels of investment than has been achieved at a national level in Australia.
Greenpeace New Zealand criticised the lack of obligations placed on New Zealand’s agricultural sector, saying it was unfair to shift the emissions reduction burden onto others.
“The budget allocation to the ‘Climate Emergency Response Fund’ is nowhere near what is needed to address the climate crisis. It is also funded from the Emissions Trading Scheme – which excludes agriculture, meaning the country’s biggest polluters aren’t paying towards the transition to a cleaner Aotearoa,” Greenpeace New Zealand’s agriculture campaigner Christine Rose said.
“Agriculture needs to fully join the ETS – as otherwise intensive dairy isn’t paying its fair share.”
Australia currently has no means of raising similar revenue from major greenhouse gas emitters, following the Abbott government’s repeal of the carbon price mechanism in 2014.
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