Later this year, the Zero Carbon Bill will be introduced to Parliament. This will mark the first step by the incumbent Government to address what Prime Minister Jacinda Arden described as "her generation's nuclear-free moment". To use Minister Shaw's language, the Zero Carbon Act (once enacted), will establish a legal framework to provide necessary, and probably significant, "constraint" on both Government and business.
While many of the details remain unknown at this stage, the end goal is not. New Zealand is transitioning to a low-emissions economy, and the Zero Carbon Act will set the targets, the mechanisms to get there, and the pace.
The Zero Carbon Bill is currently open for consultation until 19 July 2018. The Ministry for the Environment has proposed four main facets within the Zero Carbon Bill framework to ensure certainty and consistency across political cycles. They are:
- setting of an enforceable 2050 emissions target (three "net zero" targets are being considered);
- creation of a statutory framework to ensure consistent progress (via emissions budgets set every five years over a 15 year period);
- establishment of a Climate Change Commission; and
- creation of a national adaptation framework.
Accordingly, this consultation will lead to a Bill designed to create an enforceable 30 year plan for Government action on climate change. This consultation period is crucial to ensure that the Bill achieves the "smooth transition" for business to a net zero carbon future that the Ministry is seeking.
The Ministry has proposed adopting one of three net zero targets: net zero carbon dioxide, net zero long-lived gases and stabilised short-lived gases or net zero emissions. Whichever target is adopted its impact will not be equal across industry sectors. The transport and agriculture sectors are the most likely to face significant changes.
The proposal does not simply set a 2050 target, but "stepping stones" along the way, in the form of emissions budgets. These are set 15 years in advance, and are split into five-year budget periods. In such a budget period, the national emissions cannot exceed the budgeted quantity. There may be the possibility of adjusting or amending future budgets in exceptional circumstances, depending on feedback from consultation.
The Ministry also proposes the creation of a Climate Change Commission. This Commission could take very different forms under the proposal. At one end of the spectrum, the Commission could be akin to the Commerce Commission or Reserve Bank, that is a decision making body with significant powers. Some of these proposed powers include making policy decisions, setting emission trading pricing and oversight of the Emissions Trading Scheme (ETS). At the other end of the spectrum, the Commission could be an advisory body, which reports upon progress towards targets and budgets.
The proposal includes an adaptation framework, which would include a national climate change risk assessment, a national adaptation plan and regular reviews of the implementation of this plan.
The question for business is how restrictive these constraints will be and what avenues exist for upholding or challenging Government actions pursuant to this Bill. For Government, this Act will present unique challenges to meet its new duties and ensure a smooth transition to a Zero Carbon New Zealand.
At this stage, the lack of detail in the consultation document makes it uncertain what specific powers, duties or potential avenues for redress/remedies might exist in the Bill. However, there will be two primary duties incumbent upon the Government, setting an enforceable 2050 target and setting and meeting the emission budgets. Enforcing these duties against the Government may be difficult. The Minister of Climate Issues may well be subject to judicial review claims regarding their actions but remedies are likely to be limited to declaratory relief or a revision of the decision. The specific form of the Commission and its powers would determine whether it will be subject to judicial review. One potential problem is the potential for Government to move budgets between periods. Will the Government be free to subsidise one industry sector that has failed to meet its targets while holding other industries to their targets?
The Climate Change Commission, whatever its specific role, will be an important factor for businesses. For example, a Commission with purely monitoring and advisory functions could still have an influence on the ETS by providing market information, shaming poor performers and signalling policy changes. Alternatively, the Commission could have a narrow scope of power to set the number of units available, fundamentally altering the operation of the ETS and becoming its quasi-regulator. Consultation on the ETS is scheduled for September and such consultation will be linked to the Zero Carbon Bill consultation.
The Zero Carbon Bill, if enacted, will radically alter New Zealand's approach to climate change and set targets for the next 30 years of Government decision making.
Submissions on the Zero Carbon Bill close at 5:00pm on 19 July 2018. The discussion document can be found on the MfE website here. Please contact one of our experts if you have any questions about the Zero Carbon Bill or if you would like any assistance with preparing a submission on the Bill.
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