New climate change policy focuses on transport sector

The Land Transport (Clean Vehicles) Amendment Bill (Bill) was introduced to Parliament last week which seeks to rapidly reduce carbon dioxide emissions from light vehicles imported into New Zealand by:

• introducing a clean vehicle standard; and

• a separate clean vehicle discount initiative.  

The Bill also provides a mechanism for a new regulation power to prescribe vehicle labelling requirements to inform consumers about vehicle CO₂ emissions levels, and rebates receivable or charges payable in relation to vehicles offered for sale.

As transport is responsible for 47 percent of the domestic CO₂ in New Zealand, the success of these initiatives will assist New Zealand to meet its obligation under the Climate Change Response Act 2002 to reduce CO₂ emissions to net zero by 2050, and its international commitments.

These changes form only a part of the total measures recommended to Government by the He Pou a Rangi Climate Change Commission (Commission). Other policies proposed by the Commission include:

• putting a sunset date of 2030 on the manufacture and assembly of internal combustion engine vehicles in New Zealand;

• a raft of measures to increase the supply of EVs and enable equitable access to those vehicles; and

• discourage the purchase of internal combustion engine vehicles through taxation.

These changes come at a time when the Government is moving quickly to introduce a range of policy tools to reduce emissions. October 2021 will see parts of the Emissions Reduction Plan released for public consultation, together with more clarity on the coal ban and how greenhouse gases will be treated under the Resource Management Act. 
 
The key changes proposed in the Bill are summarised below.

Clean Vehicle Standard

The Bill amends the Land Transport Act 1998 and introduces a clean vehicle standard for importers of light vehicles, which comprises:

• CO₂ emissions targets; and

• a requirement for importers to pay charges if CO₂ emissions targets are exceeded. 

This initiative aligns with the Commission's recommendation to set an emissions efficiency standard for light vehicle imports.
 
Under this initiative, importers will be required to register with Waka Kotahi (NZTA) and comply with CO₂ emissions targets from 1 January 2023. These targets would then decrease year-on-year to incentivise importers to bring in more fuel-efficient vehicles over time. The targets will be reviewed in 2027.  
 
The Bill also specifies the charges payable by an importer if CO₂ emissions targets are exceeded. Importers will be required to pay charges unless they qualify to defer their obligation to meet the target for the relevant year, or if they have enough credit in their CO₂ account to offset their liability.
 
Every vehicle importer will be required to hold a CO₂ account with the Director of Land Transport. An importer who betters the fleet target applicable to them in any given year can "bank" the amount of overachievement of their target in their CO₂ account as credit to offset excess emissions in following years. Credit may also be transferred between registered importers, subject to certain restrictions.   
 
Much of the technical detail of the new regime, such as formulas for calculating targets, will be contained in regulations made under the Land Transport Act 1998. Those regulations are awaited.

Clean Vehicle Discount

Consistent with the Commission's recommendation to introduce measures to accelerate the uptake of electric vehicles, the Bill also amends the Land Transport Management Act 2013 to facilitate rebates for zero and low-emission light vehicles registered in New Zealand. 
 
Rebates on electric vehicles have been available since 1 July 2021. However, the Bill also contains provisions that implement the broader Government policy to impose fees on high-emitting vehicles from 1 January 2022. NZTA would be prohibited from issuing a certificate of registration for a vehicle if there are charges payable for the vehicle that have not been paid by a consumer.

Treasury has heavily criticised the rebate scheme as a "costly way to reduce emissions", with the forecast emission reductions from the discount being modest and the actual impacts uncertain.

Labelling – Customer Information

To support this initiative, the Bill amends the Energy Efficiency and Conservation Act 2000 to introduce a power for the Minister to make a new category of regulations prescribing vehicle labelling requirements to inform consumers about vehicle CO₂ emissions levels, and rebates receivable or charges payable in relation vehicles offered for sale.
 
Transitional provisions in the Bill allow the Minister to start publicly notifying and consulting on proposals for labelling requirements now. This would allow labelling requirements to be passed into law as soon as the power to make regulations under the Energy Efficiency and Conservation Act 2000 comes into force. 
 
The Minister has not yet released a proposal for vehicle labelling requirements, but we expect this will occur relatively promptly. The Minister must consult with interested persons on any such proposal, and ensure they are given reasonable time to make submissions on the proposed requirements.   

Next steps

The Bill is likely to be referred to Select Committee towards the end of September 2021, with submissions on the Bill likely to open in October 2021.
 
Please get in touch if you would like to discuss how this update may impact you and your organisation.