Earlier this week, the New Zealand Government released a consultation document outlining a proposed Carbon Capture, Utilisation and Storage (CCUS) framework as part of its strategy to achieve net-zero emissions by 2050. The consultation paper is available here and was released alongside a regulatory impact statement (here) and a policy assessment (here).
Carbon capture and storage is the process of removing carbon dioxide (CO2) from the atmosphere and storing it permanently underground, where it is unable to escape back into the atmosphere. Carbon capture and utilisation is where, instead of just capturing and storing CO2, it is used in various industrial processes – in New Zealand, CO2 is currently predominantly used for producing dry ice for meat and seafood exports, brewing beer, serving beverages in hospitality, packaging dairy exports, enhancing greenhouse crop growth etc. There are also emerging uses such as converting captured CO2 into fuels, chemicals and building aggregates.
The Government considers that allowing CCUS has the potential to benefit New Zealand businesses by offering cost-effective emissions reduction options tailored to their needs, while reducing the cost of gas production (promoting investment amid declining trends) and ensuring energy security during New Zealand's transition to a low-emissions economy.
The Government is seeking feedback on the proposed CCUS framework, specifically on proposals to:
- recognise and reward emission reductions or removals resulting from CCUS activities through the Emissions Trading Scheme (in addition to those already recognised in the forestry and geothermal sectors);
- ensure accurate monitoring and reporting of emission reductions resulting from CCUS activities to mitigate leakage risk (including rules relating to accounting, reporting and inspection of CO2 storage sites, and an audit and compliance regime, with penalties for non-compliance); and
- appropriately assign liability for storage sites, with operators remaining liable for a set period after the site's closure, at which point, if there is no significant risk of leakage or adverse environmental impact, the Government may opt to indemnify the operator (similar to the Australian model).
The Government is also seeking feedback on whether there are currently any barriers to:
- obtaining consents or permits for CCUS activities in New Zealand; and
- capturing CO2 to use it for the benefit of New Zealand's economy.
Stakeholders and the public are encouraged to provide feedback to ensure the CCUS framework is practical and effective. Submissions are due by 6 August 2024.
Following the consultation, Cabinet will decide on the final policy design of the CCUS policy package, which will determine the legislative and regulatory changes required for its implementation. The consultation will also be used to inform the Government's decisions on whether to include CCUS policies in the next Emission Reduction Plan, which covers the period from 2026-2030 and is due to be published by the end of this year.
If you would like assistance preparing your submission, or would like to discuss the implications of the proposed CCUS framework for your particular sector or business, please get in touch with one of our experts below.