Document 9.pdf

Choices about target delivery
Key Messages
Purpose
1.  This is the first in a set of related briefing notes about the need for Government to make
further decisions over the coming months about how our Zero Carbon Bill (ZCB) targets
and New Zealand’s first Nationally Determined Contribution (NDC) will be delivered.
2.  These notes are intended to form a useful basis for a discussion with your colleagues about
these subjects and they also describe the areas where engagement with Cabinet will be
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required. The purpose of each individual note is the following:
I.
This note:  explains the relationship between the  ZCB and NDC targets and  the
implications of this for upcoming decisions abo t how to meet these targets. We
are also seeking your initial  feedback on how we can bes  support you in future
discussions with Ministerial colleagues on these issues.
II.
High level policy approach to reducing emissions – 2019-B-05822:  this work
for the Provisional Emissions Allowance (PEA) describes the likely initial package
of policies and measures needed to deliver both the ZCB and NDC targets. This
note will seek direction on how you wish to progress these issues.
III.
International carbon markets (access and environmental integrity) – 2019-B-
05771 and 05804:  will  update you on the international carbon market work
programme. We advise that in the next two months you seek Cabinet oversight of
our work with these partners to have options for market access in place from 2021.
IV.
Recommunication of New Zealand’s Nationally Determined Contribution –
2019-B-05574:  seek agreement for  a process to reassess and recommunicate
New Zealand’s Nationally D termined Contribution.
You will receive advice on I  and III next week  and IV the week following.
3.  The  table below sets out these work programmes and an explanation of why we are
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seeking decisions now, to progress work over the coming months.

Why now
Provisional Emissions
We need to release a public consultation document on the
Allowance (PEA)
PEA following the introduction of the CCRAB to the house
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in late September to provide context to the NZ ETS
framework in the Bill.
Decisions by Ministers about the PEA are needed now in
order to produce this document.
Engagement with
In-principle agreement, later this year, to enter into formal
partners on international
negotiations in future is necessary to secure options for
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carbon markets
access to these high-integrity international carbon
markets from 2021 onwards (due to the time necessary to
negotiate and implement any instrument).
Direction  is needed now to ensure that we have
appropriate  Ministerial oversight of the pre-negotiation
discussions with EU/WCI, as this will impact any future
negotiations the Government enters into.

Recommunication of the
We will be expected to have recommunicated our NDC by
NDC
Feb/March 2020.
Work, including targeted public engagement, needs to
begin now in order to allow this.
4.  These work programmes all contribute to the delivery of the Government’s overarching
climate  change  policy framework (leadership at home and internationally; a productive
sustainable  and climate-resilient economy; and a just and inclusive society). The
International Carbon Markets  and PEA work also  directly impact on the achievement of
New Zealand’s existing emissions reduction targets. While the final decisions for each of
these  work programmes are some time away  (anticipated to all be within the next six
months), decisions are needed now to allow the work to take place.
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The relationship between the ZCB and the NDC targets
5.  We have two sets of targets:
•  The NDC for 2021-2030 is an emissions budget for the years 2021-2030, with a
headline of reducing emissions to 30% below 2005 levels by 2030. This equates to
a commitment to reduce emissions to approximately 601Mt CO2e across the 2021-
2030 period. To do this we need to reduce emissions  increase removals, or deliver
mitigation offshore by 145Mt more than what current policies  and settings are
projected to deliver.
•  The ZCB sets three single-year targets to reduce emissions, to reduce:
• emissions of biogenic methane to 10% below 2017 levels by 2030;
• emiss ons of biogenic methane to 24-47% below 2017 levels by 2050; and
• net emissions of all other greenhouse gases to zero by 2050
Alongside this, the Bill also establishes a system of five-year emissions budgets
in order to step prog essively towards the 2050 target. While the first full emissions
budget is only expected in 2021, the PEA is an interim budget which needs to be
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consulted on in late 2019 and decided in early 2020.
A fuller explanation of these targets; their relationship; and the consequences for choices
about delivery is attached (Appendix A).
6.  The budgets unde  the ZCB have yet to be set; however, based on the 2050 target and the
ambition of the NDC, it is likely that the total volume of mitigation that needs to be achieved
over 2021-2030  will be driven  by the NDC rather than the ZCB target.1  Therefore, over
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2021-2030 New Zealand needs to achieve 145Mt more mitigation than current policies and
settings are forecast to deliver.
7.  In the coming months Ministers will need to make choices about how to deliver this further
145Mt volume including:
•  how much of this 145Mt to guarantee will be delivered within New Zealand, and
how much flexibility to source offshore mitigation is appropriate (to manage risk and
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economic impacts); and
•  the specific policies and measures that will be used to deliver this mitigation

1 The Government has flexibility over the budgets for the ZCB, but they are unlikely to exceed the current NDC in
ambition over the 2021-2030 period. Further, if ZCB budgets exceeded the ambition of the current NDC we would
likely have to reconsider and increase the ambition of the NDC (as NDCs are to reflect a Party’s highest possible
ambition).

(whether domestically or offshore).
8.  Designing a successful package of policies will require ensuring that individual decisions
form a coherent and internally consistent whole, and an awareness of the trade-offs being
made across the whole package. Ministers will need to consider  issues  and trade-offs
including:
•  the need to use international carbon markets;
•  the need for higher NZ ETS prices;
•  that particular decisions may foreclose other options (for example choices about
the NZ ETS will open/close options for access to high-integrity markets);
•  the degree to which the costs of meeting our targets are borne by polluters  vs
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taxpayers; and
•  the design of a suite of policies to complement the NZ ETS.
9.  The second BN in this set (High level policy approach to reducing emissions – 2019-
B-05822) which will be provided next week, will provide more detai  on the options for this
policy package.  We note that progressing these issues will likely  require a number of
Cabinet decisions.

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Recommendations

We recommend that you:

a.  Note that MfE will provide you with advice on the Provisional Emissions
Allowance and International Carbon Markets work programme in the next week,
and the recommunication of the NDC the following week
b.  Note that all three of these processes are likely to be of interest to your Cabinet
colleagues.
c.  Note we are seeking feedback on how we can best support you in these future
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discussions.
d.  Meet with officials to discuss this briefing note and provide feedback
Yes/No
e.  Agree that this briefing and appendices will not be re eased proactively on the
Ministry for the Environment’s website
Yes/No
Signature

Matthew Cowie
Acting Director
Climate Change

Date
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Hon James Shaw
Minister for Climate Change

Date

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Appendix A - Targets
New Zealand’s Nationally Determined Contribution – 2021-to-2030
What is the NDC?
1.  The NDC is the mitigation contribution (target) that New Zealand  will make  to global
mitigation efforts under the Paris Agreement for the period 2021-to-2030.
2.  The NDC is an emissions budget for the years 2021-2030 (calculated using the UNFCCC
methodology for emissions budgets which has been used for all previous targets), with a
headline of reducing emissions to 30% below 2005 levels by 2030.
3.  This target equates to a commitment to reduce emissions to approximately 601Mt CO2e
(million tonnes of carbon dioxide equivalent) over this period.  In comparison, over this
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period we project net emissions under current setting to be 746Mt. This means additional
mitigation of 145Mt is needed.
NDC budget (2021-2030)
601 Mt
Projected net emissions (2021-2030)2  746 Mt
Mitigation needed
145 Mt
What are the relevant requirements for NDCs?
4.  In setting our  NDC, New Zealand was guided by decisions taken by all  Parties to the
UNFCCC (including New Zealand). Decision 1/CP.20 meant that our intended NDC had
to:
•  be a progress on beyond New Zealand’s previous undertakings; and
•  contain information on how New Zealand considered it to be a fair and ambitious
contribution to global efforts in light of our national circumstances.
5.  Article 4 of the  aris Agreement also contains the following (paraphrased) requirements
for NDCs:
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•  New Zealand must always maintain an NDC;
  successive NDCs are to represent a progression beyond our then current NDC and
reflect ou  highest possible ambition; and
•  NDCs may be adjusted at any time to enhance their level of ambition
How was the NDC set?
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6.  The choice of this target followed a process of extensive analysis and public consultation,
with more than 17,000 written submissions.  Based on this, officials recommended an
emissions budget target, with an endpoint of between -10 to -40% on 1990 levels – and
Cabinet selected an NDC that is equivalent to -11% on 1990 levels.
Credible range for NDC presented by officials  -10 to -40% on 1990 levels
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NDC headline
-30% on 2005 levels
(i.e. -11% on 1990 levels)

2 Using target accounting.

7.  The above graph demonstrates the progression of the NDC beyond previous targets.
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How can the NDC be met?
8.  The NDC can be met through:
•  reducing gross emissions (e.g.  ess usage of fossil fuels);
•  increasing removals of emissions (e.g. afforestation); and/or
•  offshore mitigation  (i.e. conducting/funding emissions removals and reductions
outside of New Zealand)
9.  It is clear wha  is needed to meet our NDC  –  we need to achieve 145Mt of additional
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mitigation and, as long as the mitigation is real, the NDC is agnostic about where this
occurs.
10. However, when choosing how to deliver this 145Mt Ministers need to make choices about
he policies and balance between domestic emissions reductions, domestic removals, and
offshore mitigation that make sense in a broader context, namely:
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•  knowledge that future NDCs will need to be a progression beyond our current one;
•  a need for New Zealand itself to undergo a just transition to a low-emissions and
resilient economy; and
•  our broader societal and economic goals.
Are we on track to meet the NDC?
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11. We are not currently “on track” - our projected emissions under current settings are not in
line with our target. We need to implement or strengthen measures to further reduce
emissions,  increase  removals and obtain access to offshore mitigation to put us on this
path. Even with measures for strengthened domestic action it is likely that New Zealand
will need to use offshore mitigation to meet the NDC.

What is recommunicating the NDC?

12. As a Party to the Paris Agreement, New Zealand is required to maintain successive NDCs,
to be communicated every five years. Parties are required to “communicate or update” their
NDCs at least 9-12 months in advance of the relevant Conference of the Parties serving
as the meeting of the Parties to the Paris Agreement (CMA). Based on MFAT legal advice,
New Zealand should recommunicate its NDC by February/March 2020 to satisfy this
requirement.
13. We will provide specific advice on a process to reassess and recommunicate the NDC in
two weeks  [Recommunication of New Zealand’s Nationally Determined Contribution –
2019-B-05574 refers].

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Zero Carbon Bill targets and emissions budgets
What targets and emissions budgets does the ZCB set?
14. The ZCB sets three single-year targets to reduce emissions, to reduce:
•  emissions of biogenic methane to 10% below 2017 levels by 2030;
•  emissions of biogenic methane to 24-47% below 2017 levels by 2050; and
•  net emissions of all other greenhouse gases to zero by 2050
15. The ZCB also establishes a system of five-year emissions budgets in order to step
progressively towards the 2050 target
How can the targets and emissions budgets be met?
16. Just like the NDC, ZCB targets and emissions budget may be met through
•  reducing gross emissions (e.g. less usage of fossil fuels);
•  increasing removals of emissions (e.g. afforestation); and/or
•  offshore mitigation (i e  conducting/funding emissions removals and reductions
outside of New Zealand).
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However  unlike the NDC, the ZCB specifies that these targets and budgets must be met
as far as possible through domestic action –  and that the use of offshore mitigation is
subject to a limit

How do the NDC and ZCB targets relate?
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How do these targets compare to one another?
17  The chart on page 10 shows the NDC alongside the ZCB targets. While the budgets under
the ZCB have yet to be set, this chart includes an example of a straight-line trajectory (the
blue wedge) to meet the 2050 targets.
What does this mean for choices about the delivery of targets?
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18. Based on the 2050 target and the ambition of the NDC, it is likely that the total volume of
mitigation that needs to be achieved over 2021-2030 will be driven by the NDC rather than
the ZCB. Therefore, over 2021-2030 New Zealand needs to achieve 145Mt more mitigation
than current policies and settings are forecast to deliver.
19. Over the coming months Ministers will be faced with choices about the optimal way to
deliver this 145Mt of abatement within New Zealand’s broader economic and social
context.
What’s the difference between an NDC emissions budget and a ZCB one?

20. The Government has flexibility over the emissions budgets set under the ZCB between
now and 2050 (noting that these will be informed by the recommendations of the Climate
Change Commission). In comparison, the NDC for 2021-2030 has been set, and can only
be altered to increase its ambition (in other words, the emissions budget volume can only
be reduced). The other difference is that the NDC itself is agnostic about where mitigation
occurs, but the ZCB has an emphasis on domestic action.
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