Priority: Promote a cost-effective and market-led transition to a low-emissions economy
The Government is taking a cost-effective approach to meeting our Net Zero 2050 goals. The Emissions Trading Scheme is the key tool the Government has for reducing net emissions efficiently. The Government is also supporting early trialling and demonstration, which can help to ensure more options are available to meet future emissions budgets.
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Action: Strengthen the emissions trading scheme
The Emissions Trading Scheme (ETS) is the main tool for meeting our Net Zero 2050 goals in covered sectors. Credible markets are one of the five pillars of our Climate Strategy. Markets need to be able to have trust and confidence that the rules of the game are set if they are to have confidence to invest. Putting a price on carbon means fossil fuels are more expensive, which makes low-emissions options more attractive. A robust ETS supports low-emissions technologies such as hydrogen. Well-functioning markets are best place to determine hydrogen’s place in the energy mix.
The Government is strengthening the ETS. It is providing investment certainty by committing to no vintaging, no differential treatment of forestry NZUs, and making sensible changes to limit forestry land use change and strengthen market governance. The Government is reducing the number of emissions trading scheme units available via government auction between 2025 and 2029, from 45 million to 21 million. Reducing the number of units will also support a credible ETS by reducing the surplus of units currently in the market.
Action: Continue to support early stage trialling and demonstration
As an early stage market, the Government has a role to support innovation by providing trusted information to help markets function, and to support early-stage trialling and demonstration with technology-neutral competitive funds. Doing so can reduce the cost of future emissions abatement by making a wider range of solutions feasible and affordable. Hydrogen projects can currently receive funding support from a range of contestable funds and programmes, including:
- Contestable investment funds that support scientific research and R&D in New Zealand.
- Capital grants, such as EECA’s Low Emissions Heavy Vehicle Fund
- Trialling and demonstration funding and pastoral supports, such as EECA’s Low Emissions Transport Fund and Technology Demonstration Fund, and support from Ara Ake and New Zealand Trade and Enterprise.
- Infrastructure support from MBIE’s Regional Infrastructure Fund.
Low Emissions Heavy Vehicle Fund(external link) — EECA
Low Emissions Transport Fund(external link) — EECA
Technology Demonstration Fund(external link) — EECA
New Zealand Trade and Enterprise(external link)
Regional Infrastructure Fund(external link)
Action: Engage with the private sector on its pathway forward
The hydrogen sector’s development will be market-led. The Government will continue to engage with the hydrogen sector to understand its pathway forward and the steps required from Government to reduce regulatory barriers and promote international investment and trade.
The Government has established a Hydrogen Industry Leadership Group to provide an opportunity for industry leaders to share views in a coordinated way on the policy actions needed over time to enable the development of a low-emission hydrogen sector. Participants span production, technology, finance, heavy transport, and aviation parts of the hydrogen value chain. Participation in the group is on an informal and voluntary basis. The role of the group is advisory and it does not replace formal consultation.