After multi-billion dollar climate spends in the three most recent Budgets, the coming years will be limited to just $500 million in new green funding because of cuts to its climate response fund.
Budget 2023 follows the trend of previous years in allocating nearly $2 billion to fighting climate change. This year, however, the money also goes towards adapting to the impacts of climate change, rather than just reducing greenhouse gas pollution.
Climate spending comes from a special earmarked Climate Emergency Response Fund (CERF), which takes money from polluters through the Emissions Trading Scheme (ETS) and reallocates it to green initiatives. Though $2.9 billion came from the CERF last year and another $1.9 billion was announced on Thursday, future years will have much less to spend.
This is because the CERF has been slashed by $800 million going forward, because of a crash in the price of carbon in the ETS. The carbon price fell after the Government decided last year to ignore the Climate Change Commission’s advice on ETS price controls and is now a third lower than it was when the CERF was last topped up.
The collapse in the carbon price means the CERF had been allocated $2.7b more than it is expected to receive in coming years through ETS revenues. Part of that difference ($1.9b) will be made up through additional Government borrowing, but Cabinet has also decided to shrink the size of the fund by the remaining $800m.
This leaves just $1.5b in the fund for spending over the next three years, or $500m a year.
Cost of living meets climate
Much of this year’s new spending from the CERF aligns with the overall cost of living focus of the Budget.
The single biggest item is a $402m expansion of the Warmer Kiwi Homes programme, which will see 26,000 homes retrofitted and insulated each year for the next four years. The scope of the programme is also being extended to cover LED lighting upgrades, more efficient water heating appliances and some home repairs.
“Investing in our homes helps alleviate the prevalence of respiratory illness in our children, helps whānau live comfortably and productively, while cutting energy costs during a cost of living crisis, and pollution during a climate crisis. It’s a no brainer,” Green Building Council CEO Andrew Eagles said.
“Continuing and expanding this programme is great news for thousands of New Zealanders living in cold, unhealthy homes. We’ve long called for an expansion to what the programme offers, so it’s great to see the addition of basic measures like LEDs and hot-water heat pumps.”
However, Eagles said the $100m a year is only a “drop in the bucket” compared with the need for home upgrades.
“We should be spending $1 billion a year on this.”
Free public transport fares for children under 13 and half-price tickets for those under 25 made up the next largest climate spend, totalling $327m across the next four years.
“Transport is a big cost for Kiwi households. It’s why we provided relief at the pump when petrol prices spiked following the invasion of Ukraine, and it’s why we are now providing ongoing cost reductions for children and young people,” Transport Minister Michael Wood said.
Despite this, home insulations and public transport fare reductions have been shown to have a relatively modest impact on emissions.
The Warmer Kiwi Homes programme has cut emissions by less than 6000 tonnes through more than 100,000 retrofits since its inception under National – or 0.08 percent of a year of New Zealand’s pollution.
The nationwide halving of public transport prices announced alongside the fuel tax cuts last year weren’t expected by transport officials to materially affect climate pollution either.
Other climate initiatives
Instead, reliability, spread and frequency of public transport services are the largest motivators for uptake. To that end, the Budget also includes money for councils to hire more bus drivers and pay them better, as well as $140m to fund them to restore transport services to pre-pandemic levels.
Smaller ticket items include $32m for a rebate for businesses which purchase green hydrogen in Southland, to bring the effective price down to equivalency with fossil fuels, and $30m for grants to decarbonise heavy trucks.
The Budget also includes a $120m package for an expanded EV charging network, with a charger to be placed in every town with more than 2000 people.
Kieran McAnulty, the Minister for Rural Communities, said the programme could see between 600 and 1000 new chargers in rural areas.
“With increased charging infrastructure, rural communities will be able to harness the benefits of EVs as urban centres are able to and bring visitors to their region.”
Resilience and adaptation
Budget 2023 also sees the first investments in climate adaptation from the CERF.
Up to 85 percent of the country’s coastline will be mapped through airborne LiDAR scanners to identify areas at most risk of flooding, sea-level rise and tsunamis, at a cost of $39m. Further climate data will be gathered through a $25m scheme at the Ministry for the Environment.
The flood resilience package announced for Westport last week is also allocated from the CERF.
Outside of the CERF, the Government announced a new $6b National Resilience Plan, which will focus on protecting public infrastructure like roads and the grid from the impacts of climate change.
The first phase of the project is aimed at the cyclone recovery, ensuring that rebuilt roads, bridges and other assets aren’t going to be taken out in the next extreme weather event.
“This investment will initially focus on building back better from the recent weather events. It will also include future proofing road, rail, and local infrastructure wiped out by the extreme weather, as well as telecommunications and electricity transmission infrastructure,” Grant Robertson, the Finance Minister and minister in charge of the cyclone recovery, said.
After that, the plan will take aim in the medium- and long-term at the infrastructure deficit that has built up in recent decades. The $6b is framed as just a down-payment on closing that gap.