By Robert McLachlan

New Zealand’s latest quarterly energy report shows electricity production was above 90% renewable and emissions from generation fell to the lowest level on record.

But it also shows New Zealand’s oil consumption, which had fallen markedly after the COVID pandemic, has crept back up to reach its highest quarterly level in five years.

Oil now comprises its highest quarterly share of New Zealand’s overall energy emissions on record.

Of the total carbon emissions from the burning of fossil fuels, 77% were from oil (mostly used for transport), 12% from industrial and domestic gas usage, 6% from coal, and just 5% from electricity generation.

Developing a coordinated energy strategy to reduce oil dependence would not only provide an effective climate response, but also protect New Zealand from recurring oil price and supply shocks.

The previous government had committed to a comprehensive strategy to transition to a renewable energy system in New Zealand’s first emissions reduction plan in 2022.

But the current government’s focus has shifted on energy security and it aims to boost energy supply by importing liquefied natural gas.

Missed opportunities to reduce oil dependence

Parts of New Zealand’s economy, particularly inflation and tourism, remain strongly linked to the price of oil.

During two previous periods of high oil prices, New Zealand missed the chance to weaken the country’s dependence on oil.

The 1978 oil shock was a severe hit to the economy; New Zealand’s oil consumption did not recover to its previous level until 1990.

The soaring oil prices hit New Zealand at a time of extensive government control of the economy under the National government of Robert Muldoon, whose “Think Big” strategy included building an experimental plant to produce petrol from natural gas.

This was intended to build energy independence, but unfortunately it proved to be costly and ineffective.

The 2008 financial crisis also involved extreme oil price spikes and a prolonged recession. Oil consumption did not recover until 2015. One planned response was to introduce fuel economy standards for new cars – a form of regulation already in place in most OECD countries.

Had these standards been put in place and gradually strengthened over time, New Zealand would now be in a much better place, with less pollution and less economic dependence on oil.

However, a change in government in late 2008 led to the cancellation of the planned standards. New Zealand now uses nearly twice as much transport oil per capita as the UK, where such standards have been in place since 2001.

New law changed NZ’s trajectory

The Climate Change Response (Zero Carbon) Amendment Act of 2019 was a turning point. Before that, total fossil fuel emissions were flat or trending up. Afterwards, a wave of investments in renewable electricity, in the decarbonisation of industry and in low-emission transport turned the trend around.

This was perhaps not just due to the specifics of the act, which includes five-yearly carbon budgets, but to strong pro-climate signalling from the government of the day.

A critical mass of society, from car buyers and dealers to New Zealand’s biggest companies, were investing to take steps away from fossil fuels.

Under the current government, both messaging and policy have changed. As Climate Change Minister Simon Watts has repeatedly stressed, New Zealand’s main climate tool is now the emissions trading scheme (ETS). However, this now covers only 35% of net emissions and is not an effective way to reduce oil use.

At the current price of NZ$40 per tonne of carbon dioxide emissions, the ETS adds only nine cents per litre to the price of petrol. Given New Zealand’s high car dependency, this has virtually no effect on existing drivers or on car buyers.

How to cut oil use in transport

In New Zealand, 80% of oil goes into air and land transport. An oil transition plan really means a transport plan.

There is a known way to turn off the tap on oil. The “avoid, shift, improve” framework is supported by three decades of experience.

Changing work patterns such as shorter work weeks and working-from-home arrangements can help avoid unnecessary travel. Better infrastructure for walking and cycling and public transport helps to shift transport and dramatically reduce oil use.

The remaining private vehicle travel can be improved through electrification. This requires a combination of incentives and stronger emissions standards, as the International Energy Agency reinforced this week.

At present, New Zealand is still moving in the wrong direction. Over the past decade, the total distance driven by light vehicles increased by 20%, while the distance driven by utility vehicles is up 55%.

Each utility vehicle has 50% higher carbon emissions than a (fossil-fueled) passenger car. These trends have outweighed the improvements from the rise of hybrid and electric vehicles.

There is a limit to how quickly New Zealand’s fleet can realistically be electrified. For a country with the world’s highest rate of car ownership, mass purchasing of new cars is not a good transport solution by itself.

But in any event, phasing out fossil fuels is required for a safe future and should happen in ways that build energy resilience and independence.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Robert McLachlan

Yes, we should have weaned off oil long ago. The oil shocks of the 1970s would have been a good time to start. Failing that, the 2007 oil price spike that was one of the triggers of the Global Financial Crisis. Never mind. The third best time to start is now.

What are the drivers of this increase? More cars, obviously, but also more people, with each person driving further.

Here’s the breakdown over the past decade:

Impact on road transport CO2 emissions from change in…	Change between 2013 & 2023
Population:	+16.1%
Fuel economy of fossil-fueled car fleet:	–15.6%
Distance driven in light vehicles, per person:	+4.5%
Fleet shift from cars to utes:	+4.5%
Proportion of electric driving	–1.7%
Total change in CO2 emissions	+4.2%

Utility vehicles emit 50% more than (non-hybrid) cars – 259 gCO2/km vs 175 gCO2/km – and the shift is at least partly cultural, with the twin-cab ute becoming a social norm. Utes now comprise 18% of the light vehicle fleet, do 23% of the kilometres, form 26% of sales, and emit 31% of light vehicle CO2. If that shift continues, as it appears to be doing, it forms a significant headwind to emissions reduction.

Lately, although the shift to hybrids is reducing emissions, fossil-fueled cars themselves are getting heavier and higher-emission.

Overall, the picture is grim. On balance the country is no better prepared for an oil price or supply shock than we were in the 1970s – oil imports were 2.5% of GDP last year, compared to 1.8% in 1974. But in one respect, we do have an advantage. We know how we failed to seize the opportunity previously, and we know what will work this time.

As Tim Welch wrote last week,

New Zealand still has a choice, however. It already powers lights, hospitals and factories with renewable electricity. It could have powered a diverse transport system the same way, and it still can.

Every bus electrified, every cycleway built, every train funded is a direct reduction in exposure to the next crisis. The question now is whether New Zealanders begin to treat their car dependence not as a lifestyle choice but as a strategic liability.

Three years ago I asked, “Why did New Zealand’s CO2 emissions blow out so spectacularly in 2019?“. At that point, emissions had risen 10% in three years. My conclusion was that

the forces for increasing fossil fuel burning were vastly more powerful than the puny forces opposing them. All the talk about climate change in 2017–2019 had little effect on the behaviour of companies or individuals.

Have we turned the corner? Possibly. The pro-fossil fuel forces are still there, but the opposing forces are gathering strength, especially through the Zero Carbon Act which for the first time includes a falling cap on emissions. In the most sensitive sector, electricity, the changes can be seen already. My takeaway from the new 2019 data is that the big four, road transport, aviation, electricity, and food processing, that are so large, that have performed so poorly, and that have so much scope for transformation, are where we need to look for change.

We don’t have full emissions data yet for 2023, but MBIE have just released a partial snapshot covering emissions from the burning of fossil fuels, which contribute 85% of gross CO2 emissions. 2023 was the first full post-lockdown year – travel restrictions were only eased in early and mid-2022.

Although emissions are up slightly, they are still well below the blow-out year of 2019, and stand at 23-year lows. 2022 and 2023 comprise the first half of the first 2022-2025 carbon budget, so low emissions in these two years will definitely help us meet the budget.

But digging into things in more detail, progress is not so great. Here’s the breakdown by fuel.

This shows that the fall in emissions in 2022-23 was due to falling electricity emissions, caused by full hydro lakes (hydro generation up 4200 GWh on the previous two years, or 5% of total generation) and new wind farms (up 1100 GWh). Solar (up 290 GWh) also started to make an appearance. That doesn’t mean that electricity emissions will bounce back, though: another 2800 GWh of new renewable generation is planned for the next three years, so even in an ‘average’ rain year we should be alright.

Clearly a major culprit is oil. It’s a big chunk of these emissions (70%) and it’s hard to move. Oil consumption is down on record highs, but not by much – closing the Marsden Point oil refinery in mid-2022 shifted 0.8 MtCO2 of emissions offshore, accounting for the whole decline.

The Clean Car Discount was introduced in mid-2021, and staying in place for 2 1/2 years, but has now ended. Road User Charges will be introduced on EVs in two weeks’ time, at a proposed rate of $76/1000 km – New Zealand will be the first country in the world to do this. (In Australia, the state of Victoria did impose RUCs on EVs, at A$25/1000 km, but this was annulled by the High Court last year.) There are also threats to weaken future fuel efficiency standards and to remove fuel excise duty entirely. Together these amount to a war on EVs which may lead to significant upward pressure on emissions. The fact that all the EVs in New Zealand are only saving 0.14 MtCO2 a year at present – too small to even see on the above graph – doesn’t mean they’re a failure, it just shows the scale of the problem and the persistence that is required.

Of course EVs are not the only or even the most important solution to transport emissions. In 2021 I wrote that “big battles over mode shift lie ahead” and these have now come to pass with the release of the Government’s draft policy statement on transport, which drastically de-emphasises cycling, passenger rail, and public transport. Climate Liberation Aotearoa have a handy mantra:

The first three are part of the first Emissions Reduction Plan, but the Government appears to think it is free to ignore the plan. As I read it, they are in violation of the Zero Carbon Act, which says that

The Minister may, at any time, amend the plan and supporting policies and strategies to maintain their currency (a) using the same process as required for preparing the plan; or (b) in the case of a minor or technical change, without repeating the process used for preparing the plan.

I guess that’s why we have lawyers.