The Emissions Reduction Plan 2 (ERP2) delineates Aotearoa New Zealand’s strategy to attain its emissions reduction objectives for the 2026-2030 period, alongside setting a path towards achieving long-term emissions reduction objectives. ERP2 aims to reduce annual average emissions from 72.5 MtCO2e to 61 MtCO2e. The Ministry for the Environment (MfE) engaged Principal Economics Limited, the Centre of Policy Studies, and Infometrics Limited to evaluate the comprehensive impact of the proposed policies. This includes:

• Assessing the comprehensive economic repercussions of emissions mitigation policy packages within ERP2.

• Estimating and understanding of secondary or indirect consequences.

• Carrying out distributional analysis of these ramifications.

The critical policies investigated in our report include:

• Increasing renewable energy through Electrify NZ

• Targeting 10,000 public EV chargers

• Lowering agricultural emissions

• Investing in resource recovery

• Improving public transport

• Investigating carbon capture, utilisation and storage.

Cite this article

Torshizian E, Adams P, Stroombergen A. 2024. Economic Impact of New Zealand’s Second Emissions Reduction Plan. Report to Ministry for the Environment by Principal Economics Limited in collaboration with the Centre for Policy Studies and Infometrics Limited.

Getting people in cities to switch their cars for public transport may not be enough for New Zealand to meet its emission-reduction targets. A combination of pricing and behavioural policies may be required to encourage mode shift. This will be associated with economic and social effects that vary across income groups and would need careful consideration.

At the 2015 UN Climate Change Conference (COP21) in Paris, the world’s leaders agreed to limit the global temperature rise to 1.5°C above pre-industrial levels. To do this, they recognised they would have to reduce the amount of greenhouse gases their countries emit, especially from heavy industry and transport, which produce the most harmful amounts of greenhouse gases.

How much does New Zealand have to reduce its emissions?

New Zealand’s Emissions Reduction Plan (ERP) created a set of emission-reduction targets to meet its commitments in the Paris agreement. Parliament passed the ERP into law, and New Zealand industries now have to meet its stipulated targets.

The ERP pays particular attention to road transport, which produces 15% of all New Zealand’s emissions. It includes a target for road transport’s greenhouse-gas emissions to be  41% lower by 2035. The plan includes four goals:

• 20% reduction in distances travelled by light vehicles (such as cars and vans)
• 30% of all light vehicles in use are zero-emission
• 35% reduction in emissions produced by transporting goods
• 10% reduction in emissions produced from every unit of fuel used for transport.

Principal Economics team have been working on an extensive project on identifying the policy levers and quantifying their impact on reducing travels. This work is in press.

The Ministry for the Environment (MfE) appointed Principal Economics to review the Housing and Business Development Capacity Assessments HBAs). Our review included all councils’ HBAs, except for Rotorua and Wellington, which were not available at the time of this review. The focus of our review was on the requirements of the National Policy Statement on Urban Development 2020 (NPS-UD 2020). The outcome of our review indicates the areas of improvement for the next round of HBAs both for the councils and for the MfE and HUD (the ministries).

Reviews that have been published online can be found below:

• Dunedin – Otago Regional Council and Dunedin City Council.
• Futureproof – Waikato Regional Council, Hamilton City Council, Waikato District Council and Waipa District Council.
• Tasman – Tasman District Council.

Avoid costly delays in decision-making. For deep uncertainty, plan ahead, start small, and keep monitoring. Climate is beginning to exacerbate extreme “one-in-100-year” events. Our knowledge of the likelihood of these large-impact events happening in shorter intervals is limited. Adaptive Decision-Making can help to minimise the cost (from delays) to the economy through increasing flexibility at the planning phase. Our earlier work estimated the annual cost of delay to be equal to 18 per cent of the capital cost of projects.

Read our report here.

Print-friendly version can be downloaded here.

Cite this article

Principal Economics. (2023). Climate change adaptation and investment decision making. Waka Kotahi NZ Transport Agency.

Aotearoa New Zealand suffers from an infrastructure deficit. Without the key infrastructure needed now for our economy to thrive, we deprive future generations from significant economic prosperity. While transformational infrastructure projects necessitate time to be developed into sound technical solutions to our needs, many New Zealand projects are further delayed by policy decision and financing constraints.
In this novel application of the infrastructure Wider Economic Benefits approach, we quantify the cost to society of these further delays for the first time, by using the example of the Waikato Expressway. We used our subregional CGE model to estimate the downstream benefits of the Expressway. At a high-level, results of our analysis quantify the annual benefits of having the Waikato Expressway in the economy. Without the expressway in function as early as possible, $334 million of economic benefits were forgone each year.

Read the report here.

Cite this article

Principal Economics. (2022). Great decisions are timely: Benefits from more efficient
infrastructure investment decision-making. Report to Infrastructure New Zealand.