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.

The Commerce Commission is in the process of the 2025 reset of the electricity default price-quality path in a time of uncertainty and high-inflation. The Commission tasked Principal Economics to provide a solution for dealing with supply chain and economic uncertainty for regulating $25 billion of assets of the electricity distribution businesses over the DPP4 (2025-2030) period. For that work, we used a combination of methods, including stakeholder engagement, CGE analysis (for the impact of climate policy on cost categories), econometric analysis and forecasting. The work included significant stakeholder engagement and inputs from the electricity distribution businesses from their submissions (to the Commission). The outputs are adopted in the Commission’s latest decision and are available here.

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.

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

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.

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

Dunedin City Council appointed Principal Economics to provide a comprehensive assessment of the sufficiency in development capacity of business land within Dunedin to fulfils requirements of the the National Policy Statement on Urban Development (NPS-UD 2020), including an investigation of:

• the locational requirements of business including shape, size, access, reverse sensitivities, and other market factors;
• the external pressures businesses are facing (such as the uncertainty of the COVID-19 pandemic, and the impact of coastal hazards);
• impacts on business activities from reverse sensitivities; Locational accessibility to labour markets and customers; Changes in demand from population growth; changes in residential distribution;
• infrastructure requirements for different business sectors.

In our assessment of demand and sufficiency we identified existing businesses across New Zealand and their locational attributes including but not limited to land size, shape, access, reverse sensitivities and other market-based factors. We use industries’ revealed preferences to assess the features of land that they have determined as being suitable. This was then matched with the supply of business land in Dunedin City after applying a range of spatial analysis techniques.