On Newshub Nation: Simon Shepherd interviews Minister for Climate Change James Shaw

Simon Shepherd: Public submissions closed this week on the Government’s Zero Carbon Bill. Around 15,000 people had their say on the bill, which will set a target for reducing greenhouse gas emissions by 2050 and establish an independent climate change commission. I’m joined now by climate change minister and Green co-leader James Shaw. Good morning to you.
James Shaw: Good morning.
Right, so let’s get straight into it. Agriculture makes up about half of our greenhouse gas emissions, transport energy another 40 per cent. You’ve got to tackle those to meet this goal. Where are you going to start?
Well, actually, that is kind of the point of the independent Climate Change Commission – is to give us a sense and to guide Parliament as to what is the first cab off the rank. The UK, when they set this up about 10 years ago, the first thing that they said is that they needed to pay attention to their coal-fired power stations and electrify their power system.
And obviously, that doesn’t apply here, because we are 80% renewable on our energy. So there’s not a quick, easy fix by cutting out coal.
No, there isn’t. I think probably... I want to leave this to the Commission, but certainly one of the things where I think we can make the greatest gain in the shortest period of time would be in the field of transport – you know, moving to electric vehicles, improving our public transport system, getting those light rail networks going and so on.
Yes, but agriculture accounts for 40— almost half our greenhouse gas emissions. Surely that is the spot where you have to target first; it’s the biggest emitter.
Well, no, not necessarily. So, the whole point is you’ve got a 32-year runway, right, to get to net zero. And I think different gases behave differently. You can curve those down at different rates at different times. All of those choices we’ve yet to make. I think, you know, they do behave differently, so you’ve got to take that into account. But that’s really the job of the independent Climate Change Commission.
Okay. Let’s talk about the targets, so the possible targets in the bill. There are three zero-carbon targets. One is just get rid of carbon dioxide. The second is get rid of long-life gases like carbon dioxide and nitrous oxide, and stabilise others like methane, i.e. from agriculture. And the third one is get rid of all greenhouse gases. Don’t worry about the Climate Change Commission – what is your preferred option?
I’m not going to tell you what my preferred option is, because it doesn’t just come down to me, right?
Sure, but you have been campaigning and pushing for this for a long time, and you would, as a party, have created a view on what your preferred option is. I’m sure there will be lots of negotiation about the Climate Change Commission, but what is your preferred option?
Well, my preferred option is – and we’re still getting advice on this, keep in mind – the one that gets us closest to the Paris Agreement goal of living with a 1½-degree temperature rise. And one of the things I think has kind of been missed in some of the dialogue is that you can have a stabilised flow of methane within a net zero target, all gases target, as well as within the one where you don’t. The only real difference between them is – how much of that do you choose to offset? Do you offset all of it, some of it or none of it? The ‘some’ or ‘none’ is that one around option two; offsetting all of it is option three.
Okay. So it sounds like you’re angling towards option two – stabilising methane.
No, look, what I’m saying is you’ve got to let the process play out. We’re about to start sitting down and talking to other parties about where their landing zones are. It’s going to take us about a month to process the 15,000 submissions that we had on the bill, so I’m not going to call it until we’ve done that work.
All right. So, you can’t say individually what those submissions are, but what have people been saying that they want from this?
Well, you may have seen a couple of weeks ago – there was a survey conducted by IAG, the insurance company, about New Zealanders’ attitudes. My sense is that the submissions reflect that, which is that New Zealanders do want us to lead on climate change. They think that our response so far has been inadequate. They think that New Zealand should act even if other countries don’t. That’s the level of concern. And at the same time, they want to know that we’ve got a good plan. So people are nuanced about it; it’s not black and white. They really want us to be ambitious and to do the best we can, and they recognise it’s a challenge, and they know that we’ve got to have a plan to get there.
Something I recall from that particular survey was that only 10 per cent actually believed anything would be done about it. It was very low. So there’s no faith.
No, the [no] faith was in the rest of the world acting, right? So there’s a lot of scepticism that the world will actually collectively do what it needs to do in order to get to that temperature goal. But despite that – and this was the thing that was so fascinating about that – despite that sense that only one in 10 people believe that actually the rest of the world would act collectively to be able to do this, 75 per cent still thought that New Zealand should do the right thing and work to bring down our own greenhouse gas emissions. And the two do play together, right? Because the more we do, the more that encourages other countries to do the same and to follow.
Okay. First two options as laid out in the Carbon Bill – getting rid of carbon dioxide or stabilising methane. Do those go far enough to get us to the goals, both the Paris Accord and the 2050 goal?
Certainly, the first one does not.
So option one gone?
Well, the thing is, what the Paris Agreement says is that you’ve got to get to net zero in all gases in the second half of the century. So if you exclude everything except carbon dioxide from this bill, you have to work out how you’re going to get those other gases down to net zero at some point. So you have to pick a date. And in many ways, what we’re doing with this piece of legislation is we’re actually just putting a date on our Paris Agreement target.
So number one is gone? Effectively, number one is gone.
What I’m saying is that within this piece of legislation, if you exclude the other gases from this piece of legislation, you would have to, at some point, come up with a plan and a date to manage those other gases.
All right, let’s talk about option three, then, because getting rid of all greenhouse gases – if we go for that... We're heavily reliant on agriculture in this country, right? It’s $37 billion a year in exports. And farmers say option three will put a real burden on the sector; they wouldn’t be able to compete internationally. So have you had any advice about the economic impact of that option?
Yes, we have. So, shortly after we started the consultation, we released a series of four economic research papers, including two pieces of fairly extensive modelling out to 2050. And what it told us is that all of the target options were achievable, they are challenging, and that there are some sectors that will undergo more significant change than others, and that, therefore, the Government has to be proactive in terms of targeting that support and ensuring that we do manage that transition carefully and over time.
And so, in particular with agriculture, the farmers are worried that there’s not the technology out there to help them reduce their emissions at the moment, and they’re going to be forced to comply before they’re able to introduce that kind of technology. Are you going to push them too fast?
No. No, we’re not. In fact, farmers are moving very rapidly on this. You would have seen a few weeks ago, a group of New Zealand farming leaders came out, wrote an op-ed and said that they were committed to net zero emissions from agriculture by 2050. They felt that they could do that in 30 years. Synlait, the milk processor, came out about two weeks ago and said they could get a 30% reduction in emissions on their farms just using existing technology and best practice in less than 10 years. Sorry, in 10 years, before 2030. So I f they think they can get a 30 per cent reduction in a third of the time that we’re talking about, then clearly, the options exist, right? And that’s not with any kind of new-fangled technology or scientific breakthrough; that’s just existing technology and best practice.
If farmers are brought into the Emissions Trading Scheme, it’ll be a world first. They’re worried about that. But your agreement is to only bring them in at a maximum of 5 per cent of the actual gases that are produced. I mean, that doesn’t sound like it’s going to be enough.
Well, so, for example, in steel production or aluminium production, they’re only obligated at 10 per cent right? So we actually give a free allocation up to 90 per cent for what we call ‘emissions-intensive trade-exposed industries’. And the reason for that is primarily because currently, competitor countries aren’t also applying a price to steel or to aluminium production, and we want to make sure that we’re moving broadly in line with the rest of the world. But I was in China last week, and they’re about to put in place the world’s largest emissions trading scheme across all of China. They’ve got seven regional schemes currently operating. And they will be bringing steel, aluminium and other sectors into that system.
But what about agriculture?
Well, they’re talking to us about that, because they’re interested in that. They know that they’re going to have to deal with their agricultural emissions at some point. Because you’ve got to remember – every country in the world has got to get all of their gasses down to net zero at some point, so everybody is actually on the same path as we are.
Sure. Are we going to be first, and would you actually like to see greater than five per cent when this kicks off?
Well, again, that’s kind of the point of the politically independent Climate Change Commission is to say, ‘Well, what would the correct policy mix be?’ and then to advise the government.
The productivity commission says agriculture should be fully included – transition to that.
Well, there’s a number of other commentators that have said the same thing. We have set up a sort of interim climate change committee that will look a little bit like the eventual commission. We’ve asked them to provide some advice to the government in the middle of next year about that. So that question is, you know, still up for grabs.
Okay, we’ll talk about the Climate Change Commission as it’s going to be set up a little bit later, but you mentioned transport at the beginning of this interview. You said, I see, that 90 per cent of our cars need to be electric by 2050 to meet our carbon zero goals. At the moment, we’ve got 8,700; I’ve calculated that to be 0.2 per cent of our current fleet. How are we going to reach that target? It seems way off.
Well, 30 years is a reasonable amount of time. We do hold on to our cars for quite a long time in New Zealand. So, I think the average vehicle we hold on to for about 14 years. So we’re talking about two changes between now and then in terms of the average lifespan of a car. It is clear that we are going to need some kind of incentive programme to aid that shift.
Right.
Countries like Norway, where one in two new vehicles sold as an electric vehicle, have got an extensive support programme in place. And China are putting 200,000 electric vehicles on the road every year in Beijing City alone. So, you know, it’s not like we’re on our own with this. But we do need to work out ways to incentivise.
Okay, so you talked about incentives, so let’s go through a couple of things here. You are not happy just to wait for the second-hand car market to kick in, the tipping point of fleet cars coming in. We need an incentive, is that right?
Yes. I mean, in New Zealand, most cars that people like you and I would get would be second-hand cars. Generally, about 80 per cent to 90 per cent of new cars sold in New Zealand are actually company fleet vehicles. So in many ways, that’s the best point of intervention, because we can use government purchasing power to swap out our own car fleet. We can work with large corporates on their car fleets. And three to five years down the track, those cars end up in the second-hand market.
Okay, so let’s talk about the Government fleet. I mean, the previous National government said one in three government cars by 2021 will be electric. What’s your goal?
We are hoping to make... We’re practical, because there will be somewhere we actually can’t swap them out. But we’re practical. We want to make every vehicle a zero-emission vehicle by 2023.
2023, Okay. What about the company cars? To incentivise those companies to go electric, why don’t you knock out fringe benefits tax? Is that an option?
It’s one of the options, yes.
So that’s being considered?
Well, frankly, everything is being considered at the moment. Because it’s, like you say, a pretty challenging goal in the course of the next 32 years to swap out most of your vehicle fleet. So we are considering all the options.
All right, so how is the government going to make it possible for electric vehicle ownership for low-income families? Because these cars are prohibitively expensive at the moment.
Well, they’re prohibitively expensive at the moment. And you’re absolutely right, and that’s why we’ve got to look at all the options. But like I said, most people get their cars in the second-hand market. And so we are trying to work out – how do you incentivise that? So I think it will take—
So what does that mean? How do you incentivise it? Is that giving them a rebate on the price of the car at the beginning?
Well, like I said, we’re considering all the options.
Cheaper registration?
We are considering all the options.
Okay. Are you going to make it more costly to own an older high-emissions vehicle?
Well, ultimately—
Because that might penalise low-income families, because they’re the vehicles they can afford.
Yes, that’s right. So this is the other thing about the economic modelling that we’ve done is that it’s really clear that we need to make sure that we do target support to people who are more affected by this than others. Things like the investment that we’re making in public transport disproportionately support low-income families. But also, we need to make sure that we’ve got things on the income side of the equation sorted out as well. So that’s all part of the work that we’re doing through our Just Transitions work that’s happening at MBIE and MFE at the moment. So we’re looking at not just the actual vehicle but, you know – what are all the other support systems that need to be in place as well?
When? When? I mean, you’ve got— Julie Anne Genter said earlier this week that you have four ministers working across four different departments on this.
Yes.
And this is a big bell curve—
We’ve got six different departments, actually.
Okay, well, that’s a big bell curve that you’ve got to scale. When are you going to do it? It’s got to be sooner rather than later.
Well, you know, we’re hoping to make some decisions in the second half of this year. But as you said, it’s a pretty significant challenge. It is complex. There are a lot of options, and so, you know, we’re working our way through it pretty thoroughly.
To get to carbon zero, the Productivity Commission says the price of carbon’s going to have to rise dramatically. And that’s from something like $22 a tonne at the moment up to between $75 a tonne or $200 a tonne. So is that what you’re anticipating?
No, I’m not. So, there’s a couple of things in there, one of which is they talk about the price of carbon — that’s not necessarily the same as the price in the Emissions Trading Scheme. So the way that I talk about that is that that is the cost of the transition per tonne of carbon, right? And so we know that, yes, that is going to go up. But the way to think about that is it’s not a sunk cost, it’s an investment in upgrading your economy. And we should be looking for solutions that generate a return, rather than solutions that are literally just a sunk cost.
Okay. Because what I’m getting at here is that if the price of carbon goes up that far, it directly relates to the amount of taxes in a price per litre of fuel. And so we worked out that if it goes up 200 tonnes, that’s an extra $40 a tank, you know? And that’s expensive for people.
Yeah, so, I mean, what we’ve done historically — and this is one of the things we will be consulting on later this year in terms of changes to the Emissions Trading Scheme — is how you manage the price cap. So you’re basically trying to smooth that increase over time to make it affordable, and you plan it in. When you’ve got that forward view of things, if you know that 10 years from now, 20 years from now, that petrol prices are going to be high, that incentivises the uptake to electric vehicles, for example. Already today, an electric vehicle is only a third of the running costs of a petrol-powered vehicle. The electricity is 30% of the price of petrol per kilometre travelled. So the—
Yeah, but you don’t have road user charges on those cars at the moment.
No, you don’t. Precisely, right?
Yeah, but that’s going to come in at some stage when everybody goes electric.
Well, yeah, but the point— at the moment, it’s charged through fuel, right? So, tax on fuel. So you do have an incentive to move to electrics, but the difficulty that we’ve got with electric vehicles is the upfront cost of the vehicle is really prohibitive. That’s what we need to tackle. The running costs, both in terms of the energy— transport energy and also the maintenance costs — are a fraction of what they are for combustion engine vehicles.
All right. It’s all about getting this agreement on this. Have you got bipartisan support to pass the Zero Carbon Act? Because otherwise, it’s pointless. You won’t have longevity. As you say, it’s a 32-year timeline.
Yeah, we have, shall we say, bipartisan support to work on the bill. I wouldn’t want to ask the National Party to commit to passing a bill that hasn’t even been written yet and hasn’t been drafted. But we will be working with them on the drafting, and hopefully what that means is that we’ll arrive at a consensus decision. And that does increase the chances that you will have unanimous support in the House. And that, really, would be ideal.
This whole thing is a big sell. And so do you think people understand the magnitude of the changes that are going to be needed for a carbon free future?
Yes, I do. And I’m encouraged by that survey that IAG commissioned a couple of weeks ago, because it illustrated that people really do understand that challenge. That, actually, they do want to be ambitious, they do want New Zealand to lead, they do think that there are opportunities there economically, but they also understand that it is a significant challenge, and that we will need to work together to—
Do they understand it’s going to have a significant impact on their daily lives?
Well, yes. I would argue that that survey illustrated that. But I also would question how much impact on their daily lives, right? I think that the New Zealand of 2050 will look as similar and as different as the New Zealand of today does to the New Zealand 30 years ago. You’ve got to remember, 30 years ago — the same period of time we’re talking about — 1988, the internet did not exist. It didn’t exist, right?
Mm.
But you try and run your school or your home or your community group or your business without the internet today? It’s unimaginable, right? The internet has had a profound impact on our economy, on our lives; whole new industries have been built off the back of it. And that is in the same period of time. But the New Zealand of today still feels in many ways like the New Zealand of 1988.
Okay, but do you think that zero carbon is going to have the same impact as the internet has had on society?
Yeah, I do.
It’s that big a change?
Well, yeah, I think it is. And I think it’ll be beneficial, right? I think what we’re talking about here is a more productive economy with higher tech, higher valued, higher paid jobs. I think that it’s clearly a cleaner economy, where you’ve got lower health care costs, people living in warmer homes, congestion-free streets in places like Auckland, which are currently losing $1.5 billion a year in productivity—
Okay, it all sounds rosy, but there’s a big road to get there.
Yeah, look, like I keep saying, it’s an upgrade to our economy. It’s an investment. You’ve got to put something in in order to generate that return. And if we don’t, the clean-up costs from the impacts of climate change will well exceed the costs of the investment that we’ve got to make to avoid the problem in the first place.
Okay, thanks very much. James Shaw, Minister for Climate Change. Thanks for your time.
Thanks for having me on the show.
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