National party creates doubt over meeting emissions reduction targets

Fuel sector announcements yesterday prompted the National party to confirm it would not support a biofuel mandate, creating uncertainty for industry players, writes Anna Rawhiti-Connell in this excerpt from The Bulletin. To receive The Bulletin in full each weekday morning, sign up here.

Delay to biofuel mandate 

Yesterday, two days after the UN secretary general told those gathered at Cop27 that “we were on a highway to climate hell”, energy minister Megan Woods announced a suite of fuel sector measures. Newsroom Pro’s Jono Milne says that the starkest headline among them was the postponement of the transport biofuels mandate by a year, through to April 2024. Milne says it highlights the government is most concerned about the cost of living ahead of next year’s election and not the generational challenge of climate change. The fuel announcement landed not long after the one about our commitment to climate loss funding. “New Zealand gives with one hand, while taking with the other.” writes Milne.

Biofuel mandate regulations yet to be finalised 

There is high global demand for biodiesel, which Woods says is, in part, because of the global energy shortages created by the war in Ukraine. Energy Resources Aotearoa estimates that the biofuel mandate would add between 6 and 10 cents a litre to the already high price of diesel. Fuel sector representatives said the Government’s original deadline of April next year was not practical given the regulations had yet to be finalised and that it couldn’t make investments in the necessary infrastructure without that happening first. Woods said the delay (paywalled) would “allow wholesalers to get the necessary infrastructure in place and to source high-quality feedstocks”.

National intends to scrap the biofuels mandate 

The National party created further uncertainty for the fuel sector yesterday. Energy spokesman Stuart Smith confirmed it would not support the mandate if it won next year’s general election. The Herald’s Adam Pearse writes “National’s intention to scrap the Government’s plan to use biofuels to reduce emissions puts fuel companies in a bind that could jeopardise the industry’s ability to meet climate change targets. Gull New Zealand chief executive Dave Bodger said “I’m not saying there’s going to be a change of government, but we will be investing tens of millions of dollars on this, so certainty is key going forward.”

Industry seems unbothered by Commerce Commission’s ability to step in 

Yesterday’s announcement also included the news that the government had agreed to give the Commerce Commission the right “to step in” and set fair prices for fuel if needed. Stuff’s Tom Pullar-Strecker has the clearest analysis of this. It’s been on the table since the commission concluded its market study into the industry in 2019 and is the last recommendation to be put in place. It’s a regulatory backstop. The fuel sector already provides data on its margins and profitability to the Commerce Commission on a regular basis. Most of the fuel sector representatives Pullar-Strecker spoke to seemed unbothered by it. Gull’s Dave Bodger “appeared to sum up the phlegmatic mood of petrol firms when he admitted he had ‘forgotten about this part of the regulation’”.

Correction: The original version of this article in The Bulletin stated that the delay to the introduction of the biofuel mandate would come at a cost of a million tonnes of emissions which was drawn from a Newsroom article. That has been removed from this post and has been corrected in the sourced article on Newsroom. MBIE advises the sum is 230,000 tonnes, and that will be balanced by emissions reductions elsewhere in the economy as well as increased reductions in the subsequent 2026-30 emissions budget. Those changes are expected to deliver the same emissions reductions as originally planned between now and 2035.