October 3, 2023

Government to keep petrol cheap and dirty

Government to keep petrol cheap and dirty

When the rubber hits the road, Chris Hipkins has shown he’d rather keep petrol cheap and carbon intensive than fight climate changes

Comment: Chris Hipkins’ first two policy announcements will have the combined effect of keeping petrol inexpensive and emissions intensive.

Last week, the new Prime Minister extended the fuel subsidies which see fuel excise duty lowered by 25c a litre and road user charges by a similar amount. This week, among the Ardern-era policies doused with petrol and set alight was a biofuel mandate that would have reduced New Zealand’s carbon pollution by nine million tonnes over the next 12 years.

The latest decision even has the support of the Green Party, which expressed consternation at the earlier subsidy extension. Co-leader and Climate Change Minister James Shaw told Newsroom he backed the scrapping of the biofuel mandate when approached about it amid concerns over the impact on overseas food security and the belief that its demise could hasten the electrification of the vehicle fleet.

He conceded this now leaves New Zealand with no real policies to reduce emissions from the 4.5 million petrol and diesel vehicles already in the country, which we drive until they are on average 16 years old. More than 140,000 new petrol and diesel vehicles were bought in New Zealand since the start of 2022 – we’ll still be driving these in 2038, when the country is supposed to have hit net zero carbon dioxide emissions, and they’ll still be burning the same dirty petrol and diesel as today.


* Biofuel mandate runs up against ‘unintended consequences’

* Extended petrol subsidy drives emissions gap

The biofuel mandate would have come into effect in April 2024 and required fuel companies to mix an increasing amount of fuel derived from biological sources (often food waste or purpose-grown vegetation) into petrol and diesel. These additives produce less carbon dioxide and are theoretically carbon neutral given the waste would have decayed anyway and assuming the vegetation is replanted to reabsorb the emitted carbon.

There are issues with this that mean the carbon neutrality of biofuels isn’t 100 percent, Shaw said.

“From a climate perspective, whilst biofuels are technically carbon neutral, that’s kind of only sort of true. In the sense that, you’re still burning a carbon-based fuel and putting CO2 into the atmosphere and then relying on reforesting or replanting the feedstocks to then soak up an equivalent amount of CO2 coming out of the atmosphere,” he said.

Climate change is important – we heard that plenty from Jacinda Ardern, and Chris Hipkins has made a big deal of it since coming to power too – but when it rubs up against political imperatives, the pursuit for better polling wins out

Emitting and then sequestering a tonne of CO2 doesn’t have the exact opposite climate impact as avoiding the emission in the first place, studies have shown, and biofuel systems would absorb CO2 on a time lag meaning the gas would still temporarily heat the atmosphere before it was reabsorbed.

Still, it’s not tenable to have no way of addressing emissions from the fossil fuel component of the light fleet, which is expected to make up more than half of all vehicles until nearly 2040 even under the Climate Change Commission’s rosy electrification projections.

Shaw said canning the mandate means the country will have to focus on ditching fossil fuel vehicles in favour of electric ones, or active and public transport. But it could just as easily go the other way, with mode shift continuing to lag behind the ambitious targets while shiny new gas guzzlers hit the roads and no biofuels to even mitigate their emissions.

Even an imperfect biofuel mix is still better than no mix at all. And this wasn’t Hipkins’ argument for scrapping the mandate – he argued it would raise petrol prices and was therefore untenable. That’s despite the fact that petrol prices excluding taxes are now at the same levels as they were before the Russian war in Ukraine began. Those are still elevated on historical averages but no longer the stratospheric highs that prompted the Government to cut taxes in the first place.

Regardless of what happens in the wider fleet, the mandate was still expected to reduce emissions by 1 million tonnes by 2025 and by another 7.4 million tonnes over the decade after that.

This further widens a growing gap between the Government’s climate change programme and its carbon budgets, which limit how much greenhouse gas the country can emit in five-year blocks. The first budget covers 2022 to 2025 and was already going to be tight – something Shaw readily acknowledged.

The fuel tax cuts and their many subsequent extensions used up the little wiggle room available and created a gap of 100,000 to 300,000 tonnes. Now the Government will have to come up with policies that will reduce emissions over just the next three years by more than a million tonnes, when the impact of scrapping the mandate is included. Given the policy development process is reasonably lengthy, that could mean finding levers to pull that slash emissions by half a million tonnes in each of 2024 and 2025.

Shaw said the Cabinet paper that ditched the mandate tasked him and Energy Minister Megan Woods with finding a way to make up that gap, and Hipkins said on Wednesday the Government would seek to do so.

In the view of the climate minister, Labour “essentially created a rod for their own backs” with that direction. Then again, Labour already had a rod for their own backs by introducing biofuel mandate legislation in the first place and Cabinet pulled back from that easily enough.

It’s hard to think of the last time there was a genuine “win” for the climate amid recent Government decisions. Late last year, Cabinet decided to artificially depress the carbon price because of cost of living concerns, going against the advice of the Climate Change Commission. Ministers also promised farmers a low emissions price in the He Waka Eke Noa scheme in December, again in conflict with the commission’s view.

Add on to that the recent decisions to keep petrol cheap and dirty, and a clear picture of the Government’s priorities comes into view. Yes, climate change is important – we heard that plenty from Jacinda Ardern, and Chris Hipkins has made a big deal of it since coming to power too – but when it rubs up against political imperatives, the pursuit for better polling wins out.

The voters of today may thank the Government for its efforts to keep petrol cheap but future generations will feel the real consequences of those decisions.

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