Advocacy Report Reader

Environment & Infrastructure

The Review of the Emissions Trading Scheme (ETS)

Published: August 11, 2023

Submitting To: Ministry for the Environment (MfE)

Issue for Business: The Government has decided to review the Emissions Trading Scheme. Their aim is to rebalance the ETS to account for more gross emission reductions. This was set out in the Emissions Reduction Plan and inform by recommendations from the Climate Change Commission. 1.) The ETS has severely damaged confidence in the carbon market. One objective ought to be to restore such confidence. 2.) We recommend that the Government promptly rules out retrospective changes to current NZU rights, providing stability and predictability of the ETS regime for businesses and investors. 3.) Any changes need to be grounded in key principles: flexibility, stability, cost-effectiveness, simplicity and optionality. 4.) We recommend conducting a comprehensive quantitative analysis to determine the level of gross emission reductions intended up to 2050 before any options are decided. 5.) This should include an assessment of the costs and benefits of each option in rebalancing the ETS towards more gross reductions. 6.) Alongside the assessment of current options, we recommend assessing non-ETS measures aimed at managing and controlling afforestation. 7.) We would like to see a comprehensive assessment of all aspects impacting afforestation economics and potential planting. 8.) This should include undertaking a comprehensive assessment of the potential amount and types of land suitable for afforestation in the permanent exotic forestry category. 9.) We recommend to account for constraints beyond the ETS. 10.) We do not support any option at this stage due to the lack of detail and inadequate acknowledgement of non-ETS measures that could address the stated problem.

Outcome: This marks the beginning of the ETS review. Future changes are expected in the future.


Ensuring an Orderly Thermal Transition

Published: July 28, 2023

Submitting To: Electricity Authority

Issue for Business: The EA has assessed the risk of an disorderly exit of thermal electricity generation. The Authority considers the risks to be low. Based on their assessment with modelling done by Concept Consulting, thermal generators experience net-cash flow volatility, depending on the type of generator. But overall they remain positive. They believe current market settings provide sufficient signals to existing thermal to remain in the system. This submission outlines BEC's response to several issues and matters raised. Among the several considerations mentioned in the submission, below are a few: 1. BEC believes this assessment should be ongoing because is the risk is ongoing. 2. BEC recommends that the Authority's analysis should be broadened to encompass a more comprehensive, contestable and open assessment. 3. We agree, in theory, a decrease in demand may not necessarily lead to a disorderly phase-out of thermal generation. However, at present, market participants express their deep concern about the lack of incentives and returns to justify the investment into a fast start peaking plant. This is concerning. 4. Gas supply in the broader conversation about sufficient thermal capacity must be considered adequately. 5. Existing policy uncertainty, including proposals like the NZ Battery Project and the 100% renewable electricity target, is severely damaging the investment feasibility of building new peaking plant. Abandoning the proposal would restore much needed certainty and investor confidence.


Customer and Product Data Bill & Accompanying Discussion Document

Published: July 24, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: BusinessNZ previously submitted on MBIE’s Consumer Data Right (CDR) discussion document in 2020. Given where the use of consumer data is heading globally, we believe there are economic opportunities for New Zealand if the introduction of a CDR is done effectively and efficiently, and most importantly provides a pathway for innovation. Any future steps must include the needs, concerns and opportunities for the business community.

Action: Submission sent to MBIE.

Outcome: Bill to be introduced later in 2023.


Input Methodology Review 2023 regarding EDBs

Published: July 19, 2023

Submitting To: Commerce Commission

Issue for Business: The Commission's draft decision largely retains the current methodology. This may not be prudent considering the evolving needs of electrification. There are instances where the Commission proposes changes that are retrograde steps, such as reductions to the weighted average cost of capital (WACC) percentiles for EDBs, which seem questionable given the need for investment in decarbonisation and the transition away from being less dependent on thermal generation. The WACC impacts financiability by acting as a building block for the rate of regulated return – the return that a regulated network can earn on investments. Implementing a steady state or incremental approach, in this context, could possibly slow electrification, and thus jeopardise the country’s energy transition. Insufficient allowances for network companies would likely result in a slower and impeded transition, making it more challenging for the country to meet its international commitments to achieve net-zero emissions within the designated timeframe.

Environment & Infrastructure

2023 Draft advice to inform the strategic direction of the Government’s second emissions reduction plan

Published: June 20, 2023

Submitting To: Climate Change Commission

Issue for Business: The Commission released its advice to inform the Government's second ERP. The advice outlines numerous recommendations on the strategic direction of the Government's policy direction across multiple sectors, including but not limited to, energy, industrial users and agriculture. BusinessNZ and BEC commented on several sections based on the impact upon climate change policy, and their relative consequence upon the broader business community. This submission clarifies and reinforces BusinessNZ/BEC's position on the role of gross and net emission reductions, the role of forestry, the integration of CCUS into the ETS, the Government's NDC target (and fiscal implications), the impact of policy uncertainty, RMA barriers and the important role of thermal in NZ's energy system.

Environment & Infrastructure

Annual updates to the New Zealand Emissions Trading Scheme limits and price control settings

Published: June 16, 2023

Submitting To: Ministry for the Environment (MfE)

Issue for Business: This submission is a response to MfE's proposed changes to the ETS price and unit settings. We outlined several recommendations and discussion points: 1.) We recommend conducting fewer reviews of price and unit settings and providing clarity on the balance between gross and net reductions. 2.) We recommend avoiding premature reductions in the stockpiled units. 3.) We support maintaining the status quo regarding the CCR and price floor to prevent this from becoming a reference point for particularly high prices. 4.) We emphasise that external constraints exist outside of the ETS that limit the effectiveness of a higher price signal. 5.) We recommend the Government proactively releases any market moving announcements before quarterly auctions, providing market participants sufficient to react to policy changes. The submission outlines the justification for each recommendation and statement.


Strengthening national direction on renewable electricity generation and transmission

Published: June 1, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: The Government has announced two new National Policy Statements on the national direction for renewable electricity and transmission. The Problem: the existing statements have failed to provide national direction, due to weaker or missing language. This ineffectiveness is compounded by stronger policy statements in competing areas, like NPS-FM or NPS-HPL. National direction and additional emphasis on nation significance must be provided to reduce consenting uncertainty, and provide decision-makers more weight to consider and grant consent for new renewable electricity and transmission infrastructure. BEC is pleased that the Government understands, and acknowledges, the increasing need to build this infrastructure to help meet New Zealand's climate targets. In some places, the NPS is an improvement. In others, it is a step-backwards. BEC outlines several problems with the proposed statements. This submission outlines several problems with the statements wording that must be addressed if New Zealand is to have an effective NPS-REG & ET. However, fundamentally, BEC notes that an NPS is limited in its ability to speed up and reduce the cost of NZ's costly and cumbersome consenting process. The RMA itself must be reformed. BEC refers to BusinessNZ's submission outlining the problems with the RMA's replacements - SPB and NBE, and how they can be improved.

Immigration, Education, Skills & Training

Productivity Commission Immigration Inquiry feedback

Published: May 23, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: BusinessNZ provided feedback to the Government's response to the Productivity Commission Immigration Inquiry. BusinessNZ advised a Government Policy Statement was not necessary to better co-ordinate labour market supply channels, and that Te Tiriti o Waitangi centric immigration policy required further clarification before commenting.

Action: Consult with members and submit to MBIE


Charging our future: discussion document

Published: May 11, 2023

Submitting To: Ministry of Transport (MoT)

Issue for Business: The paper outlines a system-wide vision and five proposed long-term outcomes to support the rollout of charging infrastructure in New Zealand. In response to the paper, BEC outlines some of the barriers and challenges public charger providers and electricity distribution businesses (EDBs) face, and are likely to face, as the uptake of electric vehicles accelerates. BEC supports a strategy for EV charging infrastructure. BEC recommends removing or alleviating these barriers should be the focus of the strategy, enabling businesses and investors to roll-out EV charging infrastructure without large regulatory, process and cost constraints standing in the way. BEC believes this interagency group should partner with the private sector by identifying problems and barriers, and doesn't prefer other options tabled, like the formation of a new agency and entity. BEC believes the heavy lifting will be provided by market players, and the Government has limited role in public EV charging provision in the early stages if market failures arise. But any analysis of determining a market failure must be rigorous, and rightly identify areas where chargers are needed. BEC questions the need for targets, considering the relatively arbitrary nature of targets and wider regulatory interventions, like compulsory EV charging in new builds. BEC recommends application processes can be streamlined across NZ's 29 EDBs. The processes vary in time and cost. BEC's submission outlines the cost of connecting a charger to the grid, which can vary, but is a large barrier. A new connection can substantial increase the cost of connecting, and weaken the commerciality of installing an public EV charger. However, EDBs need the revenue to fund their increase in capital expenditure. Undoubtedly, the issue of reducing reducing cost inevitably turns to who pays?


Consultation on a proposed increase to the Fire and Emergency transistional levy for 2024/25 and 2025/26

Published: April 27, 2023

Submitting To: Fire and Emergency New Zealand (FENZ)

Issue for Business: Fire and Emergency New Zealand (FENZ) is proposing an increase of 12.8% in the transistional levy component across all levied insurance policies for the 2024/25 and 2025/26 financial years to pay for the significant cost increase largely resulting for the new collective employment agreement settled in December 2022 between Fire and Emergency NZ (FENZ) and the NZ Professional Firefighters Union (NZPFU).

Action: BusinessNZ has made a submission to FENZ recommending that given the significant public good aspects of many of the services provided by the FENZ, the total cost increase in the transitional levy, forecast for the financial years 2024/25 and 2025/26, be funded from general taxation, partially compensating for the significant shortfall in FENZ's current government funding.

Outcome: FENZ are currently analysing submissions but is likely that they will proceed with their proposed policy rather than look at new funding mechanisms simply because they have discounted other methods of funding -despite the deficiencies associated with current funding methods.


Enabling investment in offshore renewable energy – discussion document

Published: April 14, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: Under the Government's ERP, they have promised to create a regulatory regime for the feasibility, construction, operation and decommissioning of offshore renewable energy by 2024. MBIE's discussion document outlines how the regime could work and raised questions on how it should work. BEC supports, and applauds, the Government's commitment to creating this regime, and has provided feedback to MBIE's questions: 1.) BEC supports a developer-led approach, not a government-led approach. 2.) BEC supports a permitting regime that creates exclusive rights to undertake feasibility studies, and the exclusive right to apply for construction and operation once the feasibility has concluded. 3.) BEC supports a 'use-it-or-lose-it' provision and recommend periodic reports demonstrating how activities are progressing to safeguard against 'land banking.' 4.) BEC recommends resolving the issue of overlapping permit applications by implementing a merit-based assessment and a negotiation mechanism. 5.) BEC recommends a permit duration of ten years. 6.) BEC questions the need for a national interest test. A test will already occur with the Overseas Investment Office (OIO) approval of overseas funds. 7.) BEC supports the involvement of iwi, hapū and whanau, but believes any requirements should not be onerous and overly prescriptive. 8.) BEC recommends a broad technical criterion, and a narrow financial criterion, to ensure developers are suitable, competent and capable, without 'locking-out' a diversity of developers and worsening competition. 9.) BEC believes that the final decision on granting permits should be made by a relevant decision maker, not the Minister.

Environment & Infrastructure

Climate Change Response (Late Payment Penalties and Industrial Allocation) Amendment Bill

Published: April 6, 2023

Submitting To: Environment Select Committee

Issue for Business: The amendment bill updates and changes several provisions within the Climate Change Response Act (CCRA) regarding industrial allocations (IA) under the Emissions Trading Scheme (ETS). BusinessNZ Energy Council supports this Bill, with amendments. We support updating IA eligibility thresholds to better reflect the higher carbon price and risk of carbon leakage. We support new activity provisions within the Bill. We support changes to the EAF's methodology and information sharing. On the matter of baseline resetting, we support a one-off change to the years used for collecting data on emissions intensity. This protects the integrity of the ETS going forward. However, we oppose continued baseline reviews every ten years, and the power to rest baselines every five years if the over-allocation test is met. This provision strips away the signal to invest in step-change decarbonisation projects. Large projects resulting in significant step changes would not proceed, as the economic returns would not outweigh the large opex and capex associated with a project. This is undesirable for the environment and the Government’s targets.