New Zealand has the potential to become energy independent by phasing out fossil fuels but unabated fossil fuels account for 59% of the current total primary energy supply (TPES), whereas renewables account for 41%.
Transport accounts for the largest share of emissions in the energy sector, particularly road transportation.
The second largest contributor to energy sector emissions is energy use in industry. Emissions increases in this subsector are the result of manufacturing industries and construction, mainly “chemicals”, and “food processing, beverage and tobacco” categories.
The government plans to ban new coal boilers by the end of 2021 and proposes phasing out existing coal boilers by 2037. As an example, coal boilers are used for drying wood or milk powder. The dairy industry is one of the country’s largest coal users. The proposal has exceptions such as for use in steel and chemical production.
The third largest contributor to energy sector emissions is the power sector, currently dominated by renewables at 81%, whereas unabated fossil fuels account for 19% of the power mix. New Zealand has a number of energy related strategies, including the Emissions Trading Scheme which incentivises renewables by requiring fossil fuel generators to purchase and surrender emissions units.
Natural gas is the main fossil fuel in the power sector representing 16%, with 3% generated by coal. Hydro power is the main renewable energy source for electricity generation followed by geothermal. Reliance on hydro power creates vulnerabilities in the power system subject to rainfall patterns.
New Zealand’s pipeline of renewable energy projects are mainly geothermal and wind. It also has targets to reach 90% and 100% of total electricity generation from renewable energy by 2025 and 2035, respectively, but few policies are in place to achieve this. Renewable energy can be ramped up with a diversified approach focusing on a number of technologies to reduce the risks associated with overreliance on one technology.
The country has an Energy Efficiency and Conservation Authority (EECA) with a strategic focus on businesses, transport, housing, government leadership and society engagement. The programmes implemented by the EECA have an estimated mitigation impact of 3 MtCO₂e in 2020.
New Zealand has a hydrogen vision focusing on green hydrogen and is developing a hydrogen roadmap. New Zealand could further decarbonise the energy sector across the energy, transport and industry sectors if the roadmap proves effective.
Beyond the energy sector, and considering the large impact of the agriculture sector on emissions, it is important to implement climate policies in the agriculture sector or utilise emissions reduction technologies in other sectors to compensate. The agriculture sector is not covered by the NZ ETS. The government and agriculture sector have partnered to explore options for an agriculture pricing system with final policy recommendations expected in April 2022. Modelling suggests the prices suggested would lead to less than 1% reductions in agriculture emissions below 2017 levels.