A tight labour market is acting as a handbrake on the Government’s climate change spending.
In some cases, the Government is coming up tens of millions of dollars shy of the funding it wanted to spend on emissions reduction policies.
Climate Change Minister James Shaw said there was another difficulty in getting money out the door: The effects of climate change itself. He said responding to the effects of climate change was frustrating or delaying the Government’s efforts.
“As Treasury notes, it is fairly uniform across agencies which are all dealing with similar constraints,” Shaw said.
“But you can’t escape the grim irony that some of the slow Climate Emergency Response Fund spending was in part due to disruptions caused by Cyclone Gabrielle, as well as other things like labour market pressures. It is yet another stark signal that the climate crisis is both present and accelerating,” he said.
A year ago, the Government launched New Zealand’s first Emissions Reduction Plan, a laundry list of initiatives intended to help the country hit its emissions targets.
These were largely paid for by the Climate Emergency Response Fund, a pot of money funded by the money the Government earns from the Emissions Trading Scheme.
Treasury has begun reporting on this fund, looking at what it expects to be spent by the end of the fiscal year at the end of June and comparing it with the funding that was allocated to that policy in the first place - known as the baseline allocation.
Because the final figures are not yet in, Treasury uses actual figures for the first two quarters of the fiscal year and forecasts for the second two.
Some of the largest shortfalls are in the area of industrial process heat. The Government is trying to get industrial energy users to switch to low-carbon fuels or electricity.
But one of its policies, “fuel switching”, had $80 million set aside for 2022/23, but is now forecast to spend only $9m.
The reason for the variance, according to a Treasury paper, is “[t]here has been more of a focus on detailed programme design and less funding committed at this stage than originally estimated”.
The other large shortfall is New Zealand’s international development commitment as part of efforts to help other countries grapple with climate change.
For this, $160m is expected to be spent by the end of the fiscal year, $40m behind the baseline allocation. The same Treasury paper said the Government may seek approval to “shift some of this allocation into future financial years”.
A further $25m was allocated to decarbonise the waste sector. Just $3m of this is expected to be spent by the end of the fiscal year.
Treasury said this funding is being administered through a “contestable process” that began only in October. It said the funding was expected to be fully committed this year, but the actual drawdown of the fund would be slower.
Greenpeace campaigner Christine Rose said the figures showed the climate crisis “is being treated as anything but an emergency by the Government”.
She said it was “particularly disappointing” to see policies like “localised renewable energy projects, supporting mode-shifts in transport, and supporting a transition from intensive dairying practices to a regenerative, organic, ecological model of farming that is much less emissions-intensive” left behind.
Rose said New Zealand needed to continue pushing for actual emissions reductions and not just offsets.
“New Zealand cannot rely on offsetting emissions, domestically or offshore. The Government’s failure to spend the allocated budget is in reality a failure to invest in initiatives that would protect the climate and provide real benefits to communities,” she said.
Another issue for the Government is hiring people to advise on policies to help with the energy transition.
The CERF was meant to fund the development of policy for “equitable transitions” - ensuring the transition to a low-emissions economy did not harm the less well-off, as well as policy on process heat decarbonisation and the development of an energy strategy and hydrogen roadmap.
All three areas have reported under-spends because of difficulty hiring staff.
Act leader David Seymour said New Zealand needs to pivot from reducing emissions to adapting to the effects of climate change. “Every dollar that is spent on reducing emissions [in New Zealand] - the rest of the world didn’t get the memo.”
Noting that New Zealand’s contribution to reducing global emissions would only ever be small, Seymour said the Emissions Trading Scheme should be used to drive mitigation.