Climate Minister says gas shortage will lower greenhouse emissions
Kapuni gas plant.
Photo:
RNZ / Robin Martin
Climate Change Minister Simon Watts says the gas shortage will lower greenhouse gas emissions, but at a cost for businesses that can't switch to electricity.
Supply from existing gas fields has plunged since the government published its
Emissions Reduction Plan
in December 2024.
Watts was asked in a scrutiny hearing in front of the environment committee of MPs why the government's
climate plan
had put such heavy emphasis on capturing and storing carbon dioxide underground at Kapuni gas field, when the project was untested and its prospects were now looking dubious.
Watts blamed the gas shortage - but said the shortage itself would lower carbon dioxide emissions.
He said, compared with when the plan was written, "New Zealand has less gas than it thought".
"Less gas that's available by virtue is less emissions, so in some ways there is an acceleration of the emissions reduction because we simply don't have that gas available," he said.
"We are at critical levels in the context of low levels of gas. Some may say with a purely climate hat on, well that's good, there are no emissions and therefore they can't use it (gas)," Watts said.
"But the reality is, in a manufacturing and industrial sense there are a number of businesses who either have an inability to transition to other sources ... or doing so is a significant fiscal cost and/or time horizon."
Watts said the government was looking at ways to help those companies.
"The good thing is, in the current environment there is an economic [and] commercial case to transition off gas because electricity is cheaper, and therefore the commercial imperative is driving that transition."
"I'll take market intervention over government regulation any day."
Watts said the government's assumptions regarding future gas use and the prospects of carbon capture at Kapuni would need to be reassessed and the results would published later this year.
Carbon capture and storage (CCS) condenses carbon dioxide and stores it underground in reservoirs.
Overseas, some high profile projects have been controversial because taxpayer funds for climate action were being paid to some of the planet's biggest emitters, fossil fuel companies, to capture and store just a tiny fraction of their pollution underground.
Fully a third of the carbon savings needed to meet the government's legal obligations to cut emissions from 2025-2030 was
supposed to come from
carbon dioxide being stashed permanently underground at Taranaki's Kapuni gas field.
But in May, Kapuni's owner Todd Energy told RNZ the project wasn't viable unless it received some kind of extra incentive or subsidy from the government.
The scheme would earn carbon credits for every tonne of emissions stored, but Todd said the market price of carbon was too low to justify the investment.
Simon Watts.
Photo:
RNZ / Samuel Rillstone
At the scrutiny hearing, Watts was grilled by opposition MPs on whether Todd Energy had asked for direct subsidies from the government.
Watts said he hadn't seen such a request, but Labour MP Deborah Russell presented him with an answer to a written question in Parliament, confirming Todd had asked for subsidies.
Watts didn't directly answer Russell when she asked what the government's reply had been. He said in regards to support for industries "there's a number of aspects that remain under active consideration".
Watts said the government was still committed to passing regulations allowing carbon capture and storage as "one tool in the toolbox" for lowering emissions.
RNZ asked Todd to clarify what it had asked for.
It said it had not asked the government for a direct subsidy for carbon capture and storage at Kapuni.
But the company confirmed it wanted either co-investment, government underwriting or shared liability with the taxpayer for any future carbon leaks from the project.
Todd has previously argued the government should treat carbon capture and storage facilities as infrastructure.
"In our 2024 submission to MBIE (Ministry for Business Innovation and Employment) on the CCUS consultation, we did signal that government support - particularly in the form of risk-sharing or enabling mechanisms - would be essential for CCS to proceed in New Zealand," it said.
"Particularly, we noted that New Zealand's declining gas reserves make the economics of CCS challenging and that 'for CCS to be effective, the government should consider sharing project risks and responsibilities.
"It could be liability for leakage, particularly if the intent is to store third party CO2 in time. Due to challenging economics there is also financing risk that co-investment or a government underwrite could help to de-risk," said the company.
Todd Energy had previously estimated the Kapuni field would have room for storing carbon dioxide produced by other companies, as well as its own.
Earlier in the hearing, Watts was asked by National MP Grant McCallum about the risk of "emissions leakage" if New Zealand started lowering its methane emissions from farming.
Emissions leakage refers to the risk of production moving overseas to get away from emissions pricing in its country of origin.
Watts
defended the necessity
of meeting New Zealand's climate targets and international obligations.
"You hear some on some corners saying, we're very small and insignificant," he said.
"Every country, big or small, has a role to play in terms of reducing emissions and New Zealand is part of the Paris Agreement for that purpose.
"In terms of adding up all the small and insignificant countries, it adds up to 40 per cent of global emissions," Watts said.
"If we pull out, what signal does that send? There are three countries that are not part of the Paris Agreement, the USA and a number of other countries that most people probably have probably never heard of."
[Those countries are
Iran, Libya and Yemen
.
"Russia, China, India, they're all part of the Paris Agreement, and all the other countries we would look to - the only one is the US.
"In regards to the implications on international trade, ... New Zealand has a reputation as a primary sector exporter of red meat, dairy and other products," he said.
"Why would we put that at risk?"
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