May 26, 2021
Hannah Riley

Did the Budget secure a Just Transition?

No, but it laid some foundations for a low-emission economy

The Budget did not secure a Just Transition for New Zealand’s transition to a low-emissions economy; however it does lay some foundations.

One of the Government’s wellbeing objectives guiding Budget 2021 investment was ‘Securing a Just Transition as we shift to a low-emissions economy’. This fits within one of the Government’s overarching policy goals: Laying the foundations for the future, including addressing key issues such as our climate change response. Although the Budget does lay some foundations for climate action, it does not deliver the amount of investment required to secure a Just Transition in New Zealand’s transition to a low-emissions economy.

The Budget includes nearly $2.3 billion for climate change mitigation and adaptation. Climate investments include:

  • $1.3 billion - rail operating and capital expenditure
  • $300 million - New Zealand Green Investment Finance to accelerate investment in low-carbon technology
  • $302 - to incentivise low-emissions vehicles
  • $67.4 million - Carbon Neutral Government Programme to cut emissions across the public sector
  • $19.7 million – to support the development of the Government’s Emissions Reduction Plan
  • $120 million – for home insulation and heating retrofits
  • $37 million – to deliver a national integrated farm planning system for farmers and growers
  • $24 million – for agricultural greenhouse gas mitigation research and development
  • $900,000 – to collect vital statistics on agricultural production
  • $131.8 million – to reform the resource management system
  • $296 million – to establish new multi-regional water services
  • $14 million – to expand Just Transition support for communities facing transitions
  • $6 million – to implement a sustainable biofuels mandate
  • $41 million – to fund low emission transport technologies and fuels.

The budget included lower than usual investment in high-emissions infrastructure. This is important for ensuring that New Zealand is not further locked into a high-emissions future. The lack of investment in high-emissions infrastructure may be reflective of including the shadow price of carbon into some of the bids cost-benefit analysis. This was the first budget to include the shadow price of carbon.

The Budget also announced that it will recycle future Emissions Trading Scheme (ETS) revenue. This means that revenue from the ETS will be used to achieve more emissions reduction from Budget 2022 onwards. These initiatives are a good start, but they are far from the investment that is required for transformational change.

The Government has signalled that transformational investment will come next year. Furthermore, the Government will receive the Climate Change Commission’s final advice report by the end of this month. This advice will inform the Government’s emissions reduction plan. Funding the emissions reduction plan will impact budgets from 2022 onwards. As such, it is expected that next year’s budget will deliver significant investment for climate action.

Climate related investment was a small portion of Budget 2021, and only $14 million was specifically for supporting communities facing transitions. The Government has therefore failed to secure a Just Transition for New Zealand’s transition to a low-emissions economy, but it has set up some foundations to deliver climate action. We hope to see significant investment next year in a manner that is truly just for all New Zealanders.