Richie Merzian:
Good morning everyone. My name is Richie Merzian. I’m the Climate and Energy Program Director at The Australia Institute, one of the three organizers… four organizers, sorry, for this particular summit today. So it’s a pleasure to be here with you. Next up we have, I think, a really nice speaker that follows on from the fireside chat we had. Mike Cannon-Brookes said that we shouldn’t be ashamed to learn from the lessons overseas, especially since we’re playing catch up, and no better lesson than the one from across the ditch where New Zealand has managed to go from three to 10% new car sales electric in just a bit over a year.
So we’re fortunate enough to have the minister, the honorable Michael Ward, minister for transport from New Zealand, joining us live from Wellington. We’re going to have him up on the screen to give his opening comments, and then hopefully have a few questions if technology allows.
Michael Wood:
Well, thank you. Kia ora koutou katoa, and a very, very good morning to everyone who’s gathered here at this Australian National EV summit. I’m very pleased to be able to speak with you a little bit about Aotearoa, New Zealand’s work and journey towards our goal being one of the most attractive markets for electric vehicles in the world. And if I can just start off with some good news to give you some hope, because we came from a pretty slow standing start just over a year ago. In fact, over recent months, we are getting closer to 20% of new sales across our fleet being zero emissions vehicles, and up to around about 45% across zero and low emissions vehicles. What that goes to show is that decisive actions, policy, and collaboration between government and industry can lead to a fast transition in this sector. And that’s what I’m keen to speak about today.
Can I also acknowledge Chris Bowen and Catherine King. I met with Catherine when I was in Australia last month, who have indicated today that they’re looking at consultation on an EV strategy and a fuel efficiency standard for Australia as well. So great to see our partners and the Australian government also really beginning to make progress in this area as well.
For New Zealand, we are keenly aware of the fact that climate change is one of the biggest threats that we face as a country. As we speak, the top of the South Island is currently coping with record floods through one of our cities, Nelson, and we continue to experience extreme weather events across all parts of the country. And so it’s abundantly clear to us that the climate crisis is not a future threat, it is a current reality, and that reminds us of the need for urgent action.
In New Zealand, our CO2 emissions come around about 40% from our transport sector, and transport as a whole is the second largest emitter after agriculture. So in short, if we don’t take action on transport, then we will not hit net zero, we will not hit our 2035 targets, and we will fail future generations. So we are seized of the fact that transport needs to affect a real transformation in the coming years to become far less carbon dependent.
In New Zealand, we have whakatauki, which are words of wisdom in Te Reo Maori that really sums up the work that I think we need to do in this area. [foreign language 00:03:27] which means wishing for the crayfish won’t bring it. You have to get on to the action point, and that’s what we’re doing in climate.
One of the other things that I’m very conscious of as we look to decarbonize the transport sector, is that we have to tell a whole story. And the story that I like to tell is that if we do this job well, we’ll make most other things better as well. We’ll have cleaner air, we’ll have less congested and pleasanter cities and towns to live in, we’ll improve road safety, and make many other improvements to the way that people live their lives. As an example, we’ve recently had a major study release called the HAPINZ 3.0 report, which is the Health and Air Pollution in New Zealand Study, which shows that currently transport related air pollution in New Zealand is resulting in the premature deaths of more than 2,200 adult New Zealanders a year, more than 9,200 hospital admissions for respiratory and cardiac illnesses, and over 13,200 cases of childhood asthma. There’s no particular reason to imagine that proportionately, you wouldn’t be suffering the same effects in Australia.
So the transport choices that we make have a direct daily impact, not only on our emissions, but on the health of people in our communities, our friends, our families, and ourselves as well. So all of this reinforces a need for us to be taking action to clean up our fleet, and to make sure that we are reducing emissions.
We’ve got work underway at the moment to move towards the adoption of Euro 6 across our fleet as well, and we have consultation with our automobile sector at the moment around what the pace and phasing of that change might be, and we look forward to working with Australia on that particular issue as well.
Our broader emissions reduction plan is a structured one. Our parliament declared a climate emergency back in 2018, which was a statement of intent. Following on from that, we created a Zero Carbon Act, which formally declares our commitment to net zero by 2050, and also establishes an independent climate commission to provide politically neutral scientific advice about the emissions budgets that we need to set sector by sector in order to be able to achieve those targets of net zero by 2050 and a 41% reduction by 2035. The government is then statutorily obliged to respond to that advice from the commission and to produce an emissions reduction plan. We produced the first such plan in May of this year, and chapter by chapter, it tells New Zealanders the objectives that we have and the policies that we will follow to meet those objectives.
The transport chapter is one of the most significant. It sets us on track to achieve a 41% reduction by 2035 across transport through four key targets. The first is increasing zero emissions vehicles to 30% of the light vehicle fleet by 2035. We need to reduce our emissions from freight transport by 35% by the same time, we need to reduce total vehicle kilometers traveled by the light fleet by 20%, and we need to reduce the emissions intensity of transport fuel by 10%. So you get the flavor across all of that, that we don’t think we can achieve those targets just by one lever. It’s got to be by all of the levers that we have available. We need more people to get onto public transport and walk and cycle instead of getting in their cars. But when they do, we need those cars to be as clean as possible, as quickly as possible.
The targets I’ve just gone through are ambitious, but our modeling shows that already with the steps that we have in place, we’re on track for our first five-year carbon budget and transport to be achieved, which will pretty much be the first time ever that we’ve turned around emissions coming out of the transport sector.
Over the course of the last year and a half, we’ve gone from extremely unfavorable policy settings in this area to very positive policy settings that are making a real difference. To encourage supply, we’ve now set a CO2 emission standard on vehicle imports into New Zealand, which suppliers must meet. The requirements strengthen globally. Starting from next year. By 2027, these will be amongst the strongest CO2 targets set globally. So we’ve gone effectively, along with Australia and Russia, from being almost alone in the OECD and having no emissions targets to having some of the strongest targets by 2027. And we believe that that will make a real difference.
We already hear from vehicle importers that it is making it easier for them to access supply from overseas suppliers because they can see that there’s a regulatory environment, which incentivizes it. Effectively for importers of vehicles, they face a fee over the course of the year based on the average emissions of their fleet. So there’s a direct incentive for them to begin lowering the emissions of their fleet by getting an increased supply of clean or cleaner vehicles into the system.
Then on the demand side, we’ve established a feebate scheme called the Clean Car Discount. Gives people up to 8,625 New Zealand dollars for purchasing a zero emissions or low emissions vehicle. The whole rebate scheme is financially sustainable as it’s paid for by charges of up to 5,175 New Zealand dollars on the highest emitting vehicles. So the Crown has effectively loaned a sum of just over $300 million to our transport agency, and they will run that scheme in a fiscally neutral way over the next 10 years or so, and the money will be paid back at the end. And what it also means is there’s an incentive at both ends, an incentive for the cleanest vehicles and a disincentive for the dirtiest vehicles in the system.
The rebates and charges work on a sliding scale based on the emissions profile of the vehicle, and it’s working better than we expected. We first introduced the rebates on the 1st of July this year, and then the full scheme came into effect on the 1st of April this year with a wider range of rebates and the introduction of fees as well. We are now seeing months in New Zealand where the top selling passenger car of any fuel type produces no emissions.
As of December of last year, which was six months after the rebates began, the new passenger vehicle segment is already on track for our 2023 CO2 target, a year ahead of schedule. We managed to achieve a 15% reduction in the average emissions of the new fleet coming into New Zealand within about three months of the scheme coming into effect. It previously took eight years to have a similar reduction. And as I said at the beginning, our sales by market share of EV passenger vehicles have risen by about 3% in 2020 to around about 20% currently as well, and we expect that to increase further based on the demand that we’re seeing.
So what it shows effectively, and I listen to the little clip that the honorable Chris Bowen and the honorable Catherine King had up on Twitter before, there’s a bit of a focus on choice here. We’ve shown that when we provide reasonable choice to consumers through a little bit of a nudge on price and a bit of encouragement on the supply side, consumers will flock to electric and low and zero emission vehicles for all of the reasons that we know.
To better inform consumers, we’ve also introduced mandatory vehicle emissions and energy economy labels on new and used vehicles, so that they’ve got that choice there and got the knowledge. We’ve also invested $15 million annually in co-funding for innovative vehicles and EV charging stations alongside the private sector. Over 97% of our state highway network now has a fast charger every 75 kilometers, and 85% of Kiwis are able to charge their EVs at home.
More recently in the budget this year, we’ve introduced the Clean Car Upgrade, which is a scrap and replace scheme for low income households to get EVs and hybrids, and it’ll start with a trial from April of next year. It’s broadly based on the California scrap and replace model, which has been effective in supporting lower and middle income households to get the benefit of EVs and cleaner vehicles.
Finally, all newly bought public buses from 2025 in New Zealand will be mandated to be zero emissions, and the entire fleet will have had to have transitioned via mandate by 2035. We already now have hundreds of electric buses in service and on order, and we’re making progress there much more quickly than was initially intended. So across the sector, our policies are working and helping to ensure that we will not become a dumping ground for the world’s dirtiest vehicles, which is a real risk for any country, which doesn’t move ahead in this area.
As I said before, our goals to decarbonize transport are ambitious, and they need to be if we want to get to our targets. To achieve our goal, almost all vehicles sold in New Zealand will need to be zero emissions for several years before 2035. Based on the projected fleet size, we need to import about 1.5 million zero emissions vehicles by then. We do know that vehicle supply, particularly for right-hand drive markets is challenging. So we’re going to need to work very closely with industry in order to be able to meet those targets and give our consumers the clean vehicles that they want.
And this is where I think there is a great opportunity for Australia and New Zealand to work together. With the strong alignment that we’re seeing between our governments now, in terms of intent, direction and vision, if we can find ways of working together to unlock supply for our two markets, that will benefit the transition in both countries. So the right national policies, but also regional and global cooperation are important. And during COP26, New Zealand joined many countries and declarations to be part of the international effort to work towards sales of all new cars and vans being zero emission from the middle of the next decade, and for medium and heavy duty trucks to become zero emission globally by 2040.
So New Zealand’s journey has started off well. There’s still a long way to go, but our government is determined about this, determined to work with the sector, and determined to ensure that clean vehicles are a critical part of our transition to a decarbonized transport sector in reaching net zero, which we all need to do. And I look forward to working with yourselves and our colleagues and the Australian government in the years to come. [foreign language 00:14:12]. And I wish you a very successful and productive summit.
Richie Merzian:
Thank you, Minister. We might just keep you for one question. The example in New Zealand gives us hope, and not just on CO2 emission standards, which otherwise known as fuel efficiency standards, which the minister just announced a process to kickoff here, but you’ve been leading on, but also on electric buses. It’s great to hear by 2035, the entire fleet will be clean, but also on the feebate scheme, which I think is something quite courageous. And in Australia, we often do it the other way around. We often tax the things we want more of and incentivize the things we want less of, but with the feebate scheme, you’ve managed to get it the right way around.
Are there any questions for the minister? We have two roving mics at the back. We have time for maybe just one question for Minister Wood if there are any right now. Otherwise I might lead with… Just gentlemen over here.
Speaker 3:
Minister, thank you very much. To what extent are used EVs part of the transition that’s happening in New Zealand, importing used EVs? And are the import rules free of restrictions?
Michael Wood:
Yes. Used vehicles are part of both the clean car standard and the clean car discount scheme. In the case of the discount scheme, the feebate scheme, both the charges and the discounts are set at a lower level than they are for new vehicles, and that’s in reference to the fact that on average, we would expect that a new vehicle will spend less time on the road in New Zealand, therefore the benefits and the disbenefits are less, but they are included within the scheme. And in fact, that’s been a very successful part of the scheme. The biggest selling vehicles receiving a discount under the clean car discount have in fact been on the used side. And the ambit of the scheme, it is set based on emissions profile, not necessarily fuel type. So obviously it captures electric vehicles, but it does also capture the different varieties of hybrid at this point. As time goes on, we expect the standard to rise and it to move closer to just capturing EVs. But at this stage, both new and used and also a variety of zero and lower emissions vehicles.
We do think that’s important by the way, because one of the sort political sticky points I think in setting up these schemes is ensuring that it isn’t in fact, and isn’t seen to be a scheme which just subsidizes vehicles for the wealthiest people in one society. So ensuring that there is access to vehicles at a lower price point I think is quite an important part of the transition and an important part of the social license. So the other detail here is we set a price cap of $80,000 for the clean car discount. So vehicles have to be priced below that to access the discounts. That had a dual benefit. Firstly, it has ensured that point I’ve just raised, but secondly, it’s sort of had a double effect. It’s meant that a range of importers and distributors have made pricing decisions in the first instance to bring vehicles down below the cap to access the benefits of the scheme, and then the discount comes on that. So with some of our number of hybrid electric vans on the market, we’ve effectively seen about a $20,000 reduction in the price as a result of that effect.
Richie Merzian:
Thank you. Could I please have one more round of applause for the minister, Michael Wood.