New Zealand moves on 3.5% GHG reduction target for all transport fuels

London (Quantum Commodity Intelligence) – New Zealand has launched a consultation for the introduction of a new greenhouse gas reduction mandate for transport fuels, including aviation and marine fuels, which is set to reach 3.5% by 2025 and have new higher targets introduced every five years.

The proposed new Sustainable Biofuels Mandate would be the first biofuels law successfully introduced in the country after a target for 2.5% biodiesel blending in 2008 was repealed before it came into effect.

The new target would start at a 1.2% reduction of GHG emissions in 2023 and increase to 2.3% in 2024.

An estimated 3.75 petajoules of renewable fuels would be required to meet the 2023 target, increasing to 7.33 PJ in 2024 and 11.08 PJ in 2025.

1 PJ is equivalent to around 26,500 mt of fatty-acid-methyl-ester (FAME) biodiesel or 40,000 mt of fuel ethanol.

The proposed legislation would allow fuel suppliers to defer initial obligations for up two years, subject to ministerial approval and a 0.1% increase to the target for each deferred year.

The deferral mechanism would be in place to allow suppliers time to ramp up access to imported low-carbon fuels and for currently limited domestic production to benefit from an increase in investment if the law is passed.

Suppliers would also be able to 'bank' surplus emissions reductions for the following year, trade surpluses with other suppliers, and defer up to 10% of the target to the following year without penalty.

While the new mandate would apply to all road fuels and aviation and marine fuels used for domestic journeys, suppliers would have the flexibility to use renewable fuels within each of the transport modes as they see fit, as long as the overall emission reduction is achieved.

The consultation document was launched Friday and responses will be accepted until July 26.

The move towards a biofuels mandate comes as the country grapples with international green obligations and a motion passed by its Parliament last December declaring a climate emergency.

If the proposed renewable transport fuels mandate is introduced, it will come at a hefty cost, with the Ministry of Business, Innovation and Employment estimating a negative impact on real GDP of 0.3%, or NZD 1.245 billion ($870 million).