The Climate Commission's report warns there will be a shortage of affordable used electric vehicles for the next 10 years, forcing greater reliance on burning biofuels.
Motorists are set to pay more for petrol and diesel laced with low-carbon biofuel, as leaders look beyond electric vehicles for solutions to the country's transport emissions problems.
The Climate Change Commission has conceded it was too optimistic about rolling out EVs to households and businesses.
Global supply constraints will limit the flow of used EVs into the New Zealand market – and it's the secondhand market that is critical to making EVs affordable to the wider public. There will be sufficient new EVs, it insists, as the global EV market is still developing.
The Commission's final report, tabled in Parliament on Wednesday, says EVs are a "key technology" in decarbonising New Zealand's transport. Light vehicles contribute two-thirds of the country's transport emissions.
The Commission's concession on EVs is a victory for the Climate Leaders Coalition and its big business members that include fuel and trucking companies, as well as Air New Zealand. The coalition's 105 members account for 60 percent of New Zealand's gross emissions, and employ around 200,000 people.
As the Commission worked to finalise its report this year, they had lobbied intensively for it to rely less on EVs, and more on biofuels, both for land transport and for international air travel.
Now, the Commission has doubled its projections for the use of biofuels, accepting the business groups' assurances that they can manufacture sufficient biofuels from animal tallows and forestry waste to complement the biofuels they would import.
The convenor of the Climate Leaders Coalition is Mike Bennetts, the chief executive of Z Energy which has built the country's only biodiesel refining plant. The $35 million plant in Wiri, south Auckland, has stood silent for the past year, because Z Energy says it's not cost-effective to produce the biofuel.
Now, an upbeat Mike Bennetts is optimistic that with a mandated clean fuel standard from Government to go out to consultation next month, there will be sufficient demand to resume manufacture of the tallow-based biodiesel in New Zealand.
Climate Change Minister James Shaw said it was difficult to make biofuels viable to produce relying purely on the market; it needed interventions like the clean fuel mandate. He rejected any suggestion that it was effectively a government bail-out for the petroleum companies.
He told Newsroom there was a place for biofuels, but only as a "next best option" until renewable transport came onstream. Forcing people to switch to EVs was a tough call, he admitted.
"Because New Zealanders hold onto their cars for so long, you need to take existing cars off the road much more quickly, and the cost of basically paying people to scrap perfectly good vehicles, and subsidise the uptake of EVs at the same time, is very very high."
He said the price increase at the pump would be "pretty marginal" but was optimistic that there were other means by which motorists could be pushed faster – including eventually banning the import of anything other than EVs. "Part of it is that we haven't forced the issue yet," Shaw said.
"In other jurisdictions it's typical for the premium on a biofuel to be spread across all of the other litres, given the benefits accrue to everybody in society." – Mike Bennetts, Z Energy
Bennetts said the increased focus on biofuels made sense. "From a household or a business perspective, you can put a biofuel into your existing vehicle to achieve emissions reductions without having to pay a premium for an EV. The average car in New Zealand is on the road for 13 or 14 years, so it's going to take a long time to replace the fleet."
Bennetts expected the Government would require every litre of petrol and diesel pumped to have 1 to 3 percent biofuel mixed in, as a start. That would progressively increase to somewhere closer to 10 percent. The cost of the more expensive biofuel would be spread across all the fuel pumped – and that would mean a small increase in the price at the pump.
He avoided commenting on the size of any increase, to avoid any accusation of price signalling. "In other jurisdictions it's typical for the premium on a biofuel to be spread across all of the other litres, given the benefits accrue to everybody in society," he said.
At the same time as the business ministry MBIE finalises the biofuel mandate to go out to consultation next month, Transport Minister Michael Wood is preparing to announce details of a feebate scheme to subsidise the purchase of EVs. Last month's Budget set aside $302 million that is expected to fund the scheme.
A Newsroom analysis of light vehicles being advertised for sale on Trade Me indicates New Zealanders still face a long wait for a supply of affordable EVs. There are 665 secondhand EVs advertised on the site this morning, including 162 plug-in hybrids.
The range of EVs starts at asking prices of around $6000 with 10-year-old Mitsubishi iMiEVs and first generation Nissan Leafs with their notoriously short range and battery life. It ranges through to the latest Porsche Taycan, Jaguar iPace, Tesla Model X and Audi e-Tron super e-cars, being advertised for nearly $290,000.
Some of the EVs advertised are near-new Japanese imports – but it is that supply that the Climate Commission seems least optimistic about.
Bennetts said he had ordered his first electric car – a moonlight grey MINI Cooper EV, which has an entry level ticket price of $60,000 in New Zealand. His wife was already driving a hybrid – and he believed EVs, hybrids and biofuels would all be part of the emissions solution for the country's light vehicle fleet.
The vast majority of the world's biofuel and sustainable aviation fuel was manufactured in just three countries; he hoped that New Zealand could scale up to supply much of its own needs. He acknowledged that would be challenging: just to provide enough biofuel to blend 10 percent into the 9 billion litres of petroleum powering the country's land transport fleet would require another 45 plants the size of Wiri.
But it could create jobs in the small communities that would be worst-hit by the demise of the pine logging industry – as also recommended by the Climate Change Commission's report this week. "Rather than have wood waste rot on the forest floor, you would do something with it," he said. "You would capture it, transport it to a manufacturing facility, and that manufacturing facility is the same as a refinery, so those are highly-skilled jobs. And you can then pump it into the existing liquid fuels infrastructure."
"Ultimately it will be about electricity and hydrogen and sustainable aviation fuels, rather than things like biodiesel or ethanol." – Mike Bennetts
Companies like Z Energy and its partner Caltex face an almost existential threat in the move from petroleum to EVs, Bennetts admitted. Already, Z Energy is reducing its number of service stations nationwide – Z service stations by Auckland Airport and in the Wellington CBD have both closed in the past year.
The majority of Z's revenues are still from diesel and jet fuel, which will help its bottom line, because fast EV charging is unlikely to provide them a viable new business model. Both BP and Mobil reported $100m-plus losses last week, and Z Energy might have suffered the same fate but for one-offs that propped up its balance sheet to $57m in the black.
So the petrol companies are motivated to instead develop biofuels that can be supplied through their remaining networks of service stations. "Imagine if you did something sizeable in Northland, what that could do for employment in that region, given there's a forest there and there's Marsden Point refinery that's currently on track to be closed down in a year."
Bennetts acknowledged the Climate Change Commission proposed to replace the country's exotic plantation forests (and 20 percent of its grazing land too) with permanent native forests – but he said it would take 10 or 20 years to log the last pine trees and in that time the forestry waste could be put to a powerful new use. Biofuels were only envisaged as a short-term, transitional solution.
"Ultimately it will be about electricity and hydrogen and sustainable aviation fuels, rather than things like biodiesel or ethanol."
