Budget 2021 - Sustainability

As anticipated, the ‘securing our recovery’, Wellbeing Budget 2021 puts a clear focus on ensuring that funding is directed to assisting those disproportionately affected by the COVID-19 pandemic, namely low income households and the tourism sector. However, the critical importance of addressing climate change has not been overlooked, as evidenced by its consideration across the Summary of Initiatives. 

Budget 2021 has been described by the Minister for Climate Change as providing “the foundation for lasting climate action” (with 2022 and 2023 highlighted as years where climate action will take an even more prominent role). The key to ensuring that this foundation is indeed lasting, will be whether appropriate rigour is applied to investment spend with consideration for specific and quantifiable outcomes (such as carbon emission reduction achieved per dollar spent).

From a climate action perspective, the most notable and exciting aspect of Budget 2021 is the significantly increased investment commitment to New Zealand’s climate action agenda. This includes the announcement of a continuous revenue stream for low-emissions technology through dedicated recycling of Emissions Trading Scheme (ETS) revenue. This initiative is estimated to result in $3 billion of funding over the next five years. 

While this commitment is perhaps the greatest source of funding announced to support New Zealand’s climate change ambitions, the boost to the NZ Green Investment Finance Fund to $300 million holds promise in supporting the required low emissions technologies which ETS revenue can support the deployment of. Together, these initiatives have the potential  to deliver long-term gains for New Zealand. 

Budget 2021 is the first to incorporate shadow pricing for carbon within budget bids, which brings New Zealand into alignment with leading climate countries. This demonstrates a commitment to considering the carbon cost of government spending and it will be interesting to see the effects of this programme, and the Government’s appetite for scaling the programme in future years.

Much of the funding announced in Budget 2021 reflects a clear drive to invest in technology that will accelerate the economy’s transition to a low-emissions future. However, there is still a significant amount of support that will be required to drive the adoption of this technology, for the betterment of all New Zealanders. 

For New Zealand to truly transition to a strong, sustainable economy that cares for both the environment and its people, the Government must deliver on its promise of even more ambitious climate-related spending in future Budgets to build on this foundation.

See more Budget 2021 commentary