Achieving a Timely, Efficient, Equitable and Orderly Transition to Net-Zero Emissions for Transport and Heating in New Zealand: Part 1 – Framing the Challenge

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Meade, Richard
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2021
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New Zealand shares the global challenge of achieving net-zero greenhouse gas emissions by 2050, in order to limit the risk of potentially devastating climate change. The country’s electricity sector is already predominantly based on renewable resources, and the agricultural sector’s emissions are difficult to abate other than through reduced production, given current technologies. This means emissions reductions in transport (land, sea and air), space/water heating and cooking, and in process heat, are priority areas for the country. Transitioning from fossil-fuel based technologies in transport, heating/cooking and process heat to low-emissions alternatives is not a simple matter. Where people have chosen to live, work and play strongly affects decisions they have made about the heating and transport technologies they use. Likewise, industries often locate where suitable energy supplies are located and tailored their processes to those energies. This naturally creates inertia in transitioning to alternative, lowemissions technologies. That inertia is only harder to overcome if low-emissions technologies are not clearly superior – i.e. either significantly cheaper, or substantially better in other dimensions, than existing options. And even if low-emissions alternatives were comparable or even superior to existing technologies, there is no guarantee that those benefits can be realised without a high degree coordination between the 1.7 million households,1 thousands of small businesses, and perhaps hundreds of larger industrial concerns in New Zealand. Such coordination is critical to unlocking the benefits of low-emissions technologies, and to induce these many decision-makers to relinquish their existing technologies. This is because the existing fossil fuels ecosystem powering transport, many forms of heating/cooking, and process heat – like clean energy ecosystems that might constitute an alternative – are essentially “platforms”. For example, the fossil fuel supply chain can be thought of as an energy platform. On one side of the platform are hardware (e.g. vehicle, appliance and equipment) suppliers and others supporting the use of that hardware. On the other are buyers of that hardware, which they combine with energy to provide the transport, heating and other services they rely on. The scale economies and network effects associated with platforms mean that benefits of migrating from one energy ecosystem to another cannot be fully realised unless a sufficiently large number of other users (suppliers and consumers) also make that migration.

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Discussion Paper for Vector Limited, Powerco Limited, and First Gas Limited

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Environment and resource economics

Industry economics and industrial organisation

Transport economics

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Meade, R, Achieving a Timely, Efficient, Equitable and Orderly Transition to Net-Zero Emissions for Transport and Heating in New Zealand: Part 1 – Framing the Challenge, 2021

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