14.11.2023

Bioenergy in New Zealand: Fuels for the Future?

The energy transition from combustion fuels to low carbon alternatives is viewed as critical in the race to cut global CO2 emissions and reach climate targets.  We look at some of the opportunities presented by bioenergy and recent legislative responses of the New Zealand Government.

Bioenergy and its opportunities

The term ‘bioenergy’ encapsulates a wide range of energy sources from organic matter, including biomass (crops, wood pellets and waste matter), biogases and biofuels.  Biomass can be used to create energy through incineration to produce heat or steam for making electricity, or to produce biogas or biofuels through alternative conversion processes. A key benefit of biomass over other renewable sources of energy such as wind and solar is that it is not intermittent and can be stored more easily. 

Liquid biofuels have been signalled as a renewable, low-emissions fuel alternative that can be blended with petrol and diesel to reduce greenhouse gas emissions from transport. They are also less dependent on new technology vehicles (for example, electric vehicles or hydrogen fuel cell vehicles) because they can be used in existing internal combustion engine vehicles.

Examples of biomass (in the New Zealand context) might include:

  • ‘Woody biomass’, which is biomass derived from trees. It includes wood offcuts, sawmill residues and forest residues (such as branches and leaves). 
  • Dedicated crops such as maize and sugar beet.
  • Tallow – rendered from beef and mutton, tallow can provide a feedstock for biodiesel as well as other products, such as soap and fabric softeners.

Challenges to the development of the bioenergy industry

The use of biofuels in New Zealand is very low and there is limited domestic production.  Some of the challenges which arise for the use of biofuels in the New Zealand context include:

  • The cost of residual woody biomass – this has been estimated to be 20% more expensive in New Zealand than in key competitor countries, due to difficult terrain and transportation.
  • The availability of woody biomass due to existing usage commitments and the high proportion of trees that are exported as logs.
  • Concern around the associated emissions resulting from the production of biofuels – including the need to account for the emissions associated with the transport collecting the feedstock and delivering it to the processing plant, and the fertiliser used in growing dedicated crops.
  • Scalable production – global competition for opportunities which attract specialist, large scale international investors is high, and scalability of operations (compared with larger countries) remains a challenge in New Zealand, although this does not preclude the opportunity for export potential to overcome the small domestic market concerns.
  • The low cost of New Zealand Units is currently around $70 (while EU carbon trading prices are closer to an equivalent of NZ$150 per tonne of CO2) – therefore the incentive may not be high enough to drive a change in behaviour.

Government intervention and policy approach

Leading bioeconomy nations (including the US and certain European nations) have recognised that driving investment in carbon projects requires government support and intervention.  Implementation of low carbon fuel standards (LCFS) are one such approach used in various economies to drive increased production and use of biofuels.  The regulator sets a carbon reduction target for the fuels which must be met by the refiners and fuel distributors in the region and the market determines the best way of meeting those targets.  This approach also has the benefit of not directly depleting treasury resources in the same ways that tax subsidies might.

The Sustainable Biofuels Obligation Bill

The (former) Government’s Sustainable Biofuels Obligation Bill was introduced in November 2022. This bill sought to assist with the transition from liquid fossil fuels to low-emissions fuels and reduce the greenhouse gas emissions from transport.  Proposed reform included requiring persons or companies that were importing or refining more than 50,000 litres of liquid fossil fuels for transport (excluding aviation fuels) in New Zealand to reduce the greenhouse gas emissions intensity of those fuels by also supplying sustainable biofuels.

Under the bill, the responsible Minister would be required to recommend regulations to set out how biofuels would be determined to be sustainable. The regulation-making powers in the bill would also allow the Minister to recommend regulations relating to certification schemes regarding the sustainability and emissions intensity of biofuels.

By February 2023, the proposed changes (which were widely understood to have increased the price of fuel) were abandoned as the Government refocussed its priorities to tackle the cost of living crisis facing New Zealanders and this position appears likely to remain (at least for the foreseeable future) under the new Government.  Our Forestry Team will be monitoring any developments in this area with interest.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Mind your business: What happens when an employer uses an employee’s personal information?
A recent decision by the Human Rights Review Tribunal (the Tribunal) provides a noteworthy reminder of the importance of privacy rights and obligations in the workplace.  In BMN v Stonewood Group Lim...
14.02.2025 Posted in Employment
Construction Framework Wide BW
Public consultation on NZS 3916:2025 and NZS 3917:2025
Public consultation on the draft DZ 3916 Conditions of contract for building and civil engineering – Design and construct and DZ 3917 Conditions of contract for building and civil engineering – F...
13.02.2025 Posted in Construction
Court of Appeal rules Gloriavale’s challenges to BNZ decision to close its account are not seriously arguable
Background BNZ made the decision to close the accounts of 16 entities associated with the Gloriavale Christian Community following a decision by senior management that this action was appropriate give...
07.02.2025 Posted in Disputes & Insurance
Milford sound
Government unveils ‘Invest New Zealand’ agency to position NZ as premier FDI destination
Yesterday, the Prime Minister Rt Hon Christopher Luxon announced the Government’s plan to establish a new foreign investment agency, as part of his ‘State of the Nation’ speech in Auckland.  We...
Construction Framework Wide BW
Construction insurance cover: Sky UK Ltd v Riverstone Managing Agency Ltd
Parties to a building contract usually take out insurance to protect the contract works from damage from unintended events such as vandalism or a flood.  The policy is intended to cover the cost of r...
23.01.2025 Posted in Construction & Insurance
Family sunset BW
Have you updated your Will since becoming a parent? The importance of nominating a Testamentary Guardian
For parents, preparing a Will or Deed that appoints a testamentary guardian is an important step to ensure the well-being of your children if you die. A testamentary guardian is a person who after a p...
22.01.2025 Posted in Private Wealth
vecteezy calendar and santa on table happy new year and xmas concept  ext e
Let me check my calen-deer – Leave entitlements over the festive period
What you need to know about holiday and leave entitlements over the festive season
18.12.2024 Posted in Employment
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.