$140 million to take equivalent of 300,000 cars off the road

The New Zealand government today announced it was partnering with NZ Steel to help it reduce the 800,000 tonnes of greenhouse gas emissions it produces each year, in what it says is the country’s largest decarbonisation project.

NZ Steel is responsible for two per cent of New Zealand’s annual emissions. The government is contributing NZ$140 million towards the installation of an electric arc furnace to replace the existing steelmaking furnace and two of the four coal-fuelled kilns, with the rest of the money provided by NZ Steel.

The government money is funded through the Government Investment in Decarbonising Industry Fund and has the potential to enable NZ Steel to cut its emissions by 45 per cent. Climate Change Minister James Shaw also argued the project is value for money, costing $16.20 for each tonne of greenhouse gases that will no longer be emitted. Offsetting those emissions would cost $55 per tonne at the current carbon price.

The opposition National Party was quick to label the deal as ‘corporate welfare’ but would this project have ever happened without a direct government subsidy? NZ Steel CEO Robin Davies was quick to say no. Then again, does this send the message to business that if you drag your feet the government will step in and pay for you to decarbonise?

Decarbonisation of heavy industry must happen to meet Paris Agreement obligations and announcements like this, if carried through, show that it is possible.