New Zealand Bans New Offshore Oil Exploration, Discusses Climate and Trade with France

19 April 2018

In a decision dubbed as a landmark move in the fight against climate change, New Zealand will immediately cease granting new offshore oil and gas exploration permits. The policy is the latest effort by the Oceanic nation to move its economy towards a lower-carbon model, working both domestically and with international partners. 

Announcing the offshoring ban on 12 April in the capital city of Wellington, Prime Minister Jacinda Ardern described the decision as “an important step to address climate change and create a clean, green, and sustainable future for New Zealand.”

The fight against climate change is a policy priority for the Labour-led coalition government, which took office last year. The government has committed to transitioning to 100 percent renewable electricity production by 2035 and achieving carbon neutrality by mid-century. (See Bridges Weekly, 26 October 2017)

Long-term transition

The ban will only apply to new permits and will not affect the 22 existing offshore exploration permits that cover an area of 100,000 square kilometres, nearly the size of the country’s North Island. Future mining permits from current exploration will also remain unaffected.

Exploration permits can last for over a decade, while subsequent mining permits can run for an additional 40 years. The ban will therefore not affect these extractive industries straight away, a field that analysts say provides nearly 5000 people with jobs directly and potentially thousands with more indirect jobs that support the sector.

Onshore oil exploration in Taranaki, home to most of New Zealand’s national oil industry, will also continue. Overall, this means that oil and gas extraction could potentially last until 2050.

Officials say that the decision reflects the government’s effort to balance multiple objectives, including meeting energy needs, providing job security, and achieving Wellington’s international climate obligations under the Paris Agreement as well as its own domestic climate ambitions.

“Transitions have to start somewhere and unless we make decisions now that will essentially take effect in 30 or more years’ time, we run the risk of acting too late and causing abrupt shocks to communities and our countries,” Ardern said.

By making the announcement now, the government aims to give the industry certainty and sufficient time to adapt by developing innovative technologies and investing in new areas.

The government will also work with affected regions to ensure a smooth transition, including through investment in infrastructure and clean energy projects. A week before the ban, the government announced a NZ$20 million (US$14.6 million) investment in regional initiatives in Taranaki to start the move towards lower-carbon industries. 

Exploration ban sparks mixed reactions

While several commentators have praised the government’s ban as a bold move, others have criticised the measure for a variety of reasons.

Some observers have questioned the value of the ban given that demand for offshore exploration permits has practically dried up, with only two permits awarded in the past two rounds, down from 15 in 2014.

Other critics claim that the ban may have no or even negative climate change impacts if it is not paired with complementary climate policies. Some commentators, for example, warn that the move may result in increased coal combustion, which would be even more harmful for the environment.

Another point of criticism relates to concerns that without demand-side policies that tackle the use of oil and gas in New Zealand, increased energy imports could compensate for lower domestic supply, which would do little to reduce greenhouse gas emissions globally. 

The opposition National Party has described the ban as “economic vandalism” that will put thousands of jobs at risk without doing anything to address the climate challenge. 

New Zealand, French leaders discuss “new generation trade deals”

Ardern has since kicked off a weeklong diplomatic mission to Europe with a meeting with French President Emmanuel Macron on 16 April in Paris, France. Following an hour-long discussion, the two leaders issued a joint statement outlining plans for cooperation on trade, climate change, environmental protection, and international security.

In the statement, the leaders agreed to enhance bilateral trade and investment “through the future negotiation of a balanced, mutually beneficial, progressive and inclusive free trade agreement between New Zealand and the European Union.”

Securing France’s support for launching formal trade talks between the EU and New Zealand prior to a European Council vote on a mandate for these negotiations in May was Ardern’s top priority, she said. The EU Commission has asked the Council to endorse the mandate and start these negotiations, as well as a separate trade agreement with Australia, promptly. (See Bridges Weekly, 14 September 2017)

Macron, who has previously expressed concern about New Zealand’s competitive agricultural sector, voiced his support for a free trade deal between the two economies, stressing that it could set the standard for a “new generation” of trade deals that include social and environmental considerations.

“I believe there is a new generation of trade agreements we can take forward and the agreement between the EU and New Zealand can set a standard,” Macron said.

The written statement is heavily loaded with references to climate change, including in relation to trade policy. It features a joint pledge to work together “to promote and defend an effective international rules-based system including by advocating for rules and institutions to adapt and address global challenges such as climate change.”

The two leaders also vowed to pursue progress in WTO negotiations on disciplining harmful fisheries subsidies and collaborate on the subject of fossil fuel subsidy reform, including through enhanced transparency and reporting on this issue in the WTO context. France is represented by the EU at the global trade club, while also being a WTO member in its own right. 

Additionally, they agreed to “[promote] trade policy that supports our shared multilateral commitments in areas such as labour and the environment, including the effective implementation of the Paris Agreement.” 

Ardern continued her trip with a 17 April meeting with German Chancellor Angela Merkel in Berlin, Germany. Merkel has been a strong supporter for trade talks between the EU and New Zealand. 

ICTSD reporting; “PM Jacinda Ardern speaks about climate change after meeting with French president Emmanuel Macron in Paris,” 17 April 2018, NZ HERALD; “Bryce Edwards' Political Roundup: A bolder and greener government,” 16 April 2018, NZ HERALD; “New Zealand Steps Up Climate Change Fight With Exploration Ban,” 12 April 2018, BLOOMBERG; “New Zealand bans all new offshore oil exploration as part of 'carbon-neutral future',” 12 April 2018, THE GUARDIAN.

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