If New Zealand wants to meet its commitment to reducing carbon emissions, it needs to put a stake in the ground – a national energy strategy linked to climate change goals that will encourage innovation to help companies struggling to meet their environmental and sustainability goals.
That's the clear picture following Microsoft's Accelerating the Journey to Net Zero report published last month – and following the efforts of one of the leading companies in that report, Z Energy, according to Russell Craig, National Technology Officer at Microsoft New Zealand.
The report reveals the issue: New Zealand organisations rate highly on their commitment to reducing carbon emissions to address climate change – but much lower when it came to successful implementation. Almost one third (32 per cent) of medium and large businesses were on track to fall short of the 2050 net carbon neutral target.
Z is one of just 12 per cent of Kiwi businesses identified in the Microsoft report who are already mapping their emissions. Z publishes an annual greenhouse gas (GHG) emissions inventory which is independently verified and includes emissions from its full value chain.
But as Z's story illustrates, the challenge for our energy and transport sectors isn't reducing their own operational emissions – it's those of its customers and the elephant in the room: finding an affordable, scalable alternative to fossil fuels.
Z is committed to a target of 42 per cent reduction in its operational emissions over FY20–FY30. It has also invested in a first-generation biofuel plant as well as recently scaling up its EV charging offering – aiming to have high capacity fast chargers at 14 sites to total 36 charging bays within Z's retail network by the end of the year to support more Kiwis to make the switch to EVs.
"In the longer term, we envisage a future supporting geothermal, solar, wind and battery development. The electricity market and transport energy markets are converging quickly," says Nicolas Williams, General Manager, Strategy & Risk at Z.
All these things – from measuring emissions to collaboration and R&D to support smaller businesses and customers on their own journeys – are recommendations of the Microsoft report.
Williams believes much more also needs to happen for Z to decarbonise its revenues and the same is true for everyone else in the energy sector. The vast majority of the products Z sells are refined fuel products – so Z's decarbonisation strategy needs to align with its customers' in terms of technology choices, pace of transition, cost and risk.
While some green solutions are becoming readily available, such as EVs, and drop-in biofuels are coming closer, others - like green hydrogen - are still very much in their infancy. The issue of how to develop these technologies at the right scale and level of affordability is a global challenge.
"Ultimately, it's difficult to get a clear idea of when it will be possible to make a full transition from fossil fuels because the technology either simply isn't there or isn't cost-competitive yet in the sector," says Williams.
"We've tried to face the reality of the products we sell and that, in our industry, there often aren't really well-developed alternatives. This isn't a problem of will. It's fundamentally one of economics. Do we have the right products available at the right price to drive change?
"We want to actively support our customers who are facing the same challenges and provide a solution that's as efficient and cost-effective as possible."
Williams says innovation is "absolutely" key: "We can't continue to rely on our existing toolkit. There needs to be more attention paid to innovation on both the supply and demand side of the energy sector (and every other industry) to create the most impact."
Z isn't alone in recognising this, says Craig. In the Accelerating the Journey report, 72 per cent of over 800 business leaders and employees agree that technological innovation has a key role to play in improving environmental sustainability. However, 29 per cent said the availability of technology to support sustainability initiatives was a concern – and fewer than half (43 per cent) say they have financial resources to execute their carbon reduction policies.
Dr Chris Brauer, who led the research team at Goldsmiths University behind the report, called for financial innovation and dedicated government funding to support businesses to make the transition: "We'd also like to see more public-private partnerships to drive innovation, with clear and consistent regulatory frameworks, guidance and funding to support businesses who want to use technological innovation to reduce their carbon emissions."
Williams agrees and says at the moment investors are having to hedge their bets on which technologies to get behind.
"A national strategy would remove that uncertainty and incentivise investment. We need a long-term approach to energy policy that sees the government and industry working together. Above all, we need a national energy strategy linked to our climate change goals, to create a clear picture of what the future needs to look like and to bring certainty to investors.
"We need to pull every lever, including greater collaboration on R&D and government policy, including subsidies or mandates to incentivise adoption of certain technologies or materials, and support growth in the market," he says. "If we do, there's a huge opportunity for New Zealand to punch above its weight on decarbonisation technology."