The Government is banning new coal-fired boilers - the second-largest source of energy-related emissions - from December this year, in the transition away from fossil fuels.
But there's a catch. The ban will only apply to new low- and medium-temperature coal-fired boilers, meaning industries with high-temperature requirements will still be able to burn coal.
These types of industries - for example, steel - would still be able to use coal provided they have a greenhouse gas emissions plan in place that demonstrates how they will reduce their emissions over time.
The Government is also proposing to phase out existing coal boilers by 2037 and prohibit other new fossil-fuel boilers where suitable alternative technology exists and it is economically viable.
Fuel used in manufacturing and production is known as process heat. It's used to manufacture products such as milk powder, paper and metal, and generates around 8 percent of New Zealand's greenhouse gas emissions.
As the second-largest source of energy-related emissions after transport, process heat makes up about 27 percent of New Zealand's energy-related emissions.
Energy and Resources Minister Megan Woods says the ban will make "a real difference" to New Zealand's emissions profile.
"The amount of coal displaced by these proposals equates to about 500,000 tonnes each year. Once the changes are fully in place it will mean the equivalent of between 400,000 to 550,000 cars being removed from our roads in a single year."
The Government has also revealed the 14 successful applicants in round one of the three-year $70 million Investment in Decarbonising Industry Fund. More than $22 million in funding has been issued in this round to help businesses transition away from fossil fuels.
For example, McCain Foods - which processes more than 200,000 tonnes of potatoes and vegetables annually - has two processing plants in New Zealand it aims to convert to biomass boilers, with more than $2 million in funding.
Greenpeace climate campaigner Amanda Larsson says banning new coal boilers for industrial processing deserves only "cautious applause", because the biggest climate polluter - industrial agriculture - has yet to be regulated.
"The key thing the Government must do is to turn agriculture from a climate polluter into a climate solution. That includes phasing out synthetic nitrogen fertiliser, which is driving intensive dairying, and investing significant funds into supporting farmers to transition to regenerative practices."
The Government will start taxing agriculture emissions from 2025, but farmers will get a 95 percent discount, despite agriculture making up about half of New Zealand's reported emissions.
The Government's announcement is the first to follow the release of the Climate Change Commission's draft package of advice to the Government in February. The final package of advice is due on May 31.
What is the Climate Change Commission doing?
Last year, the new Climate Change Commission was asked to review whether New Zealand's commitments were ambitious enough to help keep global warming within 1.5C of pre-industrial levels.
New Zealand has pledged to the international community to slash emissions by 30 percent below 2005 levels and 11 percent below 1990 levels, by 2030, as part of the Paris Agreement.
Under the Zero Carbon Act, New Zealand is also committed to bringing down carbon dioxide to net zero by 2050, with a separate aim of reducing methane levels - mainly attributed to agriculture - by somewhere between 24 to 47 percent.
The draft advice included slashing livestock numbers by around 15 percent by 2030, winding down imports of fossil fuel vehicles by 2035, and planting 380,000 hectares of new exotic forestry by 2035.
Just over a week since submissions closed on the Climate Change Commission's first draft advice to the Government, it said more than 15,000 submissions had been made.
The Government must have set the first three emissions budgets out to 2035 and released its first emissions reduction plan, by December 31.
From 2022, the Climate Change Commission will begin a new work programme to monitor how its advice is implemented, including how well New Zealand is tracking to meet the 2050 net zero target.