Christopher Luxon blasts Government's 'outrageous' spend on emissions-cutting deal with NZ Steel

The National Party has panned the Government's massive emissions reduction project that would subsidise a new electric arc furnace for NZ Steel.

The plan would see half of the coal being used at the NZ Steel site in Glenbrook, Auckland, replaced with the $300 million furnace to recycle scrap steel. This would remove at least 800,000 tonnes of pollution each year, the Government said in its announcement on Sunday, which is the equivalent of taking approximately 300,000 cars off the road.

Called New Zealand's "biggest-ever emissions reduction project", Prime Minister Chris Hipkins said it "dwarfs anything" the Government has done so far and shows how serious it is about reducing the country's emissions as fast as possible. The plan alone will eliminate 1 percent of the country's annual emissions, he added.

The $300 million electric arc furnace will be partially subsidised. The Government is part-funding up to $140 million from the Government Investment in Decarbonising Industry (GIDI) Fund and NZ Steel is covering the remaining $160 million.

But the announcement didn't go down well with the National Party, with leader Christopher Luxon saying the Government's "got it all wrong".

"I thought that announcement was outrageous, actually, because it just says to me that this is a Government that's got its priorities all wrong," he told reporters on Sunday afternoon.

"Just this week, this Budget couldn't find money to actually help support Kiwis going through a tough cost of living crisis. But all of a sudden they can find $140 million as a subsidy paid for by Kiwi taxpayers and give it to a large foreign, multinational, profitable company."

Luxon said he was on the side of "Kiwi battlers" who he believed shouldn't have to use their taxpayer money to subsidise the furnace for a profitable company.

"We really applaud what NZ Steel is doing here. I've gone and met with the CEO and the management teams and saw the site myself last year. I really like the direction of where they're going, but they are quite capable of stomaching and fronting up that $140 million themselves to get that transition away," he said.

"That transition away will be good for them in the long term because they'll end up actually not having to deal with a higher carbon price down the road and it'll be better for them profitability-wise."

Luxon added that NZ Steel's parent company, BlueScope, uses the electric technology in other plants in the United States and elsewhere around the world, so it isn't unfamiliar with it.

But NZ Steel doesn't believe it could've funded the furnace on its own. Chief executive Robin Davies said during Sunday's announcement that without the Government's contribution, this project wouldn't happen.

David Seymour and Christopher Luxon.
David Seymour and Christopher Luxon. Photo credit: Newshub.

The ACT Party was also quick to criticise the multi-million-dollar "handout", with leader David Seymour saying it shows the Government thinks the "answer to everything is spending your money".

He doesn't believe emissions will be curbed by this funding and called the funding "corporate welfare".

"Every dollar the Government gives to private businesses is a dollar that can't be spent elsewhere. The Government should cease its various corporate welfare schemes and focus on letting Kiwis keep more of their money through tax relief," he said in a statement.

"If the Government wants to take climate change seriously, all it needs to do is announce that emissions under the ETS [Emissions Trading Scheme] would be capped and reduced in line with reductions of our trading partners. That would reduce emissions by leaving it to emitters to either adopt new technologies to reduce emissions or pay the ETS price. If you emit less, you keep more of your own money."

Seymour said the climate "doesn't care" which country emissions come from, just the overall quantity. He believes the Government is "wasting hundreds of millions" on climate policies that don't lower global emissions.

"They’ve maximised political theatre while actively rejecting the least-cost path to emissions reduction during a cost of living crisis," he said.

“Rather than meddling in particular industries or picking winners, the Government should be ensuring that we have a functioning ETS which encourages people to reduce emissions at the lowest possible cost.”

Climate Change Minister James Shaw said melting scrap steel using electricity, instead of converting iron sands into steel using coal, will "substantially reduce" the emissions generated from NZ Steel's current activities. It will also build a more circular and resilient economy, putting New Zealand in a "much better" position to meet its climate target of net-zero carbon by 2050.

The deal is estimated to contribute 5.3 percent of the emissions reductions needed under New Zealand's second emissions budget (2026-2030), and 3.4 percent within the third emissions budget (2031-2035), Shaw said.

"The economics of this really stack up, especially compared to current carbon prices. The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the Government and the country money," Shaw said.

"We must reduce our reliance on fossil fuels to help avoid the worst of climate change. Switching to cleaner ways of generating process heat is one of the biggest opportunities we have to reduce our domestic emissions and meet our international climate commitments."

The supply of electricity required for the new furnace will also include a demand response arrangement in partnership with Contact Energy, where NZ Steel can scale down power supply from the electricity grid when needed to secure electricity supply in the region at peak times.