GIDI abatement cost and co-funding decisions

Assessing the cost of emissions abatement

The Government Investment in Decarbonising Industry (GIDI) Fund is a co-funding programme, administered by EECA, that set out to accelerate the reduction of New Zealand’s carbon emissions through energy efficiency and fuel switching. The programme is now closed to new applications.

The key measure of a GIDI project’s impact is related carbon dioxide abatement. This is the amount of carbon the project prevents from being emitted – compared to the most likely scenario without EECA co-funding.

When making GIDI co-funding decisions, we compared the lifetime abatement of a project to its cost, to get a figure known as the abatement cost. The lower the abatement cost, the more tonnes of CO2e abated per dollar.

Abatement cost methodology was a key input into assessing potential GIDI recipients. EECA’s investments also considered broader investment principles, beyond direct abatement cost.

Other GIDI co-funding considerations

As stated above, abatement cost was one consideration in EECA’s co-funding process. EECA also considered a number of non-cost factors, and was able to fund projects that met broader criteria if the benefits merited doing so.

The image below shows the information inputs (left) and EECA’s investment principles (right) leading to EECA co-funding recommendations.

Factors EECA considered beyond abatement cost:

• Flow-on market effects such as potential for wider adoption of specific decarbonisation technology (diffusion).
• Positive outcomes such as air quality improvement.
• Strategic factors, such as contribution to hard to abate sectors, contribution to the efficiency of the energy system, or providing an example for decarbonising a specific industry or sector.
• Fairness and contribution to wider government outcomes. When checking additionality we considered other barriers to project implementation – especially competition or constraint for capital within the business.
• For projects which claim they require a high return on investment, we assessed whether the application seemed risky based on its economic and technical details.
• For projects with relatively high abatement costs, we considered contribution to urgent emissions budget targets such as the Nationally Determined Contribution under the Paris Agreement. A project might look expensive over its lifetime compared to other options we expect to exist, but still provide a valuable short-term return that could help New Zealand reach its domestic or international targets.