New Zealand Emissions Trading Scheme (NZ ETS)

Introduction

The New Zealand Emissions Trading Scheme (NZ ETS) was legislated through the Climate Change Response Act (2002) in September 2008 and amended in November 2009.

 

 On 1 July 2010 the stationary energy and industrial processes sector and liquid fossil fuels sector joined the the forestry sector in being directly affected by the NZ ETS.

    

Which Sectors and When ? (unit surrender obligation start dates)
Sector   Amended
Forestry   1-Jan-2008
Stationary Energy and Industrial Processes   1-Jul-2010
Liquid Fossil Fuels and Transport   1-Jul-2010
Agriculture   1-Jan-2015
Waste and all remaining sectors   1-Jan-2013

 

Transitional Measures
50% obligation from 1st July 2010 to 1st January 2013  Stationary energy, liquid fossil fuels and industrial processes will only have to surrender a 1 tonne unit for every 2 tonnes of emissions.
Fixed price option of $25/tonne   Sectors facing obligations will be allowed to pay rather than purchase units to limit cost and enhance stability in start up phase.
Intensity based allocation for trade exposed industry   Support for trade exposed / emissions intensive industry on a production based, industry average approach.
- production or intensity approach means that allocation is increased or reduced relative to production rather than just 2005 levels.
- industry average approach means allocations based on average emissions per unit of production for particular industry not just 2005 levels.
Allocation phase out    1.3% / year from entry date rather than 8% / year from 2019.


Need Help?

  • We are currently advising clients in all sectors on the implications of the current NZ ETS policy, foreseen amendments and implementation.
  • Contact us if you would like to have a review of your business preparedness for this complex and new issue.

Our Role

We are active at the core of the development of NZ ETS policy:

  • Stuart Frazer's roles in the public sector include:
    • Independent Specialist Adviser to the New Zealand Parliament Emissions Trading Scheme Review Select Committee (2009  - refer publications)
    • Member of the NZ Government's Stationary Energy and Industrial Processes Technical Advisory Group (SEIP TAG) (2008)
  • Frazer Lindstrom's private sector work includes:
    • Extensive involvement in emissions trading scheme design studies (Business New Zealand, GPC, Holcim - refer publications)
    • Detailed comparison of NZ ETS, Au CPRS and Eu ETS designs for clients (2009)
    • Detailed review of NZ ETS legislation for clients (2008)
    • Submission preparation and review
    • Client representation for NZ ETS primary legislation and regulations

 

Contact us to ensure you get the expert advice you need to be prepared fully for the NZ ETS.

   

NZ ETS Basics

Background - Major Changes to NZ ETS Announced - 2009
Announcement of Changes:

On the 14th of September 2009, the Government, with Maori Party support, announced it would revise the Emissions Trading Scheme to reduce the costs to households and the impact on jobs while ensuring New Zealand takes a responsible approach to the global problem of greenhouse gas emissions and climate change.

 

Amendment Bill Introduced:

The Climate Change Response (Moderated Emissions Trading) Amendment Bill was introduced on the 24th of  September:

 

The Bill passed its first reading and has been referred to the Finance and Expenditure Select Committee. The committee reported back on the 16th of November 2009.

This schedule is in line with the Governments stated desire to have the legislation passed on or before 26th November 2009, the last sitting day of parliament prior to the Copenhagen UN climate change conference in December.  

 

 

Key Design featuresnz parliament

Below are listed just a few of the NZ ETS design parameters.

 

For a more detailed explanation please contact us.  

Which Sectors and When?

Sectors will be phased in over time:

  • 1-Jan-2008 Forestry
  • 1-Jul-2010 Stationary energy and Industrial processes
  • 1-Jul-2010 Liquid fossil fuels and transport
  • 1-Jan-2013 Waste and all remaining sectors
  • 1-Jan-2015 Agriculture

  

Unsure when/if your business will be an NZ ETS participant and what this means?

- Contact Us for a business evaluation and advice on what action is required.

  

Which Gases?

  • All six Kyoto Protocol Greenhouse gases
    • CO2, CH4, N2O, PFCs, HFCs, SF6

  

Where is the Point of Obligation?

The point of obligation determines who in each sector has unit obligations and within brackets below are the anticipated number of participants with trading obligations in each sector:

  • Forestry - landowners (or forestry rights holders)
    • pre-1990 forest  if deforested [potentially > 1,000]
    • Post 1989 credits and obligations [2,000-9,000]
  • Liquid fossil fuels and transport - fuel suppliers [5]
    • domestic aviation may opt in and take on obligations
  • Stationary energy - coal, gas, geothermal suppliers [45]
    • large users may opt in and take on obligations
  • Industrial processes - end emitters [35+]
  • Agriculture
    • nitrogen fertilisers - suppliers [10]
    • meat/dairy - processors [25]
  • Waste - landfill operators [60]

   

What is the Unit of Trade?

The unit of trade will be an NZ Unit (NZU). Each NZU represents one tonne of CO2 equivalent emissions.

 

Do you know your  emissions?

Contact us for help to establish/review your emissions inventory system.

International Linking

NZUs will be "backed up" by a Kyoto unit to enable linking with international Kyoto Protocol flexibility mechanisms. These can be used to meet trading obligations:

  • Clean Development Mechanism (CERs)
  • Joint Implementation (ERUs)
  • Emissions Trading (AAUs) may be allowed but are likely to be restricted to:
    • Greened AAUs;
    • Imported AAUs originating from a country with a domestic ETS linked to the NZ ETS
    • Imported AAUs from county where AAUs represent emission reductions
  • Forestry lCERs and tCERs are disallowed.

This means that the price of an NZU on the NZ ETS will reflect the international price of carbon emissions. Learn more

  

How are Emission Units (NZUs) Allocated to Firms?

The Government will not provide assistance (free allocation) to firms whose profits will be significantly unaffected by the NZ ETS.  For others assistance will be provided through gifting of NZUs, however:

  • No free allocation will be provided to the upstream points of obligation in the liquid fossil fuel and stationary energy sectors (including electricity generators) and landfill operators.
  • The pool of units for eligible industrial producers and agriculture will be uncapped.
  • Indirect emissions associated with the consumption of electricity, as well as direct emissions from stationary energy and direct emissions from non-energy industrial processes will be included in the concept of emissions from industrial producers.
  • the free allocation will decrease on a linear basis by 1.3% per annum.
  • In the forestry sector, free allocation will be provided such that the Crown assumes a total liability (taking the cost of the provision of the de minimus thresholds into account) for deforestation emissions as follows:
    • from 2008 to 2012, 21 Mt CO2-e for plantation forest, plus a relatively small allocation set aside for forest weed control (eg, wilding pine)
    • from 2013, an additional 34 Mt CO2-e for plantation forest.
  • Firms that cease trading will not retain any free allocation.

 

Confused? Need to know what the NZ ETS will cost you?

Contact us to find out what this means for your business.

  

What is the Trading Period?

  • The trading period is a calendar year noting the mid year start for energy sector in 2010.
  • At the end of the trading period the emitter must relinquish enough allowances to cover the past year's emissions liability (or pay fixed price in transition years).

 

Learn More and Get Ready for Trading