New Zealand’s Emissions Trading Scheme – Key Facts
Under the Kyoto Protocol, New Zealand has to reduce its greenhouse gas emissions back to 1990 levels by 2012 . New Zealand also associated itself with the Copenhagen Accord, officially announcing that “New Zealand is prepared to take on a responsibility target for greenhouse gas emissions reductions of between 10 per cent and 20 per cent below 1990 levels by 2020, if there is a comprehensive global agreement”. One of the Government’s strategies is an Emissions Trading Scheme as a cost-effective way of reducing emissions and creating an incentive to change the behaviour of business and consumers.
Overview of the key features of the New Zealand Emissions Trading Scheme (NZ ETS):
As of July, 2o1o, mandatory reporting and participation will apply to the transport fuels, electricity production, and industrial processes sectors. Synthetic gases, agriculture and waste may report voluntarily from January 1, 2011, with mandatory reporting as of January 1, 2012.
The primary unit of trade in the New Zealand Emissions Trading Scheme is a New Zealand unit (NZU).Participants are required to surrender one NZU per tonne of greenhouse gas emissions in order to meet their obligations under the scheme.
NZ ETS: 3 industry examples (Source: http://www.climatechange.govt.nz/emissions-trading-scheme/about/ets-diagram.html)
During the initial transition phase from July 2010 to December 2012, participants will have to surrender only one NZU per every two tonnes of greenhouse gas emissions. After this, one emission unit will be equal to one tonne of emissions.
NZUs can be bought from the Government for NZ$25 each. In addition, participants and secondary market traders can buy emission units from other participants or secondary market traders, either directly or by trading through a broker or trading exchange.
Participants may also surrender a range of ‘Kyoto units’, such as certified emission reduction (CER)units from emission-reduction projects in developing countries, or emission reduction units (ERUs) from an emission-reduction or emission removal projects in developed countries.
Similar to the Australian CPRS, some liable participants (e.g., emission-intensive trade-exposed) will receive a free allocation of emission units from the Government to cover some of their emissions. For more information on the allocation process, please see here.
The following penalties apply:
- Failure to collect emissions data or other required information, calculate emissions and/or removals, keep records, register as a participant when liable, submit an emissions return when required, or notify the administering agency or provide information when required to do so, NZ$24,000.
- Knowingly altering, falsifying or providing incomplete or misleading information about any obligations under the NZ ETS, NZ$50,000.
- Deliberately lying about obligations to gain financial benefit or avoid financial loss, NZ$50,000 and/or prison sentence of up to 5 years.
climatechangeadaptation
Martina Linnenluecke
Alexander Stathakis
Did you notice the NZETS is not a Cap and Trade scheme? As it does not have a Cap or clear limit on the quantity of NZ Units that may be allocated. See the second paragraph of Emissions Bulletin no 12 ‘Uncapped allocation’. (http://www.mfe.govt.nz/publications/climate/emissions-trading-bulletin-12/index.html)
In my opinion, the NZ ETS has to be taken as a first step towards doing the right thing – let’s not forget, the Australians could not get their CPRS implemented. I’d like to cite Yvo de Boer again, “The perfect is the enemy of the good”.
Even without a cap, New Zealand still is an Annex I country under the Kyoto Protocol and therefore will have to achieve its emissions target. Failure to achieve this would lead to a suspension from international emissions trading, which in turn would mean no access to (cheaper) overseas permits in form of, e.g., CERs or ERUs.
Here’s an example of the NZ ETS not influencing business to avoid investments in high-carbon plant.
Fonterra is planning a 30 megawatt coal thermal power unit for a new milk processing plant.
http://www.radionz.co.nz/news/rural/2867/greenpeace-critical-of-coal-power-at-new-dairy-plant.
That pretty much fails the ‘Hansen’ test.