Stationary Energy & Industrial Processes Technical Advisory Group (SEIP TAG)
Progress report to 11 April 2008

Climate Change Leadership Forum report number: 5
Briefing for the Climate Change Leadership Forum
Prepared by the Emissions Trading Group
Date: 11 April 2008

Overview

  1. The SEIP TAG, co-chaired by Chris Baker of Saunders and Unsworth and Mark Storey of the ETG, last met on 10 April and the next meeting is planned for Tuesday 6 May.  There are currently four sub-groups established under the SEIP TAG and work is progressing well within these sub-groups leading up to the 6 May meeting.  
  2. The Eligibility sub-group is chaired by Hans Buwalda of Fletcher Building.  This sub-group is working on criteria to determine who would be eligible to receive a free allocation of units. The sub group has reached agreement that the broad objective of the allocation package should be to avoid economic regrets. This has led the sub group to focus on a targeted free allocation model – targeted at identifying firms who are trade exposed.  The sub group is looking at a two step procedure to determining eligibility, the first being a test of trade exposure and the second a materiality threshold. The sub group now intends to further develop and test proposed criteria using real data.  A major issue that has been raised during discussion of the sub group’s work in the TAG is the impact of different eligibility criteria (and tests) on small and medium size businesses.
  3. The Allocation sub-group is chaired by Ray Deacon (Rio Tinto) and is to address the allocation options once eligibility has been determined. This group met for the first time on 3 April and discussed a range of possible allocation approaches including: ‘grandparenting’ based on emissions or output, input (usually energy related) approaches, benchmarking based on emissions or energy use, and the inclusion of updating provisions.
  4. The Methodologies (regulations) sub-group is chaired by Carmen Blackler (Contact Energy).  A cross department officials’ task group has been working on regulations issues for some time.   Officials met with the Chair on 28 March to initiate the work of the sub-group and enable industry views to inform the regulation design process.   Two industry – officials’ half day sub-group meetings are planned for April concerning regulations for (1) stationary energy and (2) industrial processes.
  5. The Progressive obligation sub-group is chaired by Craig Palmer of Solid Energy.  This sub-group has met a couple of times to further consider the benefits and costs of a progressive obligation model as an alternative to the free allocation model. The sub-group has looked at how the progressive obligation could be applied including targeted approaches and a hybrid free allocation/progressive obligation model.  Initial feedback from the sub-group suggests that the progressive obligation model, in particular a hybrid option, would result in considerable complexities. No consensus has been reached to date in either the sub group or the TAG on the merits of the progressive obligation. However, at the last TAG meeting it was agreed to continue work on the progressive obligation model awaiting further clarification of the free allocation model, at which time both approaches can be more meaningfully compared.
  6. The SEIP TAG has agreed to produce an interim progress report by the end of June. The final report is to be submitted by the end of September 2008.