Climate Change Leadership Forum reports

• June 2008

Climate Change Leadership Forum report number: 3

Stationary Energy & Industrial Processes Technical Advisory Group (SEIP TAG)
Progress report to 13 June 2008

Briefing for the Climate Change Leadership Forum

Prepared by the Emissions Trading Group
Date: 13 June 2008

1. The SEIP TAG, co-chaired by Chris Baker of Saunders Unsworth and Mark Storey of the ETG, last met on the 3rd of June and meetings are planned for Wednesday the 25th June to discuss the interim report to the Minister and the regular meeting for Tuesday the 1st July. 
2. The 3rd of June meeting began with a discussion about data issues and availability. Lack of comprehensive firm level data has previously been identified as a key impediment to understanding and testing allocation regimes.   An updated emission size distribution graph, including industrial process emissions and notional electricity emissions, was discussed.  Analysis of the distribution indicated that the top 18 emitters had annual emissions of about 11 million tonnes per annum and the next 80 emitters, annual emissions totalled about 1.4 million tonnes.
3. Concern was expressed about the need for emissions projection information and in this regard it was suggested that the focus should be on the top twenty firms.  Summing up, the Co-Chair noted that: (i) MED’s work was proceeding satisfactorily, (ii) the need for an additional survey of smaller firms remained an open question, and (iii) there was high interest in emission projection information for the larger emitters especially.     
4. The Eligibility and Allocation sub-groups, chaired by Hans Buwalda (Fletcher Building) and Ray Deacon (Rio Tinto) respectively, met jointly on the 3rd June and the meeting focussed primarily on a draft ETG paper characterising allocation options.  Two broad options for the allocation of free emissions units were discussed - the first a ‘grand-parenting’ method based on historical emissions - and the second an output or intensity based approach.  Five variations within these two options were considered.   
5. Suzi Kerr (Motu) was invited to attend this meeting by the Co-Chairs.  Suzi’s presence and contribution was intended to strengthen the links between the SEIP TAG and Cluster B and help make the work of each group complimentary.
6. The Co-Chair noted he would like the next TAG meeting to be able to consider a sub-set of decisions.  It was noted that the next steps required: a better understanding of how benchmarking could be applied in an output based approach (i.e. are there off-the-shelf numbers readily available), an understanding of forward emission projections and the consequences of such an approach, and consideration of the appropriate entities (i.e. firm, plant or product) for allocation.  Lessons from similar DEFRA¹ work in the UK were considered worthy of consideration.
7. The Methodologies (regulations) sub-group is chaired by Carmen Blackler (Contact Energy), in her absence John Carnegie (Genesis Energy) reported for the sub-group.   This work is progressing well, and useful sketch diagrams and proposed emissions accounting formulae and measurement points were presented and discussed.  The TAG considered excellent progress had been made and a further meeting is proposed upon Carmen’s return to finalise this part of the work for the interim report.
8. Officials and the sub-group have further work to do relating to the processes for applying unique (rather than standard) emission factors and how firms apply for recognition of removals in cases where potential emissions become embodied in products.
9. A proposal for an additional sub-group to work on ETS price impacts via electricity price effects was put forward.  Several TAG members and officials agreed to participate. ETG & MED officials were directed to assemble earlier relevant material relating to both electricity emission factors (tCO2e/GWh) and emission charge price pass through, for the sub-group to consider. Officials were to schedule a meeting after consulting the TAG Co-Chairs.
10. Dave Brash reported on the CCLF and Cluster B processes, in particular discussions within Cluster B about macroeconomic modelling, the leakage case studies, the nature of economic regrets, and how intensity based allocation models might work within a finite allocation cap.
11. The outline of the interim TAG report and the process for its finalisation was briefly discussed.  The Co-Chairs agreed to take responsibility for delivering an outline draft report for the TAG to consider at a special meeting planned for the 25th June. 
12. Under other business there was a brief discussion on the role for reporting standards in ETS and officials were asked to consider this issue and report back.

The TAG is to produce an interim report by the end of June and final report by the end of September 2008. The next TAG meetings are scheduled for the 25th June (re the interim report) and the 1st July (regular meeting).