Transport Fuels Technical Advisory Group: Notes of 2nd meeting held on 3 April 2.30pm – 5pm at the Ministry of Transport
Present: David White, Kirstine Hulse, Andrew Campbell (Chair), Frank Wong, David Jacobsen, Geoff Davis (by teleconference from Australia), Barry Blackett, Greg Visser, Roger Fairclough (official), Joern Scherzer (official), Leah Murphy (official), Ian Twomey (expert adviser)
Apologies: Dave Bodger, Ian McDonald, Paul Kelway
1. Meeting commenced with a welcome from the Chair.
2. Previous minutes
The minutes from the meeting on 27 February were accepted. It was agreed that the minutes could be publicly released.
Members asked that the following items be added to the agenda: (1) point of data collection, changing from upstream point to the point of sale; (2) how to treat biofuels; and (3) whether regulations should account for “stock change”
3. Adoption of Updated Terms of References
An updated version of the terms of reference was circulated with the minutes which reflected the addition of item 5 under meeting process: meeting notes will be written in summary form and will not attribute any comments to any persons (Chatham house rules). The update was requested by members at the last TF TAG meeting. The updated Terms of Reference were accepted.
4. Update on progress of Climate Change (Emissions Trading and Renewable Preference) Bill and Regulation process
Leah Murphy explained the current status of the Climate Change (Emissions Trading and Renewable Preference) Bill (‘the Bill’). She noted the following points:
- Select Committee Process has begun, public hearings have begun and are expected to continue until through May
- More specific work on allocation and phase out of free allocations is still progressing; this is running in parallel to the other processes
- Time frames could change but so far the Select Committee Process is still on track, the Committee is due to report back to the House in early June 2008
- About 250 submissions to the Bill were received, about 180 of those asked to be heard
- Enactment of Bill is envisaged for early July
A question was asked whether there is an information source available that showed the progress made through continuous updates. Officials responded that this was likely not the case but that updates were available through ETG bulletins, and other government information channels (e.g. websites, press releases).
Action: Leah Murphy to investigate whether more continuous updates are publicly available.
5. Update from The Stationary Energy and Industrial Processes (‘SEIP’) TAG
Roger Fairclough noted that the 4th meeting of the SEIP TAG had recently taken place. Some sub-groups have been formed to undertake some more substantive work in specific areas, namely: (1) emission calculation methodology, (2) allocation eligibility criteria, (3) progressive obligations as an alternative to allocation for assistance to industry (are presently awaiting some modelling), and (4) allocation methodology.
Some papers of note will soon be made available to the public which relate to:
- A report back from the Emissions Trading Group on their visit to Canberra
- A summary of a report by Prof. Garnaut, who examines the impacts of climate change on the Australian economy and recommends medium to long-term policies and policy frameworks to improve the prospects for sustainable prosperity. For the document go to http://www.garnautreview.org.au/domino/Web_Notes/Garnaut/garnautweb.nsf
6. Hale and Twomey Report
Ian Twomey (expert adviser) provided a brief summary of each of the recommendations made in his report ‘Emissions Trading Scheme, Transport Fuels, Technical Advisory Group, Expert Advisory, April 2008’ (attachment 3 to the agenda). Conclusions and actions are noted below:
- Section 2.1.1:Customs and Excise Tax definitions
- Recommendations were supported by the TF TAG.
- It was noted that moving to a single emissions factor would align NZ with other countries (UK, AUS); however this would require a change to NZ’s inventory and would be less accurate. The group agreed that having two factors would be the better system.
- Action: Officials to consider an update to the regulations that would include:
- a statement about the types of fuels that the regulations are intend to cover with a view to being able to capture fuels that are not currently used in New Zealand when they arrive in New Zealand
- ensure the octane break point is correct for the identification of premium and regular petrol
- a list of fuels excluded from the obligation fuel list, to avoid doubt
- Action: Officials to provide an update to the next TF TAG meeting about procedures for establishing a unique emission factor and to advise how this would apply to liquid fossil fuels.
- Section 2.1.2: Fuel oil definitions
- Group agreed to remove two fuel categories (bunker fuel oil, and power station fuel oil) from the obligation fuel list because these fuel oils would be caught by the heavy fuel oil item and do not need to be separately identified.
- It was discussed further whether to limit categories to two types of fuel oil (light, and heavy) or to have three categories of fuel oil (light, medium, and heavy)
- A consensus was reached that two categories would make the most sense, unless on further consideration members identified objections. Further work on an appropriate method to distinguish the split between the fuel oils was noted as being appropriate. The suggested split of 80cst was discussed. It was suggested that perhaps a cst value that provided a cleaner split would work better.
- Action: Oil company members to consider further and provide feedback on whether they agree to the obligation fuel list only including light and heavy fuel oil and on an appropriate cst value to use in the definition of each fuel.
- Action: Officials to review the Tariff and Customs reference numbers used for light and heavy fuel oil.
- Section 2.2: Complete list of obligation fuels
- It was noted that all main fuels are noted in the obligation fuel list, non-main fuels are covered by the exclusion list (as noted above). The use of ‘reprocessed lubricant’ fuels is not covered by the regulations.
- Officials noted that the use of used or waste oil is covered in the stationary energy sector of the emissions trading scheme and therefore does not need to be covered in this section.
- No action required
- Section 2.3: Future Fuels
- Officials referred to the process for establishing unique emission factors would be relevant to the management of new fuels under the ETS.
- It was noted that the Crown would need to take responsibility for establishing and updating emission factors in the event that more than one participant were to start using a unique emission factor.
- Action: Officials to report back to the next TF TAG meeting about how the unique emission factor process will manage a transition to a crown managed standard emission factor if more than one participant seeks to use a unique emission factor.
- Section 2.4: Fuels made from biomass
- It was agreed that it would be best to use the biofuels bill process to mange new types of biofuel
- Action: Officials to consider an update to the regulations that would include refer to “qualifying biofuel” as defined in the Biofuel Bill.
- Section 2.5: Background policy documents
- It was agreed that these items had already been covered by the previous points
- Section 2.6: Accounting for bio fuels
- It was agreed that a system based on whole “litres” would be simpler
- There was discussion about whether life-cycle emissions from biofuels should be recognised (which are not zero), whether there is some way to encourage 2nd generation biofuels (could be done by recognition of life-cycle emissions) and whether to account for other characteristics (including sustainability concerns) of biofuels. It was noted that any biofuels produced and transported in and around New Zealand would face the cost of carbon to the extent that the production process used fossil fuels. Therefore it would not be necessary to account for the life-cycle emissions of biofuels produced in New Zealand with feedstock sourced in New Zealand. It was noted that the production and transportation of imported biofuels do not necessarily face the price of carbon, and therefore conceptually it would be good to account for these emissions somehow. It was agreed that the liquid fossil fuel regulations is seeking to manage only tail pipe emissions and not other emissions or sustainability issues relating to biofuels. It was agreed that these matters should be managed through the Biofuels Bill.
- Action: Andrew Campbell (as Chair) to send email on behalf of the TF TAG noting the issues and asking that they are appropriately managed by MED.
- Action: Officials to update the regulations as noted in section 2.6 to reflect a whole litre methodology to account for biofuels.
- Section 2.7: Definition of litre
- The group agreed with the recommendations.
- Action: Officials to update the regulations to reflect that fuels should be measured in litres, and that at import or removal from the refinery the litre is defined as at 15 degrees and all other transactions should reflect ambient temperatures.
- Section 2.8: Flow diagram
- No action required
- Section 2.9: Jet fuel left in tank
- Issues noted
- No action required
- Section 3.0: Update of emissions factors
- It was noted that emission factors are “gross” and not net
- The group agreed with the recommendations
- Action: Officials to update the regulations to reflect:
- updated emission factors (that reflect 2007 data)
- use of CO2/kl (rather than litres)
- to include reference to what unit the emission factors are calculated in (i.e. kl)
- to include emission factors for only two grades of fuel oil (rather than three)
- to correct oxidation calculation
- to note emission factors are gross
- Section 4.0: Calculation Changes
- It was debated whether section 7(b) of the draft regulations was needed. This depends on whether the use of the statement “removal for home consumption” captures all obligation fuels or not.
- Clarification of what was covered by 7(e) i.e. product returned to the refinery and reprocessed.
- It was agreed to keep a watching brief on Customs and the Bio fuel Bill generally
- Action: Officials to obtain a legal view on whether the use of the statement “removal for home consumption” captures all obligation fuels or not. Consider if 7(b) and (e) need to be amended.
Additional agenda item: Point of data collection
- Members discussed whether the point of data collection is best placed at the point of sale or as it currently stands at the point of import or removal from a refinery. Discussion about the pros and cons of each option were discussed.
- MED commented that it had not a lot of confidence in the sales data
- It would also be simpler to deal with biofuels under the current system (upstream);
- It was noted that to change the approach at this stage would involve considerable redrafting
- It was agreed that to make a decision expert views from within member companies should be sought (i.e. from finance, fuel supply and technical experts)
- Action: Officials to prepare a short paper that outlines a request from member oil companies to seek the views of their financial, fuel supply and climate change representatives and to come up with an agreed company preference for the most appropriate place for data collection to determine obligations under the NZ ETS for further consideration by the TF TAG within the next 2 weeks.
7. Climate Change (Liquid Fossil Fuel) regulations 2008 – drafting instructions to date
Leah Murphy provided a brief summary of the instructions for the emissions trading group legal staff (that would in turn be developed into drafting instructions for the parliamentary council office).
- It was noted that member airlines should confirm whether or not there is any fuel that is initially sold as domestic fuel and then sold later as international fuel i.e. is there a need to be able to exclude fuel that is sold internationally in section 10 of the draft regulations?
- Action: Members who represent airlines to confirm whether or not there is a need to identify exclusion of international jet fuel in section 10 of the draft regulations.
8. Update on progress with Customs regarding regular and premium octane split
Officials noted that initial inquiries had been made about whether it would be possible to change the octane split used for regular and premium petrol in the customs and excise act. No indication of likelihood or timeframes was available as yet.
9. Other business
Whether or not the regulations need to reflect accounting for a change on stock (levels of fuel held at the beginning and end of the compliance year was discussed. It was agreed that it was not material issue and therefore it does not need be addressed.
10. Next meeting
It was noted that the (next) third meeting will be held Friday, 2nd May from 11am to 1.30pm.
- Action: Officials to send out a notice to all participants. Post meeting note change of meeting time due to constraints with availability of video conference facilities – 10.30 to 1.00.
The Chair closed the meeting at 5:10 pm.
Last updated: 15 September 2008
