Frequently asked questions: Liquid fossil fuels

Most forms of travel are fuelled by liquid fossil fuels, such as petrol and diesel, which result in emissions of greenhouse gases into the atmosphere. The ETS covers liquid fossil fuels used in New Zealand. It covers petrol, diesel, aviation gasoline, jet kerosene, light fuel oil, and heavy fuel oil. Emissions from fuel used for international aviation and marine transport are exempt from the scheme, consistent with the Kyoto Protocol.

The scheme applies to liquid fossil fuels as far up the supply chain as possible – in other words, when refined oil products leave the refinery or are imported.

Fuel suppliers who take fuel from the refinery or who import it (currently, this includes BP, Caltex, Gull, Mobil, and Shell) are required to participate in the scheme. Individual vehicle users are not participants.

In general, the coastal shipping and the fishing industries are not directly participating in the ETS. However, these industries face increased costs associated with the ETS while some of their competitors will not.

In the coastal shipping industry, international carriers also carry domestic cargo, but because the majority of their fuel is used for international travel the fuel they buy in New Zealand (and most likely elsewhere) does not include ETS costs.

In the fishing industry, all fuel sold to fishing vessels in New Zealand, irrespective of where they go fishing, includes the increased costs of the ETS. However, some vessels may fish in the New Zealand exclusive economic zone using fuel that is purchased outside New Zealand and it may not include any ETS costs.

Emissions from fuel used for international aviation and most marine transport are exempt from the scheme, consistent with the Kyoto Protocol. However, some large domestic users of jet fuel have decided to voluntarily enter the ETS.

New Zealand is also involved in discussions about how to reduce international transport aviation emissions with the International Civil Aviation Organisation (ICAO), the International Maritime Organisation, and the United Nations Framework Convention on Climate Change (UNFCCC).

Yes. All fuel used for domestic flights is covered by the ETS, regardless of which airline buys the fuel.

Emissions from fuel used by international aviation and marine transport is exempt from the scheme. This is consistent with the Kyoto Protocol.

Large users of jet fuel can participate voluntarily in the ETS at any time. These voluntary participants have been asked to report their emissions since 1 January 2009, and were required to report their emissions from 1 January 2010. In May 2011, 4 voluntary participants surrendered NZUs for emissions from jet fuel occurring between 1 July and 31 December 2010.

Participants in the liquid fossil fuels sector are required to monitor fuel flows, keep relevant documentation and calculate emissions according to the Climate Change (Liquid Fossil Fuel) Regulations 2008 (NZ Legislation website). Obligation fuels are listed in the regulations, which include petrol, diesel, aviation gasoline, jet kerosene, light fuel oil, heavy fuel oil and any other liquid fuel that is combusted when used. Some products are explicitly excluded to avoid any confusion: lubricating oil, solvents, chemicals and lighting kerosene.

All fuel monitored should exclude biofuels. The regulations provide default emission factors for each obligation fuel that must be used to determine emissions.

The regulations for the liquid fossil fuels sector have been published and are available on the Government’s legislation website and in hard copy from Government bookstores.

Biofuels combusted from electricity and industrial heat are covered by the ETS. Other emissions from the use of biofuels are not included. Biofuels in the transport sector are not covered by the ETS .

Manufacturers of biofuels in New Zealand face the same ETS costs as any other business. They are most likely not be participants in the scheme, but pay higher prices for sources of energy that result in emissions, such as coal or diesel used in a facility to make biofuels.