Industrial processes (not including synthetic greenhouse gases) in the emissions trading scheme
Greenhouse gas emissions from industrial processes
Industrial process emissions result when materials are transformed from one substance to another in an industrial setting. These emissions arise from non-energy uses of products.
The metal, mineral and chemical industries in New Zealand emit significant quantities of carbon dioxide. The products made by these processes include iron, steel, aluminium, clinker for cement, burnt lime, glass and gold. Limestone is the raw material for clinker and burnt-lime production. This use results in emissions of carbon dioxide that are included in the industrial processes sector.
Non-carbon dioxide emissions from the industrial processes sector include perfluorocarbons (PFCs) from aluminium smelting. The synthetic greenhouse gases PFCs, hydrofluorocarbons (HFCs) and sulphur hexafluoride (SF6) are also covered by the scheme when imported in bulk or in equipment. These emissions are treated separately from industrial process emissions under the emissions trading scheme, and enter the emissions trading scheme at a later date with mandatory reporting from 1 January 2012 and emissions obligations from 1 January 2013. More information can be found on synthetic greenhouse gases in the emissions trading scheme.
Emissions from New Zealand’s industrial processes sector represented six per cent of total greenhouse gas emissions in 2006. These emissions increased by 40.9 per cent from 1990 to 2007.
What industrial activities does the emissions trading scheme cover?
The emissions trading scheme covers:
- carbon dioxide from producing iron, steel, aluminium, clinker, burnt lime, glass and gold
- PFCs from producing aluminium.
When does the industrial sector enter the emissions trading scheme?
The industrial sector will be required to report industrial process emissions from 1 January 2010, and to surrender emission units for emissions that occur from 1 July 2010. Thereafter surrender obligations will apply to emissions for the full year.
Participants will need to submit an emissions return for each calendar year by 31 March of the following calendar year. Emission units for that year must be surrendered by 30 May of the following year.
During the transition period from 1 July 2010 to 31 December 2013 industry participants will only be required to surrender one emission unit for every two tonnes of emissions, and can buy units from the Government to meet their obligations at a fixed price of $25 per unit if they wish. After the transition period participants will be required to surrender one unit for each tonne of emissions and the Government‘s fixed-price option will cease.
How does the industrial sector participate in the emissions trading scheme?
For carbon dioxide emissions from the metal, mineral and chemical industries, and PFC emissions from aluminium production, the emissions trading obligation is placed on the emitter. Generally, emissions are to be calculated by tracking the volume of products or ‘emission sources’ (which are purchased, produced or imported) and multiplying this volume of product by an emission factor, rather than by monitoring actual emissions.
Regulations have been finalised setting out data collection and emissions calculation requirements for the industrial processes sector to comply with reporting obligations under the emissions trading scheme. Reporting obligations start on 1 January 2010. Emissions trading bulletin 13 provides an explanation of these regulations.
The following documents provide more information on administrative and reporting requirements:
- General administrative and reporting requirements for SEIP and LFF (Ministry for the Environment website)
- Guide to registering as a participant in the NZ ETS (PDF, Ministry for Economic Development website)
- Guide to registering as a user on the New Zealand Emissions Unit Registry (PDF, Ministry for Economic Development website)
- Guide to opening a holding account in the New Zealand Emissions Unit Registry (PDF, Ministry for Economic Development website)
- Guide to Reporting for industrial process activities (Ministry for the Environment website)
Industrial process emitters who are large energy users (over 250,000 tonnes of coal or two petajoules of natural gas) may also be able to opt in to the emissions trading scheme for their use of coal and natural gas. They must buy their coal or natural gas from a miner of coal or natural gas and cannot take on obligations for coal or natural gas they purchase from a wholesaler.
Potential impacts of the emissions trading scheme on the industrial sector
Industrial producers are likely to face increased costs in three ways, as a result of the emissions trading scheme:
- directly because they cause industrial process emissions
- indirectly due to the increased costs of electricity and fuels used for feedstock or input into the industrial process
- directly if they use fuels to generate energy and if they opt in to the scheme as direct points of obligation.
Will the industrial sector receive an allocation of emission units?
Emissions intensive, trade-exposed firms will receive an allocation of emission units to compensate for the increased costs they will face as a result of the emissions trading scheme.
Industrial allocation is focused on providing assistance to the parts of the economy most heavily impacted by the scheme. Industrial allocation will be provided on the basis of ‘activities’, not on the basis of firms, facilities and sectors. An ‘activity’ consists of the physical or chemical transformation of inputs into a given set of outputs (eg, the chemical transformation of hydrocarbons into methanol, or the physical and chemical transformation of silicon dioxide to produce glass containers).
Firms carrying out activities determined to be either moderately or highly emissions intensive will be able to apply for an allocation of emission units for the emissions associated with those activities. Regulations will specify which activities are eligible for allocation, and how many emission units will be allocated for production from each activity.
Last updated: 11 December 2009
