Frequently asked questions: Synthetic gases

No. Consultation on the draft amendments to the Climate Change (Stationary Energy and Industrial Processes) Regulations to cover synthetic greenhouse gas activities ran from 28th June to 23rd July 2010 and is now closed.

Synthetic greenhouse gas participants:

• can voluntarily collect data from January 2011 and calculate and report their emissions  by 31 March 2012
• are required to collect data from January 2012 and calculate and report their emissions  by 31 March 2013, and
• are required to collect data from January 2013 and calculate and report their emissions  by 31 March 2014 as well as surrender New Zealand Units (NZUs) for their emissions by 31 May 2014.

The synthetic greenhouse gases covered by the NZ ETS are:

• hydrofluorocarbons (HFCs),
• perfluorocarbons (PFCs), and
• sulphur hexafluoride (SF₆).

They are imported and exported in bulk and also contained in goods. They have specialist uses in:

• air conditioning and refrigeration systems
• aerosols, and
• electricity transmission.

They are substitutes for ozone depleting substances, whose bulk import is being phased out under the Ozone Layer Protection Act 1996.

Synthetic greenhouse gases are often released slowly into atmosphere as a result of consumption or leakage, or on disposal at the end of the life of the product in which they are contained (such as when motor vehicles are dumped).

They have very high global warming potentials compared to carbon dioxide. A kilogram of sulphur hexafluoride, for example, has the effect of almost 24 tonnes of carbon dioxide. Consequently, we expect the ETS to noticeably increase the price of synthetic greenhouse gases in the bulk gas market.

Persons who import synthetic greenhouse gases either in bulk or in products, such as synthetic gases contained in imported refrigerators or motor vehicle air-conditioning units, are mandatory participants in the NZ ETS. This means they are required to track, report, and surrender NZUs to match their emissions. 

Persons who manufacture synthetic greenhouse gases would also be mandatory participants, although this activity is not currently carried out in New Zealand.

Further detail of who is a mandatory participant, including the exemptions for importation of certain goods for medical use, are in the activity descriptions in Schedule 3 of the legislation.

The ETS allows people who export synthetic greenhouse gases in bulk or contained in products to receive NZUs for the reduction in emissions that would otherwise have occurred in New Zealand. To receive NZUs a person needs to apply for registration as a participant under Section 57 of the Act.

The same is true of people who might destroy synthetic greenhouse gases in New Zealand in the future (there is currently no facility in New Zealand ). 

The Minister has the ability under the Climate Change Response Act 2002 to recommend exemptions where the environmental integrity of the scheme is not materially undermined and where the costs of such exemptions do not outweigh the benefits. Exemptions and thresholds are in place for other ETS sectors through the Climate Change (General Exemptions) Order 2009.

Exemptions for certain synthetic greenhouse gas activities within that Order include:

• importing synthetic greenhouse gases contained in goods that are for personal and non-business use,
• importing synthetic greenhouse gases contained in the refrigeration or air conditioning systems of containers or ships or aircraft that are passing through New Zealand (and various other criteria)
• importing less than 100tCO₂ equivalent synthetic greenhouse gases contained in motor vehicles
• importing a product that contains synthetic greenhouse gases because the product consumed the gas when it was manufactured (for example, insulation foam)

These exemptions are mirrored in the eligibility criteria for NZUs when synthetic greenhouse gases are being exported. There is one additional constraint: the export of sulphur hexafluoride is only eligible for NZUs if the gas exported was imported after 1 January 2013.

Actual emissions of synthetic greenhouse gases occur for many years at a slow rate, depending on their use. Aerosols are released reasonably quickly, whereas sulphur hexafluoride is leaked from electricity transmission uses over decades.

There are no direct ETS obligations on users of synthetic greenhouse gases unless they are also the importer or manufacturer. The vast majority of users, such as motor vehicle owners, will notice an increase in the cost of the imported good, as well as an increase in maintenance costs as the refrigerant is replaced.

The ETS will price synthetic greenhouse gases as if they were emitted as soon as they were imported. This is similar to the approach used in other ETS sectors, such as importing coal and importing liquid fossil fuels. In these cases, it is more practical for the importer (instead of the user) to have responsibilities under the ETS.

No, because they are not included in New Zealand’s international climate change obligations. While some ozone depleting substances are also greenhouse gases, they are not included in the Kyoto Protocol and the NZ ETS as they are controlled by the Montreal Protocol and the Ozone Layer Protection Act 1996.

The ‘synthetic’ greenhouse gases included in the emissions trading scheme are hydrofluorocarbons (HFCs), perflourocarbons (PFCs) and sulphur hexaflouride (SF6).  Hydroflourocarbons are used in the refrigeration and air-conditioning, aerosol, fire protection and foam-blowing industries. Perfluorocarbons are used in refrigeration and air-conditioning, and sulphur hexafluoride is used in electrical switching equipment and in scientific applications.

People who import synthetic greenhouse gases either in bulk or contained within products or appliances will be participants in the emissions trading scheme. Those who re-export synthetic greenhouse gases for destruction or contained in manufactured equipment are eligible to NZUs.

Importers of synthetic gases won’t receive an allocation of NZUs because they’ll be able to pass the costs of their ETS obligations onto customers.

Exporting synthetic greenhouse gases is an activity for which you can receive NZUs; however, this isn’t considered part of the ETS allocation process but is classed as a ‘removal activity’. See the question above for more detail on removal activities.

In many applications, alternatives exist to synthetic gases. The ETS will provide incentives for these alternatives. It will also encourage better handling and recycling of synthetic greenhouse gases and their destruction.

The ETS will also favour people who can find ways to reduce greenhouse gas emissions through developing or applying new technology or more efficient production methods.

Synthetic greenhouse gas importers with ETS obligations will almost always be different from those who have some control over eventual emissions. However, it is expected that those emitters will face an increased price for the gases they use, or for the products that contain those gases.

Information on alternatives to synthetic greenhouse gases and best-practice handling procedures are readily available through associations such as IRHACE and AIRAH.