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Emissions trading

Questions and answers about the emissions trading scheme

About the emissions trading scheme

Why do we have an emissions trading scheme?

The basis of an effective response to climate change is simple: we must reduce our greenhouse gas emissions by changing our behaviour.

The emissions trading will ensure New Zealand does its fair share in tackling global climate change. It will provide New Zealanders with a flexible way of reducing their carbon footprint at minimum cost to the economy and society.

It will also help New Zealand meet its international obligations to reduce its greenhouse gas emissions under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol.

Through emissions trading, New Zealand can make a positive contribution to efforts to reduce global greenhouse gas emissions. On a local level, there are many easy actions we can each take to reduce our emissions at home, at work and on the road.

Why do we need emissions trading when we already have a host of other measures to tackle climate change?

No single, practical measure will, on its own, achieve the economic changes required to cope with a low-carbon future. This requires a broad range of tools working together and involving every sector of the economy and society.

Other major Government initiatives include the Sustainable Land Management Plan, the New Zealand Energy Strategy, and the New Zealand Energy Efficiency and Conservation Strategy.

Beyond these, individuals, households, businesses and organisations throughout New Zealand are designing and implementing many of their own initiatives aimed at reducing energy use, reducing waste, recycling, and so on.

Would a tax provide more certainty for business than an emissions trading scheme?

Emissions trading is more efficient and flexible than a tax. A tax sets the price emitters have to pay per unit of emissions and leaves individuals and companies to decide how much to reduce their emissions. Under the emissions trading scheme, the aggregate quantity of net emissions is set, and the market then determines the price of emission units, and therefore the cost per unit of emissions that firms and individuals will face. With an internationally linked emissions trading scheme, the price of units tracks the international price of emissions.

It would be difficult to set a tax at the correct level to ensure appropriate emissions reductions, and certainty about quantity is important from an environmental perspective.

What about carbon leakage?

New Zealand's climate change challenge from an economic perspective is to maximise its economic performance within an ongoing carbon constraint. Other countries may not face the same carbon constraint for a variety of reasons, at least in the short term. There is a concern that a carbon price may cause production from emissions-intensive, trade-exposed sectors to shift from New Zealand to countries without an equivalent carbon pricing regime.

The changes made to the emissions trading scheme under the Climate Change Response (Moderated Emissions Trading) Amendment Bill have been designed to provide greater protection against leakage than the previous scheme .It is not expected that the scheme will drive industry relocation at any significant scale, given the generous assistance package that will be provided. Although the cost of emissions will be factored into firms' decision-making in the same way that other costs such as electricity and labour are, it is likely that there will be far bigger drivers of firms’ location decisions. Where relocation does occur, it’s very possible that this relocation would have occurred regardless of the emissions trading scheme.

Is the emissions trading scheme going to increase inflation?

We expect the overall macroeconomic impact of emissions trading will be negligible, even though emissions trading will be felt by particular sectors and, over time, flow through the economy and impact on some costs for households. A transition phase will operate for the first two and a half years of the scheme, ensuring participants in the stationary energy, industrial and liquid fossil fuel sectors will face a carbon price of a maximum of $12.50 per tonne. The inflation impacts will be mostly the result of electricity and fuel prices, but are expected to be small. The economy will still continue to grow, and incomes and living standards will grow along with it.

How are Māori affected by climate change compared to other communities?

The reliance of Māori on the environment as both a spiritual and economic resource makes them more vulnerable and potentially less adaptable to climate change. Land presently owned by Māori is often of lower quality, which makes it more prone to invasion by subtropical grasses and erosion. Multiple land-ownership could hinder implementation of measures to adapt to climate change. This may increase the risk of reduced economic output from Māori land. On the other hand, forestry and alternative land use options will become more viable.

Impacts on the coastal environment are also of great importance to Māori culture and economy, but the impact of climate change on fisheries production is highly uncertain at the moment.

 

The emissions trading scheme legislation

The Climate Change Response (Emissions Trading) Amendment Act 2008 (Government legislation website) established the New Zealand Emissions Trading Scheme. The Act describes the legal details of the emissions trading scheme. The regulations relating to the emissions trading scheme have now been made under the Climate Change Response Act.

The Climate Change Response (Moderated Emissions Trading) Amendment Bill sets out proposed amendments to the emissions trading scheme.

 

International issues

How will the emissions trading scheme enhance New Zealand’s pure, clean, green image?

The design of the scheme covers all sectors of the economy and all greenhouse gases. It places New Zealand as part of a group of countries introducing emissions trading, giving us a strong voice on the world stage and enhancing New Zealand’s reputation and international brand as pure, clean and green.

Which other countries have or are introducing emissions trading schemes?

To respond to the need to reduce greenhouse gas emissions, many developed nations have either put in place an emissions trading scheme or are planning one. Our major trading partners are moving towards emissions trading as the most effective economic instrument to bring about change.

A study by the Pew Centre for Climate Change has confirmed that the European Union’s scheme covering 27 countries is producing emissions reductions with no harm to the European economy. Norway and Switzerland are joining the EU scheme. US President Barack Obama supports putting in place an emissions trading scheme there. Even China and South Korea, not Annex 1 countries under the Kyoto Protocol, are now considering emissions trading schemes as they recognise that climate change is a problem for all nations and all citizens.

Australia introduced bills to enact the Carbon Pollution Reduction Scheme (CPRS) to Parliament in June 2009.. The CPRS is scheduled to begin in July 2011 with a $10 fixed price period followed by full trading on 1 July 2012, a timeframe that is compatible with New Zealand’s. The Government is now working with Australia on harmonising our emissions trading scheme with their Carbon Pollution Reduction Scheme.

See our page on international examples of emissions trading for full details of emissions trading schemes overseas.

What is the effect on New Zealand’s economy if the Kyoto Protocol falls over  after 2012?

The international climate change policy situation post-2012 is not entirely certain at the moment. There could be a further commitment period under the Kyoto Protocol, a successor international agreement to the Kyoto Protocol and/or other forms of agreement, such as on a regional or sector basis.

In December 2007, international negotiations resulted in the ‘Bali Road Map’. It consists of a number of forward-looking decisions that represent the various tracks that are essential to reaching a secure climate future. The Bali Road Map includes the Bali Action Plan, which charts the course for a new negotiating process designed to tackle climate change, with the aim of completing this by late 2009. It also includes the launch of the Adaptation Fund and the scope and content of a review of the Kyoto Protocol, as well as decisions on technology transfer and on reducing emissions from deforestation.

What is certain is that climate change is a serious global issue and countries will continue to take action to reduce emissions, both individually and collectively. The emissions trading scheme has been designed so that it can endure and be adapted in light of changes to the future international framework. It will retain appropriate levels of economic incentives in the New Zealand economy to reduce emissions and improve the efficiency of production in line with global efforts, both with and without an international agreement.

Why reduce emissions domestically if New Zealand’s emissions are a small proportion of the world’s emissions?

Generally, if one person chooses not to act in the fight against climate change, that person can’t fairly expect others to act. Similarly, if New Zealand as a nation chooses not to act, we can’t expect other, big-emitting nations to act. 

We all cause emissions – we should all take action to reduce them. And we all face the consequences if others don’t act.

A failure to act could reduce New Zealand’s international credibility and influence in international forums. And any perception internationally that New Zealand was not acting with environmental integrity could harm overseas consumers’ perceptions of the desirability of our exports, and the desirability of New Zealand as a tourist destination.

Why send money to overseas firms to reduce emissions on our behalf when we could use the money to generate emissions reductions in New Zealand?

Climate change is a global issue: emissions in any part of the world have the same impact on the environment.

We want New Zealanders to be active players in the global response to climate change. We can’t expect developing economies to play their part if we sit at home and worry about only our own emissions.

The emissions trading scheme will allow New Zealanders to seek the best ways to help the global environment. Reducing emissions in a developing country is good for the environment and could be good for New Zealanders if it is a lower-cost way of achieving the same environmental goals.

Is the emissions trading scheme’s design consistent with schemes in other countries, including Australia?

The changes proposed in the Climate Change Response (Moderated Emissions Trading) Amendment Bill will make many of elements of the New Zealand Emissions Trading Scheme consistent with the proposed Australian Carbon Pollution Reduction Scheme (CPRS). In particular, the method of providing free allocation for emissions-intensive activities will be consistent with the CPRS. The emissions trading scheme will also adopt price controls for the first two and a half years that is similar to the price controls that will be in place in Australia.

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Activities covered by the emissions trading scheme

What greenhouse gas-producing activities are covered by the emissions trading scheme?

By 2015, once the emissions trading scheme has been fully phased in, it will cover greenhouse gas-emitting activities in all major sectors of the economy: forestry, stationary energy, industrial processes, transport fuels, agriculture, synthetic gases and waste. Refer to the sector-specific questions below to find out which particular activities are covered by the emissions trading scheme.

What’s a ‘removal activity’ under the emissions trading scheme?

Removal activities result in greenhouse gases being removed from the atmosphere, or prevent greenhouse gases from being released into the atmosphere, or reduce emissions reported in New Zealand’s annual inventory report under the UNFCCC or Kyoto Protocol. Under the emissions trading scheme, these activities include:

The Government can provide for further removal activities, including carbon capture and storage, through an Order in Council.

 

Participating in the emissions trading scheme

What is the nature of the ‘obligations’ created within the emissions trading scheme?

The emissions trading scheme sets up a framework in which certain participants must account for the emissions that result directly or indirectly from their activities. . Under the transition phase of the scheme (July 2010 to December 2012), participants must surrender to the Government one emission unit for every two tonnes of emissions. After this phase, one emission unit will be equivalent to one tonne of emissions. Participants can meet this obligation by buying units or they may, in certain circumstances, be allocated emission units.

What does ‘participant’ in the emissions trading scheme mean?

A participant is someone who carries out a greenhouse gas-producing activity detailed in the Climate Change Response Act as amended by the Climate Change Response (Emissions Trading) Amendment Act.

The people conducting the activities detailed in Schedule 3 of the Act are required to participate in the emissions trading scheme. In other words, they are mandatory participants.

In the stationary energy and liquid fossil fuel sectors, as detailed in Schedule 4 of the Act, eligible people can opt to be voluntary participants in the emissions trading scheme by taking on obligations that would otherwise be placed above them in the supply chain. These include major users of jet fuel (more than10 million litres per year), coal (more than 250,000 tonnes per year) and natural gas (more than 2 petajoules per year).

In the agriculture sector, initially participants will be the processors .The Act provides regulation-making powers for the Government to permit farmers to opt in voluntarily as direct participants under specific circumstances detailed in Schedule 4, Part 5 of the Act. The Government has the option to change the point of obligation to the farm level in the future, subject to stakeholder views and the successful resolution of some practical issues, including the ability to verify emissions returns and to enforce compliance within the scheme.

People conducting forestry and other removal activities defined in Schedule 4 can also opt to be voluntary participants in the scheme.

Participants aren’t required to register as a participant until their sector enters the emissions trading scheme. Participants are then required to record and report the greenhouse gas emissions for which they carry liability or the removals for which they can claim emission units, and surrender emission units when required. See the sections below for more information on these requirements.

The table below explains mandatory and voluntary participants in detail.

Sector Mandatory participant
(Schedule 3)		 Voluntary participant
(Schedule 4)
Forestry Owners of pre-1990 forest who deforest (or vested third party) Owner of post-1989 forests
Stationary energy Importer/miner/extractor of coal, natural gas, geothermal resources and used oil and refinery
> 2,000 tonnes coal per year
> 10,000 litres natural gas imports per year
  • Purchaser of > 250,000 tonnes of coal per year from miner
  • Purchaser of > 2 PJs of natural gas per year from miner
Industrial processes Various, eg, producing iron or steel, aluminium, clinker, burnt lime, glass, gold and cable If determined by Order in Council:
  • fishing in New Zealand exclusive economic zone if the vessel used for fishing consumes fuel that is purchased outside New Zealand
  • owning or operating a ship onto which goods are loaded and offloaded between New Zealand ports and where the fuel is either not purchased in New Zealand or where the fuel is purchased in New Zealand it but does not include emissions trading costs
Liquid fossil fuels Importer/removal from refinery Purchaser of > 10 million litres of jet fuel
Synthetic gases Importing synthetic gases including when contained in goods  
Agriculture
  • Import or manufacture of synthetic nitrogenous fertiliser or purchase of these
  • Slaughter and dairy processing of milk or farming of ruminant animals
 If determined by Order in Council:
  • purchasing nitrogenous fertiliser above a prescribed amount
  • farming of ruminant animals where the number of animals or emissions exceeds a prescribed amount
Waste Operating a waste disposal facility  

Why so few participants?

Officials applied four criteria for determining the participants that would have obligations to account for their emissions under an emissions trading scheme.

In all sectors except forestry, applying these criteria has led officials to suggest imposing obligations where participants:

Can I participate in emissions trading if I am not a mandatory or voluntary participant?

Anyone can participate directly in the scheme by purchasing emission units for trade or cancellation. And we’ll all be participating indirectly when, over time, emissions trading causes a price for emissions to flow through the economy.

What will the compliance costs be and how will they affect my firm?

The majority of participants in the emissions trading scheme will be large, sophisticated companies that have the capability and resources necessary to comply with the scheme. Small or medium-sized businesses, with the exception of some parts of forestry and agriculture, or households won’t face any direct obligations or compliance costs.

The scheme has been designed on a self-assessment model to further reduce compliance costs for those who are participants.

How do I register as a either a mandatory or voluntary participant?

You aren’t required to register as a participant until your sector enters the emissions trading scheme (see the sector-specific questions below for details of timing). Once your sector has entered the scheme, you need to open an account in the New Zealand Emission Unit Registry (NZEUR) so you can surrender emission units and receive free units if you’re entitled to. After that, you need to register as a participant with the administering agency for the emissions trading scheme.

How long do I have to register as a mandatory participant once my activities are included in the emissions trading scheme?

Mandatory participants conducting activities in Schedule 3 of the Act have 20 working days to register from the date when their activities are included in the emissions trading scheme. This includes opening an account in the New Zealand Emission Unit Registry.

How do I open an account in the New Zealand Emission Unit Registry (NZEUR)?

Opening an account in the NZUER requires the proposed account holder to first become a registered user of the NZEUR, before requesting on-line to open a holding account. Requests to open holding accounts are approved by the Registrar, pending receipt of the account holder declaration.

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Reporting emissions under the emissions trading scheme

When do I have to report on my emissions and removals?

For information about reporting requirements for pre-1990 forestry. refer to the information on the Climate Change Response (Emissions Trading Forestry Sector) Amendment Act

Participants in the energy, industrial and transport sectors will be required to report their greenhouse gas emissions from 1 January 2010. They will need to submit their first emissions return by 31 March 2011. The due date for the mandatory report is 31 March 2011.

Participants in the synthetic gases sector will be required to report the amount of synthetic greenhouse gases they imported from 1 January 2012.

Participants in the agriculture sector can start reporting their emissions voluntarily from 1 January 2011. Mandatory reporting will start on 1 January 2012.

Who do I submit my emissions reports to?

You need to submit your emissions return to the chief executive of the administering agency for the emissions trading scheme.

What information should my emissions return contain?

Your emissions return should record your greenhouse gas-producing activities, the emissions and/or removals resulting from those activities, an assessment of how many emission units you need to surrender, plus any other information required by the regulations, the required fee and your signature.

What methods and standards do I use to calculate my emissions?

The method for calculating emissions production and removal is detailed in regulations for each sector. The regulations relating to the emissions trading scheme have now been made under the Climate Change Response Act.

What information do I need to keep for reporting my company’s emissions and removals?

You need to keep sufficient records for the administering agency for the emissions trading scheme to be able to verify the greenhouse gas-producing or removing activities you’ve carried out, the emissions and/or removals resulting from those activities, the number of emission units you need to surrender, the number of emission units you’re entitled to receive, if any, and any other information required by regulations.

How long do I need to keep records for?

If you’re conducting forestry activities, you need to keep records for at least 20 years from the end of the year they relate to. For all other activities, you need to keep records for at least 7 years from the end of the year they relate to.

How and when do I need to verify my emissions reports?

You don’t need to have your emissions reports verified before you submit them. However, the administering agency’s chief executive can request that any emissions reports be verified as part of the review process after emissions reports have been submitted.

The administering agency will recognise people or organisations with the required expertise, technical competence or qualifications to verify emission returns should this be requested by the chief executive. You’ll need to contact one of these people or organisations to verify your emissions return if you’re asked to.

Can I report my company’s emissions voluntarily?

Participants in sectors that are later entrants to the scheme – liquid fossil fuels, agriculture, waste and synthetic gases – will have the opportunity to report their emissions voluntarily two years before they start having to surrender emission units under the scheme. For those sectors, mandatory emissions reporting will begin one year before unit obligations (surrender) or unit entitlements start.

Scheme participants in other sectors, and other people or organisations that aren’t participants in the scheme, are able to report on their emissions at any time, but the emissions trading scheme registry system won’t be available for this purpose. To find out more about voluntary emissions reporting, visit Guidance for voluntary, corporate greenhouse gas reporting (Ministry for the Environment website).

 

Emission units

What is an ‘emission unit’?

Emission units are often referred to as carbon credits, allowances or offset credits. An emission unit can represent one metric tonne of carbon dioxide itself, or the equivalent of any other greenhouse gas (carbon dioxide equivalent or CO2-e). The six greenhouse gases included in the Kyoto Protocol and the emissions trading scheme are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

There are lots of unit types and a variety of emission units are traded throughout the world. The primary type of emission unit used in New Zealand to comply with the emissions trading scheme is called the New Zealand unit or NZU. Some types of Kyoto unit can also be used to comply with the emissions trading scheme. See the section below on surrendering units for more information.

What are emission units used for?

Emission units are used to meet a participant’s compliance obligations under the emissions trading scheme. Each participant is required to surrender one emission unit to match each tonne of emissions for which the participant carries liabilities.

Emission units can also be used by firms and individuals outside the emissions trading scheme compliance system to ‘offset’ their greenhouse gas emissions.

What is a ‘free emission unit’?

A free emission unit is a New Zealand unit that is gifted to eligible individuals or firms by the New Zealand Government. It can be used to meet a participant’s obligations to account for its greenhouse gas emissions under the emissions trading scheme, it can be carried over or banked for use in future compliance periods, or it can be sold to another participant in the scheme or another person or business.

The criteria and methods for receiving emission units will be outlined in the allocation plans for each eligible sector. See below for more information about allocation plans.

What is ‘allocation’?

The term ‘allocation’ refers broadly to issuing emission units into the market. Allocation can occur through two mechanisms, gifting and sale.

The Government will allocate emission units to eligible trade-exposed industrial producers, forest owners with pre-1990 exotic forest land, fishing vessel operators, and the agriculture sector. This is done under an allocation plan for each sector.

Businesses that can pass on the costs of the emissions trading scheme to their customers will not be allocated any emission units. They’ll have to buy the emission units they need to meet their obligations to surrender units under the emissions trading scheme.

Where do emission units come from?

Kyoto emission units are issued by the UNFCCC Secretariat under the rules of the Kyoto Protocol. Kyoto units can be bought and sold among Governments, firms and individuals in the international carbon market.

For the first commitment period of the Kyoto Protocol (2008-2012), the New Zealand Government received a number of Kyoto units, called assigned amount units (AAUs), set at a level of five times its 1990 emissions. New Zealand will also earn additional Kyoto units called removal units (RMUs) for its eligible forestry activities.

Other types of Kyoto unit called emission reduction units (ERUs), certified emission reductions (CERs), long-term CERs (lCERs) and temporary CERs (tCERs) are generated by project-based activities under Joint Implementation (JI) and the Clean Development Mechanism (CDM).

The New Zealand Government has chosen to allocate some of its Kyoto units to participants in Projects to Reduce Emissions, the Permanent Forest Sink Initiative and Negotiated Greenhouse Agreements.

New Zealand units (NZUs), the primary domestic emission units under the emissions trading scheme, are issued into the New Zealand Emission Unit Registry by the Government. Then the Government allocates NZUs into the market by gifting them to eligible individuals or firms in specific sectors, awarding them to individuals or firms conducting approved removal activities, or by selling them. NZUs can be traded within New Zealand. During the transition phase (July 2010 to December 2012) only the forestry sector will be able to  convert the NZUs freely allocated to them to Kyoto units to be traded overseas. After the transition phase all sectors will be able to convert emission units to Kyoto units to trade overseas.

Additional types of emission unit can be created and traded in the voluntary market outside the emissions trading scheme and the Kyoto Protocol framework, but aren’t accepted for compliance under either the emissions trading scheme or the Kyoto Protocol.

Will the Government sell emission units and how will they do it?

In the short term, the Government is unlikely to sell emission units because the Kyoto units allocated to New Zealand will be needed to support New Zealand’s international obligations, as well as free allocation to eligible sectors under the emissions trading scheme.

In the long term, the Government may sell emission units if it has a surplus of units or if market conditions make it necessary. As the allocation of emission units in the emissions trading scheme is phased out, the Government will have more units which it may choose to sell.

Where do the proceeds go from the Government selling emission units?

Because participation in the emissions trading scheme is being phased in over or after the first Kyoto Protocol commitment period, the Government will still bear responsibility for meeting much of our Kyoto compliance costs until 2013.. Beyond 2013, costs and benefits to the Government will depend on any post-2012 emissions reduction target. The Government’s aim is to be revenue neutral.

Where can I find more information about emission units and trading?

Read the factsheet called Units of trade in the emissions trading scheme (Ministry for the Environment website).

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Allocation of emission units to the forestry sector

For information on allocation to the forestry sector see emissions trading bulletin 11

 

Allocation of emission units in the industrial, agriculture and fishing sectors

Will the Government allocate emission units to Māori, as it allocated quotas for fisheries?

The Government will not be allocating emission units (ie, a quota) to Māori, as occurred for fisheries. However, Māori who are participants in sectors such as forestry, industry, fishing and agriculture can apply for a free allocation of emission units if they meet criteria specified in the relevant allocation plans.

What happens when there are no more free emission units?

Participants in the emissions trading scheme will be taking full financial responsibility for their greenhouse gas emissions when the phase-out period for free allocation has ended.

Where will my emission units be kept?

Emission units are stored and managed through the New Zealand Emission Unit Registry (NZEUR). All participants in the emissions trading scheme must have an account in the NZEUR.

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Surrendering emission units

What does ‘surrendering’ emission units mean?

Participants with obligations under the emissions trading scheme are required to give up to the Government one emission unit for each tonne of carbon dioxide or carbon dioxide equivalent greenhouse gas emissions their activities produce in a year. See the sector-specific questions below about when participants in each sector need to start surrendering units.

Will I have to buy and surrender emission units to cover my emissions?

The vast majority of companies and individuals won’t take part directly in the emissions trading scheme. Most people and businesses are likely to face a small increase in costs for fuel, electricity and some goods, but won’t have to buy or surrender emission units.

What sorts of emission unit can be surrendered to comply with the emissions trading scheme?

The primary unit of trade for the emissions trading scheme is the New Zealand unit (NZU), which is the unit created and distributed by the Government. One NZU is equivalent to one tonne of carbon dioxide equivalent emissions.

Several types of international Kyoto unit can also be cancelled or surrendered by participants to meet their obligations under the emissions trading scheme.

The legislation also retains the option for the Government to allow through regulations imported assigned amount units for surrender (assigned amount units issued out of the initial assigned amount of a country other than New Zealand). No decision has been made about which assigned amount units will be permitted.

New Zealand AAUs (for example, those issued to participants in Projects to Reduce Emissions, the Permanent Forest Sink Initiative and Negotiated Greenhouse Agreements) can be surrendered under the emissions trading scheme.

Where can I buy New Zealand units?

If you need to buy New Zealand units to comply with your obligations under the emissions trading scheme, you can buy them directly from other scheme participants who may have a surplus of them or through a carbon market broker. See below for more information on carbon markets.

Where can I buy Kyoto units?

You can buy Kyoto units from several sources such as participants in other emissions trading schemes around the world, certified overseas projects to reduce emissions, New Zealand projects to reduce emissions, and international carbon traders.

Can I sell New Zealand Units offshore?

New Zealand units can only be traded domestically. However, they can be converted into Kyoto units to be traded offshore.

How can I convert New Zealand units to Kyoto units?

Units are converted through the New Zealand Emission Unit Registry.

How often do I have to surrender emission units?

If you’re required to surrender emission units under the emissions trading scheme, you’ll have to surrender the number of emission units you’ve calculated in your emission return by 31 May each year.

If you own post-1989 forest, you’re required to report their emissions or removals, and surrender units if relevant, once every five years.

How many emission units will I have to surrender?

This depends on the amount of greenhouse gas emissions your business’s activities produce. During the transition phase (July 2010 to December 2012) participants other than forestry participants must surrender one emission unit for every two tonnes of emissions. After this, one emission unit will be equivalent to one tonne of emissions.

How much will it cost me to surrender emission units to cover my emissions?

Under the fixed price option, units can be bought from the Government for $25 each. As participants other than forestry participants are only required to surrender one emission unit for every two tonnes of emissions, the price will effectively be $12.50 per tonne.

After this, the cost of covering emissions will depend on the price of emission units in New Zealand, which will be closely linked to the international price, and the price of Kyoto units. It will also depend on whether you’re entitled to an allocation of free emission units from the Government to cover part of your costs.

How do I surrender emission units?

Surrendering emission units is managed through the New Zealand Emission Unit Registry. See the sector-specific questions below about when participants in each sector need to start surrendering units.

Can I pay for my emissions trading scheme bill through the tax system?

No, the emissions trading scheme is separate from the tax system and is administered through the New Zealand Emission Unit Registry.

Can I borrow emission units?

Borrowing emission units is not allowed under the emissions trading scheme.

What does ‘carry over’ emission units mean?

Carrying over emission units means storing them during one compliance period to use to meet obligations under the emissions trading scheme in the next compliance period.

What does ‘banking’ emission units mean?

Banking means the same as carrying over. See above.

Can I bank emission units for future compliance periods?

You can bank New Zealand units for future compliance periods, but not imported AAUs. See the questions above about AAUs for more information.

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Penalties

What happens if I do something wrong?

You could be fined up to $24,000 if you fail to collect emissions data or other required information, calculate your emissions and/or removals, keep records, register as a participant when you are supposed to, submit an emissions return when required, or notify the administering agency or provide information when you are required to do so.

You could be fined up to $50,000 if you knowingly alter, falsify or provide incomplete or misleading information about any of your obligations under the emissions trading scheme, including your emissions return.

If you deliberately lie about your obligations under the emissions trading scheme to gain financial benefit or avoid financial loss, you could be fined up to $50,000 and/or be put in prison for up to 5 years.

In the first year that a sector enters into the emissions trading scheme, if you mistakenly surrender less units than you are meant to due to a reporting mistake, no financial penalty will apply but you’ll be still required to surrender those units.

What happens if I fail to surrender emission units when I’m required to?

If you fail to surrender emission units when you’re required to or have surrendered less units than you were meant to, you’ll have to surrender or cancel those units and pay a penalty of $30 for each emission unit. This penalty may be reduced by up to 100 per cent if you state voluntarily that you’ve failed to surrender the required emission units or made a mistake in your emissions return before the administering agency sends you a penalty notice or you’re visited by an enforcement officer.

Tax implications

What are the tax implications of the emissions trading scheme?

The Climate Change Act amends the Income Tax Act 2004, the Income Tax Act 2007 and the Goods and Services Tax Act 1985 to address:

The 'Tax treatment of emission units' (PDF, 71.9 KB) is managed by the Inland Revenue Department.

For information regarding the tax treatment of Post 1989 Forestry (Ministry of Agriculture and Forestry)

For technical information on tax treatment under the ETS (Inland Revenue Department)

If neither of these sites answer your questions please email july08.bill@ird.govt.nz and an official from IRD will respond to your questions.

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Administration of the emissions trading scheme

Who administers the emissions trading scheme?

The Ministry of Economic Development is the administering agency for the emissions trading scheme and runs the New Zealand Emission Unit Registry.

Emissions trading scheme policy development is managed by the Ministry for the Environment. The Ministry of Agriculture and Forestry manages the emissions trading scheme for the forestry sector.

In the longer term, the Government has expressed an intention to transfer the administrative functions to an Environmental Protection Authority.

Where is the record of my emission units kept?

All emission unit records are kept in the New Zealand Emission Unit Registry (NZEUR). If you’re a participant in the emissions trading scheme, you need to have an account in the NZEUR.

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Review of the emissions trading scheme

How often will the emissions trading scheme be reviewed?

The emissions trading scheme will be reviewed once during each commitment period of an international agreement and the review must be completed 12 months before the end of that commitment period. For example, we are now in commitment period one of the Kyoto Protocol which ends at the end of 2012. The emissions trading scheme must therefore have been reviewed by the end of 2011. If there is no international commitment period, the emissions trading scheme will be reviewed every five years.

What will the reviews look at?

The reviews will look at things like how the emissions trading scheme is affecting the economy and how it links with other emissions trading schemes. They must also consider any social, economic and environmental effects of the scheme, such as its effect on biodiversity.

Under the new proposals, the allocation provisions must be revised every five years, starting in 2011.

Who will conduct the reviews?

The reviews will be conducted by an independent panel of experts.

 

The carbon market

How can I sell my spare emission units?

You can sell emission units (except those bought under the fixed-price option) through direct bilateral agreements with buyers, through a broker or through an exchange. An array of financial service providers in the private sector can help with these transactions.

Why are there different prices for carbon around the world?

There are different carbon markets operating with different constraints on unit supply and demand, and different types of emission unit around the world that command varying prices. For example, the European Union emissions trading scheme (EU ETS) restricts certain types of Kyoto unit from being traded within the scheme, so the price of emission units traded within the EU ETS is usually higher than the international price.

There can also be differences in price between the carbon markets designed for Kyoto compliance and voluntary carbon markets. These reflect differences in the rules for generating and using emission units, as well as relative supply and demand.

Why is New Zealand’s emissions trading scheme linked to the international emissions price?

Linking the emissions trading scheme into the world market for carbon is likely to reduce volatility, compared to what would happen if the scheme was restricted to emission units issued by New Zealand.

With international linking, the activities of large New Zealand participants will have little or no impact on world prices. If the scheme were limited to New Zealand units, one large player buying or selling their units would have a material impact on prices.

Which types of Kyoto unit are accepted for compliance under the emissions trading scheme?

Participants in the New Zealand emissions trading scheme can surrender Kyoto units to meet their obligations under the scheme, subject to the following restrictions on the source of the units.

Can the Government change the regulations for which emission units are eligible within the emission trading scheme?

The Government will always have the right to change the regulations surrounding the emissions trading scheme, but regulations can’t be changed retrospectively. There is a consultation process for setting new regulations, so citizens will always be able to have a say on any proposed changes.

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Reducing greenhouse gas emissions

How can I reduce my emissions so I pay less for fuel and electricity?

There are lots of easy steps you can take at home and at work to reduce your fuel and electricity bills. Try walking or cycling for short trips instead of using a car, hanging laundry outside instead of using a dryer, and turning off lights when you leave a room.

How do I earn emission units or carbon credits for reducing my emissions under the emissions trading scheme?

For most New Zealanders, the cost of the emissions trading scheme will be built into the services and products you buy, such as electricity and fuel. Consequently, most individuals and firms can’t earn New Zealand units through the emissions trading scheme for actions you take at home or work to reduce your emissions. However, you can reduce your emissions and save money by reducing your energy and fuel use, such as by installing insulation in your house or using public transport to get to work.

If you want to take direct responsibility for your emissions, you can buy carbon credits on the Kyoto or voluntary market to offset your emissions, or choose goods and services from providers who are offsetting the emissions associated with their products.

Where can I claim carbon credits for my wind farm, hydro scheme or other renewable energy project?

You can’t claim carbon credits directly for small-scale renewable energy projects, but electricity prices will rise as a result of the emissions trading scheme putting a cost on fossil fuels. This will provide an incentive for renewable sources of energy which will become cheaper relative to fossil-fuelled electricity generation.

How will emissions trading change my behaviour when I live in the countryside without options like a bus system?

You have many options available for reducing your emissions, including through your household insulation, the efficiency of your vehicles and appliances, and your choice of fuel and home heating. The Government has programmes in place to help you improve your household energy efficiency and conservation, such as EnergyWise. Will I be paying twice if I take my own actions against climate change and to protect the environment?

Taking your own action is likely to reduce the costs you face under the emissions trading scheme, for example by reducing your electricity consumption.

However, to the extent that you take additional action and want to offset all your emissions, you’re therefore not paying twice, for example to become carbon neutral. You’ll need to use a reliable accounting tool to determine the proportion of your emissions that are accounted for through the increased prices you face under the emissions trading scheme. This is to ensure you’re only voluntarily paying to reduce or offset emissions over and above what’s achieved through the emissions trading scheme. This can be quite complex and, in some cases, and element of double counting may be simpler to implement.

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Prices rises as a result of the emissions trading scheme

When will petrol prices rise as a result of emissions trading?

A fuel price rise is expected in mid-2010 when transport fuels are included in the emissions trading scheme.

How much will petrol prices go up by?

The emissions trading scheme may initially add around 3 cents a litre to the price of fuel. After the transition phase (July 2010 to December 2012),  the increase in fuel prices will partly depend on the international price of carbon at the time.

What will you do for transport users to offset the impacts of the emissions trading scheme?

We know that people’s behaviour changes as the fuel price rises. The effects of the emissions trading scheme on fuel costs will encourage behaviour change, so people will use their cars less, use public transport more, buy more efficient cars, change their driving habits, and so on. This is already happening as a result of increasing petrol prices caused by the price of crude oil increasing.

We expect lower carbon-emitting forms of domestic transport will become cheaper relative to higher carbon-emitting forms of transport; this is the intention of the emissions trading scheme.

Benefits are regularly adjusted to recognise changes in consumer prices. A change in the price of petrol and diesel will flow through to consumer prices, so benefits will be changed to recognise this cost increase.

Is public transport exempt from the emissions trading scheme?

The use of fossil fuels for public transport will not be exempt from the scheme. However, it is expected that lower carbon-emitting forms of domestic transport will become cheaper relative to higher carbon-emitting forms of transport. This means that public transport that uses lower carbon-emitting forms of liquid fuels, such as those containing biofuels, will become cheaper relative to other forms of transport that rely on fossil fuels, such as petrol and diesel.

What about isolated, rural communities or transport users who don’t have any alternatives, for example, courier drivers?

Transport choices and costs are more challenging for isolated or rural communities. Options are available to such users where public transport is less likely to be an alternative, or where a business like a courier service is providing unique transport services, such as more fuel-efficient driving habits and better logistical planning.

Will revenue from transport emission units be recycled into transport projects such as roads and public transport networks?

Not explicitly. These projects will be funded through the normal budget processes.

When will electricity prices start rising as a result of emissions trading?

An electricity price rise is expected in mid-2010 when electricity production is included in the emissions trading scheme.

How much will electricity prices go up by?

The emissions trading scheme will initially add around 1 cent per kWh to the price of electricity. After the transition phase (July 2010 to December 2012), the increase in electricity prices  will partly depend on the international price of carbon at the time.

Will renewable electricity retail more cheaply than electricity generated from coal and gas?

All electricity generation goes into a central pool and is dispatched through the transmission grid to retailers. All retailers pay the same price for the electricity they supply at a particular location, regardless of whether some of the supply came from a cheaper source of generation, or from a generator with the same name. For example, Meridian Energy generates its electricity primarily from renewable resources (eg, South Island hydro) while Genesis Energy contributes to security of supply through thermal electricity generation at Huntly, and also operates a number of hydro and wind sites. The retail arms of both Meridian Energy and Genesis Energy then buy the energy they require for their customers from the same central pool, paying the same price.

Can I choose to consume only renewable electricity?

Electricity retailers and generators are separate. Even when you choose a retail company with the same name as a wholly renewable energy generator, it doesn’t actually mean the power you use was generated through renewable energy. However, choosing companies that generate power based on renewable energy gives a market signal.

If you’re concerned about the effect of your electricity consumption on the environment, you can make other decisions, such as reducing your electricity consumption, for example, by using efficient light bulbs. You could also switch to your own form of renewable electricity, for example, by installing solar water heating panels.

What will happen to profit gains for electricity generators?

Electricity prices are expected to rise to reflect the increased cost of thermal generation, but a significant proportion of New Zealand’s electricity is generated from renewable resources, which will not face an emissions cost. The introduction of a price on carbon will have a beneficial effect on the revenue of renewable generators who do not face a corresponding increase in fuel costs. Exactly how much renewable generators will profit from emissions trading is very difficult to calculate.

The Government will use any extra revenue earned by its state-owned enterprises from the emissions trading scheme to fund the financial assistance package for households, which includes one-off payments in 2010 to cover electricity price increases.

Will food prices go up as a result of the emissions trading scheme?

Small price rises in food and other items may occur as a result of the emissions trading scheme when fossil fuels are included in the scheme in July 2010 because it will be become more expensive to transport them. You can avoid some of these costs by buying locally grown or sourced products.

Will waste disposal prices go up as a result of the emissions trading scheme?

A small price rise in the cost of disposing of waste at some landfills is expected when the waste sector joins the emissions trading scheme in 2013.

I’m environmentally conscious already.  Why do I have to pay for other people’s emissions?

Under the emissions trading scheme you don’t pay for other people’s emissions – you’re contributing to the cost of emissions you’re responsible for by using goods and services, the production of which causes emissions. The more you can reduce your carbon footprint, the less you’ll have to pay.

If my energy and input costs go up, won’t I need to reduce my other business costs like wages?

That depends on the choices you make. Many options are available, including for the efficiency of your vehicles and appliances, your choice of heating, and the efficiency of any machinery you use.

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Sector-specific frequently asked questions

Forestry

The Ministry of Agriculture and Forestry has developed information to help farmers and foresters understand the implications of the emissions trading scheme. This information includes a number of frequently asked questions about forestry.

Also read the factsheet called Forestry in the emissions trading scheme (Ministry for the Environment website).

Why is 1990 so important for the emissions trading scheme?

Any scheme needs to establish a base year or reference point. Under the Kyoto Protocol, forests planted after 1 January 1990 are treated differently from forests planted before that date. The Government chose to reflect those international rules in its design of the emissions trading scheme.

Has any other country put forestry into their scheme?

New Zealand is currently the only country that is making it compulsory for all major holders of pre-1990 forest to join its emissions trading scheme and providing an opt-in for post-1989 forest owners. However, other countries are assessing the issue and Australia is proposing an approach to post-1989 forestry that is almost identical to New Zealand’s.

How will the emissions trading scheme affect Māori interests in forestry?

Forestry in the emissions trading scheme can provide many opportunities for landowners. All landowners, including Māori, can choose to receive forest sink credits as New Zealand units and associated liabilities for any carbon sequestered during the first commitment period of the Kyoto Protocol (2008-2012) for their post-1989 forests. This includes existing forests established through the East Coast Forestry Project.

The already announced Permanent Forest Sink Initiative also offers Māori the opportunity to earn forest sink credits as Kyoto Protocol assigned amount units. The proposed Afforestation Grant Scheme will provide further opportunities for Māori through a Government cash grant for the planting of new forests on Kyoto-compliant land.

In addition, discussions via the Iwi Leadership Group during the select committee process for the emissions trading legislation resulted in 18 New Zealand units per hectare being set aside for future Treaty claimants who receive Crown Forest Land. Owners of forests bought before late 2002 that qualify as pre-1990 forests in the legislation will also be allocated more emission units than originally proposed. The number has been increased from approximately 39 units to an estimated 60 units per hectare to better help the forest owners who face the greatest costs from the emissions trading scheme.

Is New Zealand working to get Kyoto rules on forestry changed?

Globally, about 20 per cent of carbon dioxide equivalent emissions into the atmosphere come from deforestation. The Government therefore supports the inclusion of deforestation of pre-1990 forests in the Kyoto Protocol and any subsequent agreements.

The Government is working through issues on the international regime post-2012. In the meantime, it’s prudent to make domestic policy broadly consistent with New Zealand’s international obligations, while bearing in mind that changes are possible to the international regime in the future.

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Transport

What greenhouse gas-producing activities from transport are covered by the emissions trading scheme?

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 emissions trading scheme 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.

Although currently excluded, there is the potential for the emissions trading scheme to include fuel used by international cargo carriers on domestic legs when domestic cargo is carried, and fuel used while fishing in the exclusive economic zone but where the fuel was not purchased in New Zealand.

Who are the participants in the scheme for the transport sector?

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

How will coastal shipping and fishing participate in the emissions trading scheme?

In general, the coastal shipping and the fishing industries will not directly participate in the emissions trading scheme. However, these industries will face increased costs associated with the emissions trading scheme 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 emissions trading scheme costs.

In the fishing industry, all fuel sold to fishing vessels in New Zealand, irrespective of where they go fishing, will include the increased costs of the emissions trading scheme. 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 emissions trading scheme costs.

To rectify these inequities, the emissions trading scheme sets up a process to consider the potential inclusion of two sources of fuel that are otherwise excluded from the scheme:

These two provisions, if progressed, would ensure the same emissions trading costs are faced by all carriers of domestic cargo and all vessels fishing in New Zealand waters. It would mean some international carriers and some fishing vessel owners would become participants in the scheme in addition to fuel suppliers.

Do the emissions trading rules include international travel?

Emissions from fuel used for international aviation and most marine transport are exempt from the scheme, consistent with the Kyoto Protocol. However, large domestic users of jet fuel can participate voluntarily in the emissions trading scheme at any time.

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

If international travel is not included, how will foreign consumers and tourists react to New Zealand and its products?

As a destination, New Zealand represents a clean, green location, particularly in light of our efforts towards sustainability, such as the emissions trading scheme. It also represents a location where, through the emissions trading scheme, emissions from domestic travel will be Kyoto-compliant. Tourists do have the option of buying emission units either from the New Zealand scheme or from abroad (Kyoto units) to offset their emissions. Some airlines and travel companies now offer this option when tourists book their holidays.

Does the emissions trading scheme apply to all domestic airlines, both New Zealand-based and international?

All fuel used for domestic flights is covered by the emissions trading scheme, regardless of which airline buys the fuel.

Are international marine transport operators exempt from the New Zealand scheme?

Emissions from fuel used by international aviation and marine transport is exempt from the scheme, consistent with the Kyoto Protocol. However, international ships moving cargo around New Zealand can be included in the emissions trading scheme.

When does voluntary emissions reporting start for transport sector participants?

Participants can start reporting their greenhouse gas emissions voluntarily from 1 January 2009. The due date for the voluntary report is 31 March 2010.

When does mandatory emissions reporting start for transport sector participants?

Participants in the transport sector will be required to report their greenhouse gas emissions from 1 January 2010. The due date for the mandatory report is 31 March 2011.

When will transport sector participants have to start surrendering emission units?

The transport sector starts having obligations to surrender emission units from 1 July 2010. The due date for the emissions report is 31 March 2011 and the due date for surrendering emission units is 31 May 2011 for emissions during the year ended 31 December 2011.

Will the transport sector receive a free allocation of emission units?

The Government won’t give fuel suppliers free emission units. This is because they can pass on the costs of the scheme to their customers, which means the impact of the scheme on the profits of fuel suppliers will be limited.

Can anyone in this sector join the emissions trading scheme voluntarily?

Large users of jet fuel can participate voluntarily in the emissions trading scheme at any time. They can start reporting their emissions from 1 January 2009 and will be required to report their emissions from 1 January 2010. They will have obligations to surrender emission units from 1 July 2010, and have until 31 May 2011 to surrender units for the period 1 January to 31 December 2011.

How do participants in the transport sector monitor and calculate their emissions?

Participants in the transport 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.

The regulations require participants to monitor:

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

Where can I find the regulations for the transport sector?

The regulations for the transport sector have been published and are available on the Government’s legislation website and in hard copy from Government book stores.

Will biofuels be covered by the emissions trading scheme?

Biofuels combusted from electricity and industrial heat will be covered by the emissions trading scheme. Other emissions from the use of biofuels will not be included.

What about the greenhouse gases emitted when biofuels are made?

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

Where can I find more information about transport in the emissions trading scheme?

Read the factsheet called Transport in the emissions trading scheme (Ministry for the Environment website).

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Fishing

Will the fishing sector receive a free allocation of emission units?

Direct to the other Q&A – see above

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Energy

What greenhouse gas-producing activities from energy are covered by the emissions trading scheme?

‘Stationary energy’ includes all fuels used in electricity generation, industrial heat generation, and the refining of petroleum. It does not include energy used for transport or emissions from industrial processes.

Who are the participants in the scheme for the energy sector?

Participants will be those who import or mine coal and import or mine natural gas, plus petrol refineries and stationary energy producers who use geothermal fluid, used oil, waste oil, used tyres , waste or biofuels for electricity generation or industrial heat.

When does mandatory emissions reporting start for energy sector participants?

Participants will be required to report their greenhouse gas emissions from 1 January 2010. They will need to submit their first emissions return by 31 March 2011. For the first year, participants must supply one return with two parts: a report for the period 1 January 2010 to 31 December 2010, and a separate report for the period 1 July 2010 to 31 December 2010. The self-assessment of liability to surrender units contained in the return should be based on emissions for the period 1 July 2010 to 31 December 2010.

When will energy sector participants have to start surrendering emission units?

The energy sector starts having obligations to surrender emission units on 1 July 2010. The first due date they must surrender units by is 31 May 2011 for the period 1 July 2010 to 31 December 2010.

Will electricity generators receive a free allocation of emission units?

The Government won’t give electricity generators free emission units. This is because they can pass on the costs of the scheme to their customers, which means the impact of the scheme on the profits of electricity producers will be limited.

Can anyone in this sector join the emissions trading scheme voluntarily?

Some companies that buy large amounts of coal or natural gas (over 250,000 tonnes of coal or 2 petajoules of natural gas) can choose to participate in the scheme. They must buy their coal or natural gas from a miner of coal or natural gas, or wholly owned subsidiary of a miner, but can’t opt in for coal or natural gas they purchase from a wholesaler.

Where can I find the regulations for the energy sector?

Regulations setting out data collection and emissions calculation methods for the energy sector come into force on 1 January 2010. Full text of the regulations and explanatory material will shortly be available at www.climatechange.govt.nz/emissions-trading-scheme/regulations. The regulations will be available in hard copy from Government bookshops.

How can I reduce my emissions from electricity production?

The emissions trading scheme will favour electricity generators who use renewable sources of power, such as geothermal, wind, solar and hydro, over those who use fossil fuels such as oil and gas. It will also favour people and businesses who use less electricity overall.

Will the emissions trading scheme rules apply to exported and imported coal?

The New Zealand emissions trading scheme will apply only to emissions generated in New Zealand. It will therefore make companies responsible for domestic emissions from imported coal and will not apply to coal exported from New Zealand. Under the Kyoto Protocol, the country importing New Zealand coal, for example Japan, is responsible for the emissions.

Fugitive emissions from coal seam gas are included in the scheme to provide coal companies with the right incentive to convert the gas into carbon dioxide, rather than allowing emissions into the atmosphere.

How will the emissions trading scheme affect micro-generation?

Micro-generation from a renewable source such as hydro will not be subject to the emissions trading scheme because it does not result in greenhouse gas emissions. However, the price of emissions will be reflected in the cost of micro-generation from coal, gas and geothermal energy.

The Government’s working on a number of other initiatives to encourage renewable micro-generation. Regulations for connecting distributed generation, which provide a process for generators to negotiate access to their local network, have come into force. The Electricity Commission has developed a model contract to help small-scale (<40,000 kWh a year) generators sell their output to a retailer.

What about nuclear energy?

Nuclear energy has been considered in the past as an option, but is not consistent with wider environmental goals, and high economic cost means that nuclear energy is not an option for New Zealand. There are no plans to change legislation to provide for nuclear energy.

Cabinet has decided that Kyoto units generated through nuclear energy offset projects will not be permitted into our emissions unit registry and will not be acceptable for compliance with the New Zealand emissions trading scheme.

Where can I find more information about stationary energy in the emissions trading scheme?

Read the factsheet called Energy in the emissions trading scheme (Ministry for the Environment website).

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Industry (not including synthetic gases)

What greenhouse gas-producing activities from industry are covered by the emissions trading scheme?

The emissions trading scheme covers:

The new Bill proposed excluding nitrogen from producing cables using a nitrogen cure process.

Who are the participants in the scheme for the industry sector?

The company that produces the metals, mineral and chemical transformations detailed above, and therefore emits the gases, will be the participant.

When does mandatory emissions reporting start for industry sector participants?

Participants will be required to report their greenhouse gas emissions from 1 January 2010. They will need to submit their first emissions return by 31 March. For the first year, participants must supply one return with two parts: a report for the period 1 January 2010 to 31 December 2010, and a separate report for the period 1 July 2010 to 31 December 2010. The self-assessment of liability to surrender units contained in the return should be based on emissions for the period 1 July 2010 to 31 December 2010.

When will industry sector participants have to start surrendering emission units?

The industry sector starts accruing obligations to surrender emission units on 1 July 2010. The first date they must surrender units by is 31 May 2011 for the period 1 July 2010 to 31 December 2010.

Will the industry sector receive a free allocation of emission units?

The Government will compensate trade-exposed, emissions-intensive firms by allocating some free emission units to them that they can use to offset their obligation. For more detail on allocation see link to bulletin 11

Where can I find the regulations for the industry sector?

Regulations setting out data collection and emissions calculation methods for industry come into force on 1 January 2010. Full text of the regulations and explanatory material will be available at www.climatechange.govt.nz/emissions-trading-scheme/regulations. The regulations will be available in hard copy from Government bookshops.

How can I reduce my emissions from industrial activity?

The emissions trading scheme will favour industry that can find ways to use energy more efficiently and reduce greenhouse gas emissions resulting from their industrial activities through developing or applying new technology or more efficient production methods.

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Synthetic gases

Which synthetic gases are covered by the emissions trading scheme?

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.

Who are the participants in the scheme for the synthetic gas sector?

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 receive free emission units.

When does voluntary emissions reporting start for participants in this sector?

Participants can start reporting their importing or exporting activities voluntarily from 1 January 2011.

When does mandatory emissions reporting start for participants in this sector?

Participants will be required to report the amount of synthetic greenhouse gases they imported from 1 January 2012.

When will synthetic gas sector participants have to start surrendering emission units?

Importers of synthetic gases will have obligations to surrender emission units from 1 January 2013.

Will the synthetic gas sector receive a free allocation of emission units?

Importers of synthetic gases won’t receive a free allocation of emission units because they’ll be able to pass the costs of their emissions trading scheme obligations onto customers.

Exporting synthetic greenhouse gases is an activity that is eligible for receiving emission units; however, this isn’t considered part of the emissions trading scheme allocation process but is classed as a ‘removal activity’. See the question above for more detail on removal activities.

Where can I find the regulations for this sector?

Regulations will be developed and released for public consultation in 2010. Once published, the regulations will be available from the Government’s legislation website and in hard copy from Government bookshops.

How can I reduce my emissions from activities using synthetic gases?

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

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

Can I get any assistance to help me reduce my emissions?

Synthetic greenhouse gas importers with emissions trading scheme 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.

Why was the entry of HFCs and PFCs to the emissions trading scheme delayed?

The date of entry into the emissions trading scheme for imported hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) was delayed from 1 January 2010 to 1 January 2013 to reflect the complexity of this small but significant sector entering the scheme.

Almost all submitters on HFCs and PFCs expressed strong concerns that if these gases remained in the emissions trading scheme, the bill did not explicitly include imports of equipment containing them and did not provide for exemptions or rebates for exports. The changes to the bill reflected the select committee’s concern that the approach did not cover a significant proportion of HFCs and PFCs. It potentially disadvantaged domestic manufacturers of equipment containing HFCs and PFCs relative to overseas manufacturers of competing products. In particular, it did not directly create incentives to collect and destroy HFCs and PFCs, and may even have created incentives to substitute ozone-depleting HCFCs for HFCs.

The bill was therefore amended to include HFCs and PFCs imported in products to provide for entitlements to emission units for exporters of products containing HFCs and PFCs, and to exclude from the emissions trading scheme people who import pre-charged equipment for certain medical and personal uses, such as asthma inhalers.

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Agriculture

What greenhouse gas-producing activities from agriculture are covered by the emissions trading scheme?

The agriculture sector (Ministry of Agriculture and Forestry website) is the largest single source of greenhouse gas emissions in New Zealand. Emissions from the sector mainly consist of methane from livestock, and nitrous oxide from animal excrement and the use of nitrogen fertiliser.

This sector is also a relatively large user of energy and transport fuels. However, sector participants won’t be the emissions trading scheme participant for those fuel- and electricity-related carbon dioxide emissions; they will face higher prices, but will not have to report their emissions and surrender units.

Who are the participants in the scheme for non-carbon dioxide agricultural emissions?

The Government prefers to make processing companies, not individual farmers, responsible for participating in the scheme. This means fertiliser manufacturers, dairy processors, and meat processors will participate. It is possible to change this decision by Order in Council, which must happen by 30 June 2010.

When will we know who will participate in the agriculture sector?

The final decision about who will participate in the emissions trading scheme must be made by 30 June 2010.

What’s the process for deciding who will participate in the agriculture sector?

The Government has established an agriculture technical advisory group to advise it on the aspects of the emissions trading scheme that relate to this sector, including the question of where to place the point of obligation. The group is made up of representatives from a range of organisations across the sector and released its final report in October 2008.

When does voluntary emissions reporting start for the agriculture sector?

Participants can start reporting their emissions voluntarily from 1 January 2011.

When does mandatory emissions reporting start for agriculture sector participants?

Participants will be required to report their greenhouse gas emissions from 1 January 2012.

When will agriculture sector participants have to start surrendering emission units?

Participants will be required to surrender emission units for all emissions that occur on or after 1 January 2013. The first due date they must surrender units by is 30 April 2014 for the period 1 January 2013 to 31 December 2013.

Why isn’t agriculture coming into the emissions trading scheme earlier when it’s such a large emitter?

The phased entry of sectors into the emissions trading scheme recognises the differing levels of readiness of each sector. The agriculture sector is considered to face the greatest technical and administrative challenges and is therefore the last sector to be brought into the scheme. It has an ‘on ramp’ into the scheme, as described above, and participants will start reporting their emissions at least a year before they have obligations to surrender emission units. This will ensure they are well prepared and reporting systems are working well.

The Government will expect the sector to start taking steps towards reducing emissions before 2015, such as by increasing the use of nitrogen inhibitors on farms, and will also require the sector to monitor and report its emissions for at least three years before it comes into the scheme.

Will the agriculture sector receive a free allocation of emission units?

The Government has identified three possible options for giving out free emission units. It could give them to:

Whichever option is chosen, the aim will be to ensure the benefits of the free allocation of emission units ultimately go to farmers, not the companies and processors, because farmers are expected to face most of the impacts of the emissions trading scheme.

When will the Government develop its allocation plan for the agriculture sector?

The Government has not yet agreed to a timeline for developing an allocation plan for the agriculture sector. This timeline will be made publicly available in due course, and all stakeholders will have an opportunity to comment on a draft of the plan before it is finalised.

Where can I find the regulations for the agriculture sector?

Regulations for the agriculture sector haven’t been developed yet. These regulations will be prepared and consulted on once final decisions have been taken about where to place the point of obligation for the sector’s non-carbon dioxide emissions. Once published, the regulations will be available from the Government’s legislation website and in hard copy from Government bookshops.

How can I reduce my emissions from agricultural activity?

The emissions trading scheme will favour people who can find ways to use electricity and fuel more efficiently and reduce greenhouse gas emissions resulting from their agricultural activities through developing or applying new technology or more efficient production methods.

Can I get any assistance to help me reduce my emissions?

Assistance for the agriculture sector will come primarily as an allocation of free emission units. In addition, the sector will receive other forms of assistance not directly associated with emissions trading, but flowing from initiatives such as the Plan of Action on Sustainable Land Management.

Can we reduce agriculture emissions without new technology?

The Government has committed to a target to reduce by 2013 greenhouse gas emissions from the agricultural sector compared to business as usual by 300,000 tonnes of CO2 equivalent.

At this stage, the opportunities for existing farmers to reduce emissions are limited to some extent, but do exist. There is opportunity to reduce nitrous oxide emissions, such as through the use of nitrogen inhibitors and more effective fertiliser use.

Some opportunities also exist to reduce methane emissions, such as through improvements in productivity. For example, the level of emissions per unit of milk solids has been decreasing by around 1.2 per cent a year over recent years. The emissions trading scheme will help encourage the development of emissions-reducing technology.

The growth in emissions from the sector is largely a result of land conversion, especially to dairy, and intensification, such as through increased irrigation, which can be very profitable. The emissions trading scheme has been designed so that the emissions costs of these conversion activities will be factored into farmers’ investment decisions.

Is the Government putting money into researching technology to reduce methane emissions?

Research into reducing emissions from agriculture, and work on technology transfer and greenhouse gas footprinting, is being undertaken through the Sustainable Land Management and Climate Change Plan of Action. This work is being funded by $175 million over five years.

A new centre for excellence in agricultural research is being developed here with strong links to work being carried out in other countries. 

The Government is also working on a Heads of Agreement on nitrous oxide emissions reduction in the dairy sector in partnership with the dairy and fertiliser industries.

Are any other countries including agriculture in their domestic emissions trading schemes?

New Zealand is currently the only country that has included agriculture in a domestic emissions trading scheme, but other countries and regions may consider including agriculture in the long term. Australia is considering including it from 2015.

Agriculture’s contribution to New Zealand’s emissions profile is unique internationally. It makes up almost 50 per cent of our total emissions, whereas it makes up only about 16 per cent of Australia’s emissions. We have no choice but to tackle emissions from this sector.

Where can I find more information about agriculture in the emissions trading scheme?

Read the factsheet called Agriculture in the emissions trading scheme (Ministry for the Environment website).

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Waste

What greenhouse gas-producing activities from waste are covered by the emissions trading scheme?

There are several sources of greenhouse gas emissions from waste disposal activities. The only waste sector activities within the emissions trading scheme will be operating a landfill and incinerating waste. Emissions from wastewater treatment are not included in the scheme at this stage.

Landfill operators will have obligations for the methane emitted through the biodegradation of organic waste. Waste incinerators emit carbon dioxide, methane and nitrous oxide, but the carbon dioxide from combusting organic waste will not be included in the scheme.

Who are the participants in the emissions trading scheme for the waste sector?

Operators of landfills and waste incinerators whose waste stream contains some element of household waste will be participants in the emissions trading scheme.

When does voluntary emissions reporting start for the waste sector?

Participants can start reporting their emissions voluntarily from 1 January 2011.

When does mandatory emissions reporting start for waste sector participants?

Participants will be required to report their greenhouse gas emissions from 1 January 2012.

When will waste sector participants have to start surrendering emission units?

The waste sector starts having obligations to surrender emission units on 1 January 2013. The first due date they must surrender units by is 30 April 2014 for the period 1 January 2013 to 31 December 2013.

Will the waste sector receive a free allocation of emission units?

The Government won’t give waste sector participants free emission units. This is because they can pass on the costs of the scheme to their customers, which means the impact of the scheme on the profits of waste sector participants will be limited.

Where can I find the regulations for the waste sector?

Regulations for the waste sector will be developed and released for consultation during 2009 and 2010. Once published, the regulations will be available from the Government’s legislation website and in hard copy from Government bookshops.

How can I reduce my emissions from waste disposal activity?

The emissions trading scheme will favour landfill and incinerator operators who can find ways to reduce greenhouse gas emissions through developing or applying new technology or managing organic waste, such as using landfill gas to produce electricity and diverting food and garden waste from landfills.

I’m a landfill operator. Can I get any assistance to help me reduce the emissions from my landfill?

The targets and activities in the New Zealand Waste Strategy and the national waste levy will lead to reduced methane emissions from landfills. The Ministry for the Environment can provide assistance with the waste strategy and the Waste Minimisation Act (New Zealand legislation website), and will be engaging with the landfill sector as they develop emissions trading scheme regulations.

Where can I find more information about waste in the emissions trading scheme?

Read the factsheet called Waste in the emissions trading scheme (Ministry for the Environment website).

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Last updated: 6 October 2009