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What Government’s new emissions trading law actually says

Oct 9th, 2008 | By | Category: Featured Article, Features, News

What does the emissions trading law actually say? ANNE CORNISH analyses the new Act:

The Climate Change Response (Emissions Trading) Amendment Act 2008 [CCR(ET)A ] is an amendment to the Climate Change Response Act 2002.

The purpose of the 2008 Act is to reduce New Zealand’s net greenhouse gas emissions below business-as-usual levels.

The tool to reduce emissions is the New Zealand Emissions Trading Scheme.

The Act requires creators of carbon emissions to become participants. For example, manufacturers, large construction companies, cement producers, freight, shipping, fishing companies. They must register with a central registrar. Air New Zealand is one of those businesses, and has launched a programme to decrease it’s quantity of emissions.

People who remove emissions may choose to register as participants. For example, forestry planters, someone who owns a parcel of lands that have wetlands, perhaps farmers who comply with regulations to prevent runoff. The land involved must be a minimum of 50 hectares. Owners of forests planted before January 1990 are obliged to register as participants.  Owners of native forest of more than one hectare may choose to register.

The introduction of sectors into the scheme is staged. The year each sector has to meet its full obligations is:

  • Forestry: 2008 – post-1989 forests generate forest sink credits for growth from January 1, 2008, and create liabilities at harvest time or if they burn down. Pre 1990 forests generate liabilities if the land is ‘deforested’.
  • Industrial processes: 2010 – eg, producers of aluminium, iron, steel, clinker, burnt lime.
  • Stationary energy: 2010  – eg, importers of coal, mining coal over 2000 tonnes in a year (except for export).
  • Liquid fossil fuels: 2011 – eg, users of petrol, diesel, aviation gasoline, jet kerosene, light fuel oil, and heavy fuel oil, as far up the supply chain as possible. Includes BP, Caltex, Gull, Mobil and Shell.
  • Synthetic gases: 2013 –  eg, refrigeration, air conditioning, aerosol industries.
  • Agriculture: 2013 – methane from livestock, nitrous oxide from animal excrement, and the use of animal fertilizer.
  • Waste: 2013 – eg, carbon dioxide emissions from burning plastic.

All participants must provide annual returns to the registrar setting out how many tonnes of carbon emissions they have emitted/removed.

Businesses will be allocated a certain number of emissions units annually. If they emit over their free allocation they have to pay the central registry for the extra units they have used.

Some units may be purchased by the businesses from overseas. They are called Assigned Amount Units. They must meet three criteria:

  1. They must not be from hot air countries (ie Eastern European).
  2. If they are from hot air countries they have to be greened. Green investment schemes in those countries commit to investing in technologies and / or projects to reduce emissions.
  3. There has to be an agreement between New Zealand and the relevant country that they’re being imported.

The primary domestic unit of trade is a New Zealand unit (NZU) issued by the Crown. Participants are required to surrender one NZU or a Kyoto unit to cover each metric tonne of eligible greenhouse gas emissions within a compliance period (usually a calendar year).

The value of an NZU will vary just like share prices do. Indicative pricing of the various units at the time of writing this article are:

  • NZ Permanent Forest Sink Initiative credits (called AAUs): NZ$25.
  • Credits earned from projects in developing countries in accordance with the Kyoto Protocol Clean Development Mechanism (called CERs): NZ$42.
  • NZ Units earned or issued under the NZ Emissions Trading Scheme (called NZUs): $40.

The reason for the need to reduce our greenhouse gas emissions is, apart from the obvious one of contributing to the reduction of global warming, that at the end of the first commitment the New Zealand government made to the Kyoto protocol, which is due in 2012, if we haven’t met the targets we committed to, we have to pay a penalty.

We know we’re in deficit, as opposed to Australia who are not in deficit because agriculture is not such a high proportion of their industry.

There is already an international market in carbon credits, with billions of dollars of units being traded annually. In 2007, the global carbon market was valued at $NZ86 million, up by 80% from 2006. The market is predicted to be worth $NZ143 million in 2008 but confirmed market data for the year will not be available until Quarter 1, 2009.

The CCR(ET)A Act 2008 was originally planned to be a two part Act, the second part being a requirement for 90 per cent of electricity generation in New Zealand to be from renewable resources by 2012.

This is now a separate Act, the Climate Change (Renewable Preference) Act 2008. The requirement for 90 per cent renewable electricity generation is aimed for by 2025.

PICTURE: Motunui methanol plant in Taranaki (David Wall).

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is a Whitireia Journalism student.
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  1. Top article Anne, thanks for cutting through some of the jargon for us.

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