FACTBOX-Main points of New Zealand's carbon scheme

Thu Jul 1, 2010 8:06am GMT
 

WELLINGTON, July 1 (Reuters) - New Zealand's emissions trading scheme, only the second national scheme outside Europe, moves up a gear on Thursday when sectors that emit more than half the nation's greenhouse gas pollution formally join.

Following are the main features of the scheme that was extensively revised by the current government and passed by parliament late last year.

(For a story, see [ID:nSGE65S00S]. For a factbox on New Zealand's emissions profile, double click on [ID:nSGE65S00Z])

TIMETABLE

Emissions from power stations, refineries, transport and industries such as steel and cement making and pulp and paper, accounting for 51 percent of emissions, come under the scheme from July 1.

Waste, representing just over 2 percent of national emissions, starts 2013.

Agriculture, dominated by methane emissions from livestock, starts Jan 1, 2015. This sector produces 46.6 percent of national emissions based on 2008 government data.

The scheme will be reviewed every five years, with the first to be carried out in 2011.

ALLOCATION OF PERMITS

The scheme's currency is called "New Zealand Units", or NZUs, each of which represents a tonne of carbon dioxide-equivalent.

These pollution permits will be allocated, or given, to energy-intensive firms that export their goods to countries that do not have limits on emissions.

Companies in this category can apply for an allocation of free permits.

There will be no free allocations to firms in the power generation and transport sectors, which collectively emit about 30 percent of the nation's greenhouse gas pollution. The emissions obligations and cost of carbon for these firms is still being worked out.

Permits will be allocated based on an average of production across each industry, instead of an allocation based on 2005 emissions.

The percentage of free permits will start at 90 percent or 60 percent depending on whether firms are "highly" or "moderately" emissions intensive.

TRANSITION MEASURES

As an additional sweetener, between July 1, 2010 and Jan 1, 2013, emitters have the option of paying a fixed price of NZ$25 ($17) per tonne of carbon, and will only have to surrender one unit for every two units of emissions.

For companies receiving free permits, this level of assistance will be phased out at the rate of 1.3 percent a year from 2013.

The first date of permit surrendering is May 2011.

CAP

None as yet. The government has set a target of cutting greenhouse gas emissions by between 10 and 20 percent by 2020 from 1990 levels, depending on the outcome of U.N. climate talks.

OFFSET IMPORTS/EXPORTS

Unlimited imports of U.N. offsets called certified emissions reductions (CERs), each of which represents a tonne of carbon dioxide-equivalent. These are sourced from U.N.-approved clean energy projects in developing countries and are priced in euros per tonne CEREZc1 <CER/RTR>.

Exports of NZUs are prohibited during the transition phase except for the forestry sector. The forestry sector can sell their NZUs overseas but these must be converted in U.N. Kyoto Protocol sovereign instruments called Assigned Amount Units, or AAUs.

COSTS

The government estimates the annual cost to households will be NZ$165 per year from NZ$330 under the old scheme during the transition period.

HOW MANY FIRMS WILL BE AFFECTED?

Climate change advisory firm Frazer Lindstrom estimates about 80 firms in the energy and transport sectors will have ETS trading obligations and about 35 for agriculture. It also estimates there will be between 3,000 and 10,000 forestry participants, depending on the final number opting in to the scheme. (Source: Ministry for the Environment, Frazer Lindstrom, Buddle Findlay) (For more on the carbon-trade debate in Australia and New Zealand, click on: [ID:nCARBONAU]) (NZ$1=68 U.S. cents) (Reporting by Adrian Bathgate and David Fogarty; Editing by Clarence Fernandez)

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