PREview Issue 6, December 2009

Welcome to the sixth issue of PREview, the Ministry for the Environment’s e-newsletter for participants in the Projects to Reduce Emissions programme. We welcome your ideas, feedback and suggestions. Please email them to projects@mfe.govt.nz or call (04) 439 7561.

In this issue:

  • Annual reports due soon from all projects
  • PRE project successes
  • Receiving and selling your emission units
  • Joint Implementation – how to receive ERUs instead of AAUs
  • New Zealand Emissions Trading Scheme
  • Verifying annual reports
  • New Zealand Emission Unit Register
  • Making changes to your PRE project agreement
  • Changes and additions to the PRE team
  • Open days at your site

Annual reports due soon from all projects

Annual reports need to be submitted by all PRE participants to the Ministry for the Environment by 31 January 2010, irrespective of whether the project is operational.

Annual report templates available

To help you prepare annual reports, the PRE team has developed templates for the different types of PRE projects: hydro, wind, geothermal and biomass. These templates have recently been updated and are available on the PRE website at http://www.mfe.govt.nz/issues/climate/policies-initiatives/projects/.
You are strongly encouraged to use these templates when preparing your annual report. The PRE team will make improvements to these templates as required, so please let us know if you have any suggestions.

Lessons learnt from previous annual reports

After reviewing annual reports from previous years, we have identified several important points to remember for your 2009 Annual Report.

  • Keep sufficient data to enable you to calculate emissions from construction, as required in your project agreement. Now that CP1 has started, construction emissions will impact on the net emission reductions from your project.
  • Retain accessible records that support the data provided in annual reports.
  • Ensure all items in Schedule 2 and Schedule 4 are responded to. The annual report templates are a good guide, but check the wording in your agreement.
  • Check to see whether you have a PRE 1 or PRE 2 agreement. The emission factors are different between these two types of agreements.
  • Include the required supporting documents in the annual report, such as:
    • a statement from the Reconciliation Manager or an Electricity Commission Approved Half Hour Data Administrator identifying the amount of electricity used or generated
    • copies of relevant certificate(s) of compliance for meters or metering installations.

Check that the documents you submit actually support the requirements of the agreement. If there is information missing, include an explanation of why it is unavailable and how it can be provided in the future.

PRE project successes

Congratulations to the following project participants who were eligible to receive emission units for abatement achieved in the 2008 year.

  • Christchurch City Council: Burwood landfill gas project
  • Energy for Industry: Nelson landfill gas project
  • Firelogs NZ: Wood pellet production project
  • Genesis Energy: Hau Nui wind farm
  • Geothermal Developments: KA24 geothermal project
  • HG Leach: Tirohia landfill gas project
  • Meridian Energy: Te Apiti wind farm, White Hill wind farm
  • Mighty River Power: Putauaki geothermal project
  • New Zealand Windfarms: Te Rere Hau wind farm
  • Northpower: Wairua hydro scheme
  • Palmerston North City Council: Awapuni landfill gas project
  • Todd Taranaki: McKee Mangahewa co-generation project
  • TrustPower: Tararua II and Tararua III wind farms, Taranaki hydro project, Waipori hydro project
  • Watercare Services: mini hydro projects

Receiving and selling your emission units

The Crown awards emission units to PRE project owners for every year the project operates during the first Commitment Period of the Kyoto Protocol (CP1 2008‐2012).  The Crown will transfer the emission units when:

  • the final milestone specified in the agreement has been achieved
  • an annual report has been received and accepted for the preceding year, reporting the abatement for which these units are awarded.

Emission units are transferred to PRE participants using the New Zealand Emission Unit Register.

Emission units arising from PRE projects are very desirable. All participants in the PRE programme are able to have their projects converted to Joint Implementation (JI) projects. Once a project is converted to JI, it will be issued emission reduction units (ERUs). If the project is not converted, the default unit under the project agreements, assigned amount units (AAUs), will be transferred into your account.

ERUs and AAUs are different ‘currencies’ of Kyoto emission units. Typically, European buyers will want to receive ERUs to comply with their obligations under the European Union Emission Trading Scheme. However, there have been a small number of AAU trades and there may be buyers or brokers interested in purchasing AAUs. Also, if you wish to use the units from a PRE project directly to meet obligations under the New Zealand Emissions Trading Scheme, New Zealand AAUs are the appropriate units to submit.

Agencies that have already purchased PRE ERUs include British Gas, SenterNovem, Swiss Cent Foundation and the Austrian Government.
Information on the market value of emission units can be found at the following sources.

Joint Implementation – how to receive ERUs instead of AAUs

If you have a confirmed buyer from a developed (Annex 1) country for your emission units, your PRE project is eligible to become a JI project.

The non‐host party involved (the country that has approved the investor or buyer to participate in the JI project) does not have to be identified up front, but must be identified before any ERUs are issued. Once the non‐host party involved is identified, we will submit the project to the UNFCCC secretariat for publishing.

If you are planning on receiving ERUs from your 2009 Annual Report and you have not already applied to become a JI project, you will have to apply for JI status as soon as possible. Otherwise, under the contract, you will get AAUs. Once you have AAUs in your account, you cannot turn them into ERUs.

The New Zealand approval process is quick, but the investor will also need to apply to be approved by the non‐host party and this approval can take a long time.

If you would like your project to receive ERUs as a JI project, please fill in the cover letter template and JI application form found on our website .

If you would like information about converting your project to a JI project, contact Catherine Moss at catherine.moss@mfe.govt.nz or phone her on (04) 439 7561.

Further information

New Zealand Emissions Trading Scheme

The Government, with Maori Party support, has passed the Climate Change Response (Moderated Emissions Trading) Amendment Act 2009.  This Act revises the New Zealand Emissions Trading Scheme (NZ ETS) to ensure New Zealand takes a responsible approach to the global problem of greenhouse gas pollution and climate change. Features of the amendment Act include:

  • revised entry dates of 1 July 2010 for transport, energy and industrial sectors and 1 January 2015 for agriculture
  • a transitional phase until 1 January 2013 with a 50 per cent obligation and $25 fixed-price option for the transport, energy and industrial sectors
  • a production-based industry average approach to allocations for trade-exposed, emissions-intensive businesses
  • a phase-out of industry support aligned with trading partners and the Government’s long-term -50 by 2050 emissions reduction target
  • incentives for afforestation created by a domestic and international market for carbon credits
  • enhanced transitional support for the fishing industry
  • a Treaty of Waitangi clause.

The primary unit of trade in the NZ ETS is a New Zealand unit (NZU) issued by the Crown. Participants are required to surrender NZUs to the Crown to meet their obligations for each calendar year. During the transition phase (July 2010 to December 2012) one NZU will be required to cover every two metric tonnes of greenhouse gas emissions. Also, to cap potential prices during the transition phase, participants will be able to buy NZUs from the Government for NZ$25 each. In addition, NZ ETS participants can buy emission units from the following sources.

  • PRE project owners
  • Approved overseas sources including most Clean Development Mechanism (CDM) projects
  • Another NZ ETS participant

Units may be bought directly or by trading through a broker or trading exchange.
After the transition phase, the price of an NZU will be determined in the trading market and will tend to match the international price of emission units. Participants can sell NZUs internationally by exchanging them for Kyoto units, within the limits on international sales set by the Kyoto Protocol.

Further information

Verifying annual reports

PRE project agreements allow for the Crown to verify any annual report submitted by a participant. This is a process in which an expert party scrutinises the participant’s annual report to ensure the emission reductions reported have actually occurred. So far, we have verified annual reports from 18 PRE projects.

The Ministry’s policy is to verify each project’s annual report at least once before any emission units are transferred to a participant. In addition, we will assess every subsequent annual report against a risk assessment to determine whether it needs to be verified. We are unlikely to choose to verify if participants have already arranged for a suitable verification.
According to the project agreement (excluding the two early PRE projects), the verification takes place after we receive the annual report and before the Crown accepts an annual report and transfers any emission units.

If we choose to verify an annual report, emission units will not be transferred to the participant until the verifier gives us a positive statement on the participant’s annual report. The Crown verifying an annual report has the potential to hold up any transfer of emission units to the participant’s account. Our experience so far has shown that verifications can take anywhere from five weeks to several months to complete.

Our policy is to use verifiers that are Designated Operational Entities (DOE) or Accredited Independent Entities (AIE) under the UNFCCC. We will also use firms that are accredited to ISO 14065. In all cases, we ask verifiers to carry out their verification in accordance with ISO 14064‐3.
Our recommendations to you to reduce the timeframes for us to complete a verification are to:

  • use the annual reporting templates
  • consider having your annual reports verified before submitting them to us.

These measures are likely to speed up the time it will take for us to accept your annual report and shorten the length of time to transfer units. If you intend to commission your own verification work, we recommend that you contact projects@mfe.govt.nz to clarify verifying procedures.

New Zealand Emission Unit Register

The New Zealand Emission Unit Register (NZEUR) at www.eur.govt.nz/ is like a bank which holds Kyoto Protocol‐compliant emission units. The NZEUR has been developed by the Ministry of Economic Development.

The NZEUR is the place where the Crown will keep its assigned amount units and PRE participants use the NZEUR to hold their assigned amount units or emission reduction units. As a participant, you need to open an account with the NZEUR so we can transfer AAUs or ERUs into your account.

For information on how to open an account, see the Climate Change (Unit Register) Regulations 2007 (SR2007/335). You can find an online version at www.legislation.govt.nz.

To find out more about opening an account in the NZEUR, visit the website at www.nzeur.govt.nz or call the NZEUR Contact Centre on freephone 0508 227 887.

Making changes to your PRE project agreement

PRE project agreements may require amendments for a variety of reasons, including changes in timelines for major milestones. You can apply to make changes to your project’s agreement at any time.
Amending the agreement can be a lengthy process. Recently, Ministers have delegated the authority to approve some amendments to the Secretary for the Environment. However, Ministers’ approval still must be gained for some PRE amendments.

Increases in capacity

Recently the PRE team has received guidance from the Minister of Finance and Minister for Climate Change Issues on amendments that reflect increased project capacity. 
The Ministers agreed that officials should negotiate with participants requesting amendments that reflect increased project capacity, with the aim to reduce the cap on emission units that are required to be transferred to the participant.
Amendment requests will still be considered on a case-by-case basis and Minsters still need to approve amendments that reflect an increased project capacity.

Further information
Contact Catherine Moss at catherine.moss@mfe.govt.nz or on (04) 439 7561.

Changes and additions to the PRE team

Following the restructure of the Ministry for the Environment, the PRE team is now part of the Climate Change Regulatory Policy team. The PRE team now includes five people.

  • Catherine Moss continues to be responsible for wider PRE programme management and administering some PRE projects. You can contact Catherine at catherine.moss@mfe.govt.nz.
  • Emily Ross returns after maternity leave to help with administering PRE projects.  You can contact Emily at emily.ross@mfe.govt.nz every weekday except Wednesdays.
  • We have recently welcomed Scott Gulliver to the PRE team. Scott has responsibility for administering PRE landfill projects. You can contact Scott at scott.gulliver@mfe.govt.nz every weekday except Tuesdays.
  • Robin Brasell is another recent addition to the PRE team. Robin worked on developing the PRE programme back in 2003 and now helps with administering PRE projects. You can contact Robin at robin.brasell@mfe.govt.nz.
  • Ted Jamieson has also recently joined the PRE team and worked with Robin on developing the PRE programme in 2003. Ted now helps with administering PRE projects. You can contact Ted at ted.jamieson@mfe.govt.nz. 

Open days at your site

The PRE team is keen to hear about any activities or open days you have planned for your site(s). Where applicable, the Ministry may be able to provide assistance with publicity or the presence of officials or Ministers on the day. Please let us know of any plans you have in the pipeline.