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Questions and answers

What is the status of current Project Agreements under the Projects to Reduce Emissions programme?

The existing PRE contracts are legally binding.  Any changes to these arrangements could be a future decision by Government; however, at this stage the government is honouring the existing contracts.

Will there be a third tender round in the Projects to Reduce Emissions programme?

The government does not intend to undertake a third tender round at this stage.

What are Projects?

Projects are specific activities that reduce greenhouse gas emissions in the Kyoto Protocol's first commitment period (2008 - 2012) in return for Kyoto Protocol emission units.

For an initiative to qualify as a project it must achieve quantifiable reductions in greenhouse gas emissions beyond what would otherwise occur.

Projects must also be additional to "business-as-usual", i.e. the project owner must demonstrate that without the award of emission units the project would not otherwise proceed.

What is the incentive for participants?

Projects that provide additional emission reductions will be rewarded with emission units. These units are expected to be internationally tradable when the Kyoto Protocol comes into force and domestically tradable within the framework of the proposed New Zealand Emissions Trading Scheme.

Project participants can elect to receive either Assigned Amount Units (AAUs) or if eligible, Emission Reduction Units (ERUs) which are assigned to Joint Implementation projects.

Emission units will be transferred to project owners annually according to the emissions they reduce in that year. The awarded units are for reductions that will be delivered during the first commitment period of the Kyoto Protocol (2008-2012).

How much is an emission unit worth?

The international market sets the price for emission units. Any buyer or seller will have to make their own assessment of the value of emission units. A number of New Zealand firms have entered negotiations to forward sell emission units awarded under the Projects to Reduce Emissions programme to European buyers. Over time, new potential buyers are expected to emerge in non-European markets such as Canada, Japan and New Zealand.

What is additionality?

The additionality tests for the Projects programme focus on both investment and environmental additionality:

  • Investment additionality - the project is carried out only because it receives a contract for future emission units. It would not be carried out in "business-as-usual" conditions.
  • Environmental additionality - the project results in at least 10,000 tonnes CO2-equivalent of measurable emission reductions during the first Kyoto Commitment Period beyond what would have occurred in the absence of the project.

When will the Government transfer emission units to a successful project?

The transfer of emission units to a project participant is conditional on the delivery of emission reductions by the project.

At the end of each year of the first commitment period, the project participant will submit an annual report to the Crown detailing the emission reductions delivered by the project in that year. The annual report will be verified by the Crown, and if accepted, the Crown will then transfer the emission units to the project participant.

The Government maintains a register of emission units through the New Zealand Emission Units Register (NZEUR) but it does not directly facilitate trading with other governments or overseas entities.

The NZEUR has been likened to an online banking system. It contains multiple accounts and allows the transfer of emission units between those accounts and accounts in overseas registers (the registry systems of other Parties to the Kyoto Protocol). Transactions must comply with rules specified by the Kyoto Protocol.

When can project participants start trading the emission units awarded to their projects?

Project participants can sell emissions units at any time they can find a buyer. This includes forward sales before the commitment period. However, as the transfer of emission units to the project participant is conditional on the delivery of emission reductions by the project, the project participant and the buyer will need to assess the risk of the project not delivering the forecast emission reductions.

Will commercially sensitive information in a project tender be publicly available?

If a tender contains information that the tenderer considers should be held confidential the tenderer is advised to clearly identify such information. The tenderer must also indicate the reason why it considers the information should be held confidential.

Information held by the Crown may be requested under the Official Information Act 1982. The Crown also has other obligations in relation to information, such as reporting to Parliament.

Why is there no reward for abatement before or after the first commitment period of the Kyoto Protocol (2008-2012)?

Binding commitments under the Kyoto Protocol only come into effect from 2008. Rewarding abatement prior to the first commitment period could result in a net decline in New Zealand's Kyoto "account". It is not clear what the rules and targets will be for the second commitment period so at this stage it is not appropriate to allocate emission units associated with this period.

The Government is offering Assigned Amount Units (AAUs), or Emission Reduction Units (ERUs), if the project participant requests these. How does a project participant choose which type of unit to receive?

Unless notified by the project participant, the Crown will transfer AAUs to the project participant.

If the project meets all the eligibility requirements for a Joint Implementation project, the project participant may notify the Crown that ERUs are to be transferred. Such notification is at the discretion of the project participant who will bear any costs the Crown incurs as a result of the participant requiring ERUs.

How can I find more information about the Projects to Reduce Emissions programme?

For more information on the Projects to Reduce Emissions programme email projects@climatechange.govt.nz.

There are a lot of terms used in conjunction with Projects. How do I find out about these terms?

Look at the descriptions provided under project key terms.

Last updated: 2 August 2009