Towards a Sustainable New Zealand: Carbon Neutral Public Service

Date: April 2007
Reference number:
POL (07) 131

Reference: POL (07) 131

Office of the Minister for the Environment

Office of the Minister Responsible for Climate Change Issues

Cabinet Policy Committee

Proposal

1. This paper provides further detail on moving the public service towards carbon neutrality, as announced in the Prime Minister’s Statement at the opening of Parliament, and seeks some decisions on implementing the initiative.

Executive summary

2. This paper is one of a set of papers providing further detail on the sustainability initiatives announced in the Prime Minister’s Statement at the opening of Parliament on 13 February 2007. In that statement, the Prime Minister announced that the government will lead by example by moving the public service towards carbon neutrality. Six departments will have offsetting plans in place by early 2008, and commit to being carbon neutral by 2012. The other 28 public service departments will develop their emissions reduction plans by early 2008 and be on a path to carbon neutrality by 2012.

3. The three steps of the carbon neutral public service initiative are measuring and reporting on greenhouse gas emissions, reducing those emissions, and then offsetting any remaining emissions through New Zealand-based offset projects. The initiative is centred on reducing emissions in a cost-effective way, to demonstrate active leadership on sustainability and climate change and to reduce the environmental impact of government business. Emissions reductions efforts will build on the existing work of the Govt3 programme and the Energy Efficiency and Conservation Authority (EECA). The reduction aspects of the initiative are also closely linked to the sustainable government procurement initiative that was announced in February.

4. The early stages of the initiative will be iterative and based around learning by doing, especially during 2007. While the outline of the initiative has already been announced, decisions on some design details are still needed. This paper seeks confirmation of some underlying principles and the reporting requirements for the initiative. The paper also asks for decisions on which New Zealand-based options may (in principle) be considered for inclusion in the offset portfolio for the six Stage 1 agencies. Officials, led by the Ministry for the Environment (MfE), will then develop a recommended portfolio by June 2007. Officials will design the initiative so that it can be altered, if necessary, to align with the broader climate change policy decisions to be made later in the year.

5. A report back by the end of June 2007 will also contain recommendations for managing and offsetting the emissions associated with Ministerial air travel.

Background

6. Cabinet agreed on 12 February 2007 that a set of initiatives to elevate sustainability be refined, including an initiative based on moving the public service towards carbon neutrality [CAB Min (07) 4/1A]. Further detail on the implementation and coordination of the sustainability package was set out in Towards a Sustainable New Zealand: Overview Paper [POL (07) 84].

7. The Prime Minister’s Statement at the opening of Parliament on 13 February 2007 and the associated press release set out a programme to move towards carbon neutrality across the 34 public service departments (listed in Annex 2). A lead group of six agencies will have ‘carbon neutral plans’ in place by early 2008 and be carbon neutral by 2012, with the others to be on the path to carbon neutrality by 2012. It was announced that New Zealand-based options, inclu­ding forestry-related projects, will be used to offset greenhouse gas emissions that cannot be avoided after emissions reduction measures are put in place.

8. The government’s intentions to improve energy efficiency and the uptake of renewable energy in the public service have also been clearly signalled in the public domain in the draft New Zealand Energy Efficiency and Conservation Strategy, released in December 2006.

9. The move towards a carbon neutral public service builds on the programmes run by MfE and EECA, which help central government agencies become more sustainable by making their buildings and vehicle fleets more efficient, reducing their energy and transport bills, buying more environmentally friendly products, and reducing their waste. In the past EECA has also provided financial support to public sector agencies through grants for energy audits, and Crown loans for energy efficiency initiatives. Many of these actions also reduce emissions.

Comment

10. The primary purpose of the move towards carbon neutrality is to demonstrate government leadership by example on sustainability and greenhouse gas emissions. The government is encouraging businesses and households to lower their carbon footprints, and must demonstrate a similar commitment in its own operations. Running low-carbon operations will, therefore, become part of business as usual for government. The initiative will also provide a practical demonstration of the steps that others can take to measure and reduce their emissions.

11. This initiative has been developed from a sustainability perspective, rather than as a climate change initiative arising from New Zealand’s Kyoto Protocol obligations. Moving the public sector towards carbon neutrality will have only a minor effect on New Zealand’s total emissions profile (current estimates are that the core public service is responsible for about 2% of New Zealand’s total emissions). The initiative should, however, raise New Zealand’s international profile as an early mover and adopter of international best practice in this space, and boost the credibility of our climate change response. Because this initiative is designed primarily to contribute to New Zealand’s sustainability rather than to address our Kyoto commitments (although it will also help to do that), at this stage we are leaving open the possibility of considering non-Kyoto options – so long as there is not a conflict with wider climate change policy settings.

12. Other governments are moving towards carbon neutrality in some or all aspects of their operations. The Norwegian, British and German governments now offset emissions from some or all business travel, and the British government has committed to making its office space carbon neutral by 2012. The British Columbia provincial government is looking at options for becoming carbon neutral by 2010.

Achieving a carbon neutral public service

13. Carbon neutrality is a three-step approach, and is achieved when an organisation:

a. measures the greenhouse gas emissions associated with its activities (these emissions mostly come from burning fossil fuels to generate electricity or as transport fuel)

b. reduces those emissions, and

c. undertakes ‘offset’ projects to remove an equivalent amount of carbon dioxide from the atmosphere or prevent it being released.

14. Offsetting emissions without having made plausible efforts to reduce emissions first would compromise the credibility of a carbon neutrality initiative and could possibly prevent external verification of departments’ carbon neutral status.

Steps to carbon neutrality - measure, reduce, offset

15. Step one is emissions measurement. Agencies will keep an emissions inventory that measures the greenhouse gas emissions associated with their energy and electricity use, business travel and transport (including domestic and international air travel), and waste sent to landfill. The inventory will not include staff commuting or the embodied energy in buildings (the emissions released in producing the materials used in construction) and products.[The environmental impacts of building construction, commuting and procurement are, however, targeted through the Govt3 programme and the sustainable government procurement initiative.]

16. The sources included in this emissions inventory are consistent with those counted by the World Resources Institute, World Business Council for Sustainable Development, New Zealand Business Council for Sustainable Development, and Landcare Research CarboNZero programme.[The reporting processes recommended by some of those organisations do not include waste disposal or measure only some aspects of the emissions associated with waste. Emissions from waste to landfill are generally minimal and falling, but are included in this proposal to maintain credibility. The World Resources Institute standard includes commuting as an optional element in emissions reporting.] The approach is also consistent with the New Zealand standard for greenhouse gas emissions monitoring and reporting that is currently being developed.

17. Step two is emissions reductions. Reduction is the most important aspect of delivering carbon neutrality, as lowered carbon emissions can bring considerable benefits such as reduced energy costs, improved environmental quality, reduced levels of material waste, and business development opportunities. Agencies will build on their Govt3 experiences and programmes to implement energy efficiency measures in their buildings and business practices, transport measures such as purchase of more fuel efficient fleets and use of technologies such as video-conferencing, and better waste management.

18. Agencies will be expected to reduce their emissions as far as practicable (within the bounds of reasonableness and cost-effectiveness) before pursuing offsets, and to continue to reduce their emissions over time. The Govt3 programme will continue to provide support to agencies and be a significant source of technical advice, as will the sustainable government procurement initiative.

19. Additional funding is also included in the Budget bid for this initiative to pay for energy audits and travel plans (especially for the six Stage 1 agencies) to accelerate reduction measures. The investment in many emissions reduction measures will be repaid over time through both reduced energy bills for agencies and through a reduction in the emissions that need to be offset.

20. Step three is the offsetting of remaining emissions. It is not feasible to reduce the public service’s greenhouse gas emissions to zero, so some offsetting will be required.

21. All offset projects for the core public service will be located in New Zealand. We consider that only domestic options should be pursued so that the environmental and other co-benefits from investment in offset projects (such as erosion control and flood risk reduction through planting or reversion on steep land) will be enjoyed by New Zealand. The first preference for offsetting unavoidable emissions for the six Stage 1 agencies is to undertake Kyoto-compliant forestry-related projects on Crown land. If these projects include afforestation, the first areas of forests will be physically planted in winter 2008, and (depending on tree type) will begin to absorb significant amounts of carbon after three years or so.

22. Individual agencies are not required to investigate or implement offset projects to neutralise their emissions, as offsetting will be done through a centralised process to minimise transaction costs. The Minister Responsible for Climate Change Issues is seeking funding through budget processes to fund offset projects for the Stage 1 agencies until at least 2012. Some projects set up before 2012 may continue to provide offsets long afterwards.

Staged approach to achieving carbon neutrality

23. The initiative takes a phased approach to achieving carbon neutrality in the core public service. Stage 1 involves a lead group of six agencies: the Ministry for the Environment (MfE), Ministry of Health, Ministry of Economic Development (MED), Inland Revenue Department, Department of Conservation (DOC) and Treasury. This group has been chosen because good information exists, or can quickly be obtained, about their energy and transport use.

24. By February 2008 these six Stage 1 agencies will have plans that set out how they will become carbon neutral by the end of 2012 for the period from the 2006/07 financial year to the 2011/12 financial year (inclusive).[Although emissions inventories are commonly based on a calendar year, we have chosen a financial year basis to minimize compliance costs and be consistent with existing reporting requirements. The Govt3 programme already requires financial year reporting on energy use and waste, and this data will feed into departments’ emissions inventories. ] Those agencies will also be required to continue to be carbon neutral from the 2012/13 financial year onwards. The ‘carbon neutral plans’ for the six Stage 1 agencies will be the same as the emissions reduction plans to be developed by other departments (see below) with additional information on how those emissions will be offset through the centralised process to be established by MfE.

25. Some aspects of Stage 2 of the initiative, covering the remaining 28 public service departments, will also start immediately. Those agencies are required to measure their emissions for the financial year 2006/07 (and subsequent years), and to develop emissions reduction plans by mid February 2008. We expect that those agencies will build on their existing Govt3 involvement to develop those plans, although funding is also being sought to provide further technical advice and support in 2008/09 and 2009/10. We are aware that many agencies are keen to begin and have already made a start on their emissions reduction planning.

26. Stage 2 agencies are required to be ‘on a path to carbon neutrality’ by 2012. They will not be required to develop offset plans immediately, or to offset all emissions from 2006/07 onwards. Detailed offsetting plans for these agencies will not be set until there is better information on the emissions profiles of all 34 public service departments, the availability of offset options has been determined, and the lessons from Stage 1 have been evaluated.

27. The broader state sector (e.g. Crown entities, schools, district health boards) will be encouraged to undertake measures to cut emissions, but the decision whether to place carbon neutrality requirements on the wider state sector can only be made after the initial stages have been completed and assessed.

Foundation principles

28. We consider it is important to have a clear set of agreed foundations or operating principles to govern the design of the initiative, and departments’ participation in it:

a. The operation of the initiative must be consistent with the govern­ment’s climate change and sustainable energy policies, and must be able to be adjusted to fit economy-wide policy settings as they are developed.

b. All public service departments must aim to reduce their emissions in order to demonstrate leadership, reduce the environmental impact of government activities, and minimise reliance on offsetting schemes.

c. Departmental emissions reduction plans and actions must:

i. identify and pursue the most cost-effective and environmentally beneficial means of lowering emissions, measured over the whole of life of an intervention

ii. meet the particular needs and profile of each department, and

iii. not result in reduced departmental performance.

iv. Offset projects are to be commissioned and coordinated through a centralised process, rather than by individual agencies.

29. We also think it is useful at this stage to clarify the offsetting obligations of Stage 2 departments. The commitment is that all public service departments are to be on ‘a path to carbon neutrality by 2012’. We propose that this means that offset projects for the post-2011/12 emissions of those departments will have been commissioned or planned by the end of 2012. We expect that many Stage 2 departments will be carbon neutral from 1 July 2012 onwards, and some may achieve that status sooner.

Implementation issues

30. The carbon neutral public service initiative has been designed to be refined further as it is developed. Implementation will take place through an iterative process, especially during 2007, using the experiences of the lead agencies in Stage 1 to identify the most successful approaches and the risks that need to be managed before all public service departments are brought fully into the initiative.

31. As a result this paper does not finalise all details for the implementation of the initiative, but rather sets out some further policy design work to be done through Stage 1. There are however some matters that need to be agreed to at this point to implement the initiative effectively. Announcements to date have set out only an overview of how the initiative will work and some broad timelines and requirements for agencies. Departments also need a clear understanding of their responsibilities, especially around emissions measurement and reporting.

32. The preliminary matters to be explored (if not resolved) in this paper include:

a. emissions associated with Ministerial air travel

b. the roles and responsibilities of departments

c. requirements for emissions reduction plans and target-setting

d. means of encouraging emissions reductions

e. cost-effectiveness, and

f. the criteria and process for selecting the offset portfolios for Stage 1 of the initiative.

Ministerial air travel

33. The carbon neutrality initiative has been designed to address the emissions associated with the operation of government departments, but the focus of the sustainability package on government leadership also requires Ministers to consider the emissions associated with their work, especially air travel.

34. The Minister Responsible for Climate Change Issues will report back to POL by 30 June 2007 with options for offsetting the emissions associated with Minister­ial air travel for the 2007/08 financial year onwards. The Ministry for the Environment will work with Parliamentary Services on these options and the means of funding any offset programme. As part of the investigation of options, officials will consider the possibility of offsetting emissions from Ministerial air travel immediately (rather than retrospectively, as for Stage 1 agencies).

Agency roles

35. As lead agency for the carbon neutral public service initiative, the Ministry for the Environment will (in consultation with other relevant departments):

a. develop New Zealand protocols for measurement and reporting that are consistent with international standards (ISO 14064 and the World Business Council for Sustainable Development protocols), and provide an inventory methodology to departments by 30 June 2007

b. manage the measurement methods and reporting formats so that they are as consistent as practicable across all agencies

c. manage independent verification of departments’ emissions inventories

d. provide guidance on developing emissions reduction plans

e. investigate how to set appropriate emissions reductions targets for individual departments

f. work with Treasury and others to develop a cost-effectiveness threshold and incorporate it into guidance for departments

g. lead the investigation of means to encourage the acceleration of emissions reductions

h. lead the development of a portfolio of offset projects

i. set up the administrative processes required to acquire and manage offset projects on a centralised basis, and

j. manage validation of the offsets process (i.e. arrange for independent verification that agencies have achieved carbon neutrality).

36. The public service departments participating in both Stage 1 and Stage 2 of the initiative will be responsible for:

a. gathering the data to measure their emissions, using standard methodologies provided by MfE

b. reporting those emissions publicly and to MfE on a financial year basis from 2006/07 onwards

c. identifying and implementing emissions reduction activities, and

d. developing emissions reduction plans by February 2008, and reviewing them at least annually.

37. Central agencies, particularly the State Services Commission, will also have an important oversight role in the initiative to ensure consistent and timely performance across the state sector.

Emissions reduction plans and targets

38. Emissions reduction plans should identify the most cost-effective and environmentally beneficial reduction measures available to the department given its particular circumstances, business patterns, and improvements that may already have been made. They should also explore the potential use of different options for reducing emissions (e.g. renewable energy technologies as well as energy efficiency measures).

39. Improvements that cut emissions and save money compared to business as usual are expected to be the top priority for agencies, especially in the first iterations of their reduction plans. Most agencies should be able to identify win-win options which result in both lower emissions and lower costs (over the whole life of the intervention) compared to current practice.

40. We also propose that, as part of developing emissions reduction plans, departments should (with the assistance of MfE, EECA and the Ministry of Transport) identify realistic but ambitious targets. These targets are likely to be based on actual and potential savings that have been identified from previous experiences in the Govt3 programme and EECA’s energy efficiency programmes. Officials will consider the relative merits of both quantitative targets and targets based on more qualitative best-practice measures. In 2007, the focus will be on target-setting for the six Stage 1 agencies.

41. We do not consider it appropriate to set a single, flat-rate target for all agencies. Departments are all starting from different base-points, and many have already lowered their emissions markedly over the last few years. A flat-rate target would penalise departments that are already performing well.

42. The Draft New Zealand Energy Efficiency and Conservation Strategy (NZEECS) contains cross-government targets for energy efficiency improve­ments in several areas. These targets may well become more stringent in the final strategy due later this year. The targets set across all departmental plans will need to be sufficient to meet or exceed the commitments in the NZEECS.

Cost-effectiveness

43. Not all potential reduction measures will save money over business as usual, and it is important that departments do not pursue reduction measures that have a cost that far outweighs the value of the expected reduction and/or other benefits. Emissions reduction is the main focus of the initiative, but we recognise that there is a point at which reduction ceases to be the best option and offsetting becomes preferable. Identifying that threshold is one of the matters to be worked through by MfE and other agencies as part of the early stages of the initiative, in conjunction with work on setting appropriate targets and the development of the sustainable government procurement initiative.

44. We consider the threshold will need to incorporate some flexibility to allow departments to reflect matters other than cost in their decisions. The threshold should have some weighting in favour of reduction measures over offsetting to:

a. demonstrate government leadership on lowering New Zealand’s carbon footprint, especially when government is communi­cating the need for net emissions reductions across New Zealand

b. encourage departments to model sustainable behaviours and identify reduction measures

c. recognise that activities that produce emissions also often have other negative effects (e.g. air pollution and health effects of vehicle emissions, impacts of power generation facilities on communities and the environment), and

d. potentially, help to build markets for emissions reduction technologies.

45. As part of the development of Stage 1 of the initiative, officials will incorporate this cost-effectiveness threshold into a framework to guide decision-making by departments, to ensure that departments only pursue emissions reduction measures that are cost-effective. The Minister Responsible for Climate Change Issues will report back on this framework to POL on 31 January 2008, in con­junction with his report back on the progress of emissions reduction planning.

46. Pricing externalities as much as possible into spending and operational decisions will also help departments to make sound decisions. It is likely that building a ‘price of carbon’ (based on the true cost of domestic offsetting, not the nominal inter­national price of carbon, and weighted to encourage reduc­tion) into decision-making will help to identify which measures should or should not be pursued. The feasibility of this idea will be pursued through the sustainable government procurement initiative and possibly trialled with some departments in Stage 1 of the programme in 2007.

Encouraging emissions reductions

47. The Govt3 and EECA programmes already help departments to foster sustainable work practices and undertake activities that will result in emissions reductions. The carbon neutral initiative Budget bid contains some additional funding to invest in tools that help departments to identify potential savings and reduction measures, such as energy audits and workplace travel plans. Public reporting of emissions and reduction targets for each department should also help to drive the culture changes that support reduction behaviours in departments (such as turning off lights and computer monitors when not in use).

48. There is also a need to investigate if there are other means to encourage agen­cies to quickly identify and make all cost-effective changes open to them, and to pursue those that offer the most benefits first. MfE, in conjunction with MED as leaders of the sustainable government procurement workstream and other key agencies such as EECA, will lead further investigation into other potential tools such as performance measures for departments, independent verification of the quality and effectiveness of reduction plans, and direct incentives (such as departments being able to recycle some or all savings into other areas). The Minister Responsible for Climate Change Issues will report back to POL by 31 January 2008 on options for encouraging greater emissions reductions.

49. The sustainable government procurement initiative led by MED will also be undertaking work in a number of areas that will support emissions reductions and cost-effectiveness across all departments. These include developing a whole of life cost-benefit analysis tool and investigating building a price of carbon into purchase and operational decisions.

Criteria for selecting the offset portfolio

50. The Prime Minister has already announced that all offset projects will be New Zealand-based, and that there will be use of forestry-based projects. At this stage, however, officials do not have sufficiently detailed information about land location and suitability, sequestration rates and relative costs to recommend a detailed portfolio of projects.

51. We seek Cabinet’s agreement that the following New Zealand-based offset options may potentially be included in the portfolio of offsets for the Stage 1 departments, and that officials should continue to investigate their suitability:

a. new planted exotic forest on Crown land, excluding public conservation land administered by the Department of Conservation (unless exotic afforestation is compatible with the purpose for which the land is held, e.g. on some government purpose reserves) or other sensitive sites

b. new planted indigenous forest on Crown land

c. accelerated indigenous forest reversion on Crown land

d. other forest management projects (for example pest control) in existing forests on Crown land

e. afforestation and forest management on private land, or on land acquired by the government for that purpose (e.g. purchase of sites suitable for reversion to indigenous forest)

f. purchase of forestry credits created under the Permanent Forest Sink Initiative

g. development and funding of additional forestry projects via the mechanism of the Afforestation Grants Scheme (if this climate change policy proposal proceeds)

h. buy-back of domestic Projects to Reduce Emissions (PRE) credits, subject to Cabinet decisions in June 2007 (see paragraph 70), and

i. investment in other New Zealand-based projects or credits (subject to policy development), such as energy efficiency projects.

52. The portfolio needs to be constructed with a degree of flexibility to allow it to change if necessary to conform with economy-wide climate change policies once they are finalised.

53. Not all options in paragraph 51 will contribute to meeting New Zealand’s Commitment Period 1 commitments under the Kyoto Protocol. The costs, benefits and risks of these various potential options – including the relative benefits and risks of Kyoto and non-Kyoto options – will be set out in more detail in the June 2007 report back, but a preliminary examination of the advantages and disadvantages is included as Annex 1.

54. We expect that Kyoto-compliant options will be preferred in the first instance because they help New Zealand meet its emission targets for the First Commitment Period under the Kyoto Protocol, and are more likely to align with broader climate change policy. One major criticism of non-Kyoto options is that they do not lessen our Kyoto liability, and therefore the government effectively pays twice to offset the emissions. Nevertheless, it is worth considering the use of non-Kyoto options as they may offer other benefits.

55. As part of the investigation of the portfolio, we expect officials to assess potential projects against a number of criteria to determine which are the most suitable to be included in the portfolio. We propose that these criteria should be:

a. availability of suitable sites

b. expected cost of the offset, including ongoing management costs (measured as cost per tonne CO2-equivalent), taking into account both the carbon sequestered by 2012 and over the longer term

c. other financial impacts such as the effect on the Crown’s liability under the Kyoto Protocol

d. verifiability of the project’s carbon sequestration

e. the degree to which the option would provide for additional offsetting capability post-2012

f. environmental, social and/or economic co-benefits, and

g. other potential advantages, disadvantages or risks.

Offset portfolio for Stage 1 agencies

56. The Minister Responsible for Climate Change Issues will report back to Cabinet committee before the end of June 2007 with a recommended mixture of projects to make up the bulk of the portfolio for the Stage 1 agencies, with the remainder to be commissioned later once emissions profiles and reduction targets are better known.

57. The preliminary estimate of the emissions for the six Stage 1 agencies for the 2006/07-2011/12 period is 100,000 to 200,000 tonnes CO2-equivalent.[A more robust projection will be developed once we have verified emissions inventories for 2006/07 and have set reduction targets for the Stage 1 agencies.] Officials are still verifying the carbon sequestration rates of the various portfolio options, but the current estimate is that these emissions could be offset by the end of 2012 by planting, for example, approximately 3,000 hectares in exotic species in winter 2008, or through the accelerated reversion of indigenous forest on between 10,000 and 27,000 hectares. Officials are in discussions with several departments regarding the availability of land. At present, it is estimated that DOC has at least 50,000 hectares of land suitable and available for accelerated reversion of indigenous forest.

58. Officials’ preliminary investigations into land availability and costs suggest the preferred options are likely to be a mixture of accelerated reversion of indigenous forest on Kyoto-compliant land, exotic afforestation, a small amount of indigenous replanting, and a relatively small number of PRE credits (if consistent with policy decisions due in June 2007). These options appear to be the most readily available and affordable, and are also Kyoto-compliant and likely to be consistent with finalised climate change policy. Pursuing a mix of options in Stage 1 has advantages as it will provide an opportunity to assess their respective merits before developing the initiative further.

59. There are benefits to making an early decision on the makeup of at least part of the offset portfolio, even though the Stage 1 agencies do not need to complete their offsetting of 2006/07-2011/12 emissions until the end of 2012. Planting trees as soon as possible lowers the number needed, and hence the cost. If seedlings can be sourced by August 2007, trees can be planted in winter 2008.

60. The Minister Responsible for Climate Change Issues will also report back to Cabinet committee before the end of June 2007 on the administrative arrange­ments needed to commission and coordinate offset projects on a centralised basis. These arrangements will include eventual validation of the offset projects and independent confirmation that departments are carbon neutral.

Timeframes for implementation and reporting

61. An indicative implementation timeline is attached as Annex 3.

62. The priority work areas for March-June 2007 are:

a. developing measurement and reporting standards for emissions inventories for all agencies

b. developing emissions reduction targets for Stage 1 agencies, and

c. assessing offset options for Stage 1 agencies and reporting back to Cabinet with a recommended portfolio.

63. The other areas which are to be focused on over the rest of 2007 include:

a. measuring and verifying the baseline (2006/07) emissions of Stage 1 agencies

b. developing emissions reduction plans for all departments and offset plans for the Stage 1 agencies

c. developing a cost-effectiveness threshold and a framework to guide decision-making

d. commissioning offset projects, especially forestry-related projects that require early investment, and

e. aligning the programme with broader climate change policy as further decisions are made.

64. The initiative is largely self-monitoring, as it is based on the annual reporting of emissions inventories and reduction targets. MfE will be primarily responsible for reporting on the progress of the initiative across all 34 departments, if necessary. All agencies will need to provide their 2006/07 emissions inventories to MfE by 30 September 2007, and provide drafts of their emissions reduction plans to MfE by 21 December 2007. The Minister Responsible for Climate Change Issues will report back to POL by 31 January 2008 on the progress of the initiative.

Relationship with stakeholders

65. The primary relationships and interests for this initiative are within central government. In designing and implementing the details of the initiative, MfE will work closely with:

a. the six Stage 1 departments, and supporting agencies such as EECA and MoT, on their emissions inventories and reduction plans (the experiences of the six agencies will be used to work with Stage 2 agencies later in 2007)

b. key land management agencies (DOC, Land Information New Zealand, and possibly others such as the New Zealand Defence Force), Ministry of Agriculture and Forestry (MAF) and Treasury on offset options

c. MED, Treasury, EECA and others on cost-effectiveness issues (these will also be dealt with through the sustainable government procurement initiative)

d. MAF, MED, Treasury and EECA on consistency with wider climate change and energy policies.

66. The initiative does not require a formal sector reference group to engage with stakeholders outside government, although officials will consult as necessary with groups such as the Native Forest Restoration Trust.

Connection to other sustainability initiatives

67. As outlined above, the initiative is particularly closely linked to sustainable government procurement and will also be supported by the eco-verification initiative (which will help departments to identify energy efficient products). The lessons learned from the implementation of the programme will also help to demonstrate the value of lowering a carbon footprint and inform the advice given to businesses and households through the initiatives targeted at those two sectors.

Connection to other work programmes and upcoming decisions

68. Consultation on a suite of five climate change and energy policy papers closed on 30 March 2007, and Cabinet will make decisions on the climate change policy package over the next few months. To reduce the impacts of climate change the government has decided that, post-2012, the cost of greenhouse gas emissions should be factored into the decisions of producers and consumers across the economy. Cabinet has indicated a preference for price-based measures, which can be combined where appropriate with transitional and complementary sectoral measures.

69. MAF is reporting to Cabinet on the potential use of Crown land for climate change mitigation, including use of Crown land by third parties. The carbon neutral public service initiative will have implications for that work, as we are proposing that Crown land also be used to develop an offset portfolio for the public sector. The carbon neutral public service initiative will not be dealing with broader issues about availability of Crown land for third party involvement, and/or climate change mitigation beyond this proposal.

70. A Cabinet paper on purchasing Projects to Reduce Emissions (PRE) credits will be delivered in June 2007. This paper will ask for a decision on:

a. whether to buy back PRE units (principally to contribute to New Zealand’s Kyoto deficit, although a small portion of the PRE credits could be purchased for the carbon neutral public service initiative)

b. key design elements of a PRE buy-back programme, including its administration, and

c. the estimated cost of funding such a programme.

71. In May 2007, we will report back to Cabinet committee with progress on the Govt3 programme (including a baseline survey of sustainability indicators within government) and on government leadership through Govt3 on sustainable buildings and transport. The measures recommended in the latter paper will contribute to emissions reductions across government.

Consultation

72. The Department of Prime Minister and Cabinet, State Services Commission, Treasury, Ministry of Economic Development, Department of Conservation, Ministry of Health, Inland Revenue Department, Ministry of Agriculture and Forestry, Land Information New Zealand, Ministry of Transport and Energy Efficiency and Conservation Authority were consulted on the paper.

73. Other public service departments (see Annex 2) were informed.

Financial implications

74. Up to $10.4 million gross over three years (not counting the savings expected from reduced energy and fuel bills) is included in Vote: Climate Change and Energy Efficiency in Budget 2007 to fund the development and delivery of this programme.

75. We are encouraging departments to prioritise reduction measures that both reduce emissions and save money (over time) compared to business as usual. These savings are not immediate, however, and there are likely to be some costs that agencies will need to meet from baseline in the short to medium term.

76. It is not yet possible to estimate the costs of offsetting emissions for the agencies in Stage 2. We are asking officials to consider how the offset projects for Stage 2 agencies should be funded, particularly whether they should be met from departmental baselines or whether there should be a further Budget bid. The Minister Responsible for Climate Change Issues will report back to POL by 31 January 2008 with recommendations on how offset projects for the Stage 2 agencies should be funded.

Human rights

77. There are no inconsistencies with the Human Rights Act 1993.

Legislative implications

78. There are no legislative implications at this stage.

Publicity

79. No further publicity is planned at this stage, although further details of the programme may be announced as part of Budget package publicity.

Recommendations

80. The Minister for the Environment and the Minister Responsible for Climate Change Issues recommend that the Committee:

Previous decisions

1. note that on 12 February 2007 Cabinet agreed that a set of initiatives to elevate sustainability be refined, including an initiative entitled ‘towards a carbon neutral public service’ [CAB Min (07) 4/1A];

2. note that on 13 February 2007 the Prime Minister’s Statement and associated press release from the Minister Responsible for Climate Change Issues announced the government's intention that the public service would move towards carbon neutrality in a phased approach:

2.1 a lead group of six agencies (Ministry for the Environment, Ministry of Health, Ministry of Economic Development, Inland Revenue Department, Department of Conservation and Treasury) will become carbon neutral by the end of 2012 by:

2.1.1 measuring their greenhouse gas emissions associated with energy use, transport (including all air travel) and waste to landfill;

2.1.2 developing emissions reduction plans;

2.1.3 setting in place ‘carbon neutral plans’ by mid February 2008; and

2.1.4 offsetting emissions ‘from now on’ through New Zealand-based projects, including forestry-related projects;

2.2 the remaining 28 public service departments will:

2.2.1 measure their greenhouse gas emissions associated with energy use, transport (including all air travel) and waste to landfill;

2.2.2 develop emissions reduction plans by mid February 2008; and

2.2.3 be on a path to carbon neutrality by 2012;

2.3 the wider state sector will be encouraged to reduce emissions but will not be required to become carbon neutral at this stage;

Sustainability initiatives

3. note that moving towards a carbon neutral public service is a demonstration of government leadership on sustainability;

4. note that the carbon neutral public service initiative links very closely to the sustainable government procurement initiative;

5. note that existing government programmes, including Govt3 and a range of Energy Efficiency and Conservation Authority programmes, assist the public sector to lower emissions and operate more sustainably;

Foundation operating requirements and principles

6. agree that:

6.1 the departments in Stage 1 of the initiative (those listed in paragraph 2.1) will offset all emissions from the start of the 2006/07 financial year to the end of the 2011/12 financial year by actual sequestration by the end of 2012;

6.2 Stage 1 departments will continue to be carbon neutral from 2012/13 onwards;

6.3 the ‘carbon neutral plans’ required of Stage 1 departments will consist of the department’s emissions reduction plan with additional information (to be provided by the Ministry for the Environment) on how remaining emissions are to be offset;

6.4 offset projects for the post-2011/12 emissions of Stage 2 departments (the remaining 28 public service departments) will be commissioned or planned by the end of 2012;

6.5 all offset projects are to be located in New Zealand; and

6.6 all offset projects are to be commissioned and coordinated through a centralised process rather than by individual agencies;

7. agree that:

7.1 the operation of this initiative must be consistent with government’s climate change and sustainable energy policies, and its operation must be able to be adjusted as future policy is developed;

7.2 all public service departments must aim to reduce their emissions, in order to demonstrate government leadership, reduce the environmental impact of government activities, and reduce reliance on offsetting schemes;

7.3 departmental emissions reduction plans and actions must:

7.3.1 identify and pursue the most cost-effective and environmentally beneficial means of lowering emissions, measured over the whole of life of an intervention;

7.3.2 meet the particular needs and profile of each department; and

7.3.3 not result in reduced departmental performance;

Measuring, reporting on and reducing greenhouse gas emissions

8. agree that:

8.1 all public service departments must measure all greenhouse gas emissions associated with their energy use, business travel (including international air travel) and waste to landfill;

8.2 all public service departments must report publicly on an annual basis on their emissions for the previous financial year;

8.3 all public service departments must develop an emissions reduction plan, to be reviewed annually; and

8.4 emissions reduction plans must identify appropriate emissions reduction targets for that department;

9. note that it is not appropriate to set a single emissions reduction target for all public service departments, as some departments have already made changes that significantly reduce their emissions;

10. direct the Ministry for the Environment, in consultation with other agencies as appropriate, to:

10.1 develop methodologies to measure and report on the greenhouse gas emissions detailed in paragraph 8.1, and provide these to all departments by 30 June 2007;

10.2 manage verification of departments’ emissions inventories;

10.3 provide departments with guidance on developing an emissions reduction plan and determining appropriate reduction targets;

10.4 investigate means of encouraging accelerated emissions reductions; and

10.5 arrange independent validation of the carbon neutral status of public service departments;

Cost-effectiveness

11. note that the Govt3 programme and Energy Efficiency and Conservation Authority programmes offer support in identifying behavioural and low-cost changes that reduce emissions;

12. agree that the first versions of departmental emissions reduction plans should identify and prioritise reduction measures that are cheaper (over a whole-of-life analysis) than business as usual;

13. direct the Ministry for the Environment, in consultation with other agencies as appropriate, to develop a cost-effectiveness threshold to guide departmental decision-making on emissions reduction measures;

14. invite the Minister Responsible for Climate Change Issues to report back to POL by 31 January 2008 on a framework for decision-making, based on that cost-effectiveness threshold, to ensure that only cost-effective reduction options are pursued;

15. agree that, until such guidance on decision-making is developed, departments should not pursue reduction measures that incur significant fiscal costs above business as usual (using a whole-of-life analysis);

16. note that the sustainable government procurement initiative, led by the Ministry of Economic Development, will also help departments to assess the cost-effectiveness of reduction measures by investigating and developing new tools such as:

16.1 cost-benefit analysis frameworks that incorporate whole-of-life costings; and

16.2 methodologies for incorporating a ‘price of carbon’ into decision-making;

Offsetting emissions

17. note that it will not be feasible to reduce departmental greenhouse gas emissions to zero, so some offsetting will be required;

18. agree that, subject to consistency with broader climate change policy, offset projects for the initiative need not be Kyoto-compliant (i.e. contribute to meeting New Zealand’s Commitment Period 1 commitments under the Kyoto Protocol);

19. note that the initial preference for offsetting emissions for the Stage 1 departments is to pursue Kyoto-compliant options where possible;

20. agree that officials may investigate the following New Zealand-based options for potential inclusion in the portfolio of offsets for the Stage 1 departments:

20.1 new planted exotic forest on Crown land, excluding public conservation land administered by the Department of Conservation (unless exotic afforestation is compatible with the purpose for which the land is held) or other sensitive sites;

20.2 new planted indigenous forest on Crown land;

20.3 accelerated indigenous forest reversion on Crown land;

20.4 other forest management projects (for example pest control) in existing forests on Crown land;

20.5 afforestation and forest management on private land or on land acquired by the government for that purpose;

20.6 purchase of forestry credits created under the Permanent Forest Sink Initiative;

20.7 development and funding of additional forestry projects via the mechanism of the Afforestation Grants Scheme, if this climate change policy proposal proceeds;

20.8 buy-back of domestic Projects to Reduce Emissions credits, subject to further Cabinet decisions; and

20.9 investment in other New Zealand-based projects or credits (subject to policy development), such as energy efficiency projects;

21. direct the Ministry for the Environment, in consultation with other agencies as appropriate, to:

21.1 investigate the range of New Zealand-based offset options listed in paragraph 20, and assess:

21.1.1 availability of suitable sites;

21.1.2 expected cost of the offset, including ongoing management costs, measured as cost per tonne CO2-equivalent;

21.1.3 other financial impacts such as the effect on the Crown’s liability under the Kyoto Protocol;

21.1.4 verifiability of the project’s carbon sequestration;

21.1.5 the degree to which the option would provide for additional offsetting capability post-2012;

21.1.6 environmental, social and/or economic co-benefits; and

21.1.7 other potential advantages, disadvantages or risks;

21.2 develop administrative arrangements to commission, coordinate and manage offset projects on a centralised basis; and

21.3 provide information on the offsetting component of the ‘carbon neutral plans’ required of Stage 1 agencies by February 2008;

22. invite the Minister Responsible for Climate Change Issues to report back to POL by 30 June 2007 with:

22.1 a recommended portfolio of projects to offset the bulk of the estimated 2006/07-2011/12 emissions of the six Stage 1 agencies, which is to be drawn from the options in paragraph 20 and take into account the criteria listed in paragraph 21.1;

22.2 a mechanism to centrally manage offset projects; and

22.3 options for offsetting the emissions associated with Ministerial air travel from the 2007/08 financial year onwards;

23. note that an offset portfolio for the Stage 2 agencies will not be developed until broader climate change policy is finalised and the lessons from Stage 1 have been assessed, subject to the requirements in paragraph 6.4;

Reporting on progress

24. direct all public service departments to provide their emissions inventories for the 2006/07 financial year, calculated using the methodology provided by the Ministry for the Environment, to the Ministry for the Environment by 30 September 2007;

25. direct all public service departments to provide their emissions reduction plans to the Ministry for the Environment by 21 December 2007;

26. invite the Minister Responsible for Climate Change Issues to report back to POL by 31 January 2008 on:

26.1 the ‘carbon neutral plans’ of the six Stage 1 agencies; and

26.2 the emissions reduction plans of all public service departments;

26.3 progress on emissions reductions across the public service;

26.4 options for encouraging greater emissions reductions; and

26.5 recommendations on how offset projects for the Stage 2 agencies are to be funded;

Financial implications

27. note that Budget 2007 will contain funding of $10.4 million gross over three years (not counting expected savings from energy efficiencies) in Vote: Climate Change and Energy Efficiency for:

27.1 energy audits and travel planning to support emissions reductions; and

27.2 the offset portfolio for the 2006/07-2011/12 emissions of Stage 1 agencies;

28. note the Minister Responsible for Climate Change Issues may lodge a further bid in a later Budget to fund offsets for the Stage 2 agencies, depending on the recommendations arising from paragraph 26.5; and

29. agree that the Minister for the Environment and Minister Responsible for Climate Change Issues may publicly release this submission, including Cabinet decisions, and any Annexes, once Cabinet has made a decision (subject to any appropriate withholdings before Budget day).

 

Hon David Benson-Pope
Minister for the Environment

Hon David Parker
Minister Responsible for Climate Change Issues

Annex 1: Preliminary assessment of potential offset options

Option

Advantages

Disadvantages

1. Exotic afforestation

 

Plantation of exotic tree species such as pinus radiata

  • Afforestation of sites in grassland as at 31 Dec 1989 will help to meet Kyoto commitments
  • Exotics characteristically grow fast (early and high rates of sequestration, although they can be lower on low quality, dry sites)
  • Some environmental co-benefits (e.g. soil erosion and flood risk control)
  • Establishment costs, management costs and sequestration rates are well known
  • The option is likely to be relatively cheap per tonne CO2-e sequestered
  • Nursery and seed considerations suggest exotic afforestation is the only "planted forest" option likely to be feasible on any scale in 2008
  • Joint venture arrangements may be possible to manage risks and costs
  • Unsuitable for use on some sites due to landscape considerations and public perception
  • Lesser biodiversity gain than indigenous afforestation
  • Can have wilding potential on some sites
  • Exotics are generally planted for harvest, and need infrastructure
  • Harvesting creates liabilities that will need to be managed
  • Ongoing forest management costs

 

2. New planted indigenous forest on Crown land

 

Indigenous trees are raised in a nursery and then planted out. Depending on the site, weed control may be needed, as well as exclusion of livestock through fencing and pest control.

  • Afforestation of sites in grassland as at 31 Dec 1989 will help to meet Kyoto commitments
  • Environmental co-benefits (e.g. biodiversity, flood control, erosion control)
  • Existing knowledge of establishment techniques and measuring carbon sequestration
  • Suitable for DOC land and other sensitive sites
  • Planting projects often have a high public profile and will attract support from local conservation groups
  • Likely to be relatively expensive because of nursery stock considerations, and the need to plant trees at high densities (compared to exotics) to achieve transition to forest.
  • As a consequence of high establishment costs, including intensive weed control during the establishment phase, the method is normally only applied at a small scale (less than 10 hectares).
  • The amount of carbon that will be sequestered by 2012 is too small to contribute significantly to the required offset
3. Accelerated indigenous forest reversion on Crown land

 

Given certain management parameters, grassland sites will "revert" to indigenous forest through succession processes. Interventions may include fencing to exclude livestock, adequate pest control, and, in some areas, strategic planting to ensure the succession.

  • Afforestation of sites in grassland as at 31 Dec 1989 will help to meet Kyoto commitments
  • Environmental co-benefits (e.g. biodiversity, flood control, erosion control)
  • Suitable for DOC land and other sensitive sites
  • Existing knowledge of establishment techniques and measuring carbon sequestration
  • Harvesting is not intended and so carbon store management is not needed
  • Potential for difficulties in determining whether some land is Kyoto compliant
  • Possible criticism that reversion would have happened anyway (i.e. no 'additionality')
  • Rates of sequestration for indigenous species over a 30-year period will be lower than exotics on a good site
  • Rates of sequestration over the short term can be highly variable and may be slow
4. Other forest management projects in existing forests on Crown land

 

Existing forests (production or indigenous) are managed to sequester more carbon. For example, in (exotic) planted production forests, the length of the rotation could be increased. In conservation forests, an increased level of pest control could mean an increase in biomass in the forest.

  • May be cheaper than some Kyoto-compliant options
  • Environmental co-benefits
  • Has some public credibility - the private sector has already approached DOC with proposals to improve the health of indigenous forest in return for branding opportunities.
  • NGOs are also likely to be supportive of measures in indigenous forest.
  • Some approaches bring about significant improvement in forest health at a relatively low cost per tonne sequestered
  • Will not count towards lowering our Kyoto liability
  • Could lead to criticism if broader climate change policy does not recognise or allow for use of non-Kyoto options to offset emissions
  • Difficult to verify – there are still scientific uncertainties, and it is not yet certain that an improvement in forest health would translate to a measurable increase in sequestered carbon by 2012
5. Forestry-related projects on private land or on land acquired by the government

 

Options 1-4 above, outside the Crown estate

May include use of commercial carbon-neutral schemes (e.g. CarboNZero)

  • As above, depending on option chosen
  • Environmental co-benefits – initiative funding could be used to acquire and retire marginal farmland for reversion to indigenous forest etc.
  • CarboNZero or similar programmes could provide immediate offsets
  • As above, depending on option chosen
  • Potentially higher costs
  • Not all commercial carbon neutral schemes use Kyoto-compliant offsets

6. Purchase of forestry credits created under the Permanent Forest Sink Initiative (PFSI)

 

The PFSI allows landowners to establish permanent forest sinks (on sites not forested at 31 Dec 1989) and get tradable Kyoto-compliant credits for the carbon sequestered in their forests.

  • Would be purchasing Kyoto-compliant credits that will assist with Kyoto commitments
  • Forestry-related environmental co-benefits
  • PFSI participants, not government, bear the risks and costs associated with forest establishment
  • May assist in creating climate change business opportunities
  • Policy not being implemented until 2008, so units may need to be purchased on a forward sale basis
  • Uncertainties regarding the potential quantity of units likely to be available to be purchased
7. Develop and fund additional forestry projects via the mechanism of the proposed Afforest­ation Grants Scheme (AGS)

 

Still only a policy proposal in the climate change consultation documents.

  • Likely to be Kyoto-compliant
  • Forestry-based option with related environmental co-benefits

 

  • The Crown would already own any credits generated under the AGS – may be difficult to clearly distinguish projects funded via this initiative from projects funded from core AGS funding
  • Policy may not be progressed
  • Option not available until at least 2008
8. Buy-back of domestic Projects to Reduce Emissions (PRE) credits

 

The PRE programme awarded carbon credits to energy initiatives that will reduce emissions in New Zealand in 2008-2012 beyond the reductions that would have occurred without the project. Most of these initiatives are renewable energy projects, such as wind farms.

  • Would be purchasing Kyoto-compliant credits that will assist with Kyoto commitments
  • Projects have passed an additionality test
  • Consistent with international practice where energy and industrial projects are more commonly used for offsets
  • Relatively simple to account for emissions reductions and verify
  • No need to account for forestry growth
  • On-going management not necessary
  • A very large volume of credits is available
  • This option cannot be pursued until Cabinet makes further decisions in June 2007
  • Credits not available until 2009, so units may need to be purchased on a forward sale basis
9. Other New Zealand-based projects or credits

 

These could include energy efficiency or other industrial and commercial projects. The offsets could be obtained either through direct investment or via a mechanism that provided for the transfer of credits, similar to the PRE programme above.

  • Builds capacity for energy reduction projects in the non forestry sector
  • Consistent with international practice where energy and industrial projects are more commonly used for offsets
  • Relatively simple to account for emissions reductions and verify
  • No need to account for forestry growth
  • On-going management not necessary
  • Additionality tests will need to be developed and implemented
  • Policy for credits not developed and depends on the details of future climate change policy.
  • Overlaps with existing energy efficiency policies

Annex 2: Public service departments

  1. Archives New Zealand
  2. Crown Law Office
  3. Department of Building and Housing
  4. Department of Conservation
  5. Department of Corrections
  6. Department of Internal Affairs
  7. Department of Labour
  8. Department of the Prime Minister and Cabinet
  9. Education Review Office
  10. Government Communications Security Bureau
  11. Inland Revenue Department
  12. Land Information New Zealand
  13. Ministry of Agriculture and Forestry
  14. Ministry for Culture and Heritage
  15. Ministry of Defence
  16. Ministry of Economic Development
  17. Ministry of Education
  18. Ministry for the Environment
  19. Ministry of Fisheries
  20. Ministry of Foreign Affairs and Trade
  21. Ministry of Health
  22. Ministry of Justice
  23. Ministry of Māori Development (Te Puni Kōkiri)
  24. Ministry of Pacific Island Affairs
  25. Ministry of Research, Science and Technology
  26. Ministry of Social Development (including Work and Income New Zealand)
  27. Ministry of Transport
  28. Ministry of Women’s Affairs
  29. National Library of New Zealand
  30. New Zealand Customs Service
  31. Serious Fraud Office
  32. State Services Commission
  33. Statistics New Zealand
  34. The Treasury

Agencies in bold are those included in Stage 1 of the initiative.

Annex 3: Indicative implementation timelines

  Core period within which this activity will take place Period within which activity may take place, depending on individual departmental situations, upcoming policy decisions, etc.

Emission estimates

April 2007  

Emission standards

April 2007 - June 2007  

Inventories (06/07) (Base)

April 2007 - September 2007  

Inventories (07/08)

July 2007 - July 2008  

Obtain verifiers

May2007 - June 2007  

Verify inventories (06/07 + 07/08)

July 2007 - December 2007  

 

Reduction targets

April 2007 - June 2007  

Reduction plans, energy audits etc.

July 2007 - December 2007  

Implement reductions

January 2008 - May 2008

April 2007 - December 2007

June 2007 - August 2008

 

Offset portfolio development

April 2007 - June 2007  

Obtain land

March 2008 - May 2008 August 2007 - February 2008

Land preparation

March 2008 - May 2008 December 2007 - February 2008

Seedling preparation

April 2007 - August 2007  

Plant trees

May 2008 - July 2008  

PRE Cabinet paper

April 2007 - June 2007  

Credit Purchase

  August 2007 - August 2008

Offset validation

April 2008 - August 2008  

Cabinet decisions: CAB Min (07) 17/2C

On 21 May 2007, following reference from the Cabinet Policy Committee, Cabinet:

Previous decisions

1. noted that on 12 February 2007 Cabinet agreed that a set of initiatives to elevate sustainability be refined, including an initiative entitled ‘towards a carbon neutral public service’ [CAB Min (07) 4/1A];

2. noted that on 13 February 2007 the Prime Minister’s Statement and associated press release from the Minister Responsible for Climate Change Issues announced the government's intention that the public service would move towards carbon neutrality in a phased approach:

2.1 a lead group of six agencies (Ministry for the Environment, Ministry of Health, Ministry of Economic Development, Inland Revenue Department, Department of Conservation and Treasury) will become carbon neutral by the end of 2012 by:

2.1.1 measuring their greenhouse gas emissions associated with energy use, transport (including all air travel) and waste to landfill;

2.1.2 developing emissions reduction plans;

2.1.3 setting in place ‘carbon neutral plans’ by mid February 2008;

2.1.4 offsetting emissions ‘from now on’ through New Zealand-based projects, including forestry-related projects;

2.2 the remaining 28 public service departments will:

2.2.1 measure their greenhouse gas emissions associated with energy use, transport (including all air travel) and waste to landfill;

2.2.2 develop emissions reduction plans by mid February 2008;

2.2.3 be on a path to carbon neutrality by 2012;

2.3 the wider state sector will be encouraged to reduce emissions but will not be required to become carbon neutral at this stage;

Sustainability initiatives

3. noted that moving towards a carbon neutral public service is a demonstration of government leadership on sustainability;

4. noted that the carbon neutral public service initiative links very closely to the sustainable government procurement initiative;

5. noted that existing government programmes, including Govt3 and a range of Energy Efficiency and Conservation Authority programmes, assist the public sector to lower emissions and operate more sustainably;

Foundation operating requirements and principles

6. agreed that:

6.1 the departments in Stage 1 of the initiative (those listed in paragraph 2.1) will offset all emissions from the start of the 2006/07 financial year to the end of the 2011/12 financial year by actual sequestration by the end of 2012;

6.2 Stage 1 departments will continue to be carbon neutral from 2012/13 onwards;

6.3 the ‘carbon neutral plans’ required of Stage 1 departments will consist of the department’s emissions reduction plan with additional information (to be provided by the Ministry for the Environment) on how remaining emissions are to be offset;

6.4 offset projects for the post-2011/12 emissions of Stage 2 departments (the remaining 28 public service departments) will be commissioned or planned by the end of 2012;

6.5 all offset projects are to be located in New Zealand;

6.6 all offset projects are to be commissioned and coordinated through a centralised process rather than by individual agencies;

7. agreed that:

7.1 the operation of this initiative must be consistent with government’s climate change and sustainable energy policies, and its operation must be able to be adjusted as future policy is developed;

7.2 all public service departments must aim to reduce their emissions, in order to demonstrate government leadership, reduce the environmental impact of government activities, and reduce reliance on offsetting schemes;

7.3 departmental emissions reduction plans and actions must:

7.3.1 identify and pursue the most cost-effective and environmentally beneficial means of lowering emissions, measured over the whole of life of an intervention;

7.3.2 meet the particular needs and profile of each department;

7.3.3 not result in reduced departmental performance;

Measuring, reporting on and reducing greenhouse gas emissions

8. agreed that:

8.1 all public service departments must measure all greenhouse gas emissions associated with their energy use, business travel (including international air travel) and waste to landfill;

8.2 all public service departments must report publicly on an annual basis on their emissions for the previous financial year;

8.3 all public service departments must develop an emissions reduction plan, to be reviewed annually;

8.4 emissions reduction plans must identify appropriate emissions reduction targets for that department;

9. noted that it is not appropriate to set a single emissions reduction target for all public service departments, as some departments have already made changes that significantly reduce their emissions;

10. directed the Ministry for the Environment, in consultation with other agencies as appropriate, to:

10.1 develop methodologies to measure and report on the greenhouse gas emissions detailed in paragraph 8.1, and provide these to all departments by 30 June 2007;

10.2 manage verification of departments’ emissions inventories;

10.3 provide departments with guidance on developing an emissions reduction plan and determining appropriate reduction targets;

10.4 investigate means of encouraging accelerated emissions reductions;

10.5 arrange independent validation of the carbon neutral status of public service departments;

Cost-effectiveness

11. noted that the Govt3 programme and Energy Efficiency and Conservation Authority programmes offer support in identifying behavioural and low-cost changes that reduce emissions;

12. agreed that the first versions of departmental emissions reduction plans should identify and prioritise reduction measures that are cheaper (over a whole-of-life analysis) than business as usual;

13. directed the Ministry for the Environment, in consultation with other agencies as appropriate, to develop a cost-effectiveness threshold to guide departmental decision-making on emissions reduction measures;

14. invited the Minister Responsible for Climate Change Issues to report to POL by 31 January 2008 on a framework for decision-making, based on that cost-effectiveness threshold, to ensure that only cost-effective reduction options are pursued;

15. agreed that, until such guidance on decision-making is developed, departments should not pursue reduction measures that incur significant fiscal costs above business as usual (using a whole-of-life analysis);

16. noted that the sustainable government procurement initiative, led by the Ministry of Economic Development, will also help departments to assess the cost-effectiveness of reduction measures by investigating and developing new tools such as:

16.1 cost-benefit analysis frameworks that incorporate whole-of-life costings;

16.2 methodologies for incorporating a ‘price of carbon’ into decision-making;

Offsetting emissions

17. noted that it will not be feasible to reduce departmental greenhouse gas emissions to zero, so some offsetting will be required;

18. agreed that, subject to consistency with broader climate change policy, offset projects for the initiative need not be Kyoto-compliant (i.e. contribute to meeting New Zealand’s Commitment Period 1 commitments under the Kyoto Protocol);

19. noted that the initial preference for offsetting emissions for the Stage 1 departments is to pursue Kyoto-compliant options where possible;

20. agreed that officials may investigate the following New Zealand-based options for potential inclusion in the portfolio of offsets for the Stage 1 departments:

20.1 new planted exotic forest on Crown land, excluding public conservation land administered by the Department of Conservation (unless exotic afforestation is compatible with the purpose for which the land is held) or other sensitive sites;

20.2 new planted indigenous forest on Crown land;

20.3 accelerated indigenous forest reversion on Crown land;

20.4 other forest management projects (for example pest control) in existing forests on Crown land;

20.5 afforestation and forest management on private land or on land acquired by the government for that purpose;

20.6 purchase of forestry credits created under the Permanent Forest Sink Initiative;

20.7 development and funding of additional forestry projects via the mechanism of the Afforestation Grants Scheme, if this climate change policy proposal proceeds;

20.8 buy-back of domestic Projects to Reduce Emissions credits, subject to further Cabinet decisions;

20.9 investment in other New Zealand-based projects or credits (subject to policy development), such as energy efficiency projects;

21. directed the Ministry for the Environment, in consultation with other agencies as appropriate, to:

21.1 investigate the range of New Zealand-based offset options listed in paragraph 20, and assess:

21.1.1 availability of suitable sites;

21.1.2 expected cost of the offset, including ongoing management costs, measured as cost per tonne CO2-equivalent;

21.1.3 other financial impacts such as the effect on the Crown’s liability under the Kyoto Protocol;

21.1.4 verifiability of the project’s carbon sequestration;

21.1.5 the degree to which the option would provide for additional offsetting capability post-2012;

21.1.6 environmental, social and/or economic co-benefits;

21.1.7 other potential advantages, disadvantages or risks;

21.2 develop administrative arrangements to commission, coordinate and manage offset projects on a centralised basis;

21.3 provide information on the offsetting component of the ‘carbon neutral plans’ required of Stage 1 agencies by February 2008;

22. invited the Minister Responsible for Climate Change Issues to report to POL by 30 June 2007 with:

22.1 a recommended portfolio of projects to offset the bulk of the estimated 2006/07-2011/12 emissions of the six Stage 1 agencies, which is to be drawn from the options in paragraph 20 and take into account the criteria listed in paragraph 21.1;

22.2 a mechanism to centrally manage offset projects;

22.3 options for offsetting the emissions associated with Ministerial air travel from the 2007/08 financial year onwards;

23. noted that an offset portfolio for the Stage 2 agencies will not be developed until broader climate change policy is finalised and the lessons from Stage 1 have been assessed, subject to the requirements in paragraph 6.4;

Reporting on progress

24. directed all public service departments to provide their emissions inventories for the 2006/07 financial year, calculated using the methodology provided by the Ministry for the Environment, to the Ministry for the Environment by 30 September 2007;

25. directed all public service departments to provide their emissions reduction plans to the Ministry for the Environment by 21 December 2007;

26. invited the Minister Responsible for Climate Change Issues to report to POL by 31 January 2008 on:

26.1 the ‘carbon neutral plans’ of the six Stage 1 agencies;

26.2 the emissions reduction plans of all public service departments;

26.3 progress on emissions reductions across the public service;

26.4 options for encouraging greater emissions reductions;

26.5 recommendations on how offset projects for the Stage 2 agencies are to be funded;

Financial implications

27. noted that Budget 2007 will contain funding of $10.4 million gross over three years (not counting expected savings from energy efficiencies) in Vote: Climate Change and Energy Efficiency for:

27.1 energy audits and travel planning to support emissions reductions;

27.2 the offset portfolio for the 2006/07-2011/12 emissions of Stage 1 agencies;

28. noted the Minister Responsible for Climate Change Issues may lodge a further bid in a later Budget to fund offsets for the Stage 2 agencies, depending on the recommendations arising from paragraph 26.5;

29. agreed that the Minister for the Environment and Minister Responsible for Climate Change Issues may publicly release the submission under POL (07) 131, including any Annexes, and Cabinet’s decisions, once Cabinet has made a decision (subject to any appropriate withholdings before Budget day);

30. noted that the Minister for the Environment indicates that the government caucuses have been consulted and that consultation is required with other parties represented in Parliament.