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Emissions trading becomes law
The emissions trading scheme will cover all the major agricultural sources of methane
and nitrous oxide, such as methane from ruminant animals and nitrous oxide from
nitrogen fertiliser used on pasture.
On 25 September, the Governor-General gave Royal Assent to the Climate Change Response (Emissions Trading) Amendment Act 2008.
The emissions trading scheme will be phased in over the next five years, and will eventually include all six greenhouse gases covered by the Kyoto Protocol and all major greenhouse gas-emitting economic sectors.
Following its first reading in Parliament, and public hearings at the Finance and Expenditure Select Committee, three major changes were made to the Bill.
First, it deferred the entry of transport fuels to the emissions trading scheme until 2011, two years later than originally proposed. This change was made to reduce future inflation pressure and the pressure on household finances, given the large increases in fuel prices over the past two years.
Secondly, the Committee extended the start of the phase-out of freely allocated emission units by five years. Phase-out will start in 2019 and end in 2029. This change aims to help businesses maintain their competitiveness and creates greater economic certainty for business.
Thirdly, owners of forests bought before late 2002 that qualify as pre-1990 forests will be allocated more emission units than originally proposed, with an increase from approximately 39 units to an estimated 60 units per hectare. In addition, 18 units per hectare are set aside for future claimants under the Treaty of Waitangi who receive Crown Forest Land. Both these changes better help the forest owners who face the greatest costs from the emissions trading scheme.
Emissions from New Zealand’s
industrial process sector
represented six percent of
total
greenhouse gas
emissions
in 2006.
These
emissions
increased by
40.9
percent from
1990 to 2007.
Forestry is New Zealand’s
largest potential carbon
‘sink’. For this reason, it
has been selected as the
first sector to enter the
emissions trading scheme.
Another important change was that some later-entry sectors now have an ‘on ramp’ into the scheme. This involves voluntary reporting of emissions starting two years before the sector begins surrendering emission units, followed by mandatory reporting a year later, then full compliance and obligations to surrender units a year after that. This approach ensures sectors are well prepared for their entry to the scheme and provides incentives to reduce emissions before participants start surrendering units.
Before the Bill’s second reading, discussions with supporting political parties produced other changes, including an Innovation Fund to encourage the development and uptake of technology that will significantly reduce emissions from industry.
The Household Fund is also being set up to encourage household investment in energy-efficient products, such as insulation. There will be a one-off payment in 2010 to all households and a cash payment for beneficiaries, superannuitants and Working for Families recipients to help households cope with the impacts of electricity price increases as a result of emissions trading.
The next steps for the emissions trading scheme are to finalise the regulations for the various sectors joining the scheme, and to prepare plans for allocating emission units to eligible businesses.
For more information about the emissions trading scheme, including the legislation, visit www.climatechange.govt.nz or call 0800 CLIMATE (254 683).
