1. Domestic measures
This chapter presents an overview of New Zealand's domestic climate change policy in place at the end of December 2005. Reflecting the transitional phase of the Government's climate change policy package at the time of publication, this report does not include further domestic policies and measures that currently are under development. For more information on the policies themselves, refer to Chapter 4, "Policies and measures" in the Fourth National Communication.
Climate change policy package
The Government's climate change policy package was developed during 2001 and 2002, and was announced at the time when New Zealand ratified the Kyoto Protocol. The 2002 climate change policy package involved policies and measures focused on the energy, transport, industry, agriculture, waste and forestry sectors. The 2002 climate change policy package included the introduction of a carbon tax from 2007. Associated Negotiated Greenhouse Agreements were available for firms that met a competitiveness-at-risk test whereby, in exchange for relief from the proposed carbon tax, firms would agree to move towards world's best practice in emissions intensity. Development of the 2002 climate change policy package involved several rounds of public consultation before final decisions were taken by Government.
As well as outlining New Zealand's climate change policies, the 2002 climate change policy package also noted that it would be important to review the progress of the policy package at regular intervals to monitor progress with emissions reductions, assess the effectiveness of policies, and confirm that New Zealand was positioned to meet its commitments. [The Kyoto Protocol commits New Zealand to reducing its greenhouse gas emissions to 1990 levels, on average, over the period from 2008 to 2012, or to take responsibility for any emissions above this level.] A full policy review was commissioned by Cabinet in mid-2005 and completed in November 2005.
The policy review concluded that some elements of the 2002 climate change policy package should be modified to better position New Zealand to respond to the longer-term challenges of climate change. A key outcome of the policy review was the announcement by the newly elected Government in December 2005 that the previously announced carbon tax would not proceed. In addition, a suite of future work programmes would be required to inform Government decisions in light of the review and contribute to further development of policies and measures. In that announcement, the Government reaffirmed its commitment to the Kyoto Protocol.
As a result of the policy review, Government officials are undertaking further policy work, in consultation with stakeholders, and will report back to Ministers on a range of work programme areas. At the time of publication of this Report on Demonstrable Progress, Ministers had not yet taken decisions on the work programmes. Therefore, this chapter reflects the Government's decision not to proceed with the announced carbon tax, but does not reflect any impact from the new work programmes being considered by the Government at the time of publication.
Energy
The Sustainable Energy work programme, within the Sustainable Development Programme of Action, sets the context for the future development of energy policy. At the end of 2005, the Government announced it would develop a National Energy Strategy to provide long-term direction and leadership to put New Zealand firmly on the path to an energy system that supports economic development while being environmentally responsible. It aims to incorporate sustainable development principles in energy policy decision-making and to ensure that New Zealand's energy system is well-positioned to meet present and future challenges, particularly climate change and peak oil.
The National Energy Efficiency and Conservation Strategy promotes energy efficiency, energy conservation and renewable energy. The strategy targets a 20 percent improvement in energy efficiency and a 30 petajoule per year increase in renewable energy by 2012. The Government agreed, in March 2006, to replace the strategy within the next 12 to 18 months. Ongoing programmes related to the National Energy Efficiency and Conservation Strategy include the following:
- Emprove, which includes the provision of grants for energy audits, loans to implement energy savings and activities to raise awareness of the opportunities to improve profitability through good energy management
- Building regulations, which seeks to make ongoing changes to the Building Code to improve the energy efficiency of residential and commercial dwellings
- EnergyWise home grants, which focuses on fitting insulation - as well as other energy efficiency measures - for existing homes
- Renewable energy to the grid, which ensures that more electricity generated for the grid or fed into local distribution networks is sourced from renewable energy
- Market development of renewable energy, which encourages the uptake of small-scale renewable energy technology through interest-free loans, information provision and education, and supporting market research
- Demand response, which identifies and instigates practical measures to facilitate greater demand response within the electricity industry
- Energy efficiency of products, which includes minimum energy performance standards and labelling (a regulatory approach); and "Energy Star" voluntary labelling.
Transportation
The New Zealand Transport Strategy defines the Government's vision of an affordable, integrated, safe, responsive and sustainable transport system by 2010. One of its five objectives is to ensure environmental sustainability. This includes encouraging more energy-efficient modes of transport.
The National Rail Strategy was released in May 2005 and will be implemented by the Ministry of Transport. It sets out the Government's rail policy objectives and priorities for action over the next 10 years and outlines key initiatives that are intended to achieve the outcomes sought. The strategy focuses on growth in two key areas: freight, both bulk and containerised; and urban passenger transport.
Specific programmes in the transport sector include:
- Air quality, which aims to improve air quality by introducing mandatory fuel standards and improving the quality of the vehicle fleet
- Renewable transport fuels, which aims to increase production and availability of bio-ethanol/petrol blends and biodiesel
- Information on vehicle fuel efficiency, which encourages the purchase of fuel-efficient vehicles by providing appropriate consumer purchasing information, covering both new and second hand vehicles
- Surface transport costs and charges, which assists the Government to make decisions on the relative competitive position of road and rail for freight transport and of rail, bus and the private car for passenger transport
- Travel demand management, which encourages people to use forms of transport that use less energy and reduce their present dependency on the single passenger car
- Aviation and maritime transport, which involves periodic communication with the International Maritime Organisation and International Civil Aviation Organisation.
Industry
When the Government completed the review of the climate change policy package in November 2005, it subsequently decided that a new focus will be required to address industry issues more effectively. As a result, the previously announced carbon tax and associated Negotiated Greenhouse Agreements for eligible industrial emitters will not now be introduced. A work programme will examine alternative measures to the announced carbon tax, including consideration of emissions trading and new, possibly voluntary, arrangements to replace Negotiated Greenhouse Agreements.
New Zealand's current climate change policies for industry are focused on the Projects to Reduce Emissions programme, measures to assist energy-intensive businesses, and the National Energy Efficiency and Conservation Strategy (all described elsewhere). In addition, New Zealand has two programmes addressing emissions of fluorinated gases. Under the sulphur hexafluoride programme, the Government has exempted users of sulphur hexafluoride from any application of its climate change policies in return for their signature of a Memorandum of Understanding supporting movement towards best practice in managing sulphur hexafluoride emissions. The No-loss campaign programme is aimed at improving the awareness of refrigeration and air conditioning engineers about the greenhouse gas risks associated with fluorocarbon refrigerants.
Agriculture
Until at least 2012, the agricultural sector will be exempt from any charge on the methane and nitrous oxide emissions it produces. There are currently no practicable options for reducing these emissions without reducing output and the industry's international competitiveness. Instead, the Government will cover the full cost of these emissions. The Pastoral Greenhouse Gas Research Consortium has been formed with funding from both the Government and the agricultural sector to develop safe, cost-effective greenhouse gas reduction technologies that improve productivity and reduce methane and nitrous oxide emissions from livestock. The Consortium aims to achieve a 20 percent or greater reduction in these emissions below business as usual by 2012.
A programme was undertaken from 2001 to 2005 to provide support for improvement of the agricultural sector national greenhouse gas inventory. The objective of this programme was to systematically reduce uncertainties and improve the estimates of agricultural methane and nitrous oxide national inventory estimates, for the purpose of reporting to the United Nations Framework Convention on Climate Change and fulfilling other reporting requirements.
Waste
The New Zealand Waste Strategy aims to minimise New Zealand's waste and improve recovery and management, including encouraging the use of landfill gas for electricity generation.
A national environmental standard requires landfills with a lifetime design capacity exceeding one million tonnes and a current stock capacity of 200,000 tonnes to collect and destroy landfill gas. The standard is expected to prevent around 40,000 tonnes of methane being emitted over the first commitment period.
Methane emissions from wastewater are addressed by local authorities, some of whom extract methane from wastewater treatment plants and use it for generating electricity, heating boilers and heating digesters.
Land use, land-use change and forestry
Between 1990 and 2003, it is estimated that 660,000 hectares of new forest was established as a result of afforestation and reforestation activities. Chapter 3 "Greenhouse gas inventory" and Chapter 4 "Policies and measures" of the Fourth National Communication provide further detail. In the Government's 2002 climate change policy package, the Government announced that it would retain all sink credits and their associated liabilities in respect of Kyoto production forests (i.e., forest plantings post-1990) for at least the first commitment period of the Kyoto Protocol. The Government would also retain the liability for deforestation of pre-1990 forests up to a cap of 21 Mt CO2 during the first commitment period. The Government is currently considering a work programme on forestry policy options for managing deforestation and encouraging afforestation and reforestation.
The Permanent Forest Sinks Initiative proposed by the Government would allow landowners the opportunity to access the value, created under the Kyoto Protocol, of carbon from newly established permanent forest sinks. The Crown would agree to devolve an amount of tradable carbon emission units equal to the amount of carbon sequestered in new permanent forest sinks over the Kyoto Protocol's first commitment period. Obligations under the contract would be registered against land titles and would run with and bind the land. These forests must maintain a continuous canopy cover, although limited timber harvesting is allowed.
Under the East Coast Forestry Project, landholders in the specified area are encouraged to tender for Government grants which help fund the cost of establishing and managing forest on severely erosion-prone land. This financial assistance offsets the additional costs and risks associated with afforestation on this land. The project allows a range of treatments to be applied to erosion-prone land including commercial forestry, poplar and willow planting, and the setting aside of areas for regeneration of native forests.
Cross-sectoral policies and measures
Under the policy for energy intensive businesses, assistance in the form of energy audits, financial grants, demonstration projects, education and training is available for energy-intensive small and medium enterprises.
The Projects to Reduce Emissions programme supports projects that will reduce New Zealand's emissions during the first commitment period. The programme uses a competitive tender to allocate tradable entitlements to Kyoto emission units to successful projects following an additionality and eligibility assessment. The project portfolio comprises 41 projects selected through two tender rounds and an early projects process, and 11 million emission units [An emission unit is equivalent to one tonne of carbon dioxide equivalent.] have been allocated. Following the review of climate change policies in November 2005, the Government has sought confirmation that there is a need for further cross-sector incentives, and if so what type of intervention is appropriate. A work programme will address this issue. The Government's consideration of future policy in this area will not affect the implementation of projects already undertaken to date under the Projects to Reduce Emissions programme.
Local government
A partnership programme between the Government and Local Government New Zealand coordinates the two-way flow of information and dialogue on climate change policy and programmes between central and local government. The partnership also assists in alerting the local government sector to wider funding opportunities.
The Government has introduced a Communities for Climate ProtectionTM - New Zealand programme. Based on a model that has proven successful in other countries, this programme helps local councils develop greenhouse gas emission inventories, set targets for emission reductions, and devise action plans for achieving them. The programme monitors the reductions achieved.
The Resource Management Act has been amended to reflect the focus on nationally based policies to manage greenhouse gas emissions, rather than reliance on regional controls. The Act also now requires special consideration to be given to renewable energy and the efficiency of the end use of energy. It is important to note that the Government's decision not to proceed with the announced carbon tax in December 2005 could affect the operation of the amended Resource Management Act. This issue will be addressed by Government officials in the new work programmes currently under development.
Bilateral climate change partnerships
New Zealand has established bilateral climate change partnerships with the United States of America and Australia. The partnerships enhance and accelerate collaboration and practical cooperation on climate change issues.
Public awareness and education
A public awareness and education programme entitled "4 Million Careful Owners" aims to raise public awareness about climate change and the actions New Zealanders can take to reduce greenhouse gas emissions (see http://www.4million.org.nz).
Response to the climate change policy review
As noted above, a full policy review was commissioned by Cabinet in mid-2005 and completed in November 2005. Updated commitment period projections completed in May 2005 indicated that under current policy settings, New Zealand would not meet its emissions reduction target for the first commitment period (2008-2012) of the Kyoto Protocol unless further action was taken. The climate change policy review investigated how New Zealand should respond to the projected deficit against the Kyoto target and gave consideration to New Zealand's high-level climate change goal: "to be set towards a permanent downward path for total gross emissions by 2012." The review was designed to identify (at a high level) an appropriate mix of policies for New Zealand up to 2012 and beyond. The review addressed the following types of questions:
- What is the best balance between further mitigation policies and Kyoto flexible mechanisms?
- Who is best placed to undertake decisions about this balance?
- How would any devolution of New Zealand's emission reduction obligations be achieved?
- What should the broad direction of any further, or alternative, policies to mitigate New Zealand's emissions be?
- What are the implications of these policies for New Zealand's strategic climate change goal and does this need to be updated?
The review report has been publicly released and can be found at http://www.climatechange.govt.nz/publications/climate/policy-review-05/index.html.
As noted above, as an outcome of the review the Government announced in December 2005 that it would not proceed with the previously announced carbon tax. The Government is currently considering other ways to ensure that New Zealand will meet its commitments to reduce greenhouse gas emissions. Officials are undertaking further policy work, in consultation with stakeholders, and will be reporting back to Ministers on a range of areas including:
- providing incentives for investment in renewable energy
- encouraging new tree planting and reducing deforestation
- improving fuel efficiency of the transport fleet
- assessing alternative measures to the announced carbon tax, including consideration of emissions trading and new, possibly voluntary, arrangements to replace Negotiated Greenhouse Agreements
- improving energy efficiency and conservation.
Compliance provisions relating to the climate change policy package
Projects to Reduce Emissions
Once a project has been approved for the Projects to Reduce Emissions programme, the Crown enters into a Project Agreement (contract) with the Participant. The Project Agreement provides that the Participant must demonstrate compliance with their obligations under the agreement by delivering:
- a milestone report within 20 business days of completion of a milestone. The milestone report must provide confirmation of the completion of a milestone
- an interim milestone report, if a milestone has not been completed by the due date, within 20 business days. The interim milestone report must provide progress towards the completion of the milestone, reasons for the delay in completion and the date by which the Participant expects to complete the milestone
- an annual report for each year, beginning in the year that emissions abatement commences through to 2012, to be delivered by 31 January the following year.
The Annual Report must include:
- tonnes of carbon dioxide equivalent emissions reductions resulting from the Project during the year, determined in accordance with a specified methodology for determining the emissions reductions, which is a schedule to the Project Agreement
- where another measure is used as a proxy measure to determine the emissions reductions, then the quantum of that measure is also reported, along with information to support this
- details of anything which the Participant is aware of that is, or has the potential to be a material impediment to achieving emissions reductions during the commitment period.
In relation to any report (including milestone reports, interim milestone reports and annual reports), the Crown has the right to request further information, or an audit by an independent person appointed by the Participant and approved by the Crown to verify any information contained in any report. The Crown also has the right to initiate the verification process to verify whether the participant has complied with the agreement. This includes the right to:
- inspect the Project and interview the Participants personnel
- make copies of any documents, records or data
- appoint a delegate to undertake the verification of each report.
In addition to the above reporting requirements, Participants are to provide advice to the Crown, within 10 business days, on any material impediments to the implementation or operation of the Project
Legal and institutional steps
It is well-established constitutional practice that New Zealand only ratifies an international treaty after it has in place the legislative and other measures necessary to enable full compliance with the treaty once it is in force for New Zealand. The Climate Change Response Act 2002, which passed into law in November 2002, provides for all the measures required to implement the legal obligations of the Kyoto Protocol that were not provided for in existing New Zealand law.
The Climate Change Response Act establishes the institutional arrangements needed under the Kyoto Protocol as well as containing compliance provisions. Its purpose is to enable New Zealand to meet its international obligations under the UNFCCC and the Kyoto Protocol, including the obligation to retire units equal to emissions in the commitment period, and the obligation to report to the Conference of the Parties and the Conference of the Parties/Meeting of the Parties under Article 12 of the UNFCCC and Article 7 of the Kyoto Protocol respectively.
Role of the Minister of Finance
The Climate Change Response Act gives powers to the Minister of Finance to carry out trading activities with respect to units, and to give direction to the Registrar regarding the establishment of accounts and the recording, issuance, and transfer of units.
The Registry
The Climate Change Response Act describes the purpose of the Registry which is to ensure the accurate accounting of units and to ensure accurate, transparent and efficient exchange of information between New Zealand's registry and those of other countries, and with the independent transaction log. The Climate Change Response Act also provides for the appointment of a Registrar and describes the Registrar's responsibilities, including maintaining the commitment period reserve. The form and operation of the unit register is specified in some detail in the Climate Change Response Act, including the accessibility of account information via the Registry's internet site.
The Climate Change Response Act is currently in the process of being amended (Climate Change Response Act Amendment Bill) to allow the Crown to transfer emission units to businesses and individuals and to allow those businesses and individuals to hold accounts in the Registry and to trade in emission units.
Inventory agency
The Climate Change Response Act establishes the Ministry for the Environment as the inventory agency. The primary functions of the inventory agency are specified to include the estimation of emissions and removals of greenhouse gases in New Zealand and preparation of New Zealand's annual inventory report, national communication and the report for calculation of assigned amount under Article 7.4 of the Kyoto Protocol. Under the Climate Change Response Act, the inventory agency must identify source categories, collect data, estimate emissions and removals, undertake uncertainty assessments, undertake procedures to verify the data, and archive information and documents that show how the estimates were determined. These functions closely align with the national system requirements under Article 5.1 of the Kyoto Protocol.
Compliance
The compliance provisions of the Climate Change Response Act are there to ensure that New Zealand can still report a complete greenhouse gas inventory even if current voluntary and cooperative systems for the collection of information were to break down. These provisions cover the power to enter land or premises to collect information on which the estimates of emissions and removals are based, as well as provisions for the way in which this power may be exercised. The Climate Change Response Act also covers offences and penalties including for the failure to provide information to the inventory agency, and for wilful interference with any survey, investigation or test carried out under the Act.
Regulations can be made under the Climate Change Response Act for a range of purposes including in relation to the powers of the Minister of Finance, the operation of the registry, and to require persons to provide information to the inventory agency for the purpose of estimating emissions and removals of greenhouse gases.
