5. Projections and the total effect of policies and measures
Overview
This chapter reports on projections of New Zealand's greenhouse gas emissions and removals from known anthropogenic (man-made) sources and sinks. The projections of greenhouse emissions sources and sinks are "with measures" and consist of energy, transport, industrial processes, agriculture, waste, and forestry (i.e., land use, land-use change and forestry) projections.
For domestic purposes, New Zealand updated its projected emissions and removals of greenhouse gases for the first commitment period (2008-2012) of the Kyoto Protocol in May 2005 (Projected Balance of Units During the First Commitment Period of the Kyoto Protocol). The emissions calculation was consistent with the methodology used for the national inventory of greenhouse gas emissions and removals submitted to the United Nations Framework Convention on Climate Change Secretariat in April 2005. The May 2005 projected balance of units report remains the official reference for projections until updated in mid-2006.
In mid-2005, a full climate change policy review was commissioned by Cabinet. A key outcome of the policy review was the announcement by the 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.
For the purpose of submitting the best available information for the Fourth National Communication and the Report on Demonstrable Progress under the Kyoto Protocol as of December 2005, officials prepared a provisionalupdate of the May 2005 projections to reflect the policy status following the 2005 review. Therefore, the projections reported in the Fourth National Communication reflect the Government's decision not to proceed with the previously announced carbon tax, but do not reflect any impact from the new work programmes being considered by the Government at the time of publication. The provisional projections reported in this document will be updated in mid-2006.
Summary of projections
4NC Table 3 summarises historical and projected New Zealand greenhouse gas emissions and removals by sector and gas for the "with measures" case. Data for the year 2003 and prior are historical values, while the numbers for 2005 and later are projections. The energy, transport, and industrial process sector projections are from the Ministry of Economic Development's Supply and Demand Equilibrium Model (SADEM). Projections for the other sectors were obtained as described in the relevant sections below. Total emissions are also reported in carbon dioxide equivalent values, converted from each gas to a carbon dioxide equivalent on the basis of global warming potentials (GWP). [All emissions of non-CO2greenhouse gases are reported in this chapter as emissions of CO2equivalent using Global Warming Potentials (GWPs). GWPs represent the relative warming effect or cumulative radiative forcing, of a unit mass of the gas when compared with the same mass of CO2over a specific period. The UNFCCC reporting requirements specify that the 100-year GWPs contained in theIPCC Second Assessment Report(IPCC, 1995) are used in national inventories.]
4NC Table 3: Historical and "with measures" emissions projections
View historical and "with measures" emissions projections (large table).
4NC Figures 29 to 31 show the historical and projected emissions of three "direct" greenhouse gases - carbon dioxide, methane and nitrous oxide - as total carbon dioxide equivalent. Other gases such as oxides of nitrogen, carbon monoxide and non-methane volatile organic compounds are considered "indirect" greenhouse gases since they react in the atmosphere to form "direct" greenhouse gases. These emissions are not included in the carbon dioxide equivalent calculation. Figure 32 shows the projected emissions of direct greenhouse gas emissions in carbon dioxide equivalents based on global warming potential. These figures exclude emissions and removals from the land use, land-use change and forestry sector.
Key assumptions
Key assumptions used for projections of emissions for each sector are summarised in 4NC Table 4.
4NC Table 4: Critical assumptions
Calendar Year |
1990 |
1995 |
2000 |
2005 |
2010 |
2015 |
2020 |
|---|---|---|---|---|---|---|---|
GDP (billion 2004 NZ$) |
94.6 |
110.1 |
125.1 |
149.1 |
171.5 |
190.7 |
210.8 |
Oil Price (2004 US$/Barrel) |
23.34 |
19.28 |
30.23 |
50.00 |
50.00 |
46.66 |
43.33 |
Coal Price (2004 NZ$/GJ) |
2.60 |
2.60 |
2.50 |
3.75 |
3.75 |
3.75 |
3.75 |
Exchange Rate (NZ$/US$) |
0.598 |
0.6664 |
0.441 |
.690 |
.600 |
.600 |
.600 |
Gas Discoveries (PJ/Year) |
(1) |
(1) |
(1) |
60 |
60 |
60 |
60 |
Population (million) |
3.33 |
3.67 |
3.86 |
4.08 |
4.22 |
4.35 |
4.48 |
Note: (1) No directly comparable historical number available.
Sources: New Zealand Treasury,Ministry of Economic Development, Ministry of Agriculture and Forestry, and Ministry for the Environment
GDP growth projections are based on current New Zealand Treasury budget forecasts [See Table 1.1, GDP (Production Measure), inhttp://www.treasury.govt.nz/forecasts/befu/2005/1eooutlook.asp] for 2005-2009 and Treasury long-range growth forecasts [See Table A3.1, p. 33, Real GDP, inhttp://www.treasury.govt.nz/budget2005/fiscalstrategy/fsr05.pdf] for 2010-2020, using actual 2004 GDP [Based on sum of four quarters of 2004 nominal GDP of $145,684 million shown in Table 6.1, in http://www2.stats.govt.nz/domino/external/pasfull/pasfull.nsf/0/4c2567ef00247c6acc257029001021b1/$FILE/2005Q1%20GDP(E)%20current_price.xls] as the base year. Oil price projections reflect recent levels of New York Mercantile Exchange Light Sweet Crude Futures prices of around US$50 to 2010, then a slow decline reflecting a general expectation among industry forecasters (including the International Energy Agency and the United States Energy Information Administration) of long-term oil prices lower than at present. Coal price projections approximate current North Island levels. Exchange rate projections reflect the long-term average value since the floating of the New Zealand dollar in 1985. Gas discovery projections reflect average historical discoveries, excluding the major Maui field. Population projections are based on Statistics New Zealand "2001 (Base) Series 4" projections assuming "medium fertility, medium mortality and long-term annual net migration of 5,000." [See Table 1, in http://www2.stats.govt.nz/domino/external/pasfull/pasfull.nsf/0/4c2567ef00247c6acc256e770077de92/$FILE/alltabls.xls]
It is assumed that New Zealand's remaining gas-to-methanol plant will close in 2006. This plant is currently using 30 to 40 petajoules per year of gas. Another plant that used a roughly equal amount of gas closed in 2004.
Energy sector
The energy sector as defined in this section includes all energy production, transformation, and consumption other than transport. Greenhouse gas emissions from transport and industrial processes that produce greenhouse gases as a by-product of a chemical reaction other than combustion are treated separately. All industrial fuel combustion, including combustion associated with the processes in the industrial process sector, is treated as part of the energy sector.
Overview
4NC Figure 33 shows a chart of historical and projected carbon dioxide equivalent emissions for the energy sector.
4NC Figure 33: Historical and "with measures" emissions projections from the energy sector (Gg CO2 equivalent)
4NCTable 5 shows a summary of historical and projected emissions for the "with measures" case.
4NC Table 5: Historical and "with measures" emissions projections from the energy sector (excluding transport) (Gg gas)
Residential sub-sector
Residential emissions include only gas, coal, LPG, and oil emissions, since emissions from electric power generation are counted in the electricity generation sub-sector. Approximately 90 percent of New Zealand's residential energy consumption is electric power, and residential emissions are a relatively small component of total energy emissions. Residential emissions declined in the mid-1990s as coal was replaced by electric power as the primary residential energy source. Residential emissions are, however, expected to grow with increasing population and GDP. 4NC Table 6 shows historical and projected residential emissions for the "with measures" case.
4NC Table 6: Historical and "with measures" emissions projections from the residential sector (Gg gas)
| 1990 | 1995 | 2000 | 2003 | 2005 | 2010 | 2015 | 2020 | |
|---|---|---|---|---|---|---|---|---|
Carbon dioxide |
565.8 |
399.0 |
555.1 |
550.5 |
598.8 |
675.5 |
718.4 |
778.7 |
Methane |
1.84 |
1.09 |
1.04 |
0.96 |
0.96 |
0.87 |
0.81 |
0.77 |
Nitrous oxide |
0.02 |
0.01 |
0.01 |
0.01 |
0.01 |
0.01 |
0.01 |
0.01 |
Carbon dioxide equivalent emissions |
609.3 |
425.6 |
580.8 |
574.6 |
622.8 |
697.5 |
739.1 |
798.5 |
Notes: The total sum of sub-sectoral emissions from 1990-2003 may not correspond precisely to values in the 2003 Common Reporting Format as an artefact of modelling.
Note: The numbers 2005 onward are projections.
Source: Ministry of Economic Development
Industrial and commercial sub-sector
The industrial and commercial sector includes heavy industries, defined as metals (primarily aluminium and steel), refining, petrochemicals (primarily methanol and urea), forestry processing (primarily pulp and paper and milling), as well as "other industrial and commercial." 4NC Table 7 shows a historical and "with measures" projection of energy emissions from the industrial and commercial sub-sector. Note that this projection excludes industrial process emissions.
4NC Table 7: Historical and "with measures" emissions projections from the industrial and commercial sector (Gg gas)
The heavy industrial sector in New Zealand is dominated by a small number of firms. Since actions by any one of the larger firms could have a significant impact on New Zealand's industrial emissions, projections of these emissions are subject to an unusually high degree of variability as small changes in one firm (or a closure) can dominate the results. For the metals sector, energy growth is projected to be negligible as there are unlikely to be additional amounts of relatively cheap electricity and gas that would make expansion of this sector economically attractive. For the petrochemicals sector a greater than 90 percent decline in gas use from 2003 to 2007 (principally in methanol production) is expected due to the decline of known gas reserves causing sharply increased gas prices. For the forestry processing sector, strong growth is expected due to increased harvesting from the maturation in the period 2010 to 2025 of forest plantings made in the late 1980s and early 1990s.
The levelling in emissions from 2015 to 2020 primarily reflects reduced emissions from the Kapuni gas field, which is assumed to run out in 2018. Kapuni gas contains approximately 50 percent carbon dioxide and this is usually vented to the atmosphere prior to use. The decommissioning of Kapuni results in a reduction of about 0.5 million tonnes of carbon dioxide equivalent emissions.
Electricity generation sub-sector
Electric power emissions are expected to increase sharply between 2005 and 2010 driven by increases in coal-fired generation to meet both overall growth in electric power demand and to substitute for increasingly costly supplies of gas. After 2015, emissions are projected to increase more slowly as growth in demand is increasingly met by wind power. These projections are, however, subject to a great deal of sensitivity to assumptions, particularly cost. Renewables (wind, geothermal, and hydro), gas and coal are all highly competitive for new generation installations in New Zealand; therefore, small changes in cost assumptions could have big impacts on emissions. Such changes in cost could be driven by advances in technology, new gas discoveries, and policies. 4NC Table 8 shows historical and projected electricity generation emissions for the "with measures" case.
4NC Table 8: Historical and "with measures" emissions projections from electricity generation (Gg CO2 equivalent)
| 1990 | 1995 | 2000 | 2003 | 2005 | 2010 | 2015 | 2020 | |
|---|---|---|---|---|---|---|---|---|
Carbon dioxide |
3,485.8 |
2,919.9 |
4,896.5 |
6,335.0 |
6,405.2 |
8,494.4 |
8,676.5 |
8,986.6 |
Methane |
0.2 |
0.1 |
0.2 |
0.2 |
0.1 |
0.2 |
0.2 |
0.2 |
Nitrous oxide |
0.0 |
0.0 |
0.0 |
0.1 |
0.1 |
0.1 |
0.1 |
0.1 |
Carbon dioxide equivalent emissions |
3,493.2 |
2,927.2 |
4,908.3 |
6,357.0 |
6,432.8 |
8,539.8 |
8,722.4 |
9,034.1 |
Notes: The total sum of sub-sectoral emissions from 1990-2003 may not correspond precisely to values in the 2003 Common Reporting Format as an artefact of modelling.
Note: The numbers 2005 onward are projections.
Source: Ministry of Economic Development
4NC Table 9 summarises the underlying engineering analysis of new generation plant potential assumed here. The potential for hydroelectric, geothermal, and wind generation is limited by the availability of suitable sites. The analysis, therefore, broke down the potential for hydro, geothermal, and wind into cost tiers. For this summary table, we have grouped the potential for each of these generation types into two cost tiers.
4NC Table 9: Indicative new plant generation profiles
| Generation Type | Total Cost c/KWh | Potential Capacity MW | Potential Supply GWh pa | Potential Average Load percent |
|---|---|---|---|---|
Hydro |
7.5 to 9.0 |
575 |
3000 |
60 |
11.0 to 13.0 |
190 |
1000 |
60 |
|
Geothermal |
5.5 to 6.5 |
385 |
3000 |
89 |
8.0 |
45 |
350 |
89 |
|
Cogeneration |
2.5 to 5.0 |
350 |
1700 |
55 |
Wind |
6.5 to 7.0 |
1220 |
4800 |
45 |
9.0 to 11.0 |
950 |
3300 |
40 |
|
Gas Combined Cycle |
5.5 to 7.0 |
785 |
4800 |
70 |
Coal |
10.5(1) |
150 |
1050 |
80 |
Distillate |
18.5 to 24.0 |
no limit |
no limit |
75 |
Note: (1) Flue Gas Desulphurisation
Source: Ministry of Economic Development
Comparison with the Third National Communication
4NC Table 10 shows a comparison of projected carbon dioxide emissions for the energy sector from the Third National Communication with this Fourth National Communication. Comparisons of projections for non-carbon dioxide gases are not shown since historical numbers for these gases have been significantly revised, making comparisons of projections not meaningful. These revisions were the result of a 2003 review of emissions factors, which resulted in the replacement of a number of outdated New Zealand-specific emission factors with Intergovernmental Panel for Climate Change default emission factors. There were some revisions to the carbon dioxide emission factors as well, but these were not as significant. [These revisions are discussed in Ministry of Economic Development (2005b),New Zealand Energy Greenhouse Gas Emissions 1990-2003, June 2004, p. v.]
The projected carbon dioxide emissions in this Fourth National Communication are higher than in the Third National Communication for the 2005-2015 periods, reflecting primarily greater than expected use of coal in power generation. This is the result of the withdrawal of a major hydroelectric development proposal and the more rapid than originally anticipated depletion of the Maui gas field. The model also now provides a more accurate accounting for emissions from gas flaring and the carbon dioxide-rich Kapuni gas field. In the 2020 period, energy emissions in this Fourth National Communication are lower than in the Third National Communication, reflecting lower use of coal in power generation. This change is driven primarily by technological improvements that are expected to lead to a greater uptake of wind energy.
4NC Table 10: Comparison of energy sector carbon dioxide emissions in the Third National Communication and Fourth National Communication
Transport Sector
Transport accounts for almost half of New Zealand's energy use and a corresponding fraction of energy greenhouse gas emissions. Transport energy use is also quite distinct from other energy uses in that it relies almost entirely on liquid fuels, while other applications of energy use comparatively small amounts of liquid fuels.
Overview
4NC Figure 34 shows a chart of historical and projected carbon dioxide equivalent emissions for the transport sector.
4NC Table 11 shows a summary of historical and projected emissions for the domestic transport sector.
4NC Table 11: Historical and "with measures" emissions projections from transport (Gg gas)
View historical and "with measures" emissions projections from transport (Gg gas) (large table)
4NC Figure 34 shows a chart of historical and projected carbon dioxide equivalent emissions for the transport sector. 4NC Figure 34 shows that transport sector emissions have grown rapidly, and are projected to continue to grow rapidly reflecting the general growth of the New Zealand economy.
Land transport
4NC Table 12 shows a summary of historical and projected emissions for the land transport sector.
4NC Table 12: Historical and "with measures" emissions projections from land transport (Gg gas)
View historical and "with measures" emissions projections from land transport (Gg gas) (large table)
A comparison of the numbers in 4NC Table 12 with those in 4NC Table 11 shows that land transport, which consists primarily of road transport, accounts for the major portion of New Zealand's transport emissions, and the major portion of the growth in these emissions.
