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1 Executive Summary

This report updates New Zealand’s projected quantity of emissions and removals of greenhouse gases during the first commitment period (2008–2012) of the Kyoto Protocol. The report is known as the net position report. The projected quantity of emissions and removals is a core component of New Zealand’s projected financial surplus or deficit over the first commitment period of the Kyoto Protocol. The other components are the international price of emissions units and the exchange rate between the New Zealand and United States currencies.

The report is a compilation of projections by sector from across government. Agricultural and forest sink projections are provided by the Ministry of Agriculture and Forestry, energy (including transport) and industrial processes projections are from the Ministry of Economic Development, and waste and solvent emissions projections are from the Ministry for the Environment. The Ministry for the Environment calculates the projected balance of units using the projected emissions and removals by sector.

This report includes the effects of refinements in modelling process and updated assumptions on variables such as economic growth, population growth and oil prices as at May 2007. The projections use the information from the latest national inventory of greenhouse gas emissions and removals submitted to Secretariat of the United Nations Framework Convention on Climate Change (the Convention) on 4 May 2007 (MfE, 2007a).

The projections reported in this document reflect the government’s agreed policies as at the end of April 2007. New policies which have been included since the 2006 net position report are the biofuels sales obligation and the solar hot water programme.

The net position report provides a projection of greenhouse gas emissions for the first commitment period of the Kyoto Protocol relative to total emissions in the base year of 1990. In comparison, the national inventory of greenhouse gas emissions and removals provides a record of New Zealand’s actual greenhouse gas emissions and removals from 1990–2005. A key difference is that the net position report is based around Kyoto Protocol accounting rules for land use, land-use change and forestry, whereas the national inventory adheres to the reporting requirements for inventories under the Convention.

2007 results

As at May 2007, New Zealand’s net position is projected to be a deficit of 45.5 million units1 over the first commitment period of the Kyoto Protocol.

The May 2007 projection shows a change from previous projections. In May 2006, the most likely estimate for the projected net position was a deficit of 41.2 million units. There were four key changes to the components of the net position estimate between the 2006 estimate and the 2007 estimate:

  • New Zealand’s assigned amount increasing (1.9 million units) due to improvements in New Zealand’s Greenhouse Gas Inventory. Increasing the assigned amount lowers the net position deficit.

  • New Zealand’s agriculture greenhouse gas emissions are now projected to be 4.3 million tonnes carbon dioxide equivalent higher than projected in 2006. This is mainly attributable to projected increases in dairy cow numbers as a consequence of higher world commodity prices for dairy products.

  • New Zealand’s emissions from energy are now projected to be 1.5 million tonnes carbon dioxide equivalent higher than projected in 2006 due to the expected higher level of dairy processing.

  • New Zealand’s transport emissions are projected to be 1.3 million tonnes carbon dioxide equivalent higher as a result of integrating the more comprehensive vehicle fleet emissions model to project transport emissions.

The Ministry of Agriculture and Forestry has provided a most likely scenario for deforestation of 21.0 million tonnes carbon dioxide. This scenario is based on the government’s current policy to cap the Crown’s deforestation liability for pre-1990 forests at 21.0 million tonnes carbon dioxide. A deforestation survey undertaken in 2006 indicated that deforestation is likely to exceed the 21.0 million tonne cap in the absence of policy interventions under current market conditions. The 2006 deforestation intention survey indicated that forest owners currently intend to deforest about 50,000 hectares during the first commitment period of the Kyoto Protocol. This area would generate deforestation emissions of approximately 41.0 million tonnes carbon dioxide. If the upper deforestation emissions value is assumed, the projected net position deficit increases by 20 million units to a deficit of 65.5 million units. This report presents both values for deforestation during the first commitment period.

Uncertainty

There is still a great deal of uncertainty as to what the final balance of units or net position will be during the first commitment period. The government’s climate change policy is continuing to develop. It will not be until the national greenhouse gas inventory covering the first commitment period of the Kyoto Protocol is accepted as final by the compliance committee of the Kyoto Protocol, when New Zealand will actually know the true value of the net position. The uncertainty around the net position estimate is large. The most significant source of uncertainty is attributable to the values used for forest sinks and this will continue to be the case until the Land Use & Carbon Analysis System being developed by the Ministry for the Environment becomes operational.

Three scenarios are used to quantitatively assess uncertainty about each sector projection. The variables used in the scenarios represent the best available knowledge as at the time of projection. The most likely scenario represents what is considered the most likely outcome of projected emissions, reductions from fully implemented policies and removals via forest sinks. It is highly unlikely that all upper or all lower situations will occur together, for this reason totals are not reported.

High uncertainty reflects the difficulty in modelling the complex relationships of the New Zealand energy sector, projecting agricultural markets and animal productivity, and projecting removals from forest sinks prior to the Land Use & Carbon Analysis System becoming operational. The projected value of the net position will continue to change as projection models are further refined, assumptions are updated and the interpretation of the Kyoto accounting rules are applied in practice.

Review

Audit New Zealand will conduct an annual audit of the net position estimate. This year AEA Technology will perform a periodic review of the net position. AEA Technology is the same independent, UK-based consulting firm that completed the 2005 net position review.

1 One emissions unit is equivalent to one tonne of greenhouse gas emissions converted to carbon dioxide equivalent by the global warming potential.

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