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Projected Balance of Emissions Units During the First Commitment Period of the Kyoto Protocol

1 Executive Summary

2 Introduction

3 Net Position Compliance Equation

4 Projected Emissions over the First Commitment Period of the Kyoto Protocol

5 Sectoral Emissions

6 References

Annex A: Agriculture Emissions Projections provided by Ministry of Agriculture and Forestry

Annex B: Energy and Industrial Processes Emissions Projections provided by Ministry of Economic Development

Annex C: Land Use, Land-use Change and Forestry Sector provided by the Ministry of Agriculture and Forestry

Annex D: Waste Emissions Projections provided by Ministry for the Environment

5 Sectoral Emissions

5.1 Agriculture

5.1.1 Sector coverage

Emissions of methane and nitrous oxide are produced when biomass (organic matter) is consumed, decays or is burnt. Naturally occurring emissions are modified by human activities such as cultivation, addition of nitrogenous fertilisers, farming of livestock, deliberate burning, or flooding. New Zealand has five subsectors within agriculture that produce greenhouse gas emissions. The subsectors are:

1. Enteric fermentation is a by-product of digestion by ruminant livestock. This is New Zealand’s highest single emissions category, contributing 31 per cent to total national emissions in 2005.
2. Agricultural soils emissions are associated with the application of nitrogenous fertilisers, animal wastes deposited to agricultural soils, and the use of nitrogen fixing crops. Emissions can be direct from the soil, and indirect through atmospheric deposition, leaching and run-off.
3. Manure management produces emissions from decomposition of animal waste held in manure management systems (eg, stored in ponds).
4. Savanna burning emissions are from the controlled burning of tussock grasslands. The amount of tussock burned has been steadily decreasing since 1959.
5. Burning of agricultural residues emissions are from field burning of crop residues, including barley, wheat and oats.

5.1.2 Projected emissions

Total emissions from the agriculture sector are projected to range from 180.0 million tonnes carbon dioxide equivalent to 228.3 million tonnes carbon dioxide equivalent over the first commitment period of the Kyoto Protocol, with a most likely value of 203.1 million tonnes carbon dioxide equivalent. Average annual emissions over the first commitment period are projected to range from 37.5 million tonnes carbon dioxide equivalent to 45.7 million tonnes carbon dioxide equivalent with a most likely value of 40.6 million tonnes carbon dioxide equivalent.

Agriculture emissions projections are driven by future values for:

• animal numbers by species: dairy cattle, beef cattle, sheep and deer in 2010 using the Ministry of Agriculture and Forestry’s Pastoral Supply Response Model

• rates of methane emissions per animal based on changes in past emissions per animal between 1990 and 2005

• rates of nitrogen output per animal based on changes in past nitrogen output per animal between 1990 and 2005

• level of nitrogen fertiliser use based on an econometric model that projects future use from projected animal numbers, fertiliser prices and other variables (output prices, agricultural productivity growth).

The most likely value for annual emissions at 2010 is 0.86 million tonnes carbon dioxide equivalent higher than was projected in 2006 and 4.30 million tonnes carbon dioxide equivalent higher over the commitment period. The difference between the optimistic and pessimistic scenarios is now 8.39 million tonnes carbon dioxide equivalent compared to 8.40 million tonnes carbon dioxide equivalent in the 2006 forecast estimates.

Two further scenarios were developed: lower and upper emissions scenarios. The upper emissions scenario combined the upper 95 per cent projection interval values for animal numbers, methane emissions per head, nitrogen output per head and nitrogen fertiliser use. The lower emissions scenario combined the lower 95 per cent projection interval values for animal numbers, methane emissions per head, nitrogen output per head and nitrogen fertiliser use. These two scenarios give an estimate of the values of the upper and lower bounds of future projected emissions at the 95 per cent confidence level.

Table 5: Summary of 2007 emission projection scenarios for 2010

Note: Some figures may not add due to rounding.

Source: MAF (2007a)

Table 6: Projected most likely animal numbers in 2010

Source: MAF (2007a)

The 2007 nitrogen application forecast for 2010 is lower than the 2006 nitrogen fertiliser application forecast (403,709 tonnes). This is due to expected higher real nitrogen fertiliser price relative to agricultural commodity prices. The nitrogen fertiliser model results in 2006 were not price responsive.

Technologies that reduce emissions at an individual animal level may emerge over the next five years. Nitrification inhibitor dicyandiamide is an example of an emerging emission reduction technology that has been shown to reduce nitrous oxide emissions in grazed pastures. Mitigation technologies, such as dicyandiamide have not been factored into the projections as they may not have be widely adopted by 2010 and may be counter balanced by greater improvement in animal productivity growth. Industry strategy plans, particularly in the dairy industry, are seeking production gains of at least three per cent per annum in milk production. Favourable commodity price forecasts suggest that these ambitious growth targets are more likely to be met.

In terms of nitrogen fertiliser usage, future changes such as limitations on nitrogen fertiliser use in some catchments, eg, Lake Taupo and Lake Rotorua, the conversion of pastoral land to forestry, the Dairying Clean Streams Accord, regional council initiatives, industry codes of practice and the increasing price of nitrogen fertiliser are likely to limit another steep upward trend in fertiliser nitrogen usage apparent during the period 1992 to 2003.

On the other hand, the recent increase in commodity prices, particularly for dairy products, is likely to lead to more nitrogen fertiliser being applied. Nitrogen fertiliser still provides the least cost means of securing additional dry matter production. Also the clover root weevil, a pest found in New Zealand in 1996, is reducing nitrogen fixation by clover, New Zealand’s main source of nitrogen for pastures. The response of some affected farmers has been to increase the use of nitrogen fertiliser and feed supplements.

5.1.3 Reconciliation with 2006 projection

Assumptions

The increase in emissions compared to the 2006 projections is mainly attributable to the higher forecast of dairy animal numbers as a consequence of current high world commodity prices for dairy products. International spot market prices for whole milk and skim milk powders have increased by over 50 per cent since September 2006, and have led price increases across all dairy commodity groups. Constrained supply of dairy commodities from a number of key exporting countries has been the main cause of the higher prices. Supply of powders onto international markets from the European Union fell due to a switch in production from powders to cheese; changes to the Common Agriculture Policy have driven this. The drought in Australia, which has constrained milk production, has also had a major impact during the past nine months.

Relative to the 2006 net position report, higher commodity prices for dairy products are now expected to prevail during the first commitment period of the Kyoto Protocol.

Method

Changes in estimation methodologies have been implemented to take into account new approaches and information obtained since the last update in May 2006. Overall these methodological changes lead to a reduction of emissions in excess of 1990 levels.

Changes were implemented in two areas:

• the projection of nitrogen fertiliser application in 2010 was based on an improved methodology developed by Ministry of Agriculture and Forestry. The methodology improvement resulted in a lower projection of nitrous oxide emissions

• updating the National Greenhouse Gas Inventory methodology in keeping with the Convention guidance for maintaining “Good Practice”. Two changes were implemented in the agricultural section of the National Greenhouse Gas Inventory in 2007, in which the 2005 emission levels are reported. These were:

  • the crop residue burning fraction for 2005 was reduced from 50 per cent to 30 per cent. This change had a minor impact on emissions output
  • the commencement of the period over which animal emissions are reported was changed from a July to June year to a January to December year, commencing in January 1989. Three year averages are used to derive animal populations. This change resulted in an approximate one per cent increase in the 1990 emissions levels for agricultural methane and nitrous oxide.

5.1.4 Uncertainty

These projections are forecasts of future agriculture greenhouse gas emissions. Forecasts are greatly influenced by prevailing conditions. As such these projections need to be assessed within the uncertainties of biological systems affected by climate and changing economic conditions, including changing international commodity prices and the New Zealand dollar exchange rate. Every effort has been made to provide the best projections of future emissions however, future changes in projected emissions are inevitable to allow for future changes in economic conditions and other factors.

An assumption implicit in the projections is that the rate of increase in productivity per animal over the next five years will be the same as the rate of increase in animal performance over the past 15 years, and therefore a linear extrapolation of methane emissions per animal is appropriate. It is possible that the rate of increase in animal performance may decline over time. To test this, other non-linear relationships were looked at; however no significant improvement in relationship was gained.

5.2 Energy (including transport) and industrial processes

5.2.1 Sector coverage

The energy sector (including transport) contributes around 40 per cent of New Zealand’s total greenhouse gas emissions.

The transport sector contributes a large portion of all emissions from the energy sector. Emissions for this sector have grown significantly since 1990 averaging over three per cent growth per annum. The growth in transport emissions is largely due to the increased use of the two major liquid fuels of petrol and diesel as well as increased use of aviation fuels.

On average, around two-thirds of annual electricity needs are met by hydro-electric generation. The balance is provided by geothermal generation, thermal generation using natural gas and coal, and other renewable sources such as wind and co-generation using wood.

Industrial processes contribute around six per cent of New Zealand’s total greenhouse gas emissions. There are six major industrial processes that are represented in this sector:

• the reduction of iron and in steel production

• the oxidisation of anodes in aluminium production

• the production of hydrogen

• the calcination of limestone of use in cement production

• the calcination of limestone for lime

• the production of ammonia and urea.

Emissions from the industrial processes sector are dominated by emissions from the metal industry.

5.2.2 Projected emissions

Total emissions from the energy and transport sectors are projected to be 172.9 million tonnes carbon dioxide equivalent for the first commitment period of the Kyoto Protocol.

Table 7: Projected energy and industrial process emissions

Source: MED (2007)

Note: Some figures may not add due to rounding.

For industrial processes the Ministry of Economic Development models carbon dioxide emissions only. Carbon dioxide emissions were increased by 19 per cent to adjust for non-carbon dioxide greenhouse gases. Total emissions from the industrial processes sector are projected to be 22.2 million tonnes carbon dioxide equivalent for the first commitment period of the Kyoto Protocol.

5.2.3 Reconciliation with 2006 projection

Since the 2006 net position report, a number of enhancements have been made in the energy sector (including transport):

• actual data for 2005 and where possible actual data for 2006 has been incorporated

• the ‘Other Industrial and Commercial’ model has been disaggregated into two separate sectoral models for ‘Commercial’ and ‘Other Industrial’

• demand elasticities have been incorporated into the new ‘Commercial’ and ‘Other Industrial’ models

• enhancements have been made to modelling on-road transport, utilising the Ministry of Transport’s Vehicle Fleet Emissions Model

• enhancements have been made to the fugitive emissions model.

These enhancements coupled with revised assumptions lead to projected emissions from the energy and transport sectors (excluding industrial processes) being 2.8 million tonnes carbon dioxide equivalent (1.6 per cent) higher than in the 2006 net position estimate.

Table 8: Projected most likely emissions results for the energy sector for 2006 and 2007

Source: MED (2007)

The increase in total greenhouse gas emissions from the energy sector (including transport) is the result of the following changes since net position 2006:

• In the 2007 projected net position, Methanex is assumed to operate until 2009. In the 2006 projected net position, Methanex was assumed to cease production prior to 2008. Methanex’s operation during the first commitment period of the Kyoto Protocol increases the projected net position.

• Revised Ministry of Agriculture and Forestry dairy herd projections used in modelling are higher than those used in 2006 net position, resulting in higher projected energy emissions from energy use in dairy processing.

• Enhancements to the ‘Other Industrial’ and ‘Commercial’ models have resulted in higher emissions projected from these sectors in the 2007 net position estimate.

• The use of the Vehicle Fleet Emissions Model to enhance on-road transport emissions has increased projected emissions from the transport sector in the projected 2007 net position estimate. The Vehicle Fleet Emissions Model was not used in modelling work for 2006 net position estimate.

A number of factors have contributed to lower emissions from some sectors in the 2007 net position projection, partially offsetting the increase:

• In the electricity sector there is increased certainty on commissioning of new renewables, increased confidence in the availability of gas through the first commitment period of the Kyoto Protocol. Genesis Energy’s Energy Efficiency Enhancement Project (known as E3P) is a new gas-fuelled, combined-cycle plant at Huntly and is in the final stages of commissioning. These factors, combined with reducing flexibility in supply of gas result in more gas fired generation relative to coal fired generation.

• The inclusion of recent actual data for air and sea transport has slightly decreased emissions from air and sea transport.

• Enhancements to the fugitive emissions model have led to decreased fugitive emission projections.

For industrial processes the Ministry of Economic Development models carbon dioxide emissions from industrial processes only (Table 9). Total carbon dioxide emissions from industrial processes are provided to the Ministry for the Environment as an input to the modelling of overall greenhouse gas emissions from industrial processes. The Ministry for the Environment increases carbon dioxide emissions by 19 per cent to adjust for non-carbon dioxide greenhouse gases.

Table 9: Projected most likely emissions of carbon dioxide only from industrial processes

Source: MED (2007)

5.2.4 Uncertainty

The following is a non-exhaustive list of conditions that could affect actual emissions from energy (including transport) and industrial processes for the first commitment period of the Kyoto Protocol:

• overall New Zealand economy performance (rapid growth or recession)

• impact of government policy measures, such as the New Zealand Energy Strategy

• success of various energy efficiency programmes

• fluctuations in international oil, coal and gas prices

• fluctuations in international commodity prices (eg, dairy prices)

• negotiated outcomes between fuel suppliers and electricity generators, who may switch fuels depending upon their price and availability

• emissions from electricity generation may fluctuate from year to year due to changing hydrological conditions

• decisions to build additional renewable plant before 2012

• constraints on gas supplies

• fuel mix for industrial sector expansions

• decisions by industrial consumers to locate operations overseas

• impacts on competitiveness of New Zealand industry due to exchange rate fluctuations (especially dairy and forestry)

• uncertain consumer response to changes of oil price (such as buying smaller size cars, diesel cars, or use of public transport)

• physical disasters impacting energy facilities or major energy consumers, such as major breakdown of electricity generator or major breakdown of high-voltage direct current link that connects the North and South Islands

• pandemic or natural disaster

• the continued operation of the Methanex methanol plant during the first commitment period of the Kyoto Protocol.

In 2007, upper and lower emissions scenarios were run to provide an indication of the range of uncertainty in the projections. Table 10 presents the results of these two scenarios, compared to the 2007 “most likely” scenario.

Table 10: Summary of assumptions and effects of upper and lower emissions scenarios

Source: MED (2007)

The projected balance of emissions from energy (including transport) during the first commitment period of the Kyoto Protocol lies in the range between 162.8 million tonnes carbon dioxide equivalent and 187.7 million tonnes carbon dioxide equivalent with the most-likely scenario of 172.9 million tonnes carbon dioxide equivalent. This compares with a range from 156.2 million tonnes carbon dioxide equivalent to 187.2 million tonnes carbon dioxide equivalent in the 2006 net position report for energy and transport. The overall range in 2007 net position projections has diminished.

5.3 Land use, land-use change and forestry

5.3.1 Sector coverage

As forests grow they remove carbon dioxide from the atmosphere through photosynthetic activity. The Kyoto Protocol provides mechanisms for Parties to account for carbon dioxide removals by forests established on land that was non-forest at 1990. These removal units can be used to offset greenhouse gas emissions from other sectors.

This section provides projected carbon dioxide removals and emissions from New Zealand’s land use, land-use change and forestry sector, limited to post-1990 afforestation, reforestation and deforestation activities accounted for under the Kyoto Protocol.

5.3.2 Projected removals and emissions

Carbon dioxide removals (less deforestation emissions) by the land use, land-use change and forestry sector for the first commitment period of the Kyoto Protocol are projected to be in the range of 16.0 to 98.3 million tonnes carbon dioxide equivalent. The base scenario is projected to be a net removal of 58.0 million tonnes carbon dioxide equivalent.

The key assumptions used in these projections are:

• future rates of deforestation

• forest growth rates

• the proportion of afforestation since 1990 which may be ineligible Kyoto forest because some may have been over-planted onto land which was already defined as forest

• the loss of soil carbon following afforestation of grassland

• future afforestation rates.

The projections also include error bounds around the existing area of Kyoto forests.

Table 11 provides a breakdown of the major contributing factors on which the removal and emission projections are based.

Table 11: Land use, land-use change and forestry projected carbon dioxide removals and emissions (million tonnes carbon dioxide equivalent relative to the most likely scenarios)

1 The combined model results account for interrelationships between adjustment factors (forest area, growth rates, soil carbon changes, ineligible afforestation, and scrub clearance during site preparation). The removals attributed to each factor are not additive, because some factors are correlated. For example, the impact of soil carbon decline due to afforestation is –3.0 Mt CO₂ under the most likely new planting assumption, but falls to –2.5 Mt CO₂ under the most likely ineligible afforestation scenario, because the area planted is reduced. Three separate simulations were run using all of the high emissions, most likely emissions and low emissions assumptions respectively to produce the combined model results.

2 Current government policy as at March 2007 is to cap its liability for deforestation of pre-1990 forests at 21.0 Mt CO₂-e.

3 41.0 Mt CO₂-e represents 50,000 hectares which is the base scenario from a deforestation intentions survey carried out in late 2006. An “accelerated deforestation and more” scenario presented in the deforestation report was 65,000 hectares or 53.3 Mt CO₂-e.

5.3.3 Deforestation

Emissions from forecast deforestation for the period 2008 to 2012 are currently projected to be in the range of 21.0 to 41.0 million tonnes carbon dioxide equivalent. The government is currently consulting on policy options to manage deforestation. As at March 2007, in the absence of any new deforestation policy decisions, the 2002 government stated policy⁵ of capping the Crown’s liability for deforestation of pre-1990 forests at 21.0 million tonnes carbon dioxide equivalent has been used for the most likely and low emissions scenarios in these projections.

Deforestation rates will have a substantial effect on New Zealand’s net position during the first commitment period of the Kyoto Protocol. If there are no policy measures put in place to manage the government’s liability within the cap then the level of deforestation emissions is likely to be significantly higher than 21.0 million tonnes carbon dioxide.

Furthermore, if the government did not implement policies to manage deforestation in the first commitment period it is likely that some forest owners may bring future (post-2012) deforestation forward into the first commitment period if they believed that post-2012 policy measures to control deforestation were likely to be introduced. A 2006 deforestation intentions survey indicated that between 17,000 and 37,000 hectares of plantation forest was intended to be deforested over the period 2013–2017. Clearly any deforestation brought forward into the first commitment period of the Kyoto Protocol would further increase deforestation emissions beyond the high emissions scenario presented in this report.

5.3.4 Afforestation

The most likely scenario assumes annual afforestation of 5,000 hectares. The low emissions scenario assumes average afforestation of 20,000 hectares per year for the first commitment period of the Kyoto Protocol. The high emissions scenario assumes no further afforestation occurs after 2006. Table 12 below shows the annual afforestation rates used in the 2007 projections.

Table 12: Land use, land-use change and forestry sector future plantation afforestation (hectares)

5.3.5 Reconciliation with 2006 projection

The most likely scenario of projected net removals of 58.0 million tonnes carbon dioxide equivalent is very similar to the 2006 most likely scenario of 57.2 million tonnes carbon dioxide equivalent.

Removals (less deforestation emissions) have decreased for both the high and low emissions scenarios. For the low emissions scenario the deforestation cap of 21.0 million tonnes carbon dioxide equivalent has been used. In 2006 the low scenario used was 6.3 million tonnes carbon dioxide equivalent for deforestation emissions. The high scenario for deforestation emissions is 41.0 million tonnes carbon dioxide equivalent based on the 2006 deforestation intentions survey results.

Estimates of net removals for the high emissions and low emissions scenarios in 2007 have also changed since 2006 due to an allowance being made for the uncertainty of New Zealand’s Kyoto forest area.

5.3.6 Uncertainty

The land use, land-use change and forestry projections need to be used with an understanding of the large uncertainties they contain. These uncertainties are due to the complexity of projecting biological systems which are inherently variable and are also affected by changing economic conditions. These projections are based on currently available information and the current state of scientific knowledge. Every effort has been made to provide the best projections at this time however, future changes in projections are inevitable as economic conditions change, and as new scientific knowledge and improved information become available.

Net removals by the land use, land-use change and forestry sector (that is, removals by post-1990 forests minus deforestation emissions) for the Kyoto Protocol commitment period are projected to be in the range of 16.0 to 98.3 million tonnes carbon dioxide equivalent. The land use, land-use change and forestry sector projections have the largest uncertainty of the five sectors in the net position report.

Table 13: Land use, land-use change and forestry projected carbon dioxide removals and emissions during the first commitment period (million tonnes)

1 The combined model results account for interrelationships between adjustment factors (forest area, growth rates, soil carbon changes, ineligible afforestation, and scrub clearance during site preparation). The removals attributed to each factor are not additive, because some factors are correlated.

2 Current government policy as at March 2007 is to cap its liability for deforestation of pre-1990 forests at 21.0 Mt CO₂.

3 41.0 Mt CO₂ is based on 50,000 ha deforestation which is the base scenario from a deforestation intentions survey carried out in late 2006. For a description on the deforestation intentions survey results refer to Manley, 2006. Details on the calculation of deforestation emissions are available later in this report and in Wakelin et al, 2007.

5.4 Waste

5.4.1 Sector coverage

Greenhouse gas emissions arise from three waste sector sources – solid waste disposal sites, domestic wastewater treatment plants and industrial wastewater treatment plants.

Waste sector emissions in 2005 are now 0.6 million tonnes carbon dioxide equivalent (25.9 per cent) below the 1990 baseline value of 2.5 million tonnes carbon dioxide equivalent.

The reduction in emissions from 1990 to 2005 has occurred in the solid waste disposal on land category as a result of initiatives to improve solid waste management practices and increase landfill gas capture rates in New Zealand.

5.4.2 Projected emissions

Emissions from the waste sector over the first commitment period are expected to range between 6.7 million tonnes carbon dioxide equivalent and 7.3 million tonnes carbon dioxide equivalent. Projected annual emissions for 2010 are expected to lie between 1.34 million tonnes carbon dioxide equivalent and 1.45 million tonnes carbon dioxide equivalent per annum with a most-likely value of 1.4 million tonnes carbon dioxide equivalent.

Since 1990, there has been a large decrease in emissions due to decreased waste volumes and less organic matter entering landfills. The New Zealand waste strategy (MfE, 2002) and national environmental standard for landfill gas collection and destruction are projected to further decrease sectoral emissions despite increasing solid waste volumes and increases in emissions from wastewater treatment.

5.4.3 Reconciliation with 2006 projection

Projected emissions from the waste sector have increased 0.5 million tonnes carbon dioxide equivalent from the 2006 projections due to:

• emissions from wastewater treatment have been revised upwards due to methodological improvements resulting in an increased methane emissions factor

• assumptions regarding the impact of the New Zealand Waste Strategy.

5.4.4 Uncertainty

Upper and lower emissions projections for the first commitment period are based on variations in the outcome of existing waste minimisation and management policies.

5.5 Solvents and other products

5.5.1 Sector coverage

This sector reports emissions from the evaporation of volatile chemicals when solvent based products are exposed to air, during processes such as chemical cleaning substances used in dry cleaning, printing, metal degreasing and a variety of industrial and household uses. Also included are emissions from paints, lacquers, thinners and related materials.

The sector is a minor contributor to New Zealand’s total greenhouse gas emissions, being responsible for just 0.03 million tonnes carbon dioxide equivalent of emissions (less than 0.1 per cent of total emissions).

5.5.2 Projected emissions

Emissions from the solvents and other product use sector is estimated by a simple linear extrapolation of emissions reported in the greenhouse gas inventory from 1990 to 2005. Total emissions are projected to be 0.3 million tonnes carbon dioxide equivalent during the first commitment period of the Kyoto Protocol.

5.5.3 Reconciliation with 2006 projection

Changes in projected emissions from solvents and other products cannot be observed at the one decimal place level of reporting.

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