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Review of New Zealand's Net Position

Executive summary

1 Introduction

2 Sector reviews

3 Impacts of New Zealand's Climate Change Policies

4 Compilation and processes used for the Net Position report 2005

5 Conclusions and recommendations

6 References

Appendix A: Additional analysis of the New Zealand SADEM Energy Model

Appendix B: Priority ranking of SADEM Energy Model improvements

5 Conclusions and recommendations

The main purpose of this review has been to assess the reasonableness of the methodologies and assumptions that lay behind the projection forecasts as documented in New Zealand's 2005 Net Position report (MfE 2005a).

In general, we have found the methodologies employed to project emissions and sinks across the different sectors to have been sound and reasonable in their approach. We have also considered that the whole of Government approach used in compilation of the projections assessment is appropriate for the national circumstances in New Zealand. However, as with any set of national projections and the respective compilation process, it has been possible to identify a number of potential improvements that would help to further increase the accuracy and robustness of future forecasts.

Full discussion and justification for these various suggested improvements is contained in the preceding sector and policy sections of this report and so these should also be referred to. We of course also note that on the basis of our discussions with Government officials, work on many of these improvements is planned for the future, or is already being addressed through on-going development work by the respective Government departments and Agencies.

The main recommendations arising from the review and described earlier are detailed below, prioritised on the basis of their perceived significance on the magnitude of forecast emissions on a sectoral or policy basis and on process/compilation issues.

Recommendations considered as being of high priority

• Energy sector: Use existing bottom-up models of key sectors (e.g. transport and residential) to cross-check the results from SADEM and, in the longer term, consider incorporating more bottom-up detail within SADEM. This will also be useful for modelling policy impacts;
• Energy sector: Revisit usage of the degree day variables in residential and OIC sectors;
• Energy sector: Explore disaggregation of sectors in OIC, possibly at the 1-digit ANZSIC level;
• Energy sector: Liase with Ministry of Transport to consider roles and responsibilities for transport energy demand modelling going forward;
• Energy sector: Consider the use of a modular demand function for estimating petrol and diesel demand (i.e., fuel demand = vehicle fleet x utilisation x fuel efficiency);
• LULUCF: Improve knowledge of the reasons and drivers for the downward trend in new forest planting to allow improved forecasting concerning the future possible intentions of forest owners;
• LULUCF: Improve quantification of the areas of planting of post-1990 forest at national scale into existing shrublands that meets Kyoto Protocol definition of forest;
• LULUCF: Improve estimation of areas deforested and drivers for this process;
• LULUCF: Undertake further research on the time pattern of loss of carbon from soils after afforestation;
• Agriculture: Improve understanding of the drivers for the rapid increase in nitrogenous fertiliser use and judge whether these can be expected to continue and whether other measures to limit fertiliser use (e.g. environmental concerns) may have an impact;
• Agriculture: Consider defining optimistic and pessimistic scenarios for livestock numbers by examining the effect of potential changes in the PRSM drivers (price data etc) rather than just for a somewhat arbitrary range based on the 2004 livestock numbers;
• Process: Establish a steering group to oversee the projection compilation process;
• Process: Improve project planning and documentation and introduction/implementation of a formal QA/QC plan for the projection compilation;
• Process: Improve written documentation to fully describe methodology and assumptions made across all sectors;
• Compilation: Ensure internal consistency both across sectors (e.g. the same rate of deforestation is used in the agriculture sector as in LULUCF sector) and in off model calculation (e.g. PRE liabilities);
• Policies: Further integrate the analysis of policy impacts to ensure that these is no double-counting of savings;
• Policies: Give consideration to how the impacts of non-modelled policies start to become part of the SADEM projections (i.e. once even some of the policy impact is included within the SADEM projection, it will no longer be appropriate to simply subtract the full saving attributable to the policy from the CO₂ projections, as this will result in double counting);
• Compilation: Perform a consistency check between the results of SADEM in relation to the success rate for projects and the assumptions used to calculate the liabilities from PREs in the compilation of the overall net position;
• Policies: Improve the documentation available concerning the basis of the attributed emission savings anticipated from climate change policies (particularly for the optimistic and pessimistic estimates).
• Uncertainties: Improve the transparency of the uncertainty calculations by clearly defining the basis for calculating the uncertainty ranges and using a consistent approach to quantifying uncertainties across sectors in terms of deciding what is trying to be quantified i.e. the uncertainty caused by future unpredictability (e.g. uncertainty in the forecasts of key drivers) or value uncertainty (e.g. uncertainty in data values).

Recommendations considered as being of lower priority

• LULUCF: Improve the information/quantification on the burning and decay of scrub vegetation;
• Agriculture: Keep under review the use of a linear extrapolation of enteric emission factors and factors for nitrogen excreted per head. Consideration should be given to examining the trend if single year rather than three year average data is used;
• Waste: Consider using an alternative calculation methodology for emissions from wastewater treatment to increase the robustness of this forecast estimate;
• Energy: Consider revising the methodology for calculating non-CO₂ greenhouse gas emissions from fuel combustion to a UNFCCC Tier 1 approach (emission factor X fuel consumption);
• Policies (waste): Revisit the basis of the savings forecast from policies in this sector and document the attributed savings in a clear and transparent fashion;
• Policies (PREs): Conduct a comparison of the project economics provided to government under the PRE tender round with those currently assumed for each plant type in SADEM to help improve the realism of the data in the model;
• Policies (PREs): Conduct a comparison of the modelled (SADEM) savings per kWh with those assumed in the PRE evaluation to ensure these are broadly consistent;
• Policies (NGAs): Ensure an improved understanding of impacts of NGA's is obtained from the ongoing work by MED looking at energy demand within the heavy industry sector;
• Compilation: Reinvigorate efforts to ensure the use of common datasets across all sectors.
• Compilation: consider aligning the definitions of projections used in the net position work to those used for international reporting to the UNFCCC.