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Executive Summary

This report presents the findings of a review by AEA Energy and Environment, the Policy Studies Institute and the Centre for Ecology and Hydrology of New Zealand’s 2007 net position report (MfE 2007). Under the terms of the Kyoto Protocol of the UN Framework Convention on Climate Change (UNFCCC) (to which New Zealand is a signatory) developed countries have agreed to limit their overall emissions of a basket of greenhouse gases from a given base year (1990 in most cases) by the period 2008–12 (the first commitment period). For New Zealand, the limit set in the Kyoto Protocol is that average emissions of the basket of greenhouse gases over this commitment period will be 100% of 1990 emissions, i.e. emissions over the five-year commitment period must total no more than five times 1990 emissions.

The 2007 net position report, which was published in September 2007, describes the most recent estimation of New Zealand’s net position with respect to its Kyoto target over the first commitment period. The report suggests that New Zealand’s net position is estimated to be a deficit of 45.5 million tonnes of carbon dioxide equivalent over the first commitment period compared to the Kyoto target. This figure has been revised upwards from the May 2006 estimate, which estimated that there would be a deficit of 41.2 million tonnes of carbon dioxide equivalent.

In 2005, the same team completed an in-depth review of New Zealand’s 2005 greenhouse gas projections methodology. Their report (AEA, 2005) made a number of recommendations for improving the projections methodology. The aims of this 2007 review were to assess whether the recommendations made in the 2005 review have been implemented, identify any further areas for improvement and to examine the approach taken to assess uncertainty.

Overall we have found the methodologies employed to project emissions and sinks across the sectors for the 2007 net position report to be generally sound and reasonable in their approach. Furthermore we consider that the improvements, which have been made since the 2005 projections, mean that the 2007 projections are more robust and better documented than the 2005 projections. While any projection of greenhouse gas emissions will be subject to uncertainty, we consider that the projections form a reasonable assessment of New Zealand’s net position over the first commitment period.

Overall, there has been significant progress towards implementing the recommendations made in the 2005 review. In the energy and transport sector, key improvements have been made to the modelling methodology, particularly in the industrial and commercial sectors. However, we still believe the use of a more technologically explicit, bottom up model to address energy efficiency and consumer preferences for different energy services in the residential sector may be appropriate. In the land use, land use change and forestry (LULUCF) sector all recommendations have been implemented, although in some cases implementation is not complete as data is required from the Land Use and Carbon Analysis System (LUCAS) project, which is due to become operational in 2010. High priority recommendations in the agriculture sector have been implemented. The compilation process has also been improved, with the introduction of a steering group, requirements for ‘sign-off’ by departments of projections, and improved documentation.

Improvements, however, could still be made to the quality assurance and quality control (QA/QC) procedures. We suggest that the Ministry for the Environment continue to build on the work, which has already been done by ensuring that the processes being put in place are documented, monitored and reviewed.

Documentation and explanation of how the effects of policies on emissions are estimated could also be improved further. For example, it is recommended that further information be provided with regard to the basis of the attributed emission savings anticipated from climate change policies.

All greenhouse gas emission projections will be uncertain because many of the factors that affect the emissions and the removal by forestry are in doubt. The uncertainties in the land use, land use change and forestry emissions make the biggest contribution to the uncertainty in the net position.

It is recommended that the Treasury and the Ministry of Economic Development develop a range of consistent economic scenarios including the most likely, optimistic and pessimistic scenarios. The estimates of the uncertainty from each of the sectors can then be combined by Monte Carlo simulation.

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