Table 2: Options for points of obligation

Participant numbers (2006)

11 (>1000 tonnes CO₂ equivalent) or 12–14 (>100 t CO₂-e).

Same

Same for chemical importers plus (estimated)¹:

Household refrigeration 7? (>1000 t CO₂-e), or 10–15 (>100 t CO₂-e)

Commercial refrigeration None? (>1000 t CO₂-e), or 20?? (>100 t CO₂-e)

Household and commercial AC 10? (>1000 t CO₂e), or 20–30 (>100 t CO₂-e)

Refrigerated transport 10? (>1000 t CO₂-e), or 20–30 (>100 t CO₂-e)

Mobile AC 50?? (>1000 t CO₂-e = 1000 cars or 600 trucks), or 500?? (>100 t CO₂-e)

Aerosols 5? (>1000 t CO₂-e), or 10?? (>100 t CO₂-e)

Fire protection 1–2 (>1000 t CO₂-e), or 4? (>100 t CO₂-e)

Foam 1 (>1000 t CO₂-e), or 4? (>100 t CO₂-e).

Coverage of 2010 emissions

100% of refilling (replacing leakage) + about 19% of new equipment.

100% of refilling + about 15% of new equipment (non-self-contained).

100% of refilling + >90% of new equipment (>1000 t CO₂-e) or >99% of new equipment ) (>100 t CO₂-e).

Export implications

For consistency with inventory methodology, exports of bulk chemicals and equipment should be exempted.

All new self-contained equipment exempted, not just exports.

For consistency with inventory methodology, exports of bulk chemicals and equipment should be exempted.

Compliance costs

Reporting costs likely to be minimal for chemical importers. Minimal extra costs in providing accurate records for exempting exports of four major manufacturers.

Market participation would add significant costs – each company will weigh up management time vs utilising permit brokers.

Reporting costs likely to be minimal for chemical importers. Minimal extra costs in providing accurate records for exempting exports and New Zealand sales of four major manufacturers.

Market participation would add significant costs – each company will weigh up management time vs utilising permit brokers.

Reporting costs likely to be minimal for chemical importers. Minimal extra costs in providing accurate records for exempting exports of four major manufacturers.

Extra reporting costs for large importers of equipment likely to be minimal if already MEPS reporting. Significant extra costs in reporting accurate records for smaller commercial refrigeration/ air-conditioning, refrigerated transport, mobile AC and aerosols importers in particular.

Market participation would add significant costs – each company will weigh up management time vs utilising permit brokers.

Potential for alternatives

Use of alternative HFCs or technologies in almost all sectors will be driven by international developments rather than New Zealand prices.

Long equipment lives mean that shifts will mainly be in new installations, e.g. supermarkets, coolstores and fire protection.

Potential perverse outcome that some HCFCs would be cheaper alternatives to HFCs covered by the ETS.

ETS pricing would encourage recycling but collection for destruction may need incentives.

Same

Same

Economic impacts

Costs of market participation will be passed from bulk HFC importers to purchasers.

Reduced business for chemical importers as HFC usage decreases in medium term (perhaps replaced by alternatives).

Main impacts likely to be investment in commercial leakage reduction and perhaps a shift to new supermarket CO₂ systems and ammonia in new large coolstores. Some foam industry impacts could be major as few alternatives once HCFCs phased out.

Reduced competitiveness for locally manufactured refrigeration and air-conditioning equipment sold in New Zealand.

Same but no reduced competitiveness for locally manufactured equipment sold in New Zealand.

Same except costs of market participation will be passed to purchasers of bulk HFC and of HFC equipment and no reduced competitiveness for locally manufactured equipment sold in New Zealand.

Additional main impacts (to leakage reduction and new supermarkets / coolstores shifts) likely to be reduced sales of relatively low priced aerosol cans and air-conditioning units.

Equity Issues

Bulk importers and manufacturers would have major concerns about equity and competitiveness if imported equipment not covered. Perhaps some avoidance behaviour by equipment importers.

Small chemical importers may find ETS participation too costly and leave HFC importing to larger suppliers leading to a reduction in competition.

Potential barrier to competition if an exempted manufacturer wants to change supplier but is concerned about confidential sales data held by previous supplier.

Same but no equity issue about imported equipment being exempted if also limited exemptions for New Zealand manufactured equipment.

Same but equity and competitiveness and avoidance concerns removed by covering imported equipment.

Some will argue a portion of equipment HFC should be exempted based on projected collection for destruction on retirement.

Transition issues

Some suppliers may import large quantities before January 2010 to avoid the obligation.

Capacity building to facilitate ETS participation.

Some suppliers may import large quantities before January 2010 to avoid the obligation.

Capacity building to facilitate ETS participation.

Same.

Uncertainties

Chemical importers’ records of HFC imports are likely to be extremely accurate and readily verified by comparison with Customs records.

Most of the major manufacturers already have accurate equipment sales records that could be adapted for use by chemical importers for exempting exports.

Most of the major manufacturers already have accurate equipment sales records that could be adapted for use by chemical importers for exempting exports and New Zealand sales that face competitiveness risks.

Chemical importers’ records of HFC imports are likely to be extremely accurate and readily verified by comparison with Customs records. Similar for equipment importers reporting for MEPS.

Uncertainties in identifying from Customs records all appropriate points of obligation then establishing their equipment sales reporting to sufficient accuracy.

Advantages

Simplicity and minimising compliance and verification costs. Relatively easy to exempt exports of four major manufacturers.

Some future retirement emissions covered.

Relatively easy to exempt exports and New Zealand sales of four major manufacturers.

No competitiveness issues over imported equipment.

Equity and competitiveness and avoidance concerns removed by covering imported equipment.

Relatively easy to exempt exports of four major manufacturers.

Future retirement emissions covered for all equipment purchased from 2010.

Disadvantages

Inconsistent for ETS to cover some future potential rather than all actual emissions.

Bulk importers and manufacturers would have major concerns about equity and competitiveness for locally manufactured refrigeration and air-conditioning equipment if imported equipment not covered. Also potential avoidance behaviour by equipment importers.

Small confidentiality issue for exemptions.

Small importers may find ETS participation too costly and leave HFC importing to larger suppliers leading to a reduction in competition.

Some suppliers may import large quantities before January 2010 to avoid the obligation.

Bulk importers would still have major concerns about equity and avoidance if imported equipment not covered.

Limited coverage of future retirement emissions.

Significant extra costs in reporting accurate records and market participation for smaller commercial refrigeration / air-conditioning, refrigerated transport, mobile AC and aerosols importers in particular.