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7 Conclusions

This report has updated New Zealands projected quantity of emissions and removals of greenhouse gases during the first commitment period (2008-2012) of the Kyoto Protocol for 2006. The net position report provides New Zealanders with an indication, using best available information at the time of projection, on how New Zealand is heading towards meeting its responsibilities under the Kyoto Protocol.

The net position is now projected to be a deficit of 41.2 million units during the first commitment period of the Kyoto Protocol (2008-2012). This compares with a projected deficit reported in May 2005 of 36.2 million units and a deficit of 64.0 million units reported on the Crown Financial Statements since December 2005.

The projections reported in this document reflect the Government's decision not to proceed with the previously announced carbon tax in December 2005, but do not reflect any impact from the new work programmes being considered by the Government at the time of publication. The projections therefore reflect the climate change policy settings in place at the end of 2005.

The report was compiled using sectoral projections from across Government. Agricultural and forest sink projections are provided by the Ministry of Agriculture and Forestry, energy and industrial processes projections are from the Ministry of Economic Development and waste projections are from the Ministry for the Environment. The Ministry for the Environment combines the sectoral projections to create the projected balance of units over the first commitment period of the Kyoto Protocol.

Key sources of change in the net position since May 2005 have been due to:

  • The recent phenomenon of deforesting plantation forest, where plantation forest land has been converted to alternative land uses, particularly pastoral grazing. Historically there has been little plantation deforestation. This has increased the projected deficit on the net position.
  • The decision not to proceed with the carbon tax which was reported in the Crown Financial Statements (December 2005) as an increase in the deficit on the net position based on an estimate of the impact of the carbon tax. In 2006 higher energy price assumptions (particularly for oil) has reduced the projected deficit on the net position.
  • The revision of the methodology for calculating nitrous oxide emissions following IPCC good practice guidelines. Application of nitrogenous fertiliser has been a growing source of emissions and this revision to the methodology for calculating emissions coupled with a change in the projection methodology for nitrogen fertiliser application has reduced projected agriculture emissions and therefore the projected deficit on the net position.

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 following the conclusion of the 2005 review. It will not be until 2015 when the national greenhouse gas inventory covering the first commitment period of the Kyoto Protocol is submitted to the United Nations Framework Convention for Climate Change, when we will actually know the true value of the net position. The uncertainty range in this report is large, with an upper deficit of 77.5 million units and a lower projection of a surplus of 1.4 million units. The most significant source of uncertainty is attributable to the values used for forest sinks; this will continue to be the case until the New Zealand Carbon Accounting System becomes operational.

The update was based on current information as well as updated assumptions regarding economic growth, population growth and oil prices as at May 2006. Officials from across Government will continue to monitor New Zealand's progress toward meeting its Kyoto Protocol responsibilities. The projected net position is likely to be revised as new knowledge becomes available, there are material changes in assumptions used (such as oil prices), new policies are implemented and the situation of the nation evolves over time.

Officials from across Government will continue to work towards improving the robustness of the projections methodology and anticipate that the next net position report to the Minister Responsible for Climate Change Issues will be delivered in May 2007.