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1 Introduction

This report summarises the findings of a review of the New Zealand 2005 Net Position Report undertaken by AEA Technology Environment, the Policy Studies Institute and the Centre for Ecology and Hydrology.

Combating climate change and minimising its potential consequences are key objectives of the UN Framework Convention on Climate Change (UNFCCC). Over 185 States have ratified or acceded the Convention, thereby binding themselves to the Convention's terms. A key objective of the UNFCCC is to achieve stabilisation of atmospheric greenhouse gas concentrations, which will ultimately require substantial reductions in global greenhouse gas emissions to be made. As an initial step in this process, Parties to the UNFCCC in 1997 adopted the Kyoto Protocol. This requires developed countries, as a whole, to reduce their overall emissions of a basket of six greenhouse gases to 5.2 % below their levels in a given base-year (1990 in most cases) by the period 2008-12 (the first commitment period - CP1). For New Zealand, the Kyoto Protocol sets the target of average overall emissions over the CP1 period to be 100% of the emissions in the base year.

The 2005 re-estimate of New Zealand's net position for CP1 is the most recent in a series of projections re-calculations that have been made in order to incorporate changes to calculation methodologies, inclusion of updated statistical datasets, changes to scenario assumptions etc. Further updates of the 2005 projection estimates are planned for 2006 in order to meet the 4th National Communication and Demonstrable Progress reporting requirements of the UNFCCC (Figure 1).

Figure 1. Timeline of recent and planned NZ CP1 projection estimates (source: MfE)

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As described in the 2005 Net Position Report (MfE 2005a), the 'most likely' estimate of annual average emissions over the commitment period is now 80.9 Mt CO2 eq, representing a net deficit of 36.2 CO2 eq over the five-year period. This revised forecast is the first time that a net deficit has been forecast, indicating that New Zealand may have a net emissions deficit relative to its Kyoto target of returning overall greenhouse gas emissions to 1990 levels. This presents a significantly different picture for New Zealand's net position compared with the previous projections forecasts of a 54.8 Mt CO2 eq surplus (2003) and a 32.6 Mt CO2 eq surplus (2004). The robustness of the re-estimated forecast is clearly dependent upon both the quality of input data, calculation methodologies and the assumptions used in generating the projections.

The Net Position report (MfE 2005) together with the associated energy sector CO2 projections report (MED 2005), have provided a general description of the assumptions used in generating the revised 2005 projection estimates and the main reasons for the decrease from the previous projections. This review has the aim of assessing the reasonableness of the documented methodologies and assumptions that lie behind these projection forecasts. In addition to the Net Projection report itself, a range of additional supporting information and accompanying detailed analysis has also been made available to the review team. Members of the project team have also met with key contacts from the various Government Departments involved with the compilation of the 2005 Net Position report and associated agencies (Crown Research Institutes etc).

The following section of the report describes the scope under which the review has been performed. Section 2 presents the findings of the sector reviews, describing the reasonableness of the general approach used in developing the 2005 projection estimates for the energy and industrial processes, agriculture, land use land use change and forestry (LULUCF) and waste sectors. Section 3 provides comment on the assumptions made in the Net Position report with respect to the anticipated impacts of New Zealand's various climate change policies. The final section (Section 4) of the report summarises the main findings and recommendations identified during the review process.

1.1 Scope of the review

The scope of this review of New Zealand's net position has been determined by the requirements for the work described in the Ministry for Environment's work specification. The main purpose of the project has been to undertake a review of the 2005 Net Position Report in order to establish whether the methodology used in compiling the projection estimates is reasonable. Accordingly, this work has focussed on the following main areas:

  • an assessment of the reasonableness of the general approach and individual underlying assumptions (sector growth rates, policy effects on emissions etc) that were used in developing the 2005 net position projection estimates for the energy and industrial processes, agriculture, LULUCF and waste sectors;
  • a review of the previous assessments made of the Ministry for Economic Development's SADEM economic energy prediction model to confirm the model's utility for climate change applications;
  • an initial assessment of the reasonableness of the approach used to determine projection uncertainty, including comment on how the uncertainty range was derived from the differences between the three policy scenarios (pessimistic, most-likely and optimistic);
  • comment on the data compilation and aggregation process used in the whole of Government approach.

There are a number of explicit issues that fell outside the scope of this review. These included any assessment of the appropriateness of the carbon trading price of US$6 per tonne CO2 eq selected by NZ Treasury, any assessment of the reasonableness of the official Government GDP projections calculated by Treasury, and any consideration of possible 'rules' concerning emissions or carbon trading practices beyond the first Kyoto commitment period.