New Zealand agricultural Emissions Trading Scheme (ETS)

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1 New Zealand agricultural Emissions Trading Scheme (ETS) Harry Clark, Director New Zealand Agricultural Greenhouse Gas Research Centre Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

2 High level outline Proposed date of entry: January 2015 Gases covered: Comprehensive coverage: Point of obligation: Agriculture designated competitive at risk industry methane and nitrous oxide only minor species exempt processor, international trading of all units special arrangements to reduce impact on farm businesses Intensity based system Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

3 Proposed date of entry Full entry into the scheme on January 2015 Voluntary recording from 2011 Mandatory recording from 2012 Review of the NZ ETS undertaken in 2011 recommended no change to the above dates Further review of the ETS to take place in 2014 Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

4 Gases covered Enteric methane and methane from wastes Nitrous oxide from animal wastes deposited on soils Fertilisers and manures applied to soils Carbon dioxide emissions from other agricultural activities captured under other arms of the NZ ETS Soil carbon not included at present Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

5 Sectors covered All except: Ruminants other than deer, cattle, sheep & goats Horses Camelids Emus and ostriches Layer hens Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

6 Point of obligation (POI) Currently at the processor minimises number of participants, Kyoto compliant NZ Units Strong desire for a farmer POI but costs a barrier (from Ag ETS Committee, ETS Review Committee) Two types of mitigation actions recognised: Unique Emission Factors (limited to POI) Removal Activities (mitigation recognised in inventory, not limited to POI) Processor POI places constraints on incorporation of mitigation Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

7 Transitional arrangements Price cap $30NZ/tonne 2013 $50NZ/tonne 2017 reviewed 2017 One for Two surrender obligation gradual phase out by 2019 Free allocation of units 90% in 2015 falling by 1.3% points per year from 2016 Effective carbon prices ($/tonne CO2-e) faced by businesses under the ETS as currently legislated (assuming a CO2-e price of $25/tonne) Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER

8 Intensity based system Details of how emissions liabilities will be calculated only provided in principle and still under review, -- currently has a per head & per unit of product charge Free allowance will be intensity based with no cap Assumed baseline year is 2015 but not specified in legislation Allocation between sectors still under discussion -- processor POI complicates allocation between beef and dairy sectors Emission factors can only be changed after full public consultation which reduces flexibility Copyright 2010 New Zealand Agricultural Greenhouse Gas Research Centre 15 DECEMBER