Allocation under the NZ ETS

Transcription

1 Allocation under the NZ ETS Presentation to IGES Emissions Trading Seminar 11 March 2011 Mark Lea Ministry for the Environment

2 Outline History and objectives of NZ ETS NZ ETS design basics Allocation under the NZ ETS Purpose Approach Sectors/activities NZ ETS Review

3 History of NZ ETS ETS rather than carbon tax or other regulatory alternatives because: Efficiency: market seeks cheapest abatement and sets price; Flexibility: manage emissions over time and between sectors; Best fit with the international framework

4 Objectives of NZ ETS Assist NZ to meet its international obligations Reduce NZ s net emissions below BAU levels ETS achieves this by: Passing costs of international obligations to emitters Providing incentives by establishing a price for carbon

5 NZ ETS design - basics Emitters have an obligation to surrender one eligible emissions unit for every tonne of emissions Eligible units = New Zealand Unit (NZU) and some eligible Kyoto units Obligations placed far up the supply chain All sectors and all gases covered

6 NZ ETS design - basics Staged entry of sectors 2008 Forestry Stationary energy Industrial processes Liquid fossil fuels Waste Synthetic gases Agriculture Forests planted after 1989 can earn NZUs All forests face obligation to surrender units when trees are cut down

7 NZ ETS design - basics Transition phase introduced to ease the introduction of NZ ETS Ends on 31 December 2012 Fixed price option (NZ$25) Obligation to surrender one eligible unit for every two tonnes of emissions NZUs cannot be sold overseas (except forestry)

8 Rationales for allocation Compensation for loss of asset values Protection from carbon leakage and competitiveness loss assistance for new and existing capacity whilst other countries are not taking equivalent action Protection from economic regrets assistance for existing capacity

9 Allocation as compensation Compensation for loss of asset values (lump sum) Fishing quota owners for loss of quota value Owners for forests planted before 1990 for loss of land value

10 Allocation as protection Protection from carbon leakage and competitiveness loss Provided to new and existing capacity Emissions intensive and trade exposed (EITE) sectors and activities Agriculture (presumed EITE) Industrial activities that meet the EITE criteria

11 Industrial allocation Criteria for industrial allocation: Moderately or highly emissions intensive Moderately: at least 800 tonnes of emissions per NZ$1million Highly: at least 1600 tonnes of emissions per NZ$1million Trade exposed Actual or potential for trade

12 Industrial allocation Eligible industrial activities (to date) Aluminium smelting Newsprint Roses Protein meal Iron and steel Caustic soda Carbon steel Cement Burnt lime Methanol Urea Packaging paper Market pulp Cartonboard Gelatine Bricks Glass containers Ethanol Cucumbers Fresh tomatoes Fresh capsicums Red = highly emissions intensive; blue = moderately emissions intensive Hydrogen peroxide Tissue paper

13 Allocation as protection Intensity basis (per unit of output - uncapped) Allocative baseline is calculated for each activity Level of assistance is either: 90% (agriculture and highly emissions intensive activities), or 60% (moderately emissions intensive activities)

14 Allocation as protection Allocation to protect competiveness Level of assistance will be phased out at 1.3% per annum from: 2013 for industrial allocation 2016 for agriculture Formula

15 NZ ETS Review Review of the NZ ETS currently taking place - report at end June 2011 Assess the effectiveness and operation of the NZ ETS Particular focus on whether New sectors should join on current timetable Transition phase should end as planned

16 Further information......and any questions?