Appendix 2: The Government's policies for Climate Change
In October last year, the Government confirmed the policies that will assist New Zealand to achieve its obligations under the Kyoto Protocol (ratified on 19 December 2002). There will be a mix of policies to manage the international and domestic challenges of responding to climate change. These include price-based measures such as an emissions charge, policy to encourage initiatives to reduce greenhouse gas emissions (Projects), policy designed for firms and sectors that face significant risks to production, and their international competitiveness, as a result of the emissions charge (Negotiated Greenhouse Agreements), and specific policies for agriculture and forestry. Policies already in existence, such as the National Energy Efficiency and Conservation Strategy and waste and transport strategies, will also support the Government’s climate change objectives.
It is important to remember that the policies outlined below will be added to and adapted to over time to meet changes in the international environment and in the dynamics of the Kyoto Protocol.
Of specific interest to business will be the policies to do with the emissions charge, Projects and Negotiated Greenhouse Agreements.
Emissions charge
An emissions charge applied to fossil fuels and industrial process emissions. The charge will approximate the international emissions price, but be capped at $NZ25 a tonne of carbon dioxide equivalent. It will apply in the Kyoto Protocol’s first commitment period 2008-2012 and not before 2007. Revenue will not be used to improve the Crown’s fiscal position but will be recycled, for example through the tax system and into funding climate change Projects and programmes. The Government retains the option of introducing emissions trading as an alternative to an emissions charge if the international carbon market is functional and the price is reliably below the $NZ25 cap.
Projects
Provision of Government incentives for climate change Projects that will deliver defined reductions in greenhouse gas emissions in any sector of the economy. Incentives might include money or the pre-allocation of emission units. The Government will invite bids from firms or groups through a contestable process. To qualify, Projects must be additional to business-as-usual. The provision of incentives will accelerate the uptake of emission reduction initiatives, including new technologies and practices that would otherwise be uneconomic.
Negotiated Greenhouse Agreements (NGAs)
NGAs for firms and industries where there is significant risk to their international competitiveness and risk of “leaking’ production overseas as a result of climate change policies (e.g. the emissions charge). NGAs would comprise a contractual commitment by the firm or industry to achieve international best practice in managing emissions, in return for exemption from all or part of the emissions charge.
Agriculture
The agricultural sector will be exempted from any charge on agricultural non-carbon dioxide emissions (i.e. nitrous oxide and methane) in the first commitment period, provided the sector invests in research to identify options for reducing these emissions. The Government intends to levy farmers to fund research into agricultural emissions reduction.
Sink Credits
Government retention of sink credits and liabilities allocated to New Zealand under the Protocol in recognition of the carbon sink value of post-1990 forest plantings. These credits will be retained and managed by the Government, at least for the first commitment period. The Government, rather than forest owners, will also assume the liability created by the Kyoto Protocol for deforestation, up to a specified cap. In recognition of the forest sector’s role in creating the sink credits, the Government and the sector have agreed to develop a ‘forestry framework’ for further policy development. Two measures already agreed under the framework are:
- There will be incentives for establishing permanent (non-harvest) forest sinks. The preferred option is for forest owners who establish permanent forest sinks, for example by regenerating indigenous forests, to receive returns in proportion to the carbon sequestered in their forests. This was widely supported during consultation.
- The cap on the liability the Government will assume for deforestation has been raised from 5 percent to 10 percent of forests expected to be harvested during the Protocol’s first commitment period (2008-2012). This equates to 21 million tonnes of carbon dioxide emissions. The change responds to concerns raised by the forestry sector that the lower cap might create an undesirable incentive for forest owners to deforest early, to avoid the risk of incurring liabilities should the cap be exceeded.
Resource Management Act
The RMA will be amended to remove regional councils’ ability to directly control greenhouse gas emissions through resource consents and regional plans. This is because emissions are to be dealt with through national policies. Further amendments are being considered relating to prioritising renewable energy and adaptation to the effects of climate change.
Existing policies
There a number of existing polices that will support the Government’s climate change objectives. These include the National Energy Efficiency and Conservation Strategy, the New Zealand Transport Strategy, the New Zealand Waste Strategy, the Growth and Innovation Framework, climate change research, a public awareness and education programme, and a partnership with local government in addressing climate change at a local level.
Contact for Enquiries
Please send submissions to:
Natural Resources Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
Fax: +64 4 894 0746
Contact this person
