Institutional arrangements: National Registry, National Inventory and audit
Establishment of a National Registry and National Inventory
A National Registry would ensure accurate accounting of the issuance, holding, transfer, acquisition, cancellation, retirement and carry-over of emission units.
The establishment of the registry is a requirement of the Kyoto Protocol. Its primary function is to account for changes in New Zealand's assigned amount. Accounting for assigned amount is how New Zealand demonstrates internationally that it is complying with its target under the Protocol (i.e. that New Zealand's greenhouse gas emissions do not exceed the assigned amount held in the registry).
Under an emissions trading regime, legal persons (including organisations) would be allowed to hold an emission unit account in the national registry for trading emission units. The appropriateness of eligibility requirements for account holders will need to be considered. (See working paper "Domestic emissions trading" for more detail about a domestic emissions trading regime.)
A point of obligation would be required to hold an emission unit account and be subject to the ongoing obligation to retire sufficient emission units to cover eligible emissions.
The National Inventory would estimate greenhouse gas emissions and removals by sinks to show compliance with the Protocol. The national inventory would also record entity data on emissions (including deforestation emissions) for points of obligation under a domestic emissions trading regime. A National Inventory and the national system7 that underpins it are a pre-requisite for participation in international emissions trading. (For more information about the proposed National Register and National Inventory, see the working paper "Legislation to ratify the Kyoto Protocol".
New Zealand is already required to annually report national inventory data under the United Nations Framework Convention on Climate Change (UNFCCC).
Audit of points of obligation
There would need to be provision for a regulator to periodically audit activities that lead to reductions in carbon stock for which New Zealand is accountable (i.e. deforestation followed by land conversion, and harvesting of Kyoto forests). Similarly, audits could also check the system's rigour regarding claims to and verification of emission units.
Periodic audits would guard against over-claiming of emission units and under-reporting of emissions.
Compliance with the system
The compliance, liability and penalties regime would provide clear standards of
behaviour for points of obligation and a comprehensive set of penalties for failure to
comply. Coupled with an audit process, the aim of the system is to encourage reporting by
points of obligation.
7 A national system (the institutional and legal arrangements for the national inventory) is a requirement of Article 5 of the Kyoto Protocol
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