Questions and Answers on Preferred Policy Package

What are New Zealand’s obligations under the Kyoto Protocol?

Under the Kyoto Protocol, New Zealand must reduce greenhouse gas emissions to 1990 levels between 2008-2012 or the Government, in the first instance, must take responsibility for the excess by:

- purchasing additional emission units on the international market; or

- using other options such as sink credits accruing from carbon sequestered from forests; or

- using other emissions credits earned overseas through the project-based mechanisms of the Protocol; or

- combinations of the above.

The Government can choose what proportion of New Zealand’s obligation will be achieved through domestic emissions reductions and what proportion will be achieved through the mechanisms listed above. The appropriate mix depends on:

- the international price of emission units, which will affect incentives for greenhouse gas abatement and the value of sink credits;

- the desired transition towards a permanent downward path for emissions; and

- the costs/benefits associated with that path.

What happens now that the Government has announced its preferred policy package?

National and regional stakeholders will be consulted on the package during May and June. This second phase of public consultation will seek feedback on the preferred policy package. While this is happening, the Foreign Affairs, Defence and Trade Select Committee will report back on the National Interest Analysis in mid-May. A final decision on the policy package, as well as on ratification, is expected to be made in late July or early August 2002.

How does the climate change legislation fit in with this process?

The Climate Change Response Bill will be introduced to Parliament in May and considered by the Foreign Affairs, Defence and Trade Select Committee. The Bill puts in place the framework to allow New Zealand to meet its international obligations under the Kyoto Protocol. It will also put in place structures for monitoring and recording New Zealand’s greenhouse gas performance.

What happens if the Kyoto Protocol is not ratified by enough countries to come into force in 2008?

It will lapse. Furthermore, there will be no emissions charges, NGAs (see below) or sink credits. In short, none of the “price” policies will come into effect. New Zealand will still be committed under the UN Framework Convention on Climate Change to put in place policies and measures to reduce emissions and enhance sinks. Other policies, such as the National Energy Efficiency and Conservation Strategy, Transport Strategy and Waste Strategy, will continue, because they have other benefits besides contributing to the reduction of greenhouse gas emissions.

I am a dairy farmer. What will this policy package mean for me?

How much the policies will affect you directly will depend on the willingness of agricultural groups to invest, alongside the Government, in research to identify options for reducing agricultural emissions of methane and nitrous oxide. It will be business as usual for you, as far as your non-CO2 agricultural emissions went, if this research effort meets the level required. If it did not, a levy could be imposed on individual farmers during the first commitment period (2008 - 2012).

Like other businesses you will face increased electricity and fuel costs as a result of a price for emissions being introduced in the first commitment period. This increase might be offset by revenue recycling (eg through the tax system).

My company is a big user of energy and an exporter. What will this policy package mean for us?

It is likely you could show your company was “at-risk” from the Kyoto Protocol. If this was the case, you would have the option of entering into a Negotiated Greenhouse Agreement (NGA) with the Government. This means you would agree on a plan for managing your emissions which met international best practice over an agreed timeframe. In return, you would be exempt from any price for greenhouse gas emissions during the first commitment period.

Your firm would also be able to apply for government incentives for undertaking projects aimed at reducing your emissions.

My business is a forestry company. What will this policy package mean for us?

It will be business as usual for your company. It will not face any liabilities for harvesting trees or for converting its land to some other use. In the future your company might have access to some kind of incentive for creating forest sinks. The way in which this would operate is still being developed.

If your company is a wood processor using a lot of energy, and it exports a significant proportion of its product or faces significant competition from imports, it could reach a Negotiated Greenhouse Agreement with the Government (see above).

Your company could also apply for government incentives for undertaking projects aimed at reducing your emissions. (See “projects” in the attached glossary).

My company is in the waste sector. What will this policy package mean for us?

Companies in the waste sector are subject to the New Zealand Waste Strategy which the Government recently released. The Government is due to review the success of the strategy in 2005 and at that point will assess whether any new policies are needed for the waste sector.

Your company would be able to apply for government incentives for undertaking projects aimed at reducing your emissions.

My company manufactures refrigerators. What would this policy package mean for us?

Your company would be subject to a voluntary handling and recovery programme for hydrofluorocarbons (HFCs). The Government is working with the Institute of Refrigeration, Heating and Air Conditioning Engineers to develop this voluntary regime and helped launch the partnership No-Loss Programme last week to ensure people who handle refrigerants are properly trained and qualified. The Government would assess the success of this voluntary approach before the first commitment period (2008 - 2012). If inadequate progress had been made it would develop a mandatory regime and your company would be subject to mandatory standards for handling and recovering HFCs.

Your company would be able to apply for government incentives for undertaking projects aimed at reducing your emissions.

My business is an electricity lines company. What will this policy package mean for us?

The electricity industry uses sulphur hexafluoride (SF6), a greenhouse gas, in switchgear and imports it to replace leaked gas. The Government plans to charge businesses for SF6 emissions as the gas is imported. However, before doing this it would offer industry groups the chance to negotiate an alternative approach to managing emissions of SF6.

Your company will be able to apply for government incentives for undertaking projects aimed at reducing your emissions.

I own a courier company. What will this policy package mean for us?

Like any business or individual, your company will be affected by the introduction of a price for emissions in the first commitment period (2008 - 2012). This will lead to higher fuel and electricity costs. However, these additional costs will be offset by the revenue generated by the price for emissions being recycled back into the economy.

Your company would be able to apply for government incentives for undertaking projects aimed at reducing your emissions.

NB: All businesses would be affected by the introduction of a price for emissions in the first commitment period (2008 - 2012). Overall, this would lead to increased energy, electricity and fuel costs. However, these would be offset by the revenue generated by the price for emissions being fed back into the economy.

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