15 climate-friendly projects win Kyoto carbon credits

Fifteen projects, including wind farms, hydro-electricity schemes and industrial heat plants, have won a share of Kyoto Protocol 'carbon credits' from the Government for reducing emissions of greenhouse gases.

The credits, or Kyoto Protocol emission units, have been awarded in the first tender round for Projects to Reduce Emissions, a key plank in the Government's climate change policy. The Government received a total of 46 bids for the four million emission units on offer.

"This tender round, the first of its kind anywhere in the world, has produced a great result," says the Convenor of the Ministerial Group on Climate Change, Pete Hodgson.

"Some of these 15 projects could start reducing emissions of greenhouse gases into the atmosphere as early as next year. What's more, the bulk of them will help to make New Zealand's electricity supply more secure in the next few years. This is a great result for the environment, the owners of these projects and New Zealand as a whole."

Other successful tenders include proposals for generating electricity from geothermal activity and gas from landfills. The owners of the 15 projects include large and small organisations in both the private and public sectors.

The Government expects to sign the first agreements with project owners this month, at which stage further information about each project will be available.

All 46 tenders were assessed by an independent panel, chaired by company director Rick Christie, while the final decisions were taken by the Chief Executive of the Ministry for the Environment, Barry Carbon.

The emission units awarded by the Government are expected to be internationally tradeable when the Kyoto Protocol comes into force. Some international carbon credit trading is already occurring and project owners will be free to trade their units as they wish.

Emission units will be transferred to project owners annually according to the emissions they reduce in that year. The awarded units are for reductions that will be delivered during the first commitment period of the Kyoto Protocol (2008-2012).

"This programme is a great example of how businesses and New Zealand as a whole can take advantage of the opportunities created by the Kyoto Protocol," Mr Hodgson said.

"None of these projects or reductions in emissions would have happened without the award of these units - that's the basis of this programme. It offers tangible rewards for developments that take us further towards a sustainable energy future."

Questions and Answers

How were the successful tenders selected?

To be eligible for the Projects to Reduce Emissions tender, a project had to:

achieve a minimum reduction in emissions of 10,000 tonnes of CO2-equivalent during the first commitment period of the Kyoto Protocol (2008-2012); be additional to "business as usual"; achieve reductions in emissions that would not occur without the project; and achieve reductions equal to or greater than the number of emission units requested from the Government.

Projects that will contribute to near-term electricity security were given priority over other projects and those offering the most reductions in exchange for the least number of units were also ranked higher than others.

Who decided which tenders would be awarded emission units?

Tenders were evaluated by the New Zealand Climate Change Office and then assessed by an independent panel. The panel was chaired by company director Rick Christie, and included PriceWaterhouse Coopers partner Suzanne Snively, company director and dairy farmer Hilary Webber and chemical process engineer Bill Wakelin. The final decisions, based on the recommendations of the assessment panel, were made by the "Decision Maker" Chief Executive of the Ministry for the Environment, Barry Carbon.

Were all eligible tenders awarded emission units?

There was extremely strong competition for the four million emission units available which means not all eligible tenders were awarded units.

How much is an emission unit worth?

The international market will set the price for future emission units. Greenhouse gas emissions trading is already underway through emerging national-level emissions trading schemes and on a voluntary level. One brokerage firm estimates that over 60 million tonnes of CO2-equivalent have been traded since 1996.

Will there be more tender rounds in the Projects to Reduce Emissions programme?

It is expected that Projects rounds will be held annually.

If a project was unsuccessful in this tender round, can it be considered in subsequent tender rounds?

Yes. However, it would still need to pass the eligibility tests in future rounds.

What's the difference between a Negotiated Greenhouse Agreement (NGA) and a Project?

During the first commitment period of the Kyoto Protocol (2008 to 2012), it is recognised that the international competitiveness of some New Zealand firms or industry groupings could be at risk from the proposed emissions charge. For firms that are prepared to commit to moving towards world's best practice in the management of their greenhouse gas emissions, the Government is prepared to negotiate a full or partial exemption from the emissions charge. This is called a Negotiated Greenhouse Agreement (NGA).

A project is a specific activity that reduces greenhouse gas emissions in the Kyoto Protocol's first commitment period (2008 to 2012) in return for an incentive. It may involve new technologies and practices that would not be currently economic, or where market barriers exist to prevent them being taken up. An activity can only be a project if it would be uneconomic without the award of the incentive.

Are firms with a Negotiated Greenhouse Agreement in place also eligible for Projects?

Firms in the process of negotiating a Negotiated Greenhouse Agreement (NGA) with the Government were not eligible to participate in the Projects tender unless their negotiations had been concluded. Firms with an NGA in place were able to submit a project proposal but a "no double dipping" principle applies under which the Projects incentive cannot be used to help meet an agreed NGA target.

How does the "no double dipping" principle work in respect of Negotiated Greenhouse Agreements?

Under the "no double dipping" principle:

firms in the process of negotiating a Negotiated Greenhouse Agreement (NGA) with the Government were not eligible to participate in the Projects tender until their negotiations had been concluded; and firms with an NGA in place could submit a project proposal but the Projects incentive could not be used to help meet an agreed NGA target. Similarly, a firm with a successful project could apply for NGA status, but the project would be excluded from the scope of the NGA.

Can emission units awarded to projects be used to offset the Government's proposed emissions charge?

No, they cannot be used to offset any other domestic policy measures such as the emissions charge.

What part do Projects play in the Government's climate change policy package?

Projects are a key component of the Government's confirmed policy package on climate change. The package was announced in October 2002, to enable New Zealand to meet its targets under the Kyoto Protocol to the United Nations Framework Convention on Climate Change. The Projects policy, together with the emissions charge planned from 2007, and Negotiated Greenhouse Agreements (NGAs for firms whose competitiveness will be at risk from the charge) are expected to play key roles in reducing emissions.

What is the status of the Kyoto Protocol?

More than 100 countries have ratified the Kyoto Protocol including the member states of the European Union, Canada, Japan, Norway, Iceland and a number of Eastern European countries. The Kyoto Protocol will enter into force if 55 countries (including developed countries that were responsible for 55 per cent of developed-country carbon dioxide emissions in 1990) ratify the Protocol.

What happens if the Kyoto Protocol does not enter into force?

If the Kyoto Protocol does not enter into force then the agreement with project participants will automatically be terminated.

What are greenhouse gas emissions?

Greenhouse gases trap some of the heat the earth radiates back into space. This is referred to as 'global warming' or the 'greenhouse effect', hence the term, 'greenhouse gas'. The greater the concentration of greenhouse gases in the atmosphere, the greater the projected temperature rise and associated climate change. The greenhouse gases included in the Kyoto Protocol are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and a group of synthetic gases - hydrofluorocarbons (HFCs), sulphur hexafluoride (SF6) and perfluorocarbons (PFCs).

ENDS

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