20 December 2004

Emissions deal signed with Austria

The governments of New Zealand and Austria have signed a co-operation arrangement on the implementation of emission reduction projects and for the trading of Kyoto Protocol emissions units.

New Zealand's Kyoto Protocol ratifying nation status means that internationally tradable emissions units are available to eligible Kiwi firms, organisations and individuals. It also means the units are available to New Zealand businesses working with partners from other ratifying developed nations to deliver emissions reductions under the Protocol's Joint Implementation initiative. This opportunity is already worth many millions of dollars to New Zealand business.

Tradable emissions units are awarded within New Zealand through the Projects to Reduce Emissions programme. The allocation of six million units through the second round of this was announced two weeks ago. Firms that sign Negotiated Greenhouse Agreements and reduce emissions beyond their contractual requirements, as well as those who establish permanent forest sinks, can also be awarded units under the Kyoto Protocol.

The arrangement was signed by Convenor, Ministerial Group on Climate Change, Pete Hodgson and the Austrian Federal Minister for Agriculture, Forestry, Environment and Water Management, Josef Pröll. They signed on Saturday during the 10th meeting of the Conference to the Parties of the United Nations Framework Convention on Climate Change that is being held in Buenos Aires.

The Austrian government recently called for expressions of interest in the second tender round of its programme to accrue tradable emission reduction units. The signing of this arrangement signals the two governments' commitment to encouraging Kiwi business to get involved in Joint Implementation projects with Austria.

"This agreement demonstrates the determination of both governments to tackle climate change. New Zealand's pro-active, pro-business approach to climate change is good news for the economy and the environment. Participation in the Projects to Reduce Emissions programme and this arrangement are innovative examples of how businesses can gain a real competitive advantage from tackling climate change," says Pete Hodgson.

The governments of New Zealand and the Netherlands signed an emissions trading co-operation arrangement in August.

Contact: Christian Judge, press secretary, 04 471 9707, 021 670 349 christian.judge@parliament.govt.nz www.climatechange.govt.nz
Questions and Answers

What is the Projects to Reduce Emissions programme? The Government has developed the Projects to Reduce Emissions programme to support initiatives that will reduce emissions of greenhouse gases. The programme is a key part of the Government’s climate change policy package. This Projects first tender round was run in 2003 and offered a pool of four million emissions units or “carbon credits”. Businesses, organisations and individuals were invited to submit proposals for projects to reduce emissions of greenhouse gases in return for a share of the pool of emission units. Fifteen projects projects including wind farms, bio-energy, landfill gas schemes and hydro-electricity were awarded emission units in the first tender round.

The second tender round, held in 2004, offered 6 million emission units and attracted 46 bids seeking a total of more than 15 million emission units. It resulted in emission units being awarded for 24 projects including wind farms, hydro-energy generation, geothermal-energy generation, bio-energy and landfill gas.

What are Projects? Projects are specific activities that reduce greenhouse gas emissions in the Kyoto Protocol’s first commitment period (2008 – 2012) in return for an incentive of Kyoto Protocol emission units. For an initiative to qualify as a project, it must achieve quantifiable reductions in greenhouse gas emissions beyond that would otherwise occur.

Projects must also be additional to business-as-usual, i.e. the project owner must demonstrate that without the award of emission units the project would not otherwise proceed.

What is the incentive provided by the Government for a successful bid in the Projects tender? Projects that are successful through the tender process that provide additional emission reductions will be rewarded with emission units. These units are expected to be internationally tradable when the Kyoto Protocol comes into force.

For the purposes of the Projects tender, project participants can elect to receive either Assigned Amount Units (AAUs) or Emission Reduction Units (ERUs), which are assigned to Joint Implementation projects.

What is Joint Implementation? This is a mechanism established under Article 6 of the Kyoto Protocol. Joint Implementation allows for the acquisition and transfer of emission reduction units (ERUs) linked to projects between two Annex 1 countries.

What is the Clean Development Mechanism Article 12 of the Kyoto Protocol defines the Clean Development Mechanism. It is a tool created under the Kyoto Protocol to promote sustainable development while minimising the costs of greenhouse gas emissions. The CDM allows Annex 1 countries to acquire certified emissions reductions by undertaking greenhouse gas reduction or mitigation projects in non-Annex 1 (developing) countries.

Can overseas companies apply under the Projects to Reduce Emissions programme? Yes. The tender is open to participation from any parties, either from New Zealand or overseas, provided that the emission reductions from the project take place in New Zealand.

How much is an emission unit worth? The international market sets the price for future emission units. Any tenderer will have to make their own assessment of the value of emission units. Greenhouse gas emissions trading is already underway through emerging national-level emissions trading schemes and on a voluntary level.

For example, last December, Meridian Energy’s Te Apiti wind farm, one of two early projects the Government supported, was offered a contract under the Dutch ERUPT programme to sell its emission units to the Netherlands Government. This was the first international sale of New Zealand emission units.

The average price in the tender round in which Meridian Energy agreed to sell its units to the Netherlands Government was NZ$10.50 a unit. Emerging prices under the European Union Emissions Trading Scheme, due to be launched on 1 January 2005 will provide indications of what emission units are worth.

What is the status of the Kyoto Protocol? The Kyoto Protocol will enter into force in February 2005.

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