UK Carbon Reduction – a lesson for NZ firms

Media Release

6 August 2008

UK Carbon Reduction Commitment – a lesson for New Zealand firms

New Zealand organisations wishing to participate in the New Zealand Emissions Trading Scheme (NZETS) – if the relevant legislation is passed into law – are being urged to act quickly if they want to operate in a carbon restrained market-place.

That’s according to Bryan Gundersen, a senior partner at Kensington Swan and leader of the firm’s Energy and Climate Change teams.

Mr Gundersen says recent moves in the UK show all participants must get themselves in a position to deal effectively with the NZ ETS now, not later.

“The UK Government is proposing a mandatory cap and trade scheme - the Carbon Reduction Commitment (CRC) – which will apply to emissions from primarily large non-energy intensive organisations. It is estimated that the scheme could affect up to 10,000 organisations in the UK.

“This scheme, like our own proposed NZ ETS, will put certain obligations on participants to report and reduce their carbon emissions. If they successfully reduce emissions they will have the opportunity to trade their reduction units, but if participants go over their allowable levels they will be penalised by having to purchase or surrender units.

“Participants are expected to have carbon and energy processes in place by 2010 but the obligations to reduce energy use and emissions will not be enforced until 2013. The rationale is to give participants time to organise themselves in order to be able to deal effectively with the operation of the CRC once it becomes operable.”

However, it has been reported that many UK businesses have little or no experience in carbon trading and are therefore likely to strike difficulty when their obligations become enforceable.

“This significant problem appears to be from a lack of organisation on behalf of the firms who will be subject to the CRC.

“There is a lesson here for New Zealand organisations who are likely to be participants under the NZ ETS.

“Currently, different sectors of the economy are set to enter the proposed NZ ETS at different stages - beginning with forestry in 2008/9 - with all sectors covered by 2013. Like the UK scheme, this gives some participants a number of years to prepare themselves to face the full obligations under the scheme.

“What the UK experience tells us is that all participants must get themselves in a position to deal effectively with the NZ ETS now, not later.

“Organisation and familiarisation with the emissions legislation and policy framework will be crucial in mitigating the costs that come with the implementation of the NZ ETS.

“New Zealand firms must learn from the UK experience and put in place emission accounting and reporting mechanisms as soon as possible if they want to be successful in the new regime,” says Mr Gundersen.

ENDS

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