Australia: Issue 10: Asia Pacific climate change policy series: New Zealand

This article is part of a series: Click Issue 9: Asia Pacific climate change policy series: Vietnam for the previous article.

Introduction

The Copenhagen Accord called on Annex I countries to make their climate change pledges, and on Annex II countries to identify their nationally appropriate mitigation actions by 31 January 2010.

In this edition of the Asia Pacific climate change policy series we examine the regulatory framework and climate change investment opportunities in New Zealand.

Key points on New Zealand:

  • chief policy tool to reduce GHG emissions is the NZ ETS which introduces a price on GHG emissions to incentivise a reduction in those emissions and to plant forests to absorb carbon
  • the NZ ETS links with international markets such as the CDM and the EU ETS by making emission reduction units or allowances from those markets available for surrender or offsetting under the New Zealand scheme
  • has abundant natural energy resources making it amenable to a high proportion of renewable energy generation
  • has set a target for its energy sector of having 90 per cent of its electricity generated from renewable sources by 2025. Around two thirds of New Zealand's energy is currently generated from renewable sources, principally hydro, geothermal and wind
  • investment opportunities in the renewable energy sector are likely to arise principally in new wind and geothermal projects. Opportunities also exist in projects designed to increase energy efficiency in industry and buildings
  • if Australia, through its Climate Change Committee, decides to implement an emissions trading scheme, there may also be opportunities that arise in terms of employment, skills and technology transfer between these two closely linked economies.

Copenhagen Accord commitments

New Zealand's submission to the Executive Secretary of the UNFCCC dated 31 January 2010 reiterated its support for the Copenhagen Accord and made non-binding commitments to reduce greenhouse gas (GHG) emissions between 10 and 20 per cent below 1990 levels on the condition of there being a comprehensive global agreement under which:

  • the world is set on a pathway to limiting temperature rise to no more than 2° C
  • where developed countries make comparable efforts to those of New Zealand
  • where advanced and major emitting developing countries take action fully commensurate with their respective capabilities
  • where there is an effective set of rules for land use, land-use change and forestry (LULUCF)
  • where there is full recourse to a broad and efficient international carbon market.

A long-term target of a 50 per cent reduction in net greenhouse gases from 1990 levels by 2050 was also set as outlined in the Policies and Measures chapter of New Zealand's 5th National Communication to the UNFCCC.

Regulatory framework

New Zealand's chief policy tool to reduce GHG emissions is the Emissions Trading Scheme (NZ ETS) as established under the Climate Change Response Act 2002 (CCRA) (amended to include the NZ ETS provisions). The NZ ETS will ultimately bring the vast majority of the New Zealand economy and all six UNFCCC GHGs within its scope, including industrial processes, energy, industrial gases, transport and agriculture. The NZ ETS introduces a price on GHG emissions to incentivise a reduction in those emissions and to plant forests to absorb carbon. To help ease the transition, the compliance obligations are halved until 31 December 2012. In this period emitters only have to surrender one emission unit for every two tonnes of emissions and the carbon price is capped at NZ$25 per unit.

The scheme will see the progressive capture of different sectors of the economy. The forestry sector was the first to enter the scheme, doing so retrospectively in September 2008. The stationary energy, industrial processes and liquid fuels industries entered the scheme in July 2010. Industrial gases will enter the scheme in 2013 and the agriculture sector, responsible for approximately half of New Zealand's CO2 equivalent emissions, will enter the scheme in 2015 rather than 2013 as originally planned. Most allowances to emit will be auctioned, however the most emission-intensive and trade-exposed industries will receive the highest level of freely allocated allowances (either 60 or 90 per cent depending on the category) with free allocation also phasing out more slowly for these industries.

The NZ ETS links with international markets such as the CDM and the EU ETS by making emission reduction units or allowances from those markets available for surrender or offsetting under the New Zealand scheme. The scheme will be reviewed every five years, with the first review due in 2011.

New Zealand has abundant natural energy resources making it amenable to a high proportion of renewable energy generation. New Zealand has set a target for its energy sector of having 90 per cent of its electricity generated from renewable sources by 2025. This should not be difficult to achieve however, with around two thirds of New Zealand's energy already being generated from renewable sources, principally hydro, geothermal and wind. Despite such a large proportion of energy already coming from renewable sources, and ambitious goals set for future renewable energy generation, New Zealand currently offers no subsidisation for its renewable electricity industry (such as feed-in-tariffs). Rather, the government sees its role as being to reduce unnecessary regulatory barriers to renewable energy generation, such as planning and certification barriers.

New Zealand does offer however a number of schemes designed to promote the development of new low-carbon technologies, including in energy generation. In 2007 the government established its Marine Energy Deployment Fund that is designed to deploy NZ$8 million over four years in projects such as tidal turbine and wave power demonstration projects.

One program providing support at the planning stage of renewable energy projects is the Distributed Generation Fund. Under this fund, the Energy Efficiency and Conservation Authority (EECA) provides part-funding (up to NZ$20,000 or 75 per cent) for eligible feasibility studies for smaller renewable energy generation projects typically between three and 10,000 KW. Eligible technologies include wind, solar, hydro, geothermal, bio-energy, cogeneration and diesel or gas turbines.

New Zealand has a number of schemes dealing with energy efficiency across its economy. New Zealand collaborates with Australia in the setting of minimum efficiency standards for some products and also in the mandatory disclosure of efficiency ratings for classes of products. Currently 13 classes of product are covered, ranging from white goods through to entertainment equipment, with a further 12 classes expected to be included by the end of 2012.

The EECA runs several programs that support businesses to become more energy efficient, in particular for energy intensive business (businesses that spend more than NZ$500,000 on energy per year). Grants are available for energy audits, design audits and new or under-utilised technology improvements. Energy audits examine a business's current energy use and sets out where energy savings can be made, whereas design audits examine the energy efficiency of facilities or premises yet to be constructed and consider design changes that could be made to make them more energy efficient. New and under-utilised technologies that may be supported include but are not limited to fans, boiler-controls, bio-digesters and heat recovery systems. Grant funding is available for up to 40 per cent of the project cost (to a maximum of NZ$100,000) or up to 75 per cent of the cost of a feasibility study (up to NZ$10,000).

Investment opportunities

Investment opportunities in the renewable energy sector in New Zealand are likely to arise principally in new wind and geothermal projects. These resources are considered lowest cost due principally to the abundance of those resources throughout the country. It will be important for project developers to take advantage of planning stage public grants, if available, to reduce the planning hurdles and start-up costs of their projects.

Opportunities also exist in projects designed to increase energy efficiency in industry and buildings. Due to New Zealand's already large proportion of renewable energy in its stationary energy sector, it will have to rely heavily on energy efficiency measures to reach its Copenhagen Accord emission reduction targets. This is reflected in the wide range of public grants available for planning and carrying out energy efficiency projects.

The NZ ETS will be a significant driver of opportunity. Opportunities to date have been largely in the forestry sector, and particularly for farmers looking to take advantage of the forestation of otherwise marginally productive lands. There have been some opportunities open up in the trading and service industries as exchanges open platforms for emissions allowances and offsets. However, the most significant opportunities will be in emissions reducing and offsetting projects, such as energy efficiency projects, and in the development of low-carbon technologies, in particular for the agriculture sector due to come within the scope of the NZ ETS in 2015.

Going forward it will be critical for New Zealand to reduce emissions in the agriculture sector, with 50 per cent of New Zealand's emissions coming from that sector. The development of low-carbon agricultural technologies also represents a significant export opportunity with rapidly developing countries such as China, India and Brazil also requiring significant improvements in agricultural carbon efficiency to meet their emission reduction goals.

If Australia, through its Climate Change Committee, decides to implement an emissions trading scheme, there may also be opportunities that arise in terms of employment, skills and technology transfer between these two closely linked economies.

Experience

Norton Rose Group has significant experience advising on climate change matters in New Zealand. We have advised on AAU transactions and a JI forestry project. We have also worked on a number of matters with leading New Zealand legal practices. Recent experience includes:

  • advised one of New Zealand's largest energy generators on the purchase of AAUs from the Republic of Hungary. Our role was to review, advise on, help negotiate and provide drafting changes for the AAU Purchase Agreement and related documentation. Following the amendments to the emissions trading scheme legislation in New Zealand, this deal is now on hold
  • advised a New Zealand compliance buyer on the potential purchase of AAUs from the Republic of Slovakia.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

This article is part of a series: Click Issue 9: Asia Pacific climate change policy series: Vietnam for the previous article.
This article is part of a series: Click Issue 11: Asia Pacific climate change policy series: Australia for the next article.
Authors
Felicity Rourke
Elisa de Wit
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.