Climate Change and
Energy News

2 September 2009

Notice:

Our aim is to keep our clients, associates and others in the climate change community informed of significant policy releases and events.

If you would like to be removed from our mailing list, please use the unsubscribe facility at the bottom of the newsletter.

In this issue:

 FL-Journey to Trading
 
 
 


 

Frazer Lindstrom Ltd
L1 BERL House
108 The Terrace
PO Box 10-310
Wellington
New Zealand

Tel. +64 4 4997179
Fax.+64 4 4997181
info@frazerlindstrom.com
www.frazerlindstrom.com 

 

 
 
NZ ETS Review Edition
- includes links to Committee, Advisers' and Officials' Reports
 
Dear Reader,

There is nothing like an external deadline to focus the mind!

On both sides of the Tasman, December's UN climate change meeting in Copenhagen is that milestone:

  • New Zealand's government aims to have legislation in place to amend its emissions trading scheme - the NZ ETS;  and

  • Australia's government is focused on passing legislation for  its Carbon Pollution Reduction Scheme (CPRS).

Both face challenges along the way.

Read on as we bring together links to press releases, policy documents  and resources in one easy format covering :

  • The Emissions Trading Review Committee's recommendations and what this means for the future of the New Zealand Emissions Trading Scheme (NZ ETS);

  • An update on the Australian government's plans for their Carbon Pollution Reduction Scheme (Au CPRS); and 

  • Recent statements covering Au CPRS / NZ ETS alignment.

   

New Zealand Emissions Trading Scheme Review Committee Report Back

 

Following the General Election of 8 November 2008, the incoming National led Government formed a Select Committee to review the NZ ETS legislation and wider climate change policy for New Zealand.

The Committee's  report was released  on the 31st of  August 2009.

The key outcome of the review is that New Zealand is edging closer to full implementation of emissions trading.

We have held back the release of this newsletter to ensure that we can provide you with links to the advice given to the Committee from advisers and officials.

 

 Summarising, the Committee's (majority) view is that:

  • The science is accepted (Act Party excepted)
  • New Zealand needs to both mitigate emissions and have adaption policies
  • Pricing emissions has a role in mitigation policy
  • Emissions trading is preferred over a carbon tax (Act and Maori Parties excepted)  

Beyond this point, as we step into more detail around the design parameters of the NZ ETS, the consensus is weaker as set out in the three minority position examples below:

  • The Committee recommends international linkages between the NZ ETS and other Kyoto compliant schemes and indicates there may be good reason to limit them in the short term while the NZ ETS market matures.
    • Opposition to price caps was expressed by the Act, Green, Labour and Maori Parties.
  • The majority of the Committee recommend that the agriculture sector should be included in the NZ ETS but no dates are stated
    • The Green and Labour Parties recommend no later than 2013
    • The Act Party does not support its inclusion at all.
  • Allocation on an intensity basis without a cap on the pool of units available is favoured by the Act, National and United Future Parties.
    • The Green, Labour and Maori Parties oppose this with the Green and Labour Parties preferring retention of historical based allocation (grandparenting - or 2nd best -  intensity allocation within a cap)

Our Role

Stuart Frazer was appointed as one of three independent specialist advisers to the Committee, alongside Julia Hoare and Chris Karamea Insley. Their report to the Committee covers climate change policy in a wide context, applies those policy considerations in the New Zealand context and then focuses on the emissions trading scheme design issues.

The report provides an objective overview of the core issues and decisions to be made.

 

 
NZ ETS Review - Specialist Advisers' Report

Links to the ETS Review Committee Reports

Next Steps

The Government has indicated that it is still planning to amend legislation before the UN Copenhagen meeting (December 2009).  

In the media and speeches it has been made clear that National and Labour negotiations on amendments have not been concluded.

In its minority report, Labour has indicated willingness to consider changes including:

  • deferral of entry of industry to 1 July 2010 (to allow allocation design) but with transport sector brought forward to that date;

  • a one-off fixed period price cap set well above current prices; and

  • intensity based allocation but within a fixed pool.

In the absence of Labour support National would need to have support or abstentions by Maori and/or the Act Parties. Both have indicated they do not favour an ETS.  

Where does this leave business?  

While the situation remains uncertain, and key policy design parameters remain unresolved, we still recommend that businesses prepare for emissions trading, noting that the stationary energy and industrial processes sector entry date will need to be deferred from 1 January 2010 by (up to) 1 year to allow allocation scheme design to be carried out.

  • We are currently advising clients in all sectors on the implications of the current NZ ETS policy, foreseen amendments and implementation.

  • Contact us if you would like to have a review of your business preparedness for this complex and new issue.
 

Australian CPRS Update

Australia's emissions trading scheme - the Carbon Pollution Reduction Scheme (CPRS) is due to commence trading on 1 July 2011.

Legislation is however still to be passed and much of the detailed work around defining industry activities for allocation is ongoing.
 

  • Legislation was introduced to parliament on the 14th of May 2009, however it was voted down by the Senate on the 13th of August 2009. abc news report

  • Read Senator Penny Wongs remarks at the end of the debate on 13th August 2009 here.

  • An amended legislation package is likely to be introduced by the end of November 2009.

Visit our website to read more of the background to the Australian Carbon Pollution Reduction Scheme (CPRS) here.

 

  

Au CPRS / NZ ETS Alignment?

Alignment of the Australian and New Zealand emissions trading schemes seems to be shifting to a medium term aspiration.

On both sides of the Tasman significant political uncertainty remains. By year end:

  • The Australian Government is seeking the votes to get its scheme legislated;

  • The New Zealand Government is seeking the votes to get its scheme amended.
     

emissions

This is reflected in a speech by the New Zealand's Minister for Climate Change Nick Smith at a conference held last week (August 25-26) in Melbourne.

"It is going to be challenging enough getting domestic legislation passed through both Parliaments in a timely way without the complexity of attempting full harmonisation at this stage. Our approach to this should be one of sharing information on policy development and taking opportunities where possible to align. Our initial priority should be to get our respective schemes up and running and then over time formally linking the schemes." Full Speech

Australia's Minister Penny Wong gave similar signals in her conference speech. Full Speech

One of the key alignment areas is allocation to trade exposed industry where Minister Nick Smith is openly supportive of the Australian intensity based approach. Price controls may also be aligned.

We are tracking the Au CPRS closely for this reason.
 

Need Advice?

 
For many businesses, emissions trading is both complex and new.

We have the experience and expertise to help your business.

As a niche consulting firm we provide indepth expert knowledge on emissions trading, broader climate change policy and energy sector issues.

 

"The Journey to Trading"

We have developed a structured approach to prepare businesses for emissions trading.
 FL-Journey to Trading

 

Contact us to get the advice you need for your business.

Kerstin, Peter and Stuart - The Frazer Lindstrom Team.

This newsletter has been prepared by Frazer Lindstrom Limited. It is intended to provide general information in summary form. Accordingly, professional policy advice should be sought before applying the information to particular circumstances.