New Zealand Parliament Passes Carbon Trading Scheme

PlanetArk 11 Sep 08;

SYDNEY - New Zealand on Wednesday passed a climate change bill that will set up the country's first emissions trading scheme and help it meet obligations under the Kyoto Protocol, the government said.

Trading of carbon credits begins in 2009 and Wednesday's parliamentary approval means the system is the first national cap-and-trade scheme outside of Europe.

Neighbouring Australia has set a 2010 deadline for its scheme to begin operation.

The bill faced a rocky path to approval by lawmakers, with the minority-led government forced into months of negotiation with the Greens and New Zealand First parties to win majority support.

The bill was passed into law on a 63-57 vote in parliament.

The Climate Change (Emissions Trading and Renewable Preference) Bill will eventually bring all sectors of the economy under a regime that sets limits on the amount of greenhouse gas they can emit.

Those that breach their limit will have to buy credits from users that produced emissions below their ceiling.

The New Zealand trading scheme will phase in sectors across the economy and includes all emissions from forestry from 2008, transport by 2009, stationary energy such as coal-fired power stations by 2010 and agricultural waste by 2013.

About 60 percent of New Zealand's power comes from hydro-electricity, while agricultural emissions, such as methane from livestock, comprise about half the nation's total greenhouse gas emissions.

The plan would act as a catalyst to bring forward clean technology and would create incentives for climate-friendly behaviour and investments, according to David Parker, minister for climate change.

"For the first time we will start factoring in the true cost of greenhouse gas emissions into our economy," Parker said in a statement.

New Zealand was joining 27 others nations that had adopted emissions trading schemes, and many others that were developing them, Parker said.

Provisions in the bill meant New Zealand could meet its obligations under the Kyoto Protocol while helping the country reduce emissions at the lowest possible cost, Parker said.

"It does so in a fair and effective way by charging the polluter for increases in emissions and rewarding decreases," Parker said.

New Zealand aims to be "carbon neutral" in the total energy sector by 2040. (Reporting by James Regan; Editing by David Fogarty)

FACTBOX - Carbon Trading Schemes Around the World
PlanetArk 11 Sep 08;

Companies and governments are turning to emissions trading as a weapon to fight climate change, in a carbon market worth US$64 billion last year.

Cap-and-trade schemes force participants -- often energy-intensive industries -- to buy permits to emit greenhouse gases such as carbon dioxide, which is produced from burning fossil fuels.

New Zealand's parliament on Wednesday passed the Labour government's climate change bill, which will introduce emissions trading from 2009.

The scheme will eventually cover all emissions from the economy, but critics said it was too slow to phase in the crucial sectors such as agriculture, which makes up around half of the countries total emissions.

Australia's leading climate guru Ross Garnaut last week said the Australian government should aim for an emissions cut of at least 10 percent by 2020 (based on 2000 levels), or up to 25 percent if a tougher target is adopted.

He also recommended that Aussie carbon prices be pegged at A$20 (US$16) a tonne from 2010, with only marginal increases for the first two years.

The 27-nation European Union launched its cap-and-trade scheme in 2005, while Canada is set to launch a market of its own in 2010.

US senators in June defeated a proposed federal US climate change bill which included cap and trade.

In another type of carbon market, countries and companies can trade carbon offsets under three, UN-led Kyoto Protocol schemes.

A full list of established and proposed schemes follows.


INTERNATIONAL SCHEMES

KYOTO PROTOCOL (United Nations) (1)

Launched: 2005

Mandatory for 37 developed signatory countries

Target: 5 percent reduction in 1990 emissions by 2008-2012

Contains three sub-schemes to help signatories meet targets:

1- Clean Development Mechanism (CDM): Developed countries can invest in clean energy projects in developing nations

2- Joint Implementation (JI): Rich countries can invest in clean energy projects in former communist countries or "economies in transition"

3- Assigned Amount Units (AAUs): Signatories can trade surplus emissions rights among themselves

First commitment period expires in 2012 and governments scrambling to negotiate a successor agreement.

EU ETS - European Union Emissions Trading Scheme (2)

Launched: 2005 (Phase 1: 2005-2007, Phase 2: 2008-2012, Phase 3: 2013-2020)

Mandatory for 27 nations in EU

Covers around half of all EU emissions

Target: Reduce EU ETS emissions by 21 percent by 2020 compared to 2005 levels

Worth US$50 billion in 2007 (3)


PROPOSED NATIONAL SCHEMES

UNITED STATES

Mandatory cap-and-trade scheme proposed under Lieberman-Warner Climate Security Act was rejected by the US Senate in June, but many observers expect either presidential candidate to introduce new climate legislation within first six months of their presidency.

CANADA (4)

Launch: 2010

Mandatory for all 10 provinces and three territories

Target: Reduce 2006 emissions by 20 percent by 2020

Scheme covers 50 percent of Canada's emissions

Potential problems: Alberta already has a provincial scheme and several provinces have joined US regional schemes.

JAPAN (5)

Currently a voluntary scheme (JVETS), and government trialling a mandatory scheme in autumn 2008.

Target: Cut emissions by 14 pct below current levels by 2020

JVETS (voluntary scheme) - Launched: 2005

Target: Cut emissions from a 2002-2004 average, using government-subsidised clean energy equipment

AUSTRALIA (6)

Launch: 2010

Mandatory - to cover 75 percent of Australian emissions

Target: First cap (2010-2012) to cut emissions to 8 percent above 1990 levels (Australia's Kyoto target). Medium-term caps could be 10-25 percent below 2000 levels by 2020, while long-term targets "should reflect increasing levels of ambition" and move country towards an eventual goal of reducing 2000 emissions by 60 percent by 2050.

NEW ZEALAND (7)

Launch: Obligations start in 2008, trading starts in 2009

Mandatory - includes forestry in 2008, electricity in 2010, transport fuels (16 pct of total emissions) in 2011 and agricultural waste (47 pct of total emissions) from 2013.

Target: To be announced

Participants will receive permits representing 90 percent of 2005 emissions between 2013-2018. Free permits will then be phased out from 2019 to have full auctioning by 2029. Importing HFC and PFC offsets to be restricted until 2013, and using AAUs for compliance will only be allowed between 2008-2012.

Auckland's TZ1 exchange has been appointed to be VCS (Voluntary Carbon Standard) registry.

Sources: (1) UNFCCC

(2) European Commission

(3) World Bank

(4) Environment Canada

(5) Japanese government

(6) Australian government

(7) New Zealand government, Barclays Capital (Compiled by Michael Szabo; Editing by David Fogarty)