New Zealand ETS: Agriculture - Hayden Montgomery - EPA Domestic Offsetting Workshop May 2011
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This document summarizes New Zealand's proposed agriculture emissions trading scheme: 1) It would cover methane from livestock and nitrous oxide from fertilizer, applying to dairy and meat processors initially and transitioning to farmers by 2015. 2) Regulations would define emission factors, reporting requirements, and allocation baselines to incentivize emission reductions while avoiding perverse outcomes. 3) Costs to participants would vary depending on emission intensities and commodity prices, but moving the point of obligation to farmers could significantly increase participation and incentives while making compliance more difficult.
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New Zealand ETS: Agriculture - Hayden Montgomery - EPA Domestic Offsetting Workshop May 2011
- 1. Agriculture emissions • Methane from enteric fermentation and animal waste • Nitrous oxide from fertiliser, dung and urine • NZ ETS covers 96% of agriculture emissions
- 2. ETS - Agriculture Sector Voluntary Mandatory Full obligations reporting reporting Forestry - - 1 Jan 2008 Transport fuels - 1 Jan 2010 1 July 2010 Electricity - 1 Jan 2010 1 July 2010 production Industrial - 1 Jan 2010 1 July 2010 processes Synthetic gases 1 Jan 2011 1 Jan 2012 1 Jan 2013 Waste 1 Jan 2011 1 Jan 2012 1 Jan 2013 Agriculture 1 Jan 2011 1 Jan 2012 1 Jan 2015
- 3. Participants Dairy processors Meat processors Egg producers Live animal exporters Fertiliser importers and manufacturers
- 4. Changing the Participant The participant to be changed from processor to farmer provided: – information can be verified – Leads to a reduction of emissions – Compliance and administration costs are minimised – Fiscal costs to the Government are minimised
- 5. Regulation development: 2010: Exemptions 2010: Emission factors and reporting 2011: Unique emission factors 2011: ETS Review 2012: Allocation baselines and process
- 6. Proposed Exemptions - species Species i.e. Horses, Llama and Alpaca, Emus and Ostriches Threshold level exemption i.e. importing fertiliser less than 1 tonne of N fertiliser
- 7. ETS Agriculture Regulations • Cover emission factors and information requirements • Aligned as much as possible with existing industry information • Trying to avoid: • Double counting of emissions • Perverse effects e.g. bobby calves • Trying to: • Reflect integrated nature of modern farming • Reward efficiency gains • Provide participants with certainty
- 8. Emission factors and Reporting - Dairy processors Cow Emissions = MS (tonnes) x 6.14 Goat Emissions = MS (tonnes) x 2.69 Sheep Emissions = butter fat (tonnes) x 7.61
- 9. Emission factors and Reporting - Meat processors Emissions = (no. of animals x Em Factor1) + (tonnes of meat x Em Factor2)
- 10. Reporting - Fertiliser companies Emissions = (N imported or manufactured – N exported) x 5.72
- 11. Allocation to agriculture • Intensity based • Assistance level is 90% of the baseline in 2015 • 1.3% per annum phase out from 2016 • The baseline will be average emissions per unit of output 100 90 Assistance Level 80 (% of Baseline) 70 60 50 40 30 20 10 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
- 12. How much will it cost @ 2015? Description Cost @ Cost @ $25/tonne $50/tonne CO2e1 CO2e1 Kg MS $ 0.015 $ 0.03 Steer carcass (240 kg) $11.25 $22.50 Lamb carcass (17 kg) $ 0.94 $ 1.88 Hind carcass (50 kg) $ 2.84 $ 5.68 Tonne N $14.30 $28.60 1 2015 at $50/tonne and 90% allocation
- 13. Key design features for incentivising action • Point of obligation • Emission factors – incorporation of mitigation technology • Allocation: historic versus intensity Point of obligation Processor Farmer Number of participants 40-50 45,000 Cost pa ($ millions) 5-7 25-57 Incentive to reduce Weak Strong emissions Compliance Easy to enforce More difficult
- 14. Complementary measures • Information and awareness – Speeding up technology transfer – $2m pa – Joint industry/government investment in Overseer - $5 million • Investment in research and development – Current research investment – PGgRC $25m, MAF $40m – Partnership between Government, dairy sector and fertiliser companies in a major research trial on nitrification inhibitors $10 million – Establishment of a Centre for Agriculture Greenhouse Gas Research $50 million – Recognition of mitigation technology in NZ National GHG Inventory – Global Alliance
- 15. New Zealand Experience • Take time to develop methodology • Continuous development – stepped progression • Founded on peer reviewed science • Clear and ongoing dialogue with stakeholders