How to cre­ate an Emis­sions Trad­ing Scheme

Element - - Business -

1 De­cide which green­house gases to take into ac­count The ‘Green­house ef­fect’ drives cli­mate change when some of the in­frared ra­di­a­tion ra­di­at­ing from the planet is ab­sorbed by ‘green­house gases’ and emit­ted back into the Earth’s at­mos­phere in­stead of pass­ing back out into space. The key ‘green­house gases’ are Car­bon Diox­ide (CO2) and Meth­ane (CH4). CO2 is the most com­monly gen­er­ated by in­dus­trial pro­cesses and has the great­est over­all con­tri­bu­tion to the green­house ef­fect, while meth­ane is the ma­jor emis­sion from the agri­cul­tural sec­tor, and has a much more pow­er­ful ef­fect on cli­mate change tonne for tonne. Other gases also taken into ac­count are hy­droflu­o­ro­car­bons (HFCs), per­flu­o­ro­car­bons (PFCs) and sul­phur hex­aflu­o­ride (SF6) 2 Iden­tify the busi­ness sec­tors that are the ma­jor emit­ters in the econ­omy In New Zealand this means agri­cul­ture (47%), en­ergy – which in­cludes trans­port (43.4%), in­dus­trial pro­cesses (6.7%) and waste (2.8%) as of the lat­est fig­ures in 2010. 3 Choose the sec­tors in which to make re­port­ing emis­sions com­pul­sory In New Zealand the agri­cul­tural sec­tor, en­ergy sec­tor and in­dus­tries en­gaged in the pro­duc­tion of iron, steel, alu­minium, clinker, glass and large amounts of gold must now report their green­house gas emis­sions. 4 Choose which sec­tors in which to make emis­sions trad­ing com­pul­sory Cur­rently this cov­ers the en­ergy sec­tor, and some of the in­dus­trial sec­tor. The agri­cul­tural sec­tor had been due to be­gin trad­ing in 2015, but that has now been post­poned in­def­i­nitely. New Zealand’s emis­sions trad­ing cur­rency, the New Zealand Unit or NZU is cre­ated and dis­trib­uted by the Government. Emit­ting busi­nesses within the scheme can buy units di­rect from the government at a fixed price of $25 a tonne, or buy them from busi­nesses that re­ceive units for ‘ap­proved emis­sions re­moval ac­tiv­i­ties’ in­clud­ing forestry, as well as some to­mato, cu­cum­ber, cap­sicum and rose grow­ers. Also, some in­ter­na­tion­ally recog­nised units can be used in­stead of NZUs. Cur­rently most of the firms tar­geted hand over one credit or emis­sion unit to the government for ev­ery two tonnes of emis­sions. The sit­u­a­tion in New Zealand is fur­ther com­pli­cated by the free al­lo­ca­tion of NZUs to in­dus­tries con­sid­ered by the government to be “emis­sions in­ten­sive” and “trade ex­posed”. In other words, those where the government be­lieves the cost of com­ply­ing would make the busi­nesses un­ac­cept­ably un­com­pet­i­tive in overseas mar­kets. There are cur­rently at least 26 of th­ese, which re­ceive free al­lo­ca­tions of ei­ther 60% or 90%. They in­clude, con­tro­ver­sially, many of the ma­jor emit­ters in the coun­try. This means that so far they have only had to pay for ei­ther 40% or 10% of their green­house gas emis­sions. The group paying only 10% at the moment, for ex­am­ple, in­cludes alu­minium smelt­ing, iron and steel from iron sand, burnt lime and urea pro­duc­tion, and ce­ment pro­duc­tion.

CO2 AB­SORBED Government gives NZUs to green­house gas ab­sorbers

CO2 EMIT­TED Emit­ters sur­ren­der cred­its

to government

NZ GOVERNMENT

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