Total greenhouse gas emissions from the energy sector dropped seven percent in 2009, according to a new Ministry of Economic Development report.

Electricity generation was the star performer within the sector, with a 24% reduction in emissions. The report attributes the drop to higher than usual lake levels which allowed more hydro energy to be used in lieu of coal and gas generation.

Electricity generation made up 19% of total energy sector emissions in 2009.

New Zealand is likely to remain "addicted to oil," presenting a key challenge for reducing energy sector emissions, according to a Ministry of Economic Development report.

The latest New Zealand Energy Outlook (2009) is designed as a reference for the country’s energy policy debate. Published every few years, it makes 25-year projections of the country’s energy supply, demand, prices and emissions.

A key message from the report was New Zealand’s “addition” to oil, although demand was expected to slow, with growth in diesel use instead.

While it seems there are enough new trees growing to offset our increased carbon emissions for the first Kyoto commitment period from 2008-2012 – big questions remain for the future, especially for agriculture.

Climate change minister Nick Smith has essentially vetoed the very public push by the Green party to reduce carbon emissions by 40% of 1990 levels by 2020 pointing to a direct cost to the economy of around $15 billion.

A reduction target of that size would “obliterate the economy” according to Federated Farmers president Don Nicolson.

Increases in forestry to offset greenhouse gas emissions in New Zealand are dependent on more than just high carbon prices.

New Zealand Forest Owners Association president Peter Berg said there are too many unknowns to encourage people to invest in growing trees right now.

A new report published by Infometrics suggested that for New Zealand to reach a target of 25-40% below 1990 emission levels by 2020, a carbon price of $200 per tonne would be required.

The government has yet to confirm its target to the International Panel on Climate Change.

The National Party’s promise this week to allow pre-1990 forest owners to offset the cost of carbon emissions caused by deforestation by planting on other land is not the boon to forest owners it first seems.

National’s policy is to establish a forestry offset scheme, but this will be “subject to a full assessment of the costs of such a scheme.”

And Forestry spokesman Shane Ardern confirmed to NBR that those “costs” are the financial implications under Kyoto, which currently does not recognise offset planting.