NZ leads the world with its ETS ... or does it?

Politicians usually at the front of the scrum when claims are made that New Zealand leads the world have been noticeably shy about the nation's emissions trading scheme (ETS) which kicks up several notches on July 1.

Climate Change Issues Minister Nick Smith proclaimed in Parliament last September that "this emissions trading scheme will be the first of any country outside Europe, and on July 1, 2010 will be the most comprehensive by including transport, industrial, and energy emissions".

"There is a cost (to taxpayers) in reducing the immediate impact on fuel and electricity prices ... but there are also savings as a consequence of reducing allocations earlier," he said.

But his Prime Minister, John Key, said last month that of the 38 countries that signed the Kyoto Protocol, 29 have an ETS: "When people say to you, 'gosh New Zealand's going to lead the world and they'll be the only one with an ETS', not true".

Since his predecessor Helen Clark voiced an "aspirational" goal of making New Zealand carbon neutral and leading the world in sustainability, Mr Key's colleagues have argued that leading the world in the war against greenhouse gases also means leading the world in the price of fuel and energy.

So the Government's climate change information on the ETS presses the point that schemes in other countries cover more of their emissions than New Zealand's will this year. It says the only area in which the Government is seeking to lead the world is in its work with the global research alliance working on agricultural greenhouse gases.

According to Mr Smith, the EU's scheme covers 43 percent of its emissions, compared to 23 percent in New Zealand, EU schemes have been in place for five years, and emissions per head of population have dropped 9 percent below 1990 levels as compared to New Zealand's 23 percent increase.

"We are closer to leading the developed world in increasing our emissions than in reducing them," he said.

And Mr Key is confident that other Kyoto treaty nations -- including even Australia -- will join NZ with ETS-type responses.

So, how does our scheme compare with the rest of the world?

NEW ZEALAND:

Mandatory ETS that will cover all sectors and all greenhouse gases by 2015 with different "entry dates" for different sectors: forestry has been in for two years, and stationary energy, industrial processes and liquid fossil fuel emissions enter next Thursday. Agriculture enters in 2015, but some farmers hope a review in 2011 will let them avoid accountability.

A transition period will operate to the end of 2012 with the price of New Zealand emissions units (NZUs) capped at $NZ25, and only one unit to be surrendered for every two tonnes of carbon-dioxide-equivalent emissions, effectively a cost of $NZ12.50/tonne.

The Government has said moving to a full obligation in 2013 and bringing in additional sectors are conditional on progress in international agreements.

EUROPEAN UNION:

The EU ETS is the world's first and largest mandatory trading scheme for CO2 emissions, and started in 2005, capping the amount of carbon dioxide emitted from large industries such as energy, ferrous metals, mineral industry and pulp and paper -- about 46 percent of the CO2 emissions.

Aluminium smelters and some steelworks, and chemical industries are proposed to start reporting both carbon dioxide and nitrous oxide, and to account for nitrous oxide and perfluorocarbons from 2013.

The EU scheme doesn't yet include transport, though a few countries in Europe do have separate carbon taxes on transport. All domestic and international flights between EU airports will be accountable from 2011, as will emissions from all international flights that arrive at or depart from an EU airport from 2012 (including flights to and from New Zealand).

Free handouts of emissions to some firms have been rorted for windfall profits, but the EU cut emissions by about 2 percent in the first couple of years, though design flaws limited the effectiveness of the scheme. The initial total allocation of allowances actually exceeded emissions and drove the carbon price down to zero in 2007.

The current phase is expected reduce emissions by about 2.4 percent this year and for 2013 to 2020, there are proposals for an overall EU cap, with allowances allocated to member countries, tighter limits on the use of offsets, and a move from allowances to auctioning.

AUSTRALIA:

The Garnaut Climate Change Review recommended in 2008 an ETS that included transport but not agriculture, with compensation for living cost increases for poor families and no handouts of emissions permits to carbon polluters. When Kevin Rudd became prime minister in Australia, he promised an ETS in 2010, then delayed it until 2011, then last month further delayed it until 2013.

JAPAN:

A voluntary ETS with incentives for participants started in 2005, covering CO2 combustion from participating companies.

NORWAY:

A cap and trade scheme for CO2 emissions from large direct emitters took effect in selected industries from 2005 to 2007, and fully linked to the EU scheme since 2008.

SWITZERLAND:

A voluntary ETS started in 2008, with an exemption from proposed mandatory CO2 taxes covering CO2 emissions from large companies or groups of companies that opt in.

BRITAIN:

Some UK companies participate in the EU ETS, and the British government proposes a carbon reduction scheme for CO2 emissions from large businesses which are not energy-intensive and not covered by the EU. The mandatory auction-based cap and trade scheme covers CO2 emissions from direct and indirect (electricity) consumption, and applies above a threshold for electricity consumption. Emissions covered by UK Climate Change Agreements are excluded.

UNITED STATES:

The 2010 US federal budget proposed to support clean energy development with a 10-year investment of $US15 billion a year, generated from the sale of greenhouse gas emissions credits, with all emissions credits auctioned off to generate an estimated $US78.7 billion in additional revenue in the 2012 financial year, increasing to $US83 billion by 2019.

Seven northeastern states have a regional greenhouse gas scheme to trade CO2 emissions from fossil fuel electricity generators above a size threshold of 25MW, and credits from offsets from other sectors and gases may be used to comply with obligations. The first phase is due to run to 2015, with a second phase proposed from 2016-2020.

Another collaboration between seven western US states and four Canadian provinces plans ETS reporting from this year and trading from 2012 covering all six Kyoto greenhouse gases in sectors including electricity generation, commercial and industrial combustion, and industrial process emissions (above a 25,000 tonne threshold). Household, commercial and industrial fuel combustion (below the 25,000 tonne threshold will join in 2015, and other sectors may be included via "offset" projects in a bid to help cut emissions for the region to 15 percent below 2005 emissions by 2020.

In some states renewable energy certificates, or "green tags" have been issued for each 1000kWh of energy a wind turbine or hydro generator sells into the electrical grid. The certificates can be sold on the open market for profit to companies which want to show corporate responsibility, though the certificates are unregulated, with no national registry to avoid double-counting.

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