Home > Publications > Newsletters > Issue 2, March 2008

Welcome... to the second edition of carboNZnewz

In this newsletter, we note the beginning of the first commitment period of the Kyoto Protocol, reflect on some significant events of 2007 for carbon markets and look back on a remarkable year for the carboNZero programme.

Towards the end of 2007, the fourth assessment report on climate change 2007 was published by the Intergovernmental Panel on Climate Change, New Zealand announced its emissions trading scheme, the Voluntary Carbon Standard was launched and Australia ratified the Kyoto Protocol.

The latest IPPC assessment report has confirmed that human-created greenhouse gas (GHG) emissions are increasing in the atmosphere and that radiative forcing or warming caused by these emissions is the primary cause of climate change. The GHG emissions in the atmosphere have increased 70% between 1970 and 2004 and are predicted to increase at least 25% (and possibly up to 90%) above 2000 levels by 2030. As a result, global temperatures are rising and are likely to continue to rise. If the increase in GHG emissions in the atmosphere continues unchecked, the impacts of climate change will cause serious damage.

The good news is that Government, industry and individuals can make a difference by reducing GHG emissions so that the levels in the atmosphere stabilise to limit the increase in temperature to around 2°C above pre-industrial levels. There is debate about whether the stabilisation level we should aim for is 450 or 550 parts per million (ppm) carbon dioxide equivalents (CO2-e) – the current level is about 430 ppm CO2-e – and whether the target date is 2030 or 2050.

The Kyoto Protocol set an emissions reduction target of 5.2% below 1990 levels to be achieved in the first commitment period 2008–2012. That target is clearly too little. In 2007, the United Kingdom legislated for a 60% reduction, California legislated for an 80% reduction and Australia and some Scandinavian countries called for reductions of 90% by 2050.

There is no doubt we need to reduce GHG emissions and that the sooner we do it, the less costly it will be. Reducing GHG emissions makes good sense no matter who you are. Not only is it good for the atmosphere and good for business, but also it leads to changes to the way that we manage energy, water, waste and biodiversity. In taking up the challenge to reduce our GHG emissions, we are setting out on a sustainability journey that will bring many other benefits.

The carboNZero programme offers robust tools and resources for all who wish to take action to reduce their climate change impacts. Whether you need to measure your emissions, plan reduction efforts, find quality offsets or have your own initiatives endorsed, we offer you business solutions based on solid science, credibility and integrity.

Professor Ann Smith
Technical Manager
carboNZero programme

 

Growth of the carboNZero programme

The year 2007 was indeed remarkable for the carboNZero programme. Since our last newsletter we have increased our team to 12 and welcome new team members senior advisor Simon Bannock and marketing assistants Kathryn Hailes and May Chang. Our enquiries manager, Bonnie Schaab, went off to gain overseas experience and Martin Fryer joined Auckland International Airport’s sustainability team. We wish them well.

We also established our independent advisory panel and authorised over 20 external auditors to conduct verification audits for clients seeking carboNZero certification. We handled enquiries from over 400 organisations, certified 20 organisations and events, and are currently assisting more than 100 companies through the certification process. In addition, numerous small businesses, events and individuals are participating in the programme.

We made over 40 presentations at national and international conferences, conducted numerous media interviews, featured in well over 200 media articles (print, radio, TV, magazines, online) and received over 30,000 unique visits to the carboNZero website. The carboNZero programme was highlighted by the Prime Minister and other government ministers in conference presentations and we were the subject of a Cabinet paper put up by the Ministry of Economic Development exploring ways to broaden the delivery of the carboNZero programme to New Zealand firms and sectors. The carboNZero programme was ranked as one of the top three schemes of its type in the world in a study by the University of Oxford and we were finalists in the Deloitte Top 200 awards, which recognise outstanding individuals and management teams who have navigated challenges and opportunities to ‘step beyond’.

We participated in the development of new greenhouse gas standards being prepared by the World Resources Institute, British Standards and the International Accreditation Forum. We brought international experts to New Zealand to provide training for our team on the Greenhouse Gas Protocol and lifecycle assessment.

We applaud the most recent companies to achieve carboNZero certification: Adventure South, Christchurch & Canterbury Tourism, Christchurch International Airport Limited, Lowndes Associates, Pitango Innovative Cuisine, Trilogy Products, and Warren and Mahoney. Many of our newly certified companies are the first in their sector to gain carbon neutral status and some are first in the world.

Another first was achieved with recertification of the New Zealand Wine Company. Last year NZWC was certified for growing, producing and distributing their award-winning Grove Mill and Sanctuary wines. For recertification, NZWC extended the boundary for their inventory to include the life cycle GHG emissions of their wine, gaining carboNZero certification for both their organisation and product. This was not a small undertaking and we commend Dave Pearce and Roger Kerrison for their commitment to NZWC’s long-term sustainability and for generously sharing their learnings so that other wineries can benefit from their experience.

We have improved the look and feel of the carboNZero website and added many more resources including information about all the organisations and events participating in the programme. Take a look at our challenge to New Zealand’s political and business leaders where we offer to list the leaders who submit their personal GHG emissions inventory and reduction plan. We believe that leaders ’walking the talk' will inspire others to take action.

 

New Zealand’s Emissions Trading Scheme and the carboNZero programme

At the end of 2007, New Zealand’s Emissions Trading Scheme (NZ-ETS) was launched. The NZ-ETS is the Government’s key policy instrument for reducing GHG emissions and enhancing forest sinks. It replaces previous attempts to introduce a carbon tax, negotiated greenhouse agreements (NGAs) with competitiveness-at-risk energy intensive firms, and the unpopular and incorrectly named 'fart tax' intended to help reduce agricultural emissions.

The purpose of the NZ-ETS is to help reduce New Zealand’s net emissions below business-as-usual levels and comply with our obligations under the Kyoto Protocol. All industry sectors and all greenhouse gases are included. The sectors will be phased in as follows:

• 1 January 2008 – forestry
• 1 January 2009 – liquid fossil fuels and transport
• 1 January 2010 – stationary energy and industrial processes
• 1 January 2013 – agriculture, waste and all remaining sectors

The emissions trading scheme establishes a compliance market in New Zealand that will put a value on carbon emissions in the economy and requires certain businesses (points of obligation) to supply the Crown with emission units equal to their greenhouse gas emissions. In the case of emissions from liquid fuels and stationary energy, the upstream points of obligation will be responsible to provide units for the full downstream emissions from the dates of those sectors entering the scheme (e.g. 1 January 2009 for liquid fuels). It is still unclear where the point of obligation will be placed in the agriculture and waste sectors when they enter the scheme in 2013.

For firms that are points of obligation, the more they reduce emissions or help their downstream customers reduce emissions, the less emission units they will have to buy and provide to the government. This will encourage businesses to find smart, efficient ways to reduce their emissions obligations.

For the sectors required to participate in the NZ-ETS, the key to minimising compliance costs is to reduce emissions as much as possible up to the point where it becomes cheaper to purchase compliance units. If the market is working and providing proper price signals, this becomes the overall least cost strategy – for firms and ultimately the country in meeting its Kyoto compliance obligations.

We get many questions about the implications of the NZ-ETS for the carboNZero programme. The simple answer is that the NZ-ETS is a compliance scheme and the carboNZero programme is a voluntary scheme. The underlying purposes for these two schemes are totally different and to a large extent they should be seen as having little to do with each other. The carboNZero programme will continue to play a valuable role in helping individuals, organisations and events to be carbon neutral, and in doing so help reduce New Zealand’s greenhouse gas emissions. In most cases these are unlikely to be firms or organisations that are points of obligation in the NZ-ETS.

However, like the many emissions trading schemes around the world (EU-ETS, the proposed Australian ETS, the Japanese voluntary scheme J-VETS), the NZ-ETS will require its point of obligation firms to prepare an annual emissions inventory. The reporting requirements of these schemes are generally based on the GHG Protocol and ISO 14064-1. The carboNZero certification scheme is completely aligned with these requirements and we have world class tools and resources to assist firms that are points of obligation in the NZ-ETS with the preparation of their GHG emissions inventory. 

Many of the companies participating in the carboNZero programme are using our framework to establish emissions measurement systems and reduction plans and voluntarily putting a price on carbon within their own accounting systems. To gain carboNZero certification, organisations must measure and reduce their GHG emissions as far as possible, and then purchase suitable offsets to mitigate any remaining unavoidable emissions. These steps are verified through an external audit.

As a voluntary scheme, the carboNZero programme sits outside compliance obligations. For any firms seeking carboNZero certification that are also points of obligation in the NZ-ETS, it is important to ensure that any allocations of allowed emissions under the NZ-ETS and any additional emission units purchased to achieve compliance are not double-counted in any way with respect to their carboNZero status. Compliance within the NZ-ETS does not mean that an organisation has met the requirements for carboNZero certification and vice versa, carboNZero certification does not mean that an organisation is compliant with the requirements of the NZ-ETS.  

The carboNZero programme will continue to provide value to organisations that seek carbon neutral status for reasons other than compliance. As noted above, we expect most firms and organisations seeking carboNZero status, and indeed the vast majority of New Zealand firms and organisations, will not be points of obligation in the NZ-ETS. In short, both the NZ-ETS and the carboNZero programme have important complementary roles to play in helping to reduce New Zealand’s GHG emissions in a cost-effective way, and both schemes add value to participating organisations.

 

Recent developments in the voluntary carbon market

Since 2006, the voluntary carbon market has seen remarkable growth. The Ecosystem Marketplace estimates the voluntary market was worth $US91 million in 2006. Some financial experts predict it may become the largest commodities market in the world. The US carbon market is predicted to be worth $US1 trillion by 2020. Through 2006 and 2007, businesses were the largest buyers of offsets or carbon credits. Their motivation was corporate social responsibility and ‘walking the talk‘ rather than anticipating future regulation.

The quality of offsets has become one of the most important issues for buyers and sellers. Discerning buyers are most concerned to ensure carbon credits are additional, verified against a recognised standard and that no double-counting or double-selling has occurred.

The main purpose of the additionality principle is to ensure that emissions reductions being sold as offsets are not ‘business as usual‘. Additionality tests for offset projects include:

• Regulatory – does the project go beyond legal requirements?
• Financial – is the project economically viable without the offset revenues?
• Barriers – are there significant non-financial barriers, e.g. technological, that need to be overcome?
• Common or prevailing practice – does the project go beyond common business practice?
• Timing – was the project started after a certain date?

An important report prepared for WWF by the Oeko-Institut in Germany found that some 20% of emission reduction offsets sold under the UNFCCC Clean Development Mechanism (CDM) projects lacked environmental integrity, i.e. the projects were not additional. See: Is the CDM fulfilling its environmental and sustainable development objectives? An evaluation of the CDM options for improvement www.oeko-institut.org/new/dok/725.php

In addition to all the ‘greenwash‘ issues we highlighted in the last newsletter, it pays to remember the old adage of ‘buyer beware’. The quality of the offsets you buy is a business risk that could undermine your reputation. At the end of this article, we offer some questions for you to ask before buying offsets or carbon credits.

During 2007, the standards for offset projects became clearer with three emerging as preferred by the markets:

• The Gold Standard is applicable to offsets from renewable energy and energy efficiency projects that are traded in the regulated (CDM and JI) and voluntary markets.
• ISO 14064-2 is the specification at project level for quantification, monitoring and reporting of GHG reductions or removal enhancements. It is applicable to any offset project whether or not it is creating carbon credits for trading.
• The Voluntary Carbon Standard (VCS) is a standard that approves baseline scenario and monitoring methodologies for offset projects. To date, it has approved the UNFCCC Clean Development Mechanism and Joint Implementation schemes and is currently assessing the California Climate Action Registry.

An important issue for New Zealand is the recognition of forest sinks projects. The European carbon market has had no appetite for offsets from forest sinks and this has created concern about their credibility and integrity. Until recently, only the Chicago Climate Exchange (a voluntary emissions trading scheme) recognised forest offsets. The VCS has developed guidance for agriculture, forestry and land-use (AFOLU) projects, but has not yet approved any of these types of project.

We get many questions about the status of Landcare Researchs EBEX21 carbon credits (forest regeneration) programme. EBEX21 is currently negotiating its status within either the Permanent Forest Sinks Initiative or the Emissions Trading Scheme. Once completed, EBEX21 offsets will be Kyoto units from 2008, and they will be listed on the New Zealand Emission Unit Register (NZEUR). Some enquirers also expressed concern that EBEX21 projects are double-counted, i.e. they are also counted as emissions removals in the land-use change account in the national inventory. This is not the case as there was no Kyoto carbon-accounting prior to 2008. EBEX21 offsets have only been accounted for once, by the carboNZero programme.

Another important issue for buyers of carbon credits is having confidence that the offsets purchased are real and have not already been used. The establishment of public registries should make it easier to track the ownership, status and movement between registries of both Kyoto emission units and voluntary carbon credits. However, you may find the number of registries and the types of accounts confusing as the rules are still being developed. All units and credits should have a unique serial number for each tonne of CO2-e offset or assigned amount available for trading. The serial number for your offset could be listed in any one of the following registries:

• UNFCCC International Transaction Log – this is the final resting place for all compliance units under the Kyoto Protocol
• CDM registry – this is where the credits assigned to CDM projects first appear
• National registries – this is where the ownership is registered for the compliance units assigned to Annex B countries participating in the Kyoto Protocol. The New Zealand Emission Unit Register (NZEUR) is maintained by the Ministry of Economic Development.
• Gold Standard registry – this is where all offsets verified as meeting the requirements of the Gold Standard will be logged. Previously verified Gold Standard offsets will be transferred to this registry.
• Voluntary Carbon Standard registry – this is where all offsets verified as meeting the requirements of the VCS will be logged
• Chicago Climate Exchange – this is where voluntary offsets recognised by the CCX are registered
• TZ1 Market – this is a registry and trading platform for Kyoto units and voluntary carbon credits being established by the New Zealand Exchange Limited (NZX)
• The Registry Company (regi) – this is a New Zealand registry for voluntary carbon credits
• Other significant registries – European Union Community Independent Transaction Log, New South Wales Greenhouse Gas Abatement Scheme (GGAS), California Climate Action Registry, Regional Greenhouse Gas Initiative (RGGI) – a voluntary emissions trading scheme for nine northeast and mid-Atlantic states in the USA

Questions to ask about offsets and carbon credits

• What do you want to achieve by purchasing offsets?
• Have you reduced your own emissions? The more you reduce your emissions, the less offsets you need to purchase to become carbon neutral.
• What sort of offsets are they?
• Are the offsets externally verified and additional?
• What standard were they verified against?
• Are the offsets listed in a recognised registry?
• Have the units been used before to offset someone else’s emissions?
• How can you be sure the offsets have not been sold to multiple buyers?
• Have the offsets been retired or cancelled?
• What evidence for the status of the offsets will you be given when you purchase them?
• How much of the cost of the offsets actually goes to the project that created them?

 

GHG Protocol Director visits carboNZero

We were honoured to host a visit from the Director of the Greenhouse Gas Protocol, Pankaj Bhatia, who ran master classes for the carboNZero team and public seminars in Auckland, Christchurch and Wellington. Pankaj spent five days with the carboNZero team exploring the detail of the protocol and providing guidance. Over 60 people attended the public seminars, including carboNZero clients, and local authority and government officials. The visit gave us a deeper understanding of the protocol and how to apply it most effectively in situations that are not typical. It was clear from Pankaj’s visit that the carboNZero programme meets and exceeds the intention of the protocol.

The GHG Protocol is a framework and set of standards for the measurement and reporting of GHG emissions by corporate entities or projects. Over 2000 business worldwide use the protocol to disclose their GHG emissions and manage the risks associated with them. There are also many GHG schemes around the world using the protocol as a framework, including the ISO 14064 standards, the Carbon Disclosure Project, the European Union Emissions Trading Scheme and the carboNZero programme.
 
One of the main issues commonly encountered in applying the protocol is the definition of organisational boundary:

• How do you define what emissions your organisation is responsible for?
• When should you be responsible for only the emissions you can control?
• When should equity share define your organisational responsibility?

Organisational boundaries refer to defining which facilities are recognised as part of the GHG inventory. Two approaches for defining organisational boundaries are used:

• Under the control approach, an organisation looks at facilities where it has authority to implement either financial or operational policies, then accounts for all GHG emissions from facilities where it does have control.

• Under the equity share approach, the organisation accounts for emissions from all facilities in which it has some equity interest, but accounts for only a percentage of the total emissions equal to the share it has in the particular facility or sub-entity (e.g. joint venture, partnership).

Consultation with the company’s legal or accounting staff may be required to correctly establish the equity-share boundaries. If the reporting company wholly owns all its operations, the organisational boundary will be the same whether the equity-share or control approach is used.

For example, when a business owns its vehicle fleet, it has full operational and financial control over the use of the vehicles and fuel efficiency. However, when the vehicle fleet is leased, there is less operational control but the vehicles are still accounted as an asset and should be included in the GHG inventory.

For further reference to defining organisation boundaries, see:

• ISO 14064-1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals. 4.1 Organisational boundaries (Page 6) and Annex A. Consolidating facility-level data to the organisation level.
• The Greenhouse Gas Protocol: A corporate accounting and reporting standard (revised edition). 3. Setting Organisational Boundaries.

 

Upcoming events participating in the carboNZero programme

Sustainable Consumption Symposium	12–13 March 2008
The organisation and promotion of Earth Hour	29 March 2008 www.earthhour.org
Small Business Expos 2008 Auckland ● Wellington ● Christchurch	16–18 April ● 20–22 May ● 25–27 June www.businessexpo.co.nz
Vero Excellence in Business Support Awards 2008	17 April www.excellenceinbusinesssupport.co.nz
EECA Biofuels & Electric Vehicle Conference	2 April 2008 www.eeca.govt.nz
Government Information System Managers Forum	2 May 2008 www.govis.org.nz
Auckland Writers & Readers Festival	15–18 May 2008 www.writersfestival.co.nz
Pure Luxury New Zealand	21–23 May 2008 www.pureluxury.co.nz
State Services Senior Leaders Development Conference	19 June 2008 devcon.ssc.govt.nz/2008/programme.aspx
New Zealand Organisation of Quality Learn Share Grow Conference	22–24 October 2008 www.conference2008.nzoq.org.nz

Keep your eye on the carboNZero events website: www.carbonzero.co.nz

 

In this month’s top links, we feature emissions trading schemes:

UNFCCC Kyoto Protocol – Emissions Trading
The Kyoto Protocol is an emissions trading scheme with a cap that aims to reduce global emissions by 5.2% below 1990 levels by the end of the first commitment period 2008–2012.
http://unfccc.int/kyoto_protocol/mechanisms/emissions_trading/items/2731.php

EU Emission Trading Scheme (EU-ETS)
The EU-ETS is the largest multi-country, multi-sector trading scheme covering more than 10,000 installations in the energy and industrial sectors. The scheme aims to reduce GHG emissions by 21% below 2005 levels by 2020.
http://ec.europa.eu/environment/climat/emission.htm

Australian Emissions Trading Scheme
The Australian Government announced in 2007 that it would introduce an emissions trading scheme to be operating by 2010. The scheme is underpinned by the National Greenhouse and Energy Reporting Act 2007, which establishes GHG reporting requirements, and OSCAR, an online system for comprehensive activity reporting.
www.greenhouse.gov.au/emissionstrading/index.html

Japanese Voluntary Domestic Emissions Trading Scheme (J-VETS)
The Japanese Ministry of the Environment has been operating Japan’s voluntary emissions trading scheme since 2006 involving 34 companies that aim to reduce GHG emissions by 21% against a baseline of 2002–2004.
www.et.chikyukankyo.com/english/

New Zealand Emissions Trading Scheme (NZ-ETS)
The New Zealand Government announced in 2007 that it would introduce an emissions trading scheme to be operating from 2008. The site provides many information sheets and reports relevant to the NZ-ETS.
www.climatechange.govt.nz/nz-solutions/implementing-emissions-trading-scheme.shtml

International Emissions Trading Association (IETA)
An international membership organisation with 150 member companies that seek to develop an emissions trading regime that results in real and verifiable GHG emissions reductions. It is involved in the development of standards such as the Voluntary Carbon Standard.
www.ieta.org

Global carbon market set to explode in next decade
Overview of emissions trading schemes with statistics on the volumes and value of offsets traded and discussion on the potential growth of carbon markets.
www.euractiv.com/en/climate-change/global-carbon-market-set-explode-decade/article-170384
 

For more information about the carboNZero programme please contact our marketing team, Kathryn Hailes ( 03 321 9735) and May Chang (03 321 9831), or free phone 0800 CNZERO.

ISSN 1178-3990

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