Submitter details
1. Submitter name
Individual or organisation name
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Waste Management New Zealand Ltd (WM New Zealand)
Section A: NZ ETS sector-specific regulatory updates and improvements
8. Do you support updating the waste DEF used to calculate UEFs?
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Yes
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No
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I don't know
Please explain your answer here.
Waste Management NZ Limited (WMNZ) supports updating (correcting) the DEF referred to in the Climate Change (Unique Emissions Factors) Regulations (UEF Regulations) from 0.91 to 1.023 tCO2e/TJ so that the same DEF is used in both the UEF Regulations and the Climate Change (Waste) Regulations Clause 5 (1).
More specifically, WMNZ supports the change to UEF Regulations 23C (1) (g) of to read:
UEF = 0.91 1.023 × (1 − C)
More specifically, WMNZ supports the change to UEF Regulations 23C (1) (g) of to read:
UEF = 0.91 1.023 × (1 − C)
9. Do you support using historical waste composition to inform the calculation of UEFs?
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Yes
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No
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I don't know
Please explain your answer here.
Yes. WMNZ supports updating the UEF Regulations so that applicants use the default (historical) waste composition that applied at the time that waste was disposed at the landfill.
We suggest this be done through amending wording to clause 23C (2) and we ask for the opportunity to review this wording change before it is finalised.
When referencing the need for this correction to waste UEFs, section “4b – Clarifying data used to calculate UEFs for waste participants” of the consultation document references waste participants using waste composition data for the current DEF as provided in Schedule 2 of the UEF Regulations. This should reference Schedule 3, rather than Schedule 2.
We suggest this be done through amending wording to clause 23C (2) and we ask for the opportunity to review this wording change before it is finalised.
When referencing the need for this correction to waste UEFs, section “4b – Clarifying data used to calculate UEFs for waste participants” of the consultation document references waste participants using waste composition data for the current DEF as provided in Schedule 2 of the UEF Regulations. This should reference Schedule 3, rather than Schedule 2.
10. Do you support allowing landfill gas to be destroyed offsite, potentially by a third party?
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Yes
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No
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I don't know
Section B: NZ ETS auctioning and operational regulatory updates and improvements
Do you have any feedback or suggestions on the process by which the Government routinely updates the regulations that govern the NZ ETS?
Please write your feedback here.
WMNZ is New Zealand’s largest waste management company, with ownership and operational interests in six landfills, undertaking ETS reporting for Redvale, Whitford, Tirohia and Kate Valley landfills. We have a highly experienced in-house technical team who have enjoyed working closely with MfE Technical Advisory Groups in the past to set up the ETS and Waste Disposal Levy regulations and with the Climate Change Commission. WMNZ requests closer involvement and open dialogue with MfE on matters relating to the ETS prior to publication of consultation documents. We believe this will lead to more efficient processes and a better understanding of the industry and MfE’s requirements.
Are there any improvements, corrections, or clarifications to the NZ ETS regulations, along the lines of those proposed in this document, that you think the Government should add to the update process in future years?
Please write your answer here
a. Background
When the ETS was developed, the purpose was to place a price on emissions from landfills and incentivise landfill operators to maximise the capture and destruction of landfill gas. Several key principles guided this development:
• Default Liability: Landfill operators are initially charged as though all methane produced at a landfill is released to atmosphere (fugitive methane), providing a strong incentive to reduce ETS liability by maximising gas destruction.
• Physical Measurement Limitations: Since it is not possible to physically measure fugitive methane emissions from landfills, the agreed methodology compares theoretical (calculated) methane production with actual (measured) methane destruction. It is therefore conceivable that a landfill operator might destroy more than 100% of the calculated methane production.
• Passing on costs to the producers of waste: Landfill operators only get one opportunity to pass on the cost of fugitive methane emissions to customers, namely on receipt of their waste. This means operators must take on risk by setting a customer's disposal price before the year starts, based on estimated waste composition and gas destruction capability. They must then maximise gas capture during the year and can only confirm their actual ETS liability after the year is complete.
• Regulation Certainty: To allow fair waste disposal pricing for customers, regulations and calculation methodologies must be set and confirmed before the year in which the waste is received.
• Annual Methane Release: The assumption was that all the methane produced from waste is released during the year of waste acceptance. This would also assist landfill operators in recovering ETS costs from customers.
b. Our feedback
i. Timing of changes
During the on-line Webinar “Consultation on 2024 Annual Updates to NZ ETS Settings and other Regulations” held on 28 May 2024, attendees were told that regulation changes would come into effect in January 2025 and would apply to waste received in 2024.
As explained above, a landfill operator will have no ability to recover this additional cost from customers if regulations apply retrospectively. While we support all corrections listed in Proposed “regulatory update 4: Improving accuracy for the waste sector”, these corrections should only apply to waste that is received after January 2025.
The need for these corrections was previously brought to the attention of EPA by WMNZ on 19 December 2022. On 20 Jan 2023, EPA responded to advise that “While this has not been the intention, MfE will work to address this issue”. MfE has had adequate time to correct these errors without the need to introduce corrections retrospectively.
ii. Limit of 90%
The consultation document states landfill operators that use a UEF for capture and destruction of landfill gas, have a maximum landfill gas collection efficiency of 90% of the DEF. It states this 90% cap on waste UEFs was put in place because of uncertainty in the modelling used to estimate the efficiency of the capture system.
WMNZ does not agree with the stated reasoning because we understand the 90% to be based on an industry accepted level of 10% oxidation of methane through landfill cover / capping rather than a random 10% uncertainty factor, which has no basis.
A more accurate way to recognise this oxidation is by deducting the actual methane destroyed from the theoretical (calculated) methane produced to calculate the “uncaptured” methane. Then, (and only then), should the 10% oxidation factor be applied, leaving the fugitive methane (ETS liability) to be calculated on 90% of the uncaptured methane.
iii. Banking of methane destruction
Outlined above is the difference between the theoretical methane produced (calculated using the IPCC or similar model) and the actual measured methane destroyed. While this is accepted and common practice, it must also be accepted that there are some inaccuracies in the methodology, emphasising that it is not possible to accurately measure the actual fugitive methane (tonnes CH4 per year).
Similarly, the exact parameters (eg composition, moisture content etc) of waste, the density and void ratios of placed waste (eg voids filled with oxygen once waste is compacted in place) and numerous other factors (eg atmospheric pressures) will differ from site to site, from year to year. This introduces inaccuracies into theoretical modelling and variations in methane production, meaning there will always be a difference between theoretical and actual methane production, which will include the possibility of methane being produced and captured earlier/ faster than the theoretical assumptions.
It is therefore possible that the early production of methane under certain conditions results in a >90% methane destruction in the early and mid-operating years of the landfill, reducing to a < 90% methane capture in the later years of a landfill operation. This is particularly true at larger landfills where methane is considered as a valuable renewable energy source for generation and export of electricity. In these cases, landfill operators intentionally operate the landfill to maximise early methane production, but receive no recognition of this under the ETS.
The 90% cap imposed by the New Zealand ETS regulations reduces the landfill operator’s incentive to maximise methane destruction in excess of 90%, especially if this additional methane is surplus to generation needs.
We recommend a change to the ETS regulations that would allow for the banking of methane destruction above 90% in any year and enable any shortfall in the later years of the landfill operating life to be topped up by drawing down this banked volume if, and only if, the same landfill is unable to meet the 90% level at that time.
iv. New Landfills
It is WMNZ’s understanding that no new landfills have been opened since the introduction of the ETS and we submit that the ETS as current written unfairly penalises new landfills.
When municipal solid waste is first deposited in a landfill, it undergoes an aerobic decomposition stage when little or no methane is generated. Then, typically within one year, anaerobic conditions are established and methane-producing bacteria begin to decompose the waste and generate methane. Peak gas production only occurs after several years.
Modelled results clearly show that the ETS imposes significant and unjustified financial penalties on any new landfill by assuming full methane production and release during, and from, the first year of waste acceptance when, in reality, no methane is produced until methane producing bacteria begin to establish themselves. Methane production will only then gradually increase to full production.
As such, the ETS is flawed when applied to a new landfill by charging the operator for methane emissions when methane is not yet produced (1st and 2nd phases of bacterial decomposition) and overcharging during the 3rd phase while methane production is still building up to full steady production in the 4th phase.
In addition, the IPCC gas model assumes methane is produced in the first year after waste is placed. The IPCC model is intended to predict methane production over an extended period and not during a very short period at the start of a new landfill. As a result, applying an unmodified IPCC model to the initial years of a new landfill in isolation is also flawed in that a landfill operator will again be penalised for not collecting methane when it is not yet produced.
We suggest the regulations are amended to use a modified IPCC waste model (“First Order Decay model”) as per Climate Change (Unique Emission Factors) Regulations 2009 regulation 23C (2) to calculate the gross methane, but in a manner that will phase this in (0% to 100%) over a period of (say) five years before switching to the (current) standard ETS calculations. This will reflect that all the theoretical methane generated is not available during this initial 5-year period.
During this phasing in period, the landfill operator can measure actual landfill gas extracted and destroyed and deduct it from the phased in IPCC model in a similar manner to the ETS calculations. This option should be written into legislation and be available to all parties opening a new landfill.
In summary
• WMNZ supports the accuracy improvements / corrections in the proposed "regulatory update 4" for the waste sector. However, we recommend these changes only apply to waste received after January 2025.
• WMNZ proposes a more accurate approach to the 90% cap where landfills can bank any methane captured above 90% each year, enabling a shortfall in subsequent years (if any) to be topped up.
• We suggest the phased-in use of the IPCC waste model to calculate the gross methane generation from any new landfill for each of (for example) the first five years before transitioning to the (current) standard ETS calculations to reflect that all the theoretical methane generated is not available during this initial period.
When the ETS was developed, the purpose was to place a price on emissions from landfills and incentivise landfill operators to maximise the capture and destruction of landfill gas. Several key principles guided this development:
• Default Liability: Landfill operators are initially charged as though all methane produced at a landfill is released to atmosphere (fugitive methane), providing a strong incentive to reduce ETS liability by maximising gas destruction.
• Physical Measurement Limitations: Since it is not possible to physically measure fugitive methane emissions from landfills, the agreed methodology compares theoretical (calculated) methane production with actual (measured) methane destruction. It is therefore conceivable that a landfill operator might destroy more than 100% of the calculated methane production.
• Passing on costs to the producers of waste: Landfill operators only get one opportunity to pass on the cost of fugitive methane emissions to customers, namely on receipt of their waste. This means operators must take on risk by setting a customer's disposal price before the year starts, based on estimated waste composition and gas destruction capability. They must then maximise gas capture during the year and can only confirm their actual ETS liability after the year is complete.
• Regulation Certainty: To allow fair waste disposal pricing for customers, regulations and calculation methodologies must be set and confirmed before the year in which the waste is received.
• Annual Methane Release: The assumption was that all the methane produced from waste is released during the year of waste acceptance. This would also assist landfill operators in recovering ETS costs from customers.
b. Our feedback
i. Timing of changes
During the on-line Webinar “Consultation on 2024 Annual Updates to NZ ETS Settings and other Regulations” held on 28 May 2024, attendees were told that regulation changes would come into effect in January 2025 and would apply to waste received in 2024.
As explained above, a landfill operator will have no ability to recover this additional cost from customers if regulations apply retrospectively. While we support all corrections listed in Proposed “regulatory update 4: Improving accuracy for the waste sector”, these corrections should only apply to waste that is received after January 2025.
The need for these corrections was previously brought to the attention of EPA by WMNZ on 19 December 2022. On 20 Jan 2023, EPA responded to advise that “While this has not been the intention, MfE will work to address this issue”. MfE has had adequate time to correct these errors without the need to introduce corrections retrospectively.
ii. Limit of 90%
The consultation document states landfill operators that use a UEF for capture and destruction of landfill gas, have a maximum landfill gas collection efficiency of 90% of the DEF. It states this 90% cap on waste UEFs was put in place because of uncertainty in the modelling used to estimate the efficiency of the capture system.
WMNZ does not agree with the stated reasoning because we understand the 90% to be based on an industry accepted level of 10% oxidation of methane through landfill cover / capping rather than a random 10% uncertainty factor, which has no basis.
A more accurate way to recognise this oxidation is by deducting the actual methane destroyed from the theoretical (calculated) methane produced to calculate the “uncaptured” methane. Then, (and only then), should the 10% oxidation factor be applied, leaving the fugitive methane (ETS liability) to be calculated on 90% of the uncaptured methane.
iii. Banking of methane destruction
Outlined above is the difference between the theoretical methane produced (calculated using the IPCC or similar model) and the actual measured methane destroyed. While this is accepted and common practice, it must also be accepted that there are some inaccuracies in the methodology, emphasising that it is not possible to accurately measure the actual fugitive methane (tonnes CH4 per year).
Similarly, the exact parameters (eg composition, moisture content etc) of waste, the density and void ratios of placed waste (eg voids filled with oxygen once waste is compacted in place) and numerous other factors (eg atmospheric pressures) will differ from site to site, from year to year. This introduces inaccuracies into theoretical modelling and variations in methane production, meaning there will always be a difference between theoretical and actual methane production, which will include the possibility of methane being produced and captured earlier/ faster than the theoretical assumptions.
It is therefore possible that the early production of methane under certain conditions results in a >90% methane destruction in the early and mid-operating years of the landfill, reducing to a < 90% methane capture in the later years of a landfill operation. This is particularly true at larger landfills where methane is considered as a valuable renewable energy source for generation and export of electricity. In these cases, landfill operators intentionally operate the landfill to maximise early methane production, but receive no recognition of this under the ETS.
The 90% cap imposed by the New Zealand ETS regulations reduces the landfill operator’s incentive to maximise methane destruction in excess of 90%, especially if this additional methane is surplus to generation needs.
We recommend a change to the ETS regulations that would allow for the banking of methane destruction above 90% in any year and enable any shortfall in the later years of the landfill operating life to be topped up by drawing down this banked volume if, and only if, the same landfill is unable to meet the 90% level at that time.
iv. New Landfills
It is WMNZ’s understanding that no new landfills have been opened since the introduction of the ETS and we submit that the ETS as current written unfairly penalises new landfills.
When municipal solid waste is first deposited in a landfill, it undergoes an aerobic decomposition stage when little or no methane is generated. Then, typically within one year, anaerobic conditions are established and methane-producing bacteria begin to decompose the waste and generate methane. Peak gas production only occurs after several years.
Modelled results clearly show that the ETS imposes significant and unjustified financial penalties on any new landfill by assuming full methane production and release during, and from, the first year of waste acceptance when, in reality, no methane is produced until methane producing bacteria begin to establish themselves. Methane production will only then gradually increase to full production.
As such, the ETS is flawed when applied to a new landfill by charging the operator for methane emissions when methane is not yet produced (1st and 2nd phases of bacterial decomposition) and overcharging during the 3rd phase while methane production is still building up to full steady production in the 4th phase.
In addition, the IPCC gas model assumes methane is produced in the first year after waste is placed. The IPCC model is intended to predict methane production over an extended period and not during a very short period at the start of a new landfill. As a result, applying an unmodified IPCC model to the initial years of a new landfill in isolation is also flawed in that a landfill operator will again be penalised for not collecting methane when it is not yet produced.
We suggest the regulations are amended to use a modified IPCC waste model (“First Order Decay model”) as per Climate Change (Unique Emission Factors) Regulations 2009 regulation 23C (2) to calculate the gross methane, but in a manner that will phase this in (0% to 100%) over a period of (say) five years before switching to the (current) standard ETS calculations. This will reflect that all the theoretical methane generated is not available during this initial 5-year period.
During this phasing in period, the landfill operator can measure actual landfill gas extracted and destroyed and deduct it from the phased in IPCC model in a similar manner to the ETS calculations. This option should be written into legislation and be available to all parties opening a new landfill.
In summary
• WMNZ supports the accuracy improvements / corrections in the proposed "regulatory update 4" for the waste sector. However, we recommend these changes only apply to waste received after January 2025.
• WMNZ proposes a more accurate approach to the 90% cap where landfills can bank any methane captured above 90% each year, enabling a shortfall in subsequent years (if any) to be topped up.
• We suggest the phased-in use of the IPCC waste model to calculate the gross methane generation from any new landfill for each of (for example) the first five years before transitioning to the (current) standard ETS calculations to reflect that all the theoretical methane generated is not available during this initial period.