Proposed changes to regulations for the NZ ETS 2022

I agree that the use of Kyoto Protocol-era emission units is no longer relevant, but there is a lack of clarity around what voluntary involvement looks like under the Paris Agreement.

In order to improve alignment with the goal of reducing greenhouse gases, we must have a clearer understanding of what voluntary market participation looks like under the Paris Agreement, and how we can better encourage companies to participate in it.

Overall, we need more incentive for voluntary actions: every tonne reduced within NZ reduces the need for purchase offshore to meet NZ's NDC. People who want to go further and do more should see the reward for that.

The current timeline is acceptable

None that I'm aware of, but I would defer to iwi leaders to respond to this question in your consultation.

While I agree the destruction of potent greenhouse gases is required, I disagree with the choice to export the emissions and recycling or destruction of such chemicals.

I also disagree that removing the product stewardship scheme requirements is unlikely to increase the risk of undesirable environmental outcomes. I understand that a regulated product stewardship scheme is currently under development for refrigerants: rather than remove any link to product stewardship, we should be strengthening this requirement.

When considering this issue, we must consider the potential negative externalities from exporting potent greenhouse gases to other countries. It’s like offshoring Aotearoa's plastic waste: we can’t pretend the problem has gone away just because it leaves our shores. Further, such measures are likely to disproportionately burden second and third world countries, and continues a trend of leaving the consequences to be suffered disproportionately by those who have not contributed nearly as significantly to the problem.

No, I disagree as I believe Option 2 fails on alignment and accuracy. It does not align with global efforts to accurately reduce emissions, nor does it align with the international goal of reducing greenhouse gas emissions globally. This regulation change could inadvertently cause the offshoring of harmful waste gases to countries which do not include this type of gas in their target, which could then be left off greenhouses gas registers internationally.

I strongly recommend Option 2 be reviewed and further conditions applied restricting the exportation to certain countries. We should not export our emission waste - instead, focus this incentive only around recycling and destruction within NZ.

I would suggest an amendment to Option 2 to limit this new incentive to only the destruction, not exportation, of HFCs or PFCs, and that participation in the new regulated product stewardship scheme for refrigerants be compulsory.

None that I am aware of, however I would defer to iwi leaders to respond to this question in your consultations.

I agree that the schedule of emissions factors should be updated. However, the current schedule of emissions factors and the analysis on which it is based both have considerable deficiencies and omissions.

The primary requirement for any changes to DEFs is that all pre-combustion emissions should be included and accurately reported. This should also apply to Unique Emissions Factors (UEFs).

Natural gas miners and NZ ETS opt-in participants use the methodologies and emissions factors in the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 (SEIP 2009) to calculate their emissions.

​​A key question is whether, in line with international literature, ‘fugitive emissions’ include emissions that leaked unintentionally during the process of extracting, distributing and storing natural gas (i.e. not from combusting (for miner’s own use), intentional flaring and venting at the production platform).

Two key principles for an effective Emissions Trading Scheme are that emitters should pay for their emissions, whether those are intentional or unintentional, and those emissions should be accurately measured.

It is essential that all fugitive emissions be included in emissions factors, whether these are DEFs or UEFs. Therefore, as part of updating the DEFs, the SEIP criteria should be updated to ensure that unintentional leakage during the process of extracting, distributing and storing natural gas should be included, as well as intentional flaring, venting and combustion.

The net gas production for each field is the appropriate basis for establishing the distribution of natural gas for each field between:
-own use of gas for on-site energy purposes (including compression)
-direct sales to the non-energy purposes in Taranaki (methanol and urea production)
-direct sales to power generation in Taranaki
-dispatch to and recovery from the Ahuroa gas storage facility
-delivery to the high-pressure gas distribution pipeline

Provision in the carbon accounting system should be made for the addition of gas manufactured for non-fossil sources (e.g. biodigesters). There are also proposals to use the natural gas transmission network for delivering surplus electrolytic hydrogen to consumers, mixed with the reticulated gas.

The high-pressure gas transmission network and the downstream lower pressure gas distribution network lose via leaks about 0.4% of the gas carried.

An extraordinary natural gas discharge to air occurred on January 29th 2022 when maintenance work on the Maui gas pipeline, by First Gas, involved the release of 400,000 cubic metres (0.016 PJ) of natural gas with a methane content of 240 tonnes. That is 2% of the annual transmission and distribution leakage in the space of 2 hours. Using a global warming potential of 25, that single event contributed 6,000 tonnes of CO2e. It appears that there is currently no mechanism for that large greenhouse gas emission to be accounted for under the ETS. A mechanism should be created to cover this.

There is a significant discrepancy between the amount of gas supply reported and the amount of gas consumption reported in the MBIE gas data file. The consumption exceeding the supply by an average of 2.5% over the last 4 years, points to either overreporting of consumption or underreporting of supply.

Therefore:
Before accurate carbon accounting can be carried out, it is essential that effective auditing of the data returns from the gas production and retailing companies is carried out. An accurate mass and energy balance of the gas production, supply and distribution network, perhaps on a quarterly basis, is an essential prerequisite for effective greenhouse gas accounting.

A good definition of the carbon accounting boundaries is required. The units of the emission factors are tCO2=e/TJ, where TJ refers to the energy content of gas. The point in the gas processing train that that energy term refers to needs to be clarified. It appears to be based on the gross input of gas to each gas production station. It would be preferable for the emission factor to be related to the net product from each gas production station, which is the unit of energy that is sold either directly to a customer or into the high-pressure gas transmission network.

The applications of the emission factors should be clearly defined. If the field-by-field emission factors are to be used to define the emission trading liabilities of the direct purchasers of the gas from a field, then the emission factors need to define whether the upstream emissions are included in the emission factors or not.

If the upstream emissions from gas processing, venting, etc are not to be included in the gas product emission factor, then the emissions from gas production activities would need to be assessed to provide a greenhouse gas emission liability for each field operator. That is particularly important for the operator of the Kapuni gas production station with the Benfield plant to define where liability for the CO2 emissions would fall.

It may be preferable for the emission factors for natural gas sources to include an allocation for the consequential greenhouse gas emissions arising from the gas production activities. In that case the purchaser of natural gas would also become liable for the full greenhouse gas consequences of producing that gas. For example, if the full greenhouse gas consequences of producing natural gas products from Kapuni gas were to be included in the Kapuni gas emission factors, it would be seen that the greenhouse benefit of using Kapuni gas instead of coal would be marginal.

The application of the national average emission factor needs to be clearly defined. If it is to be used to calculate the greenhouse gas emission liabilities for consumers of reticulated natural gas then it should be based on a weighted average of all the sources of net natural gas that contribute to the reticulated supply.

Furthermore, the national average emission factor must be adjusted to allow for the methane emissions arising from the losses and leakages from high-pressure natural gas transmission and distribution. Assessment of these losses should not be based on reported figures from industry. Their measurement should be carried out independently. Likewise, methane losses from the Ahuroa gas storage facility must be assessed and factored into the national average emission factor.

My preference is the DEFs be updated, provided the matters listed in the answer to Question 8 are taken into consideration.

None that I am aware of, however I would defer to iwi leaders to respond to this question in your consultation.

Overall, I agree that the issue warrants a law change to enable importation and opt-in participants’ supply to be included in emissions returns. I welcome the effort to increase the use of SAFs in one of our highest-emitting industries, and are in support of the broader biofuel mandate.

However, concerns which are not addressed in the document include:

1) This does not take into account full lifecycle emissions of biofuels, in fact it dangerously treats biofuels as if they have zero emissions, which is unrealistic and could set a dangerous precedent as well as perverse incentives.

Biofuel synthesis generates GHGs in every step in the supply chain, from the raw feedstock production, to transport, conversion, to biofuels distribution and end application.
https://www.energy.gov/sites/prod/files/edg/media/BiofuelsMythVFact.pdf
Lifecycle assessment (LCA) must be addressed in the calculation of deduction of ETS. We recommend pursuing a net energy balance approach, as documented https://www.sciencedirect.com/topics/engineering/net-energy-balance

If no LCA analysis can be provided, it would also be possible to determine fixed ranges for emissions per fuel source, with zero emissions reserved for local production from non-food sources, like landfill biogas.

2) This policy may encourage importation over purchase of locally produced biofuels, or biofuels synthesised by displacing land used for food; directly negating the Paris agreement goals.

For example, as New Zealanders have petitioned against the use of palm oil in Cadbury chocolate, the importation of palm oil-based biofuel would be unpopular.

Adding regulation around the sources of biofuels permitted to be imported would help ensure that food production is not harmed, and auditing would help ensure the carbon emissions for transportation are accounted for within New Zealand’s carbon ledger.

I would support a new option in which lifecycle emissions of biofuels are incorporated.

Fixed ranges are acceptable, although per fuel source and incentives for non-food source biofuels would be recommended.

As soon as practicable. We have seen during the COVID emergency how quickly things can change and how quickly measures can be implemented when governmental departments are instructed to treat an emergency as an actual emergency.

Air travel is such a huge contributor to emissions globally that it seems critical for the aviation industry to move to sustainable fuels like biofuels as soon as possible.

Binding targets for the aviation sector to utilize a certain quantity of SAFs by a target date. A reasonable target would be 2% blending by 2023, and 5.5% by 2035.

Citation: O’Malley and Pavlenko, Estimating the Sustainable Aviation Fuel Feedstock Availability to Meet Growing European Union Aviation Sector Demand

None that I am aware of, however I would defer to iwi leaders to respond to this question during consultations.