Emissions Trading Scheme

The New Zealand Emissions Trading Scheme or ETS is New Zealand’s primary response to global climate change.  It puts a price on greenhouse gases* to provide an incentive to reduce emissions, invest in energy efficiency and develop new technologies.  Coal producers are a mandatory participant in the ETS and are required to remit emission units – sometimes called ‘carbon credits’ or “New Zealand Units” (NZU’s) – to the New Zealand Government on an annual basis for the emissions they are deemed responsible for under the scheme.

Bathurst Resources (Bathurst) participates in the New Zealand ETS, purchasing emission units for surrender to the New Zealand government for climate change gases that result directly from its mining activities and from the burning of its coal in New Zealand.

Emission units** are a globally recognised currency that allows participating nations to put a price on greenhouse gas emissions.  The price in New Zealand is currently $25 per tonne of carbon dioxide (CO2) or other greenhouse gas.

The New Zealand ETS legislation came into effect from 1 July 2010 and is applicable to Bathurst and all other New Zealand coal miners for:

  • All CO2 and other greenhouse gas emissions produced from mining, and
  • All CO2 generated by the combustion of the coal sold in New Zealand.

Even though Bathurst doesn’t actually burn the coal it sells, it is responsible for reporting the emissions from the combustion of that coal in New Zealand and surrendering the required units under the ETS.  The ETS charge is calculated on the amount of greenhouse gases generated in the use of the coal in New Zealand and for the gas emissions associated with the mining of all coal, regardless of where it is used.

The price that the ETS puts on emission units is to incentivise a move away from carbon based fuels in New Zealand.  Under the ETS participants must surrender one emission unit to the Government for every tonne of CO2 (or other greenhouse gas) they emit.  This includes all CO2 and other greenhouse gas emissions associated with mining (Fugitive Emissions) and the CO2 generated by combustion of coal Bathurst sells in New Zealand.

However upon its introduction, the ETS had an initial transition period until 31 December 2012 whereby for non-forestry sectors, for every two emission units calculated to be surrendered the participant was only required to surrender one unit.  This ‘two for one’ arrangement has now been extended past 1 January 2013 until further notice.

Emission units are a globally traded commodity.  To benefit its customers, Bathurst endeavours to purchase units at current market prices when prices drop below the New Zealand ETS price, which happens from time to time.  As with any traded commodity, prices fluctuate with supply and demand.  Bathurst then passes on any cost savings of its unit purchases to the customer less an administration charge.

 *What are greenhouse gases?

Greenhouse gases are constituents of the atmosphere, both natural and man-made, which absorb and re-emit infrared radiation.

Water vapour (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4) and ozone (O3) are the primary greenhouse gases in the Earth’s atmosphere.

Greenhouse gas emissions covered by the emissions limitation or reduction commitment for the first commitment period of the Kyoto Protocol (1997) are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

 The Framework for a New Zealand Emissions Trading Scheme September 2007 New Zealand Ministry for the Environment and The Treasury

Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007

Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)

Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

 What is the greenhouse effect?

 What is the greenhouse effect?

Greenhouse gases effectively absorb infrared radiation, emitted by the Earth’s surface, by the atmosphere itself due to the same gases and by clouds. Atmospheric radiation is emitted to all sides, including downward to the Earth’s surface. In absorbing this radiation, greenhouse gases trap heat within the surface-troposphere system. This is called the natural greenhouse effect. Atmospheric radiation is strongly coupled to the temperature of the level at which it is emitted. In the troposphere the temperature generally decreases with height.  Effectively, infrared radiation emitted to space originates from an altitude with a temperature of, on average, -19°C, in balance with the net incoming solar radiation, whereas the Earth’s surface is kept at a much higher temperature of, on average, +14°C.

An increase in the concentration of greenhouse gases leads to an increased infrared opacity of the atmosphere, and an effective radiation into space from a higher altitude at a lower temperature. This causes a radiative forcing, an imbalance that can only be compensated for by an increase of the temperature of the surface-troposphere system. This is the enhanced greenhouse effect.

Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007

Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)

Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

 ** What is an emission unit?

An instrument created under law that can be bought and sold and used to meet an entity’s obligations under an emissions trading scheme. In the New Zealand Emissions Trading Scheme, one emission unit corresponds to one metric tonne of carbon dioxide equivalent emissions.

In New Zealand, participants are required to surrender emission units to the Crown to meet their obligations under the scheme. Participants from the forestry sector are required to surrender one unit for each tonne of greenhouse gas emissions they produce, while participants from non-forestry sectors are required to surrender only one unit for every two tonnes of greenhouse gas emissions.

All participants may buy emission units from the Government for a fixed price of $25 or from domestic and international carbon markets at market prices.

The Framework for a New Zealand Emissions Trading Scheme September 2007 New Zealand Ministry for the Environment and The Treasury

http://www.climatechange.govt.nz/emissions-trading-scheme/about/questions-and-answers.html