Frequently asked Questions
What is Climate Change?
Climate Change is commonly used interchangeably with ‘global warming’ and ‘the greenhouse effect’ but is a more descriptive term. Climate change refers to the build-up of man-made gases in the atmosphere that trap the sun’s heat, causing changes in weather patterns on a global scale. The effects include changes in rainfall patterns, sea level rise, potential droughts, habitat loss and heat stress.
The six greenhouse gases covered by the Kyoto Protocol are carbon dioxide, methane, and nitrous oxides but also Hydrofluorocarbons, Perfluorocarbons and Sulphur Hexafluoride.
What is the Paris Agreement?
Under the terms of the agreement, signatories committed to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.” The deal requires countries to set their own targets for reducing emissions by 2020. The Obama administration committed the U.S. to reducing carbon emissions by 26 to 28 percent by 2025. The agreement also established a $100 billion fund to help vulnerable countries deal with the effects of climate change.
The final text of the agreement was adopted at the Conference of Parties to the U.N. Framework Convention on Climate Change, known as COP21, in December 2015. The U.S. took the lead in negotiating the deal and signed onto the agreement in April 2016, along with China, the European Union and 171 other nations. China and the U.S. account for nearly 40 percent of global carbon emissions. The agreement took effect in November of that year, after nations accounting for 55 percent of global emissions ratified the treaty. As of May 2017, 147 parties have ratified the agreement, out of 195 who signed onto the accord.
The Obama administration committed the U.S. to the agreement without seeking ratification in the Senate, meaning Mr. Trump can withdraw support unilaterally. The U.S. joins Nicaragua and Syria as the only countries not participating in the agreement.
What is New Zealand's target under the Paris Agreement?
In 2015 New Zealand met a previous target under the first Kyoto Protocol commitment period of reducing greenhouse gas emissions to 1990 levels between 2008 and 2012 by submitting its “True-up Report” to the United Nations Framework Convention for Climate Change (UNFCCC).
In 2013, the Government announced an unconditional target to reach 5 per cent below our 1990 greenhouse gas emissions levels by 2020. This is our current target as it covers the years from 2013 until 2020.
Although New Zealand chose to take its 2020 target under the UNFCCC rather than the Kyoto Protocol, we are applying the Kyoto Protocol rules in our emissions accounting to ensure transparency.
We report progress towards the 2020 target in the net position report. New Zealand is on track to meet this target.
New Zealand also has a conditional 2020 target. This target is to reduce greenhouse gas emissions to between 10 per cent and 20 per cent below 1990 greenhouse gas emissions on the condition that there is a comprehensive global agreement.
This target is our commitment to the Paris Agreement which aims to limit the global temperature increase to 1.5 to 2°C above pre-industrial levels in this century.
New Zealand’s target under the Paris Agreement is to reduce greenhouse gas emissions by 30 per cent below 2005 levels by 2030. This target is equivalent to 11 per cent below 1990 levels by 2030.
Our target is expressed against 2005 emission levels. This is similar to what some of our trading partners have done. We have provided the 1990 equivalent for ease of comparison with previous targets. Our target covers the period of 2021-2030.
A credible long-term greenhouse gas emissions reduction target is an important part of ensuring that New Zealand can make a smooth transition to a low-emissions future.
The current 2050 target is to reduce greenhouse gas emissions to 50 per cent below 1990 levels by 2050. This was notified in the New Zealand Gazette in March 2011.
The 2050 target is based on gross greenhouse gas emissions in 1990 but will take into account any removals or emissions arising from afforestation or deforestation. This is consistent with the rules of the Kyoto Protocol under the UNFCCC. The Government is currently consulting on a new 2050 target as part of the Zero Carbon Bill. A new 2050 target would bring New Zealand more in line with the global ambition set under the Paris Agreement.
How big is the international carbon market?
The World Bank estimated the size of the carbon market in 2007 as USD 30 billion of which USD 25 billion was in the European Union where there is an EU Emissions Trading scheme in place since 2005 and the rest of the world USD 5 billion where there is a market for Clean Development Mechanism (CDM) and Joint Implementation (JI) projects. In contrast the size of New Zealand’s carbon market in 2007 was small in comparison at circa USD 20 million based on completed transactions to date. The carbon market is growing rapidly, doubling every year for the period 2004 to 2007.
What is emissions trading?
Emissions trading is a market-based approach to achieving environmental objectives that allows those reducing GHG emissions below what is required to use or trade the excess reductions to offset emissions at another source inside or outside the country.
In general, trading can occur at the domestic, international and intra-company levels. Article 17 of the Kyoto Protocol allows for emissions trading between Annex B parties of assigned amount units (AAUs). A global market for emissions allowances is slowly being created.
A voluntary emissions trading scheme was created in the UK at the start of 2002 and a smaller scheme in Denmark. From 2005, a mandatory European wide emissions trading scheme is proposed to be launched and member states are currently in the process of drawing up allocation plans which will outline how various sectors of the economy will be affected. From 2008 full international emissions trading is envisaged under Kyoto.
How do I Trade Carbon Credits?
What are Joint Implementation projects?
Joint Implementation (JI) projects that limit or reduce emissions or enhance sinks are permitted among developed countries under Article 6 of the Kyoto Protocol. JI activity is also permitted in Article 4.2(a) of the FCCC, between all Parties.
As defined in the Kyoto Protocol joint implementation would allow developed countries, or companies from those countries, to cooperate on projects to reduce greenhouse gas emissions and share the emissions reduction units (ERUs). Investing in joint implementation projects may be a more cost-effective way for companies to meet future carbon liabilities.
What are the benefits for project developers?
Under the Kyoto Protocol project developers of renewable energy and energy efficiency projects can obtain carbon credits for reducing emissions below a baseline of what would have happened under a business as usual scenario. The mechanisms which enable creation of value from carbon assets are called joint implementation and the clean development mechanism.
What is a Clean Development Mechanism (CDM) project?
Defined in Article 12 of the Kyoto Protocol, CDM projects undertaken in developing countries are intended to meet two objectives:
- to address the sustainable development needs of the host country; and
- to generate emissions credits called certified emission reductions (CERs) that can be used to satisfy commitments on Annex 1 Parties and thus increase flexibility in where government Parties meet their reduction commitments.
Investing in CDM projects may offer companies a cost-effective means of meeting future carbon liabilities.
What is the Kyoto Protocol?
Under Kyoto, industrialised nations pledged to cut their yearly emissions of carbon, as measured in six greenhouse gases, by varying amounts, averaging 5.2%, by 2012 as compared to 1990. That equates to a 29% cut in the values that would have otherwise occurred. However, the protocol didn’t become international law until more than halfway through the 1990–2012 period. By that point, global emissions had risen substantially. Some countries and regions, including the European Union, were on track by 2011 to meet or exceed their Kyoto goals, but other large nations were falling woefully short. And the two biggest emitters of all – the United States and China – churned out more than enough extra greenhouse gas to erase all the reductions made by other countries during the Kyoto period. Worldwide, emissions soared by nearly 40% from 1990 to 2009, according to the Netherlands Environmental Assessment Agency.
What about non-Kyoto (Voluntary) Carbon Credits?
Verified Emission Reductions (VERs) – VERs are non-Kyoto carbon credit units. They can be used for voluntary offsetting for corporate branding, corporate social responsibility and for public relations purposes.
VERs can be from projects which meet certain minimum standards such as the gold standard, the voluntary carbon standard, or VER+.
In New Zealand, several projects which were awarded Kyoto carbon credits for the years 2008-12 have VERs for the emission reductions which have been achieved up until the end of 2007. Unlike carbon credits allocated under the Kyoto Protocol, VERs do not require approval or authorisations from governments.
It is important to note that VERs cannot be used by companies for compliance either in New Zealand Emissions Trading Scheme or internationally.
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