Government proposes ban of certain CO2 offset units

Government proposes ban of certain CO2 offset units

The recent release of the Emissions Trading Scheme Review Panel’s report, which suggested staggering the entry of sectors like energy and transport, wasn’t a resounding winner, but Nick Smith maintains its latest ETS move is all about “integrity”. Smith has announced the government is considering banning specific types of international Kyoto units generated from the destruction of industrial gases from the New Zealand Emissions Trading Scheme. 

The Ministry for the Environment has released a consultation document proposing regulations to restrict the use of HFC-23 and N20 Certified Emission Reductions (CERs) in the NZ ETS. 

HFC-23 (Trifluoromethane) and N2O (Nitrous Oxide) are powerful greenhouse gases with high global warming potentials. HFC-23 is a by-product produced during the manufacture of the refrigerant HCFC-22. Projects in developing countries that destroy these gases are able to earn CERs under the Kyoto Protocol’s Clean Development Mechanism. 

“There are legitimate questions about these types of international units,” said Smith. “While very few were used in the first surrender period this year, we need to be conscious of changes in the international market and risks into the future. 

“The concern about these Kyoto units is that they are generated by the destruction of powerful greenhouse gases like HFC-23 and N2O. The high value for destroying these gases creates perverse incentives in developing countries to manufacture more of them bringing into question the environmental gains.” 

Currently about two-thirds (745 million) of CERs issued so far come from HFC-23 and nitrous oxide destroying projects. 

The European Union is already looking at banning the units from 2013 and Australia is also looking into a ban. The Ministry for the Environment’s consultation document proposes the units be banned from New Zealand from 1 July 2012 or 1 July 2013. 

“The Government is also very conscious of New Zealand being a small market and, if we are alone in accepting these units, our market may be flooded or it may limit our capacity to link with other schemes,” said Smith.

The consultation document is available here.