PwC

1
MFE / ETG Carbon Markets Workshop
The New Zealand Experience The
standardisation of the language of emissions
trading Challenges to NZ Business
Julia Hoare 4 April 2008
PwC
2
Framework

• NZ landscape how we evolved
• ETS patchworks
• Building trust in emissions monitoring
  reporting
• Emissions compliance processes
• Four tier model of emissions compliance
  transparency
• Key terminology differences in NZ ETS
• Practical issues arising form the NZ ETS

3
NZ landscape How we evolved

• Options
• Price based measures
• Direct regulatory
• Incentive technology implementation
• Voluntary actions
• Price based measures
• ETS vs Carbon tax
• Environmental integrity

4
ETS Patchwork

• Patchwork of market based schemes
• All underpinned by monitoring, reporting and
  verification standards and guidelines
• Differences more marked than similarities
• Gas sector coverage
• Varying degrees of prescriptiveness
• Need for consistent, accurate and mandatory
  emissions calculations

5
Building trust in emissions compliance reporting

• Credibility of carbon markets/ ETS crucial
• Market mechanisms depend on trust confidence
• Systems processes
• Markets market participants
• Regulators and regulated
• Key basic themes and issues
• Transparency
• Accountability
• Integrity

6
Emissions Compliance Processes
7
Four-Tier Model of Emissions Compliance
Transparency
Tier Four
Tier Three
Tier Two
Tier One
8
Monitoring and Reporting objectives aligned with
the Emissions Trading Scheme
Quality Reliable data on emissions Compliance
with MRG Timeliness Information available on
time Cost-effectiveness Keep overhead costs
low Consistency Data integrity Comparable results
9
Terminology within NZ ETS

• Starting principle informed by Kyoto Protocol
  definitions (Tier 1)
• Application and scope of NZ ETS different to
  other global players ie sectors, gases,
  terminology, administration (Tier 2)
• Use of industry specific rules legislation vs
  regulation (Tier 3)

10
Practical issues arising

• Balance between NZ centric and global
  compatibility
• Ease of compliance
• Severity of penalties
• Interplay between the regulatory and voluntary
  markets
• Carbon credit creation (daughter of PRE)
• Carbon neutrality

11
Where to from here?

• Future scheme design, terminology, and process
  do they fit the tiered system?
• Review of existing (new) rules
• Re-examine whether our emissions compliance
  processes are globally compatible
• Close linking and watch on Australian design an
  influencer?
• Need for rapid education