Office of the Minister for the Environment
Cabinet Policy Committee
1. This paper provides further detail on the options available to the Carbon Neutral Public Service programme to offset unavoidable emissions and seeks agreement to the recommended offsets portfolio.
2. The Carbon Neutral Public Service initiative seeks to reduce government department greenhouse gas emissions in a cost-effective way, to demonstrate leadership on sustainability and climate change and to reduce the environmental impact of government business. The three steps of the programme are measuring and reporting on greenhouse gas emissions, reducing those emissions, and then offsetting any remaining emissions through New Zealand-based offset projects.
3. This paper recommends the use of a mixed portfolio to offset the unavoidable emissions of the six Stage 1 agencies under the Carbon Neutral Public Service programme. Diversity in the portfolio will ensure the delivery of credible offsets which support the integrity of the programme, in the most cost-effective manner possible, and will minimise the risks associated with one particular type of activity.
4. This paper also contains recommendations for managing and offsetting the emissions associated with Ministerial air travel.
5. Cabinet agreed on 12 February 2007 that a set of initiatives to elevate sustainability be refined, including an initiative based on moving the public service towards carbon neutrality [CAB Min (07) 4/1A]. Further detail was set out in Towards a Sustainable New Zealand: Carbon Neutral Public Service [CAB Min (07) 17/2C].
6. The Carbon Neutral Public Service programme will move the 34 public service departments towards carbon neutrality. It will ensure that the lead group of six agencies have ‘carbon neutral plans’ in place by early 2008 and are carbon neutral by 2012, with the other 28 agencies being on the path to carbon neutrality by 2012.
7. Achieving carbon neutrality is a three-step process involving:
8. Offsetting emissions without having made plausible efforts to reduce emissions first would compromise the credibility of the Carbon Neutral Public Service programme and could possibly prevent external verification of departments’ carbon neutral status.
9. The programme will use New Zealand-based options to offset those greenhouse gas emissions that cannot be avoided after emissions reduction measures are put in place.
10. In May 2007, Cabinet invited me to report back to Cabinet Policy Committee by 30 June 2007 with:
11. The Ministry for the Environment’s initial estimate is that 100,000 – 200,000 tonnes of CO2 equivalent (tCO2e) will need to be offset retrospectively by 2012 for the six Stage 1 agencies. This estimate will be refined when emission inventories are completed and verified in late 2007.
12. Officials at the Ministry for the Environment have been continuing the evaluation of offset options in order to further define the requirements of the Carbon Neutral Public Service offset portfolio, based on the initial estimate of 100,000 – 200,000 tCO2e that will need to be offset.
13. Cabinet agreed in May 2007 that officials may investigate the following New Zealand-based options for potential inclusion in the portfolio of offsets for the Stage 1 departments:
14. I strongly recommend the use of a mixed portfolio to offset the Carbon Neutral Public Service programme.
15. It is prudent to employ a diverse portfolio to ensure the delivery of sufficient credible offsets and to support the integrity of the programme in the most cost-effective manner possible. There is a need to actively balance short-term high sequestration options required for the 2012 timeframe for Stage 1 agencies with the longer term options which will sequester carbon for offsetting by agencies beyond 2012.
16. Diversity in the portfolio will minimise the risks associated with one particular type of activity. For example the inclusion of indigenous tree planting offsets is important because of the biodiversity and environmental co-benefits. The credibility of forestry offsets can, however, be affected by concerns over permanence1. Therefore, including non-forestry options in the portfolio will lessen the impact of such concerns across the entire mix and provide greater credibility.
17. A mixed portfolio maximises opportunities for learning from experience. This fits with the design of the Carbon Neutral Public Service programme, which has a staged approach, thus allowing the experience from the six Stage 1 agencies to feed into the carbon neutral plans for the remaining 28 agencies.
18. I am also aware of the need to maintain flexibility in the programme. The area of carbon credits is in its infancy and going through rapid growth. It is important that the Carbon Neutral Public Service programme is not locked into a portfolio that cannot adapt.
19.The quality of offsets is important in order to maintain the credibility of the programme. Potential areas of criticism could include:
20. Investment in Kyoto-compliant offsets has the advantage of addressing the above issues. I, therefore, recommend that preference be given to Kyoto-compliant offsets in Stage 1.
21. While there is considerable potential for some non-Kyoto offsets, notably non-Kyoto forestry projects (such as wild animal control in the Conservation estate), I consider that these options need further investigation before they can be relied on. For this reason I recommend that non-Kyoto forestry is only considered as a possibility for offsetting emissions from Stage 2 of the programme.
Stage 1 Offsets
22. I recommend that the priority for Stage 1 should include the following Kyoto-compliant offsets:
23. The majority of offsets should be generated through the use of accelerated indigenous forest reversion on Crown land, where there is substantial potential for ecological co-benefits and strong public buy-in to the process.
24. The initial focus is on forestry options on Crown land, as there is sufficient Crown land available for the Carbon Neutral Public Service programme and there is logic in offsetting government emissions on Crown land. However, this does not necessarily exclude forestry options on private or local authority land from the portfolio.
25. Further rationale for these inclusions, as well as those options that have been excluded, is contained in Annex One.
Stage 2 Offsets
26. A broader range of options will be used for Stage 2, drawing on experience from Stage 1 and incorporating policy developments. These may include:
27. Further discussion of these options is contained in Annex One.
28. Budget 2007 contained funding of $10.4 million gross over three years (not counting expected savings from energy efficiencies) for the Carbon Neutral Public Service programme to deliver offsets for Stage 1 and emissions reductions for all 34 agencies.
29. Investing approximately half of this funding in the Stage 1 offset portfolio would be equivalent to between [Information withheld] per tonne of carbon offsets prior to 2012. This price range allows for a portion of the portfolio to include slow-growing forestry options in the mix, and also allows for validation costs. On a cost per tonne basis, slow-growing forestry is very expensive in the short term (to 2012), but becomes more cost-effective over the longer term. The details of costs for each option are given in Annex One.
30. Timing will affect costs. Costs will increase significantly if planting is not undertaken in the very near future, as a larger number of trees will be needed to ensure that there is sufficient carbon sequestration by 2012. [Information withheld].
Emissions Trading Scheme
31. If a broad emissions trading scheme (or another price mechanism) is in place before 2012, public service agencies are very likely to pay an increased price for electricity and fuel as a result of industry passing on the cost of carbon. In effect, this means the Carbon Neutral Public Service will pay extra for its emissions: a passed-on carbon price, and for the offsets themselves.
32. If a broad emissions trading scheme (or another price mechanism) is in place before 2012, public service agencies are very likely to pay an increased price for electricity and fuel as a result of industry passing on the cost of carbon. In effect, this means the Carbon Neutral Public Service will pay extra for its emissions: a passed-on carbon price, and for the offsets themselves.
33. Paying extra is a consequence of the Carbon Neutral Public Service having a more ambitious goal than is likely from an emissions trading scheme: the Carbon Neutral Public Service programme aims for carbon neutrality whereas an emissions trading scheme will merely establish a cap on emissions. The extra cost covers the extra offsets needed to achieve carbon neutrality.
Project and forestry credits
34. One of the offsetting options is to use credits from project based mechanisms, similar to Projects to Reduce Emissions, which could include energy efficiency measures. It is possible that future policy developments may create a suitable system to enable Kyoto Protocol credits to be generated from these types of projects.
35. The New Zealand emissions trading scheme may develop tradeable forestry sequestration credits, which would be allocated to Kyoto-compliant forestry developments.
36. Such credits could be incorporated in the portfolio in the future should the necessary policy be developed.
37. [Information withheld]
38. [Information withheld]
39. [Information withheld]
40. Officials will monitor and review the offsets portfolio as it develops and alter the mix as required to ensure its performance. This will provide useful experience to assist in evaluating offset options for Stage 2.
41. Cabinet has agreed that the Minister Responsible for Climate Change Issues will report back to POL by 31 January 2008 with recommendations on how offset projects for the Stage 2 agencies should be funded.
42. Officials will report back to the Minister Responsible for Climate Change Issues by 31 January 2009, on the monitoring and review of the portfolio, with recommendations on the nature of the offset portfolio for Stage 2. By this time a large part of the Stage 1 portfolio would be in progress and officials should be in a better position to advise on the science of non-Kyoto forestry management options.
43. A number of administrative arrangements are needed to commission and coordinate offset projects on a centralised basis across the public service.
44. The development of forestry projects in conjunction with appropriate agencies or contractors will be a significant undertaking. There are a number of issues that need to be taken into account in this area, including that of permanence and additionality (emissions reduction beyond business as usual).
45. Once decisions have been made with regard to the specific projects that will be undertaken there will be a need for ongoing management of these projects including the development of contractual arrangements regarding access to the land.
46. Permanence is important in ensuring that the projects are actually sequestering carbon for the long term, rather than just delaying its release. Ensuring the permanence of the projects will be required as part of the legal and contractual requirements that will be put in place under this programme.
47. Given the expertise required, there will be a need to enter into contractual arrangements with third parties to manage the forestry projects on the government’s behalf. These may include joint venture partnerships, memoranda of understanding with other agencies, or contracting forestry company(s) to manage the day-to-day requirements.
48. The Carbon Neutral Public Service programme will set up its own account within the New Zealand Emission Units Register to facilitate the purchase of the credits. These credits will then be transferred into the Carbon Neutral Public Service programme register which will record the relevant emissions and offsets for the agencies involved.
49. The Carbon Neutral Public Service programme will be required to have an accurate, transparent and auditable registry system to demonstrate the retirement2 of the credits or offsets used in the Carbon Neutral Public Service programme. As Kyoto-compliant offsets will be used for Stage 1 of the programme, this can be facilitated by using the New Zealand Emissions Unit Registry.
50. The Ministry for the Environment will commission an independent auditor to validate forestry offset projects and certify they have sequestered the necessary amount of carbon in order to claim carbon neutrality for the six Stage 1 agencies. The validation of the overall programme will occur at the end of the 2011/12 financial year.
51. I recommend that the Ministry for the Environment enter into negotiations on the contractual arrangements for the acquisition of credits or offsets, subject to my approval.
52. Ministers are not part of the public service. For this reason our emissions have not been included in the Carbon Neutral Public Service programme. The focus of the sustainability policy package, however, is on government leadership. Cabinet needs to consider the emissions associated with Ministers’ work, in particular our air travel.
53. There are two options to address Ministerial air travel from the 2007/08 financial year onwards. One is to offset emissions year by year starting with grey market3 credits. The other is to bundle them into the Carbon Neutral Public Service programme and offset the 2007/08 to 2011/12 emissions retrospectively by 2012.
54. I recommend that we immediately offset our emissions as it allows immediate demonstration of leadership in this area. At present there is no option to pay for offsets via the purchase of air tickets. The purchase of offsets for the 2007/08 year will therefore need to be facilitated through a credible grey market provider, such as Landcare Research’s CarboNZero programme. These are non-Kyoto credits and are most suitable for pre-2008 offsets.
55. For the 2008/09 year onwards, officials will need to re-evaluate the role of grey market credits compared with Kyoto-compliant credits, to determine the most cost effective and administratively efficient option. For example, should alternative options become available in New Zealand, such as the option to pay for emissions at the time of purchasing air tickets, this may prove to be the cheapest and most efficient method.
56. I recommend that the Ministry for the Environment work with Ministerial Services to procure the necessary offsets. Funding will come from the Ministerial Services’ budget and will be considered a baseline expense.
57. Officials are awaiting information as to the extent of Minister’s international and domestic air travel from Ministerial Services.
58. The Treasury, Department of Conservation, Department of the Prime Minister and Cabinet, Ministry of Agriculture and Forestry and Parliamentary Services were consulted on this paper.
59. Funding for the Carbon Neutral Public Service project has been approved from Vote Climate Change and Energy Efficiency for the next three years. Investment in offset projects will need to begin in winter 2008 and a substantial part of the expenditure will occur at this point. [Information withheld].
60. There are no financial implications beyond decisions already taken for Budget 2007.
61. I will report back to Cabinet Policy Committee by 31 January 2008 with recommendations on how offset projects for the Stage 2 agencies should be funded.
62. There are no inconsistencies with the Human Rights Act 1993.
63. There are no legislative implications at this stage.
64. No further publicity is planned at this stage for the Carbon Neutral Public Service programme, although further details of the programme may be announced to demonstrate the progress made and Government leadership demonstrated.
65. There are likely to be opportunities for publicity under the Ministerial air travel offsetting initiative. These will be fully explored by officials.
66. Future opportunities for publicity will be undertaken as they arise.
66. I recommend that the Committee:
Hon David Parker
Minister Responsible for Climate Change Issues
|Description||Advantages and Disadvantages||Land Availability and Costs4||Recommendation|
Exotic afforestation on Crown land
Change of land use where land is converted from grassland to forest land by the planting of exotic species.
The exotic species to be planted will be location-specific and chosen depending on which are the most appropriate for the given climate and soil conditions.
Exotics grow fast with earlier and higher rates of sequestration and are likely to be cheaper per tCO2e sequestered (at least in the short term).
May also provide economic co-benefits from sustainable harvesting of the timber and environmental benefits through erosion and flood control.
The main disadvantage is that exotics offer limited biodiversity gain.
Officials have identified several hundred hectares of Crown land for planting exotics in winter 2008. Initial discussions with nurseries indicate there is sufficient seed available for exotic afforestation.
Costs are approximately:
Exotics on Crown land form a limited part of the portfolio for Stage 1, because there are fewer ecological co-benefits than with indigenous forestry options.
Indigenous afforestation through new planting on Crown land
Indigenous afforestation involves growing indigenous trees in a nursery before planting them out.
Advantages include Kyoto compliance, alignment to broader biodiversity and environmental goals and greater potential for public profile and support from local conservation groups.
The main disadvantages are that it is expensive per hectare over the short term because the carbon sequestered in the first four years would not contribute significantly to the offsets required by 2012.
This option would, however, contribute to offsetting beyond 2012 and thus would form a part of the offset portfolio for Stage 2.
DOC is still investigating the suitability of specific parcels of land but early indications are that there is a substantial amount available for the Carbon Neutral Public Service programme.
Costs are between:
Indigenous afforestation by tree planting should form a minor part of the Stage 1 portfolio, with some planting undertaken early in the programme to gain benefits for Stage 2 of the Carbon Neutral Public Service programme.
Indigenous afforestation by accelerated natural regeneration on Crown land
Grassland sites where shrub species are present can be accelerated to revert to emergent forest with appropriate management.
The management options include fencing to exclude livestock, pest control and in some areas, strategic planting to ensure succession.
Two types of accelerated natural regeneration, both Kyoto-compliant:
Advantages include an alignment to biodiversity goals and are therefore, inherently more acceptable on DOC administered conservation estates. This option is not dependent on the availability of seed stock or seedlings.
Disadvantages include the difficulty of determining the additional regeneration that occurred as a result of the management action (i.e. compared with what would have occurred in the absence of the new management action).
The costs for enhancement of existing post-1990 regeneration on Crown land is approximately:
For post-2008 regeneration, costs cannot be assessed over the short term because very little sequestration is achieved.
Over 25 years costs range from:
There is a large amount of Crown land available for these options.
Indigenous afforestation by accelerated natural regeneration forms a substantial part of the portfolio mix for both Stage 1 and Stage 2 of the Carbon Neutral Public Service programme.
For Stage 1 the initial focus should be on the enhancement of existing post-1990 regeneration, where short-term benefits can be gained at reasonable costs.
|[Information withheld]||[Information withheld]||[Information withheld]5||[Information withheld]|
Forestry on private land
The same forestry options exist on private and local authority land as with Crown land discussed above - that is exotics and indigenous accelerated regeneration.
As with Crown land options above, the programme would require marginal land where the opportunity cost of reverting to forestry is not great.
|Yet to be determined.||The use of private land should be considered as part of the portfolio mix.|
I do not recommend the inclusion of the following offset options as part of the Stage 1 portfolio at this stage. As officials review the portfolio mix and as the programme becomes more established the Government may wish to include these in the future.
|Permanent Forest Sink Initiative (PFSI) and Afforestation Grant Scheme (AGS)||The role of PFSI and AGS within the Carbon Neutral Public Service programme has been contemplated. As both of these are not yet fully established (approval has not been given for the AGS) they cannot be considered for the Carbon Neutral Public Service Stage 1, where early investment in forestry is needed.||
PFSI and AGS should not be included in the offsets for Stage 1.
Both could be considered in the future as part of offsetting Stage 2.
Non-Kyoto forest management
This option relates to forest management in existing forests and includes activities such as pest control to enhance the sequestration of carbon in existing trees.
There are co-benefits such as the improved health of indigenous forest, as well as likely public support from organisations such as the Royal Forest and Bird Society.
The biggest disadvantage is scientific uncertainty. It is difficult to accurately predict how an improvement in forest health (through activities such as the eradication of pests) would translate to a measurable increase in sequestered carbon. The measurement and verification of increased carbon is likely to be difficult and costly.
New Zealand has elected not to claim carbon credits through the Kyoto Protocol for such activities, though may wish to do so in the future. Therefore, any such activities undertaken will not reduce New Zealand’s Kyoto liability in the short term and may limit the ability to “benefit” from these activities in the future.
Non-Kyoto forest management should not be included in the offset portfolio for Stage 1 of the programme.
If, and when, scientific uncertainties are overcome, this option might provide an important future part of the Carbon Neutral Public Service.
|Industrial projects, such as energy efficiency measures||
There is a need to be cautious of the credibility issues around so-called “grey market” or voluntary credits.
There can be concerns over additionality and double counting (more than one party claiming credit for the abatement), and the added complication that future climate change policy (such as an emissions trading scheme) could impact on such projects.
The use of credits that have been generated from New Zealand-based energy efficiency measures or similar types of industrial projects, [Information withheld] are not recommended because they are non-Kyoto credits.
If climate change policy was implemented that would allow for projects which generated Kyoto credits [Information withheld], then their inclusion in the portfolio could be reconsidered (especially for Stage 2).
Other “grey market” credits
Generation of credits from a range of projects outside the Kyoto Protocol, including forestry, renewable energy and energy efficiency.
Facilitated through stand-alone voluntary schemes such as CarboNZero.
Some of these schemes are high quality and offer genuine emissions abatement to a standard consistent with Kyoto rules.
The non-Kyoto market is uncertain at present however, and it may take time to develop internationally consistent quality standards and to establish a clear position as complementary to Kyoto markets.
In the meantime, there are concerns about potential double counting and possible overlaps with a future New Zealand emissions trading scheme, particularly for credits purchased in the first commitment period (2008-2012).
Grey market credits are not recommended for inclusion in the offsets portfolio for the Carbon Neutral Public Service at this stage as there are sufficient Kyoto-complaint credits available.
There is potential for using high quality grey market credits to offset emissions prior to 2008, making them suitable for the Ministerial air travel offsetting from 2007/08.
On 27 June 2007, the Cabinet Policy Committee (POL):
1. Permanence relates to whether the offset activity is actually sequestering carbon for the long term, rather than just delaying is release.
2. “Retiring” credits is necessary to ensure that the credit is only used to offset a single tonne of CO2e and not used to either offset more credits or on-sold for use by another programme.
3. “Grey market” refers to voluntary (non-Kyoto) carbon offsetting market
4. All costs exclude validation costs
5. [Information witheld]
Last updated: 20 November 2007