6 Other Issues

6.1 Introduction

In addition to the key issues raised in the consultation document, submitters raised a number of other issues, including those relating to data preparation and verification, and other more generic issues relating to the NZ ETS more broadly.

6.2 Data preparation – general comments

As stated in the consultation document, data called for must be submitted in accordance with the requirements (Rules) specified in a Gazette Notice. If data is not provided within the prescribed period specified in the Gazette Notice, firms will not be eligible for an allocation. The minimum period for data collection that can be specified in the Gazette Notice is 30 days, and this is the default period that the Government expects to apply to most activities, to ensure firms can be given certainty over allocation as soon as possible.

6.2.1 Summary of issues

Submitters made a number of comments about the data preparation, timescales and verification approach to be applied to data collection.

Responses from firms on the amount of time needed to collect data necessary for decisions on eligibility and allocative baselines varied widely. Some firms indicated that they could prepare the necessary data quickly, others stated that they would need more time than the minimum 30 working days specified in legislation, up to four months.

A number of submitters asked officials to create specific spreadsheets for each activity (or allow applications to customise generic spreadsheets used for data collection in Australia) to make data collection as easy as possible for potential firms.

Some submitters noted that verification requirements needed to reflect information firms do not have or that would be onerous to collect.

Submitters including Pan Pac Forest and O-I New Zealand noted that clear guidelines should be provided by the Government on the type of records that should be kept to enable future verification. Others noted that records kept for financial audits should be sufficient for data collection under industrial allocation, and that requirements for record keeping should not duplicate or override existing record-keeping requirements that exist for tax purposes.

Finally, a number of firms sought assurances that commercially sensitive information will be identified and appropriately protected.

6.2.2 Analysis and decisions

The Minister recognises that firms will need assistance as part of the data collection process, and that this level of assistance will need to vary firm by firm.

Further guidance on data collection will be provided alongside the Gazette Notice call for data. Data will need to be submitted in a specified data form. This will simplify the data collection process for firms and provide greater certainty and consistency. Finally, the Government will provide for direct assistance to firms through a major accountancy firm.

Where firms have made a formal request for additional time for data collection, the Government will increase the period above the 30 working days minimum.

The Government will ensure that the validation approach to be applied to data provided under the industrial allocation process is appropriate and reflects the self assessment approach to data and reporting under the NZ ETS. Changes to the data rules noted elsewhere in this summary will clarify the approach to be taken to uncertainty and materiality.

Significant penalties exist in cases where data is provided (or omitted) fraudulently. The Act contains a general requirement for persons applying for allocation to keep sufficient records to enable the Ministry to verify that they are entitled to receive an allocation, and the Government retains powers of inquiry to verify this if necessary in future. Further guidance will be provided alongside the Gazette Notice on the record keeping that firms should aim for to ensure they are well prepared for any future verification.

The Government will provide for a secure data storage facility to ensure data submitted to it, as part of the industrial allocation process, is protected. Where firms would rather not provide data over the internet, they will be able to provide it on CD. Commercially sensitive data will be treated as such in a similar manner with which the Official Information Act applies.

6.3 Comments about the ETS more broadly

6.3.1 Summary of issues

A number of comments were made and issues raised outside the scope of the consultation. Examples of these comments include:

  • that small and medium enterprises (SMEs) that are intensely trade exposed may be excluded on the emissions intensity threshold (A&G Price)
  • that aviation is being excluded from eligibility and allocation when the domestic industry cannot pass their costs on to customers (Aviation Industry Association)
  • that the NZ ETS will penalise those who have already made attempts to reduce their energy requirements, and that proactive investment should get recognition (Nelson Pine Industries, Wood Processors Association, Max Hill)
  • that, in some countries incentives have been provided to firms to switch to renewable energy sources (Carter Holt Harvey Pulp and Paper)
  • questioning if allocation should include labour used and alternative energy sources available (Qualityarns)
  • asking if further information can be provided for projecting budgets when the NZ ETS comes into effect (SCA Hygiene)
  • that an industry-wide survey should be undertaken to assess the impact on business (Qualityarns).

General comments on how the NZ ETS will operate were made by Max Hill, Fonterra, Business NZ and Methanex. These comments included that:

  • agriculture should not be subject to the NZ ETS
  • units should be transferred quarterly and in advance
  • the allocation of moderately intensive activities is insufficient
  • the eligibility thresholds do not reflect competitiveness-at-risk
  • New Zealand’s current net position surplus under the Kyoto Protocol affords more generous allocations
  • the planned five-year review of the NZ ETS be brought forward.

Some submissions, including SCA Hygiene, Methanex, Coal Association, Nelson Pine Industries, and Fletcher Building commented on the alignment with the Australian CPRS. Comments focused on ensuring alignment between the Australian and New Zealand schemes to ensure the same activities are recognised under both schemes and that activities receive the same assistance under both schemes. One submission commented that the focus should be on achieving the overarching objectives of free allocation, not matching with Australian scheme.

A number of submitters commented that the fact that the CPRS has not come into effect in Australia has material impacts which should be taken into consideration. In particular, as long as the CPRS is not enacted:

  • the Australian track for eligibility will not be available for New Zealand industry
  • New Zealand companies will be at even greater competitive disadvantage through facing a cost of CO2 whilst their Australian counterparts will not.

Some submissions (New Zealand Flower Growers, Westland Milk Products, Business NZ) noted disappointment in the communication and stakeholder engagement that has occurred. Comments were made on the consequences of this in terms of the amount of time available to respond to the consultation.

6.3.2 Analysis

The Government remains committed to implanting the NZ ETS as New Zealand’s most efficient and effective response to climate change. The NZ ETS is a flexible scheme, subject to regular reviews, which can be adjusted as necessary to reflect different international and national circumstances. Industrial allocation will provide assistance to the firms most at risk from the introduction of an NZ ETS, those who are emissions intensive and trade exposed.

The transition phase to the end of 2012 will significantly reduce the costs of the scheme for all firms. The 2011 review will provide an opportunity to review the scheme, and allocations in particular, in light of progress towards a post 2012 international agreement, reflecting developments in Australia and other factors. The issues raised by submitters above are relevant to that review, even if they are out of the scope of this consultation.

The Minister has decided that it is not possible to use the Australian track for eligibility whilst it is unclear whether the CPRS will be enacted. This is because it is not possible to demonstrate whether an activity is or ‘is likely to be’ eligible under the CPRS in such circumstances.

Whilst firms will not be able to take advantage of the Australian track for eligibility, initial evidence provided for this consultation indicates that this is unlikely to have a significant impact on the vast majority of eligible industry sectors. This is because the proposed New Zealand activity definitions are substantially identical to those developed in draft for the Australian CPRS. Accordingly, the outcomes for most sectors in terms of eligibility and allocative baselines are not likely to be substantially different between the New Zealand and Australian tracks in most cases. In addition, a number of activities not eligible in Australia will benefit by becoming eligible for allocation here under the New Zealand track.

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