Thursday, 29 April 2004

Media Statement

NZ Refining Company co-generation plant gets carbon credits

A proposed electricity and steam co-generation plant at the Marsden Point refinery has been awarded a share of carbon credits from the Government.

"This project offers the double benefit of reducing greenhouse gas emissions and adding to the nation's electricity supply," said the Convenor of the Ministerial Group on Climate Change, Pete Hodgson.

The refinery proposes to build a biomass boiler, burning wood waste to produce steam for refinery processes, and two electricity generation turbines powered by refinery gas and natural gas. The plant would be able to export electricity to the national grid and waste heat from the turbines would be used to generate additional process steam.

The new plant would replace electricity purchased from the national grid and steam generated from refinery waste gases. It is scheduled to come on-stream in 2007, pending final approval early next year. The New Zealand Refining Company (NZRC) is developing the project with HRL Limited, an Australian energy, technology and project development company, that will build, own and operate the plant.

"The plant would provide new electricity generation capacity of about 80 megawatts," Mr Hodgson said. "By avoiding the need for extra generation from fossil fuels such as coal or gas, it has the potential to reduce greenhouse gas emissions equal to more than one million tonnes of carbon dioxide by 2012."

The NZRC project has the single largest award of credits in the first tender round of the climate change Projects to Reduce Emissions programme. If it proceeds as planned, NZRC will receive up to 1,225,545 credits, or emission units.

The NZRC was also the first New Zealand company to secure a Negotiated Greenhouse Agreement (NGA) with the Government, in April 2003. This is a binding agreement that commits the firm to moving towards world's best practice in managing greenhouse gas emissions in return for a full or partial exemption for the emissions charge that is to be introduced by 2008. The proposed co-generation plant is outside the scope of the NGA.

Contacts: Graeme Speden, press secretary, 04 471 9707 / 021 270 9055 Lisa-Marie Richan, NZ Climate Change Office, 04 916 7610 / 027 479 1295
Questions and Answers

What is the Projects to Reduce Emissions programme?

The Government has developed the Projects to Reduce Emissions programme to support initiatives that will reduce emissions of greenhouse gases. The programme is a key plank in the Government’s climate change policy package. This Projects tender round was the first to be run and offered a pool of four million emissions units or “carbon credits”. Businesses, organisations and individuals were invited to submit proposals for projects to reduce emissions of greenhouse gases in return for a share of the pool of emission units.

What are Projects?

Projects are a domestic mechanism incentivised by Kyoto Protocol emissions units. For an initiative to qualify as a project it must achieve quantifiable reductions in greenhouse gas emissions that would not otherwise occur. It must also be additional to “business as usual”, i.e. the project owner must prove that without the award of emission units the project would not otherwise proceed.

What is an emission unit or “carbon credit”?

An emission unit is equivalent to one tonne of carbon dioxide (or its equivalent in other greenhouse gases) that would otherwise have been emitted into the atmosphere. Emission units are effectively permits to emit greenhouse gases. Each country with targets under the Kyoto Protocol must hold sufficient emissions units to match its emissions during the first commitment period of the Protocol. International markets for carbon trading are developing, even though the Kyoto Protocol has yet to come into force, and project owners are able to sell their units on this market.

How much is an emission unit worth?

The international market sets the price for emission units. Last December, Meridian Energy’s Te Apiti wind farm, one of two early projects the Government supported, was offered a contract to sell its emission units to the Netherlands Government. This involved the first sale of New Zealand’s Kyoto credits. The average price for the tender round in which Meridian Energy agreed to sell its units to the Netherlands Government was NZ$10.50 a unit. This is a good indication of the current worth of emission units. What other projects have been awarded emission units in the Projects to Reduce Emissions programme?

Nine other successful projects have been announced. They are: Southern Paprika’s proposed bio-energy plant to heat glasshouses. TrustPower’s proposed enhancement of an existing hydro generation scheme at Waipouri. TrustPower’s proposed enhancement of an existing hydro generation in Taranaki. Te Rere Hau Windfarm, New Zealand Windfarms – a proposed 50 megawatt wind farm in Manawatu. Toronui Mini-Hydro Power Scheme, Esk Hydro Power – a proposed mini-hydro scheme on the Pask family’s Toronui station in northern Hawkes Bay. Awapuni Landfill, Palmerston North City Council – a proposed scheme for generating electricity from landfill gas. Wainui Hill Wind Farm – a proposed wind farm of up to 30 megawatts on Wellington’s Wainui hills. Genesis Hau Nui Wind Farm, Wairarapa – a proposed five megawatt extension of the existing wind farm. Genesis Awhitu Wind Farm, South Auckland – a proposed wind farm of 19 megawatts on the Awhitu peninsula.

Details of the remaining projects awarded emission units will be announced in due course.

What is the status of the Kyoto Protocol?

More than 100 countries have ratified the Kyoto Protocol including the member states of the European Union, Canada, Japan, Norway, Iceland and a number of Eastern European countries. The Kyoto Protocol will enter into force if 55 countries (including developed countries that were responsible for 55 per cent of developed-country carbon dioxide emissions in 1990) ratify the Protocol. This requires Russia to ratify.

What happens if the Kyoto Protocol does not enter into force?

If the Kyoto Protocol does not enter into force the Government’s agreements with project owners will automatically be terminated.

ENDS

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