Emissions associated with excluded office activities
Emissions from activities such as head office, marketing and administration are likely to be less than five per cent of total emissions.
Emission rule 10 provides for simplified and reasonable emission calculation methods to be used in these situations. Such methods may be derived from sources such as floor space, head count, or likely standard energy data including ratings for equipment and lighting used.
The method adopted should be reasonable for the activity’s specific circumstances and be disclosed in the basis of preparation form.
Emissions from the production of the product (basis of allocation)
Emission rule 11 requires all emissions associated with the activity to be included. Emission rule 10 allows simplified and reasonable calculation methods to be used for small emissions sources.
Emissions from part of the activity that is carried out off site or by another firm
This will depend on the description of the activity and the directions in the Gazette notice calling for information as to what are included emissions and what are excluded emissions.
Where the description of the activity and the included emissions encompass a part of the activity that is carried out off-site or by another person, the emissions from that part of the activity will need to be included in the information provided.
Emissions from the transport of prepared materials between sites are excluded as specified in schedule 3 of the Gazette notice.
Emissions from waste oil and used oil
The data form treats waste oil and used oil in the same way and therefore it is not necessary to distinguish between them.
Emissions associated with electricity
Transmission and distribution losses need to be excluded from emissions associated with electricity.
The intention is to not differentiate between firms undertaking the same activity at different locations. Transmission and distribution charges are the cost of transporting electricity to the geographic location of the activity. This approach is consistent with the approach adopted for gas distribution losses and the transportation of other inputs to the location where the activity takes place.
Calorific value for each type of coal (or used/waste oil or tyres)
The calorific value for each type of coal (or used/waste oil or tyres) needs to be representative of the amount used.
Many firms will periodically test the calorific value of the coal used in the activity. For others, suppliers will have tested the calorific value of the coal and provided this information to their customer.
The data form requires only one calorific value for each coal type to be entered for all of the specified financial years.
Where there are a range of calorific values used for a particular coal type, you should apply a weighted average calorific value which most accurately portrays the calorific value of the coal consumed by the activity during those years.
The basis for the calorific value used is required to be disclosed in the basis of preparation form.
All calorific values should be stated in gross terms (higher heating value), not net terms (lower heating value).
Application of emissions rule 10 is across all years
Emissions rule 10 applies where small emissions sources are in aggregate estimated to be no more than five percent of total emissions from the activity. In this context, ‘in aggregate’ should be interpreted to mean all specified financial years.
Emissions factor to use when calculating emissions from natural gas
As detailed in the Industrial Allocation Guide to Data Collection 2023, where the contract to purchase natural gas specifies the field from which the natural gas is obtained, the emissions factor for that field must be used.
A natural gas emissions factor from Table 10 in Schedule 2 of the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 must be used. The particular natural gas emissions factor that must be used will depend on how gas is supplied.
Natural gas supplied through a dedicated supply line
Where natural gas is supplied through a dedicated supply line, you must enter data against the emissions factor for that specific field.
Natural gas supplied from an unknown source
Where natural gas is not supplied through a dedicated supply line and the contract to purchase natural gas does not specify the field from which the natural gas is obtained, the national average emissions factor must be used (see data form).
Natural gas supplied from a specified field through an integrated network
Where the contract to purchase natural gas does specify the field(s) from which gas is obtained and the natural gas is supplied through an integrated network (that also transports gas from other fields), one of the following emissions factors must be used:
- emissions factor for that field
- national average emissions factor.
Adjustments for electricity consumption outside the activity boundary even if they are immaterial in size
Although the electricity consumed by functions outside the activity may be immaterial in size, they are material in nature because they are specifically listed as excluded emissions in the Gazette notice.
Therefore, this electricity consumption must be excluded from the data provided. Some of these adjustments may be immaterial in size in which case a reasonable estimation would be acceptable consistent with emissions Rule 10, accompanied by disclosure of the basis of the estimation in the basis of preparation form.
Emission sources under a threshold should be provided
Schedule 3 of the Climate Change Response Act 2002 identifies which persons must be participants to the Emissions Trading Scheme on the basis of the activities they undertake.
A person may be exempted from being a participant under the Climate Change (General Exemptions) Order 2009 or under section 60 of the Climate Change Response Act 2002 when carrying out an activity covered by that Order if they fall under a threshold.
Thresholds that may apply
Using geothermal fluid to generate electricity or industrial heat
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4,000 tonnes of CO2-e per annum
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Combusting used or waste oil to generate electricity or industrial heat
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1,500 tonnes of used or waste oil per annum
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Importing coal
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2,000 tonnes of coal per annum
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Producing iron or steel
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100 tonnes of carbon added per annum
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If, due to exemption there is no obligation to surrender units, then no assistance will be provided for the emissions from these sources. However, the emissions still need to be specified in the data form as per emissions rule 4. When determining eligibility or allocative baseline for an activity, the Ministry will assess whether a threshold is met and disregard those emissions where appropriate.
Apportioning excluded or included emissions sources
It is likely that some firms will need to apportion included or excluded emissions sources to fulfil the requirements of the Gazette notice. The application of this apportionment is not necessarily intuitive.
Example illustrating one possible process
Firm A is using its utility bills to calculate its electricity usage. It has determined it has used 150 GWh for the 2016/17 financial year which excludes transmission losses.
Its electricity consumption includes electricity usage of the head office, the production of its product, the packaging and distribution centre, and its storage warehouse. In this instance only the electricity used for the production of its product is an eligible emissions source.
To subtract the excluded emissions the firm has used the following process.
- It has estimated that the annual electricity usage for its office space is 200 kWh/m2. Its total office space is 550 m2 so it estimates the electricity usage attributable to its head office as 110 MWh annually.
- It has calculated that the electricity usage for packaging is 900 kWh per tonne. This is based on the power used by the machine to package its product as well as an estimation of the electricity usage for other auxiliary sources. It produced 2,000 tonnes of product for the 2016/17 financial year so the total power usage excluded from this source is 1.8 GWh.
- Its storage facility has a cooling system that has an average power usage of 1 MW. The cooling system is on for 280 days (6,720 hours) of the financial year so it uses 6,720 MWh or 6.72 GWh of electricity.
- Accounting for these three excluded emission sources its total electricity usage is 150 – 0.11 – 1.8 – 6.72 = 141.37 GWh.
The process of apportioning these excluded emissions was a multi-step process that required a significant amount of approximation. In the basis of preparation form all of these steps require explanation of where the numbers originate (such as the power rating of a packaging machine) and the rationale behind assumptions.
If a firm produces multiple products that use the same electricity supply and only one of its products is subject to a Gazette notice then similar apportionments will need to be made to exclude emissions from the out-of-scope product. Conversely a similar exercise might be done if a firm needs to include an emission source that is not accounted for in its metered or billed energy use.
This exercise does not only apply to electricity usage but to any energy source that is responsible for emissions. For example, natural gas that is used to heat a storage area and which uses the same supply line as the natural gas that goes into production would need to be deducted.
To reiterate the point above – if a firm needs to apportion its emissions the process needs to be detailed in its basis of preparation form. If the process is transparent and reasonable apportionment methods have been used, it is likely to satisfy the Ministry. We will be in contact if we have concerns about the methods used.