New Zealand launches CCUS framework consultation

New Zealand's coalition government today launched a consultation for a planned regulatory framework for carbon capture, utilisation and storage (CCUS), proposing that project operators receive New Zealand emissions units (NZUs).

Establishing a regulatory regime for CCUS could reduce the cost of gas production, especially for higher CO2 content fields. This could attract investment and help to reverse the current decline in output, supporting supply security, the government said on 9 July. The government recently said it plans to introduce legislation later this year to overturn a 2018 ban on new oil and gas exploration.

The New Zealand Emissions Trading Scheme (ETS) currently does not include mechanisms to recognise emission reductions or removals resulting from carbon capture and storage (CCS) activities, apart from forestry removals and geothermal reductions. The government is proposing that one tonne of CO2 captured and stored would be equivalent to one tonne of emissions reduction under the ETS.

ETS participants, which include oil and gas companies, could be allowed to subtract emissions captured and stored from their own activities through CCS projects, for the purpose of estimating their ETS liability. Businesses deploying storage technologies could also choose to capture CO2 to receive NZUs for their removals, which might enable a market for CO2 storage from third-party emitters.

The government noted that the Australian Carbon Credit Unit (ACCU) scheme allows CCS projects to be awarded carbon credit units if project activities capture greenhouse gases and inject them for permanent underground storage.

Implementing CCUS could reduce New Zealand's net CO2 emissions by 4.65mn t over the country's next two emission reduction plan periods — 2026-30 and 2031-35 — energy minister Simeon Brown said.

CCUS could become commercially and technically viable from 2027 for gas production and 2030 for the petrochemical industry if a suitable regulatory regime is put in place, according to the government's assumptions. Commercial viability would be driven by the cost of CCUS compared to ETS carbon prices.

The consultation is open until 6 August, with the government seeking feedback on several other proposals around the type of monitoring regime for CCUS projects and how liability for CO2 storage sites should be managed.

By Juan Weik