Solid Energy and the ETS

Under the Emissions Trading Scheme (ETS), Solid Energy and all other coal miners:

• From 1 January 2010, had to report our carbon emissions
• From 1 July 2010, are liable for:
• All CO₂ and other greenhouse gas emissions associated with mining,
• All CO₂ that will eventually be generated by the combustion of the coal we sell in NZ.

Solid Energy must either purchase “emissions units” from someone else or pay the government directly for all these greenhouse gas emissions after 1 July, 2010, for each calendar year from now on.

Until 31 December 2012 we have to give the Government one emission unit, or the cash equivalent, for each two tonnes of our CO₂ or equivalent emissions liability.

After 1 January 2013 we have to give the Government one emission unit, or the cash equivalent, for every tonne of our CO₂ or equivalent emissions liability.

To calculate our CO₂ equivalent emissions liability per tonne of coal sold is quite complicated.  Different mining methods generate different levels of emissions, including fugitive emissions of methane (FEM) – a greenhouse gas generated when mining coal.  Each coal type emits a different amount of CO₂, when it is combusted.  Export coal does not attract the carbon charge but it does attract a charge for FEM. 

Our emissions liability therefore has to be calculated for each tonne of coal sold, depending on the type of coal, whether it comes from - an opencast or underground mine, whether it is blended with other types of coal, and who it is going to be sold to.

The current cost of an emissions unit in New Zealand is capped by the Government at $25 per tonne of CO_2.   The “one for two” approach reduces this by half for the first two and a half years so that the effective cost until 31 December 2012 is equivalent to $12.50 per tonne of CO₂.

Starting 1 July 2010 these additional costs will be added onto the price of the coal that we sell customers. Solid Energy will not add any additional administration charges.  ETS charges will be calculated in strict accordance with the ETS legislation and regulations, and the calculation and resulting ETS charges will be shown as a separate line on customers’ invoices.

ETS costs per tonne of coal from different Solid Energy mines, with the effective emissions cost at the interim $12.50 level until 31 December 2012, are:

These prices may change depending on any ETS modifications.

While the current sale price of our coal to individual customers is commercially sensitive, we can indicate that the increase on a tonne of coal ranges on average from 17% to 40%.